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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): AUGUST 26, 1998
CROSS TIMBERS OIL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 1-10662 75-2347769
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
810 HOUSTON STREET, SUITE 2000, FORT WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)
(817) 870-2800
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
Planned Royalty Trust Distribution
On August 26, 1998, Cross Timbers Oil Company ("the Company") announced
that it plans to begin the systematic distribution of royalty trusts to its
stockholders beginning no later than early in the year 2000. The Company
estimates that such royalty trust distributions will approximate 30% to 40% of
the Company's current total assets. The Company's capital decisions and
operating strategies over the coming months will be consistent with this plan.
On September 9, 1998, the Company provided additional details about the
Company's recently announced plans to begin systematic distributions of royalty
trust units. The Company intends to form three separate royalty trusts over
time: one for the Hugoton area, one for the San Juan Basin area and one for the
Permian Basin area. The royalty trust units will represent a dividend of assets
of the Company. The trust units will be marketable securities and are expected
to be listed on the New York Stock Exchange. The Company expects the trust
units to be distributed on a quarterly basis at an initial rate of $2.00 per
common share in market value of trust units annually.
The press releases issued by the Company on August 26, 1998 and September
9, 1998, with respect to the royalty trusts are attached hereto as exhibits and
incorporated herein by reference.
Stockholder Rights Plan
On August 25, 1998, the Board of Directors of Cross Timbers Oil Company
(the "Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $.01 per share,
of the Company (the "Common Stock"). The dividend is payable on September 15,
1998 to stockholders of record on September 15, 1998 (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company one one-
thousandth of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share, of the Company (the "Preferred Stock") at a price of $80
per one one-thousandth of a share of Preferred Stock (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth in
a Rights Agreement dated as of August 25, 1998, as the same may be amended from
time to time (the "Rights Agreement"), between the Company and ChaseMellon
Shareholder Services, LLC, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (with certain
exceptions, an "Acquiring Person") has acquired beneficial ownership of 15% or
more of the outstanding shares of Common Stock or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the "Distribution
Date"), the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date, by such Common Stock certificate
together with a copy of a Summary of Rights.
The Rights Agreement provides that, until the Distribution Date (or earlier
expiration of the Rights), the Rights will be transferred with and only with the
Common Stock. Until the Distribution Date (or earlier expiration of the
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuances of Common Stock will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even without such
notation or a copy of a Summary of Rights, will also constitute the transfer of
the Rights associated with the shares of Common Stock represented by such
certificate. As soon as
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practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on August 25, 2008 (the "Final Expiration Date"), unless the Final
Expiration Date is advanced or extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights is subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price, less than
the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights is subject to adjustment in the event of a
stock dividend on the Common Stock payable in shares of Common Stock or
subdivisions, consolidations or combinations of the Common Stock occurring, in
any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will not
be redeemable. Each share of Preferred Stock will be entitled, when, as and if
declared, to a minimum preferential quarterly dividend payment of $10 per share
but will be entitled to an aggregate dividend of 1000 times the dividend
declared per share of Common Stock. In the event of liquidation, dissolution or
winding up of the Company, the holders of the Preferred Stock will be entitled
to a minimum preferential payment of $10 per share (plus any accrued but unpaid
dividends) but will be entitled to an aggregate payment of 1000 times the
payment made per share of Common Stock. Each share of Preferred Stock will have
1000 votes, voting together with the Common Stock. Finally, in the event of any
merger, consolidation or other transaction in which outstanding shares of Common
Stock are converted or exchanged, each share of Preferred Stock will be entitled
to receive 1000 times the amount received per share of Common Stock. These
rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right that number
of shares of Common Stock having a market value of two times the exercise price
of the Right.
In the event that, after a person or group has become an Acquiring Person,
the Company is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provisions will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive upon the exercise of a Right that number of
shares of common stock of the person with whom the Company has engaged in the
foregoing transaction (or its parent) that at the time of such transaction have
a market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the earlier of one of the
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events described in the previous paragraph or the acquisition by such Acquiring
Person of 50% or more of the outstanding shares of Common Stock, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such Acquiring Person which will have become void), in whole or in part, for
shares of Common Stock or Preferred Stock (or a series of the Company's
preferred stock having equivalent rights, preferences and privileges), at an
exchange ratio of one share of Common Stock, or a fractional share of Preferred
Stock (or other preferred stock) equivalent in value thereto, per Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock or Common Stock
will be issued (other than fractions of Preferred Stock which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), and in lieu
thereof an adjustment in cash will be made based on the current market price of
the Preferred Stock or the Common Stock.
At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right (the "Redemption Price"), payable, at the option of
the Company, in cash, shares of Common Stock or such other form of consideration
as the Board of Directors of the Company shall determine. The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in their sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
For so long as the Rights are then redeemable, the Company may, except with
respect to the Redemption Price, amend the Rights Agreement in any manner.
After the Rights are no longer redeemable, the Company may, except with respect
to the Redemption Price, amend the Rights Agreement in any manner that does not
adversely affect the interests of holders of the Rights.
Until a Right is exercised or exchanged, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or receive dividends.
The press release issued by the Company on August 26, 1998 with respect to
the Rights, is attached hereto as an exhibit and incorporated herein by
reference.
Forward-Looking Statements
Statements concerning future production, development expenditures, market
values, cash flow and planned royalty trust distributions are forward-looking
statements. These statements are based on assumptions concerning commodity
prices, drilling results, production costs, market conditions and the Company's
future performance that management believes are reasonable based on currently
available information; however, management's assumptions are subject to a wide
range of business risks, and there is no assurance that these goals and
projections can or will be met. Further information is available in the
Company's filings with the Securities and Exchange Commission, which are
incorporated by this reference as though fully set forth herein.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit Number
and Description Page
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99.1 Cross Timbers Oil Company News Release Number 98-19 7
99.2 Cross Timbers Oil Company News Release Number 98-20 9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CROSS TIMBERS OIL COMPANY
Date: September 15, 1998 By: LOUIS G. BALDWIN
--------------------------------
Louis G. Baldwin
Senior Vice President and
Chief Financial Officer
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EXHIBIT 99.1
[CROSS TIMBERS OIL COMPANY NEWS RELEASE LETTERHEAD]
NUMBER: 98-19
CROSS TIMBERS OIL PLANS TO DISTRIBUTE ROYALTY TRUSTS;
ADOPTS STOCKHOLDER RIGHTS PLAN
FORT WORTH, TX (AUGUST 26, 1998) - Cross Timbers Oil Company (NYSE-XTO)
today announced that it plans to begin the systematic distribution of royalty
trusts to its stockholders beginning no later than early in the year 2000. The
Company also adopted a stockholder rights plan.
"We plan to attain our goals for 1999 of $4.00 cash flow per share and 36
Mcfe per share," stated Bob R. Simpson, Cross Timbers' Chairman and CEO. "After
achieving those goals, our size will make growing at our historic rate
increasingly more difficult. In order to continue our outstanding growth after
1999 and to unlock the intrinsic value of our premium oil and gas assets, we
plan to systematically distribute selected assets affecting 30 to 40% of the
Company's total assets in the form of royalty trusts beginning no later than
early in the year 2000. Capital structure decisions and operating strategies
over the coming months will be consistent with this plan.
"We believe that long-lived oil and gas reserves with significant upside
potential and name recognition achieve optimum capitalization rates when held in
the form of publicly traded royalty trusts," Simpson added. "Management has
previously formed three royalty trusts: the San Juan Basin Royalty Trust, the
Permian Basin Royalty Trust and Cross Timbers Royalty Trust. All of these
trusts are listed on the NYSE and continue to trade at premiums to exploration
and production companies.
"Our Board believes that the Company's premium quality oil and gas assets
are significantly undervalued and that this plan will achieve values in excess
of double our current stock price," Simpson concluded.
The Company's Board of Directors also approved the declaration of a
dividend distribution of one Preferred Share Purchase Right on each outstanding
share of its Common Stock. Each Right will entitle shareholders to buy one one-
thousandth of a share of newly created Series A Junior Participating Preferred
Stock of the Company at an exercise price of $80. The Rights will be
exercisable if a person or group hereafter acquires 15% or more of the Common
Stock of the Company or announces a tender offer for 15% or more of the Common
Stock. The Board of Directors will be entitled to redeem the Rights at one cent
per Right at any time before any such person hereafter acquires 15% or more of
the outstanding Common Stock.
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CROSS TIMBERS OIL PLANS TO DISTRIBUTE ROYALTY TRUSTS; ADOPTS STOCKHOLDER RIGHTS
PLAN
The Rights are not being distributed in response to any specific effort to
acquire the Company. The Rights are designed to assure that all shareholders of
the Company receive fair and equal treatment in the event of any proposed
takeover of the Company and to guard against partial tender offers, open market
accumulations and other tactics designed to gain control of the Company without
paying all shareholders a fair price.
If a person hereafter acquires 15% or more of the outstanding Common Stock
of the Company, each Right will entitle its holder to purchase, at the Right's
exercise price, a number of shares of Common Stock having a market value at that
time of twice the Right's exercise price. Rights held by the 15% holder will
become void and will not be exercisable to purchase shares at the bargain
purchase price. If the Company is acquired in a merger or other business
combination transaction after a person acquires 15% or more of the Company's
Common Stock, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at that time of twice the Right's exercise price.
The dividend distribution will be payable to shareholders of record on
September 15, 1998. The Rights will expire in ten years. The Rights
distribution is not taxable to shareholders.
Cross Timbers Oil Company is engaged in the acquisition, exploitation and
development of quality, long-lived producing oil and gas properties. The
Company, whose predecessors were established in 1986, completed its initial
public offering in May 1993. Its properties are concentrated in Texas,
Oklahoma, Kansas, New Mexico and Wyoming.
CONTACT: LOUIS G. BALDWIN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CROSS TIMBERS OIL COMPANY
(817) 870-2800
This release can be found at the Company Web site at www.crosstimbers.com
Statements concerning future production, development expenditures, market
values and cash flow are forward-looking statements. These statements are based
on assumptions concerning commodity prices, drilling results and production
costs that management believes are reasonable based on currently available
information; however, management's assumptions and the Company's future
performance are both subject to a wide range of business risks, and there is no
assurance that these goals and projections can or will be met. Further
information is available in the Company's filings with the Securities and
Exchange Commission, which are incorporated by this reference as though fully
set forth herein.
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EXHIBIT 99.2
[CROSS TIMBERS OIL COMPANY NEWS RELEASE LETTERHEAD]
NUMBER: 98-20
CROSS TIMBERS DISCLOSES ADDITIONAL DETAILS
ABOUT ROYALTY TRUST PLAN
FORT WORTH, TX (SEPTEMBER 9, 1998) - Cross Timbers Oil Company's (NYSE-XTO)
Chairman and Chief Executive Officer Bob R. Simpson today discussed at the
Lehman Brothers Energy Conference additional details about the Company's
recently announced plans to begin systematic distributions of royalty trust
units. The royalty trust units will represent a dividend of assets of the
Company.
The Company anticipates systematic distributions to begin no later than
early 2000. Depending on interim commodity prices, market conditions and other
factors, distributions could begin mid-1999. The trust units will be marketable
securities and are expected to be listed on the New York Stock Exchange. The
trust units are expected to be distributed on a quarterly basis at an initial
rate of $2.00 per common share in market value of trust units annually.
The Company expects to meet its 1999 cash flow per share goal of $4.00 and
reserves per share goal of 36 Mcfe (assuming $18.00 per barrel of oil and $2.20
per Mcf of gas, net to the Company). The debt per Mcfe goals will remain
unchanged at 40 cents. And, most importantly, Cross Timbers can continue during
2000 and beyond implementing the consistent formula for value creation
successfully utilized in the past, while providing a higher valuation for a
substantial portion of its existing assets.
The Company expects to distribute over a period of years as much as 30% to
40% of currently held assets. The Company intends to form three separate
royalty trusts over time: one for the Hugoton area, one for the San Juan Basin
area and one for the Permian Basin area. All of these trusts will have the
attributes required for a well-regarded royalty trust -- long-lived, "name-
brand" properties with the upside potential sufficient to maintain a consistent
reserve base. Trusts with these attributes have historically traded at 10 to 12
times cash flow. Since independent energy companies have historically traded at
lesser cash flow multiples, the combined securities will have a higher market
capitalization.
The royalty trusts will allow the Company to systematically monetize a
portion of its growth going forward. The remaining Company will continue its
growth strategy which, when combined with royalty trust distributions, will
provide consistent outstanding returns to shareholders. The
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CROSS TIMBERS DISCLOSES ADDITIONAL DETAILS ABOUT ROYALTY PLAN
Company will be an aggressive buyer and developer of properties that meet its
acquisition criteria in order to continue to grow its reserve base.
"Importantly, this strategy of asset distribution will facilitate the
Company's continued growth in shareholder value with its proven, low-risk
strategy," stated Simpson. "Our observation is that most independents, as they
grow larger, have adopted increasingly risky strategies to try to maintain
meaningful growth rates, with generally disappointing results. We are not going
down that road.
"We have always put investor value first, and we believe that this plan
will at least double the value of our current stock price, while providing an
exciting approach to the future for further shareholder returns," Simpson
concluded.
Cross Timbers Oil Company is engaged in the acquisition, exploitation and
development of quality, long-lived producing oil and gas properties. The
Company, whose predecessors were established in 1986, completed its initial
public offering in May 1993. Its properties are concentrated in Texas,
Oklahoma, Kansas, New Mexico and Wyoming.
CONTACT: LOUIS G. BALDWIN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CROSS TIMBERS OIL COMPANY
(817) 870-2800
This release can be found at the Company Web site at www.crosstimbers.com
Statements concerning future production, development expenditures, market
values, cash flow and planned royalty trust distributions are forward-looking
statements. These statements are based on assumptions concerning commodity
prices, market conditions, drilling results, production costs and the Company's
future performance that management believes are reasonable based on currently
available information; however, management's assumptions and the Company's
future performance are both subject to a wide range of business risks, and there
is no assurance that these goals and projections can or will be met. Further
information is available in the Company's filings with the Securities and
Exchange Commission, which are incorporated by this reference as though fully
set forth herein.
