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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-12534
NEWFIELD EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
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STATE OF INCORPORATION: DELAWARE I.R.S. EMPLOYER IDENTIFICATION NO. 72-1133047
363 NORTH SAM HOUSTON PARKWAY,
SUITE 2020,
HOUSTON, TEXAS 77060
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: 281-847-6000
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Securities Registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, Par Value $0.01 Per Share New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred New York Stock Exchange
Stock,
Par Value $0.01 per Share
6 1/2% Cumulative Quarterly Income Convertible Preferred New York Stock Exchange
Securities,
Series A, of Newfield Financial Trust I
(and the guarantee of the registrant with respect thereto)
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $873,499,000 as of February 29, 2000 (based on
the last sale price of such stock as quoted on the New York Stock Exchange).
As of February 29, 2000 there were 41,864,050 shares of the registrant's
common stock, par value $0.01 per share, outstanding.
Documents incorporated by reference: Proxy Statement of Newfield
Exploration Company for the Annual Meeting of Stockholders to be held May 4,
2000, which is incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 4A. Executive Officers.......................................... 11
PART II
Item 5. Market for Common Stock and Related Stockholder Matters..... 12
Item 6. Selected Financial Data..................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
Item 7a. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 29
Item 8. Financial Statements and Supplementary Data................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 61
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 61
Item 11. Executive Compensation...................................... 61
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 61
Item 13. Certain Relationships and Related Transactions.............. 61
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 61
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All references in this Form 10-K to "Newfield," "we", "us" or "our" are to
Newfield Exploration Company and its subsidiaries. Unless otherwise noted, all
information in this Form 10-K relating to oil and gas reserves and the estimated
future net cash flows attributable to those reserves are based on estimates
prepared by Newfield and are net to Newfield's interest. Explanations of some
commonly used oil and gas terms can be found under the caption "Commonly Used
Oil and Gas Terms" at the end of Item 7 of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
Newfield is an independent oil and gas company engaged in the exploration,
development and acquisition of crude oil and natural gas properties. At year-end
1999, we had proved reserves of 594.8 Bcfe consisting of 440.2 Bcf of natural
gas and 25.8 MMBbls of oil and condensate. Our proved reserve mix shifted in
1999 primarily due to acquisitions of oil properties. As of year-end 1999,
natural gas reserves accounted for 74% of our proved reserves, compared to 82%
at year-end 1998. Approximately 87% of our reserves at such date were proved
developed and 94% were located in the U.S.
Newfield was founded in 1989 and acquired its first oil and gas reserves in
1990. Since that time, we have grown rapidly. Our initial focus area was the
Gulf of Mexico. Over the last several years we have expanded our areas of
operation to include the U.S. onshore Gulf Coast, offshore Australia and China's
Bohai Bay. Our growth strategy has remained unchanged and is based on the
following elements:
- Growing reserves through drilling of a balanced portfolio
- Balancing exploration with the acquisition and exploitation of proved
properties
- Focusing on select geographic areas
- Controlling operations and costs
- Using 3-D seismic data and other advanced technologies
- Attracting and retaining a quality workforce through equity ownership and
other incentives
DRILLING PROGRAM. We have an active, technologically driven drilling
program conducted by four multi-disciplined teams focused in the Gulf of Mexico,
the U.S. onshore Gulf Coast and select international areas. We balance our
drilling program between a smaller number of higher risk, higher potential
prospects and a greater number of lower risk, low and moderate potential
prospects. We continuously evaluate opportunities and have a substantial
inventory of prospects, including 20-30 exploration/exploitation wells that we
expect to drill in the U.S. in 2000. We expect that these wells will be split
fairly evenly between onshore and offshore prospects. In addition, we also
expect to drill four to six international exploration wells and at least two
infill wells in our producing fields offshore Australia. In 1999, we drilled 12
successful wells from our 19 well exploration/exploitation drilling program.
BALANCE. Since inception, we have added 43% of our proved reserves through
acquisitions, 33% through exploration and 24% by exploitation and development of
acquired properties. Our exploration, acquisition and exploitation and
development activities often overlap and are complimentary in a number of ways.
Proved properties we acquire typically have exploration or exploitation
potential. Acquisitions can also be used to increase our presence in an area or
to create the infrastructure to allow us to capture other opportunities at a
competitive advantage. In our exploration efforts, we use information gathered
while evaluating production on acquisition candidates and adjacent acreage as
appropriate. In addition, a successful exploratory prospect may reveal similar
untested reserve potential on an adjacent property, making its purchase
attractive.
Exploration. We acquire exploration prospects through proved property
acquisitions, farm-ins from other operators and federal and state lease sales.
During 1999, we invested $51.5 million in exploration
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activities. The largest component of that expenditure was in the Gulf of Mexico.
This compares to an exploration expenditure of $65.3 million in 1998.
Acquisitions. We actively pursue the acquisition of proved oil and gas
properties in our focus areas. We use the same team approach used in our
drilling activities to evaluate acquisition opportunities. Our extensive
seismic, land and production databases, along with regional geological
interpretations, supplement the information provided by potential sellers.
During 1999, we invested $86 million on the acquisition of properties in the
Gulf of Mexico, U.S. onshore Gulf Coast and offshore Australia.
Development. In 1999, we invested $72.3 million in development projects,
including exploitation and development drilling and well recompletions. In 1998,
we spent $155.8 million on development projects.
GEOGRAPHIC FOCUS. One of our founding and continuing business principles is
focus. We believe that long-term success requires extensive knowledge of
geologic and operating conditions in the areas where we operate. Because of this
belief, we focus our efforts on a limited number of geographic areas where we
can use our core competencies, such as geological and geophysical analyses
through the application of 3-D seismic data and other advanced technologies,
expertise in marine operations and significant influence on operations. We also
believe that geographic focus allows us to make the most efficient use of our
capital and staff resources because we can manage a large asset base with a
relatively small number of employees and add successful wells and proved
property acquisitions at relatively low incremental costs. Our current focus
areas include the Gulf of Mexico, U.S. onshore Gulf Coast and select
international areas.
Gulf of Mexico. We believe that our focus in the Gulf of Mexico is the
foundation for our continued growth. The Gulf of Mexico is a prolific oil and
gas province, accounting for approximately 25% of domestic natural gas
production, and we believe that it has significant remaining undiscovered
reserve potential. Our management and technical personnel have extensive
experience in the Gulf of Mexico, and our geographic focus assists us in
controlling operating and administrative costs. The Gulf of Mexico has a
substantial existing infrastructure, including gathering systems, platforms and
pipelines, and numerous drilling and service companies maintain a substantial
presence there, facilitating cost effective operations and timely development of
discoveries.
Onshore Gulf Coast. As a natural extension of our offshore efforts, we
established onshore Gulf Coast operations in 1995. As of February 29, 2000, we
held an interest in more than 50,000 gross acres onshore. Our onshore efforts
are centered on small geographic regions in South Texas and southern Louisiana.
With similar geologic features, our onshore program will benefit from our core
competencies.
International. We continue to evaluate and pursue new opportunities for
international expansion in areas where we can use our core competencies under an
attractive fiscal regime. We believe these areas include Australia, China and
South America. To date, we have expanded our operations to Australia and China.
In July 1999, we acquired interests in two producing oil fields, Jabiru and
Challis, and 10 exploration and production licenses covering 3.0 million gross
acres in the Timor Sea, offshore Australia. The Jabiru and Challis fields have
cumulative gross production of 100 MMBbls and 50 MMBbls of oil, respectively.
The acquisition included 5,000 square kilometers of 3-D seismic data.
In 1997, we acquired a 35% interest in a production sharing license that
now covers approximately 300,000 acres in the Bohai Bay, offshore China. The
property does not have current production. We plan to drill one exploratory well
on this license in 2000.
CONTROL OF OPERATIONS AND COSTS. We prefer to operate our properties. By
controlling operations, we can better manage production performance, control
operating expenses and capital expenditures, consider the application of
technologies and influence timing. At the end of 1999, we operated 85% of our
total equivalent production. We also use independent contractors for much of our
field operation activities to control costs.
TECHNOLOGY. We use advanced technologies in our exploration and development
activities to help reduce risks and lower costs. At year-end 1999, we held
licenses, or had access to, 3-D seismic surveys covering approximately 3,000
blocks (15.4 million acres) in the Gulf of Mexico, 835 square miles in southern
Louisiana and Texas and 5,000 square kilometers of 3-D seismic data offshore
Australia, including coverage of
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substantially all of the producing fields we operate. In addition, we hold
licenses or have access to more than 380,000 miles of recent vintage
conventional seismic data in the Gulf of Mexico and own a library containing
logs on more than 5,000 wells drilled in our focus areas.
MANAGEMENT AND EMPLOYEES. Another of our founding and continuing business
principles is to provide incentives to, and reward our employees through equity
ownership and performance-based compensation. As of February 15, 2000, our
employees owned or had options to acquire an aggregate of approximately 10% of
our outstanding common stock on a fully diluted basis.
At February 15, 2000, we had 227 employees including 93 Australian
employees who are offshore workers. We believe that our relationships with our
employees are satisfactory.
Our 111 U.S. employees are primarily professionals, including geologists,
geophysicists and engineers. None of our U.S. employees are covered by a
collective bargaining agreement. From time to time, we utilize the services of
independent consultants and contractors to perform various professional
services, particularly in the areas of construction, design, well site
surveillance, permitting and environmental assessment. U.S. field and on-site
production operation services, such as pumping, maintenance, dispatching,
inspection and testing, are generally provided by independent contractors.
We also have 116 employees located in Australia. In addition to our
offshore workers, our Perth, Australia office employs 23 people to manage our
offshore operations. The employment of the offshore employees is covered by
collective bargaining agreements. At December 31, 1999, there were no
significant issues outstanding under these agreements.
MARKETING
We market nearly all of the oil and gas production from properties we
operate for both our account and the account of the other working interest
owners in these properties. Substantially all of our natural gas production is
sold to a variety of purchasers under short-term (less than 12 months) contracts
or 30-day spot gas purchase contracts. Oil sales contracts are short-term and
are based upon field posted prices plus negotiated bonuses. For a list of
purchasers of our oil and gas production that accounted for 10% or more of
consolidated revenue, please see "Major Customers" in Note 1 to the Company's
consolidated financial statements. Because alternative purchasers of oil and gas
are readily available, the Company believes that the loss of any of these
purchasers would not have a material adverse effect on the Company.
COMPETITION
Competition in the oil and gas industry is intense, particularly with
respect to the acquisition of producing properties and proved undeveloped
acreage. For a further discussion of this competitive environment, please see
the information set forth under the caption "Additional Factors Affecting Our
Business" in Item 7 of this Form 10-K.
REGULATION
For a discussion of the significant governmental regulations to which our
business is subject, please see the information set forth under the caption
"Regulation" in Item 7 of this Form 10K.
ADDITIONAL FACTORS AFFECTING OUR BUSINESS
For a discussion of other significant factors that may affect our business,
please see the information set forth under the caption "Additional Factors
Affecting Our Business" in Item 7 of this Form 10-K.
FORWARD-LOOKING STATEMENTS
This Form 10-K includes "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. All statements other than statements of historical facts
included in this document, including statements regarding production targets,
anticipated production rates, planned capital expenditures, the availability of
capital resources to fund capital
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expenditures, estimates of proved reserves, wells planned to be drilled in the
future, our financial position, business strategy and other plans and objectives
for future operations, are forward-looking statements. Although we believe that
the expectations reflected in these forward-looking statements are reasonable,
these statements are based upon assumptions and anticipated results that are
subject to numerous uncertainties. Actual results may very significantly from
those anticipated due to many factors, including drilling results, oil and gas
prices, industry conditions, the prices of goods and services, the availability
of drilling rigs and other support services and the availability of capital
resources. In addition, the drilling of oil and gas wells and the production of
hydrocarbons are subject to governmental regulations and operating risks. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by such
factors.
ITEM 2. PROPERTIES
GENERAL
Our 10 largest properties accounted for approximately 47% of our equivalent
proved reserves at year-end 1999. No single property held more than 9% of our
equivalent proved reserves as of such date, nor did any single property hold
more than 10% of the net present value of proved reserves as of such date.
GULF OF MEXICO. The majority of our proved properties in the U.S. are
located in federal waters offshore Texas and Louisiana. These properties are in
water depths ranging from 45 to 480 feet. For 1999, no single field accounted
for more than 15% of our production. As of December 31, 1999, we owned interests
in 168 leases (669,530 gross acres) and operated 133 platforms, 82 of which were
considered major platforms. Major platforms are those that have six or more
wells or two components of production processing equipment.
U.S. ONSHORE GULF COAST. We currently control more than 50,000 gross acres
in the U.S. onshore regions of South Texas and southern Louisiana. Our largest
producing onshore asset is the Broussard Field in southern Louisiana. Discovered
in 1998, this field is currently producing 40 MMcf/d and 1,000 BOPD. Exploratory
programs are underway in both regions.
In early 2000, we acquired three producing gas fields in South Texas for
$142 million. This represented our largest acquisition ever and provides us with
both production and new drilling opportunities. Net production from this
acquisition is now 35 MMcfe/d. We expect to continue expansion of our onshore
program in the coastal regions of Texas and Louisiana.
INTERNATIONAL. We have expanded our focus to include select international
areas. We currently have operations offshore Australia and China.
In Australia, we own a 50% interest in two producing offshore oil fields
and two related floating production, storage and off-loading vessels. In
addition, we have exploration permits on about 3.0 million gross acres.
In China's Bohai Bay, we own a 35% interest in a production sharing
contract in Block 05/36. This is a 300,000 gross acre area. There is no current
production on the block.
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PROVED RESERVES AND FUTURE NET CASH FLOWS
The following table shows our estimated net proved oil and gas reserves and
the present value of estimated future pre-tax and after-tax net cash flows
related to such reserves as of December 31, 1999. The present value of estimated
future pre-tax and after-tax net cash flows was prepared using year-end oil and
gas prices, discounted at 10% per year.
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PROVED RESERVES
----------------------------------
DEVELOPED UNDEVELOPED TOTAL
--------- ----------- -----
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UNITED STATES:
Oil and condensate (MBbls)................................ 17,123 2,514 19,637
Gas (MMcf)................................................ 376,820 63,353 440,173
Total proved reserves (MMcfe)............................. 479,558 78,434 557,992
Present value of estimated future pre-tax net cash flows
(in thousands)......................................... $884,141
Present value of estimated future after-tax net cash flows
(in thousands)......................................... $713,065
AUSTRALIA:
Oil and condensate (MBbls)................................ 6,133 -- 6,133
Gas (MMcf)................................................ -- -- --
Total proved reserves (MMcfe)............................. 36,798 -- 36,798
Present value of estimated future pre-tax net cash flows
(in thousands)......................................... $ 29,152
Present value of estimated future after-tax net cash flows
(in thousands)......................................... $ 19,454
TOTAL:
Oil and condensate (MBbls)................................ 23,256 2,514 25,770
Gas (MMcf)................................................ 376,820 63,353 440,173
Total proved reserves (MMcfe)............................. 516,356 78,434 594,790
Present value of estimated future pre-tax net cash flows
(in thousands)......................................... $913,293
Present value of estimated future after-tax net cash flows
(in thousands)......................................... $732,519
</TABLE>
There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and in projecting future rates of production and
timing of development expenditures. For a discussion of these uncertainties, see
"Additional Factors Affecting Our Business" under Item 7 of this Form 10-K.
As an operator of domestic oil and gas properties, we have filed Department
of Energy Form EIA-23, "Annual Survey of Oil and Gas Reserves," as required by
Public Law 93-275. There are differences between the reserves as reported on
Form EIA-23 and as reported in this Form 10-K. The differences are attributable
to the fact that Form EIA-23 requires that an operator report on the total
reserves attributable to wells that are operated by it, without regard to
ownership (i.e., reserves are reported on a gross operated basis, rather than on
a net interest basis).
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FINDING COSTS
The following table sets forth certain information regarding the costs
associated with finding, acquiring and developing our proved oil and gas
reserves:
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CAPITALIZED RESERVES COST TO
COSTS(1) ADDED FIND AND DEVELOP(2)
(IN THOUSANDS) (MMCFE) (PER MCFE)
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1995............................................ $ 103,511 102,580 $1.01
1996............................................ 162,315 119,050 1.36
1997............................................ 237,574 190,279 1.25
1998............................................ 304,891 166,475 1.83
1999............................................ 206,157 194,970 1.06
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Five-year period ended December 31, 1999........ $1,014,448 773,354 $1.31
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(1) Capitalized costs represent capitalized expenditures of Newfield as shown in
the immediately following table, other than international acquisition and
exploration costs and interest capitalized.
(2) The cost to find and develop per Mcfe for 1999 and the five-year period
ended December 31, 1999 would have been $1.08 and $1.35, respectively, if we
had included all capitalized expenditures as shown in the immediately
following table.
DEVELOPMENT, EXPLORATION AND ACQUISITION CAPITAL EXPENDITURES
The following table sets forth certain information regarding the
capitalized costs we incurred in the purchase of proved and unproved properties
and in our development and exploration activities:
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YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
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Property acquisition:
Unproved properties -- U.S. ... $ 5,849 $ 3,400 $ 31,541 $ 5,670 $ 10,154
Unproved properties -- Other
International............... -- -- 7,196 -- --
Proved properties -- U.S. ..... 77,673 86,219 30,368 28,480 29,393
Proved
properties -- Australia..... 2,490 -- -- -- --
Exploration -- U.S. ............. 44,332 60,087 59,787 48,525 32,518
Exploration -- Australia......... 3,852 -- -- -- --
Exploration -- Other
International.................. 1,266 1,512 4,908 -- --
Development -- U.S. ............. 70,913 155,185 115,878 79,640 31,446
Development -- Australia......... 1,048 -- -- -- --
Interest capitalized -- U.S. .... 2,376 4,369 3,481 1,508 674
-------- -------- -------- -------- --------
Total capitalized
costs................ $209,799 $310,772 $253,159 $163,823 $104,185
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DRILLING ACTIVITY
The following table sets forth our drilling activity for each year of the
three-year period ended December 31, 1999:
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1999 1998 1997
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GROSS NET GROSS NET GROSS NET
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Exploratory wells:
Productive -- U.S. ...................... 6 3.9 8 4.4 9 6.1
Nonproductive -- U.S. ................... 6 3.1 8 5.8 9 6.2
Nonproductive -- China................... -- -- -- -- 1 0.3
-- --- -- ---- -- ----
Total............................ 12 7.0 16 10.2 19 12.6
== === == ==== == ====
Development wells:
Productive -- U.S. ...................... 7 4.8 17 11.4 18 9.4
Nonproductive -- U.S. ................... 1 0.6 2 0.9 1 0.5
-- --- -- ---- -- ----
Total............................ 8 5.4 19 12.3 19 9.9
== === == ==== == ====
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We were in the process of drilling four gross (2.4 net) exploratory wells at
December 31, 1999.
PRODUCTIVE WELLS
The following table sets forth the number of productive oil and gas wells
in which we owned an interest as of December 31, 1999:
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COMPANY OUTSIDE TOTAL
OPERATED OPERATED PRODUCTIVE
COMPANY WELLS WELLS WELLS
OPERATED ------------- ------------ -------------
PLATFORMS GROSS NET GROSS NET GROSS NET
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Offshore Louisiana
Federal:
Oil................................. 21 60 37.1 7 2.3 67 39.4
Gas................................. 95 114 75.9 52 11.7 166 87.6
State:
Oil................................. 1 1 0.8 -- -- 1 0.8
Gas................................. 2 1 0.7 -- -- 1 0.7
Onshore Louisiana
Oil.................................... -- -- -- -- -- -- --
Gas.................................... -- 4 2.4 3 1.1 7 3.5
Offshore Texas
Federal:
Oil................................. 2 16 8.3 -- -- 16 8.3
Gas................................. 12 22 11.9 4 1.0 26 12.9
Onshore Texas
Oil.................................... -- -- -- -- -- -- --
Gas.................................... -- 1 0.7 -- -- 1 0.7
Offshore Australia
Oil.................................... -- 12 6 -- -- 12 6
Gas.................................... -- -- -- -- -- -- --
--- --- ----- -- ---- --- -----
Total.......................... 133 231 143.8 66 16.1 297 159.9
=== === ===== == ==== === =====
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ACREAGE DATA
The following table shows certain information regarding our developed and
undeveloped lease acreage as of December 31, 1999:
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DEVELOPED ACRES UNDEVELOPED ACRES
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GROSS NET GROSS NET
--------- ------- --------- ---------
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Offshore Louisiana:
Federal waters.......................... 505,810 272,915 30,631 28,566
State waters............................ 3,153 2,426 1,956 1,356
Onshore Louisiana......................... 6,002 3,385 11,505 7,099
Offshore Texas:
Federal waters.......................... 58,860 37,070 69,120 49,968
Onshore Texas............................. 640 477 28,239 21,864
Offshore Australia........................ 431,437 215,719 2,375,373 978,267
Offshore People's Republic of China....... -- -- 312,910 109,519
--------- ------- --------- ---------
Total........................... 1,005,902 531,992 2,829,734 1,196,639
========= ======= ========= =========
</TABLE>
Leases covering approximately 227,432 (80,623 net), 26,337 (19,684 net),
163,429 (73,522 net), 1,147,503 (371,996 net) and 988,582 (566,012 net)
undeveloped acres are scheduled to expire in 2000, 2001, 2002, 2003 and 2004,
respectively.
TITLE TO PROPERTIES
We believe that we have satisfactory title to all of our producing
properties in accordance with generally accepted industry standards. Our
properties are subject to customary royalty interests, liens incident to
operating agreements, liens for current taxes and other burdens that we believe
do not materially interfere with the use of or affect the value of such
properties. The MMS must approve all transfers of record title of or operating
rights on leases located in federal waters of the Gulf of Mexico. The MMS
approval process can in some cases delay the requested transfer for a
significant period of time.
ITEM 3. LEGAL PROCEEDINGS
We have been named as a defendant in certain lawsuits arising in the
ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, we do not expect these matters to have a material
adverse effect on our financial position, cash flows or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages (as of February 29, 2000)
of and positions held by Newfield's executive officers. Newfield's executive
officers serve at the discretion of the Board of Directors.
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NAME AGE POSITION
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<S> <C> <C>
David A. Trice........................ 51 President and Chief Executive Officer
and a Director
Robert W. Waldrup..................... 55 Vice President -- Operations and a
Director
Terry W. Rathert...................... 47 Vice President, Chief Financial
Officer and Secretary
David F. Schaible..................... 39 Vice President -- Acquisitions and
Development
Elliott Pew........................... 45 Vice President -- Exploration
William D. Schneider.................. 48 Vice President -- International
Exploration
C. William Austin..................... 47 Legal Counsel and Assistant Secretary
Ronald P. Lege........................ 55 Controller and Assistant Secretary
Susan G. Riggs........................ 42 Treasurer
</TABLE>
Each of the executive officers has held the above positions for the past
five years, with the exception of the following:
David A. Trice has served as President and Chief Executive Officer since
February 1, 2000 and was named to Newfield's Board of Directors on February 10,
2000. Prior there to, he served as President and Chief Operating Officer of
Newfield since May 1999. Mr. Trice was one of Newfield's original founders. He
rejoined Newfield in May 1997 as Vice President -- Finance and International.
From 1991 to 1997 he served as President and Chief Executive Officer and a
Director of Huffco Group, Inc.
Terry W. Rathert was named Vice President, Chief Financial Officer and
Secretary on February 10, 2000. Prior to this role, he had served as Vice
President -- Planning and Administration and Secretary of Newfield since July
1997.
Elliott Pew has served as Vice President -- Exploration since January 1998.
Prior to joining Newfield, he served as Senior Vice President of Louis Dreyfus
Natural Gas Company's Gulf Coast Region and prior to Louis Dreyfus' merger with
American Exploration Company in October 1997, as Senior Vice President of
Exploration for American Exploration Company from March 1997 to the date of such
merger. From 1992 to March 1997, Mr. Pew was Vice President of Exploration for
American Exploration Company.
William D. Schneider has served as Vice President -- International
Exploration since January 1998. From 1992 to January 1998, he served as
Manager-Exploration of Newfield.
Susan G. Riggs was named Treasurer of Newfield in August 1999. From 1997 to
August 1999, she served as a Financial Analyst for Newfield. Prior to joining
Newfield, Mrs. Riggs was Treasurer/Controller for the Huffco Group from 1995 to
1997.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is listed on the New York Stock Exchange under the symbol
"NFX." The following table sets forth, for the periods indicated, the range of
the high and low sales prices of our common stock as reported by the New York
Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1998
First Quarter............................................. 27 11/16 19 9/16
Second Quarter............................................ 26 3/8 17 13/16
Third Quarter............................................. 24 7/8 15 7/16
Fourth Quarter............................................ 26 7/16 16 5/8
1999
First Quarter............................................. 24 3/4 14 7/8
Second Quarter............................................ 28 1/2 22 1/8
Third Quarter............................................. 35 27 7/16
Fourth Quarter............................................ 32 15/16 21
2000
First Quarter (through February 29, 2000)................. 31 1/4 24 1/2
</TABLE>
On February 29, 2000 the last reported sale price of our common stock on
the New York Stock Exchange Composite Tape was $31.00 per share.
As of February 29, 2000 there were approximately 271 holders of record of
our common stock.
We have not paid any cash dividends in the past on our common stock and do
not intend to pay cash dividends in the foreseeable future. We intend to retain
earnings for the future operation and development of our business. Any future
cash dividends to holders of common stock would depend on future earnings,
capital requirements, our financial condition and other factors determined by
our Board of Directors. The payment of dividends is restricted by the terms of
our credit facility.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FIVE-YEAR FINANCIAL AND RESERVE DATA
The following table shows selected consolidated financial and reserve data
derived from our consolidated financial statements which are set forth in Item 8
of this Form 10-K. The data should be read in conjunction with the information
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 of this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas revenues......................... $281,967 $195,685 $199,399 $149,256 $ 94,598
-------- -------- -------- -------- --------
Operating expenses:
Lease operating............................ 45,561 35,345 24,308 16,946 14,227
Production and other taxes................. 2,215 -- -- -- --
Depreciation, depletion and amortization... 152,644 123,147 94,000 64,026 49,904
Ceiling test writedown..................... -- 104,955 4,254 -- --
General and administrative (exclusive of
stock compensation)..................... 14,405 9,848 11,093 7,552 5,549
Stock compensation......................... 1,999 2,222 1,177 1,943 692
-------- -------- -------- -------- --------
Total operating expenses........... 216,824 275,517 134,832 90,467 70,372
-------- -------- -------- -------- --------
Income (loss) from operations................ 65,143 (79,832) 64,567 58,789 24,226
Interest income (expense), net............... (13,128) (8,544) (2,146) 497 780
-------- -------- -------- -------- --------
Income (loss) before income taxes............ 52,015 (88,376) 62,421 59,286 25,006
Income tax provision (benefit)............... 18,811 (30,677) 21,818 20,792 8,742
-------- -------- -------- -------- --------
Net income (loss)............................ $ 33,204 $(57,699) $ 40,603 $ 38,494 $ 16,264
======== ======== ======== ======== ========
Basic earnings (loss) per common share....... $ 0.81 $ (1.55) $ 1.14 $ 1.10 $ 0.48
======== ======== ======== ======== ========
Diluted earnings (loss) per common share..... $ 0.79 $ (1.55) $ 1.07 $ 1.03 $ 0.45
======== ======== ======== ======== ========
Weighted average number of shares outstanding
for basic earnings per share............... 41,194 37,312 35,612 34,872 33,935
Weighted average number of shares outstanding
for diluted earnings per share............. 42,294 37,312 38,017 37,409 36,454
CASH FLOW DATA:
Net cash provided by operating activities
before changes in operating assets and
liabilities................................ $205,553 $141,948 $161,852 $125,226 $ 75,613
Net cash provided by operating activities.... 184,903 146,575 160,338 127,494 67,640
Net cash used in investing activities........ (210,817) (318,991) (242,962) (159,537) (99,329)
Net cash provided by financing activities.... 67,758 164,291 77,551 32,800 33,810
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital surplus (deficit)............ $ 35,202 $ (8,806) $ 372 $ 11,436 $ 11,235
Oil and gas properties, net.................. 644,842 578,423 483,954 328,615 228,509
Total assets................................. 781,561 629,311 553,621 395,938 277,406
Long-term debt and capital lease obligations,
less current maturities.................... 124,679 208,650 129,623 60,000 25,152
Convertible preferred securities............. 143,750 -- -- -- --
Stockholders' equity......................... 375,018 323,948 292,048 239,902 193,571
RESERVE DATA (AT END OF PERIOD):
Proved Reserves:
Oil and condensate (MBbls)................. 25,770 15,171 16,307 13,659 9,633
Gas (MMcf)................................. 440,173 422,277 337,481 241,385 203,580
Total proved reserves (MMcfe).............. 594,790 513,304 435,323 323,339 261,378
Present value of estimated future pre-tax net
cash flows................................. $913,293 $549,818 $654,669 $859,817 $364,879
Present value of estimated future after-tax
net cash flows............................. $732,519 $451,156 $502,948 $611,928 $276,326
</TABLE>
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
We use the full cost method of accounting. Under this method, all costs
incurred in the acquisition, exploration and development of oil and gas
properties are capitalized into cost centers that are established on a
country-by-country basis. For each cost center, at the end of each quarter, the
net capitalized costs of oil and gas properties are limited to the lower of
unamortized cost or the cost center ceiling, defined as the sum of the present
value (10% discount rate) of estimated future net revenues from proved reserves,
based on period-end oil and gas prices; plus the cost of properties not being
amortized, if any; plus the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any; less related income
tax effects. If net capitalized costs of oil and gas properties exceed the
ceiling limit, we are subject to a ceiling test writedown to the extent of such
excess. A ceiling test writedown is a non-cash charge to earnings. If required,
it would reduce earnings and impact stockholders' equity in the period of
occurrence and result in lower depreciation, depletion and amortization expense
in future periods.
The risk that we will be required to write down the carrying value of our
oil and gas properties increases when oil and gas prices are depressed or if we
have substantial downward revisions in our estimated proved reserves.
Application of these rules during periods of relatively low oil or gas prices,
even if temporary, increases the probability of a ceiling test writedown.
Primarily because of low oil and gas prices, we recorded a ceiling test
writedown at December 31, 1998 of $105.0 million. Because of the volatility of
oil and gas prices, no assurance can be given that we will not experience a
ceiling test writedown in future periods. See the discussion under the caption
"Volatility of Oil and Gas Prices" in Item 7 of this Form 10-K.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The statement, as amended, requires companies to report
the fair value of derivatives on the balance sheet and record in income or other
comprehensive income, as appropriate, any changes in the fair value of the
derivative. Statement No. 133 will now become effective for us on January 1,
2001. We are currently evaluating the impact of this statement.
RESULTS OF OPERATIONS
The following table presents information about our oil and gas operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
PRODUCTION:
UNITED STATES
Natural gas (Bcf).................................. 87.4 66.6 53.5
Oil and condensate (MBbls)......................... 3,487 3,643 3,424
Total production (Bcfe)............................ 108.3 88.5 74.0
AUSTRALIA*
Oil and condensate (MBbls)......................... 867 -- --
Total (Bcfe)....................................... 5.2 -- --
TOTAL
Natural gas (Bcf).................................. 87.4 66.6 53.5
Oil and condensate (MBbls)......................... 4,354 3,643 3,424
Total (Bcfe)....................................... 113.5 88.5 74.0
AVERAGE REALIZED PRICES:
UNITED STATES
Natural gas (per Mcf).............................. $ 2.32 $ 2.25 $ 2.51
Oil and condensate (per Bbl)....................... 16.27 12.75 19.08
AUSTRALIA*
Oil and condensate (per Bbl)....................... $25.70 $ -- $ --
TOTAL
Natural gas (per Mcf).............................. $ 2.32 $ 2.25 $ 2.51
Oil and condensate (per Bbl)....................... 18.15 12.75 19.08
</TABLE>
- ---------------
* In July 1999, we acquired oil producing assets offshore Australia.
14
<PAGE> 15
PRODUCTION
NATURAL GAS. Our 1999 natural gas volumes increased 31% over 1998. The
significant increase was primarily related to acquisitions of producing
properties, development projects and the success of our drilling program. Major
contributors to the increased production were East Cameron 286 and 373 and South
Marsh Island 141. Producing property acquisitions closed in 1999 contributed 2.2
Bcf to 1999 production. Gains in production were partially offset by natural
declines from producing properties. In 1998, our natural gas volumes increased
25% over 1997. Increased gas production in 1998 was due to production increases
from development drilling activities at East Cameron 373, West Cameron 561 and
the first full year of production from our acquisition of interests in nine
offshore blocks in the East Cameron, West Cameron and High Island areas of the
Gulf of Mexico in July 1997. These increases were partially offset by production
curtailments as a result of tropical storm activity during September 1998 and by
natural production declines on other properties.
CRUDE OIL AND CONDENSATE. The acquisition of oil producing properties
offshore Australia and in the Gulf of Mexico offset natural production declines
in the Gulf of Mexico. Our oil production increased nearly 20% in 1999 over
1998. At year-end 1999, our proved reserves were 26% crude oil and condensate,
an increase from 18% at year-end 1998. Oil and condensate production in 1998 was
six percent higher than in 1997 due to acquisitions and the success of our
drilling program in the Gulf of Mexico. Increased oil production in 1998 was due
primarily to development drilling activities during 1997 at Ship Shoal 354, West
Delta 152 and High Island 537.
REALIZED PRICES
NATURAL GAS. Our average realized gas price in 1999 was $2.32 per Mcf, an
increase of 3% over an average realized price of $2.25 per Mcf in 1998. Hedging
activities in 1999 resulted in a price that was 102% of what otherwise would
have been received without hedging activities. In 1998, the gas hedging program
resulted in a gas sales price that was 106% of what otherwise would have been
received without hedging activities. This compares to an average realized price
of $2.51 per Mcf in 1997, or 96% of what would have been received without
hedging activities.
CRUDE OIL AND CONDENSATE. Crude oil and condensate prices in 1999 averaged
$18.15 per barrel compared to an average price of only $12.75 per barrel in
1998. Our average crude oil price in 1999 was 94% of what would have been
received prior to hedging activities. We realized $12.75 per barrel in 1998,
which was 102% of the price that would have otherwise been received without
hedging activities. Our average realized oil price in 1997 was $19.08 per
barrel. As a result of hedging activities, our average realized oil price in
1997 was 101% of what would have been received.
NET INCOME AND REVENUES
For 1999, we reported net income of $33.2 million, or $0.79 cents per
diluted share. This compares to a net loss of $57.7 million, or $1.55 per
diluted share, in 1998. Revenues for 1999 increased 44% to $282.0 million
compared to revenues of $195.7 million in 1998. The increase in net income and
revenues in 1999 was primarily due to sharp increases in commodity prices
coupled with higher production volumes and operating income from Australia. Our
1998 financial performance was adversely affected by a non-cash, pre-tax,
full-cost ceiling test write-down of $105.0 million (resulting in a charge to
earnings of $68.3 million after-tax) in the carrying value of our oil and gas
properties. The write-down was primarily due to low commodity prices at December
31, 1998.
Our 1997 net income was $40.6 million, or $1.07 per diluted share. Revenues
for the same period were $199.4 million. Our financial results benefited from
higher realized commodity prices as compared to 1998.
15
<PAGE> 16
OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
AVERAGE COSTS (PER MCFE):
UNITED STATES
Lease operating........................................ $0.36 $0.40 $0.33
Depreciation, depletion and amortization............... 1.38 1.39 1.27
General and administrative (exclusive of stock
compensation)......................................... 0.13 0.11 0.15
AUSTRALIA
Lease operating........................................ $1.35 $ -- $ --
Depreciation, depletion and amortization............... 0.63 -- --
General and administrative (exclusive of stock
compensation)......................................... 0.02 -- --
TOTAL
Lease operating........................................ $0.40 $0.40 $0.33
Depreciation, depletion and amortization............... 1.35 1.39 1.27
General and administrative (exclusive of stock
compensation)......................................... 0.13 0.11 0.15
</TABLE>
During 1999, our operating expenses decreased 21% over 1998. The decrease
relates primarily to the ceiling test writedown taken during 1998. Exclusive of
the writedown, our operating expenses for 1999 increased 17% as compared to
1998. Operating expenses in 1999 were impacted by the following:
- Lease operating expense, stated on a unit of production basis, was flat
compared to 1998. Domestic lease operating expense decreased 10% on a
unit of production basis to $0.36 per Mcfe in 1999 compared to $0.40 per
Mcfe in 1998. Lower domestic lease operating expense was offset by
Australian lease operating expense of $8.07 per BOE, or $1.35 per Mcfe.
High lease operating expense per Mcfe in Australia is primarily due to
the higher cost of operations and maintenance of the two FPSOs.
- Production and other taxes of $2.2 million primarily relates to the
production tax on our Australian operations but also includes lease taxes
for domestic onshore production.
- Depreciation, depletion and amortization expense decreased 3% on a unit
of production basis. Our domestic DD&A rate decreased slightly to $1.38
per Mcfe in 1999 compared to $1.39 per Mcfe in 1998. The Australian DD&A
rate was $0.63 per Mcfe.
- General and administrative expense was up $4.6 million, or 46%, due
primarily to a larger workforce and an increase in performance-based pay.
Operating expenses for 1998 increased by $140.7 million over 1997 and were
impacted by the following factors:
- Lease operating expense for 1998 increased to $35.3 million, or $0.40 per
Mcfe, from $24.3 million, or $0.33 per Mcfe, for 1997. The increase
primarily relates to significantly higher oil field service industry
costs, costs of properties acquired after December 31, 1997 and initial
costs associated with the start-up of production from East Cameron 373.
- DD&A expense in 1998 increased 31% over 1997. This relates to an increase
in production and the depletion rate per Mcfe, which increased from $1.27
per Mcfe in 1997 to $1.39 in 1998 due primarily to a general increase in
the costs of drilling goods and services, platform and facilities
construction and industry transportation services.
- Operating expense was positively impacted in 1998 when compared to 1997
due to a decrease in general and administrative expense that primarily
resulted from a decrease in performance-based pay. Excluding
performance-based pay, general and administrative expense increased
slightly primarily due to a larger workforce.
16
<PAGE> 17
INTEREST EXPENSE AND
DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998 1997
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Gross interest expense...................................... $13.6 $13.9 $ 6.8
Capitalized interest........................................ (2.4) (4.4) (3.5)
----- ----- -----
Net interest expense........................................ 11.2 9.5 3.3
Dividends on preferred securities........................... 3.6 -- --
----- ----- -----
Total interest expense and dividends........................ $14.8 $ 9.5 $ 3.3
===== ===== =====
</TABLE>
Our total interest expense and dividends increased in 1999 over 1998 due to
increased borrowings in the first half of 1999 and accrued dividends on $143.8
million of 6.5% convertible preferred securities issued by Newfield Financial
Trust I in August 1999.
Interest expense for 1998 increased as compared to 1997 due to higher
average debt levels during 1998 and a lower percentage of gross interest expense
being capitalized.
LIQUIDITY AND CAPITAL RESOURCES
We had a working capital surplus of $35.2 million as of December 31, 1999.
This compares to a deficit of $8.8 million at December 31, 1998. We raised
$143.8 million in August 1999 from the issuance by Newfield Financial Trust I of
6.5% quarterly income convertible trust preferred securities. A portion of the
proceeds from these securities was used to repay borrowings under our credit
facility. Long-term debt decreased to $124.7 million at December 31, 1999 from
$208.7 million at December 31, 1998. Working capital balances may fluctuate from
year to year to the extent we increase or decrease borrowings under our
revolving credit facility. Historically, we have funded our oil and gas
activities through cash flow from operations, equity capital from private and
public sources, public debt and bank borrowings.
We maintain our reserve-based revolving credit facility with Chase Bank of
Texas, National Association, as agent. As of December 31, 1999, there were no
borrowings outstanding under the credit facility. The credit facility provides a
$225 million revolving credit maturing on October 31, 2002. The amount available
under the credit facility is subject to a calculated borrowing base determined
by a majority of the banks participating in the credit facility, which is
reduced by the aggregate principal outstanding on our senior unsecured notes
(currently $125 million). The borrowing base is redetermined at least
semi-annually and, after reduction for the senior unsecured notes, is currently
$175 million. No assurances can be given that a majority of the banks will not
elect to redetermine the borrowing base in the future. We have an option,
subject to the borrowing base, to increase the facility to $250 million.
We have also established money market lines of credit with various banks in
an amount limited by the credit facility to $25 million. As of December 31,
1999, there were no borrowings outstanding under these lines of credit. As of
February 29, 2000, after funding our purchase of three producing gas fields in
South Texas we had $110 million outstanding under the credit facility. Without
so increasing the facility, we have approximately $90 million of available
capacity under the credit facility and money market lines.
CASH FLOW FROM OPERATIONS. Our net cash flow from operations for 1999
increased 26% over 1998 to $184.9 million. The increase in 1999 cash flow is due
to higher production volumes and higher commodity prices for oil and gas. Net
cash flow from operations before changes in operating assets and liabilities for
1999 was $205.6 million compared to $141.9 million in 1998. The increase in net
cash flow from operations before changes in operating assets and liabilities in
1999 over 1998 is primarily attributable to higher production volumes and
commodity prices, offset slightly by increased operating expenses.
CAPITAL EXPENDITURES. We invested $209.8 million in 1999 capital spending.
This includes $51.5 million for exploration, $72.3 million for exploitation and
development projects and $86 million for property acquisitions. We have budgeted
$315 million for capital spending in 2000. Of that amount, we have allocated
17
<PAGE> 18
$137 million for our purchase of three producing gas fields in South Texas in
February 2000. Approximately $42 million has been budgeted for domestic
exploration projects and $104 million for domestic exploitation and development
drilling and the construction of platforms, facilities and pipelines.
International spending is estimated at $32 million in 2000. Acquisitions are
opportunistic and are generally not budgeted under our capital program. We
continue to pursue attractive acquisition opportunities, however, the timing,
size and purchase price of acquisitions are unpredictable. Actual levels of
capital expenditures may vary significantly due to many factors, including
drilling results, oil and gas prices, industry conditions, the prices and
availability of goods and services and the extent to which proved properties are
acquired.
Our February 2000 South Texas acquisition was funded with working capital
and borrowings under our credit facility. We anticipate that our remaining
capital expenditure budget for 2000 will be funded principally from cash flow
from operations and working capital. We do not anticipate additional borrowings
under our credit facility and money market lines of credit during 2000 unless we
make another significant acquisition.
HEDGING
We utilize and expect to continue to utilize hedging transactions with
respect to a portion of our oil and gas production. These derivative financial
instruments are used to hedge our exposure to changes in the market price of
natural gas and crude oil and to achieve more predictable cash flow. While the
use of these hedging arrangements limits the downside risk of adverse price
movements, they may also limit future revenues from favorable price movements.
The use of hedging transactions also involves the risk that the counterparties
will be unable to meet the financial terms of such transactions. All of our
hedging transactions to date were carried out in the over-the-counter market. We
account for these transactions as hedging activities and, accordingly, gains or
losses are included in oil and gas revenues when the hedged production is
delivered. Neither the hedging contracts nor the unrealized gains or losses on
these contracts are recognized in our financial statements.
As of December 31, 1999, we had entered into commodity price hedging
contracts with respect to our 2000 natural gas production as follows:
<TABLE>
<CAPTION>
NYMEX CONTRACT
PRICE PER MMBTU
-----------------------------------------
COLLARS
VOLUME IN SWAPS ----------------- FLOOR FAIR MARKET
PERIOD MMMBTUS (AVERAGE) FLOORS CEILINGS CONTRACTS VALUE(1)
- --------------------------------- --------- --------- ------ -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
January 2000
Price Swap Contracts........... 750 $2.74 -- -- -- $0.9 Million
Collar Contracts............... 250 -- $2.63 $3.25 -- $0.1 Million
Floor Contracts................ 100 -- -- -- $2.63 --
</TABLE>
- ---------------
(1) Fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1999.
These hedging transactions are settled based upon the average of the
reported settlement prices on the NYMEX for the last three trading days or
occasionally, the penultimate trading day of a particular contract month (the
"settlement price"). With respect to any particular swap transaction, the
counterparty is required to make a payment to us in the event that the
settlement price for any settlement period is less than the swap price for such
transaction, and we are required to make payment to the counterparty in the
event that the settlement price for any settlement period is greater than the
swap price for such transaction. For any particular collar transaction, the
counterparty is required to make a payment to us if the settlement price for any
settlement period is below the floor price for such transaction, and we are
required to make payment to the counterparty if the settlement price for any
settlement period is above the ceiling price for such transaction. For any
particular floor transaction, the counterparty is required to make a payment to
us if the settlement price for any settlement period is below the floor price
for such transaction. We are not required to make any payment in connection with
the settlement of a floor transaction.
18
<PAGE> 19
We believe that we have no material basis risk with respect to gas swaps
because substantially all of our natural gas production is sold under spot
contracts that have historically correlated with the swap price.
As of December 31, 1999, we had entered into commodity price hedging
contracts with respect to its domestic oil production for 2000 and 2001 as
follows:
<TABLE>
<CAPTION>
NYMEX CONTRACT
PRICE PER BBL
------------------------------------------------------
COLLARS
VOLUME IN SWAPS -------------------------------- FLOOR FAIR MARKET
PERIOD BBLS (AVERAGE) FLOORS CEILINGS CONTRACTS VALUE(1)
- ----------------------------- --------- --------- --------------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
January 2000 - March 2000
Price Swap Contracts....... 455,000 $21.63 -- -- -- $(1.6 Million)
Collar Contracts........... 182,000 -- $18.28 - $19.50 $20.10 - $21.00 -- $(0.2 Million)
Floor Contracts............ 91,000 -- -- -- $19.32 $(0.8 Million)
April 2000 - June 2000
Price Swap Contracts....... 455,000 $21.70 -- -- -- $(0.3 Million)
Collar Contracts........... 182,000 -- $18.28 - $19.50 $20.10 - $21.00 -- $(0.3 Million)
July 2000 - September 2000
Price Swap Contracts....... 460,000 $21.70 -- -- -- $ 0.3 Million
Collar Contracts........... 92,000 -- $18.28 $21.00 -- $(0.1 Million)
October 2000 - December 2000
Price Swap Contracts....... 460,000 $21.70 -- -- -- $ 0.7 Million
January 2001 - March 2001
Price Swap Contracts....... 180,000 $21.25 -- -- -- $ 0.3 Million
</TABLE>
- ---------------
(1) Fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1999.
Because substantially all of our domestic oil production is sold under spot
contracts that have historically correlated to the NYMEX West Texas Intermediate
price, we believe that we have no material basis risk with respect to these
transactions. The actual cash price we receive in the U.S., however, generally
is about $2.00 per barrel less than the NYMEX West Texas Intermediate price when
adjusted for location and quality differences.
During 1999, approximately 55% of our equivalent production was subject to
hedge positions as compared to 61% in 1998. We have also entered into hedging
transactions with respect to a portion of our estimated production through June
2001. We continue to evaluate additional hedging transactions for 2000 and
future years.
REGULATION
FEDERAL REGULATION OF SALES AND TRANSPORTATION OF NATURAL
GAS. Historically, the transportation and sale for resale of natural gas in
interstate commerce has been regulated pursuant to several laws enacted by
Congress and the regulations promulgated under these laws by the FERC. In the
past, the federal government has regulated the prices at which gas could be
sold, Congress removed all price and non-price controls affecting wellhead sales
of natural gas effective January 1, 1993. Congress could, however, reenact price
controls in the future.
Our sales of natural gas are affected by the availability, terms and cost
of transportation. The price and terms for access to pipeline transportation are
subject to extensive federal and state regulation. From 1985 to the present,
several major regulatory changes have been implemented by Congress and the FERC
that affect the economics of natural gas production, transportation and sales.
In addition, the FERC is continually proposing and implementing new rules and
regulations affecting those segments of the natural gas industry, most notably
interstate natural gas transmission companies, that remain subject to the FERC's
jurisdiction. These initiatives may also affect the intrastate transportation of
gas under certain circumstances. The stated
19
<PAGE> 20
purpose of many of these regulatory changes is to promote competition among the
various sectors of the natural gas industry and these initiatives generally
reflect more light-handed regulation.
The ultimate impact of the complex rules and regulations issued by the FERC
since 1985 cannot be predicted. In addition, many aspects of these regulatory
developments have not become final but are still pending judicial and FERC final
decisions. We cannot predict what further action the FERC will take on these
matters. Some of the FERC's more recent proposals may, however, adversely affect
the availability and reliability of interruptible transportation service on
interstate pipelines. We do not believe that we will be affected by any action
taken materially differently than other natural gas producers, gatherers and
marketers with which it compete.
The Outer Continental Shelf Lands Act (the "OCSLA") requires that all
pipelines operating on or across the Outer Continental Shelf (the "OCS") provide
open-access, non-discriminatory service. Although the FERC has opted not to
impose the regulations of Order No. 509, in which the FERC implemented the
OCSLA, on gatherers and other non-jurisdictional entities, the FERC has retained
the authority to exercise jurisdiction over those entities if necessary to
permit non-discriminatory access to service on the OCS.
Additional proposals and proceedings that might affect the natural gas
industry are pending before Congress, the FERC and the courts. The natural gas
industry historically has been very heavily regulated; therefore, there is no
assurance that the less stringent regulatory approach recently pursued by the
FERC and Congress will continue.
FEDERAL REGULATION OF SALES AND TRANSPORTATION OF CRUDE OIL. Our sales of
crude oil, condensate and natural gas liquids are currently not regulated and
are made at market prices. In a number of instances, however, the ability to
transport and sell such products are dependent on pipelines whose rates, terms
and conditions of service are subject to FERC jurisdiction under the Interstate
Commerce Act. Certain regulations implemented by the FERC in recent years could
result in an increase in the cost of transportation service on certain petroleum
products pipelines. However, we do not believe that these regulations affect us
any differently than other natural gas producers.
FEDERAL LEASES. The substantial majority of our U.S. operations are located
on federal oil and gas leases, which are administered by the MMS. Such leases
are issued through competitive bidding, contain relatively standardized terms
and require compliance with detailed MMS regulations and orders pursuant to the
OCSLA (which are subject to change by the MMS). For offshore operations, lessees
must obtain MMS approval for exploration plans and development and production
plans prior to the commencement of such operations. In addition to permits
required from other agencies (such as the Coast Guard, the Army Corps of
Engineers and the Environmental Protection Agency), lessees must obtain a permit
from the MMS prior to the commencement of drilling. The MMS has promulgated
regulations requiring offshore production facilities located on the OCS to meet
stringent engineering and construction specifications. The MMS also has
regulations restricting the flaring or venting of natural gas, and has proposed
to amend such regulations to prohibit the flaring of liquid hydrocarbons and oil
without prior authorization. Similarly, the MMS has promulgated other
regulations governing the plugging and abandonment of wells located offshore and
the removal of all production facilities. To cover the various obligations of
lessees on the OCS, the MMS generally requires that lessees have substantial net
worth or post bonds or other acceptable assurances that such obligations will be
met. The cost of such bonds or other surety can be substantial and there is no
assurance that bonds or other surety can be obtained in all cases. We are
currently exempt from the supplemental bonding requirements of the MMS. Under
certain circumstances, the MMS may require that our operations on federal leases
be suspended or terminated. Any such suspension or termination could materially
and adversely affect our financial condition, cash flows and results of
operations.
The MMS has issued a proposal to amend its regulations governing the
calculation of royalties and the valuation of crude oil produced from federal
leases. This proposed rule would modify the valuation procedures for
non-arm's-length crude oil transactions and amend the valuation procedure for
the sale of federal royalty oil. We cannot predict what action the MMS will take
on this matter. We believe that these rules, if adopted as proposed, will not
have a material effect on its financial position, cash flows or results of
operations.
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STATE AND LOCAL REGULATION OF DRILLING AND PRODUCTION. We own interests in
properties located onshore Louisiana and Texas and in the state waters offshore
Texas and Louisiana. We also occasionally conduct operations in the state waters
offshore Mississippi. These states regulate drilling and operating activities by
requiring, among other things, drilling permits, bonds and reports concerning
operations. The laws of these states also govern a number of environmental and
conservation matters, including the handling and disposing of waste materials,
unitization and pooling of oil and gas properties and establishment of maximum
rates of production from oil and gas wells. Some states prorate production to
the market demand for oil and gas.
ENVIRONMENTAL REGULATIONS. Our operations are subject to numerous laws and
regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection. Failure to comply with these
laws and regulations may result in the assessment of administrative, civil and
criminal penalties. Public interest in the protection of the environment has
increased dramatically in recent years. Both onshore and offshore drilling in
certain areas has been opposed by environmental groups and, in certain areas,
has been restricted. To the extent laws are enacted or other governmental action
is taken that prohibits or restricts onshore or offshore drilling or imposes
environmental protection requirements that result in increased costs to the oil
and gas industry in general and the offshore drilling industry in particular,
our business and prospects could be adversely affected.
The Oil Pollution Act of 1990 (the "OPA") imposes regulations on
"responsible parties" related to the prevention of oil spills and liability for
damages resulting from such spills in U.S. waters. A "responsible party"
includes the owner or operator of an onshore facility, vessel or pipeline, or
the lessee or permittee of the area in which an offshore facility is located.
The OPA assigns liability to each responsible party for oil removal costs and a
variety of public and private damages. While liability limits apply in some
circumstances, a party cannot take advantage of liability limits if the spill
was caused by gross negligence or willful misconduct or resulted from violation
of a federal safety, construction or operating regulation. If the party fails to
report a spill or to cooperate fully in the cleanup, liability limits likewise
do not apply. Even if applicable, the liability limits for offshore facilities
require the responsible party to pay all removal costs, plus up to $75 million
in other damages for offshore facilities and pay up to $350 million for onshore
facilities. Few defenses exist to the liability imposed by the OPA. Failure to
comply with ongoing requirements or inadequate cooperation during a spill event
may subject a responsible party to administrative, civil or criminal enforcement
actions. In addition to the OPA, our discharges to waters of the U.S. are
further limited by the federal Clean Water Act (the "CWA") and analogous state
laws. The CWA prohibits any discharge into waters of the United States except in
strict conformance with permits issued by federal and state governmental
agencies. Failure to comply with the CWA, including discharge limits on permits
issued pursuant to the CWA, may also result in administrative, civil or criminal
enforcement actions. The OPA and the CWA also impose other requirements, such as
the preparation of an oil spill response plan. We have all required spill
response plans in place.
The OPA requires responsible parties to demonstrate proof of financial
responsibility to cover environmental cleanup and restoration costs that could
be incurred in connection with an oil spill. As amended by the Coast Guard
Authorization Act of 1996, the OPA requires responsible parties for offshore
facilities to provide financial assurance in the amount of $35 million to cover
potential OPA liabilities. This amount can be increased up to $150 million based
on a covered facility's potential worst case oil spill discharge volume or if a
formal risk assessment indicates that an amount higher than $35 million should
be required. On August 11, 1998, the MMS issued its new rule implementing these
OPA financial responsibility requirements. We believe that we are in compliance
with the OPA and the MMS rule for demonstrating financial responsibility for our
covered facilities.
In September 1999, we experienced a well blowout at our Ship Shoal 354
lease in the Gulf of Mexico. Natural gas and approximately 5,000 barrels of
condensate were released during the blowout. We abated the blowout and redrilled
the well, and the natural gas and condensate that were released either
evaporated or dissipated in the Gulf of Mexico. The MMS is currently reviewing
the matter and the possibility of a penalty exists, although we do not expect
such a penalty to have a material adverse effect on our financial position, cash
flows or results of operations.
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The OCSLA authorizes regulations relating to safety and environmental
protection applicable to lessees and permittees operating on the OCS. Specific
design and operational standards may apply to OCS vessels, rigs, platforms,
vehicles and structures. Violations of lease conditions or regulations issued
pursuant to the OCSLA can result in substantial administrative, civil and
criminal penalties, as well as potential court injunctions curtailing operations
and the cancellation of leases. Such enforcement liabilities can result from
either governmental or private prosecution.
The Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
that are considered to have contributed to the release of a "hazardous
substance" into the environment. Persons who are or were responsible for
releases of hazardous substances under CERCLA may be subject to joint and
several liability for the costs of cleaning up the hazardous substances that
have been released into the environment and for damages to natural resources,
and it is not uncommon for neighboring landowners and other third parties to
file claims for personal injury and property damage allegedly caused by the
hazardous substances released into the environment.
In addition, legislation has been proposed in Congress from time to time
that would reclassify certain oil and gas exploration and production wastes as
"hazardous wastes," which would make the reclassified wastes subject to much
more stringent handling, disposal and clean-up requirements. If such legislation
were to be enacted, it could increase our operating costs, as well as the oil
and gas industry in general.
We believe that we are in substantial compliance with current applicable
U.S. federal, state and local environmental laws and regulations and that
continued compliance with existing requirements will not have a material adverse
effect on our financial position, cash flows or results of operations. Our
foreign operations are potentially subject to similar governmental controls and
restrictions relating to the environment. We believe that we are in substantial
compliance with any such foreign requirements pertaining to the environment.
There can be no assurance, however, that current regulatory requirements will
not change, currently unforeseen environmental incidents will not occur or past
non-compliance with environmental laws or regulations will not be discovered.
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ADDITIONAL FACTORS AFFECTING OUR BUSINESS
OIL AND GAS PRICES FLUCTUATE WIDELY, AND LOW PRICES FOR AN EXTENDED PERIOD OF
TIME ARE LIKELY TO HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS.
Our revenues, profitability and future growth depend substantially on
prevailing prices for oil and gas. These prices also affect the amount of cash
flow available for capital expenditures and our ability to borrow and raise
additional capital. The amount we can borrow under our credit facility is
subject to periodic redeterminations based in part on changing expectations of
future prices. Lower prices may also reduce the amount of oil and gas that we
can economically produce.
Prices for oil and gas fluctuate widely. For example, oil and gas prices
declined significantly in 1998 and, for an extended period of time, remained
substantially below prices received in recent years. Among the factors that can
cause fluctuations are:
- the domestic and foreign supply of oil and natural gas,
- the price of foreign imports,
- world-wide economic conditions,
- political conditions in oil and gas producing regions,
- the level of consumer demand,
- weather conditions,
- domestic and foreign governmental regulations and
- the price and availability of alternative fuels.
As discussed above, we often use hedging transactions with respect to a
portion of our oil and gas production to achieve more predictable cash flow and
to reduce our exposure to price fluctuations. While the use of hedging
transactions limits the downside risk of price declines, their use may also
limit future revenues from price increases.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO REPLACE RESERVES THAT WE PRODUCE.
Our future success depends on our ability to find, develop and acquire oil
and gas reserves that are economically recoverable. As is generally the case in
the Gulf Coast region, our producing properties in that region usually have high
initial production rates, followed by steep declines in production. As of
December 31, 1999, our proved reserves, if produced constantly at the then
current rate of production, would produce for approximately 5 years. As a
result, we must locate and develop or acquire new oil and gas reserves to
replace those being depleted by production. We must do this even during periods
of low oil and gas prices when it is difficult to raise the capital necessary to
finance these activities. Without successful exploration or acquisition
activities, our reserves, production and revenues will decline rapidly. We
cannot assure you that we will be able to find and develop or acquire additional
reserves at an acceptable cost.
SUBSTANTIAL CAPITAL IS REQUIRED TO REPLACE AND GROW RESERVES.
We make, and will continue to make, substantial expenditures to find,
develop, acquire and produce oil and gas reserves. We made capital expenditures
of $311 million during 1998 and $210 million during 1999. We plan to make
capital expenditures of $315 million in 2000. We believe that we will have
sufficient cash provided by operating activities and borrowings under our credit
facility to fund planned capital expenditures in 2000. If, however, lower oil
and gas prices or operating difficulties result in our cash flow from operations
being less than expected or limit our ability to borrow under our credit
facility, we may be unable to expend the capital necessary to undertake or
complete our drilling program unless we raise additional funds through debt or
equity financings. We cannot assure you that debt or equity financing, cash
generated by operations or borrowing capacity will be available to meet these
requirements.
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IF OIL AND GAS PRICES DECREASE, WE MAY BE REQUIRED TO TAKE ADDITIONAL
WRITEDOWNS.
There is a risk that we will be required to writedown the carrying value of
our oil and gas properties when oil and gas prices are low or if we have
substantial downward adjustments to our estimated proved reserves, increases in
our estimates of development costs or deterioration in our exploration results.
We capitalize the costs to acquire, find and develop our oil and gas
properties. Under the full cost accounting method we use, the net capitalized
costs of our oil and gas properties may not exceed the present value of
estimated future net cash flows from proved reserves, using period end oil and
gas prices and a 10% discount factor, plus the lower of cost or fair market
value of unproved properties. If net capitalized costs of our oil and gas
properties exceed this limit, we must charge the amount of this excess to
earnings. This type of charge will not affect our cash flow from operating
activities, but it will reduce the book value of our stockholders' equity. We
review the carrying value of our properties quarterly, based on prices in effect
as of the end of each quarter or as of the time of reporting our results. The
carrying value of oil and gas properties is computed on a country-by-country
basis. Therefore, while our properties in one country may be subject to a
writedown, our properties in other countries could be unaffected. Once incurred,
a writedown of oil and gas properties is not reversible at a later date even if
oil or gas prices increase.
Primarily because of low oil and gas prices, we recorded a writedown of the
carrying value of our properties for the year ended December 31, 1998 in the
amount of $105 million. Although the prices of oil and gas have recently
recovered, we cannot assure you that we will not be required to take additional
writedowns in future periods.
RESERVE ESTIMATES ARE INHERENTLY UNCERTAIN AND DEPEND ON MANY ASSUMPTIONS THAT
MAY TURN OUT TO BE INACCURATE.
Estimating accumulations of oil and gas is complex, but it is not an exact
science because of the numerous uncertainties inherent in the process. The
process relies on interpretations of available geologic, geophysic, engineering
and production data. The extent, quality and reliability of this technical data
can vary. The process also requires certain economic assumptions, some of which
are mandated by the Securities and Exchange Commission, such as oil and gas
prices, drilling and operating expenses, capital expenditures, taxes and
availability of funds. The accuracy of a reserve estimate is a function of:
- the quality and quantity of available data;
- the interpretation of that data;
- the accuracy of various mandated economic assumptions; and
- the judgment of the persons preparing the estimate.
Our proved reserve information included in this Form 10-K is based on estimates
we prepared. Estimates prepared by others might differ materially from our
estimates.
Actual future production, oil and gas prices, revenues, taxes, development
expenditures, operating expenses and quantities of recoverable oil and gas
reserves most likely will vary from our estimates. Any significant variance
could materially affect the quantities and present value of our reserves. In
addition, we may adjust estimates of proved reserves to reflect production
history, results of exploration and development and prevailing oil and gas
prices. Our reserves may also be susceptible to drainage by operators on
adjacent properties.
You should not assume that the present value of future net cash flows
included in this prospectus supplement or incorporated by reference in the
prospectus is the current market value of our estimated proved oil and gas
reserves. In accordance with SEC requirements, we generally base the estimated
discounted future net cash flows from proved reserves on prices and costs on the
date of the estimate. Actual future prices and costs may be materially higher or
lower than the prices and costs as of the date of the estimate.
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WE MAY BE SUBJECT TO RISKS IN CONNECTION WITH FUTURE ACQUISITIONS.
The successful acquisition of producing properties requires an assessment
of several factors, including:
- recoverable reserves;
- future oil and gas prices;
- operating costs; and
- potential environmental and other liabilities.
The accuracy of these assessments is inherently uncertain. In connection
with these assessments, we perform a review of the subject properties that we
believe to be generally consistent with industry practices, which usually
includes on-site inspections and the review of reports filed with the MMS for
environmental compliance. Our review will not reveal all existing or potential
problems nor will it permit us to become sufficiently familiar with the
properties to fully assess their deficiencies and capabilities. Inspections may
not always be performed on every platform or well, and structural and
environmental problems are not necessarily observable even when an inspection is
undertaken. Even when problems are identified, the seller may be unwilling or
unable to provide effective contractual protection against all or part of the
problems. We are generally not entitled to contractual indemnification for
environmental liabilities and acquire structures on a property on an "as is"
basis.
COMPETITIVE INDUSTRY CONDITIONS MAY NEGATIVELY AFFECT OUR ABILITY TO CONDUCT
OPERATIONS.
Competition in the oil and gas industry is intense, particularly with
respect to the acquisition of producing properties and proved undeveloped
acreage. Major and independent oil and gas companies actively bid for desirable
oil and gas properties, as well as for the equipment and labor required to
operate and develop these properties. Many of our competitors have financial
resources that are substantially greater than ours, which may adversely affect
our ability to compete with these companies.
DRILLING IS A HIGH-RISK ACTIVITY.
Our future success will depend on the success of our drilling program. In
addition to the numerous operating risks described in more detail below, these
activities involve the risk that no commercially productive oil or gas
reservoirs will be discovered. In addition, we often are uncertain as to the
future cost or timing of drilling, completing and producing wells. Furthermore,
our drilling operations may be curtailed, delayed or canceled as a result of a
variety of factors, including:
- unexpected drilling conditions;
- pressure or irregularities in formations;
- equipment failures or accidents;
- adverse weather conditions;
- compliance with governmental requirements; and
- shortages or delays in the availability of drilling rigs and the delivery
of equipment.
THE OIL AND GAS BUSINESS INVOLVES MANY OPERATING RISKS THAT CAN CAUSE
SUBSTANTIAL LOSSES; INSURANCE MAY NOT PROTECT US AGAINST ALL THESE RISKS.
The oil and gas business involves a variety of operating risks, including:
- fires;
- explosions;
- blow-outs;
- uncontrollable flows of oil, gas, formation water or drilling fluids;
- natural disasters;
- pipe or cement failures;
- casing collapses;
- embedded oilfield drilling and service tools;
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- abnormally pressured formations; and
- environmental hazards such as oil spills, natural gas leaks, pipeline
ruptures and discharges of toxic gases.
If any of these events occur, we could incur substantial losses as a result
of:
- injury or loss of life;
- severe damage to and destruction of property, natural resources and
equipment;
- pollution and other environmental damage;
- clean-up responsibilities;
- regulatory investigation and penalties;
- suspension of our operations; and
- repairs to resume operations.
If we experience any of these problems, our ability to conduct operations
could be adversely affected.
Offshore operations are subject to a variety of operating risks peculiar to
the marine environment, such as capsizing, collisions and damage or loss from
hurricanes or other adverse weather conditions. These conditions can cause
substantial damage to facilities and interrupt production. As a result, we could
incur substantial liabilities that could reduce or eliminate the funds available
for our drilling and development programs and acquisitions, or result in loss of
properties.
We maintain insurance against some, but not all, of these potential risks
and losses. We may elect not to obtain insurance if we believe that the cost of
available insurance is excessive relative to the risks presented. In addition,
pollution and environmental risks generally are not fully insurable. If a
significant accident or other event occurs and is not fully covered by
insurance, it could adversely affect us.
WE HAVE RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS.
We continue to evaluate and pursue new opportunities for international
expansion in areas where we can use our core competencies. We believe these
areas include Australia, China and South America. To date, we have expanded our
operations to Australia and China. If our exploratory drilling in Australia and
China is successful, we may make significant future investments in these areas.
Ownership of property interests and production operations in areas outside
the United States are subject to the various risks inherent in foreign
operations. These risks may include:
- currency restrictions and exchange rate fluctuations;
- loss of revenue, property and equipment as a result of expropriation,
nationalization, war or insurrection;
- increases in taxes and governmental royalties;
- renegotiation of contracts with governmental entities and
quasi-governmental agencies;
- change in laws and policies governing operations of foreign-based
companies;
- labor problems; and
- other uncertainties arising out of foreign government sovereignty over
our international operations.
Our international operations may also be adversely affected by laws and
policies of the United States affecting foreign trade, taxation and investment.
In addition, in the event of a dispute arising from foreign operations, we may
be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of the courts of
the United States.
OTHER INDEPENDENT OIL AND GAS COMPANIES' LIMITED ACCESS TO CAPITAL MAY CHANGE
OUR EXPLORATION AND DEVELOPMENT PLANS.
Many independent oil and gas companies have limited access to the capital
necessary to finance their activities. As a result, some of the other working
interest owners of our wells may be unwilling or unable to pay
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their share of the costs of projects as they become due. These problems could
cause us to change, suspend or terminate our drilling and development plans with
respect to the affected project.
WE ARE SUBJECT TO COMPLEX LAWS THAT CAN AFFECT THE COST, MANNER OR FEASIBILITY
OF DOING BUSINESS.
Exploration, development, production and sale of oil and gas are subject to
extensive federal, state, local and international regulation. We may be required
to make large expenditures to comply with environmental and other governmental
regulations. Please see the discussion above under the caption "Regulation" for
a discussion of some of the regulations to which we are subject.
COMMONLY USED OIL AND GAS TERMS
Below are explanations of some commonly used terms in the oil and gas
business.
BASIS RISK. The risk associated with the sales point price for oil or gas
production varying from the reference (or settlement) price for a particular
hedging transaction.
BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.
BCF. Billion cubic feet.
BCFE. Billion cubic feet equivalent, determined using the ratio of six Mcf
gas to one Bbl of crude oil, condensate or natural gas liquids.
BOPD. Barrels of crude oil or other liquid hydrocarbons per day.
BTU. British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
COMPLETION. The installation of permanent equipment for the production of
oil or natural gas, or in the case of a dry hole, the reporting of abandonment
to the appropriate agency.
DEVELOPED ACREAGE. The number of acres that are allocated or assignable to
producing wells or wells capable of production.
DEVELOPMENT WELL. A well drilled within the proved area of an oil or
natural gas field to the depth of a stratigraphic horizon known to be
productive, including a well drilled to find and produce probable or possible
reserves (an EXPLOITATION WELL).
DRY HOLE OR WELL. A well found to be incapable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production exceed
production expenses and taxes.
EXPLORATORY WELL. A well drilled to find and produce oil or natural gas
reserves that is not a development well.
FARM-IN OR FARM-OUT. An agreement whereunder the owner of a working
interest in an oil and gas lease assigns the working interest or a portion
thereof to another party who desires to drill on the leased acreage. Generally,
the assignee is required to drill one or more wells in order to earn its
interest in the acreage. The assignor usually retains a royalty or reversionary
interest in the lease. The interest received by an assignee is a "farm-in,"
while the interest transferred by the assignor is a "farm-out."
FERC. The Federal Energy Regulatory Commission.
FIELD. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.
FINDING COSTS. Costs associated with acquiring and developing proved oil
and gas reserves which are capitalized by the Company under generally accepted
accounting principles.
GROSS ACRES OR GROSS WELLS. The total acres or wells in which a working
interest is owned.
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LIQUIDS. Crude oil, condensate and natural gas liquids.
MBBLS. One thousand barrels of crude oil or other liquid hydrocarbons.
MCF. One thousand cubic feet.
MCFE. One thousand cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate, or natural gas liquids.
MMS. The Minerals Management Service of the United States Department of the
Interior.
MMBBLS. One million barrels of crude oil or other liquid hydrocarbons.
MMCF. One million cubic feet.
MMCF/D. One million cubic feet per day.
MMCFE. One million cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil condensate or natural gas liquids.
NET ACRES OR NET WELLS. The sum of the fractional working interests owned
in gross acres or gross wells, as the case may be.
NYMEX. New York Mercantile Exchange.
POSSIBLE RESERVES. Reserves similar to probable reserves but that are less
likely to be recovered than not.
PRESENT VALUE. When used with respect to oil and natural gas reserves, the
estimated value of future gross revenues (estimated in accordance with the
requirements of the Securities and Exchange Commission) to be generated from the
production of proved reserves, net of estimated production and future
development costs, using prices and costs in effect as of the date indicated,
without giving effect to non-property related expenses such as general and
administrative expenses, debt service and future income tax expenses or to
depreciation, depletion and amortization, discounted using an annual discount
rate of 10%.
PROBABLE RESERVES. Reserves which analysis of drilling, geological,
geophysical and engineering data does not demonstrate to be proved under current
technology and existing economic conditions, but where such analysis suggests
the likelihood of their existence and future recovery.
PRODUCTIVE WELL. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.
PROVED DEVELOPED PRODUCING RESERVES. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and capable of production to market.
PROVED DEVELOPED RESERVES. Proved reserves that can be expected to be
recovered from existing wells with existing equipment and operating methods.
PROVED DEVELOPED NONPRODUCING RESERVES. Proved developed reserves expected
to be recovered from zones behind casing in existing wells.
PROVED RESERVES. The estimated quantities of crude oil, natural gas and
natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
PROVED UNDEVELOPED RESERVES. Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
TURNKEY DRILLING CONTRACT. A fixed rate contract pursuant to which the
drilling contractor generally bears the risk of loss for unbudgeted
contingencies.
UNDEVELOPED ACREAGE. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.
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WORKING INTEREST. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.
WORKOVER. Operations on a producing well to restore or increase production.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from adverse changes in oil and gas prices,
interest rates and foreign currency exchange rates as discussed below.
OIL AND GAS PRICES. As independent oil and gas producer, our revenue,
profitability, access to capital and future rate of growth are substantially
dependent upon the prevailing prices of natural gas, oil and condensate.
Prevailing prices for such commodities are subject to wide fluctuation in
response to relatively minor changes in supply and demand and a variety of
additional factors beyond our control. We utilize and expect to continue to
utilize hedging transaction with respect to a portion of our oil and gas
production to achieve a more predictable cash flow, as well as to reduce our
exposure to price fluctuations. While hedging limits the downside risk of
adverse price movements, it may also limit future revenues from favorable price
movements. Because gains or losses associated with hedging transactions are
included in oil and gas revenues when the hedged production is delivered, such
gains and losses are generally offset by similar changes in the realized prices
of commodities. For a further discussion of our hedging activities, see the
information under the caption "Hedging" in Item 7 of this Form 10-K.
INTEREST RATES. At December 31, 1999, we had approximately $125 million of
outstanding long-term debt (7.45% senior unsecured notes, due 2007) subject to a
fixed rate of interest. Additionally, we had $144 million of convertible
preferred securities subject to a fixed dividend rate of 6.5%. Because all of
our long term obligations at December 31, 1999 are at fixed rates, we consider
our interest rate exposure to be minimal. We may also use borrowings under our
credit facility from time to time that are subject to a rate of interest that
fluctuates based on short-term interest rates. No amounts are outstanding under
the credit facility at December 31, 1999. We had no open interest rate hedge
positions to reduce our exposure to changes in interest rates.
FOREIGN CURRENCY EXCHANGE RATES. Our cash flow stream relating to certain
international operations is based on the U.S. dollar equivalent of cash flows
measured in foreign currencies. Our Australian oil production is sold under U.S.
dollar contracts. Disbursement transactions denominated in Australian dollars
are converted to U.S. dollar equivalents based on the average of the Australian
and U.S. dollar exchange rates for the period reported. We consider our current
risk exposure to exchange rate movements, based on net cash flows, to be
immaterial. We did not have any open derivative contracts relating to foreign
currencies at December 31, 1999.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NEWFIELD EXPLORATION COMPANY
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management Report on Financial Statements................... 31
Independent Accountants' Report............................. 32
Consolidated Balance Sheet as of the fiscal years ended
December 31, 1999 and 1998................................ 33
Consolidated Statement of Income for each of the three years
in the period ended
December 31, 1999......................................... 34
Consolidated Statement of Stockholders' Equity for each of
the three years in the period ended December 31, 1999..... 35
Consolidated Statement of Cash Flows for each of the three
years in the period ended
December 31, 1999......................................... 36
Notes to Consolidated Financial Statements.................. 37
Supplemental Oil and Gas Disclosure......................... 54
</TABLE>
30
<PAGE> 31
MANAGEMENT REPORT ON FINANCIAL STATEMENTS
The Management of Newfield Exploration Company is responsible for the
preparation and integrity of all information contained in this Annual Report on
Form 10-K. The financial statements and other financial information are prepared
in accordance with generally accepted accounting principles and, accordingly,
include certain informed judgments and estimates of management. Newfield's
independent public accountants have audited the financial statements as
described in their report which follows.
Management maintains a system of internal accounting and managerial
controls which are designed to provide reasonable assurance that assets are
safeguarded, transactions are executed in accordance with management's
authorization and accounting records are reliable for financial statement
preparation.
An Audit Committee of the Board of Directors, consisting of directors who
are not employees of the Company, meets periodically with management and the
independent public accountants to obtain assurances as to the integrity of
Newfield's accounting and financial reporting and to affirm the adequacy of the
system of accounting and managerial controls in place. The independent
accountants have full, free and separate access to the Audit Committee to
discuss all appropriate matters.
We believe that the Company's policies and system of accounting and
managerial controls reasonably assure the integrity of the information in the
financial statements and in the other sections of this Annual Report on Form
10-K.
<TABLE>
<S> <C>
/s/ DAVID A. TRICE /s/ TERRY W. RATHERT
David A. Trice Terry W. Rathert
President and Vice President,
Chief Executive Officer Chief Financial Officer
and Secretary
</TABLE>
31
<PAGE> 32
INDEPENDENT ACCOUNTANTS' REPORT
To the Stockholders and Board of Directors of Newfield Exploration Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Newfield Exploration
Company and its subsidiaries at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS
Houston, Texas
February 10, 2000, Except for Note 13,
as to which the date is February 25, 2000
32
<PAGE> 33
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 41,841 $ 92
Accounts receivable - oil and gas......................... 67,744 43,095
Inventories............................................... 9,962 --
Other current assets...................................... 6,382 2,082
---------- --------
Total current assets.............................. 125,929 45,269
---------- --------
Oil and gas properties (full cost method, of which $77,732
at December 31, 1999 and $34,234 at December 31, 1998 were
excluded from amortization)............................... 1,210,895 992,629
Less - accumulated depreciation, depletion and
amortization.............................................. (566,053) (414,206)
---------- --------
644,842 578,423
---------- --------
Furniture, fixtures and equipment, net...................... 3,369 2,208
Other assets................................................ 7,421 3,411
---------- --------
Total assets...................................... $ 781,561 $629,311
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities.................. $ 88,670 $ 52,123
Advances from joint owners................................ 2,057 1,952
---------- --------
Total current liabilities......................... 90,727 54,075
---------- --------
Other liabilities........................................... 10,586 11,467
Long-term debt.............................................. 124,679 208,650
Deferred taxes.............................................. 36,801 31,171
---------- --------
Total long-term liabilities....................... 172,066 251,288
---------- --------
Company - obligated, mandatorily redeemable, convertible
preferred securities of Newfield Financial Trust I........ 143,750 --
---------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock ($0.01 par value, 5,000,000 shares
authorized; no shares issued).......................... -- --
Common stock ($0.01 par value, 100,000,000 shares
authorized; 41,734,884 and 40,429,729 shares issued and
outstanding at December 31, 1999 and December 31, 1998,
respectively).......................................... 417 404
Additional paid-in capital................................ 267,352 250,642
Unearned compensation..................................... (3,685) (5,007)
Accumulated other comprehensive loss - foreign currency
translation adjustment................................. (179) --
Retained earnings......................................... 111,113 77,909
---------- --------
Total stockholders' equity........................ 375,018 323,948
---------- --------
Total liabilities and stockholders' equity........ $ 781,561 $629,311
========== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
33
<PAGE> 34
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Oil and gas revenues.................................. $ 281,967 $ 195,685 $ 199,399
----------- ----------- -----------
Operating expenses:
Lease operating..................................... 45,561 35,345 24,308
Production and other taxes.......................... 2,215 -- --
Depreciation, depletion and amortization............ 152,644 123,147 94,000
Ceiling test writedown.............................. -- 104,955 4,254
General and administrative (exclusive of stock
compensation).................................... 14,405 9,848 11,093
Stock compensation.................................. 1,999 2,222 1,177
----------- ----------- -----------
Total operating expenses.................... 216,824 275,517 134,832
----------- ----------- -----------
Income (loss) from operations......................... 65,143 (79,832) 64,567
Other income (expenses):
Interest income..................................... 1,616 964 1,122
Interest expense, net............................... (11,188) (9,508) (3,268)
Dividends on convertible preferred securities of
Newfield Financial Trust I....................... (3,556) -- --
----------- ----------- -----------
(13,128) (8,544) (2,146)
----------- ----------- -----------
Income (loss) before income taxes..................... 52,015 (88,376) 62,421
Income tax provision (benefit):
Current............................................. 1,105 -- --
Deferred............................................ 17,706 (30,677) 21,818
----------- ----------- -----------
18,811 (30,677) 21,818
----------- ----------- -----------
Net income (loss)..................................... $ 33,204 $ (57,699) $ 40,603
=========== =========== ===========
Basic earnings (loss) per common share................ $ 0.81 $ (1.55) $ 1.14
=========== =========== ===========
Diluted earnings (loss) per common share.............. $ 0.79 $ (1.55) $ 1.07
=========== =========== ===========
Weighted average number of shares outstanding for
basic earnings per share............................ 41,194,021 37,311,928 35,612,488
Weighted average number of shares outstanding for
diluted earnings per share.......................... 42,293,865 37,311,928 38,017,177
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
34
<PAGE> 35
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
------------------- PAID-IN UNEARNED RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS LOSS EQUITY
---------- ------ ---------- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1996...................... 35,243,040 $352 $147,291 $(2,746) $ 95,005 $ -- $239,902
Issuance of common
stock................... 686,915 7 8,088 8,095
Issuance of restricted
stock, less amortization
of $226................. 45,822 1 3,022 (2,797) 226
Amortization of stock
compensation............ 951 951
Tax benefit from exercise
of stock options........ 2,271 2,271
Net income................ 40,603 40,603
---------- ---- -------- ------- -------- ----- --------
BALANCE, DECEMBER 31,
1997...................... 35,975,777 360 160,672 (4,592) 135,608 -- 292,048
Issuance of common
stock................... 4,341,620 43 85,472 85,515
Issuance of restricted
stock, less amortization
of $583................. 115,668 1 2,706 (2,124) 583
Cancellation of restricted
stock................... (3,336) (70) 50 (20)
Amortization of stock
compensation............ 1,659 1,659
Tax benefit from exercise
of stock options........ 1,862 1,862
Net loss.................. (57,699) (57,699)
---------- ---- -------- ------- -------- ----- --------
BALANCE, DECEMBER 31,
1998...................... 40,429,729 404 250,642 (5,007) 77,909 -- 323,948
Issuance of common
stock................... 1,283,544 13 7,995 8,008
Issuance of restricted
stock, less amortization
of $218................. 37,211 1,048 (830) 218
Cancellation of restricted
stock................... (15,600) (371) 312 (59)
Amortization of stock
compensation............ 1,840 1,840
Tax benefit from exercise
of stock options........ 8,038 8,038
Comprehensive Income:
Net income................ 33,204 33,204
Foreign currency
translation adjustment
net of tax.............. (179) (179)
--------
Total Comprehensive
Income............ 33,025
---------- ---- -------- ------- -------- ----- --------
BALANCE, DECEMBER 31,
1999...................... 41,734,884 $417 $267,352 $(3,685) $111,113 $(179) $375,018
========== ==== ======== ======= ======== ===== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
35
<PAGE> 36
NEWFIELD EXPLORATION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 33,204 $ (57,699) $ 40,603
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization................ 152,644 123,147 94,000
Ceiling test writedown.................................. -- 104,955 4,254
Deferred taxes.......................................... 17,706 (30,677) 21,818
Stock compensation...................................... 1,999 2,222 1,177
--------- --------- ---------
205,553 141,948 161,852
Changes in assets and liabilities:
(Increase) decrease in accounts receivable - oil and
gas.................................................. (23,382) 11,028 (7,309)
Decrease in inventories................................. 775 -- --
(Increase) decrease in other current assets............. (2,780) 344 (1,226)
(Increase) decrease in other assets..................... (4,010) (130) 1,359
Increase (decrease) in accounts payable and accrued
liabilities.......................................... 12,020 (4,652) 6,912
Increase (decrease) in advances from joint owners....... 105 1,392 (3,052)
Increase (decrease) in other liabilities................ (3,378) (3,355) 1,802
--------- --------- ---------
Net cash provided by operating activities....... 184,903 146,575 160,338
--------- --------- ---------
Cash flows from investing activities:
Acquisition of Gulf Australia, net of cash acquired of
$12,064.............................................. (10,977) -- --
Additions to oil and gas properties..................... (197,882) (317,831) (242,309)
Additions to furniture, fixtures and equipment.......... (1,958) (1,160) (653)
--------- --------- ---------
Net cash used in investing activities........... (210,817) (318,991) (242,962)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from borrowings................................ 443,000 795,750 357,250
Repayments of borrowings................................ (527,000) (716,750) (412,250)
Proceeds from issuance of senior notes.................. -- -- 124,619
Proceeds from issuance of convertible preferred
securities........................................... 143,750 -- --
Proceeds from issuances of common stock, net............ 8,008 85,291 8,095
Payments on capital lease obligations................... -- -- (163)
--------- --------- ---------
Net cash provided by financing activities....... 67,758 164,291 77,551
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. (95) -- --
--------- --------- ---------
Increase (decrease) in cash and cash equivalents.......... 41,749 (8,125) (5,073)
Cash and cash equivalents, beginning of period............ 92 8,217 13,290
--------- --------- ---------
Cash and cash equivalents, end of period.................. $ 41,841 $ 92 $ 8,217
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
36
<PAGE> 37
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Principles of Consolidation
These financial statements include the accounts of Newfield Exploration
Company, a Delaware corporation, and its subsidiaries (collectively, the
"Company"). All significant intercompany balances and transactions have been
eliminated. The Company was formed on December 5, 1988, to conduct oil and gas
exploration and drilling and development operations in the Gulf of Mexico. The
Company has expanded its operations into the U.S. Gulf Coast and select
international areas. The Company conducts foreign operations through its
subsidiaries. As an independent oil and gas producer, the Company's revenue,
profitability and future rate of growth are substantially dependent upon
prevailing prices for natural gas, oil and condensate, which are dependent upon
numerous factors beyond the Company's control, such as economic, political and
regulatory developments and competition from other sources of energy. The energy
markets have historically been very volatile, as evidenced by the recent
volatility of oil and gas prices, and there can be no assurance that oil and gas
prices will not be subject to wide fluctuations in the future. A substantial or
extended decline in oil and gas prices could have a material adverse effect on
the Company's financial position, results of operations, cash flows, quantities
of oil and gas reserves that may be economically produced and access to capital.
Reclassifications and Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date(s) of the financial
statements and the reported amounts of revenues and expenses during the
reporting period(s). Actual results could differ from these estimates. The
Company's most significant financial estimates are based on remaining proved oil
and gas reserves (see Supplementary Oil and Gas Disclosures included in
Supplementary Financial Information). Certain reclassifications for prior years
have been made to conform with the current year presentation.
Inventories
Inventories consist of international oil produced but not sold. Crude oil
from the Company's operations located offshore Australia is produced into a
floating production, storage and off-loading ("FPSO") vessel and sold
periodically as a barge quantity is accumulated. The product inventory at
December 31, 1999 consists of approximately 310,080 barrels of crude oil, valued
at $7.8 million net to the Company's interest, and is carried at the market
value on the balance sheet date, net of estimated costs to sell. Also included
in inventories are materials and supplies, stated at the lower of average cost
or market.
Foreign Currency
The functional currency for all foreign operations, except Australia, is
the U.S. dollar. Translation adjustments resulting from translating the
Australian subsidiary's Australian dollar financial statements into U.S. dollars
are included as other comprehensive income in the consolidated statement of
stockholders' equity. Gains and losses incurred on currency transactions in
other than a country's functional currency are included in the consolidated
statement of income.
Earnings Per Share
Basic earnings (loss) per common share ("EPS") is computed by dividing net
income (loss) by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities were exercised for or converted into common stock.
37
<PAGE> 38
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There are no adjustments to reported net income (loss) for purposes of
calculating earnings per share. The following is a calculation of basic and
diluted weighted average shares outstanding for each of the three years in the
period ended December 31, 1999:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Shares outstanding for basic EPS................. 41,194,021 37,311,928 35,612,488
Dilution effect of stock options outstanding at
end of period.................................. 1,099,844 -- 2,404,689
---------- ---------- ----------
Shares outstanding for diluted EPS............... 42,293,865 37,311,928 38,017,177
========== ========== ==========
</TABLE>
The calculation of diluted EPS for 1999 does not include the effect of
3,923,225 shares underlying the 6.5% quarterly income convertible preferred
securities because to do so would have been antidilutive. Additionally, the
calculation of shares outstanding for diluted EPS at December 31, 1998 does not
include the effect of stock options outstanding of 2,143,349 shares, because to
do so would have been antidilutive.
Financial Instruments
Cash equivalents include highly-liquid investments with a maturity of three
months or less when acquired. The Company invests cash in excess of operating
requirements in U.S. Treasury Notes, Eurodollar bonds and investment grade
commercial paper. Cash equivalents are stated at cost, which approximates fair
market value.
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different from
the book value. The book value of those financial instruments that are
classified as current assets or liabilities approximate fair value because of
the short maturity of those instruments.
The Company enters into various commodity price hedging contracts with
respect to its oil and gas production. While the use of these hedging
arrangements limits the downside risk of adverse price movements, they may also
limit future revenues from favorable price movements. The use of hedging
transactions also involves the risk that the counterparties will be unable to
meet the financial terms of such transactions. Such contracts are accounted for
as hedges, in accordance with Statement of Financial Accounting Standards No.
80. Gains and losses on these contracts are recognized in revenue in the period
in which the underlying production is delivered. These instruments are measured
for correlation at both the inception of the contract and on an ongoing basis.
If these instruments cease to meet the criteria for deferral accounting, any
subsequent gains or losses are recognized in revenue. If these instruments are
terminated prior to maturity, resulting gains and losses continue to be deferred
until the hedged item is recognized in revenue. Neither the hedging contracts
nor the unrealized gains or losses on these contracts are recognized in the
financial statements.
Oil and Gas Properties
The Company uses the full cost method of accounting. Under this method, all
costs incurred in the acquisition, exploration and development of oil and gas
properties are capitalized into cost centers that are established on a
country-by-country basis. Such capitalized costs and estimated future
development and dismantlement costs are amortized on a unit-of-production method
based on proved reserves. For each cost center, the net capitalized costs of oil
and gas properties are limited to the lower of unamortized cost or the cost
center ceiling, defined as the sum of the present value (10% per annum discount
rate) of estimated future net revenues from proved reserves, based on year-end
oil and gas prices; plus the cost of properties not being amortized, if any;
plus the lower of cost or estimated fair value of unproved properties included
in the costs being amortized, if any; less related income tax effects. As
required by these rules, a non-cash writedown of oil
38
<PAGE> 39
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and gas properties of $105.0 million (resulting in a charge to earnings of $68.3
million after-tax) was recognized at December 31, 1998. The writedown was
primarily attributable to the lower prices for both oil and natural gas at
December 31, 1998.
Proceeds from the sale of oil and gas properties are applied to reduce the
costs in the cost center unless the sale involves a significant quantity of
reserves in relation to the cost center, in which case a gain or loss is
recognized.
Unevaluated properties and associated costs not currently being amortized
and included in oil and gas properties were $67.3 million and $25.1 million at
December 31, 1999 and 1998, respectively. Additionally, at December 31, 1999 and
1998, there was $10.4 million and $9.2 million, respectively, of unproved
property costs associated with the Company's investment in international
activities. The properties represented by these costs were at such dates
undergoing exploration activities, or are properties on which the Company
intends to commence such activities in the future. The Company believes that the
unevaluated properties at December 31, 1999 will be substantially evaluated and
therefore subject to amortization within 12 to 24 months.
Other property and equipment are recorded at cost and are depreciated over
their estimated useful lives of five to seven years using the straight-line
method. At December 31, 1999 and 1998, furniture, fixtures and equipment is net
of accumulated depreciation of $2.6 million and $2.0 million, respectively.
Abandonment and Dismantlement Costs
Future abandonment and dismantlement costs include costs to dismantle,
relocate and dispose of the Company's offshore production platforms, FPSOs,
gathering systems, wells and related structures. The Company develops estimates
of its future abandonment and dismantlement costs for each of its properties
based upon the type of production structure, depth of water, currently available
abandonment procedures and consultations with construction and engineering
consultants. The Company does not currently anticipate additional abandonment
and dismantlement costs will be incurred beyond such estimates. Such estimates
are re-evaluated at least annually by the Company's engineers.
Total estimated future abandonment and dismantlement costs associated with
the Company's developed and acquired properties were $133.1 million, $69.1
million and $53.9 million as of December 31, 1999, 1998 and 1997, respectively.
Estimated future abandonment and dismantlement costs are accrued on a
unit-of-production method based on proved reserves. The portion of future
abandonment and dismantlement costs that has been accrued is included in
accumulated depreciation, depletion and amortization and was $43.1 million,
$29.7 million and $23.6 million as of December 31, 1999, 1998 and 1997,
respectively.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined by applying tax
regulations existing at the end of a reporting period to the cumulative
temporary differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements.
A valuation allowance is established to reduce deferred tax assets if it is
more likely than not that the related tax benefits will not be realized.
Concentration of Credit Risk
The Company maintains cash balances with several banks that frequently
exceed federally insured limits and invests its cash in investment grade
commercial and U.S. Government backed securities. The Company's joint interest
partners consist primarily of independent oil and gas producers. The Company's
oil and gas
39
<PAGE> 40
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
production purchasers consist primarily of independent marketers and major gas
pipeline companies. The Company performs credit evaluations of its customers'
financial condition and obtains letter of credit agreements and parental
guarantees from selected oil and gas purchase customers. The Company has not
experienced any significant losses from uncollectible accounts. Substantially
all of the Company's hedging transactions to date were carried out in the
over-the-counter market.
Major Customers
The Company sold oil and gas production representing more than 10% of its
oil and gas revenues for the year ended December 31, 1999, to Conoco Inc. (18%)
and Superior Natural Gas Corporation (10%); for the year ended December 31,
1998, to Conoco Inc. (13%) and Coast Energy Group (10%); for the year ended
December 31, 1997, to Coast Energy Group (12%) and Gulfmark Energy, Inc. (11%).
Because alternative purchasers of oil and gas are readily available, the Company
believes that the loss of any of these purchasers would not have a material
adverse effect on the Company.
2. HEDGING TRANSACTIONS:
During 1999, approximately 55% of the Company's equivalent production was
subject to hedge positions as compared to 61% in 1998.
As of December 31, 1999, the Company had entered into commodity price
hedging contracts with respect to its natural gas production for 2000 as
follows:
<TABLE>
<CAPTION>
NYMEX CONTRACT
PRICE PER MMBTU
-----------------------------------------
COLLARS
VOLUME IN SWAPS ----------------- FLOOR FAIR MARKET
PERIOD MMMBTUS (AVERAGE) FLOORS CEILINGS CONTRACTS VALUE(1)
- --------------------------------- --------- --------- ------ -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
January 2000
Price Swap Contracts........... 750 $2.74 -- -- -- $0.9 Million
Collar Contracts............... 250 -- $2.63 $3.25 -- $0.1 Million
Floor Contracts................ 100 -- -- -- $2.63 --
</TABLE>
- ---------------
(1) Fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1999.
40
<PAGE> 41
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998, the Company had entered into commodity price
hedging contracts with respect to its natural gas production for 1999 and 2000
as follows:
<TABLE>
<CAPTION>
NYMEX CONTRACT
PRICE PER MMBTU
---------------------------------------------------
COLLARS
VOLUME IN SWAPS ------------------------- FLOOR FAIR MARKET
PERIOD MMMBTUS (AVERAGE) FLOORS CEILINGS CONTRACTS VALUE(1)
- -------------------------- --------- --------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
January 1999-March 1999
Price Swap Contracts.... 2,430 $2.45 -- -- -- $1.5 Million
Collar Contracts........ 5,600 -- $2.25-$2.58 $2.69-$3.50 -- $3.5 Million
Floor Contracts......... 1,800 -- -- -- $2.30-$2.63 $1.0 Million
April 1999-June 1999
Price Swap Contracts.... 930 $2.25 -- -- -- $0.3 Million
Collar Contracts........ 7,000 -- $2.10-$2.15 $2.25-$2.50 -- $1.4 Million
July 1999-September 1999
Price Swap Contracts.... 930 $2.24 -- -- -- $0.3 Million
Collar Contracts........ 3,750 -- $2.10 $2.40 -- $0.5 Million
October 1999-December 1999
Price Swap Contracts.... 930 $2.40 -- -- -- $0.2 Million
January 2000-December 2000
Price Swap Contracts.... 3,000 $2.31 -- -- -- $0.3 Million
</TABLE>
- ---------------
(1) Fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1998.
These hedging transactions are settled based upon the average of the
reported settlement prices on the NYMEX for the last three trading days or,
occasionally, the penultimate trading day of a particular contract month (the
"settlement price"). With respect to any particular swap transaction, the
counterparty is required to make a payment to the Company in the event that the
settlement price for any settlement period is less than the swap price for such
transaction, and the Company is required to make payment to the counterparty in
the event that the settlement price for any settlement period is greater than
the swap price for such transaction. For any particular collar transaction, the
counterparty is required to make a payment to the Company if the settlement
price for any settlement period is below the floor price for such transaction,
and the Company is required to make payment to the counterparty if the
settlement price for any settlement period is above the ceiling price of such
transaction. For any particular floor transaction, the counterparty is required
to make a payment to the Company if the settlement price for any settlement
period is below the floor price for such transaction. The Company is not
required to make any payment in connection with the settlement of a floor
transaction.
The Company believes that it has no material basis risk with respect to gas
swaps because substantially all of the Company's natural gas production is sold
under spot contracts that have historically correlated with the swap price.
41
<PAGE> 42
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1999, the Company had entered into commodity price
hedging contracts with respect to its oil production for 2000 and 2001 as
follows:
<TABLE>
<CAPTION>
NYMEX CONTRACT
PRICE PER BBL
--------------------------------------------------
COLLARS
VOLUME IN SWAPS ---------------------------- FLOOR FAIR MARKET
PERIOD BBLS (AVERAGE) FLOORS CEILINGS CONTRACTS VALUE (1)
- --------------------------------- --------- --------- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
January 2000-March 2000
Price Swap Contracts........... 455,000 $21.63 -- -- -- $(1.6 Million)
Collar Contracts............... 182,000 -- $18.28-$19.50 $20.10-$21.00 -- $(0.2 Million)
Floor Contracts................ 91,000 -- -- -- $19.32 $(0.8 Million)
April 2000-June 2000
Price Swap Contracts........... 455,000 $21.70 -- -- -- $(0.3 Million)
Collar Contracts............... 182,000 -- $18.28-$19.50 $20.10-$21.00 -- $(0.3 Million)
July 2000-September 2000
Price Swap Contracts........... 460,000 $21.70 -- -- -- $ 0.3 Million
Collar Contracts............... 92,000 -- $18.28 $21.00 -- $(0.1 Million)
October 2000-December 2000
Price Swap Contracts........... 460,000 $21.70 -- -- -- $ 0.7 Million
January 2001-March 2001
Price Swap Contracts........... 180,000 $21.25 -- -- -- $ 0.3 Million
</TABLE>
- ---------------
(1) Fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1999.
As of December 31, 1998, the Company had entered into commodity price
hedging contracts with respect to its oil production for 1999 as follows:
<TABLE>
<CAPTION>
COLLARS
-----------------------------
NYMEX CONTRACT
PRICE PER BBL
VOLUME IN ----------------------------- FAIR MARKET
PERIOD BBLS FLOORS CEILINGS VALUE(1)
- ------ --------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
January 1999-March 1999................. 180,000 $15.00-$17.00 $17.00-$18.10 $0.7 Million
April 1999-June 1999.................... 182,000 $15.00-$17.00 $17.00-$18.70 $0.7 Million
July 1999-September 1999................ 184,000 $15.00-$17.00 $17.00-$19.15 $0.6 Million
October 1999-December 1999.............. 92,000 $15.00 $17.00 $0.2 Million
</TABLE>
- ---------------
(1) Fair market value is calculated using prices derived from NYMEX futures
contract prices existing at December 31, 1998.
Because substantially all of the Company's domestic oil production is sold
under spot contracts that have historically correlated to the NYMEX West Texas
Intermediate price, the Company believes that it has no material basis risk with
respect to these transactions. The actual cash price the Company receives in the
U.S., however, generally is about $2.00 per barrel less than the NYMEX West
Texas Intermediate price when adjusted for location and quality differences.
3. ACQUISITION OF GULF AUSTRALIA:
On July 15, 1999, the Company completed the purchase of Gulf Australia
Resources Limited for $23 million. Included in the purchase price was a
substantial amount of working capital, including an inventory of 479 MBbls of
oil. The acquisition includes interests in two producing oil fields in the Timor
Sea, offshore Australia.
42
<PAGE> 43
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Senior Unsecured Debt
Bank revolving credit facility:
Prime rate based loans................................. $ -- $ --
LIBOR based loans...................................... -- 84,000
-------- --------
Total bank revolving credit facility.............. -- 84,000
-------- --------
7.45% Senior Notes, due 2007.............................. 124,679 124,650
-------- --------
Stand alone facilities.................................... -- --
-------- --------
Long-term debt......................................... $124,679 $208,650
======== ========
</TABLE>
At December 31, 1998, the interest rates for LIBOR based loans was 5.75%.
The estimated fair market value of the senior notes, based on quoted market
prices at December 31, 1999 and 1998, was $115.2 million and $119.4 million,
respectively. Debt outstanding under the bank revolving credit facility is
stated at cost, which approximates fair market value.
The Company maintains its reserve-based revolving credit facility (the
"Credit Facility") with Chase Bank of Texas, National Association, as agent. The
Credit Facility provides a $225 million revolving credit maturing on October 31,
2002. The amount available under the Credit Facility is subject to a calculated
borrowing base determined by a majority of the banks participating in the Credit
Facility, which is reduced by the aggregate principal outstanding on the
Company's senior unsecured notes (currently $125 million) (as so reduced, the
"Borrowing Base"). The Borrowing Base is re-determined at least semi-annually
and is currently $300 million. No assurances can be given that a majority of the
banks will not elect to redetermine the Borrowing Base in the future. The
Company has an option, subject to the Borrowing Base, to increase the facility
to $250 million. As of December 31, 1999, there were no amounts outstanding
under the Credit Facility.
Borrowings under the Credit Facility bear interest, at the Company's
option, at (i) the higher of (a) the federal fund rate plus 50 basis points and
(b) the bank's prime rate or (ii) LIBOR plus a variable margin, which is based
upon the loan amount outstanding relative to the Borrowing Base and the
Company's corporate credit ratings.
The Credit Facility also provides for the payment of a commitment fee and a
standby fee. The Company paid fees of approximately $336,000, $178,000 and
$148,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The Credit Facility contains positive and negative covenants which, among
other things, require the Company to maintain a working capital ratio, as
defined, a fixed charge coverage ratio, as defined, and a minimum net worth. The
Credit Facility also limits the incurrence of additional debt and additional
liens on properties, sale of certain assets and the declaration or payment of
dividends.
5. CONVERTIBLE PREFERRED SECURITIES OF NEWFIELD FINANCIAL TRUST I:
In August 1999, Newfield Financial Trust I, a Delaware business trust and
wholly owned subsidiary of the Company (the "Trust"), issued, in an underwritten
public offering, $143,750,000 (2,875,000 securities having a liquidation
preference of $50 each) of 6.5% Cumulative Quarterly Income Convertible
Securities,
43
<PAGE> 44
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Series A (the "Trust Preferred Securities"). The proceeds of the issuance of the
Trust Preferred Securities were used to purchase $143,750,000 of the Company's
6.5% Junior Subordinated Convertible Debentures, due 2029 (the "Debentures").
The interest terms and payment dates of the Debentures correspond to those of
the Trust Preferred Securities. The Company's obligations under the Debentures
and related agreements, when taken together, constitute a full and unconditional
guarantee of payments due on the Trust Preferred Securities. The sole asset of
the Trust is the Debentures. The Trust has no independent operations. The
Debentures are eliminated in the consolidated financial statements.
The Trust Preferred Securities accrue and pay distributions quarterly in
arrears at a rate of 6.5% per annum on the stated liquidation amount of $50 per
Trust Preferred Security on February 15, May 15, August 15, and November 15 of
each year to security holders of record 15 business days immediately preceding
the distribution payment date. The Company may on one or more occasions defer
the payment of interest on the Debentures for up to 20 consecutive quarterly
periods unless an event of default on the Debentures has occurred and is
continuing. During any such deferral period, the Trust will defer the payment of
distributions, but accrued distributions on the Trust Preferred Securities will
compound quarterly and the Company will generally not be permitted to declare or
pay any dividends or distributions on, or redeem or acquire, any of its capital
stock or make any payment of principal or interest on any debt securities that
rank equal or junior to the Debentures.
The Trust Preferred Securities are convertible at the option of the holder
at any time into common stock of the Company at the rate of 1.3646 shares of
Company common stock per Trust Preferred Security. This conversion rate is
subject to adjustment to prevent dilution and is currently equivalent to a
conversion price of $36.64 per share of Company common stock. The Trust
Preferred Securities are mandatorily redeemable upon maturity of the Debentures
on August 15, 2029, and on a proportionate basis to the extent of any earlier
redemption of any Debenture by the Company. The Debentures are redeemable by the
Company at any time after August 15, 2002.
The estimated fair market value of the Trust Preferred Securities, based on
quoted market prices at December 31, 1999, was $134.8 million.
6. INCOME TAXES:
Income (loss) before income taxes is composed of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. Federal........................................... $41,178 $(88,376) $62,421
Foreign................................................ 10,837 -- --
------- -------- -------
Total........................................ $52,015 $(88,376) $62,421
======= ======== =======
</TABLE>
44
<PAGE> 45
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current taxes:
U.S. Federal......................................... $ 1,105 $ -- $ --
Deferred taxes:
U.S. Federal......................................... 13,668 (30,677) 21,818
Foreign.............................................. 4,038 -- --
------- -------- -------
$18,811 $(30,677) $21,818
======= ======== =======
</TABLE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------- -----------------
U.S. AUSTRALIA U.S.
-------- --------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax asset:
Alternative minimum tax credit........................ $ 2,953 $ -- $ 1,848
Net operating loss carry forwards..................... 23,961 4,646 41,539
Other, net............................................ 1,834 -- 1,897
-------- ------- --------
Gross Deferred Tax Asset...................... 28,748 4,646 45,284
Valuation allowance................................... -- (2,326) --
-------- ------- --------
Net Deferred Tax Asset........................ 28,748 2,320 45,284
-------- ------- --------
Deferred Tax Liability:
Oil and gas properties................................ (65,549) -- (76,455)
-------- ------- --------
Net deferred tax asset (liability)...................... (36,801) 2,320 (31,171)
Less current deferred tax asset......................... -- 2,320 --
-------- ------- --------
Noncurrent deferred tax liability....................... $(36,801) $ -- $(31,171)
======== ======= ========
</TABLE>
U.S. deferred taxes have not been provided on foreign income of $10.8
million, which is permanently reinvested in Australia. The Company currently
does not have any foreign tax credits which would be available to reduce U.S.
taxes on such income if it was repatriated.
As of December 31, 1999, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $63.5 million
that may be used in future years to offset taxable income. Utilization of the
Company's NOL carryforwards are subject to annual limitations due to certain
stock ownership changes that have occurred or may occur. To the extent not
utilized, the NOL carryforwards will begin to expire in 2018.
The $2.3 million Australian current deferred tax asset is included in other
current assets on the consolidated balance sheet. The Company expects to realize
its deferred tax assets through future taxable income.
7. COMMITMENTS AND CONTINGENCIES:
The Company has entered into a non-cancellable operating lease agreement
for office space in Houston, Texas. The lease term expires in October 2005, with
two options to renew the lease for five years each. In addition, the Company
enters into various other equipment leases as part of its operations.
45
<PAGE> 46
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments required as of December 31, 1999 related to
these operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
(IN THOUSANDS)
<S> <C>
2000...................................................... $ 3,043
2001...................................................... 3,095
2002...................................................... 3,158
2003...................................................... 2,108
2004...................................................... 1,539
Thereafter................................................ 1,332
-------
Total minimum lease payments.................... $14,275
=======
</TABLE>
Rent expense for the years ended December 31, 1999, 1998 and 1997 was $2.8
million, $1.9 million and $0.6 million, respectively.
The Company has been named as a defendant in certain lawsuits arising in
the ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial position, cash flows or results of
operations of the Company.
8. STOCK-BASED COMPENSATION:
The Company has several stock-based compensation plans, which are described
below. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock-based compensation plans.
Stock Option Plans
The Company has granted options pursuant to its 1989, 1990, 1991, 1993,
1995 and 1998 stock option plans (collectively, the "Stock Option Plans").
Options that have been granted and are outstanding generally expire 10 years
from the date of grant and become exercisable at the rate of 20% per year.
46
<PAGE> 47
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of all stock option activity for 1997, 1998 and
1999:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SHARES AVERAGE
UNDERLYING EXERCISE
OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding at December 31, 1996.......................... 3,482,700 $ 6.39
Granted................................................. 285,000 22.16
Exercised............................................... (375,070) 5.25
Forfeited............................................... (640) 13.94
---------- ------
Outstanding at December 31, 1997.......................... 3,391,990 7.84
Granted................................................. 959,900 20.81
Exercised............................................... (296,570) 5.13
Forfeited............................................... (133,900) 21.22
---------- ------
Outstanding at December 31, 1998.......................... 3,921,420 10.76
Granted................................................. 308,000 27.38
Exercised............................................... (1,243,960) 5.80
Forfeited............................................... (83,800) 18.68
---------- ------
Outstanding at December 31, 1999.......................... 2,901,660 $14.43
========== ======
Exercisable at December 31, 1997.......................... 2,291,480 $ 4.73
========== ======
Exercisable at December 31, 1998.......................... 2,442,030 $ 5.52
========== ======
Exercisable at December 31, 1999.......................... 1,534,420 $ 8.16
========== ======
</TABLE>
At December 31, 1999, the Company had an additional 534,140 options
available for grant. If granted, these additional options will be exercisable at
a price not less than the fair market value per share of the Company's common
stock on the date of grant. The weighted average fair value of options granted
during 1999, 1998 and 1997 was $12.68, $8.92 and $10.15, respectively.
The fair value of each stock option granted is estimated as of the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 1999, 1998 and 1997: no dividend yield for all
years; expected volatility of 33.77%, 30.57% and 31.56%, respectively; risk-free
interest rates of 5.97%, 5.55% and 6.47%, respectively; and an expected option
life of 6.50 years for all years.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------ ----------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.50 to $ 5.62 1,070,000 2.3 years $ 3.92 1,070,000 $ 3.92
10.94 to 14.78 370,260 5.8 years 13.76 229,740 13.68
15.04 to 20.94 468,800 8.3 years 17.28 56,000 18.84
21.06 to 32.88 992,600 8.4 years 24.66 178,680 23.15
- ---------------- --------- --------- ------ --------- ------
$ 3.50 to $32.88 2,901,660 5.8 years $14.43 1,534,420 $ 8.16
</TABLE>
Common stock issued through the exercise of stock options results in a tax
deduction for the Company equivalent to the taxable gain recognized by the
optionee. For financial reporting purposes, the tax effect of this deduction is
accounted for as a credit to additional paid-in capital rather than as a
reduction of income tax
47
<PAGE> 48
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expense. The exercise of stock options during 1999, 1998 and 1997 resulted in a
deferred tax benefit to the Company of approximately $8.0 million, $1.9 million
and $2.3 million, respectively.
Employee Stock Purchase Plan
The Company's employee stock purchase plan (the "Stock Purchase Plan")
permits eligible employees to acquire common stock. Under the Stock Purchase
Plan, the Company is authorized to issue up to 200,000 shares of common stock.
For each six month period beginning on January 1 or July 1 during the term
of the Stock Purchase Plan, each eligible employee has the opportunity to
purchase common stock for a purchase price equal to 85% of the lesser of the
fair market value of the common stock on (i) the first day of the period or (ii)
the last day of the period. No employee may purchase common stock under the
Stock Purchase Plan valued at more than $25,000 for each calendar year.
Under the Stock Purchase Plan, the Company has sold 24,945 shares, 25,369
shares and 23,124 shares to employees in 1999, 1998 and 1997, respectively,
which had weighted average prices of $19.73, $18.72 and $17.48, respectively. In
accordance with APB Opinion No. 25, the Company has not recognized any
compensation expense with respect to the Stock Purchase Plan.
The weighted average fair value of the option to purchase stock during
1999, 1998 and 1997 was $6.34, $5.92 and $7.15, respectively. The fair value of
each option granted under the Stock Purchase Plan is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 1999, 1998 and 1997: no dividend yield for all
years; expected volatility of 33.77%, 30.57% and 31.56%, respectively; risk-free
interest rates of 4.78%, 5.01% and 6.47%, respectively; and an expected option
life of six months for all years.
Pro Forma Net Income and Net Income Per Common Share
If the fair value based method of accounting in Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("Statement No. 123") had been applied, the Company's net income and earnings
per common share for 1999, 1998 and 1997 would have approximated the pro forma
amounts below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
---------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Income (loss): As reported........................... $33,204 $(57,699) $40,603
Pro forma............................. 31,242 (59,275) 39,613
Basic earnings (loss) per common share - As reported..... $ 0.81 $ (1.55) $ 1.14
Pro forma....... 0.76 (1.59) 1.11
Diluted earnings (loss) per common share - As reported... $ 0.79 $ (1.55) $ 1.07
Pro forma..... 0.74 (1.59) 1.04
</TABLE>
The effects of applying Statement No. 123 in this pro forma disclosure are
not indicative of future amounts. Statement No. 123 does not apply to awards
prior to 1995. The Company anticipates making awards in the future under its
stock-based compensation plans.
Restricted Stock
The Company has adopted three plans pursuant to which restricted shares of
common stock may be granted.
48
<PAGE> 49
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the Newfield Exploration Company 1995 Omnibus Stock Plan (the "1995
Omnibus Plan"), the Company may grant to employees (including an officer or a
director who is also an employee) as restricted common stock all or a portion of
400,000 shares of common stock reserved under the 1995 Omnibus Plan. In 1999,
1998 and 1997 the Company issued 29,000, 107,100 and 35,400 shares,
respectively, of restricted common stock that fully vest after 9 years. Vesting
may, however, be accelerated if certain performance-based criteria are met.
Under the Newfield Exploration Company 1995 Non-Employee Director
Restricted Stock Plan (the "Non-Employee Director Plan"), subject to a maximum
of 50,000 shares, each non-employee director who is in office immediately after
each annual meeting of stockholders of the Company shall receive a number of
restricted shares determined by dividing $30,000 by the fair market value on the
date of the annual meeting of stockholders, subject to the terms of the
Non-Employee Director Plan. The forfeiture restrictions with respect to all
restricted shares granted since the last annual meeting of stockholders lapse on
the day before the first annual meeting of stockholders following the date of
issuance of such shares, provided that the holder remains a director until such
time. The Company issued 8,211 shares to seven Non-Employee Directors in 1999,
8,568 shares to seven Non-Employee Directors in 1998, and 10,422 shares to seven
Non-Employee Directors in 1997.
Under the Newfield Exploration Company 1998 Omnibus Stock Plan (the "1998
Omnibus Plan") the Company may, subject to certain restrictions, grant to
employees (including an officer or director who is also an employee) as
restricted common stock all or a portion of 250,000 shares of common stock
reserved under the 1998 Omnibus Plan.
In accordance with APB Opinion No. 25, the Company recognized unearned
compensation for the fair value of the restricted common stock in the amount of
$1.0 million for 1999, $2.7 million for 1998 and $1.0 million for 1997. This
amount is charged to stockholders' equity and recognized as compensation expense
over the applicable vesting period, in the amount of $0.9 million for 1999, $2.0
million for 1998 and $0.8 million for 1997. The weighted average price for
37,211 shares of restricted common stock issued in 1999 is $27.75. The weighted
average price for 115,668 shares of restricted common stock issued in 1998 is
$23.40. The weighted average price for 45,822 shares of restricted common stock
issued in 1997 is $22.65.
9. EMPLOYEE BENEFIT PLANS:
The Company sponsors a 401(k) Profit Sharing Plan (the "401(k) Plan") under
Section 401(k) of the Internal Revenue Code. This plan covers all employees of
the Company other than employees of the Company's Australian subsidiaries. The
Company matches $1.00 for each $1.00 of employee deferral, with the Company's
contribution not to exceed 8% of an employee's salary, subject to limitations
imposed by the Internal Revenue Service. The Company's contributions to the
401(k) Plan totaled $605,000, $546,000 and $466,000 for the years ended December
31, 1999, 1998 and 1997, respectively.
The Company also sponsors the Newfield Employee 1993 Incentive Compensation
Plan (the "Plan"), which is a non-qualified plan funded by amounts equal to
revenues that would be attributable to a 1% overriding royalty interest on
acquired proved properties and a 2% overriding royalty interest from exploration
properties. Such amounts are attributable to both the Company's interest and the
interest of certain working interest owners in these properties. Amounts
available for distribution under the Plan and attributable to the overriding
royalty interests bearing against the Company are limited to 5% of the Company's
adjusted net income as defined in the Plan. The Plan is administered by the
Compensation Committee of the Board of Directors with award amounts recommended
by the Chief Executive Officer of the Company, based on the performance of the
Company and the eligible employees during the performance period. All employees
of the Company are eligible for awards if employed on both October 1 and
December 31 of the performance period. Awards may have both a current and a
deferred component of compensation. Eligible employees may elect for deferred
amounts to be paid in common stock instead of cash. If the eligible employee
elects for a deferred
49
<PAGE> 50
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount to be paid in common stock, the number of shares of common stock to be
awarded is determined by using the fair market value of common stock on the date
of the award. Total expense under the Plan for the years ended December 31,
1999, 1998 and 1997 were $3.9 million, $1.9 million and $5.3 million,
respectively.
During 1997, the Company implemented a highly compensated employee Deferred
Compensation Plan (the "Deferred Plan"). This non-qualified plan allows an
eligible employee to defer a portion of the employee's salary or bonus on an
annual basis. The Company matches $1.00 for each $1.00 of employee deferral,
with the Company's contribution not to exceed 8% of an employee's salary,
subject to limitations imposed by the Deferred Plan. The Company's contribution
is reduced by the amount of contribution made by the Company to the 401(k) Plan
for each participant. The Company's contributions to the Deferred Plan totaled
$34,000, $30,000 and $22,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
10. STOCKHOLDER RIGHTS PLAN:
In 1999, the Company adopted a stockholder rights plan. The plan is
designed to ensure that all Newfield stockholders receive fair and equal
treatment in the event of a proposed takeover of the Company. It includes
safeguards against partial or two-tiered tender offers, squeeze-out mergers and
other abusive takeover tactics.
The plan provides for the issuance of one right for each outstanding share
of the Company's common stock. The rights will become exercisable only if a
person or group acquires 20% or more of the Company's outstanding voting stock
or announces a tender or exchange offer that would result in ownership of 20% or
more of the Company's voting stock.
Each right will entitle the holder to buy one one-thousandth (1/1000) of a
share of a new series of junior participating preferred stock at an exercise
price of $85 per right, subject to antidilution adjustments. Each one
one-thousandth of a share of this new preferred stock has the dividend and
voting rights of, and is designed to be substantially equivalent to, one share
of common stock. The Company's Board of Directors may, at its option, redeem all
rights for $0.01 per right at any time prior to the acquisition of 20% or more
of the Company's stock by a person or group.
If a person or group acquires 20% or more of the Company's outstanding
voting stock, each right will entitle holders, other than the acquiring party,
to purchase common stock of the Company having a market value of $170 for a
purchase price of $85, subject to antidilution adjustments.
The plan also includes an exchange option. If a person or group acquires
20% or more, but less than 50% of the outstanding voting stock, the Board of
Directors may at its option exchange the rights in whole or part for shares of
common stock of the Company. Under this option, the Company would issue one
share of common stock, or one one-thousandth of a share of new preferred stock,
for each two shares of common stock for which a right is then exercisable. This
exchange would not apply to rights held by the person or group holding 20% or
more of the Company's voting stock.
If, after the rights have become exercisable, the Company merges or
otherwise combines with another entity, or sells assets constituting more than
50% of its assets or producing more than 50% of its earning power or cash flow,
each right then outstanding will entitle its holder to purchase for $85, subject
to antidilution adjustments, a number of the acquiring party's common shares
having a market value of twice that amount.
This plan will not prevent, nor is it intended to prevent, a takeover of
the Company. Since the rights may be redeemed by the Board under certain
circumstances, they should not interfere with any merger or other business
combination approved by the Board. The issuance of the rights does not in any
way diminish the financial strength of the Company or interfere with its
business plans. The issuance of the rights has no dilutive effect, does not
affect reported earnings per share or change the way the common stock of the
Company is currently traded.
50
<PAGE> 51
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. GEOGRAPHIC INFORMATION:
<TABLE>
<CAPTION>
OTHER
UNITED STATES AUSTRALIA INTERNATIONAL TOTAL
------------- --------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1999
- ------------------------------------------------
Oil and gas revenues............................ $259,681 $22,286 $ -- $281,967
Operating expenses:
Lease operating............................... 38,562 6,999 -- 45,561
Production and other taxes.................... 699 1,516 -- 2,215
Depreciation, depletion and amortization...... 149,350 3,294 -- 152,644
Allocated income taxes........................ 24,875 3,772 --
-------- ------- -------
Net income from oil and gas operations..... $ 46,195 $ 6,705 $ --
======== ======= =======
General and administrative (exclusive of stock
compensation).............................. 14,405
Stock compensation............................ 1,999
--------
Total operating expenses.............. 216,824
--------
Income from operations.......................... 65,143
Interest expense, net......................... (13,128)
--------
Income before income taxes...................... $ 52,015
========
Total Long-Lived Assets......................... $630,316 $ 4,096 $10,430 $644,842
======== ======= ======= ========
Additions to Long-Lived Assets.................. $201,143 $ 7,390 $ 1,266 $209,799
======== ======= ======= ========
1998
- ------------------------------------------------
Oil and gas revenues............................ $195,685 $ -- $ -- $195,685
Operating expenses:
Lease operating............................... 35,345 -- -- 35,345
Production and other taxes.................... -- -- -- --
Depreciation, depletion and amortization...... 123,147 -- -- 123,147
Ceiling test writedown........................ 104,955 -- -- 104,955
Allocated income taxes........................ (23,717) -- --
-------- ------- -------
Net loss from oil and gas operations....... $(44,405) -- --
======== ======= =======
General and administrative (exclusive of stock
compensation).............................. 9,848
Stock compensation............................ 2,222
--------
Total operating expenses.............. 275,517
--------
Loss from operations............................ (79,832)
Interest expense, net......................... (8,544)
--------
Loss before income taxes........................ $(88,376)
========
Total Long-Lived Assets......................... $569,259 $ -- $ 9,164 $578,423
======== ======= ======= ========
Additions to Long-Lived Assets.................. $309,260 $ -- $ 1,512 $310,772
======== ======= ======= ========
</TABLE>
51
<PAGE> 52
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OTHER
UNITED STATES AUSTRALIA INTERNATIONAL TOTAL
------------- --------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
- ------------------------------------------------
Oil and gas revenues............................ $199,399 $ -- $ -- $199,399
Operating expenses:
Lease operating............................... 24,308 -- -- 24,308
Production and other taxes.................... -- -- -- --
Depreciation, depletion and amortization...... 94,000 -- -- 94,000
Ceiling test writedown........................ -- -- 4,254 4,254
Allocated income taxes........................ 28,382 -- --
-------- ------- -------
Net income (loss) from oil and gas
operations............................... $ 52,709 $ -- (4,254)
======== ======= =======
General and administrative (exclusive of stock
compensation).............................. 11,093
Stock compensation............................ 1,177
--------
Total operating expenses.............. 134,832
--------
Income from operations.......................... 64,567
Interest expense, net......................... (2,146)
--------
Income before income taxes...................... $ 62,421
========
Total Long-Lived Assets......................... $476,104 $ -- $ 7,850 $483,954
======== ======= ======= ========
Additions to Long-Lived Assets.................. $241,055 $ -- $12,104 $253,159
======== ======= ======= ========
</TABLE>
12. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash payments:
Interest payments (includes interest on the senior notes
and dividends on the convertible preferred securities,
net of interest capitalized of $2,376, $4,369 and
$3,481 during 1999, 1998 and 1997, respectively)....... $11,598 $ 7,478 $ 1,196
Income tax payments....................................... -- -- --
Non-cash items excluded from the statement of cash flows:
Increase (decrease) in accrued capital expenditures....... $ 9,261 $(7,059) $10,850
Other..................................................... (179) (23) (50)
</TABLE>
13. SUBSEQUENT EVENTS:
In February 2000, the Company closed the acquisition of interests in
producing gas assets in South Texas for $142 million. The producing gas fields
are located in Hidalgo, Brooks and Kenedy counties. The effective date of the
transaction is January 1, 2000.
52
<PAGE> 53
NEWFIELD EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The results of operations by quarter for the years ended December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
1999 QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Oil and gas revenues............................. $52,889 $60,188 $78,648 $90,242
Income from operations........................... 3,236 9,886 22,699 29,322
Net income (loss)................................ (170) 4,375 12,405 16,594
Basic earnings per common share.................. $ 0.00 $ 0.11 $ 0.30 $ 0.40
Diluted earnings per common share................ $ 0.00 $ 0.10 $ 0.29 $ 0.39
</TABLE>
<TABLE>
<CAPTION>
1998 QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Oil and gas revenues............................. $49,982 $49,902 $45,296 $ 50,505
Income (loss) from operations (1)................ 11,696 7,785 4,377 (103,690)
Net income (loss)(1)............................. 6,712 3,772 850 (69,033)
Basic earnings (loss) per common share (1)....... $ 0.19 $ 0.10 $ 0.02 $ (1.71)
Diluted earnings (loss) per common share (1)..... $ 0.18 $ 0.10 $ 0.02 $ (1.71)
</TABLE>
- ---------------
(1) A non-cash full cost ceiling test writedown of oil and gas properties
totaling $105.0 million (resulting in a charge to earnings of $68.3 million
after-tax) was recognized at December 31, 1998.
53
<PAGE> 54
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED
Costs incurred for oil and gas property acquisition, exploration and
development activities for each of the three years in the period ended December
31, 1999 are as follows:
<TABLE>
<CAPTION>
OTHER
UNITED STATES AUSTRALIA CHINA FOREIGN TOTAL
------------- --------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1999
- -------------------------------------------
Property acquisition:
Unproved................................. $ 5,849 $ -- $ -- $ -- $ 5,849
Proved................................... 77,673 2,490 -- -- 80,163
Exploration................................ 46,343 3,852 641 625 51,461
Development................................ 71,278 1,048 -- -- 72,326
------------- ------ ------- ------ --------
Total costs incurred............. $ 201,143 $7,390 $ 641 $ 625 $209,799
============= ====== ======= ====== ========
1998
- -------------------------------------------
Property acquisition:
Unproved................................. $ 3,400 $ -- $ -- $ -- $ 3,400
Proved................................... 86,219 -- -- -- 86,219
Exploration................................ 63,802 -- 510 1,002 65,314
Development................................ 155,839 -- -- -- 155,839
------------- ------ ------- ------ --------
Total costs incurred............. $ 309,260 $ -- $ 510 $1,002 $310,772
============= ====== ======= ====== ========
1997
- -------------------------------------------
Property acquisition:
Unproved................................. $ 31,541 $ -- $ 6,770 $ 426 $ 38,737
Proved................................... 30,368 -- -- -- 30,368
Exploration................................ 61,825 -- 4,908 -- 66,733
Development................................ 117,321 -- -- -- 117,321
------------- ------ ------- ------ --------
Total costs incurred............. $ 241,055 $ -- $11,678 $ 426 $253,159
============= ====== ======= ====== ========
</TABLE>
54
<PAGE> 55
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
Capitalized costs for oil and gas producing activities consist of the
following at the end of each of the three years in the period ended December 31,
1999:
<TABLE>
<CAPTION>
UNITED OTHER
STATES AUSTRALIA CHINA FOREIGN TOTAL
---------- --------- ------ ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
- ------------------------------------------
Proved properties......................... $1,135,225 $ 3,538 $ -- $ -- $1,138,763
Unproved properties....................... 57,850 3,852 8,575 1,855 72,132
---------- ------- ------ ------ ----------
1,193,075 7,390 8,575 1,855 1,210,895
Accumulated depreciation, depletion and
amortization............................ (562,759) (3,294) -- -- (566,053)
---------- ------- ------ ------ ----------
Net capitalized cost...................... $ 630,316 $ 4,096 $8,575 $1,855 $ 644,842
========== ======= ====== ====== ==========
DECEMBER 31, 1998
- ------------------------------------------
Proved properties......................... $ 960,127 $ -- $ -- $ -- $ 960,127
Unproved properties....................... 23,338 -- 7,934 1,230 32,502
---------- ------- ------ ------ ----------
983,465 -- 7,934 1,230 992,629
Accumulated depreciation, depletion and
amortization............................ (414,206) -- -- -- (414,206)
---------- ------- ------ ------ ----------
Net capitalized cost...................... $ 569,259 $ -- $7,934 $1,230 $ 578,423
========== ======= ====== ====== ==========
DECEMBER 31, 1997
- ------------------------------------------
Proved properties......................... $ 714,850 $ -- $ -- $ -- $ 714,850
Unproved properties....................... 52,885 -- 7,424 426 60,735
---------- ------- ------ ------ ----------
767,735 -- 7,424 426 775,585
Accumulated depreciation, depletion and
amortization............................ (291,631) -- -- -- (291,631)
---------- ------- ------ ------ ----------
Net capitalized cost...................... $ 476,104 $ -- $7,424 $ 426 $ 483,954
========== ======= ====== ====== ==========
</TABLE>
55
<PAGE> 56
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
Users of this information should be aware that the process of estimating
quantities of "proved" and "proved developed" natural gas and crude oil reserves
is very complex, requiring significant subjective decisions in the evaluation of
all available geological, engineering and economic data for each reservoir. The
data for a given reservoir may also change substantially over time as a result
of numerous factors including additional development activity, evolving
production history and continual reassessment of the viability of production
under varying economic conditions. Consequently, material revisions to existing
reserve estimates occur from time to time. Although every reasonable effort is
made to ensure that reserve estimates reported represent the most accurate
assessments possible, the significance of the subjective decisions required and
variances in available data for various reservoirs make these estimates
generally less precise than other estimates presented in connection with
financial statement disclosures.
Subsequent to December 31, 1999, the Company acquired interests in
producing gas assets in South Texas which include substantial proved developed
and proved undeveloped reserves.
56
<PAGE> 57
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
ESTIMATED NET QUANTITIES OF OIL AND GAS RESERVES
The following table sets forth the Company's net proved reserves (at 14.73
pounds per square inch absolute), including the changes therein, and proved
developed reserves at the end of each of the three years in the period ended
December 31, 1999, as estimated by the Company's petroleum engineering staff:
<TABLE>
<CAPTION>
OIL, CONDENSATE AND
NATURAL GAS LIQUIDS (MBBLS) NATURAL GAS (MMCF) TOTAL (BCFE)
--------------------------- ----------------------------- -------------------------------
U.S. AUSTRALIA TOTAL U.S. AUSTRALIA TOTAL U.S. AUSTRALIA TOTAL
------ --------- ------ ------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED DEVELOPED AND
UNDEVELOPED RESERVES:
DECEMBER 31, 1996........... 13,659 -- 13,659 241,385 -- 241,385 323,339 -- 323,339
Revisions of previous
estimates............... 6 -- 6 3,014 -- 3,014 3,050 -- 3,050
Extensions, discoveries
and other additions..... 3,716 -- 3,716 83,783 -- 83,783 106,079 -- 106,079
Purchases of properties... 2,426 -- 2,426 66,594 -- 66,594 81,150 -- 81,150
Sales of properties....... (76) -- (76) (3,790) -- (3,790) (4,246) -- (4,246)
Production................ (3,424) -- (3,424) (53,505) -- (53,505) (74,049) -- (74,049)
------ ----- ------ ------- --- ------- -------- ------ --------
DECEMBER 31, 1997........... 16,307 -- 16,307 337,481 -- 337,481 435,323 -- 435,323
Revisions of previous
estimates............... (246) -- (246) 1,981 -- 1,981 505 -- 505
Extensions, discoveries
and other additions..... 1,635 -- 1,635 83,777 -- 83,777 93,589 -- 93,589
Purchases of properties... 1,118 -- 1,118 65,672 -- 65,672 72,381 -- 72,381
Sales of properties....... -- -- -- -- -- -- -- -- --
Production................ (3,643) -- (3,643) (66,634) -- (66,634) (88,494) -- (88,494)
------ ----- ------ ------- --- ------- -------- ------ --------
DECEMBER 31, 1998........... 15,171 -- 15,171 422,277 -- 422,277 513,304 -- 513,304
Revisions of previous
estimates............... 499 -- 499 (4,359) -- (4,359) (1,365) -- (1,365)
Extensions, discoveries
and other additions..... 1,600 -- 1,600 52,210 -- 52,210 61,808 -- 61,808
Purchases of properties... 6,780 7,000 13,780 60,517 -- 60,517 101,195 42,000 143,195
Sales of properties....... (926) -- (926) (3,112) -- (3,112) (8,668) -- (8,668)
Production................ (3,487) (867) (4,354) (87,360) -- (87,360) (108,282) (5,202) (113,484)
------ ----- ------ ------- --- ------- -------- ------ --------
DECEMBER 31, 1999........... 19,637 6,133 25,770 440,173 -- 440,173 557,992 36,798 594,790
====== ===== ====== ======= === ======= ======== ====== ========
PROVED DEVELOPED RESERVES:
December 31, 1996......... 11,820 -- 11,820 199,452 -- 199,452 270,372 -- 270,372
December 31, 1997......... 15,712 -- 15,712 252,018 -- 252,018 346,290 -- 346,290
December 31, 1998......... 14,648 -- 14,648 388,040 -- 388,040 475,927 -- 475,927
December 31, 1999......... 17,123 6,133 23,256 376,820 -- 376,820 479,558 36,798 516,356
</TABLE>
57
<PAGE> 58
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES
The following information has been developed utilizing procedures
prescribed by Statement of Financial Accounting Standards No. 69 "Disclosures
about Oil and Gas Producing Activities" ("FAS 69") and based on natural gas and
crude oil reserve and production volumes estimated by the Company's petroleum
engineering staff. It may be useful for certain comparative purposes, but should
not be solely relied upon in evaluating the Company or its performance. Further,
information contained in the following table should not be considered as
representative of realistic assessments of future cash flows, nor should the
Standardized Measure of Discounted Future Net Cash Flows be viewed as
representative of the current value of the Company.
The Company believes that the following factors should be taken into
account in reviewing the following information: (1) future costs and selling
prices will probably differ from those required to be used in these
calculations; (2) due to future market conditions and governmental regulations,
actual rates of production achieved in future years may vary significantly from
the rate of production assumed in the calculations; (3) a 10% discount rate may
not be reasonable as a measure of the relative risk inherent in realizing future
net oil and gas revenues; and (4) future net revenues may be subject to
different rates of income taxation.
Under the Standardized Measure, future cash inflows were estimated by
applying year-end oil and gas prices to the estimated future production of
year-end proved reserves. Future cash inflows were reduced by estimated future
development, abandonment and production costs based on year-end costs in order
to arrive at net cash flow before tax. Future income tax expense has been
computed by applying year-end statutory tax rates to aggregate future pre-tax
net cash flows, reduced by the tax basis of the properties involved and tax
carryforwards. Use of a 10% discount rate is required by FAS 69.
Management does not rely solely upon the following information in making
investment and operating decisions. Such decisions are based upon a wide range
of factors, including estimates of probable as well as proved reserves and
varying price and cost assumptions considered more representative of a range of
possible economic conditions that may be anticipated.
58
<PAGE> 59
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves is as follows:
<TABLE>
<CAPTION>
U.S. AUSTRALIA TOTAL
---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1999
- ----------------------------------------------------------
Future cash inflows....................................... $1,552,273 $156,247 $1,708,520
Less related future:
Production costs........................................ (239,010) (95,252) (334,262)
Development and abandonment costs....................... (205,402) (31,324) (236,726)
---------- -------- ----------
Future net cash flows before income taxes................. 1,107,861 29,671 1,137,532
10% annual discount for estimating timing of cash flows... (223,720) (519) (224,239)
---------- -------- ----------
Standardized measure of discounted future net cash flows
before income taxes..................................... 884,141 29,152 913,293
Future income tax expense, net of 10% annual discount..... (171,076) (9,698) (180,774)
---------- -------- ----------
Standardized measure of discounted future net cash
flows................................................... $ 713,065 $ 19,454 $ 732,519
========== ======== ==========
1998
- ----------------------------------------------------------
Future cash inflows....................................... $1,047,290 $ -- $1,047,290
Less related future:
Production costs........................................ (203,717) -- (203,717)
Development and abandonment costs....................... (162,005) -- (162,005)
---------- -------- ----------
Future net cash flows before income taxes................. 681,568 -- 681,568
10% annual discount for estimating timing of cash flows... (131,750) -- (131,750)
---------- -------- ----------
Standardized measure of discounted future net cash flows
before income taxes..................................... 549,818 -- 549,818
Future income tax expense, net of 10% annual discount..... (98,662) -- (98,662)
---------- -------- ----------
Standardized measure of discounted future net cash
flows................................................... $ 451,156 $ -- $ 451,156
========== ======== ==========
1997
- ----------------------------------------------------------
Future cash inflows....................................... $1,150,023 $ -- $1,150,023
Less related future:...................................... --
Production costs........................................ (159,619) -- (159,619)
Development and abandonment costs....................... (170,537) -- (170,537)
---------- -------- ----------
Future net cash flows before income taxes................. 819,867 -- 819,867
10% annual discount for estimating timing of cash flows... (165,198) -- (165,198)
---------- -------- ----------
Standardized measure of discounted future net cash flows
before income taxes..................................... 654,669 -- 654,669
Future income tax expense, net of 10% annual discount..... (151,721) -- (151,721)
---------- -------- ----------
Standardized measure of discounted future net cash
flows................................................... $ 502,948 $ -- $ 502,948
========== ======== ==========
</TABLE>
59
<PAGE> 60
NEWFIELD EXPLORATION COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
SUPPLEMENTARY OIL AND GAS DISCLOSURES -- UNAUDITED -- (CONTINUED)
A summary of the changes in the standardized measure of discounted future
net cash flows applicable to proved oil and gas reserves is as follows:
<TABLE>
<CAPTION>
U.S. AUSTRALIA TOTAL
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
1999
- ------------------------------------------------------------
Beginning of the period..................................... $451,156 $ -- $451,156
-------- -------- --------
Revisions of previous estimates:
Changes in prices and costs............................... 229,539 -- 229,539
Changes in quantities..................................... (2,553) -- (2,553)
Changes in future development costs....................... (4,069) -- (4,069)
Development costs incurred during the period................ 21,658 -- 21,658
Additions to proved reserves resulting from extensions,
discoveries and improved recovery, less related costs..... 100,907 -- 100,907
Purchases of reserves in place.............................. 145,515 33,225 178,740
Accretion of discount....................................... 54,982 -- 54,982
Sales of oil and gas, net of production costs............... (220,420) (13,771) (234,191)
Net change in income taxes.................................. (72,414) -- (72,414)
Production timing and other................................. 8,764 -- 8,764
-------- -------- --------
Net increase................................................ 261,909 19,454 281,363
-------- -------- --------
End of the period........................................... $713,065 $ 19,454 $732,519
======== ======== ========
1998
- ------------------------------------------------------------
Beginning of the period..................................... $502,948 $ -- $502,948
-------- -------- --------
Revisions of previous estimates:
Changes in prices and costs............................... (226,749) -- (226,749)
Changes in quantities..................................... 662 -- 662
Changes in future development costs....................... 5,401 -- 5,401
Development costs incurred during the period................ 55,153 -- 55,153
Additions to proved reserves resulting from extensions,
discoveries and improved recovery, less related costs..... 117,837 -- 117,837
Purchases of reserves in place.............................. 48,889 -- 48,889
Accretion of discount....................................... 65,467 -- 65,467
Sales of oil and gas, net of production costs............... (160,340) -- (160,340)
Net change in income taxes.................................. 53,059 -- 53,059
Production timing and other................................. (11,171) -- (11,171)
-------- -------- --------
Net decrease................................................ (51,792) -- (51,792)
-------- -------- --------
End of the period........................................... $451,156 $ -- $451,156
======== ======== ========
1997
- ------------------------------------------------------------
Beginning of the period..................................... $611,928 $ -- $611,928
-------- -------- --------
Revisions of previous estimates:
Changes in prices and costs............................... (356,858) -- (356,858)
Changes in quantities..................................... 5,535 -- 5,535
Changes in future development costs....................... (7,464) -- (7,464)
Development costs incurred during the period................ 35,810 -- 35,810
Additions to proved reserves resulting from extensions,
discoveries and improved recovery, less related costs..... 136,977 -- 136,977
Purchases of reserves in place.............................. 101,266 -- 101,266
Accretion of discount....................................... 85,982 -- 85,982
Sales of oil and gas, net of production costs............... (175,091) -- (175,091)
Net change in income taxes.................................. 96,168 -- 96,168
Production timing and other................................. (31,305) -- (31,305)
-------- -------- --------
Net decrease................................................ (108,980) -- (108,980)
-------- -------- --------
End of the period........................................... $502,948 $ -- $502,948
======== ======== ========
</TABLE>
60
<PAGE> 61
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
For information concerning Item 10 -- Directors and Executive Officers of
the Registrant, Item 11 -- Executive Compensation, Item 12 -- Security Ownership
of Certain Beneficial Owners and Management and Item 13 -- Certain Relationships
and Related Transactions, see the definitive Proxy Statement of Newfield
Exploration Company for the Annual Meeting of Stockholders to be held on May 4,
2000 which will be filed with the Securities and Exchange Commission and is
incorporated herein by reference, and "Part I -- Item 4A. Executive Officers."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
The following financial statements of Newfield and the report of management
and Newfield's independent accountants thereon are included in this Form 10-K:
Management Report on Financial Statements
Report of Independent Accountants
Consolidated Balance Sheet as of the fiscal years ended December 31, 1999
and 1998
Consolidated Statement of Income for each of the three years in the period
ended December 31, 1999
Consolidated Statement of Stockholders' Equity for each of the three years
in the period ended December 31, 1999
Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1999
Notes to the Consolidated Financial Statements
2. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
*3.1 -- Second Restated Certificate of Incorporation of Newfield
3.2 -- Certificate of Amendment to Second Restated Certificate
of Incorporation of Newfield dated May 15, 1997
(incorporated by reference to Exhibit 3.1.1 to the
Company's Registration Statement on Form S-3
(Registration No. 333-32582))
*3.3 -- Restated Bylaws of Newfield as amended by Amendment No. 1
thereto adopted January 31, 2000.
3.4 -- Certificate of Designation of Series A Junior
Participating Preferred Stock, par value $0.01 per share,
setting forth the terms of the Series A Junior
Participating Preferred Stock, par value $0.01 per share
(incorporated by reference to Exhibit 3.5 to Newfield's
Annual Report on Form 10-K for the year ended December
31, 1998 (File No. 1-12534))
</TABLE>
61
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
4.1 -- Rights Agreement, dated as of February 12, 1999, between
Newfield and ChaseMellon Shareholder Services L.L.C., as
Rights Agent, specifying the terms of the Rights to
Purchase Series A Junior Participating Preferred Stock,
par value $0.01 per share, of Newfield (incorporated by
reference to Exhibit 1 to Newfield's Registration
Statement on Form 8-A filed with the Securities and
Exchange Commission on February 18, 1999 (File No.
1-12534))
4.2 -- Indenture dated as of October 15, 1997 among Newfield, as
issuer, and First Union National Bank, as trustee
(incorporated by reference to Exhibit 4.3 to Newfield's
Registration Statement on Form S-4 (Registration No.
333-39563))
4.3 -- Amended and Restated Trust Agreement of Newfield
Financial Trust I, dated as of August 13, 1999
(incorporated by reference to Exhibit 4.1 of Newfield's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 13, 1999 (File No. 1-12534)
4.4 -- Form of Preferred Security of Newfield Financial Trust I
(incorporated by reference to Exhibit 4.2 of Newfield's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 13, 1999 (File No. 1-12534)
4.5 -- Junior Subordinated Convertible Indenture, dated as of
August 13, 1999, between Newfield and First Union
National Bank, as Trustee (incorporated by reference to
Exhibit 4.3 of Newfield's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
August 13, 1999 (File No. 1-12534)
4.6 -- Form of 6 1/2% Junior Subordinated Convertible Debenture,
Series A due 2029 (incorporated by reference to Exhibit
4.4 of Newfield's Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 13, 1999
(File No. 1-12534)
4.7 -- Guarantee Agreement, dated as of August 13, 1999,
relating to Newfield Financial Trust I (incorporated by
reference to Exhibit 4.5 of Newfield's Current Report on
Form 8-K filed with the Securities and Exchange
Commission on August 13, 1999 (File No. 1-12534)
+10.1 -- Newfield Exploration Company 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.1 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.2 -- Newfield Exploration Company 1990 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.3 -- Newfield Exploration Company 1991 Stock Option Plan
(incorporated by reference to Exhibit 10.3 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.4 -- Newfield Exploration Company 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.4 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.5 -- Newfield Employee 1993 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.5 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.6 -- Newfield Exploration Company 1995 Omnibus Stock Plan
(incorporated by reference to Exhibit 4.1 to Newfield's
Registration Statement on Form S-8 (Registration No.
33-92182))
</TABLE>
62
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
10.7 -- Amended and Restated Credit Agreement dated as of October
9, 1997 among Newfield, The Chase Manhattan Bank, as
Agent, and the Banks signatory thereto (without Exhibits)
(incorporated by reference to Exhibit 10.1 to Newfield's
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1997 (File No. 1-12534))
10.8 -- First Amendment to Amended and Restated Credit Agreement
dated as of August 20, 1998 among Newfield, The Chase
Manhattan Bank, as Agent, and the Banks signatory thereto
(without Exhibits) (incorporated by reference to Exhibit
10.1 to Newfield's Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 28, 1998
(File No. 1-12534))
10.9 -- Second Amendment to Amended and Restated Credit Agreement
dated as of August 6, 1999 among Newfield, The Chase
Manhattan Bank, as Agent, and the Banks signatory thereto
(without Exhibits) (incorporated by reference to Exhibit
10.1 to Newfield's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999 (File No.
1-12534))
*10.10 -- Third Amendment to Amended and Restated Credit Agreement
dated as of December 20, 1999 among Newfield, The Chase
Manhattan Bank, as Agent, and the Bank's signatory
thereto (without Exhibits) (File No. 1-12534)
+10.11 -- Newfield Exploration Company 1995 Non-Employee Director
Restricted Stock Plan (Restated) (incorporated by
reference to Exhibit 10.10 to Newfield's Registration
Statement on Form S-3 (Registration No. 333-32587))
+10.12 -- Newfield Exploration Company Deferred Compensation Plan
(incorporated by reference to Exhibit 10.11 to Newfield's
Registration Statement on Form S-3 (Registration No.
333-32587))
+10.13 -- Asset Purchase Agreement among Newfield Offshore Inc.,
Huffco and Huffco Turkey, Inc. dated as of May 12, 1997
(without exhibits and schedules) (incorporated by
reference to Exhibit 10.14 to Newfield's Registration
Statement on Form S-3 (Registration No. 333-32587))
+10.14 -- Resolution of Members Establishing the Preferences,
Limitations and Relative Rights of Series "A" Preferred
Shares of Huffco China, LDC dated May 14, 1997
(incorporated by reference to Exhibit 10.15 to Newfield's
Registration Statement on Form S-3 (Registration No.
333-32587))
+10.15 -- Guaranty Agreement among Newfield, Newfield Offshore
Inc., Huffco and Huffco Turkey, Inc. dated as of May 15,
1997 (incorporated by reference to Exhibit 10.16 to
Newfield's Registration Statement on Form S-3
(Registration No. 333-32587))
+10.16 -- Newfield Exploration Company 1998 Omnibus Stock Plan
(incorporated by reference to Exhibit 4.1.1 to Newfield's
Registration Statement on Form S-8 (Registration No.
333-59383))
+10.17 -- Amendment of 1998 Omnibus Stock Plan, dated May 7, 1998
(incorporated by reference to Exhibit 4.1.2 to Newfield's
Registration Statement on Form S-8 (Registration No.
333-59383))
*+10.18 -- Newfield Exploration Company 2000 Non-Employee Director
Restricted Stock Plan
*+10.19 -- Newfield Exploration Company 2001 Employee Stock Purchase
Plan
*+10.20 -- Newfield Exploration Company 2000 Omnibus Stock Plan
</TABLE>
63
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
*21.1 -- List of Significant Subsidiaries
*23.1 -- Consent of PricewaterhouseCoopers LLP
*27.1 -- Financial Data Schedule (included only in the electronic
filing of this document)
</TABLE>
- ---------------
* Filed herewith.
+ Identifies management contracts and compensatory plans or arrangements.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed in the fourth quarter of 1999.
64
<PAGE> 65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on the 3rd day of March, 2000.
NEWFIELD EXPLORATION COMPANY
By: /s/ DAVID A. TRICE
----------------------------------
David A. Trice
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated and on the 3rd day of March, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DAVID A. TRICE President and Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
David A. Trice
/s/ ROBERT W. WALDRUP Vice President -- Operations and Director
- -----------------------------------------------------
Robert W. Waldrup
/s/ TERRY W. RATHERT Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial Officer)
Terry W. Rathert
/s/ RONALD P. LEGE Controller (Principal Accounting Officer)
- -----------------------------------------------------
Ronald P. Lege
/s/ JOE B. FOSTER Director
- -----------------------------------------------------
Joe B. Foster
/s/ PHILIP J. BURGUIERES Director
- -----------------------------------------------------
Philip J. Burguieres
/s/ CHARLES W. DUNCAN, JR. Director
- -----------------------------------------------------
Charles W. Duncan, Jr.
/s/ DENNIS HENDRIX Director
- -----------------------------------------------------
Dennis Hendrix
/s/ TERRY HUFFINGTON Director
- -----------------------------------------------------
Terry Huffington
/s/ HOWARD H. NEWMAN Director
- -----------------------------------------------------
Howard H. Newman
</TABLE>
65
<PAGE> 66
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ THOMAS G. RICKS Director
- -----------------------------------------------------
Thomas G. Ricks
/s/ JOHN C. SAWHILL Director
- -----------------------------------------------------
John C. Sawhill
/s/ C. E. SHULTZ Director
- -----------------------------------------------------
C. E. Shultz
</TABLE>
66
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
*3.1 -- Second Restated Certificate of Incorporation of Newfield
3.2 -- Certificate of Amendment to Second Restated Certificate
of Incorporation of Newfield dated May 15, 1997
(incorporated by reference to Exhibit 3.1.1 to the
Company's Registration Statement on Form S-3
(Registration No. 333-32582))
*3.3 -- Restated Bylaws of Newfield as amended by Amendment No. 1
thereto adopted January 31, 2000.
3.4 -- Certificate of Designation of Series A Junior
Participating Preferred Stock, par value $0.01 per share,
setting forth the terms of the Series A Junior
Participating Preferred Stock, par value $0.01 per share
(incorporated by reference to Exhibit 3.5 to Newfield's
Annual Report on Form 10-K for the year ended December
31, 1998 (File No. 1-12534))
4.1 -- Rights Agreement, dated as of February 12, 1999, between
Newfield and ChaseMellon Shareholder Services L.L.C., as
Rights Agent, specifying the terms of the Rights to
Purchase Series A Junior Participating Preferred Stock,
par value $0.01 per share, of Newfield (incorporated by
reference to Exhibit 1 to Newfield's Registration
Statement on Form 8-A filed with the Securities and
Exchange Commission on February 18, 1999 (File No.
1-12534))
4.2 -- Indenture dated as of October 15, 1997 among Newfield, as
issuer, and First Union National Bank, as trustee
(incorporated by reference to Exhibit 4.3 to Newfield's
Registration Statement on Form S-4 (Registration No.
333-39563))
4.3 -- Amended and Restated Trust Agreement of Newfield
Financial Trust I, dated as of August 13, 1999
(incorporated by reference to Exhibit 4.1 of Newfield's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 13, 1999 (File No. 1-12534)
4.4 -- Form of Preferred Security of Newfield Financial Trust I
(incorporated by reference to Exhibit 4.2 of Newfield's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 13, 1999 (File No. 1-12534)
4.5 -- Junior Subordinated Convertible Indenture, dated as of
August 13, 1999, between Newfield and First Union
National Bank, as Trustee (incorporated by reference to
Exhibit 4.3 of Newfield's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
August 13, 1999 (File No. 1-12534)
4.6 -- Form of 6 1/2% Junior Subordinated Convertible Debenture,
Series A due 2029 (incorporated by reference to Exhibit
4.4 of Newfield's Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 13, 1999
(File No. 1-12534)
4.7 -- Guarantee Agreement, dated as of August 13, 1999,
relating to Newfield Financial Trust I (incorporated by
reference to Exhibit 4.5 of Newfield's Current Report on
Form 8-K filed with the Securities and Exchange
Commission on August 13, 1999 (File No. 1-12534)
+10.1 -- Newfield Exploration Company 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.1 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.2 -- Newfield Exploration Company 1990 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
</TABLE>
67
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
+10.3 -- Newfield Exploration Company 1991 Stock Option Plan
(incorporated by reference to Exhibit 10.3 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.4 -- Newfield Exploration Company 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.4 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.5 -- Newfield Employee 1993 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.5 to Newfield's
Registration Statement on Form S-1 (Registration No.
33-69540))
+10.6 -- Newfield Exploration Company 1995 Omnibus Stock Plan
(incorporated by reference to Exhibit 4.1 to Newfield's
Registration Statement on Form S-8 (Registration No.
33-92182))
10.7 -- Amended and Restated Credit Agreement dated as of October
9, 1997 among Newfield, The Chase Manhattan Bank, as
Agent, and the Banks signatory thereto (without Exhibits)
(incorporated by reference to Exhibit 10.1 to Newfield's
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1997 (File No. 1-12534))
10.8 -- First Amendment to Amended and Restated Credit Agreement
dated as of August 20, 1998 among Newfield, The Chase
Manhattan Bank, as Agent, and the Banks signatory thereto
(without Exhibits) (incorporated by reference to Exhibit
10.1 to Newfield's Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 28, 1998
(File No. 1-12534))
10.9 -- Second Amendment to Amended and Restated Credit Agreement
dated as of August 6, 1999 among Newfield, The Chase
Manhattan Bank, as Agent, and the Banks signatory thereto
(without Exhibits) (incorporated by reference to Exhibit
10.1 to Newfield's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999 (File No.
1-12534))
*10.10 -- Third Amendment to Amended and Restated Credit Agreement
dated as of December 20, 1999 among Newfield, The Chase
Manhattan Bank, as Agent, and the Bank's signatory
thereto (without Exhibits) (File No. 1-12534)
+10.11 -- Newfield Exploration Company 1995 Non-Employee Director
Restricted Stock Plan (Restated) (incorporated by
reference to Exhibit 10.10 to Newfield's Registration
Statement on Form S-3 (Registration No. 333-32587))
+10.12 -- Newfield Exploration Company Deferred Compensation Plan
(incorporated by reference to Exhibit 10.11 to Newfield's
Registration Statement on Form S-3 (Registration No.
333-32587))
+10.13 -- Asset Purchase Agreement among Newfield Offshore Inc.,
Huffco and Huffco Turkey, Inc. dated as of May 12, 1997
(without exhibits and schedules) (incorporated by
reference to Exhibit 10.14 to Newfield's Registration
Statement on Form S-3 (Registration No. 333-32587))
+10.14 -- Resolution of Members Establishing the Preferences,
Limitations and Relative Rights of Series "A" Preferred
Shares of Huffco China, LDC dated May 14, 1997
(incorporated by reference to Exhibit 10.15 to Newfield's
Registration Statement on Form S-3 (Registration No.
333-32587))
+10.15 -- Guaranty Agreement among Newfield, Newfield Offshore
Inc., Huffco and Huffco Turkey, Inc. dated as of May 15,
1997 (incorporated by reference to Exhibit 10.16 to
Newfield's Registration Statement on Form S-3
(Registration No. 333-32587))
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
+10.16 -- Newfield Exploration Company 1998 Omnibus Stock Plan
(incorporated by reference to Exhibit 4.1.1 to Newfield's
Registration Statement on Form S-8 (Registration No.
333-59383))
+10.17 -- Amendment of 1998 Omnibus Stock Plan, dated May 7, 1998
(incorporated by reference to Exhibit 4.1.2 to Newfield's
Registration Statement on Form S-8 (Registration No.
333-59383))
*+10.18 -- Newfield Exploration Company 2000 Non-Employee Director
Restricted Stock Plan
*+10.19 -- Newfield Exploration Company 2001 Employee Stock Purchase
Plan
*+10.20 -- Newfield Exploration Company 2000 Omnibus Stock Plan
*21.1 -- List of Significant Subsidiaries
*23.1 -- Consent of PricewaterhouseCoopers LLP
*27.1 -- Financial Data Schedule (included only in the electronic
filing of this document)
</TABLE>
- ---------------
* Filed herewith.
+ Identifies management contracts and compensatory plans or arrangements.
69
<PAGE> 1
EXHIBIT 3.1
SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEWFIELD EXPLORATION COMPANY
FIRST: The name of the Corporation is Newfield Exploration Company.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 32 Loockerman Sq., Suite L-100, in the City of Dover
19901, County of Kent. The name of the registered agent of the Corporation at
such address is The Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful business, act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 55,000,000 shares, of which 5,000,000 shall be shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"), and 50,000,000
shall be shares of Common Stock, par value of $.01 per share ("Common Stock").
The following is a statement fixing certain of the designations and
powers, voting powers, preferences, and relative, participating, optional or
other rights of the Preferred Stock, and the Common Stock of the Corporation,
and the qualifications, limitations or restrictions thereof, and the authority
with respect thereto expressly granted to the Board of Directors of the
Corporation.
I. Preferred Stock
The Board of Directors is hereby expressly vested with the authority to
adopt a resolution or resolutions providing for the issuance of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to
time in one or more series and in such amounts as may be determined by the
Board of Directors in such resolution or resolutions. The voting powers, full
or limited, or no voting powers, and such designations, preferences, and
relative, participating, optional or other special rights, if any, of each
series of Preferred Stock and the qualifications, limitations or restrictions,
if any, of such preferences and/or rights (collectively the "Series Terms"),
shall be such as are stated and expressed in a resolution or resolutions
providing for the creation or revision of such Series Terms (a "Preferred Stock
Series Resolution") adopted by the Board of Directors.
Any of the Series Terms, including voting rights, of any series may be
made dependent upon facts ascertainable outside this Second Restated
Certificate of Incorporation and the Preferred Stock Series Resolution,
provided that the manner in which
<PAGE> 2
such facts shall operate upon such Series Terms is clearly and expressly set
forth in this Second Restated Certificate of Incorporation or in the Preferred
Stock Series Resolution.
Except in respect to characteristics of a particular series fixed by the
Board of Directors, all shares of Preferred Stock shall be of equal rank and
shall be identical. All shares of any one series of Preferred Stock so
designated by the Board of Directors shall be alike in every particular, except
that shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative.
II. Common Stock
1. Dividends. Subject to the provisions of any Preferred Stock Series
Resolution, the Board of Directors may, in its discretion, out of funds legally
available for the payment of dividends and at such times and in such manner as
determined by the Board of Directors, declare and pay dividends on the Common
Stock.
2. Liquidation. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation and
payment or setting aside for payment of any preferential amount due to the
holders of any other class or series of stock, the holders of the Common Stock
shall be entitled to receive ratably any or all assets remaining to be paid or
distributed.
3. Voting Right. Except as may otherwise be required by law, this Second
Restates Certificate of Incorporation or the provisions of any Preferred Stock
Series Resolution, each holder of Common Stock shall have one vote for each
share of such stock held by such holder on each matter voted upon by the
stockholders.
III. No Preemptive Rights
No holder of shares of stock of the Corporation shall have any preemptive
or other rights, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series
thereof, of stock of the Corporation, whether now or hereafter authorized, or
any warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any shares of any class, or
series thereof, of stock.
FIFTH: In furtherance of, and not in limitation of, the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the bylaws of the Corporation.
<PAGE> 3
SIXTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
SEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for such liability as is expressly not
subject to limitation under the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended to further limit or
eliminate such liability. In addition, the Corporation shall, to the fullest
extent permitted by law, indemnify any and all officers and directors of the
Corporation, and may, to the fullest extent permitted by law or to such lesser
extent as is determined in the discretion of the Board of Directors, indemnify
any and all other persons whom it shall have power to indemnify, from and
against all expenses, liabilities or other matters arising out of their status
as such or their acts, omissions or services rendered in such capacities. The
Corporation shall have the power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability.
EIGHTH: The Corporation shall have the right, subject to any express
provisions or restrictions contained in this Second Restated Certificate of
Incorporation or bylaws of the Corporation, from time to time, to amend the
Second Restated Certificate of Incorporation or any provision thereof in any
manner now or hereafter provided by law, and all rights and powers of any kind
conferred upon a director or stockholder of the
-3-
<PAGE> 4
Corporation by this Second Restated Certificate of Incorporation or any
amendment hereto are subject to such right of the Corporation.
NINTH: Except as otherwise provided by statute, any action that might have
been taken at a meeting of stockholders by a vote of the stockholders may be
taken with the written consent of holders of at least 66 2/3% of the outstanding
capital stock entitled to vote on such proposed corporate action.
TENTH: Notwithstanding any other provision of this Second Restated
Certificate of Incorporation or the bylaws of the Corporation, the affirmative
vote of the holders of at least 66 2/3% of the outstanding Shares of Common
Stock shall be required to approve the following actions: (i) any merger or
consolidation of the Corporation; (ii) any sale or transfer of all or
substantially all of the assets of the Corporation; or (iii) the amendment
alteration or repeal of this Article TENTH.
<PAGE> 1
EXHIBIT 3.3
RESTATED BYLAWS
OF
NEWFIELD EXPLORATION COMPANY
A Delaware Corporation
As of July 28, 1994
(Amendment No. 1 adopted on January 31, 2000 is appended hereto)
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES............................................................................... 1
Section 1. Registered Office.......................................................... 1
Section 2. Other Offices.............................................................. 1
ARTICLE II STOCKHOLDERS......................................................................... 1
Section 1. Place of Meetings.......................................................... 1
Section 2. Quorum; Required Vote for Stockholder Action;
Withdrawal During Meeting; Adjournment..................................... 1
Section 3. Annual Meetings............................................................ 2
Section 4. Special Meetings........................................................... 2
Section 5. Record Date................................................................ 2
Section 6. Notice of Meetings......................................................... 3
Section 7. List of Stockholders....................................................... 4
Section 8. Proxies.................................................................... 4
Section 9. Voting; Elections; Inspectors.............................................. 4
Section 10. Conduct of Meetings........................................................ 5
Section 11. Treasury Stock............................................................. 6
Section 12. Action Without Meeting..................................................... 6
ARTICLE III BOARD OF DIRECTORS.................................................................. 6
Section 1. Power; Number; Term of Office.............................................. 6
Section 2. Quorum; Required Vote for Director Action.................................. 6
Section 3. Place of Meetings; Order of Business....................................... 7
Section 4. First Meeting.............................................................. 7
Section 5. Regular Meetings........................................................... 7
Section 6. Special Meetings........................................................... 7
Section 7. Removal.................................................................... 7
Section 8. Vacancies; Increases in the Number of Directors............................ 7
Section 9. Compensation............................................................... 8
Section 10. Action Without a Meeting; Telephone Conference
Meeting.................................................................... 8
Section 11. Approval or Ratification of Acts or Contracts
by Stockholders............................................................ 8
ARTICLE IV COMMITTEES........................................................................... 9
Section 1. Designation; Powers........................................................ 9
Section 2. Procedure; Meetings; Quorum................................................ 9
Section 3. Substitution of Members.................................................... 9
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V OFFICERS.............................................................................. 9
Section 1. Number, Titles and Term of Office.......................................... 9
Section 2. Compensation............................................................... 10
Section 3. Removal.................................................................... 10
Section 4. Vacancies.................................................................. 10
Section 5. Powers and Duties of the Chief Executive Officer........................... 10
Section 6. Powers and Duties of the Chairman of the Board............................. 10
Section 7. Powers and Duties of the President......................................... 10
Section 8. Vice Presidents............................................................ 10
Section 9. Secretary.................................................................. 11
Section 10. Assistant Secretaries...................................................... 11
Section 11. Action with Respect to Securities of Other
Corporations............................................................... 11
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS......................................................................... 11
Section 1. Right to Indemnification................................................... 11
Section 2. Advance Payment............................................................ 12
Section 3. Indemnification of Employees and Agents.................................... 12
Section 4. Appearance as a Witness.................................................... 12
Section 5. Right of Claimant to Bring Suit............................................ 13
Section 6. Nonexclusivity of Rights................................................... 13
Section 7. Insurance.................................................................. 13
Section 8. Savings Clause............................................................. 13
Section 9. Definitions................................................................ 13
ARTICLE VII CAPITAL STOCK....................................................................... 14
Section 1. Certificates of Stock...................................................... 14
Section 2. Transfer of Shares......................................................... 14
Section 3. Ownership of Shares........................................................ 14
Section 4. Regulations Regarding Certificates......................................... 15
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates.......................... 15
ARTICLE VIII MISCELLANEOUS PROVISIONS........................................................... 15
Section 1. Fiscal Year................................................................ 15
Section 2. Corporate Seal............................................................. 15
Section 3. Notice and Waiver of Notice................................................ 15
Section 4. Resignations............................................................... 16
Section 5. Facsimile Signatures....................................................... 16
Section 6. Reliance upon Books, Reports and Records................................... 16
ARTICLE IX AMENDMENTS........................................................................... 16
</TABLE>
-ii-
<PAGE> 4
RESTATED BYLAWS
OF
NEWFIELD EXPLORATION COMPANY
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
required by the General Corporation Law of the State of Delaware to be
maintained in the State of Delaware shall be the registered office named in the
original Certificate of Incorporation of the Corporation, or such other office
as may be designated from time to time by the Board of Directors in the manner
provided by law. If the Corporation maintains a principal office within the
State of Delaware, the registered office need not be identical to such principal
office of the Corporation.
Section 2. Other Offices. The Corporation may have other offices at
such places both within and without the State of Delaware as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders shall be
held at the principal office of the Corporation, or at such other place either
within or without the State of Delaware as shall be specified or fixed in the
notices or waivers of notice thereof.
Section 2. Quorum; Required Vote for Stockholder Action; Withdrawal
During Meeting; Adjournment. Unless otherwise required by law, the Certificate
of Incorporation or these bylaws, the holders of a majority of the stock issued
and outstanding and entitled to vote at any meeting of stockholders, present in
person or represented by proxy, shall constitute a quorum at any such meeting of
stockholders for the transaction of business and the affirmative vote of the
holders of a majority of such stock so present or represented at any such
meeting at which a quorum is present and entitled to vote on the subject matter
being considered shall constitute the act of the stockholders. Where there is a
required quorum present when any duly organized meeting convenes, the
stockholders present may continue to transact business until adjournment,
notwithstanding the subsequent withdrawal of sufficient stockholders or proxies
to reduce the total number of voting shares below the number of shares required
for a quorum.
<PAGE> 5
Notwithstanding other provisions of the Certificate of Incorporation or
these bylaws, the chairman of the meeting of stockholders or the holders of a
majority of the issued and outstanding stock entitled to vote at such meeting,
present in person or represented by proxy, at any meeting of stockholders,
whether or not a quorum is present, shall have the power to adjourn such meeting
from time to time, without any notice other than announcement at the meeting of
the time and place of the holding of the adjourned meeting. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at such meeting. At such adjourned
meeting at which a quorum shall be present or represented by proxy, any business
may be transacted which might have been transacted at the meeting as originally
called. If a quorum is present at the original duly organized meeting of
stockholders, it is also present at an adjourned session of such meeting.
Section 3. Annual Meetings. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly be considered at the meeting,
shall be held at such place, within or without the State of Delaware, on such
date and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting. If the Board of Directors has not fixed a place for the
holding of the annual meeting of stockholders in accordance with this Article
II, Section 3, such annual meeting shall be held at the principal place of
business of the Corporation.
Section 4. Special Meetings. Unless otherwise provided in the
Certificate of Incorporation, special meetings of the stockholders for any
proper purpose or purposes may be called at any time by the Chairman of the
Board (if any), by the President or by a majority of the Board of Directors, or
by a majority of the executive committee (if any), and shall be called by the
Chairman of the Board (if any), by the President or the Secretary upon the
written request therefor, stating the purpose or purposes of the meeting,
delivered to such officer, signed by the holder(s) of at least 15% of the issued
and outstanding stock entitled to vote at such meeting.
If not otherwise stated in or fixed in accordance with the remaining
provisions hereof, the record date for determining stockholders entitled to call
a special meeting shall be the date any stockholder first signs the notice of
that meeting. Only business within the proper purpose or purposes described in
the notice (or waiver thereof) required by these bylaws may be conducted at a
special meeting of the stockholders.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
connection with any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders entitled to notice
of or to vote at a meeting, which date shall not be more than 60 nor less than
10 days prior to the date of such meeting.
If the Board of Directors does not fix a record date for any meeting of
the stockholders, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the day next preceding the day on which notice of such meeting is
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given, or, if notice is waived in accordance with Article VIII, Section 3 of
these bylaws, the close of business on the day next preceding the day on which
the meeting is held.
If, in accordance with Article II, Section 12 hereof, corporate action
without a meeting of stockholders is to be taken, the Board of Directors may fix
a record date for determining stockholders entitled to consent in writing to
such corporate action, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 10 days subsequent to the date upon
which the resolution fixing the record date is adopted by the Board of
Directors.
If no record date has been fixed by the Board of Directors, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office, its principal place of
business, or to an officer or to agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be the close of business on
the day on which the Board of Directors adopts the resolution taking such prior
action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or the stockholders entitled to exercise any rights in connection with
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Notice of Meetings. Written notice stating the place, day
and hour of all meetings, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered by or at the
direction of the President, the Secretary or the other person(s) calling the
meeting not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. Such notice may be delivered
either personally or by mail. If mailed, notice shall be deemed to have been
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the Secretary, an Assistant Secretary or the transfer agent of the
Corporation that the notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
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Section 7. List of Stockholders. The officer or agent having charge of
the share transfer records of the Corporation shall prepare and make, at least
10 days prior to each meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a period of 10 days prior to such meeting, shall
be kept on file at the registered office or principal place of business of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to inspection by any
stockholder during the course of the meeting. The original share transfer
records shall be prima facie evidence as to the identity of those stockholders
entitled to examine such voting list or transfer records or to vote at any
meeting of stockholders. Failure to comply with the requirements of this Article
II, Section 7 shall not affect the validity of any action taken at such meeting.
Section 8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Proxies for use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of such meeting. All proxies
shall be received and taken charge of and all ballots shall be received and
canvassed by the secretary of the meeting who shall decide all questions with
respect to the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have
been appointed by the chairman of the meeting, in which event such inspector or
inspectors shall decide all such questions.
No proxy shall be valid after 3 years from the date of its execution,
unless such proxy provides for a longer period. Each proxy shall be revocable
unless expressly provided therein to be irrevocable and only as long as it is
coupled with an interest sufficient in law to support an irrevocable power.
If a proxy designates two or more persons to act as proxies, unless
such instrument shall expressly provide to the contrary, a majority of such
persons present at any meeting at which their powers thereunder are to be
exercised shall have and may exercise all the powers of voting or consent
thereby conferred, or if only one be present, then such powers may be exercised
by that one; or, if an even number attend and a majority cannot agree on any
particular issue, the Corporation shall not be required to recognize such proxy
with respect to such issue, if such proxy does not specify how the shares that
are the subject of such proxy are to be voted with respect to such issue.
Section 9. Voting; Elections; Inspectors. Unless otherwise required by
law or provided in the Certificate of Incorporation, each stockholder shall, on
each matter submitted to a vote at a meeting of stockholders, have one vote for
each share of capital stock entitled to vote thereon that is registered in his
name on the record date for such meeting. Shares registered in the name of
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the bylaws (or comparable instrument) of such corporation may
prescribe, or in the absence of such provision, as the Board of Directors (or
comparable body) of such corporation may determine. Shares registered in the
name of a deceased person may be voted by his executor or administrator, either
in person or by proxy.
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All voting, except as otherwise required by law or the Certificate of
Incorporation, may be by a voice vote; provided, however, that upon demand
therefor by stockholders holding a majority of the issued and outstanding stock
present in person or by proxy at any meeting of stockholders, a stock vote shall
be taken. Every stock vote shall be taken by written ballot, and each ballot
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
All elections of directors shall be by stock vote, unless otherwise provided in
the Certificate of Incorporation.
At any meeting of stockholders at which a vote is to be taken by
ballot, the chairman of the meeting shall appoint one or more inspectors, each
of whom shall sign an oath or affirmation to faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability. The
inspectors shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except that no candidate for the office of
director shall be appointed as an inspector.
All elections shall be determined by a plurality of the votes cast and,
except as otherwise required by law, the Certificate of Incorporation or these
bylaws, all other matters shall be determined by a majority of the votes cast.
Unless otherwise provided in the Certificate of Incorporation,
cumulative voting for the election of directors shall be prohibited.
Section 10. Conduct of Meetings. All meetings of the stockholders shall
be presided over by the chairman of the meeting, who shall be the Chairman of
the Board (if any) or his designee, or if he is not present, the President or
his designee, or if neither the Chairman of the Board (if any) nor President is
present, a chairman elected at the meeting. The Secretary of the Corporation, if
present, shall act as secretary of such meetings, or if he is not present, an
Assistant Secretary (if any) shall so act; if neither the Secretary nor an
Assistant Secretary (if any) is present, then a secretary shall be appointed by
the chairman of the meeting.
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion, as seem to the chairman in
order. Unless the chairman of the meeting shall otherwise determine, the order
of business shall be as follows:
(a) Calling of meeting to order.
(b) Election of a chairman and appointment of a secretary,
if necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of
a quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) Election of directors, if an annual meeting, or special
election if a meeting called for such purpose.
(h) Unfinished business.
(i) New business.
(j) Adjournment.
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Section 11. Treasury Stock. Neither the Corporation nor any other
person shall vote, directly or indirectly, shares of the Corporation's own stock
owned by the Corporation, shares of the Corporation's own stock owned by another
corporation the majority of the voting stock of which is owned or controlled by
the Corporation, or shares of the Corporation's own stock held by the
Corporation in a fiduciary capacity and such shares shall not be counted for
quorum purposes or in determining the number of outstanding shares.
Section 12. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action permitted or required by law, the
Certificate of Incorporation or these bylaws to be taken at a meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of 66 2/3% of the outstanding stock entitled to
vote thereon and such consent shall be delivered to the Corporation's registered
office, its principal place of business, or to an officer or agent of the
Corporation having custody of the book in which the proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature thereto and no written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the first consent delivered to the Corporation in the
manner required by this Article II, Section 12, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Power; Number; Term of Office. The powers of the Corporation
shall be exercised by or under the authority of, and the business and affairs of
the Corporation shall be managed by or under, the direction of the Board of
Directors, and subject to the restrictions imposed by law or the Certificate of
Incorporation, they may exercise all the powers of the Corporation.
Unless otherwise provided in the Certificate of Incorporation, the
number of directors that shall constitute the Board of Directors shall be
determined from time to time by resolution of the Board of Directors (provided
that no decrease in the number of directors that would have the effect of
shortening the term of an incumbent director may be made by the Board of
Directors). If the Board of Directors does not make such determination, the
number of directors shall be the number set forth in the Certificate of
Incorporation as the number of directors constituting the initial Board of
Directors. Each director shall hold office for the term for which he is elected
and thereafter until his successor shall have been elected and qualified, or
until his earlier death, resignation or removal.
Unless otherwise provided in the Certificate of Incorporation,
directors need not be stockholders or residents of the State of Delaware.
Section 2. Quorum; Required Vote for Director Action. Unless otherwise
required by law or in the Certificate of Incorporation or these bylaws, a
majority of the total number of directors shall constitute a quorum for the
transaction of business of the Board of Directors and the vote of
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a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 3. Place of Meetings; Order of Business. The directors may hold
their meetings and may have an office and keep the books of the Corporation,
except as otherwise provided by law, in such place or places, within or without
the State of Delaware, as the Board of Directors may from time to time determine
by resolution. At all meetings of the Board of Directors, business shall be
transacted in such order as shall from time to time be determined by the
Chairman of the Board (if any), or in his absence by the President (if the
President is a director) or by resolution of the Board of Directors.
Section 4. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the transaction of business, if a quorum is present,
immediately after and at the same place as the annual meeting of the
stockholders. Notice of such meeting shall not be required. At the first meeting
of the Board of Directors in each year at which a quorum shall be present, held
next after the annual meeting of stockholders, the Board of Directors shall
proceed to the election of the officers of the Corporation.
Section 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be designated from time to time
by resolution of the Board of Directors. Notice of such regular meetings shall
not be required.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board (if any), the President or, upon
written request of any two directors, by the Secretary, in each case on at least
24 hours personal, written, telegraphic, cable or wireless notice to each
director. Such notice, or any waiver thereof pursuant to Article VIII, Section 3
hereof, need not state the purpose or purposes of such meeting, except as may
otherwise be required by law, the Certificate of Incorporation or these bylaws.
Section 7. Removal. Any one or more directors or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors; provided that,
unless the Certificate of Incorporation otherwise provides, if the Board of
Directors is classified, the stockholders may effect such removal only for
cause; and provided further that, if the Certificate of Incorporation expressly
grants to stockholders the right to cumulate votes for the election of directors
and if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire Board of Directors
or, if there be classes of directors, at an election of the class of directors
of which such director is a part.
Section 8. Vacancies; Increases in the Number of Directors. Unless
otherwise provided in the Certificate of Incorporation or these bylaws,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class may be filled by the affirmative vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If the Certificate of Incorporation entitles the
holders of any class or classes of stock or series thereof to elect one or more
directors, vacancies and newly created directorships of such class or classes or
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series may be filled by a majority of the directors elected by such class or
classes or series thereof then in office, or by a sole remaining director so
elected.
If the directors of the Corporation are divided into classes, any
directors elected to fill vacancies or newly created directorships shall hold
office until the next election of the class for which such directors shall have
been chosen, and until their successors shall be duly elected and qualified.
Section 9. Compensation. Unless otherwise provided in the Certificate
of Incorporation, the Board of Directors shall have the authority to fix the
compensation, if any, of directors.
Section 10. Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any meeting of the Board of Directors, or
any committee designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting, and may
be stated as such in any document or instrument filed with the Secretary of
State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee, as the case
may be, by means of conference telephone or similar communications equipment, by
means of which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 11. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the stockholders,
or at any special meeting of the stockholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or ratified by the vote of the stockholders holding a majority of the
issued and outstanding shares of stock of the Corporation entitled to vote and
present in person or represented by proxy at such meeting (provided that a
quorum is present), shall be as valid and as binding upon the Corporation and
upon all the stockholders as if it had been approved or ratified by every
stockholder of the Corporation. In addition, any such act or contract may be
approved or ratified by the written consent of stockholders holding 66 2/3%
of the issued and outstanding shares of capital stock of the Corporation
entitled to vote thereon.
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ARTICLE IV
COMMITTEES
Section 1. Designation; Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including an executive committee, each such committee to consist of
one or more of the directors of the Corporation. Any such committee shall have
and may exercise such of the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation as may be provided
in such resolution, except that no such committee shall have the power or
authority of the Board of Directors with regard to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution of the
Corporation, or amending, altering or repealing the bylaws or adopting new
bylaws for the Corporation and, unless such resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger. Any such designated committee may
authorize the seal of the Corporation to be affixed to all papers which may
require it. In addition, such committee or committees shall have such other
powers and limitations of authority as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Article IV, Section 1 hereof, shall choose its own chairman and
secretary, shall keep regular minutes of its proceedings and report the same to
the Board of Directors when requested, shall fix its own rules or procedures,
and shall meet at such times and at such place or places as may be provided by
such rules or procedures, or by resolution of such committee or resolution of
the Board of Directors. At every meeting of any such committee, the presence of
a majority of all the members thereof shall constitute a quorum and the
affirmative vote of a majority of the members present shall be necessary for the
adoption by it of any resolution.
Section 3. Substitution of Members. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member.
ARTICLE V
OFFICERS
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President, one or more Vice Presidents (any one or more
of whom may be designated Executive Vice President or Senior Vice President), a
Secretary and, if the Board of Directors so elects, a Chairman of the Board and
such other officers as the Board of Directors may from time to time elect
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or appoint. Each officer shall hold office until his successor shall be duly
elected and shall qualify or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided. Any number of offices may
be held by the same person, unless the Certificate of Incorporation provides
otherwise. Except for the Chairman of the Board, if any, no officer need be a
director.
Section 2. Compensation. The salaries or other compensation, if any, of
the officers and agents of the Corporation shall be fixed from time to time by
the Board of Directors.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed, either with or without cause, by the vote of
a majority of the whole Board of Directors at a special meeting called for such
purpose, or at any regular meeting of the Board of Directors, provided the
notice for such meeting shall specify that such proposed removal will be
considered at the meeting; provided, however, that such removal shall be without
prejudice to the contractual rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create contractual
rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board or other officer as the
chief executive officer. Subject to the control of the Board of Directors and
the executive committee (if any), the chief executive officer shall have general
executive charge, management and control of the properties, business and
operations of the Corporation with all such powers as may be reasonably
incident to such responsibilities; he may agree upon and execute all leases,
contracts, evidences of indebtedness and other obligations in the name of the
Corporation and may sign all certificates for shares of capital stock of the
Corporation; and he shall have such other powers and duties as designated in
accordance with these bylaws and as may be assigned to him from time to time by
the Board of Directors.
Section 6. Powers and Duties of the Chairman of the Board. The Chairman
of the Board (if any) shall preside at all meetings of the stockholders and of
the Board of Directors; and he shall have such other powers and duties as
designated in accordance with these bylaws and as may be assigned to him from
time to time by the Board of Directors.
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
stockholders and (if he is a director) of the Board of Directors; and the
President shall have such other powers and duties as designated in accordance
with these bylaws and as may be assigned to him from time to time by the Board
of Directors.
Section 8. Vice Presidents. In the absence of the Chairman of the Board
(if any) or the President, or in the event of their inability or refusal to act,
a Vice President designated by the Board
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of Directors or, in the absence of such designation, the Vice President who is
present and who is senior in terms of time as a Vice President of the
Corporation, shall perform the duties of the Chairman of the Board (if any) or
the President, as the case may be, and when so acting shall have all the powers
of and be subject to all the restrictions upon the President; provided, however,
that such Vice President shall not preside at meetings of the Board of Directors
unless he is a director. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 9. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of directors and of the
stockholders in books provided for such purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Corporation affix the seal
of the Corporation to all contracts of the Corporation and attest thereto; he
may sign with the other appointed officers all certificates for shares of
capital stock of the Corporation; he shall have charge of the certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors may direct, all of which shall at all reasonable times be open to
inspection by any director upon application at the office of the Corporation
during business hours; he shall have such other powers and duties as designated
in accordance with these bylaws and as may be prescribed from time to time by
the Board of Directors; and he shall in general perform all acts incident to the
office of Secretary, subject to the control of the chief executive officer and
the Board of Directors.
Section 10. Assistant Secretaries. Each Assistant Secretary (if any)
shall have the usual powers and duties pertaining to his office, together with
such other powers and duties as designated in accordance with these bylaws and
as may be prescribed from time to time by the chief executive officer, the Board
of Directors or the Secretary. The Assistant Secretaries shall exercise the
powers of the Secretary during the Secretary's absence or inability or refusal
to act.
Section 11. Action with Respect to Securities of Other Corporations.
Unless otherwise determined by the Board of Directors, the chief executive
officer shall have the power to vote and otherwise to act on behalf of the
Corporation, in person or by proxy, at any meeting of security holders of any
other corporation, or with respect to any action of security holders thereof, in
which the Corporation may hold securities and otherwise, to exercise any and all
rights and powers which the Corporation may possess by reason of its ownership
of securities in such other corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 1. Right to Indemnification. Subject to the limitations and
conditions as provided in this Article VI, each person who was or is made a
party to or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative (other than an action by
or in the right of the Corporation) (hereinafter a "proceeding"), or any appeal
in such a proceeding or any inquiry or investigation that could lead to such a
proceeding, by reason of the fact that he, or a person of whom he is the legal
representative, is or was or has agreed to become a director or officer of the
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Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving or having agreed to serve as a director or officer of the
Corporation, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) against all reasonable expense, liability and loss
(including without limitation, attorneys' fees, judgments, fines, excise or
similar taxes, punitive damages or penalties and amounts paid or to be paid in
settlement) actually incurred or suffered by such person in connection with such
proceeding, and such indemnification under this Article VI shall continue as to
a person who has ceased to serve in the capacity which initially entitled such
person to indemnity hereunder and shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification granted pursuant to this Article VI shall be a
contractual right, and no amendment, modification or repeal of this Article VI
shall have the effect of limiting or denying any such rights with respect to
actions taken or proceedings arising prior to any such amendment, modification
or repeal. It is expressly acknowledged that the indemnification conferred in
this Article VI could involve indemnification for negligence or under theories
of strict liability.
Section 2. Advance Payment. The right to indemnification conferred in
this Article VI shall include the right to be paid or reimbursed by the
Corporation for the reasonable expenses incurred by a person of the type
entitled to be indemnified under Section 1 who was, is or is threatened to be
made a named defendant or respondent in a proceeding in advance of the final
disposition of the proceeding and without any determination as to the person's
ultimate entitlement to indemnification; provided, however, that the payment of
such expenses incurred by any such person in advance of the final disposition of
a proceeding shall be made only upon delivery to the Corporation of a written
affirmation by such director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification under this Article VI and
a written undertaking, by or on behalf of such person, to repay all amounts so
advanced if it shall ultimately be determined that such indemnified person is
not entitled to be indemnified under this Article VI or otherwise.
Section 3. Indemnification of Employees and Agents. The Corporation
may, by action of its Board of Directors, provide indemnification to employees
and agents of the Corporation, individually or as a group, with the same scope
and effect as the indemnification of directors and officers provided for in this
Article VI.
Section 4. Appearance as a Witness. Notwithstanding any other provision
of this Article VI, the Corporation may pay or reimburse expenses incurred by a
director or officer in connection with his appearance as a witness or other
participation in a proceeding at a time when he is not a named defendant or
respondent in the proceeding.
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<PAGE> 16
Section 5. Right of Claimant to Bring Suit. If a written claim received
by the Corporation from or on behalf of an indemnified party under this Article
VI is not paid in full by the Corporation within ninety days after such receipt,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commence ment of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 6. Nonexclusivity of Rights. The right to indemnification and
advancement and payment of expenses conferred in this Article VI shall not be
exclusive of any other rights which a director or officer or other person
indemnified pursuant to this Article VI may have or hereafter acquire under any
law (common or statutory), provision of the Certificate of Incorporation, these
bylaws, any agreement, vote of stockholders or disinterested directors or
otherwise.
Section 7. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was
serving as a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, employee, agent or similar functionary of another domestic
or foreign corporation, partnership, joint venture, proprietorship, employee
benefit plan, trust or other enterprise against any expense, liability or loss
asserted against any such person and incurred in any such capacity, or arising
out of the person's status as such, whether or not the Corporation would have
the power to indemnify such person against such expense, liability or loss under
this Article VI.
Section 8. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any grounds by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director,
officer or any other person indemnified in accordance with this Article VI as to
costs, charges and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any proceeding, to the full extent
permitted by any applicable and valid portion of this Article VI to the fullest
extent permitted by applicable law.
Section 9. Definitions. For purposes of this Article, reference to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger prior to (or, in the case of an entity specifically
designated in a resolution of the Board of Directors, after) the adoption hereof
and which, if its separate existence had continued, would have had the power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or
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<PAGE> 17
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
ARTICLE VII
CAPITAL STOCK
Section 1. Certificates of Stock. The shares of the capital stock of
the Corporation shall be represented by certificates, provided, however, that
the Board of Directors may determine by resolution that some or all of any or
all the classes or series of the Corporation's stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and, upon request, every
holder of uncertificated shares shall be entitled to have a certificate signed
by, or in the name of the Corporation by the Chairman of the Board of Directors
(if any), the Chief Executive Officer (if any), the President or a Vice
President, and by the Secretary or an Assistant Secretary of the Corporation
representing the number of shares registered in certificate form. Any or all the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may be issued by
the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
Section 2. Transfer of Shares. The shares of stock of the Corporation
shall only be transferable on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares (or
upon compliance with the provisions of Article VII, Section 5 hereof, if
applicable). Upon surrender to the Corporation or a transfer agent of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer (or upon compliance with the
provisions of Article VII, Section 5 hereof, if applicable) and of compliance
with any transfer restrictions applicable thereto contained in any agreement to
which the Corporation is a party, or of which the Corporation has knowledge by
reason of a legend with respect thereto placed upon any such surrendered stock
certificate, it shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the owner in fact thereof at that time for purposes of voting
such shares, receiving distributions thereon or notices in respect thereof,
transferring such shares, exercising rights of dissent, exercising or waiving
any preemptive rights, or giving proxies with respect to such shares; and,
neither the Corporation nor any of its officers, directors, employees, or agents
shall be liable for regarding that person as the owner of those shares
-14-
<PAGE> 18
at that time for those purposes, regardless of whether or not that person
possesses a certificate for those shares.
Section 4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as it
may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates. The Board
of Directors may determine the conditions upon which a new certificate of stock
may be issued in place of any certificate which is alleged to have been lost,
stolen, destroyed or mutilated; and may, in its discretion, require the owner of
such certificate or his legal representative to give bond, with suffi cient
surety, to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the issuance
of a new certificate in the place of the one so lost, stolen, destroyed or
mutilated.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal containing the name of the Corporation. The Secretary shall have
charge of the seal (if any). If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by an
Assistant Secretary.
Section 3. Notice and Waiver of Notice. Whenever any notice is required
to be given by law, the Certificate of Incorporation or these bylaws, except
with respect to notices of meetings of stockholders (with respect to which the
provisions of Article II, Section 6 hereof apply) and except with respect to
notices of special meetings of directors (with respect to which the provisions
of Article III, Section 6 hereof apply) said notice shall be deemed to be
sufficient if given (i) by telegraphic, cable or wireless transmission or (ii)
by deposit of such postage prepaid notice, in a post office box addressed to the
person entitled thereto at his address as it appears on the records of the
Corporation. Such notice shall be deemed to have been given on the day of such
transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Certificate of
Incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or a committee of
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<PAGE> 19
directors need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or these bylaws.
Section 4. Resignations. Any director, member of a committee or officer
may resign at any time. Such resignation shall be made in writing and shall take
effect at the time specified therein, or if no time be specified, at the time of
its receipt by the chief executive officer or Secretary. The acceptance of a
resignation shall not be necessary to make such resignation effective, unless
expressly so provided in the resignation.
Section 5. Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized elsewhere in these
bylaws, facsimile signatures of any officer or officers of the Corporation may
be used as determined by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records. A member of the
Board of Directors, or a member of any committee thereof, shall be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation
by any of its officers or employees, or committees of the Board of Directors, or
by any other person as to matters the director reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation, as to the value and
amount of the assets, liabilities and/or net profits of the Corporation, or any
other facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid, or with which the
Corporation's stock might properly be purchased or redeemed.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the Corporation may be adopted, amended
or repealed by the incorporators, by the initial directors if they are named in
the Certificate of Incorporation, or, before the Corporation has received any
payment for any of its stock, by its Board of Directors. After the Corporation
has received any payment for any of its stock, the power to adopt, amend or
repeal bylaws shall reside in the stockholders entitled to vote; provided,
however, the Corporation may, in the Certificate of Incorporation, confer the
power to adopt, amend or repeal bylaws upon the directors. The fact that such
power has been so conferred upon the directors, shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal
bylaws.
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<PAGE> 20
AMENDMENT NO. 1
TO
RESTATED BYLAWS
OF
NEWFIELD EXPLORATION COMPANY
By resolution of the Board of Directors of Newfield Exploration
Company, a Delaware corporation (the "Corporation"), adopted by unanimous
written consent effective as of January 31, 2000:
A. Section 1 of ARTICLE III of the Corporation's Restated Bylaws
was amended and restated to read in its entirety as follows:
"Section 1. Power; Number; Term of Office; Chairman. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed by or under, the direction of
the Board of Directors, and subject to the restrictions imposed by law or the
Certificate of Incorporation, they may exercise all the powers of the
Corporation.
Unless otherwise provided in the Certificate of Incorporation, the
number of directors that shall constitute the Board of Directors shall be
determined from time to time by resolution of the Board of Directors (provided
that no decrease in the number of directors that would have the effect of
shortening the term of an incumbent director may be made by the Board of
Directors). If the Board of Directors does not make such determination, the
number of directors shall be the number set forth in the Certificate of
Incorporation as the number of directors constituting the initial Board of
Directors. Each director shall hold office for the term for which he is elected
and thereafter until his successor shall have been elected and qualified, or
until his earlier death, resignation or removal.
Unless otherwise provided in the Certificate of Incorporation,
directors need not be stockholders or residents of the State of Delaware.
A Chairman of the Board may be elected or appointed by the Board of
Directors. The Chairman of the Board must be a director. The Chairman of the
Board (if any) shall preside at all meetings of the stockholders and of the
Board of Directors; and he shall have such other powers and duties as designated
in accordance with these bylaws and as may be assigned to him from time to time
by the Board of Directors. The position of Chairman of the Board shall not be an
officer of the Corporation. The Chairman of the Board may be removed, either
with or without cause, by the vote of a majority of the whole Board of Directors
at a special meeting called for such purpose, or at any regular meeting of the
Board of Directors, provided the notice for such meeting shall specify that such
proposed removal will be considered at the meeting; provided, however, that such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed. Election or appointment as Chairman of the Board shall not of
itself create contractual rights.";
B. ARTICLE V of the Corporation's Restated Bylaws was amended
and restated to read in its entirety as follows:
A-1
<PAGE> 21
"ARTICLE V
OFFICERS
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President, one or more Vice Presidents (any one or more
of whom may be designated Executive Vice President or Senior Vice President) and
a Secretary and such other officers as the Board of Directors may from time to
time elect or appoint. Each officer shall hold office until his successor shall
be duly elected and shall qualify or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
provides otherwise. No officer need be a director.
Section 2. Compensation. The salaries or other compensation, if any, of
the officers and agents of the Corporation shall be fixed from time to time by
the Board of Directors.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed, either with or without cause, by the vote of
a majority of the whole Board of Directors at a special meeting called for such
purpose, or at any regular meeting of the Board of Directors, provided the
notice for such meeting shall specify that such proposed removal will be
considered at the meeting; provided, however, that such removal shall be without
prejudice to the contractual rights, if any, of the person so removed. Election
or appointment as an officer or agent shall not of itself create contractual
rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates another officer as the chief executive officer.
Subject to the control of the Board of Directors and the executive committee (if
any), the chief executive officer shall have general executive charge,
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonably incident to such
responsibilities; he may agree upon and execute all leases, contracts, evidences
of indebtedness and other obligations in the name of the Corporation and may
sign all certificates for shares of capital stock of the Corporation; and he
shall have such other powers and duties as designated in accordance with these
bylaws and as may be assigned to him from time to time by the Board of
Directors.
Section 6. Chairman of the Board. The position of Chairman of the Board
shall not be an officer of the Corporation.
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
stockholders and (if he is a director) of the Board of Directors; and the
President shall have such other powers and duties as
A-2
<PAGE> 22
designated in accordance with these bylaws and as may be assigned to him from
time to time by the Board of Directors.
Section 8. Vice Presidents. In the absence of the President, or in the
event of his inability or refusal to act, a Vice President designated by the
Board of Directors or, in the absence of such designation, the Vice President
who is present and who is senior in terms of time as a Vice President of the
Corporation, shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President; provided, however, that such Vice President shall not preside at
meetings of the Board of Directors unless he is a director. Each Vice President
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 9. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of directors and of the
stockholders in books provided for such purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Corporation affix the seal
of the Corporation to all contracts of the Corporation and attest thereto; he
may sign with the other appointed officers all certificates for shares of
capital stock of the Corporation; he shall have charge of the certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors may direct, all of which shall at all reasonable times be open to
inspection by any director upon application at the office of the Corporation
during business hours; he shall have such other powers and duties as designated
in accordance with these bylaws and as may be prescribed from time to time by
the Board of Directors; and he shall in general perform all acts incident to the
office of Secretary, subject to the control of the chief executive officer and
the Board of Directors.
Section 10. Assistant Secretaries. Each Assistant Secretary (if any)
shall have the usual powers and duties pertaining to his office, together with
such other powers and duties as designated in accordance with these bylaws and
as may be prescribed from time to time by the chief executive officer, the Board
of Directors or the Secretary. The Assistant Secretaries shall exercise the
powers of the Secretary during the Secretary's absence or inability or refusal
to act.
Section 11. Action with Respect to Securities of Other Corporations.
Unless otherwise determined by the Board of Directors, the chief executive
officer shall have the power to vote and otherwise to act on behalf of the
Corporation, in person or by proxy, at any meeting of security holders of any
other corporation, or with respect to any action of security holders thereof, in
which the Corporation may hold securities and otherwise, to exercise any and all
rights and powers which the Corporation may possess by reason of its ownership
of securities in such other corporation."; and
C. The third sentence of Section 1 of ARTICLE VII of the Corporation's
Restated Bylaws was amended to delete the words "the Chairman of the Board of
Directors (if any)," from such sentence.
A-3
<PAGE> 1
EXHIBIT 10.10
THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") dated as of December 20, 1999 is among: NEWFIELD EXPLORATION
COMPANY, a corporation formed under the laws of the State of Delaware (the
"Company"); each of the lenders that is a signatory hereto; and CHASE BANK OF
TEXAS, NATIONAL ASSOCIATION as agent (the "Agent") for the Banks (as defined in
the Credit Agreement, which is defined below).
R E C I T A L S
A. The Company, the Agent, and the Banks (as defined in the Credit
Agreement as defined below) have entered into that certain Amended and Restated
Credit Agreement dated as of October 9, 1997, as amended, (as so amended, the
"Credit Agreement"), pursuant to which the Banks have agreed to make certain
loans and extensions of credit to the Company upon the terms and conditions as
provided therein; and
B. The parties hereto now desire to make certain amendments to the
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements herein
expressed, the parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.
2. The definition of "Reserve Report" in Section 1.02 of the Credit
Agreement is hereby amended to read as follows:
"Reserve Report" shall mean a report, in form and substance
satisfactory to the Agent, setting forth, as of the last day of each
December (the "December 31 Reserve Report") and as of the last day of
June (the "June 30 Reserve Report") (or such other date in the event of
an unscheduled redetermination) the proved oil and gas reserves
attributable to the Company's Oil and Gas properties, together with a
projection of the rate of production and future net income, production,
severance or similar taxes, operating expenses and capital expenditures
with respect thereto as of such date, based upon the pricing
assumptions consistent with SEC reporting requirements at the time.
Furthermore, such information shall be provided for each individual
well, unit or lease comprising the Company's Oil and Gas Properties and
by category of the reserves contained in each well, unit or lease
including proved producing, proved non-producing and proved
undeveloped.
3. Section 1.02 of the Credit Agreement is hereby supplemented by the
addition of the following definition in the appropriate alphabetical order:
"Third Amendment" shall mean that certain Third Amendment to
Amended and Restated Credit Agreement dated as of December 20, 1999,
among the Company, the parties thereto and the Agent.
<PAGE> 2
4. Section 8.04(a) of the Credit Agreement is hereby amended to read as
follows:
(a) The Company shall deliver the December 31 Reserve Report
at least 60 days prior to the next following May 1 Scheduled
Redetermination Date. The Company shall deliver the June 30 Reserve
Report at least 60 days prior to the next following November 1
Scheduled Redetermination Date. The December 31 Reserve Report shall
include (a) a report prepared by Ryder-Scott Company, Petroleum
Engineers, or other certified independent engineer satisfactory to the
Agent (the "Outside Report"), which covers at least 80% of the proved
oil and gas reserves attributable to the Company's Oil and Gas
properties, and (b) a report prepared by or under the supervision of
the Chief Engineer of the Company who shall certify such report to be
true and accurate and to have been prepared in accordance with the
procedures used in such Outside Report (the "Company Report"), which
covers the proved oil and gas reserves attributable to the Company's
Oil and Gas Properties which were not covered by such Outside Report.
The June 30 Report shall include a Company Report which covers the
proved oil and gas reserves attributable to all of the the Company's
Oil and Gas Properties. The Company may elect to use the December 31
Reserve Report instead of preparing the June 30 Reserve Report, in
which case reserve run off with no replacement will be assumed.
Further, the Company will be required to provide a review of the Oil
and Gas Properties which shall include a comparison of actual and
projected production volumes.
5. This Amendment shall become binding on the Banks when, and only
when, the Agent shall have received an original or facsimile executed signature
page to this Agreement from the Company and the Majority Banks.
6. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the Loan
Documents shall remain in full force and effect in accordance with its terms.
7. The Company hereby reaffirms that as of the date of this Amendment,
the representations and warranties contained in Article VII of the Credit
Agreement are true and correct on the date hereof as though made on and as of
the date of this Amendment, except as such representations and warranties are
expressly limited to an earlier date.
8. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
9. This Amendment may be executed in two or more counterparts, and it
shall not be necessary that the signatures of all parties hereto be contained on
any one counterpart hereof; each counterpart shall be deemed an original, but
all of which together shall constitute one and the same instrument. Delivery of
an executed signature page of this Amendment by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
[SIGNATURES BEGIN NEXT PAGE]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of date first above written.
NEWFIELD EXPLORATION COMPANY
By: /s/ TERRY W. RATHERT
------------------------------
Name: Terry W. Rathert
----------------------------
Title: Vice-President - Planning
and Administration
---------------------------
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, individually and as
Agent
By: /s/ ROBERT C. MERTENSOTTO
------------------------------
Name: Robert C. Mertensotto
----------------------------
Title: Managing Director
---------------------------
BANK OF MONTREAL
By: /s/ MELISSA A. BAUMAN
------------------------------
Name: Melissa A. Bauman
----------------------------
Title: Director, U.S. Corporate
Banking
---------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ PHILIPPE SOUSTRA
------------------------------
Name: Philippe Soustra
----------------------------
Title: Senior Vice President
---------------------------
S-1
<PAGE> 4
FIRST UNION NATIONAL BANK
By: /s/ ROBERT R. WETTEROFF
------------------------------
Name: Robert R. Wetteroff
----------------------------
Title: Senior Vice President
---------------------------
BANK OF AMERICA, N.A., formerly
NationsBank, N.A.
By: /s/ JAMES V. DUCOTE
------------------------------
Name: James V. Ducote
----------------------------
Title: Vice President
---------------------------
SOCIETE GENERALE
SOUTHWEST AGENCY
By: /s/ RICHARD A. GOULD
------------------------------
Name: Richard A. Gould
----------------------------
Title: Director
---------------------------
BANKBOSTON, N.A.
By: /s/ TERRENCE RONAN
------------------------------
Name: Terrence Ronan
----------------------------
Title: Director
---------------------------
S-2
<PAGE> 5
BANK ONE, TEXAS, NA
By: /s/ CHRISTINE M. MACAN
------------------------------
Name: Christine M. Macan
----------------------------
Title: Vice President
---------------------------
HIBERNIA NATIONAL BANK
By: /s/ DAVID R. REID
------------------------------
Name: David R. Reid
----------------------------
Title: Senior Vice President
---------------------------
S-3
<PAGE> 1
EXHIBIT 10.18
NEWFIELD EXPLORATION COMPANY
2000 NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PLAN
I. PURPOSE OF THE PLAN
The NEWFIELD EXPLORATION COMPANY 2000 NON-EMPLOYEE DIRECTOR RESTRICTED
STOCK PLAN (the "PLAN") is intended to promote the interests of Newfield
Exploration Company, a Delaware corporation (the "COMPANY"), by enhancing the
ability of the Company to attract and retain the services of individuals as
directors of the Company who are essential for the growth and profitability of
the Company.
II. DEFINITIONS
Unless the context otherwise indicates, the following definitions shall
apply to the Plan:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "COMMITTEE" shall mean the Committee of the Board appointed
pursuant to Paragraph III of the Plan.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(d) "FAIR MARKET VALUE" shall mean as of any specified date, the
closing price of the Stock on the New York Stock Exchange (or,
if the Stock is not then listed on such exchange, such other
national securities exchange on which the Stock is then
listed) on that date, or if no prices are reported on that
date, on the last preceding date on which such prices of the
Stock are reported.
(e) "FORFEITURE RESTRICTIONS" shall mean the conditions applicable
to shares of Stock granted under the Plan, including the
prohibitions against sale or other disposition of shares of
Stock granted under the Plan and the corresponding obligation
of the Non-Employee Director to forfeit his/her ownership of
or right to such shares and to surrender such shares to the
Company in the event the Non-Employee Director fails to
satisfy such conditions.
(f) "NON-EMPLOYEE DIRECTOR" shall mean a director of the Company
who is not otherwise an employee of the Company or any of its
Subsidiaries.
(g) "RESTRICTED SHARES" shall mean shares of Stock granted under
the Plan which are subject to Forfeiture Restrictions.
<PAGE> 2
(h) "RULE 16B-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act or
any successor rule or regulation thereto as in effect from
time to time.
(i) "STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company and may consist of authorized but unissued
shares of the Company or previously issued shares reacquired
and held by the Company or any of its Subsidiaries.
(j) "SUBSIDIARY" shall mean any subsidiary corporation as defined
in section 424(f) of the Internal Revenue Code of 1986, as
amended.
(k) "TOTAL AND PERMANENT DISABILITY" shall mean the inability to
perform duties and services as a director of the Company by
reason of a medically determined physical or mental impairment
supported by medical evidence which in the opinion of the
Committee can be expected to result in death or which can be
expected to last for a continuous period of not less than
twelve (12) months.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee which shall be appointed
by and serve at the pleasure of the Board and consist of at least two members.
Members of the Committee shall be "disinterested persons" within the meaning of
Rule 16b-3. The Committee is authorized to interpret the Plan and may from time
to time adopt such rules, regulations, forms and agreements, consistent with the
provisions of the Plan, as it may deem advisable to carry out the Plan.
IV. ELIGIBILITY OF NON-EMPLOYEE DIRECTORS
Shares of Stock shall be issued under Paragraph VI of the Plan only to
individuals who are Non-Employee Directors. Shares of Stock may not be granted
to a Non-Employee Director if such director has been an employee of the Company
or any of its Subsidiaries for any part of the calendar year preceding the
calendar year in which such grant is to be made.
V. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Stock that may be issued under the
Plan may not exceed 50,000 shares. Any of such shares which remain unissued at
the termination of the Plan shall cease to be subject to the Plan. If shares
issued under Paragraph VI of the Plan are forfeited to the Company, such shares
shall again become available for issuance under the Plan to the extent
permissible under Rule 16b-3. The aggregate number of shares that may be issued
under the Plan shall be adjusted to reflect a change in capitalization of the
Company, such as stock dividends or stock splits. Until termination of the Plan,
the Company shall make available at all times a sufficient number of shares to
meet the requirements of the Plan.
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<PAGE> 3
VI. ISSUANCE OF RESTRICTED SHARES AND FORFEITURE RESTRICTIONS
(a) ANNUAL ISSUANCE OF RESTRICTED SHARES. Subject to the
limitation of the number of shares of Stock set forth in
Paragraph V, (i) as of the date of the annual meeting of the
stockholders of the Company in each year that the Plan is in
effect as provided in Paragraph VIII hereof, each Non-Employee
Director who is in office immediately after such meeting shall
receive, without the exercise of the discretion of any person
or persons, a number of Restricted Shares determined by
dividing (y) $30,000 by (z) the Fair Market Value on the date
of the annual meeting of stockholders, rounded down to the
nearest whole number, subject to the terms set forth below,
and (ii) each Non-Employee Director who is appointed to the
Board by the Board for the first time after the 2000 annual
meeting of stockholders (and not in connection with an annual
meeting of stockholders) shall receive, without the exercise
of the discretion of any persons or person, a number of
Restricted Shares determined by dividing (y) $30,000 by (z)
the Fair Market Value on the effective date of his/her
appointment as a director, rounded down to the nearest whole
number, effective as of his/her date of appointment as a
director, subject to the terms set forth below. Any nominee
Non-Employee Director may make an irrevocable written
election in advance of election or appointment to the Board
not to receive a grant of Restricted Shares pursuant to this
Paragraph VI(a).
(b) FORFEITURE RESTRICTIONS AND OTHER TERMS AND CONDITIONS. The
following provisions are applicable to the Restricted Shares
issued pursuant to Paragraph VI(a):
(i) The shares of Stock issued to a Non-Employee Director
pursuant to this Plan shall not be sold, assigned,
pledged, or otherwise transferred to the extent then
subject to the Forfeiture Restrictions.
(ii) The Forfeiture Restrictions shall lapse as to each
grant of shares of Stock issued to a Non-Employee
Director pursuant to this Plan on the day before the
date of the first annual meeting of stockholders
following the date of issuance of such Restricted
Shares, provided that the lapse conditions described
below have been satisfied.
(iii) The Forfeiture Restrictions shall lapse as of a given
date with respect to the applicable number of shares
of Stock only if the Non-Employee Director has
remained a Non-Employee Director of the Company
continuously from the date of issuance of the
Restricted Shares through such lapse date, provided,
however, that if a Non-Employee Director terminates
as a director by reason of death or Total and
Permanent Disability, the Forfeiture Restrictions on
all Restricted Shares issued pursuant to this Plan to
such Non-Employee Director shall lapse as of the
date of his termination as a director. To the extent
that the lapse conditions are not satisfied as of a
given lapse date, the Non-Employee Director shall for
no consideration forfeit and surrender to the
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<PAGE> 4
Company all of the shares of Restricted Shares which
are then subject to Forfeiture Restrictions.
Unrestricted shares of Stock, evidenced in such
manner as the Committee shall deem appropriate, shall
be issued to the holder of Restricted Shares promptly
after the applicable restrictions have lapsed or
otherwise been satisfied.
(iv) Any Restricted Shares shall be evidenced by issuance
of a stock certificate which shall be registered in
the name of the Non-Employee Director and shall bear
an appropriate legend referring to the terms,
conditions and restrictions applicable to such
Restricted Shares. The Non-Employee Director shall
not be entitled to delivery of the stock certificate
until the Forfeiture Restrictions have lapsed, and
the Company shall retain custody of the stock
certificate until the Forfeiture Restrictions have
lapsed.
(v) In the event that the number of shares of Stock
available for grants under the Plan is insufficient
to make all grants provided for in this Paragraph VI
hereby made on the applicable date, then all
Non-Employee Directors who are entitled to a grant on
such date shall share ratably in the number of shares
of Stock then available, if any, for grant under the
Plan, shall have no right to receive a grant with
respect to the deficiencies in the number of
available shares of Stock and the grants under this
Paragraph VI shall thereafter terminate.
(vi) It is intended that the Plan meet the requirements of
Rule 16b-3 and that any Non-Employee Director who is
eligible to receive a grant of Restricted Shares or
to whom a grant of Restricted Shares is made pursuant
to this Paragraph VI will not for such reason cease
to be a "disinterested person" within the meaning of
Rule 16b-3 with respect to the Plan and other
stock-related plans of the Company.
VII. SHARES RECEIVED IN REORGANIZATION OR STOCK SPLIT
The prohibitions of Paragraph VI shall not apply to the transfer of
Restricted Shares pursuant to a plan of reorganization of the Company, but the
stock or securities received in exchange therefor, and any Stock received as a
result of a stock split or stock dividend with respect to Restricted Shares,
shall also become Restricted Shares subject to the Forfeiture Restrictions and
provisions governing the lapsing of such Forfeiture Restrictions applicable to
the original shares granted to the Non-Employee Director for all purposes of
the Plan and the certificates representing such additional shares shall be
legended to show such restrictions. Notwithstanding the foregoing, if (i) the
Company shall not be the surviving entity in any merger or consolidation (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges or
agrees to sell, lease or exchange all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company), or
(iii) the Company is to be dissolved and liquidated, then effective as of the
effective date of such merger, consolidation, dissolution and liquidation, or
sale, all Forfeiture Restrictions on all Restricted Shares shall lapse.
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<PAGE> 5
VIII. TERM OF PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is subsequently approved by the stockholders of the Company
within 12 months thereafter. Unless sooner terminated under the provisions of
Paragraph XI, no shares shall be issued under Paragraph VI after the expiration
of ten years from the effective date of the Plan.
IX. RIGHTS AS STOCKHOLDER
Upon issuance of Restricted Shares to a Non-Employee Director, except
with respect to the Forfeiture Restrictions, such Non-Employee Director shall
have all the rights of a stockholder of the Company with respect to such
Restricted Shares, including the right to vote such Restricted Shares and to
receive all dividends or other distributions paid with respect to such
Restricted Shares.
X. WITHHOLDING TAX
To the extent the issuance of shares of Stock or the lapse of
Forfeiture Restrictions results in the receipt of compensation by a Non-Employee
Director, the Company (or the employing Subsidiary) is authorized to withhold
from any other cash compensation then or thereafter payable to such Non-Employee
Director any tax required to be withheld by reason of the receipt of
compensation resulting from the issuance of shares or the lapse of Forfeiture
Restrictions.
Alternatively, a Non-Employee Director may authorize the Company to
retain or withhold sufficient shares of Stock otherwise receivable by the
Non-Employee Director from the Company with respect to Restricted Shares or may
deliver to the Company sufficient shares of Stock to enable the Company to
satisfy any such withholding requirement.
XI. AMENDMENT OR TERMINATION OF PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares of Stock which have not theretofore been issued. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided that no change may be made which would impair the rights of a
Non-Employee Director to whom Restricted Shares have theretofore been issued
without the consent of such Non-Employee Director; and provided, further that
the Board may not make any alteration or amendment that would materially
increase the benefits accruing to participants under the Plan, increase the
aggregate number of shares of Stock that may be issued under the Plan (other
than an increase reflecting a stock dividend, stock split or similar
recapitalization of the Company), change the class of individuals eligible to
receive Stock under the Plan, or extend the maximum period during which
Restricted Shares may be granted under the Plan, without the approval of the
stockholders of the Company. Notwithstanding the foregoing, the Plan
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<PAGE> 6
shall not be amended more than once every six months other than to comport with
changes in the Internal Revenue Code of 1986, as amended, and the Employee
Retirement Income Security Act of 1974, as amended, or the regulations issued
thereunder.
XII. GOVERNMENT REGULATIONS
Notwithstanding any provisions hereof to the contrary, the obligations
of the Company to deliver shares of Stock under the Plan shall be subject to all
applicable laws, rules and regulations and to such approvals by any governmental
agencies or national securities exchanges on which the Stock is traded.
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<PAGE> 1
EXHIBIT 10.19
NEWFIELD EXPLORATION COMPANY
2001 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The NEWFIELD EXPLORATION COMPANY 2001 EMPLOYEE STOCK
PURCHASE PLAN (the "Plan") is intended to provide an incentive for employees of
NEWFIELD EXPLORATION COMPANY (the "Company") and certain of its subsidiaries to
acquire or increase a proprietary interest in the Company through the purchase
of shares of the Company's common stock. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The provisions of the Plan shall be construed in
a manner consistent with the requirements of that section of the Code.
2. DEFINITIONS. Where the following words and phrases are used in the
Plan, they shall have the respective meanings set forth below, unless the
context clearly indicates to the contrary:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means a committee appointed from time to time
by the Board to administer the Plan as provided in paragraph 3.
(d) "Company" means Newfield Exploration Company.
(e) "Date of Exercise" means the last day of each Option
Period.
(f) "Date of Grant" means January 1, 2001, and, thereafter,
the first day of each successive July and January.
(g) "Eligible Compensation" means regular straight-time
earnings or base salary, determined before giving effect to any salary
reduction agreement pursuant to (i) a qualified cash or deferred
arrangement (within the meaning of Section 401(k) of the Code) or (ii)
a cafeteria plan (within the meaning of Section 125 of the Code).
Eligible Compensation shall not include management incentives,
overtime, bonuses, commissions, severance pay, incentive pay, shift
premium differentials, extended work-week premiums, pay in lieu of
vacation, reimbursements, or any other special or incentive payments
excluded by the Committee in its discretion (applied in a uniform
basis).
(h) "Eligible Employee" means, with respect to each Date of
Grant, each employee of the Company or a Participating Company who, as
of such Date of Grant, is regularly scheduled to work more than 20
hours per week and more than five months in any calendar year.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
<PAGE> 2
(j) "Option Period" means the six month period beginning on
each Date of Grant.
(k) "Option Price" shall have the meaning assigned to such
term in paragraph 8(b).
(l) "Participating Company" means any present or future parent
or subsidiary corporation of the Company that participates in the Plan
pursuant to paragraph 4.
(m) "Plan" means this Newfield Exploration Company 2001
Employee Stock Purchase Plan, as amended from time to time.
(n) "Stock" means the shares of the Company's common stock,
par value $.01 per share.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee, the members of which shall be appointed from time to time by the
Board. Each member of the Committee shall serve for a term commencing on a date
specified by the Board and continuing until he dies, resigns, or is removed from
office by the Board. Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all options granted under the Plan, make such rules as it
deems necessary for the proper administration of the Plan, and make all other
determinations necessary or advisable for the administration of the Plan. In
addition, the Committee shall correct any defect or supply any omission or
reconcile any inconsistency in the Plan, or in any option granted under the
Plan, in the manner and to the extent that the Committee deems desirable to
carry the Plan or any option into effect. The Committee shall, in its sole
discretion, make such decisions or determinations and take such actions, and all
such decisions, determinations and actions taken or made by the Committee
pursuant to this and the other paragraphs of the Plan shall be conclusive on all
parties. The Committee shall not be liable for any decision, determination or
action taken in good faith in connection with the administration of the Plan.
The Committee shall have the authority to delegate routine day-to-day
administration of the Plan to such officers and employees of the Company as the
Committee deems appropriate.
4. PARTICIPATING COMPANIES. The Committee may designate any present or
future parent or subsidiary corporation of the Company that is eligible by law
to participate in the Plan as a Participating Company by written instrument
delivered to the designated Participating Company. Such written instrument shall
specify the effective date of such designation and shall become, as to such
designated Participating Company and persons in its employment, a part of the
Plan. The terms of the Plan may be modified as applied to the Participating
Company only to the extent permitted under Section 423 of the Code. Transfer of
employment among the Company and Participating Companies (and among any other
parent or subsidiary corporation of the Company) shall not be considered a
termination of employment hereunder. Any Participating Company may, by
appropriate action of its Board of Directors, terminate its participation in the
Plan. Moreover, the Committee may, in its discretion, terminate a Participating
Company's Plan participation at any time.
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<PAGE> 3
5. ELIGIBILITY. Subject to the provisions hereof, all Eligible
Employees as of a Date of Grant shall be eligible to participate in the Plan
with respect to options granted under the Plan as of such date.
6. STOCK SUBJECT TO THE PLAN. Subject to the provisions of paragraph
13, the aggregate number of shares which may be sold pursuant to options granted
under the Plan shall not exceed 200,000 shares of the authorized Stock, which
shares may be unissued shares or reacquired shares, including shares bought on
the market or otherwise for purposes of the Plan. Should any option granted
under the Plan expire or terminate prior to its exercise in full, the shares
theretofore subject to such option may again be subject to an option granted
under the Plan. Any shares that are not subject to outstanding options upon the
termination of the Plan shall cease to be subject to the Plan.
7. GRANT OF OPTIONS.
(a) IN GENERAL. Commencing on January 1, 2001, and continuing
while the Plan remains in force, the Company shall, on each Date of Grant, grant
an option under the Plan to purchase shares of Stock to each Eligible Employee
as of such Date of Grant who elects to participate in the Plan; provided,
however, that no option shall be granted to an Eligible Employee if such
individual, immediately after the option is granted, owns stock possessing five
percent or more of the total combined voting power or value of all classes of
stock of the Company or of its parent or subsidiary corporations (within the
meaning of Sections 423(b)(3) and 424(d) of the Code). Except as provided in
paragraph 13, the term of each option shall be for six months, which shall begin
on a Date of Grant and end on the last day of such six-month period. Subject to
subparagraph 7(d), the number of shares of Stock subject to an option for a
participant shall be equal to the quotient of (i) the aggregate payroll
deductions withheld on behalf of such participant during the Option Period in
accordance with subparagraph 7(b), divided by (ii) the Option Price of the Stock
applicable to the option, rounded down to the nearest whole share; provided,
however, that the maximum number of shares of Stock that may be subject to any
option for a participant may not exceed 3,000 (subject to adjustment as provided
in paragraph 13).
(b) ELECTION TO PARTICIPATE; PAYROLL DEDUCTION AUTHORIZATION.
An Eligible Employee may participate in the Plan only by means of payroll
deduction. Except as provided in subparagraph 7(f), each Eligible Employee who
elects to participate in the Plan shall deliver to the Company, within the time
period prescribed by the Committee, a written payroll deduction authorization in
a form prepared by the Company whereby he gives notice of his election to
participate in the Plan as of the next following Date of Grant, and whereby he
designates a stated percentage of his Eligible Compensation to be deducted from
his compensation for each pay period and paid into the Plan for his account. The
designated percentage may not be less than 2% nor exceed 10%.
(c) CHANGES IN PAYROLL AUTHORIZATION. The payroll deduction
authorization referred to in subparagraph 7(b) may be reduced at any time during
the Option Period by the employee giving written notice to the Company that his
payroll deductions with respect to such Option Period shall thereafter be
reduced to a specific percentage (not less than 2%) of his Eligible
Compensation. Such reduction shall be irrevocable.
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<PAGE> 4
(d) $25,000 LIMITATION. No employee shall be granted an option
under the Plan which permits his rights to purchase Stock under the Plan and
under all other employee stock purchase plans of the Company and its parent and
subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market
value of Stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time (within the meaning of
Section 423(b)(8) of the Code). Any payroll deductions in excess of the amount
specified in the foregoing sentence shall be returned to the participant as soon
as administratively feasible after the next following Date of Exercise.
(e) LEAVES OF ABSENCE. During a paid leave of absence approved
by the Company and meeting the requirements of Treasury Regulation Section
1.421-7(h)(2), a participant's elected payroll deductions shall continue. A
participant may not contribute to the Plan during an unpaid leave of absence. If
a participant takes an unpaid leave of absence that is approved by the Company
and meets the requirements of Treasury Regulation Section 1.421-7(h)(2), then
such participant's payroll deductions for such Option Period that were made
prior to such leave may remain in the Plan and be used to purchase Stock under
the Plan on the Date of Exercise relating to such Option Period. If a
participant takes a leave of absence that is not described in the first or third
sentence of this subparagraph 7(e), then he shall be considered to have
terminated his employment for purposes of the Plan and withdrawn from the Plan
pursuant to the provisions of paragraph 9 hereof. Further, notwithstanding the
preceding provisions of this subparagraph 7(e), if a participant takes a leave
of absence that is described in the first or third sentence of this subparagraph
7(e) and such leave of absence exceeds 90 days, then he shall be considered to
have withdrawn from the Plan pursuant to the provisions of paragraph 9 hereof
and terminated his employment for purposes of the Plan on the 91st day of such
leave of absence.
(f) CONTINUING ELECTION. Subject to the limitation set forth
in subparagraph 7(d), a participant (i) who has elected to participate in the
Plan pursuant to subparagraph 7(b) as of a Date of Grant and (ii) who takes no
action to change or revoke such election as of the next following Date of Grant
and/or as of any subsequent Date of Grant prior to any such respective Date of
Grant shall be deemed to have made the same election, including the same
attendant payroll deduction authorization, for such next following and/or
subsequent Date(s) of Grant as was in effect immediately prior to such
respective Date of Grant. Payroll deductions that are limited by subparagraph
7(d) shall recommence at the rate provided in such participant's payroll
deduction authorization at the beginning of the first Option Period that is
scheduled to end in the following calendar year, unless the participant changes
the amount of his payroll deduction authorization pursuant to paragraph 7,
withdraws from the Plan as provided in paragraph 9, or is terminated from
participation in the Plan as provided in paragraph 10.
8. EXERCISE OF OPTIONS.
(a) GENERAL STATEMENT. Subject to the limitation set forth in
subparagraph 7(d), each participant in the Plan automatically and without any
act on his part shall be deemed to have exercised his option on each Date of
Exercise to the extent his unused payroll deductions under the Plan are
sufficient to purchase at the Option Price whole shares of Stock subject to his
option and to the extent the issuance of Stock to such participant upon such
exercise is lawful. Any amount relating to such option that remains in his
account representing a fractional share shall be applied
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<PAGE> 5
to the purchase of shares of Stock during the next Option Period as if such
participant had contributed such amount by payroll deduction to the Plan during
such period for the option that relates to such period. If the total number of
shares for which options are exercised on any date of exercise exceeds the
maximum number of shares remaining to be sold under the Plan, the Company shall
make a pro rata allocation of the shares of stock available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable, and the balance of the payroll deductions
credited to the account of each participant under the Plan shall be refunded to
him promptly.
(b) "OPTION PRICE" DEFINED. The term "Option Price" shall mean
the per share price of Stock to be paid by each participant on each exercise of
his option, which price shall be equal to 85% of the fair market value of the
Stock on the Date of Exercise or on the Date of Grant, whichever amount is less.
For all purposes under the Plan, the fair market value of a share of Stock on a
particular date shall be equal to the mean of the reported high and low sales
prices of the Stock on the New York Stock Exchange composite tape on that date,
or if no prices are reported on that date, on the last preceding date on which
such prices of the Stock are so reported. If the Stock is traded over the
counter at the time a determination of its fair market value is required to be
made hereunder, its fair market value shall be deemed to be equal to the average
between the reported high and low or closing bid and asked prices of Stock on
the most recent date on which Stock was publicly traded. In the event Stock is
not publicly traded at the time a determination of its value is required to be
made hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(c) DELIVERY OF SHARE CERTIFICATES. The Company shall deliver
to each optionee a certificate issued in his name for the number of shares of
Stock with respect to which his option was exercised and for which he has paid
the Option Price. The certificate shall be delivered as soon as practicable
following the date of exercise. If the Company is required to obtain from any
U.S. commission or agency authority to issue any such shares, the Company shall
seek to obtain such authority. Inability of the Company to obtain from any
commission or agency (whether U.S. or foreign) authority which counsel for the
Company deems necessary for the lawful issuance of any such shares shall relieve
the Company from liability to any participant in the Plan except to return to
him the amount of his payroll deductions under the Plan which would have
otherwise been used upon exercise of the relevant option.
9. WITHDRAWAL FROM THE PLAN.
(a) GENERAL STATEMENT. Any participant may withdraw in whole
from the Plan at any time prior to the Date of Exercise relating to a particular
Option Period. Partial withdrawals shall not be permitted. A participant who
wishes to withdraw from the Plan must timely deliver to the Company a notice of
withdrawal in a form prepared by the Company. The Company, promptly following
the time when the notice of withdrawal is delivered, shall refund to the
participant the amount of his payroll deductions under the Plan which have not
yet been otherwise returned to him or used upon exercise of options; and
thereupon, automatically and without any further act on his part, his payroll
deduction authorization and his interest in unexercised options under the Plan
shall terminate.
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<PAGE> 6
(b) ELIGIBILITY FOLLOWING WITHDRAWAL. A participant who
withdraws from the Plan shall be eligible to participate again in the Plan upon
expiration of the Option Period during which he withdrew (provided that he is
otherwise eligible to participate in the Plan at such time).
10. TERMINATION OF EMPLOYMENT.
(a) GENERAL STATEMENT. Except as provided in subparagraph
10(b), if the employment of a participant terminates for any reason whatsoever,
then his participation in the Plan automatically and without any act on his part
shall terminate as of the date of the termination of his employment. The Company
shall promptly refund to him the amount of his payroll deductions under the Plan
which have not yet been otherwise returned to him or used upon exercise of
options, and thereupon his interest in unexercised options under the Plan shall
terminate.
(b) TERMINATION BY RETIREMENT, DEATH OR DISABILITY. If the
employment of a participant terminates after such participant has attained age
65 or due to such participant's death or permanent and total disability (within
the meaning of Section 22(e)(3) of the Code), then such participant, or such
participant's personal representative, as applicable, shall have the right to
elect either to:
(1) withdraw all of such participant's accumulated unused
payroll deductions under the Plan; or
(2) exercise such participant's option as of his
retirement date, his date of death, or his date of termination due to
permanent and total disability, as applicable, for the purchase of the
number of whole shares of Stock which the accumulated payroll
deductions at the date of such participant's termination of employment
will purchase at the Option Price (subject to subparagraph 7(d)), and
receive a payment from the Company promptly after such exercise in the
amount of such participant's payroll deductions under the Plan which
have not yet been otherwise returned to him or used upon exercise of
options. For purposes of this subparagraph 10(b)(2), the date of
termination of employment will be deemed to be the Date of Exercise for
the purpose of computing the Option Price.
The participant or, if applicable, such personal representative, must make such
election by giving written notice to the Committee within 90 days of the
participant's date of retirement, date of death, or date of termination due to
permanent and total disability, as applicable. In the event that no such written
notice of election is timely received by the Committee, the participant or
personal representative will automatically be deemed to have elected as set
forth in clause (1) above.
11. RESTRICTION UPON ASSIGNMENT OF OPTION. An option granted under the
Plan shall not be transferable otherwise than by will or the laws of descent and
distribution. Each option shall be exercisable, during his lifetime, only by the
employee to whom granted. The Company shall not recognize and shall be under no
duty to recognize any assignment or purported assignment by an employee of his
option or of any rights under his option or under the Plan.
12. NO RIGHTS OF SHAREHOLDER UNTIL EXERCISE OF OPTION. With respect to
shares of Stock subject to an option, an optionee shall not be deemed to be a
shareholder, and he shall not
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<PAGE> 7
have any of the rights or privileges of a shareholder, until such option has
been exercised and a certificate of shares has been issued to him.
13. CHANGES IN STOCK; ADJUSTMENTS. Whenever any change is made in the
Stock, by reason of a stock dividend or by reason of subdivision, stock split,
reverse stock split, recapitalization, reorganization, combination,
reclassification of shares or other similar change, appropriate action will be
taken by the Committee to adjust accordingly the number of shares subject to the
Plan, the maximum number of shares that may be subject to any option, and the
number and Option Price of shares subject to options outstanding under the Plan.
If the Company shall not be the surviving corporation in any merger or
consolidation (or survives only as a subsidiary of another entity), or if the
Company is to be dissolved or liquidated, then, unless a surviving corporation
assumes or substitutes new options (within the meaning of Section 424(a) of the
Code) for all options then outstanding, (i) the Date of Exercise for all options
then outstanding shall be accelerated to a date fixed by the Committee prior to
the effective date of such merger or consolidation or such dissolution or
liquidation, (ii) an employee (or his legal representative) may make a lump-sum
deposit prior to the Date of Exercise in lieu of the remaining payroll
deductions which otherwise would have been made, and (iii) upon such effective
date any unexercised options shall expire and the Company promptly shall refund
to each participant the amount of such participant's payroll deductions under
the Plan which have not yet been otherwise returned to him or used upon exercise
of options.
14. USE OF FUNDS; NO INTEREST PAID. All funds received or held by the
Company under the Plan shall be included in the general funds of the Company
free of any trust or other restriction, and may be used for any corporate
purpose. No interest shall be paid to any participant.
15. TERM OF THE PLAN. The Plan shall be effective January 1, 2001,
provided the Plan is approved by the shareholders of the Company within 12
months after the adoption by the Board. Notwithstanding any provision in the
Plan, no option granted under the Plan shall be exercisable prior to such
shareholder approval, and, if the shareholders of the Company do not approve the
Plan by the Date of Exercise of the first option granted hereunder, then the
Plan shall automatically terminate, no options may be exercised hereunder, and
the Company promptly shall refund to each participant the amount of such
participant's payroll deductions under the Plan; and thereupon, automatically
and without any further act on his part, his payroll deduction authorization and
his interest in unexercised options under the Plan shall terminate. Except with
respect to options then outstanding, if not sooner terminated under the
provisions of paragraph 16, the Plan shall terminate upon and no further payroll
deductions shall be made and no further options shall be granted after December
31, 2010.
16. AMENDMENT OR TERMINATION OF THE PLAN. The Board in its discretion
may terminate the Plan at any time with respect to any Stock for which options
have not theretofore been granted. The Board shall have the right to alter or
amend the Plan or any part thereof from time to time; provided, however, that no
change in any option theretofore granted may be made that would impair the
rights of the optionee without the consent of such optionee.
17. SECURITIES LAWS. The Company shall not be obligated to issue any
Stock pursuant to any option granted under the Plan at any time when the offer,
issuance or sale of shares covered
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by such option has not been registered under the Securities Act of 1933, as
amended, or does not comply with such other state, federal or foreign laws,
rules or regulations, or the requirements of any stock exchange upon which the
Stock may then be listed, as the Company or the Committee deems applicable and,
in the opinion of legal counsel for the Company, there is no exemption from the
requirements of such laws, rules, regulations or requirements available for the
offer, issuance and sale of such shares. Further, all Stock acquired pursuant to
the Plan shall be subject to the Company's policies concerning compliance with
securities laws and regulations, as such policies may be amended from time to
time. The terms and conditions of options granted hereunder to, and the purchase
of shares by, persons subject to Section 16 of the Exchange Act shall comply
with any applicable provisions of Rule 16b-3. As to such persons, the Plan shall
be deemed to contain, and such options shall contain, and the shares issued upon
exercise thereof shall be subject to, such additional conditions and
restrictions as may be required from time to time by Rule 16b-3 to qualify for
the maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
18. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan
shall be construed to prevent the Company or any subsidiary from taking any
corporate action that is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any option granted under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
subsidiary as a result of any such action.
19. MISCELLANEOUS PROVISIONS.
(a) PARENT AND SUBSIDIARY CORPORATIONS. For all purposes of
the Plan, a corporation shall be considered to be a parent or subsidiary
corporation of the Company only if such corporation is a parent or subsidiary
corporation of the Company within the meaning of Sections 424(e) and (f) of the
Code.
(b) NUMBER AND GENDER. Wherever appropriate herein, words used
in the singular shall be considered to include the plural and words used in the
plural shall be considered to include the singular. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.
(c) HEADINGS. The headings and subheadings in the Plan are
included solely for convenience, and if there is any conflict between such
headings or subheadings and the text of the Plan, the text shall control.
(d) NOT A CONTRACT OF EMPLOYMENT. The adoption and maintenance
of the Plan shall not be deemed to be a contract between the Company or any
Participating Company and any person or to be consideration for the employment
of any person. Participation in the Plan at any given time shall not be deemed
to create the right to participate in the Plan, or any other arrangement
permitting an employee of the Company or any Participating Company to purchase
Stock at a discount, in the future. The rights and obligations under any
participant's terms of employment with the Company or any Participating Company
shall not be affected by participation in the Plan. Nothing herein contained
shall be deemed to give any person the right to be retained in the employ of the
Company or any Participating Company or to restrict the right of the Company or
any Participating Company to discharge any person at any time, nor shall the
Plan be deemed to give the
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Company or any Participating Company the right to require any person to remain
in the employ of the Company or such Participating Company or to restrict any
person's right to terminate his employment at any time. The Plan shall not
afford any participant any additional right to compensation as a result of the
termination of such participant's employment for any reason whatsoever.
(e) COMPLIANCE WITH APPLICABLE LAWS. The Company's obligation
to offer, issue, sell or deliver Stock under the Plan is at all times subject to
all approvals of and compliance with any governmental authorities (whether
domestic or foreign) required in connection with the authorization, offer,
issuance, sale or delivery of Stock as well as all federal, state, local and
foreign laws. Without limiting the scope of the preceding sentence, and
notwithstanding any other provision in the Plan, the Company shall not be
obligated to grant options or to offer, issue, sell or deliver Stock under the
Plan to any employee who is a citizen or resident of a jurisdiction the laws of
which, for reasons of its public policy, prohibit the Company from taking any
such action with respect to such employee.
(f) SEVERABILITY. If any provision of the Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.
(g) GOVERNING LAW. All provisions of the Plan shall be
construed in accordance with the laws of Delaware except to the extent preempted
by federal law.
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EXHIBIT 10.20
NEWFIELD EXPLORATION COMPANY
2000 OMNIBUS STOCK PLAN
I. PURPOSE
The purpose of the NEWFIELD EXPLORATION COMPANY 2000 OMNIBUS STOCK PLAN
(the "Plan") is to provide a means through which NEWFIELD EXPLORATION COMPANY, a
Delaware corporation (the "Company"), and its subsidiaries may attract able
persons to enter the employ of the Company or its subsidiaries and to provide a
means whereby those individuals upon whom the responsibilities of the successful
administration and management of the Company and its subsidiaries rest, and
whose present and potential contributions to the welfare of the Company and its
subsidiaries are of importance, can acquire and maintain stock ownership,
thereby strengthening their concern for the welfare of the Company and its
subsidiaries. A further purpose of the Plan is to provide such individuals with
additional incentive and reward opportunities designed to enhance the profitable
growth of the Company and its subsidiaries. Accordingly, the Plan provides for
granting Incentive Stock Options, options that do not constitute Incentive Stock
Options, Restricted Stock Awards, or any combination of the foregoing, as is
best suited to the circumstances of the particular employee as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
(a) "AWARD" means, individually or collectively, any Option or
Restricted Stock Award.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CHANGE OF CONTROL" means the occurrence of any of the following
events: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity), (ii) the Company sells, leases or exchanges all or substantially all of
its assets to any other person or entity, (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Exchange Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board. Notwithstanding the foregoing, for purposes
of Subparagraph IX(d), a "Change of Control" shall not include any merger,
consolidation, reorganization, sale, lease, exchange, or similar transaction
involving solely the Company and one or more entities that were wholly-owned
directly or indirectly by the Company immediately prior to such event.
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(d) "CHANGE OF CONTROL VALUE" shall mean (i) the per share price
offered to stockholders of the Company in any merger, consolidation,
reorganization, sale of assets or dissolution transaction which constitutes a
Change of Control, (ii) the price per share offered to stockholders of the
Company in any tender offer or exchange offer whereby a Change of Control takes
place, or (iii) if such Change of Control occurs other than pursuant to a tender
or exchange offer, the fair market value per share of the shares into which
Awards are exercisable, as determined by the Committee. In the event that the
consideration offered to stockholders of the Company in any Change of Control
transaction consists of anything other than cash, the Committee shall determine
the fair cash equivalent of the portion of the consideration offered which is
other than cash.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(f) "COMMITTEE" means the Compensation Committee of the Board which
shall be comprised solely of two or more outside directors (within the meaning
of the term "outside directors" as used in section 162(m) of the Code and
applicable interpretive authority thereunder and within the meaning of
"Non-Employee Director" as defined in Rule 16b-3).
(g) "COMMON STOCK" means the common stock, par value $.01 per share, of
the Company, or any security into which such Common Stock may be changed by
reason of any transaction or event of the type described in Paragraph IX.
(h) "COMPANY" means Newfield Exploration Company, a Delaware
corporation.
(i) An "EMPLOYEE" means any person (including an officer or a director)
in an employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "FAIR MARKET VALUE" means, as of any specified date, the mean of
the high and low sales prices of the Common Stock (i) reported by the National
Market System of NASDAQ on that date or (ii) if the Common Stock is listed on a
national stock exchange, reported on the stock exchange composite tape on that
date; or, in either case, if no prices are reported on that date, on the last
preceding date on which such prices of the Common Stock are so reported. If the
Common Stock is traded over the counter at the time a determination of its fair
market value is required to be made hereunder, its fair market value shall be
deemed to be equal to the average between the reported high and low or closing
bid and asked prices of Common Stock on the most recent date on which Common
Stock was publicly traded. In the event Common Stock is not publicly traded at
the time a determination of its value is required to be made hereunder, the
determination of its fair market value shall be made by the Committee in such
manner as it deems appropriate.
(l) "HOLDER" means an employee who has been granted an Award.
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(m) "INCENTIVE STOCK OPTION" means an incentive stock option within the
meaning of section 422 of the Code.
(n) "OPTION" means an Award granted under Paragraph VII of the Plan and
includes both Incentive Stock Options to purchase Common Stock and Options that
do not constitute Incentive Stock Options to purchase Common Stock.
(o) "OPTION AGREEMENT" means a written agreement between the Company
and a Holder with respect to an Option.
(p) "PLAN" means the Newfield Exploration Company 2000 Omnibus Stock
Plan, as amended from time to time.
(q) "RESTRICTED STOCK AGREEMENT" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(r) "RESTRICTED STOCK AWARD" means an Award granted under Paragraph
VIII of the Plan.
(s) "RULE 16B-3" means SEC Rule 16b-3 promulgated under the Exchange
Act, as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.
(t) "SEC" means the Securities and Exchange Commission.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon the date of its adoption by the
Board, provided the Plan is approved by the stockholders of the Company within
twelve months thereafter. Notwithstanding any provision in the Plan, in any
Option Agreement or in any Restricted Stock Agreement, no Option shall be
exercisable and no Restricted Stock Award shall vest prior to such stockholder
approval. No further Awards may be granted under the Plan after ten years from
the date the Plan is adopted by the Board. The Plan shall remain in effect until
all Options granted under the Plan have been satisfied or expired, and all
Restricted Stock Awards granted under the Plan have vested or been forfeited.
IV. ADMINISTRATION
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by the
Committee.
(b) POWERS. Subject to the express provisions of the Plan, the
Committee shall have authority, in its discretion, to determine which employees
shall receive an Award, the time or times when such Award shall be made, whether
an Incentive Stock Option, nonqualified Option or Restricted Stock Award shall
be granted, and the number of shares to be subject to each Option or Restricted
Stock Award. In making such determinations, the Committee shall take into
account the
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nature of the services rendered by the respective employees, their present and
potential contribution to the Company's success and such other factors as the
Committee in its discretion shall deem relevant.
(c) ADDITIONAL POWERS. The Committee shall have such additional powers
as are delegated to it by the other provisions of the Plan. Subject to the
express provisions of the Plan, this shall include the power to construe the
Plan and the respective agreements executed hereunder, to prescribe rules and
regulations relating to the Plan, and to determine the terms, restrictions and
provisions of the agreement relating to each Award, including such terms,
restrictions and provisions as shall be requisite in the judgment of the
Committee to cause designated Options to qualify as Incentive Stock Options, and
to make all other determinations necessary or advisable for administering the
Plan. The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any agreement relating to an Award in the
manner and to the extent it shall deem expedient to carry it into effect. The
determinations of the Committee on the matters referred to in this Paragraph IV
shall be conclusive.
V. SHARES SUBJECT TO THE PLAN; GRANT OF OPTIONS;
GRANT OF RESTRICTED STOCK AWARDS
(a) SHARES SUBJECT TO THE PLAN AND AWARD LIMITS. Subject to adjustment
from time to time in the same manner as provided in Paragraph IX with respect to
shares of Common Stock subject to Options then outstanding, the aggregate number
of shares of Common Stock that may be issued under the Plan shall not exceed
2,000,000 shares. Shares shall be deemed to have been issued under the Plan only
to the extent actually issued and delivered pursuant to an Award. To the extent
that an Award lapses or the rights of its Holder terminate, any shares of Common
Stock subject to such Award shall again be available for the grant of an Award
under the Plan. Notwithstanding any provision in the Plan to the contrary, the
maximum number of shares of Common Stock that may be subject to Awards granted
to any one individual during any calendar year is 100,000 shares of Common
Stock, of which no more than 50,000 shares of Common Stock may be subject to
Restricted Stock Awards (subject to adjustment from time to time in the same
manner as provided in paragraph IX with respect to shares of Common Stock
subject to Options then outstanding). The limitation set forth in the preceding
sentence shall be applied in a manner which will permit compensation generated
under the Plan that is intended to constitute "performance-based" compensation
for purposes of section 162(m) of the Code to qualify as such, including,
without limitation, counting against such maximum number of shares, to the
extent required under section 162(m) of the Code and applicable interpretive
authority thereunder, any shares subject to Options that are canceled or
repriced or shares subject to Restricted Stock Awards that are forfeited.
Further, notwithstanding any provision of the Plan to the contrary, the maximum
number of shares of Common Stock that may be granted as Restricted Stock Awards
under Paragraph VIII during the term of the Plan is 200,000 shares of Common
Stock (subject to adjustment in the same manner as provided in Paragraph IX with
respect to shares of Common Stock subject to Options then outstanding).
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(b) GRANT OF OPTIONS. The Committee may from time to time grant Options
to one or more employees determined by it to be eligible for participation in
the Plan in accordance with the terms of the Plan.
(c) GRANT OF RESTRICTED STOCK AWARDS. The Committee may from time to
time grant Restricted Stock Awards to one or more employees determined by it to
be eligible for participation in the Plan in accordance with the terms of the
Plan.
(d) STOCK OFFERED. Subject to the limitations set forth in Paragraph
V(a), the stock to be offered pursuant to the grant of an Award may be
authorized but unissued Common Stock or Common Stock previously issued and
outstanding and reacquired by the Company. Any of such shares which remain
unissued and which are not subject to outstanding Awards at the termination of
the Plan shall cease to be subject to the Plan but, until termination of the
Plan, the Company shall at all times make available a sufficient number of
shares to meet the requirements of the Plan.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are
employees. An Award may be granted on more than one occasion to the same person,
and, subject to the limitations set forth in the Plan, such Award may include an
Incentive Stock Option, an Option that is not an Incentive Stock Option, a
Restricted Stock Award, or any combination thereof.
VII. STOCK OPTIONS
(a) OPTION PERIOD. The term of each Option shall be as specified by the
Committee at the date of grant.
(b) LIMITATIONS ON EXERCISE OF OPTION. An Option shall be exercisable
in whole or in such installments and at such times as determined by the
Committee.
(c) SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that
the aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Common Stock with respect to which Incentive Stock
Options granted after 1986 are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its parent and subsidiary corporations exceeds $100,000, such Incentive
Stock Options shall be treated as Options which do not constitute Incentive
Stock Options. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of a Holder's Incentive Stock Options will not constitute
Incentive Stock Options because of such limitation and shall notify the Holder
of such determination as soon as practicable after such determination. No
Incentive Stock Option shall be granted to an individual if, at the time the
Option is granted, such individual owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation, within the meaning of section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the option price is at least
110% of the Fair Market Value of the Common Stock subject to the Option and (ii)
such Option by its terms is not exercisable after the expiration of five years
from the date of grant. An Incentive Stock Option shall not be
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transferable otherwise than by will or the laws of descent and distribution, and
shall be exercisable during the Holder's lifetime only by such Holder or the
Holder's guardian or legal representative.
(d) OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. Each Option Agreement shall specify the effect of
termination of employment on the exercisability of the Option. An Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Common Stock (plus cash if necessary)
having a Fair Market Value equal to such option price. Moreover, an Option
Agreement may provide for a "cashless exercise" of the Option by establishing
procedures satisfactory to the Committee with respect thereto. The terms and
conditions of the respective Option Agreements need not be identical.
(e) OPTION PRICE AND PAYMENT. The price at which a share of Common
Stock may be purchased upon exercise of an Option shall be determined by the
Committee but, subject to adjustment as provided in Paragraph IX, such purchase
price shall not be less than the Fair Market Value of a share of Common Stock on
the date such Option is granted. The Option or portion thereof may be exercised
by delivery of an irrevocable notice of exercise to the Company, as specified by
the Committee. The purchase price of the Option or portion thereof shall be paid
in full in the manner prescribed by the Committee. Separate stock certificates
shall be issued by the Company for those shares acquired pursuant to the
exercise of an Incentive Stock Option and for those shares acquired pursuant to
the exercise of any Option that does not constitute an Incentive Stock Option.
(f) STOCKHOLDER RIGHTS AND PRIVILEGES. The Holder shall be entitled to
all the privileges and rights of a stockholder only with respect to such shares
of Common Stock as have been purchased under the Option and for which
certificates of stock have been registered in the Holder's name.
(g) OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY
OTHER CORPORATIONS. Options may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations who
become employees as a result of a merger or consolidation or other business
combination of the employing corporation with the Company or any subsidiary.
VIII. RESTRICTED STOCK AWARDS
(a) FORFEITURE RESTRICTIONS TO BE ESTABLISHED BY THE COMMITTEE. Shares
of Common Stock that are the subject of a Restricted Stock Award shall be
subject to restrictions on disposition by the Holder and an obligation of the
Holder to forfeit and surrender the shares to the Company under certain
circumstances (the "Forfeiture Restrictions"). The Forfeiture Restrictions shall
be determined by the Committee in its sole discretion, and the Committee may
provide that the Forfeiture Restrictions shall lapse upon (i) the attainment of
one or more performance targets established by the Committee that are based on
the price of a share of Common Stock, the Company's earnings per share, the
Company's market share, the market share of a business unit of
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the Company designated by the Committee, the Company's sales, the sales of a
business unit of the Company designated by the Committee, the net income (before
or after taxes) of the Company or any business unit of the Company designated by
the Committee, the cash flow return on investment of the Company or any business
unit of the Company designated by the Committee, the earnings before or after
interest, taxes, depreciation, and/or amortization of the Company or any
business unit of the Company designated by the Committee, the economic value
added, the return on stockholders' equity achieved by the Company, reserve
additions or revisions, economic value added from reserves, total
capitalization, total stockholder return, assets, exploration successes,
production volumes, finding and development costs, cost reductions and savings,
return on sales, or profit margins, (ii) the Holder's continued employment with
the Company for a specified period of time, (iii) the occurrence of any event or
the satisfaction of any other condition specified by the Committee in its sole
discretion, or (iv) a combination of any of the foregoing. Each Restricted Stock
Award may have different Forfeiture Restrictions, in the discretion of the
Committee.
(b) OTHER TERMS AND CONDITIONS. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award. The Holder shall have the
right to receive dividends with respect to Common Stock subject to a Restricted
Stock Award, to vote Common Stock subject thereto and to enjoy all other
stockholder rights, except that (i) the Holder shall not be entitled to delivery
of the stock certificate until the Forfeiture Restrictions have expired, (ii)
the Company shall retain custody of the stock until the Forfeiture Restrictions
have expired, (iii) the Holder may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the stock until the Forfeiture Restrictions
have expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement shall cause a forfeiture of
the Restricted Stock Award. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms, conditions or restrictions relating
to Restricted Stock Awards, including, but not limited to, rules pertaining to
the termination of employment (by retirement, disability, death or otherwise) of
a Holder prior to expiration of the Forfeitures Restrictions. Such additional
terms, conditions or restrictions shall be set forth in a Restricted Stock
Agreement made in conjunction with the Award.
(c) PAYMENT FOR RESTRICTED STOCK. The Committee shall determine the
amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.
(d) COMMITTEE'S DISCRETION TO ACCELERATE VESTING OF RESTRICTED STOCK
AWARDS. The Committee may, in its discretion and as of a date determined by the
Committee, fully vest any or all Common Stock awarded to a Holder pursuant to a
Restricted Stock Award and, upon such vesting, all restrictions applicable to
such Restricted Stock Award shall terminate as of such date. Any action by the
Committee pursuant to this Subparagraph may vary among individual Holders and
may vary among the Restricted Stock Awards held by any individual Holder.
Notwithstanding the preceding provisions of this Subparagraph, the Committee may
not take any action described in this Subparagraph with respect to a Restricted
Stock Award that has been granted after such date to a "covered employee"
(within the meaning of Treasury Regulation section 1.162-27(c)(2)) if such
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Award has been designed to meet the exception for performance-based compensation
under section 162(m) of the Code.
(e) RESTRICTED STOCK AGREEMENTS. At the time any Award is made under
this Paragraph VIII, the Company and the Holder shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby and such
other matters as the Committee may determine to be appropriate. The terms and
provisions of the respective Restricted Stock Agreements need not be identical.
IX. RECAPITALIZATION OR REORGANIZATION
(a) NO EFFECT ON RIGHT OR POWER. The existence of the Plan and the
Awards granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's or any
subsidiary's capital structure or its business, any merger or consolidation of
the Company or any subsidiary, any issue of debt or equity securities ahead of
or affecting Common Stock or the rights thereof, the dissolution or liquidation
of the Company or any subsidiary or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) SUBDIVISION OR CONSOLIDATION OF SHARES; STOCK DIVIDENDS. The shares
with respect to which Options may be granted are shares of Common Stock as
presently constituted, but if, and whenever, prior to the expiration of an
Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Common Stock or the payment of a stock dividend on
Common Stock without receipt of consideration by the Company, the number of
shares of Common Stock with respect to which such Option may thereafter be
exercised (i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased. Any fractional share resulting from
such adjustment shall be rounded up to the next whole share.
(c) RECAPITALIZATIONS. If the Company recapitalizes, reclassifies its
capital stock, or otherwise changes its capital structure (a
"recapitalization"), the number and class of shares of Common Stock covered by
an Option theretofore granted shall be adjusted so that such Option shall
thereafter cover the number and class of shares of stock and securities to which
the Holder would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to the recapitalization, the Holder had
been the holder of record of the number of shares of Common Stock then covered
by such Option.
(d) CHANGE OF CONTROL; RESTRICTED STOCK AWARDS. Notwithstanding any
provision herein to the contrary, in the event of a Change of Control, any and
all Restricted Stock Awards outstanding on the date of such Change of Control
shall be fully vested and nonforfeitable.
(e) CHANGE OF CONTROL; OPTIONS. In the event of a Change in Control,
the Committee, acting in its sole discretion without the consent or approval of
any Holder, may effect one or more
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of the following alternatives with respect to outstanding Options, which
alternatives may vary among individual Holders and which may vary among Options
held by any individual Holder: (1) accelerate the time at which Options then
outstanding may be exercised so that such Options may be exercised in full for a
limited period of time on or before a specified date (before or after such
Change in Control) fixed by the Committee, after which specified date all
unexercised Options and all rights of Holders thereunder shall terminate, (2)
require the mandatory surrender to the Company by selected Holders of some or
all of the outstanding Options held by such Holders (irrespective of whether
such Options are then exercisable under the provisions of the Plan) as of a
date, before or after such Change of Control, specified by the Committee, in
which event the Committee shall thereupon cancel such Options and cause the
Company to pay to each Holder an amount of cash per share equal to the excess,
if any, of the Change of Control Value of the shares subject to such Option over
the exercise price(s) under such Options for such shares, (3) make such
adjustments to Options then outstanding as the Committee deems appropriate to
reflect such Change of Control (provided, however, that the Committee may
determine in its sole discretion that no adjustment is necessary to Options then
outstanding), or (4) provide that the number and class of shares of Common Stock
covered by an Option theretofore granted shall be adjusted so that such Option
shall thereafter cover the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the Holder
would have been entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets and dissolution if, immediately prior to such
merger, consolidation or sale of assets and dissolution, the Holder had been the
holder of record of the number of shares of Common Stock then covered by such
Option. The provisions of Subparagraphs IX(d) and IX(e) shall not terminate any
rights of the Holder to further payments pursuant to any other agreement with
the Company following a Change of Control.
(f) OTHER CHANGES IN THE COMMON STOCK. In the event of changes in the
outstanding Common Stock by reason of recapitalizations, reorganizations,
mergers, consolidations, combinations, split-ups, split-offs, spin-offs,
exchanges or other relevant changes in capitalization or distributions to the
holders of Common Stock occurring after the date of the grant of any Award and
not otherwise provided for by this Paragraph IX, such Award and any agreement
evidencing such Award shall be subject to adjustment by the Committee at its
discretion as to the number and price of shares of Common Stock or other
consideration subject to such Award. In the event of any such change in the
outstanding Common Stock or distribution to the holders of Common Stock, the
aggregate number of shares available under the Plan and the maximum number of
shares that may be subject to Awards granted to any one individual may be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
(g) STOCKHOLDER ACTION. Any adjustment provided for in the above
Subparagraphs shall be subject to any required stockholder action.
(h) NO ADJUSTMENTS UNLESS OTHERWISE PROVIDED. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any class
or securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares of Common Stock subject to Awards
theretofore granted or the purchase price per share, if applicable.
-9-
<PAGE> 10
X. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares of Common Stock for which Awards have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or any part
thereof from time to time; provided that no change in any Award theretofore
granted may be made which would impair the rights of the Holder without the
consent of the Holder, and provided, further, that the Board may not, without
approval of the stockholders, amend the Plan to (a) increase the maximum
aggregate number of shares that may be issued under the Plan or (b) change the
class of individuals eligible to receive Awards under the Plan.
XI. MISCELLANEOUS
(a) NO RIGHT TO AN AWARD. Neither the adoption of the Plan nor any
action of the Board or of the Committee shall be deemed to give an employee any
right to be granted an Option, a right to a Restricted Stock Award, or any other
rights hereunder except as may be evidenced by an Option Agreement or a
Restricted Stock Agreement duly executed on behalf of the Company, and then only
to the extent and on the terms and conditions expressly set forth therein. The
Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of funds or assets to
assure the performance of its obligations under any Award.
(b) NO EMPLOYMENT RIGHTS CONFERRED. Nothing contained in the Plan shall
(i) confer upon any employee any right with respect to continuation of
employment with the Company or any subsidiary or (ii) interfere in any way with
the right of the Company or any subsidiary to terminate his or her employment at
any time.
(c) OTHER LAWS; WITHHOLDING. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at any time
when the shares covered by such Award have not been registered under the
Securities Act of 1933, as amended, and such other state and federal laws, rules
and regulations as the Company or the Committee deems applicable and, in the
opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules and regulations available for the
issuance and sale of such shares. No fractional shares of Common Stock shall be
delivered, nor shall any cash in lieu of fractional shares be paid. The Company
shall have the right to deduct in connection with all Awards any taxes required
by law to be withheld and to require any payments required to enable it to
satisfy its withholding obligations.
(d) NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan
shall be construed to prevent the Company or any subsidiary from taking any
corporate action which is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No
-10-
<PAGE> 11
employee, beneficiary or other person shall have any claim against the Company
or any subsidiary as a result of any such action.
(e) RESTRICTIONS ON TRANSFER. An Award (other than an Incentive Stock
Option, which shall be subject to the transfer restrictions set forth in
Paragraph VII(c)) shall not be transferable otherwise than (i) by will or the
laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, or (iii) with
the consent of the Committee.
(f) GOVERNING LAW. THE PLAN SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE.
-11-
<PAGE> 1
EXHIBIT 21.1
Newfield Exploration Company -- Listing of Significant
Subsidiaries as of February 29, 2000
Exact Name of Subsidiary and Name Jurisdiction of
Under Which Subsidiary Does Business Incorporation or Organization
------------------------------------ -----------------------------
Newfield International Holdings Inc. Bahamas
Newfield Australia Inc. Bahamas
Newfield International (Australia) Pty Ltd Australia
Newfield Exploration Australia Limited Australia
Newfield Australia (Cartier) Pty Ltd Australia
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statements of Newfield Exploration Company on Form S-8 (Nos. 33-72848, 33-79826,
33-92182, 333-59383) and on Form S-3 (Registration Nos. 333-32587, 333-59391 and
333-81583) of our report dated February 10, 2000, Except for Note 13, as to
which the date is February 25, 2000, relating to the financial statements, which
appear in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Houston, Texas
March 3, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEWFIELD
EXPLORATION COMPANY'S CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999, THAT ARE
CONTAINED IN ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999. THE SCHEDULE IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 41,841
<SECURITIES> 0
<RECEIVABLES> 67,744
<ALLOWANCES> 0
<INVENTORY> 9,962
<CURRENT-ASSETS> 125,929
<PP&E> 1,216,911
<DEPRECIATION> 568,700
<TOTAL-ASSETS> 781,561
<CURRENT-LIABILITIES> 90,727
<BONDS> 124,679
143,750
0
<COMMON> 267,769
<OTHER-SE> 107,249
<TOTAL-LIABILITY-AND-EQUITY> 781,561
<SALES> 281,967
<TOTAL-REVENUES> 281,967
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 200,420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,744
<INCOME-PRETAX> 52,015
<INCOME-TAX> 18,811
<INCOME-CONTINUING> 33,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,204
<EPS-BASIC> 0.81
<EPS-DILUTED> 0.79
</TABLE>
