<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Belco Oil & Gas Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[BELCO LOGO]
BELCO OIL & GAS CORP.
767 FIFTH AVENUE, 46TH FLOOR
NEW YORK, NEW YORK 10153
(212) 644-2200
April 2, 1998
Dear Shareholders:
On behalf of your Board of Directors and management, I cordially invite you
to attend the 1998 Annual Meeting of Shareholders of Belco Oil & Gas Corp. to be
held on Wednesday, May 13, 1998, at 11:00 a.m. New York time, at 522 Fifth
Avenue (at 44th Street), 7th Floor, Rooms LPR 1 & 2, New York, New York.
The principal items of business will be the election of seven directors and
the ratification of Arthur Andersen LLP as independent accountants.
Information about the nominees as well as other important information is
set forth in the accompanying Notice of Annual Meeting and Proxy Statement,
which you are urged to read.
It is important that your shares be represented at the meeting whether or
not you plan to attend and regardless of the number of shares you own.
Accordingly, please sign, date and mail promptly the enclosed proxy in the
return envelope.
Thank you for your continued support.
Sincerely,
ROBERT A. BELFER
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
[BELCO LOGO]
BELCO OIL & GAS CORP.
767 FIFTH AVENUE, 46TH FLOOR
NEW YORK, NEW YORK 10153
(212) 644-2200
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 13, 1998
TO OUR SHAREHOLDERS:
The 1998 Annual Meeting of Shareholders (the "Annual Meeting") of Belco Oil
& Gas Corp., a Nevada corporation (the "Company"), will be held on Wednesday,
May 13, 1998, at 11:00 a.m., New York time at 522 Fifth Avenue (at 44th Street),
7th Floor, Rooms LPR 1 & 2, New York, New York, for the following purposes:
1. To elect seven directors of the Company to hold office until the next
annual meeting of shareholders and until their respective successors are
duly elected and qualified;
2. To ratify the Board of Directors' appointment of Arthur Andersen LLP.,
independent public accountants, as the Company's auditors for the year
ending December 31, 1998; and
3. To transact such other business as may properly be brought before the
meeting or any adjournment(s) thereof.
Holders of record of Belco Oil & Gas Corp. Common Stock at the close of
business on March 27, 1998, will be entitled to notice of and to vote at the
meeting or any adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. Shareholders who do
not expect to attend the meeting are requested to sign and return the enclosed
Proxy, for which a postage-paid, return envelope is enclosed. The Proxy must be
signed and returned in order to be counted.
By Order of the Board of Directors,
MYRA TUROFF
Secretary
New York, New York
April 2, 1998
<PAGE> 4
[BELCO LOGO]
BELCO OIL & GAS CORP.
---------------------
PROXY STATEMENT
---------------------
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1998
GENERAL INFORMATION
The enclosed proxy (the "Proxy") is solicited by and on behalf of the Board
of Directors of Belco Oil & Gas Corp., a Nevada corporation (the "Company" or
"Belco"), to be used at the 1998 Annual Meeting of its Shareholders (the "Annual
Meeting") to be held on Wednesday, May 13, 1998 at 11:00 a.m. New York time at
522 Fifth Avenue (at 44th Street), 7th Floor, Rooms LPR 1 & 2, New York, New
York, or at any adjournment(s) thereof. The mailing address of the principal
executive offices of the Company is 767 Fifth Avenue, 46th Floor, New York, New
York 10153.
This Proxy Statement and the related Proxy are first being mailed to the
shareholders of the Company on or about April 10, 1998.
The enclosed Proxy, even though executed and returned, may be revoked at
any time prior to the voting of the Proxy (a) by execution and submission of a
revised Proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation, the
shares represented by the Proxies will be voted at the Annual Meeting in
accordance with the instructions specified thereon.
The Company's Secretary will appoint inspectors of election to tabulate all
votes and to certify the results of all matters voted upon at the Annual
Meeting.
The Board of Directors has established March 27, 1998 as the record date
(the "Record Date") to determine shareholders entitled to notice of and to vote
at the Meeting. At the close of business on the Record Date, 31,584,400 shares
of the Company's common stock, par value $0.01 per share (the "Common Stock"),
were outstanding. Holders of record at the close of business on the Record Date
of Belco's Common Stock will be entitled to one vote per share on all maters
submitted to the meeting. Holders of record at the close of business on the
Record Date of Belco's 6 1/2% Convertible Preferred Stock, par value $0.01 per
share (the Preferred Stock") have no voting rights. The holders of a majority of
the outstanding shares of Common Stock, present in person or by Proxy, will
constitute a quorum for the transaction of business at the Annual Meeting. There
are no other voting securities outstanding.
The Company's Annual Report to Shareholders for the year ended December 31,
1997, including 10-K and financial statements, is being mailed herewith to all
shareholders entitled to vote at the Annual Meeting. The Annual Report does not
constitute a part of the proxy soliciting material.
The cost of any solicitation of Proxies will be borne by the Company. In
addition to solicitation by use of the mails, certain officers and regular
employees of the Company may solicit the return of Proxies by telephone,
telegraph or personal interview. The Company will request banks and brokers or
other similar agents or fiduciaries to transmit the proxy materials to the
beneficial owners for their voting instructions and will reimburse them for
their expenses in doing so.
<PAGE> 5
ELECTION OF DIRECTORS
At the Annual Meeting, seven directors are to be elected to hold office
until the next succeeding annual meeting of the shareholders and until their
respective successors have been elected and qualified. All of the nominees are
currently directors of the Company. Proxies cannot be voted for a greater number
of persons than the number of nominees named. Election of directors shall be
effective upon receiving the affirmative vote of the holders of a majority of
the Common Stock present or represented by Proxy and entitled to vote at the
Annual Meeting. Under Nevada law, an abstention would have the same effect as a
vote against this proposal, but a broker non-vote would not be counted for
purposes of determining whether a majority has been achieved. Shareholders may
not cumulate their votes in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR
ELECTION TO THE BOARD OF DIRECTORS.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed Proxy will be voted for the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed Proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors. The following
information regarding the nominees, their principal occupations, employment
history and directorships in certain companies is as reported by the respective
nominees.
GRAHAM ALLISON, 58
Director since 1996
Dr. Allison is the Douglas Dillon Professor of Government, Harvard
University. Until March 1994, he served as Assistant Secretary of Defense for
Policy and Plans and continues to serve as Special Advisor to the Secretary of
Defense. From 1977 to 1989, Dr. Allison was Dean of Harvard's John F. Kennedy
School of Government. He was a founding member of the Trilateral Commission and
a Director of the Council on Foreign Relations. He also formerly served as a
Director of the Getty Oil Company, New England Securities and the Taubman
Companies.
DANIEL C. ARNOLD, 68
Director since 1996
Mr. Arnold practiced law with the firm of Vinson & Elkins, L.L.P. in
Houston, Texas from 1953 until 1983. From January 1983 through April 1988, Mr.
Arnold served as Director, and as President and later Chairman of First City
Bancorporation of Texas, Inc. Mr. Arnold held a number of positions, including
serving as Chairman of the Board and Chief Executive Officer of Farm & Home
Financial Corporation and its wholly owned subsidiary, Farm and Home Savings
Association from February 1989 to April 1991. Currently, Mr. Arnold serves as
Director of the Parkway Company and U.S. Physical Therapy, Inc., and is engaged
primarily in managing personal investments.
ROBERT A. BELFER, 63
Director since 1996
Since March 1996 Mr. Belfer has been Chairman of the Board and Chief
Executive Officer of the Company. From March 1996 to April 1, 1997, Mr. Belfer
was also President of the Company. Mr. Belfer began his career at BPC in 1958
and became Executive Vice President in 1964, President in 1965 and Chairman of
the Board in 1984. BPC was an independent oil and gas producer in the United
States and abroad, which went public in 1959. It was one of the larger
independent oil and gas companies in the United States and was included in
Fortune's listing of the 500 largest industrial companies in the United States
prior to merging with InterNorth, Inc. (now Enron Corp.) in 1983. Following the
merger, Mr. Belfer became Chief Operating Officer of BelNorth Petroleum Corp., a
combination of oil and gas producing operations of BPC and InterNorth. He
resigned from his position with InterNorth in 1986 and pursued personal
investments. In April 1992, Mr. Belfer founded the Company. In addition to his
position at the Company, Mr. Belfer serves on
2
<PAGE> 6
the boards of Enron Corp. and NAC Re Corporation. Mr. Belfer received his
undergraduate degree from Columbia College (A.B. 1955) and a law degree from the
Harvard Law School (J.D. 1958).
LAURENCE D. BELFER, 31
Director since 1996
Mr. Belfer is Director, President and Chief Operating Officer of Belco. Mr.
Belfer joined the Company as Vice President in September 1992. He was promoted
to Executive Vice President in May 1995 and Chief Operating Officer in December
1995 and was named President in April 1997. He is a founder and Chairman of
Harvest Management, Inc., a money management firm. Mr. Belfer graduated from
Harvard University (B.A. 1988) and from Columbia Law School (J.D. 1992).
ALAN D. BERLIN, 58
Director since 1996
Mr. Berlin is a partner in the law firm of Aitken Irvin Lewin Berlin
Vrooman & Cohn, LLP, where he specializes in international energy matters,
taxation and corporate law. For over five years prior to joining the firm in
1995, he was engaged in the private practice of law. Mr. Berlin was previously a
special consultant to the United Nations Department of Technical Cooperation for
Development and the Center for Transnational Corporations (1989-1994). Mr.
Berlin has been appointed an Honorary Associate of the Centre for Petroleum and
Mineral Law and Policy at the University of Dundee, Scotland, and is a member of
the Association of International Petroleum Negotiators. Mr. Berlin was employed
in various positions with BPC from 1977 to 1985 with his last position being
President of BPC Peru. Mr. Berlin also serves as a Director and Secretary of
Chaparral Resources, Inc.
JACK SALTZ, 66
Director since 1996
Mr. Saltz is a private investor in oil and gas, real estate development and
other industries. He is President of OTS Corp., a real estate management
company. He is also President of Highpro Corp., a firm that invests in oil and
gas exploration projects. Mr. Saltz was a major stockholder of BPC and served
BPC in many capacities including Director and Senior Vice President.
GEORGIANA SHELDON-SHARP, 74
Director since 1996
Ms. Sheldon-Sharp has over 30 years of experience in the executive and
legislative branches of the federal government, as well as politics and private
business. Her areas of expertise include defense, foreign affairs and fossil and
nuclear energy. She served as Acting Chairman and Commissioner of the FERC from
1977 to 1985 and served on the Board of Directors of Enron Corp. from 1985 to
1993. Ms. Sheldon-Sharp served on the Board of Trustees of Keuka College and the
Federal Woman's Award, Inc. and is presently a member of the Executive Committee
of the United States Energy Association World Energy Conference.
Laurence D. Belfer is the son of Robert A. Belfer. Jack Saltz is the
brother-in-law of Robert A. Belfer and the uncle of Laurence D. Belfer.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held four regularly scheduled meetings and one
telephonic meeting during the Company's fiscal year ended December 31, 1997. The
Board of Directors has standing audit, compensation, executive and stock option
committees.
Audit Committee. The Audit Committee, which currently consists of Graham
Allison, Daniel C. Arnold and Georgiana Sheldon-Sharp, is responsible for
recommending to the Board of Directors each year the engagement of a firm of
independent auditors to review the Company's accounting and internal control
systems and principal accounting policies and procedures and overseeing the
entire independent audit
3
<PAGE> 7
function. The Audit Committee met three times during the fiscal year ended
December 31, 1997 and met once during the first quarter of 1998.
Compensation Committee. The Compensation Committee, which currently
consists of Robert A. Belfer, Alan D. Berlin and Jack Saltz, is responsible for
determining the salaries of the officers of the Company. The Compensation
Committee met one time during the fiscal year ended December 31, 1997 and met
one time during the first quarter of 1998.
Executive Committee. The Executive Committee, which currently consists of
Robert A. Belfer, Laurence D. Belfer and Jack Saltz, is responsible for aiding
and assisting the Company's management in the day-to-day operation of the
Company. The Executive Committee met one time during the fiscal year ended
December 31, 1997.
Stock Option Committee. The Stock Option Committee, which currently
consists of Alan D. Berlin and Jack Saltz, is responsible for the administration
of the Stock Incentive Plan and the Performance Unit Plan. The Stock Option
Committee met one time during the fiscal year ended December 31, 1997 and took
action by unanimous written consent 13 times in 1997.
During the year ended December 31, 1997, each Director attended at least
75% of the total number of meetings of the Board and the committees on which the
Director served.
4
<PAGE> 8
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The table below sets forth as of the Record Date (i) the name and address
of each person known by management to own beneficially more than 5% of the
Company's outstanding Common Stock, the number of shares beneficially owned by
each such shareholder and the percentage of outstanding shares owned and (ii)
the number and percentage of outstanding shares of Common Stock and Preferred
Stock beneficially owned by each of the Company's director nominees and
executive officers listed in the Summary Compensation Table below and by all
directors and executive officers of the Company as a group. Unless otherwise
noted, the persons named below have sole voting and investment power with
respect to such shares.
The Company knows of no one who beneficially owns in excess of five percent
of a class of the Company's Common Stock except as set forth in the table below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNERSHIP AS OF PERCENT OF
OF STOCK BENEFICIAL OWNER MARCH 27, 1998(1) CLASS
-------------- ------------------- -------------------------- ----------
<S> <C> <C> <C>
Common ROBERT A. BELFER** 12,876,933(2)(3) 40%
Convertible Preferred 767 Fifth Avenue, 46th Floor 540,000(4) 13%
New York, New York 10153
Common RENEE E. BELFER 5,882,179(5) 18.62%
767 Fifth Avenue, 46th Floor
New York, New York 10153
Common LAURENCE D. BELFER** 2,690,296(6) 8.51%
767 Fifth Avenue, 46th Floor
New York, New York 10153
Common JACK SALTZ** 2,112,580(7)(8)(9)(10) 6.67%
Convertible Preferred 767 Fifth Avenue, 46th Floor 60,000 2%
New York, New York 10153
Common SALTZ INVESTMENT GROUP 1,883,223 5.96%
767 Fifth Avenue, 46th Floor
New York, New York 10153
Common ROBERT A. BELFER DESCENDANT'S TRUST 1,642,040 5.20%
(FORMERLY 1983 GRANTOR TRUST)
767 Fifth Avenue, 46th Floor
New York, New York 10153
Common SHIV K. SHARMA 291,054(11) *
Common PHILIP A. EPSTEIN 209,466(12) *
Common DOMINICK J. GOLIO 136,362(11)(13) *
Common GRAHAM ALLISON** 23,000(9) *
Common DANIEL C. ARNOLD** 29,000(9)(14) *
Common ALAN D. BERLIN** 4,500(9) *
Common GEORGIANA H. SHELDON** 4,000(9) *
Common ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP 18,476,000(15) 58.40%
</TABLE>
- ---------------
* Less than 1%
** Director
(1) Under the regulations of the Securities and Exchange Commission, shares are
deemed to be "beneficially owned" by a person if he or she directly or
indirectly has or shares the power to vote or dispose of such shares,
whether or not he or she has any pecuniary interest in such shares, or if
he or she
5
<PAGE> 9
has the right to acquire the power to vote or dispose of such shares within
60 days, including any right to acquire such power through the exercise of
any option, warrant or right.
(2) Does not include shares owned by Robert A. Belfer's spouse, children or
trusts of which his children or grandchildren are beneficiaries, totaling
10,091,079 shares, of which he disclaims beneficial ownership. Includes
400,000 shares held by Robert A. Belfer as Trustee of the Robert A. and
Renee E. Belfer Family Foundation of which he disclaims beneficial
ownership.
(3) Includes 540,000 shares of Preferred Stock convertible into Common Stock at
a conversion rate of 1.1292 shares of Common Stock for each share of
Preferred Stock.
(4) Includes 140,000 shares of Preferred Stock owned by A & B Investors, Inc.
of which Mr. Belfer is a 50% owner.
(5) Renee E. Belfer is the spouse of Robert A. Belfer and mother of Laurence D.
Belfer. Includes 1,510,338 shares held by trusts of which Renee E. Belfer
is sole trustee and the beneficiaries of which are her children. Includes
1,642,040 shares held by the Robert A. Belfer Descendant's Trust (formerly
the Robert A. Belfer 1983 Grantor Trust ) of which Renee E. Belfer is
co-trustee and has shared voting and investment power.
(6) Includes 557,674 shares held by a trust of which Laurence D. Belfer is sole
trustee and the beneficiaries of which are Laurence D. Belfer and his two
sisters. Includes options to purchase 28,000 shares of Common Stock.
(7) Includes 1,883,223 shares held by Saltz Investment Group, LLC, a limited
liability company of which Mr. Saltz is sole managing director and 150,000
shares held by the Jack and Anita Saltz Foundation, Inc. of which Mr. Saltz
is the trustee.
(8) Does not include 259,654 shares held by trusts of which Mr. Saltz's wife is
trustee and the beneficiaries of which are his children, and of which he
disclaims beneficial ownership.
(9) Includes options to purchase 3,000 shares of Common Stock pursuant to the
1996 Nonemployee Directors' Stock Option Plan.
(10) Includes 60,000 shares of Preferred Stock convertible into Common Stock at
a conversion rate of 1.1292 shares of Common Stock for each share of
Preferred Stock.
(11) Includes options to purchase 13,000 shares of Common Stock.
(12) Includes options to purchase 16,000 shares of Common Stock.
(13) Does not include 6,150 shares owned by Dominick J. Golio's spouse and
children, of which he disclaims beneficial ownership.
(14) Includes 25,000 shares owned by two limited partnerships of which Mr.
Arnold is the Managing General Partner and has shared voting and investment
power.
(15) Does not include 6,147,213 shares owned by the spouses of the directors and
officers as a group. If included, the total number of shares owned by the
directors and officers as a group would be 24,635,505 which would
constitute 77.87% of the class of stock.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers and
persons who beneficially own more than 10% of the Common Stock to file reports
of ownership and subsequent changes with the Securities and Exchange Commission.
The Company believes that all reports required to be filed by such persons under
Section 16(a) with respect to 1997 transactions have been timely filed, except
amended Form 4's were filed on November 25, 1997, to amend the Form 4's of March
1996, December 1996 and October 1997 of Philip A. Epstein. The number of shares
owned by Mr. Epstein were reported incorrectly due to a typographical error and
were reported immediately following the detection of error.
6
<PAGE> 10
EXECUTIVE COMPENSATION
AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years ending December 31,
1996 and 1997, the cash compensation of (i) the Company's chief executive
officer and (ii) the other four most highly compensated executive officers of
the Company, (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- --------------
SECURITIES
UNDERLYING
RESTRICTED STOCK OPTIONS/SARS ALL OTHER
YEAR SALARY($) BONUS($) AWARDS($) (# OF SHARES) COMPENSATION($)(1)
---- --------- -------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
ROBERT A. BELFER 1997 $179,769 -- -- -- $4,800
Chairman of the Board and 1996 $112,500 -- -- -- --
Chief Executive Officer
LAURENCE D. BELFER 1997 $179,769 -- -- 40,000 $4,800
Director, President, and Chief 1996 $153,569 -- -- 60,000 $4,750
Operating Officer
SHIV K. SHARMA 1997 $206,539 -- -- 15,000 $4,800
Senior Vice President -- 1996 $204,077 -- $ 95,000(2) 30,000 $4,750
Engineering
DOMINICK J. GOLIO 1997 $182,231 $10,000 -- 20,000 $4,800
Vice President -- Finance, Chief 1996 $176,658 -- $475,000(2) 30,000 $1,145
Financial Officer and Treasurer
PHILIP A. EPSTEIN 1997 $204,577 $125,000 -- 30,000 $4,800
Senior Financial and Legal 1996 $153,752 -- $ 76,000(2) 30,000 $4,500
Advisor and General Counsel
</TABLE>
- ---------------
(1) The amounts listed reflect amounts contributed or accrued by the Company on
behalf of the Named Executive Officers under the Company's 401(k) profit
sharing plan.
(2) The amounts listed reflect the value of Restricted Stock awards granted on
March 25, 1996 ($19.00 per share), which vest 20% per year beginning at the
first anniversary date of the grant. Holders of Restricted Stock are
entitled to receive dividends, if and when declared by the Board of
Directors. As of December 31, 1997, fiscal year end, Named Executive
Officers had the following number of shares of restricted stock having a
value as noted: Mr. Sharma 5,000 shares, value $95,000; Mr. Golio 25,000
shares, value $475,000; Mr. Epstein, 4,000 shares, value $76,000.
7
<PAGE> 11
STOCK OPTIONS GRANTED IN 1997 AND YEAR-END VALUES
The following table contains certain information concerning Incentive Stock
Options and Non-Statutory Stock Options to purchase Common Stock granted in
fiscal 1997, pursuant to the Company's 1996 Stock Incentive Plan, to the Named
Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
----------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERMS(2)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) IN 1997 ($/SHARE) DATE 5%($) 10%($)
- --------------------------- ------------- ---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Belfer........... -- -- -- -- -- --
Laurence D. Belfer......... 20,000(3) 3.66% $22.1375 2/28/2007 $721,200 $1,148,400
2,750(3) 0.50% $20.7625 8/19/2007 $ 93,005 $ 48,088
17,250(4) 3.16% $18.8750 8/19/2007 $530,438 $ 844,560
Philip A. Epstein.......... 4,000(3) 0.73% $20.1250 2/28/2007 $ 50,620 $ 208,800
16,000(4) 2.93% $20.1250 2/28/2007 $202,480 $ 35,200
1,025(3) 0.19% $18.8750 8/19/2007 $ 12,172 $ 50,184
8,975(4) 1.64% $18.8750 8/19/2007 $439,416 $ 439,416
Dominick J. Golio.......... 1,000(3) 0.18% $20.1250 2/28/2007 $ 32,780 $ 52,200
4,000(4) 0.73% $20.1250 2/28/2007 $131,120 $ 208,800
3,000(3) 0.55% $18.8750 8/19/2007 $ 92,250 $ 146,880
12,000(4) 2.20% $18.8750 8/19/2007 $269,000 $ 587,520
Shiv K. Sharma............. 1,000(3) 0.18% $20.1250 2/28/2007 $ 32,780 $ 52,200
4,000(4) 0.73% $20.1250 2/28/2007 $131,120 $ 208,800
2,000(3) 0.37% $18.8750 8/19/2007 $ 61,500 $ 97,920
8,000(4) 1.83% $18.8750 8/19/2007 $246,000 $ 391,680
</TABLE>
- ---------------
(1) The options expire 10 years from the date of grant. Twenty percent of the
options will vest on the first and each succeeding anniversary of the date
of the grant.
(2) Calculated based upon the indicated rates of appreciation, compounded
annually, from the date of grant to the end of each option term. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved. The calculation does not take into account the
effects, if any, of provisions of the option plan governing termination of
options upon employment termination, transferability or vesting.
(3) These amounts represent incentive stock options granted under the Company's
1996 Stock Incentive Plan.
(4) These amounts represent non-statutory stock options granted under the
Company's 1996 Stock Incentive Plan.
8
<PAGE> 12
STOCK OPTION YEAR-END VALUES
No options were exercised by the Company's executive officers during the
fiscal year ended December 31, 1997. The following table sets forth information
about the unexercised options to purchase Common Stock held by the Named
Executive Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/97(#) OPTIONS AT 12/31/97($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert A. Belfer................... -- -- -- --
Laurence D. Belfer................. 12,000 88,000 -- $1,250
Philip A. Epstein.................. 6,000 54,000 -- 625
Dominick J. Golio.................. 6,000 44,000 -- 938
Shiv K. Sharma..................... 6,000 39,000 -- 625
</TABLE>
- ---------------
(1) The value of each unexercised in-the-money stock option is equal to the
difference between the closing price of the Common Stock on the New York
Stock Exchange on December 31, 1997 of $18.8125 and the per share exercise
price of the stock option.
TEN-YEAR OPTION REPRICINGS
In August 1997, the Stock Option Committee of the Board of Directors
approved a repricing of stock options of all employees of the Company whose
stock options had an exercise price higher than $20.125. There were 25 employees
holding a total of 101,500 stock options that were repriced.
The following Ten-Year Option Repricings table shows options repriced
during the period March 26, 1996 (inception of the Company) through December 31,
1997, for persons who were executive officers of the Company at the time of the
repricing of such options.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL TERM
SECURITIES MARKET PRICE EXERCISE PRICE REMAINING AT
UNDERLYING OF STOCK AT AT TIME OF DATE OF
DATE OF OPTIONS TIME OF REPRICING NEW EXERCISE REPRICING
REPRICING REPRICED(#) REPRICING($) ($/SH) PRICE($/SH) (YEARS)
--------- ----------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. Bradford Moody....... 8/18/97 10,000 $19.59375 $28.1250 $20.1250 8.7
Vice President -- 8/18/97 2,500 $19.59375 $24.8125 $20.1250 9.2
Land & Legal
Steve Mueller........... 8/18/97 20,000 $19.59375 $27.0000 $20.1250 9.1
Senior Vice President --
Exploration
</TABLE>
DIRECTOR COMPENSATION
Pursuant to the Company's 1996 Nonemployee Directors' Stock Option Plan
(the "Directors' Plan"), directors of the Company who are not officers or
employees of the Company or any of its subsidiaries ("Non-Employee Directors")
receive, as of the date of each annual meeting of the shareholders of the
Company, a nonqualified stock option to purchase 3,000 shares of Common Stock.
Each option has an exercise price equal to the fair market value of the Common
Stock on the New York Stock Exchange on the date of grant. The exercise price
may be paid in cash, in shares of Common Stock having a fair market value equal
to the purchase price thereof, or by a combination of such means of payment. The
number of shares covered by each option and the exercise price per share will be
proportionately adjusted in the event of a stock split, reverse stock split,
stock dividend, or similar capital adjustment effected without receipt of
consideration by the Company. The aggregate number of shares of Common Stock
that may be issued pursuant to the exercise of options granted under the
Directors' Plan cannot, on the date of the grant of any such option, exceed an
amount equal to 0.5% of the number of then outstanding shares of Common Stock.
Shares issuable pursuant
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<PAGE> 13
to the Directors' Plan may be authorized but unissued shares or reacquired
shares, and the Company may purchase shares required for this purpose. Effective
as of the Company's first Board of Directors Meeting, dated April 24, 1996, each
of Messrs. Arnold, Berlin, Saltz, Dr. Allison and Ms. Sheldon-Sharp were granted
an option to purchase 3,000 shares of Common Stock at an exercise price of
$29.00 per share (the fair market value of the Common Stock on the New York
Stock Exchange on such date) pursuant to the Directors' Plan. On May 13, 1997,
each of Messrs. Arnold, Berlin, Saltz, Dr. Allison and Ms. Sheldon-Sharp were
granted an option to purchase 3,000 shares of Common Stock at an exercise price
of $22.9375 per share (the fair market value of the Common Stock on the New York
Stock Exchange on such date) pursuant to the Directors' Plan.
Options granted under the Directors' Plan have a maximum term of ten years
and vest in three equal annual installments beginning on the first anniversary
of the date of grant. Upon the occurrence of a "Change of Control" (defined in
the Directors' Plan) while a Non-Employee Director is a member of the Board of
Directors, or in the event that a Non-Employee Director's membership on the
Board of Directors terminates by reason of death or disability, each option then
held by such Non-Employee Director will be exercisable in full.
During 1997, each Non-Employee Director of the Company received an annual
retainer of $10,000 payable quarterly in arrears, and was reimbursed for
expenses incurred in attending meetings of the Board of Directors and committees
thereof.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE REPORTS ON EXECUTIVE
COMPENSATION
The Compensation Committee's principal duties are to determine the salaries
of the officers of the Company.
Executive Compensation. The Committee believes that compensation of
executive officers should not only be adequate to attract, motivate and retain
competent executive personnel, but should also serve to align the interests of
executive officers with those of shareholders. To achieve these ends, in
addition to a competitive base salary, the Company has adopted long-term
incentive compensation plans that are dependent upon the performance of the
Company's Common Stock. The Compensation Committee does not currently intend to
award levels of compensation that would result in a limitation on the
deductibility of a portion of such compensation for federal income tax purposes
pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"); however, the Compensation Committee may authorize compensation that
results in such limitations in the future if it determines that such
compensation is in the best interest of the Company.
Base Salary. While the Committee believes it is crucial to provide salaries
within a competitive market range in order to attract and retain managers who
are highly talented, the Committee has established a philosophy of generally
providing moderate base salaries together with significant incentive
compensation opportunities, primarily in the form of restricted stock and
incentive stock options, in order to strongly emphasize pay-for-performance and
align executive and shareholder economic returns. The specific competitive
markets considered in determining base salaries depend on the nature and level
of the positions in question and the labor markets from which qualified
individuals would be recruited. The Committee intends to review the executive
group's salaries on an annual basis and adjust them if they deviate
substantially from salary levels implied by market data.
Performance Unit Plan and Stock Option Plan. The Performance Unit Plan and
Stock Incentive Plan are administered by the Stock Option Committee.
Performance Unit Plan The Company's Performance Unit Plan authorizes
the Stock Option Committee to award Performance Units to employees of the
Company prior to the beginning of each Plan Year. No employee may receive
more than 250,000 Performance Units in any one Plan Year. A Performance
Unit has a Performance Period which is four consecutive calendar years
(sixteen quarters) beginning with and including the calendar year for which
the Performance Unit is granted. Each Performance Unit has an initial value
of $1.00. The payment value at the end of the Performance Period (or any
other period as may be determined by the Stock Option Committee) will be
based on the
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<PAGE> 14
Company's Total Shareholder Return Ranking Position compared to that of a
Peer Group. If the Company ranks first, the Performance Unit is worth $2.00
and if the Company ranks lower than sixth the Performance Unit has no
value. The Company must rank third to maintain the initial value of $1.00.
No Performance Units were granted in 1997.
Stock Incentive Plan The Company's Stock Incentive Plan authorizes the
Stock Option Committee to award (the "Award") incentive stock options,
nonstatutory stock options and restricted stock to employees of the
Company. The aggregate maximum number of shares that may be issued pursuant
to Awards granted under the Plan is 2,250,000 shares of Common Stock. The
Committee determined that this number was comparable, as a percentage of
outstanding stock, to the number of shares available for grant under stock
option plans of the companies comprising the Peer Group. The Committee
generally grants incentive stock options; however, in the case of the value
of a grant of stock options totaling more than $500,000, the Stock Option
Committee will grant the remainder as non-statutory stock options both at
an exercise price equal to the fair market value of the Company's Common
Stock on the date of the grant. Options generally have ten-year terms, with
exercise restrictions that lapse over a five-year period.
Repricing of Stock Options. On August 19, 1997, the Stock Option
Committee of the Board of Directors approved a repricing of stock options
of certain employees of the company. The Committee reviewed the exercise
prices of all stock options in light of the current stock trading price.
The Committee believed that in order to retain and motivate employees it
would be in the best interest of the Company to reprice all options that
were higher than $20.125. There were 25 employees holding a total of
101,500 stock options that were repriced.
The Stock Option Committee also grants awards of Restricted Stock which are
shares of Common Stock that are subject to forfeiture under the circumstances
specified by the Committee at the time of the award of such shares.
Stock option grants are designed to align the long-term interests of the
Company's employees with those of its shareholders by directly linking
compensation to shareholder return, as well as by enabling employees to develop
and maintain a significant, long-term equity ownership position in the Company.
During 1997, options were granted to Messrs. Laurence D. Belfer, Philip A.
Epstein, Shiv K. Sharma and Dominick J. Golio for the foregoing reasons and to
provide such executive officers with further incentive with respect to the
Company's future performance.
401(k) Plan. Under the Company's 401(k) profit sharing plan, eligible
employees are permitted to defer receipt of up to 15% of their compensation
(subject to certain limitations imposed under the Code). The plan provides that
a 50% match of up to 6% deferred of employee deferrals may be made by the
Company in cash. The amounts held under the plan are to be invested among
various investment funds maintained under the plan in accordance with the
directions of each participant.
Salary deferral contributions are 100% vested. Matching contributions are
vested over a period of five years at the rate of 20% per year. If a participant
terminates employment with the Company after attaining age 65 or by reason of
death or disability, however, the participant will be fully vested in his or her
share of Company matching contributions. Participants or their beneficiaries are
entitled to payment of vested benefits upon termination of employment. In
addition, hardship distributions to participants under the plan depends on the
level of the participant's elective deferrals under the plan, the amount of
company matching contributions made to the plan and the performance of the
investment funds maintained under the plan in which contributions are invested.
11
<PAGE> 15
Chief Executive Officer Compensation. The Company's executive compensation
philosophy for the compensation of the Company's Chief Executive Officer, Robert
A. Belfer, is a competitive, but conservative, base salary.
<TABLE>
<CAPTION>
Compensation Committee Stock Option Committee
<S> <C>
Robert A. Belfer Alan D. Berlin
Alan D. Berlin Jack Saltz
Jack Saltz
</TABLE>
TRANSACTIONS WITH MANAGEMENT AND CERTAIN SHAREHOLDERS
Set forth below is a description of certain transactions entered into
between the Company and certain of its officers, directors and shareholders.
The Company has entered into a substantial portion of its natural gas and
crude oil commodity swap agreements and option agreements with Enron Capital &
Trade Resources Corp. ("ECT"), a wholly owned subsidiary of Enron Corp. Mr.
Robert A. Belfer is a member of the Board of Directors of Enron. These
agreements were entered into in the ordinary course of business of the Company
and are on terms that the Company believes are no less favorable than the terms
of similar arrangements with third parties. Pursuant to the terms of these
agreements the Company paid ECT a net amount of approximately $8,571,000 in
fiscal year 1997. The amount of future payments (as well as whether payments
will be made by the Company to ECT or vice versa) is affected by fluctuations in
energy commodity prices. The Company believes that it and ECT will continue to
enter into similar arrangements throughout 1998.
The Company sells, from time to time, liquids products to ECT on a
competitive basis.
Certain officers and employees of the Company have loans outstanding to the
Company. These loans were made to enable such persons to finance their purchase
of interests in oil and gas properties prior to the Offering. As part of the
Offering such persons were issued shares of Common Stock in exchange for their
interests pursuant to the Combination Agreement (the "Combination"). The loans
remain outstanding and are secured by certain of such shares of Common Stock.
The loans have been modified to provide for final maturity after three years
from the date of the Combination, which occurred on March 29, 1996, and all
outstanding principal will be due at such date. The loans may be prepaid at any
time at the option of the borrower. Each borrower will have the option of
repaying such loan in cash or with shares of Common Stock. If a borrower chooses
to repay with Common Stock, the shares to be used for such purpose will be
valued based on the then fair market value of the Common Stock. The interest
rate on each of the loans is at the prime rate, as announced from time to time,
of The Chase Manhattan Bank. Interest will accrue during the first two years of
such loans but the payment of interest will not be required during such period.
After such two year period, cash payments of interest will be required quarterly
until the loan is repaid. The officers of the Company who have received such
loans, and the principal amounts of their loans plus accrued interest as
applicable as of December 31, 1997 are as follows: Dominick J.
Golio -- $314,742.23, Shiv K. Sharma -- $445,728.90, George
Sheffer -- $115,786.75 and Mel Fife -- $31,452.66.
The officers of the Company have other business positions that they will
continue to pursue independent of the Company; however, none of these interests
are related to the oil and gas business of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Robert A.
Belfer, Alan D. Berlin and Jack Saltz. During 1997 there were no compensation
committee interlocks between the Company and any other entity. For a description
of transactions in 1997 with Robert A. Belfer, see "Transactions with Management
and Certain Shareholders" above.
12
<PAGE> 16
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
As required by applicable rules of the Securities and Exchange Commission,
the performance graph shown below was prepared based on the following
assumptions:
1. $100 was invested in the Company's Common Stock, the S&P 500 and the
Peer Group (as defined below) on March 25, 1996 at the initial public
offering price of the Company's Common Stock of $19.00 per share and the
closing price of the stocks comprising the S&P 500 and the Peer Group,
respectively, on such date. The Company's Common Stock began trading on
the New York Stock Exchange on March 26, 1996.
2. Peer Group investment is weighted based upon the market capitalization
of each individual company within the Peer Group at the beginning of the
period.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's current Peer Group are as
follows: Barrett Resources Corporation, Cabot Oil & Gas Corp., Chesapeake Energy
Corp., Cross Timbers Oil Co., Forcenergy Gas Exploration, Newfield Exploration
Co., Parker and Parsley Petroleum Co., Seagull Energy Corp., United Meridien
Corp., Union Pacific Resources Company, Vintage Petroleum Inc.
BELCO OIL & GAS CORP.
COMPARATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) BELCO PEER GROUP S&P 500
<S> <C> <C> <C>
3/26/96 100.00 100.00 100.00
12/31/96 144.08 144.56 117.82
12/31/97 99.01 112.80 157.13
</TABLE>
13
<PAGE> 17
RATIFICATION OF APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Arthur Andersen LLP, independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 1998. The Company is advised that no member of Arthur Andersen LLP
has any direct or material indirect financial interest in the Company or, during
the past three years, has had any connection with the Company in the capacity of
promoter, underwriter, voting trustee, director, officer or employee.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by Proxy and entitled to vote at the Annual Meeting. Under Nevada
law, an abstention would have the same effect as a vote against this proposal,
but a broker non-vote would not be counted for purposes of determining whether a
majority has been achieved.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THIS APPOINTMENT.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting, will be
offered the opportunity to make a statement if such representative desires to do
so and will be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the person voting the Proxy.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for inclusion in the proxy
material and or presentation at the Company's 1999 Annual Meeting of
Shareholders must forward such proposal to the Secretary of the Company at the
address indicated in this Proxy Statement, so that the Secretary receives it no
later than December 11, 1998.
By Order of the Board of Directors
MYRA TUROFF
Secretary
April 2, 1998
14
