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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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 0-23166
[ LOGO] HUGOTON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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KANSAS 48-1036256
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
301 N. MAIN, SUITE 1900,
WICHITA, KANSAS 67202
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (316) 262-1522
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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None None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate 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 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 [ ]
As of February 1, 1997, Registrant had outstanding 19,753,911 shares of
Common Stock. The aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing sale price of the
Common Stock on February 1, 1997 as reported on the NASDAQ National Market, was
approximately $49,925,000.
DOCUMENTS INCORPORATED BY REFERENCE
Notice of Annual Meeting of Shareholders and Proxy Statement Dated April 10,
1997 (in Part III)
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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.................................................. 13
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder
Matters..................................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 8. Consolidated Financial Statements and Supplementary Data.... 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 21
PART III
Item 10. Directors and Executive Officers of the Company............. 21
Item 11. Executive Compensation...................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 21
Item 13. Certain Relationships and Related Transactions.............. 21
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 21
Signatures............................................................ 24
Financial Information................................................. Appendix A
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PART I
ITEM 1. BUSINESS
OVERVIEW
Hugoton Energy Corporation (the "Company") is a rapidly growing independent
oil and natural gas company engaged in the exploration for and the development,
exploitation, production and acquisition of oil and natural gas reserves and
properties. The Company has historically been one of the most active independent
operators in the Hugoton Field and has expanded its operations throughout the
Mid-Continent area in Kansas, Oklahoma and Texas, and into the Permian Basin in
West Texas and New Mexico, the Austin Chalk Trend of Texas and Louisiana and the
Williston Basin in Montana and North Dakota. The Company intends to expand its
reserve base by continuing its drilling and acquisition activities primarily in
its four core areas. The Company focuses on exploring and developing properties
that it believes possess significant upside potential, which can be realized
through the application of 3-D seismic technology and traditional geologic
studies, as well as advanced drilling and completion techniques.
The Company has increased its proved reserves from 22 Bcfe at December 31,
1991 to 322 Bcfe at December 31, 1996. The proved reserves are 70% natural gas
and are 77% proved developed producing, with a reserve-to-production ratio of 11
years, based on 1996 production. The Company operates 1,625 wells, representing
87% of its reserves. During the five years ended December 31, 1996, the Company
added proved reserves equal to 500% of production at an average cost of $.66 per
Mcfe. The Company's average net daily production has increased from 2.6 MMcfe
during 1991 to 79.8 MMcfe during 1996.
The Company's rapid growth is a result of its aggressive drilling and
acquisition programs. During the last five years, the Company has drilled a
total of 242 wells and completed 176 of them for a success ratio of 73%. This
drilling program has added approximately 106 Bcfe of proved reserves, or 141% of
production, at an average cost of $.37 per Mcfe.
During the five year period ended December 31, 1996, the Company's
acquisitions added over 270 Bcfe to proved reserves, or 359% of production, at
an average cost of $.78 per Mcfe. The Company focuses on potential acquisitions
within its core areas, but also considers selected opportunities in new areas.
The Company's strategy is to acquire producing properties with operational
control in oil and natural gas basins that offer significant exploitation,
development and exploratory prospects. The Company's most significant
acquisitions have been the purchase of the limited partnership interests in two
oil and natural gas partnerships owned by The Prudential Insurance Company of
America ("Prudential") in 1993 and the purchase of Consolidated Oil & Gas, Inc.
("COG") in 1995.
The Company has accumulated an acreage position of approximately 567,000
net acres, including 165,000 net acres that were added during 1996. These
acreage holdings are located in the Company's four core areas and have
exploration and development opportunities with multiple pay horizons. The
Company believes that it has sufficient drilling prospects in its acreage
inventory to allow it to continue its drilling program through 1999, and it
intends to continue to add acreage to its holdings. The Company's 1997 capital
budget is $75 million, an increase of 63% over 1996 capital expenditures, and
includes $50 million for the drilling of approximately 200 wells, $10 million
for 3-D seismic and land costs and $15 million for small strategic acquisitions.
In its 1997 drilling budget, the Company has assembled prospects with a wide
range of risk profiles, with approximately 60% of the budget to be spent for
relatively lower risk development drilling, and approximately 40% for
exploratory drilling. The drilling budget will be expended 30% in the Hugoton
Producing Area and other fields in the Mid-Continent areas, 30% in the Permian
Basin, 20% in the Austin Chalk Trend, and 20% in the Williston Basin.
The Company is incorporated in the State of Kansas, its principal executive
offices are located at 301 North Main, Suite 1900, Wichita, Kansas 67202 and its
telephone number is (316) 262-1522.
DRILLING
The Company continues to aggressively develop and explore its extensive
leasehold position and plans to drill approximately 200 wells during 1997.
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Infill and Development Drilling. The Company has drilled 93 infill and
development wells during the last five years and achieved a success rate of 88%.
The Company seeks to acquire properties that contain additional infill and
development potential. These properties generally contain producing wells with
multiple pay horizons that have not been fully developed.
Field Extension and Exploratory Drilling. The Company has drilled 149 field
extension and exploratory wells during the last five years and achieved a
success rate of 63%. The Company continues to extend the limits of its producing
fields as well as those owned by or acquired from others. In addition, the
Company is involved in numerous exploration projects, including various 3-D
seismic and horizontal drilling projects.
The following table sets forth the wells drilled by the Company during the
periods indicated:
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YEARS ENDED DECEMBER 31,
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1996 1995 1994
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GROSS NET GROSS NET GROSS NET
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Infill and Development:
Productive............................ 30.0 23.9 5.0 2.3 22.0 21.0
Non-Productive........................ 1.0 0.1 4.0 3.0 2.0 1.3
---- ---- ---- ---- ---- ----
Total......................... 31.0 24.0 9.0 5.3 24.0 22.3
==== ==== ==== ==== ==== ====
Field Extension and Exploratory:
Productive............................ 28.0 12.2 23.0 14.4 26.0 20.0
Non-Productive........................ 8.0 5.8 7.0 5.8 28.0 21.0
---- ---- ---- ---- ---- ----
Total......................... 36.0 18.0 30.0 20.2 54.0 41.0
==== ==== ==== ==== ==== ====
Total:
Productive............................ 58.0 36.1 28.0 16.7 48.0 41.0
Non-Productive........................ 9.0 5.9 11.0 8.8 30.0 22.3
---- ---- ---- ---- ---- ----
Total......................... 67.0 42.0 39.0 25.5 78.0 63.3
==== ==== ==== ==== ==== ====
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As of December 31, 1996, the Company had a working interest in 939 gross
(446 net) natural gas wells and 1,320 gross (1,064 net) oil wells. At February
15, 1997, the Company was participating in the drilling of 5 wells.
GAS GATHERING AND PROCESSING
The Company owns and operates the Kinsler gas gathering system and
processing plant in Morton County, Kansas. The gathering system consists of more
than 30 miles of pipelines and currently serves 28 wells, of which 24 are
operated by the Company. The gathering system has a throughput capacity of
approximately 10 MMcf per day. During the year ended December 31, 1996, the
system gathered an average of 4.1 MMcf per day of natural gas.
The processing plant is currently processing 2.3 MMcf per day and during
the year ended December 31, 1996, the plant recovered an average of 9,000
gallons of NGLs per day. All gas delivered to the system is purchased by the
Company at the wellhead at prices related to the Panhandle Eastern Pipe Line
monthly index. All NGLs are trucked to the Jayhawk NGL pipeline and delivered to
a Warren NGL, Inc. fractionation plant where they are sold at monthly average
spot market prices. In August of 1996, the Company modified its downstream
transportation arrangements and now all residue gas available after processing
is delivered to PanEnergy Field Services and is marketed on the Panhandle
Eastern Pipe Line system at spot market prices.
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ACREAGE
The table below describes the Company's developed and undeveloped leasehold
acreage as of December 31, 1996. A substantial portion of the developed
leasehold acreage is developed above 3,500 feet, but is undeveloped below 3,500
feet.
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UNDEVELOPED ACREAGE DEVELOPED ACREAGE TOTAL ACREAGE
------------------- ----------------- -------------------
GROSS NET GROSS NET GROSS NET
-------- -------- ------- ------- --------- -------
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Hugoton/Mid-Continent..... 221,754 112,984 311,070 219,792 532,824 332,776
Permian Basin............. 19,616 4,208 44,074 34,712 63,690 38,920
Austin Chalk.............. 149,583 68,136 12,147 3,339 161,730 71,475
Williston Basin........... 265,810 111,240 49,778 13,009 315,588 124,249
------- ------- ------- ------- --------- -------
Total........... 656,763 296,568 417,069 270,852 1,073,832 567,420
======= ======= ======= ======= ========= =======
</TABLE>
No possible or probable reserves have been assigned to the Company's
undeveloped acreage. As is customary in the oil and gas industry, the Company
can retain its interests in undeveloped acreage by drilling activity which
establishes commercial production sufficient to maintain the leases, or by
payment of delay rentals during the remaining primary term of such a lease. The
Company paid $0.2 million in delay rentals for 1996 and projects an expense of
approximately $1.7 million for 1997. The oil and natural gas leases in which the
Company has an interest are for varying primary terms.
In addition to the developed and undeveloped acreage indicated, the Company
is engaged in numerous farmout agreements with other owners of oil and natural
gas leases and is actively leasing additional acreage. A farmout agreement is a
customary industry agreement which provides that the assignee drill an
exploratory well or wells on the farmout properties, and if the well is
completed as a commercial producer of oil and/or natural gas, the assignee earns
an assignment of some or all of the assignor's natural gas and oil lease
interests.
As of December 31, 1996, the Company is an assignee in various farmout
agreements. Rights to earn the interest in the farmout acreage can be
surrendered by the Company at any time by giving notice to an assignor, or they
can be lost through nonperformance by the Company.
OIL AND NATURAL GAS RESERVES
The following table summarizes the estimates of the Company's proved
producing, proved non-producing and proved undeveloped reserves as of December
31, 1996, and the discounted present value attributable to the Company's
estimated proved reserves at such date, as estimated by independent petroleum
engineers, Ryder Scott Company.
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PROVED RESERVES
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PRODUCING NON-PRODUCING UNDEVELOPED TOTAL
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Natural gas (MMcf)..................... 180,610 9,217 35,354 225,181
Oil and NGLs (MBbls)................... 11,200 868 4,110 16,178
Natural gas equivalents (MMcfe)........ 247,810 14,425 60,014 322,249
Present value of estimated future net
revenues before income taxes
(discounted at 10%) (in
thousands)(1)........................ $345,544 $25,124 $93,772 $464,440
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(1) The present value of estimated future net revenues before income taxes
determined in accordance with Commission regulations (discounted at 10%) as
of December 31, 1996 was determined using the weighted average sales prices
of $3.79 per Mcf of natural gas and $24.53 per Bbl of oil.
These estimates of the Company's proved reserves have not been filed with
or included in reports to any federal agency.
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In accordance with applicable requirements of the Securities and Exchange
Commission (the "Commission"), estimates of the Company's proved reserves and
future net revenues are made using oil and natural gas sales prices estimated to
be in effect as of the date of such reserve estimates and are held constant
throughout the life of the properties (except to the extent a contract
specifically provides for escalation). Estimated quantities of proved reserves
and future net revenues therefrom are affected by oil and natural gas prices,
which have fluctuated widely in recent years. There are numerous uncertainties
inherent in estimating oil and natural gas reserves and their estimated values,
including many factors beyond the control of the producer. The reserve data set
forth in this document represents only estimates. Reserve engineering is a
subjective process of estimating underground accumulations of oil and natural
gas that cannot be measured in an exact manner. The accuracy of any reserve
estimate is a function of the quality of available data and engineering and
geological interpretation and judgment. As a result, estimates of different
engineers may vary. In addition, estimates of reserves are subject to revision
based upon actual production, results of future development and exploration
activities, prevailing oil and natural gas prices, operating costs and other
factors, of which revisions may be material. Accordingly, reserve estimates are
often different from the quantities of oil and natural gas that are ultimately
recovered. The meaningfulness of such estimates is highly dependent upon the
accuracy of the assumptions upon which they are based.
The volume of production from oil and natural gas properties declines as
reserves are depleted. Except to the extent the Company acquires properties
containing proved reserves or conducts successful exploration and development
activities, or both the proved reserves of the Company will decline as reserves
are produced. The Company's future oil and natural gas production is therefore
highly dependent upon its level of success in finding or acquiring additional
reserves.
PRODUCTION
The following table sets forth the Company's oil and natural gas production
data during the periods indicated:
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YEARS ENDED DECEMBER 31,
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1996 1995 1994
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Net Production(1):
Natural gas (MMcf)....................................... 19,026 14,651 12,491
Oil (MBbls).............................................. 1,700 1,018 369
Natural gas equivalents (MMcfe).......................... 29,226 20,759 14,705
Average Net Daily Production(1):
Natural gas (Mcf)........................................ 51,983 40,139 34,223
Oil (Bbls)............................................... 4,644 2,789 1,012
Natural gas equivalents (Mcfe)........................... 79,847 56,873 40,295
Average Sales Price(2):
Natural Gas ($/Mcf)...................................... $ 1.87 $ 1.30 $ 1.44
Oil ($/Bbl).............................................. 18.03 16.37 15.31
Natural gas equivalents ($/Mcfe)......................... 2.27 1.72 1.61
Other Data:
Production costs ($/Mcfe)(3)............................. $ 0.74 $ 0.56 $ 0.51
Depreciation, depletion and amortization ($/Mcfe)(4)..... 0.76 0.68 0.54
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(1) Net production and average net daily production excludes NGLs and natural
gas purchased by AmGas Corporation and resold to third parties.
(2) Includes the effect of hedging transactions. Average prices received from
sales of natural gas include revenues attributable to NGLs as the Company
has not historically accounted separately for production or revenues
attributable to NGLs.
(3) Consists of lease operating expenses, production and severance taxes and
gathering, transportation and other production expenses.
(4) Excludes depreciation, depletion and amortization not related to oil and gas
properties.
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MARKETING
Approximately 90% of the Company's natural gas production is sold at index
related, spot-market prices. The balance of the Company's gas is sold under
longer term contracts at percentage-of-proceeds or fixed prices.
Most of the Company's spot market gas is sold to Cibola Energy Services
Corporation ("Cibola"), a wholly-owned subsidiary of TransCanada Pipelines, Ltd.
Under a marketing agreement, Cibola has marketing rights to all of the Company's
undedicated gas production. The agreement mitigates the Company's exposure to
pipeline imbalance penalties and enables the Company to take advantage of the
size, diverse markets and trading expertise of Cibola, while still maintaining
market control. This arrangement increases the Company's access to premium gas
markets and enhances its pricing options. In addition, Cibola assists the
Company in such areas as nominations, scheduling and solicitation of gathering
and transportation discounts. This symbiotic relationship provides the benefits
of an in-house marketing company, without the overhead expense. The agreement
may be canceled by either party upon sixty (60) days notice.
Natural Gas Liquids. The Company's natural gas liquids produced from its
processing plant are sold at market prices (see "Gas Gathering and Processing").
The Company's natural gas liquids extracted by third party processors are
generally sold under percentage of proceeds contracts.
Hedging Activities. The Company utilizes commodity swap agreements in an
attempt to reduce its exposure to commodity price movements. At December 31,
1996, the Company had entered into swap agreements fixing the price of 70,000
Bbls per month, for the first three months of its oil production for 1997 at a
weighted average price of $24.25 per Bbl. In addition, the Company had entered
into forward sales contracts for 20 MMcf per day of natural gas for the first
three months of 1997 at a net price of $3.68 per Mcf.
Customers. During 1996, Cibola and GPM Gas Corporation each purchased in
excess of 10% of the oil and natural gas sold by the Company (29% in the
aggregate). The Company entered into an exclusive marketing agreement with
Cibola during 1995. The agreement allows either party to terminate the agreement
upon 60 days notice if they are dissatisfied with the results. The Company
benefits from a long-standing business relationship with the above purchasers;
however, based on the current demand for oil and natural gas, the Company does
not believe the loss of any of these purchasers would have a material adverse
effect on the Company (see Note 10 of the Company's Notes to the Consolidated
Financial Statements).
Oil and Natural Gas Condensate. All of the Company's crude oil and
condensate is sold at current market prices, under various short and
intermediate term contracts. The Company aggregates the majority of its
production into regional packages and periodically solicits offers from
qualified buyers.
Trading. In December 1995, the Company formed HEC Trading Company ("HTC"),
a wholly-owned subsidiary, to buy, sell and trade various oil and natural gas
products, including financial instruments, in order to add value to the
Company's production.
TITLE TO PROPERTIES
As is customary in the oil and natural gas industry, the Company makes only
a cursory review of title to farmout acreage and to undeveloped oil and natural
gas leases upon execution of any contracts. Prior to the commencement of
drilling operations, a thorough title examination is conducted and curative work
is performed with respect to significant defects. To the extent title opinions
or other investigations reflect title defects, the Company, rather than the
seller of the undeveloped property, is typically responsible to cure any such
title defects at its expense. If the Company were unable to remedy or cure any
title defect of a nature such that it would not be prudent to commence drilling
operations on the property, the Company could suffer a loss of its entire
investment in the property. The Company has obtained title opinions on
substantially all of its producing properties and believes that it has
satisfactory title to such properties in accordance with standards generally
accepted in the oil and gas industry. Prior to completing an acquisition of
producing oil and natural gas leases, the Company obtains title opinions on all
leases valued at $25,000 or greater. The Company's oil and natural gas
properties are subject to customary royalty interests, liens for current taxes
and
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other burdens which the Company believes do not materially interfere with the
use of or affect the value of such properties.
COMPETITION
The oil and gas industry is highly competitive. The Company competes for
the acquisition of oil and natural gas properties, primarily on the basis of the
price to be paid for such properties, with numerous entities, including major
oil companies, other independent oil and gas concerns and individual producers
and operators. Many competitors have financial and other resources substantially
greater than those of the Company. The Company believes that it enjoys a
competitive advantage over most other companies active in the Hugoton Producing
Area because of its extensive database of information and its technical and
geological experience in the area.
REGULATION
General
Various aspects of the Company's oil and natural gas operations are
regulated by administrative agencies under statutory provisions of the states
where such operations are subject to various types of regulation, including
regulation by state and federal agencies. Legislation affecting the oil and gas
industry is under constant review for amendment or expansion. Numerous
departments and agencies, both federal and state, are authorized by statute to
issue, and have issued, rules and regulations binding upon the oil and gas
industry and its individual members. The Federal Energy Regulatory Commission
("FERC") regulates the transportation and sale for resale of natural gas in
interstate commerce pursuant to the Natural Gas Act of 1938 ("NGA") and the
Natural Gas Policy Act of 1978 ("NGPA"). In the past, the Federal government has
regulated the prices at which oil and gas could be sold. While sales by
producers of natural gas, and all sales of crude oil, condensate and natural gas
liquids can currently be made at uncontrolled market prices, Congress could
reenact price controls in the future. Deregulation of wellhead sales in the
natural gas industry began with the enactment of the NGPA in 1978. In 1989,
Congress enacted the Natural Gas Wellhead Decontrol Act ("the Decontrol Act").
The Decontrol Act removed all NGA and NGPA price and nonprice controls affecting
wellhead sales of natural gas effective January 1, 1993.
Regulation of Oil and Natural Gas Exploration and Production
Exploration and production operations of the Company are subject to various
types of regulation at the federal, state and local levels. Such regulations
include requiring permits and drilling bonds for the drilling of wells,
regulating the location of wells, the method of drilling and casing wells, and
the surface use and restoration of properties upon which wells are drilled. Many
states also have statutes or regulations addressing conservation matters,
including provisions for the utilization or pooling of oil and gas properties,
the establishment of maximum rates of production from oil and gas wells and the
regulation of spacing, plugging and abandonment of such wells. Some state
statutes limit the rate at which oil and gas can be produced from the Company's
properties. See "Risk Factors -- Compliance with Governmental Regulations."
Natural Gas Marketing, Gathering, Processing and Transportation
Federal legislation and regulatory controls in the United States have
historically affected the price of natural gas and the manner in which such
production is marketed.
Commencing in April 1992, the FERC issued Order Nos. 636,636-A, and 636-B
("Order No. 636"), which require interstate pipelines to provide transportation
separate, or "unbundled," from the pipelines' sales of gas. Also, Order No. 636
requires pipelines to provide open-access transportation on a basis that is
equal for all gas supplies. Although Order No. 636 does not directly regulate
the Company's activities, the FERC has stated that it intends for Order No. 636
to foster increased competition within all phases of the natural gas industry.
It is unclear what impact, if any, increased competition within the natural gas
industry under Order No. 636 will have on the Company's activities. Although
Order No. 636 could provide the Company with additional market access and more
fairly applied transportation service rates, Order No. 636 could also subject
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the Company to more restrictive pipeline imbalance tolerances and greater
penalties for violation of those tolerances.
In many instances, the result of Order No. 636 and related initiatives have
been to substantially reduce or eliminate the interstate pipelines' traditional
role as wholesalers of natural gas in favor of providing only storage and
transportation services.
Order No. 636 has been implemented on all interstate pipelines. In July
1996, the United States Court of Appeals for the District of Columbia Circuit
largely upheld Order No. 636. A number of parties have appealed this ruling to
the Supreme Court and proceedings on remanded issues are currently ongoing at
FERC. In addition, numerous parties have filed petitions for review of Order No.
636, as well as orders in individual pipeline restructuring proceedings. Upon
such judicial review, these orders may be remanded or reversed in whole or in
part. With Order No. 636 subject to court review, and pending ongoing court
reviews of individual pipeline restructurings, it is difficult to predict with
precision its ultimate effects.
In December 1992, the FERC issued Order No. 547, governing the issuance of
blanket marketer sales certificates to all natural gas sellers other than
interstate pipelines. The order eliminates the need for natural gas producers
and marketers to seek specific authorization under Section 7 of the NGA from the
FERC to make sales of natural gas for resale. The FERC intends Order No. 547, in
tandem with Order No. 636, to foster a competitive market for natural gas by
giving natural gas purchasers access to multiple supply sources at market-driven
prices. Order No. 547 may increase competition in markets in which the Company's
natural gas is sold.
The FERC has recently announced its intention to re-examine certain of its
transportation-related policies, including the appropriate manner in which
interstate pipelines release transportation capacity under Order No. 636, and
the use of market-based rates for interstate gas transmission. While any
resulting FERC action would affect the Company only indirectly, these inquires
are intended to further enhance competition in natural gas markets.
Regulation of onshore natural gas gathering activities is primarily a
matter of state oversight. Regulation of gas gathering and transportation
activities, depending upon the state involved, may include various
transportation, safety, rate, environmental and non-discriminatory purchase and
transport requirements.
Oil Sales and Transportation Rates
Sales prices of crude oil and gas liquids by the Company are not regulated.
The price the Company receives from the sale of these products may be affected
by the cost of transporting the products to market. Effective January 1995, the
FERC implemented regulations establishing an indexing system under which oil
pipelines will be able to change their transportation rates, subject to
prescribed ceiling levels. The indexing system would generally index such rates
to inflation, subject to certain conditions and limitations. The Company is not
able at this time to predict the effects of these regulations if any, on the
transportation costs associated with oil production from the Company's oil
producing operations.
Additional proposals and proceedings that might affect the oil and gas
industry are pending before the FERC and the courts. The Company cannot predict
when or whether any such proposals may become effective. In the past, the
natural gas industry has been heavily regulated. There is no assurance that the
regulatory approach currently pursued by the FERC will continue indefinitely.
Pipeline Safety Regulation
The Company's gathering operations are subject to safety and operational
regulations relating to the design, installation, testing, construction,
operation, replacement and management of facilities. Pipeline safety issues have
recently been the subject of increasing focus in various political and
administrative arenas at both the state and federal levels. Additional pending
legislation would, among other things, increase the frequency with which certain
pipelines must be inspected, as well as increase potential civil and criminal
penalties for violations of pipeline safety.
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Operating Hazards and Environmental Matters
The oil and gas business involves a variety of operating risks, including
the risk of fire, explosions, blow-outs, pipe failure, casing collapse,
abnormally pressured formations and environmental hazards such as oil spills,
gas leaks, ruptures and discharges of toxic gases, the occurrence of any of
which could result in substantial losses to the Company due to injury or loss of
life, severe damage to or destruction of property, natural resources and
equipment, pollution or other environmental damage, clean-up responsibilities,
regulatory investigation and penalties and suspension of operations. Such
hazards may hinder or delay drilling, development and on-line operations.
Extensive federal, state and local laws govern oil and natural gas
operations regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment. Numerous governmental
departments issue rules and regulations to implement and enforce such laws which
are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. Some laws, rules and regulations relating to
protection of the environment may, in certain circumstances, impose "strict
liability" for environmental contamination, rendering a person liable for
environmental damages and cleanup costs without regard to negligence of fault on
the part of such person. Other laws, rules and regulations may restrict the rate
of oil and natural gas production below the rate that would otherwise exist. The
regulatory burden on the oil and natural gas industry increases its cost of
doing business and consequently affects its profitability. These laws, rules and
regulations affect the operations of the Company. Compliance with environmental
requirements generally could have a material adverse effect upon the capital
expenditures, earnings or competitive position of Hugoton and its subsidiaries.
The Company believes that it is in substantial compliance with current
applicable environmental laws and regulations and that continued compliance with
existing requirements will not have a material adverse impact on the Company.
Nevertheless, changes in environmental law have the potential to adversely
affect the Company's operations. For instance, at least two separate courts have
recently ruled that certain wastes associated with the production of crude oil
may be classified as hazardous substances under the Comprehensive Environmental
Response, Compensation, and Liability Act (commonly called "Superfund") and thus
the Company could become subject to the burdensome cleanup and liability
standards established under the federal Superfund program if significant
concentrations of such wastes were determined to be present at the Company's
properties or to have been produced as a result of the Company's operations.
Alternately, pending amendments to Superfund presently under consideration by
the U.S. Congress could relax many of the burdensome cleanup and liability
standards established under the statute.
The Company has established guidelines to be followed to comply with
environmental laws, rules and regulations. The Company has designated a
compliance officer whose responsibility is to monitor regulatory requirements
and their impacts on the Company and to implement appropriate compliance
procedures. The Company also employs an environmental manager whose
responsibilities include causing the Company's operations to be carried out in
accordance with applicable environmental guidelines and implementing adequate
safety precautions.
Although the Company maintains insurance against some, but not all, of the
risks described above, including insuring the cost of clean-up operations,
public liability and physical damage, there is no assurance that such insurance
will be adequate to cover all such costs or that such insurance will continue to
be available in the future or that such insurance will be available at premium
levels that justify its purchase. The occurrence of a significant event not
fully insured or indemnified against could have a material adverse effect on the
Company's financial condition and operations.
The Company has established guidelines to be followed to comply with
environmental laws, rules and regulations. The Company has designated a
compliance officer whose responsibility is to monitor regulatory requirements
and their impacts on the Company and to implement appropriate compliance
procedures. Although the Company maintains pollution insurance against the costs
of clean-up operations, public liability and physical damage, there is no
assurance that such insurance will be adequate to cover all such costs or that
such insurance will continue to be available in the future.
10
<PAGE> 11
EMPLOYEES
On February 7, 1997, the Company employed 113 people, including 53 that
work in the Company's various field offices. The Company believes its
relationship with its employees is satisfactory.
OFFICES AND EQUIPMENT
The Company leases its Wichita, Kansas headquarters under a lease covering
approximately 40,000 square feet, expiring in 2006. The monthly rent is
approximately $30,000. The Company also leases office space in Denver, Colorado
and owns six field operating offices in Kansas, Oklahoma, Texas, and North
Dakota. The Company also maintains an inventory of field equipment and materials
including tubular goods, compressors, pumping units and field vehicles.
FORWARD-LOOKING INFORMATION AND RISK FACTORS
Certain of the statements set forth under "Item 1. -- Business" and "Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Form 10-K, such as the statements regarding
planned capital expenditures, the availability of capital resources to fund
capital expenditures and the number of anticipated wells to be drilled in 1997
and thereafter, are forward-looking and are based upon the Company's current
belief as to the outcome and timing of such future events. There are numerous
risks and uncertainties that can affect the outcome and timing of such events,
including many factors beyond the control of the Company. These factors include,
but are not limited to, the matters described below. Should one or more of these
risks or uncertainties occur, or should underlying assumptions prove incorrect,
the Company's actual results and plans for 1997 and beyond could differ
materially from those expressed in the forward-looking statements.
Volatility of Oil and Gas Prices. The Company's future revenue,
profitability and rate of growth are substantially dependent upon the prevailing
prices of, and the demand for, oil and natural gas. Prices for oil and natural
gas are subject to wide fluctuation due to changes in the supply of and demand
for oil and natural gas, market uncertainty, and a variety of additional factors
that are beyond the control of the Company, such as various economic, political
and regulatory developments, and competition from other sources of energy.
Uncertainty of Estimates of Oil and Gas Reserves. Estimating quantities of
reserves and future net cash flows is not an exact science. There are numerous
uncertainties inherent in estimating quantities of proved oil and gas reserves,
including many factors beyond the control of the Company. This Form 10-K
contains estimates of the proved oil and gas reserves of the Company and the
estimated future net cash flows therefrom. Such estimates rely upon various
assumptions, including those prescribed by the Commission, such as future oil
and gas prices, drilling and operating expenses, capital expenditures, taxes,
and availability of funds. The present value of future net cash flows referred
to in this Form 10-K should not be construed as the current market value of the
estimated oil and gas reserves attributable to the Company's properties. The
process of estimating oil and gas reserves is complex, requiring significant
decisions and assumptions in the evaluation of available geological, engineering
and economic data for each reservoir. As a result, any such estimate is
inherently an imprecise estimation of reserve quantities and estimated future
net revenue therefrom. Actual future production, revenue, taxes, development
expenditures, operating expenses and quantities of recoverable oil and gas
reserves will vary from those assumed in the estimate.
Any significant variance from the assumptions could materially affect the
quantity and value of the Company's reserves as compared to the estimates set
forth in this Form 10-K. The Company's production operations may be curtailed or
suspended as a result of governmental requirements or price controls, mechanical
difficulties or other circumstances beyond the control of the Company. The
Company's properties may also be susceptible to hydrocarbon drainage from
production by other operators on adjacent properties. In addition, these
reserves may be subject to downward or upward revision based upon production
history, results of future exploration and development, prevailing oil and gas
prices and other factors.
11
<PAGE> 12
Need for Development and Acquisition of Additional Reserves. The Company's
future success, as is generally the case in the industry, depends upon its
ability to find, develop or acquire additional oil and gas reserves that are
economically recoverable. Unless the Company conducts successful exploration,
development and exploitation activities on properties it currently owns or
acquires additional properties containing proved reserves, the Company's proved
reserves will decline. The successful acquisition of producing properties
requires an assessment of recoverable reserves, future oil and gas prices and
operating costs, potential environmental and other liabilities, title issues and
other factors. Such assessments are necessarily inexact and their accuracy is
inherently uncertain.
There can be no assurance that the Company's exploration and development
projects will result in significant additional reserves or that the Company will
have success drilling productive wells at economically viable costs.
Furthermore, while the Company's revenues may increase if prevailing oil and gas
prices increase, the Company's finding costs for additional reserves could also
increase.
The Company intends to make substantial capital expenditures for the
acquisition, exploration, development and production of its oil and natural gas
reserves. While the Company believes that cash flow from operations and
borrowings under the Company's existing bank credit facility should provide the
Company sufficient funds for its planned activities through the end of 1997,
additional debt or equity financing may be required prior to such time or
thereafter to fund further exploration, exploitation and development activities
or future property acquisitions. No assurances can be given as to the
availability or terms of any such additional financing that may be required or
that financing will continue to be available to the Company. If such financing
is not available, the Company's exploration, exploitation and development
activities and future property acquisitions may be curtailed.
Risks of Hedging Transactions. In order to manage its exposure to price
risks in the marketing of its oil and natural gas, the Company has in the past
and expects to continue to enter into oil and natural gas price hedging
arrangements with respect to a portion of its expected production. These
arrangements may include futures contracts on the New York Mercantile Exchange
("NYMEX"), fixed price delivery contracts and financial swaps. While intended to
reduce the effects of volatility of the price of oil and natural gas, such
transactions may limit potential gains by the Company if oil and natural gas
prices were to rise substantially over the price established by the hedge. In
addition, such transactions may expose the Company to the risk of financial loss
in certain circumstances, including instances in which (i) production is less
than expected, (ii) if there is a widening of price differentials between
delivery points for the Company's production and the delivery point assumed in
the hedging arrangement, (iii) the counterparties to the Company's future
contracts fail to perform the contract, or (iv) a sudden, unexpected event
materially impacts oil or natural gas prices.
Concentration of Ownership. The Company, Odyssey Partners, L.P., Cramer,
Rosenthal, McGlynn, Inc., American Gas & Oil Investors, Limited Partnership, Am
GO II, Limited Partnership, Am GO III, Limited Partnership, First Reserve
Secured Energy Assets Fund, Limited Partnership, First Reserve Fund V, Limited
Partnership, COMDISCO, Inc. and Floyd C. Wilson entered into a certain Agreement
of Shareholders (the "Shareholders Agreement"). The Shareholders Agreement
provides that the parties agree, so long as they own certain percentages of
common stock of the Company, to vote their shares of Company Common Stock to
elect the members of the Board of Directors. The parties to the Shareholders
Agreement beneficially own approximately 83% of the outstanding shares of Common
Stock. Accordingly, these shareholders, if they voted together, would have the
ability to elect all of the Company's directors and to approve all other
stockholder actions.
Dependence on Key Personnel. The Company depends to a large extent on the
services of Floyd C. Wilson and W. Mark Womble. Mr. Wilson and Mr. Womble devote
their full time to the Company. The Company currently has an employment contract
with Mr. Wilson that expires in August 2000 and with Mr. Womble that expires in
September 1999. The unavailability of Mr. Wilson or Mr. Womble could have a
material adverse effect on the Company. The Company believes that its success is
also dependent upon its ability to continue to employ and retain skilled
technical personnel.
Marketability of Production. The marketability of the Company's production
depends upon the availability and capacity of gas gathering systems, pipelines
and processing facilities, and the unavailability or
12
<PAGE> 13
lack of capacity thereof could result in the shut-in of producing wells or the
delay or discontinuance of development plans for properties. In addition,
Federal and state regulation of oil and gas production and transportation,
general economic conditions and changes in supply and demand could adversely
affect the Company's ability to produce and market its oil and natural gas on a
profitable basis.
Competition. The Company operates in a highly competitive environment. The
Company competes with major and independent oil and gas companies for the
acquisition of desirable oil and gas properties, as well as the equipment and
labor required to develop and operate such properties. The Company also competes
with major and independent oil and gas companies in the marketing and sale of
oil and natural gas to marketers and end-users. Many of these competitors have
financial and other resources substantially greater than those of the Company.
Drilling Risks. Drilling involves numerous risks, including the risk that
no commercially productive oil or gas reservoirs will be encountered. The cost
of drilling and completing wells is often uncertain, and 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, weather conditions, and shortages or delays in
the delivery of equipment. There can be no assurance as to the success of the
Company's future drilling activities.
Operating Hazards. The oil and gas business involves a variety of operating
risks, including the risk of fire, explosions, blow-outs, pipe failure,
abnormally pressured formations and environmental hazards such as oil spills,
gas leaks, ruptures or discharges of toxic gases, the occurrence of any of which
could result in substantial losses to the Company due to injury or loss of life,
severe damage to or destruction of property, natural resources and equipment,
pollution or other environmental damage, clean-up responsibilities, regulatory
investigation and penalties, and suspension of operations. In accordance with
customary industry practice, the Company maintains insurance against some, but
not all, of the risks described above. There can be no assurance that any
insurance obtained by the Company will be adequate to cover any losses or
liabilities. The Company cannot predict the continued availability of insurance
or the availability of insurance at premium levels that justify its purchase.
Compliance with Governmental Regulations. Oil and gas operations are
subject to various federal, state and local governmental regulations which may
be changed from time to time in response to economic or political conditions.
Matters subject to regulation include discharge permits for drilling operations,
drilling and abandonment bonds or other financial responsibility requirements,
reports concerning operations, the spacing of wells, unitization and pooling of
properties and taxation. From time to time, regulatory agencies have imposed
price controls and limitations on production by restricting the rate of flow of
oil and gas wells below actual production capacity in order to conserve supplies
of oil and gas. In addition, the production, handling, storage, transportation
and disposal of oil and gas, by-products thereof and other substances and
materials produced or used in connection with oil and gas operations are subject
to regulation under federal, state and local laws and regulations primarily
relating to protection of human health and the environment. These laws and
regulations have continually imposed increasingly strict requirements for water
and air pollution control and solid waste management.
No Dividends. The Company has never paid cash dividends on its Common Stock
and does not intend to pay cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to retain its cash for the continued
development of its business, including development, exploration and acquisition
activities. In addition, the Company's bank credit facility currently restricts
the ability of the Company to pay dividends.
ITEM 2. PROPERTIES
The location and character of the Company's oil and gas properties and its
gathering facilities are described above under Item 1. Business.
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<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
The Company is a named defendant in lawsuits and is a party in governmental
proceedings from time to time arising in the ordinary course of business. While
the outcome of such lawsuits and other proceedings against the Company cannot be
predicted with certainty, management does not believe that these matters will
have a material adverse effect on the financial condition or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on the NASDAQ National Market under the
symbol "HUGO." The following table sets forth the high and low sales price per
share for the Company's common stock for the period January 1, 1996 through
December 31, 1996:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
First Quarter............................................... $ 9 1/4 $7 1/4
Second Quarter.............................................. 8 3/4 7
Third Quarter............................................... 9 3/8 7 3/8
Fourth Quarter.............................................. 11 5/8 8 1/4
</TABLE>
On February 19, 1997, the closing price for the Company's common stock was
$11.125.
The Company has approximately 1,100 shareholders, including 1,000
beneficial owners and 100 holders of record as of February 15, 1997.
No dividends have been paid on the Company's common stock to date. The
Company intends to maintain a policy of retaining cash for the continued
expansion of its business.
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<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas.................................. $ 66,292 $ 35,906 $ 23,696 $17,349 $ 6,731
Gas plant.................................... 1,914 1,638 1,945 1,172 2,177
Other(1)..................................... 10 (3,315) (11) 16 547
-------- -------- -------- ------- -------
Total revenues....................... 68,216 34,229 25,630 18,537 9,455
-------- -------- -------- ------- -------
Expenses:
Production................................... 21,667 11,570 7,528 7,178 4,671
Gas plant.................................... 1,420 978 1,189 934 1,320
Exploration.................................. 1,711 2,239 3,036 587 137
General and administrative................... 6,872 4,346 3,117 1,883 1,761
Compensatory stock option expense(2)......... -- -- -- 3,289 --
Depreciation, depletion and amortization..... 23,423 15,234 8,677 5,582 1,452
-------- -------- -------- ------- -------
Total expenses....................... 55,093 34,367 23,547 19,453 9,341
-------- -------- -------- ------- -------
Operating income (loss)........................ 13,123 (138) 2,083 (916) 114
Other income (expenses):
Interest..................................... (6,070) (5,108) (3,077) (2,371) (502)
Other........................................ 466 319 252 199 44
-------- -------- -------- ------- -------
Total other income (expense)......... (5,604) (4,789) (2,825) (2,172) (458)
-------- -------- -------- ------- -------
Income (loss) before income taxes and
extraordinary item........................... 7,519 (4,927) (742) (3,088) (344)
(Provision) benefit for income taxes........... (3,316) 1,394 66 582 (86)
-------- -------- -------- ------- -------
Income (loss) before extraordinary item........ 4,203 (3,533) (676) (2,506) (430)
Extraordinary item-loss from early
extinguishment of debt, net of tax........... -- (136) -- -- --
-------- -------- -------- ------- -------
Net income (loss).................... $ 4,203 $ (3,669) $ (676) $(2,506) $ (430)
======== ======== ======== ======= =======
Net income (loss) per common share... $ 0.21 $ (0.27) $ (0.07) $ (0.41) $ (0.09)
======== ======== ======== ======= =======
Weighted average number of common shares
outstanding.................................. 19,698 13,460 10,310 6,071 5,000
OTHER DATA:
Net cash provided by operating activities...... $ 29,484 $ 11,367 $ 10,431 $ 5,931 $ 1,928
Net cash (used) in investing activities........ (36,706) (36,869) (39,116) (78,765) (3,685)
Net cash provided by financing activities...... 7,040 27,750 28,683 73,755 1,865
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit)...................... $ 8,545 $ 6,083 $ 11,551 $ 1,732 $(2,234)
Property and equipment, net.................... 232,778 217,635 96,436 78,842 12,342
Total assets................................... 251,929 234,655 116,634 88,329 16,309
Long-term debt................................. 95,000 88,000 60,000 62,500 9,062
Shareholders' equity........................... 131,527 127,324 50,225 19,995 1,184
</TABLE>
- ---------------
(1) The year ended December 31, 1995 includes a charge of $2.7 million relating
to the Company's natural gas hedging activities resulting from a loss of
basis correlation for certain contracts (see Note 11 of Company's Notes to
the Consolidated Financial Statements).
(2) Reflects a non-cash charge for compensatory stock options granted to certain
employees that have been or will be satisfied by the Company's Chairman of
the Board, President and Chief Executive Officer.
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<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OVERVIEW
GENERAL
Hugoton Energy Corporation was formed in 1987 through the acquisition of
several limited partnership interests in the Hugoton Producing Area, and until
1993 grew primarily through acquisitions in that core area. Since 1993, the
Company has grown through producing property and leasehold acquisitions and
development and exploratory drilling, primarily in three additional core areas:
the Williston Basin, the Permian Basin and, most recently, the Austin Chalk
Trend. Expansion into these areas marked a shift in the Company's asset base
from the lower risk, limited upside of the Hugoton Producing Area to areas with
much greater exploration and development potential. On February 1, 1994, the
Company completed its initial public offering of 3.45 million shares of Common
Stock.
The Company's 1997 capital budget is $75 million, an increase of 63% over
1996 capital expenditures, and 70% of the drilling budget is planned for
expenditures outside of the Hugoton Producing Area. The Company continues to
aggressively pursue acquisitions, but the timing and impact of such acquisitions
cannot be predicted.
1996 Acquisitions and Property Sales. During 1996, the Company spent $17.4
million to acquire 165,000 additional net undeveloped acres, including 95,000
net acres in the Williston Basin. These acreage additions were equal to 70% of
the Company's net undeveloped acres at December 31, 1995.
On June 20, 1996, the Company purchased a 50% working interest for $12.9
million in approximately 95,000 gross acres in the Austin Chalk Trend in
Louisiana. This acreage acquisition, coupled with the January 1, 1996 acreage
acquisition mentioned below and several smaller acreage acquisitions in the
third quarter, presents the Company with a total of 148,000 gross acres in the
Austin Chalk Trend to explore.
During 1996, the Company sold its interest in a group of non-strategic
producing gas properties and a gas gathering and salt water disposal system
located in Southern Colorado and Northern New Mexico to a major oil company for
$4.5 million. The Company also sold its interest in approximately 450
non-strategic producing oil properties located in Northeast Oklahoma for $1.5
million.
On January 1, 1996, the Company purchased an undivided interest in a group
of producing oil and gas properties and undeveloped acreage for $9.7 million
from a privately-held company that owns an undivided interest in and operates
the properties. The producing properties and acreage are located in Southeast
Texas and established a presence for the Company in the Austin Chalk Trend. The
acquisition included eight producing wells and 35,000 gross acres, in which the
Company's working interests are 25% and 50%, respectively.
Prior Major Property Acquisitions. The Company's current property position
has been shaped by two large acquisitions consummated in 1995 and 1993 and
several smaller acquisitions.
In September 1995, the Company acquired COG, a privately owned oil and gas
company for $35 million in cash and 9.1 million shares of Common Stock. The
acquisition extended the Company's operations into several basins outside the
Hugoton Producing Area, primarily into the Williston Basin and Permian Basin.
In July 1993, the Company significantly strengthened its position as a
major operator in the Hugoton Field with the $73.5 million purchase from
Prudential of interests in two limited partnerships formed to acquire and
develop properties in the Hugoton Producing Area for which the Company had acted
as general partner.
These two acquisitions were supplemented by a $13.6 million acquisition of
56 producing wells in the Hugoton Producing Area from Mobil Corporation in 1995,
as well as the purchase in 1994 of a 50% interest in 186,000 mineral acres
covering deep rights underlying shallow production located in the Hugoton Field
which is being developed jointly with Oxy U.S.A.
The future results of the Company may depend on its ability to locate and
develop additional oil and natural gas properties, to attract and employ new
sources of capital, to develop these properties and to successfully market the
resulting production of crude oil and natural gas products. Historically, the
markets for
16
<PAGE> 17
oil and natural gas have been volatile and are likely to continue to be volatile
in the future but it is impossible to predict these future price movements.
Declines in oil and natural gas prices may adversely affect the Company's cash
flow, liquidity and profitability. Due to the nature of the oil and natural gas
industry and the general risks relating to the exploration for and production of
oil and natural gas, including the volatility of prices for crude oil and
natural gas products, there can be no assurance that these efforts will be
successful.
RESULTS OF OPERATIONS
The following table sets forth the Company's oil and natural gas production
during the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net Production:
Natural gas (MMcf)..................................... 19,026 14,651 12,491
Oil (MBbls)............................................ 1,700 1,018 369
Natural gas equivalents (MMcfe)........................ 29,226 20,759 14,705
Average Sales Price(1):
Natural gas ($/Mcf)(2)................................. $ 1.87 $ 1.30 $ 1.44
Oil ($/Bbl)............................................ 18.03 16.37 15.31
Natural gas equivalents ($/Mcfe)....................... 2.27 1.72 1.61
Other Data:
Production costs ($/Mcfe)(3)........................... $ 0.74 $ 0.56 $ 0.51
Depreciation, depletion and amortization($/Mcfe)(4).... 0.76 0.68 0.54
</TABLE>
- ---------------
(1) Includes the effect of hedging transactions. See Note 11 of the Company's
Notes to the Consolidated Financial Statements.
(2) Average prices received from sales of natural gas include revenues
attributable to NGLs as the Company has not historically accounted
separately for production or revenues attributable to NGLs.
(3) Consists of lease operating expenses, production and severance taxes and
gathering, transportation and other production expense.
(4) Excludes depreciation, depletion and amortization not related to oil and gas
properties.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Income or Loss and Cash Flow from Operating Activities. For the year
ended December 31, 1996, the Company reported net income of $4.2 million, or
$.21 per share, on total revenue of $68.2 million. This compares to a net loss
of $3.7 million, or $.27 per share, on total revenue of $34.2 million for the
year ended December 31, 1995. Cash flows from operating activities for 1996
increased by 159% to $29.4 million from $11.4 million in 1995. The increase in
net income for 1996 is largely attributable to a full year impact of the
addition of the properties acquired in the COG acquisition completed in
September of 1995, higher average sales prices per Mcfe ($2.27 in 1996 versus
$1.72 in 1995) and the continued success of the Company's drilling program. The
Company's net income, cash flows and average sales prices for 1996 were all
significantly impacted by the Company's oil and natural gas swap contracts,
resulting in pre-tax income and the average sales price per Mcfe being reduced
by $8.7 million and $.30, respectively, for the year ended December 31, 1996.
Oil and Gas Revenues. Revenues from oil and gas operations increased by 85%
to $66.3 million in 1996, compared to $35.9 million during 1995. The increase
from 1995 to 1996 is largely attributed to the inclusion of the COG and other
acquisition properties for the full year in 1996, higher average sales prices
and the continued success of the Company's drilling activities. The Company's
1996 gas production increased by 30% and oil production increased by 67% over
1995 production.
Production Expense. Production expense for 1996 increased to $21.7 million
compared to $11.6 million in 1995. The overall increase reflects the addition of
a substantial number of wells (through the COG and other
17
<PAGE> 18
acquisitions and the Company's drilling program), and the per unit increase in
production expenses reflects an increase in the oil component of the Company's
production, which is relatively higher cost than gas production.
Exploration Expense. Exploration expense decreased by $.5 million from $2.2
million in 1995 to $1.7 million in 1996. The decrease was due largely to the
higher success rate achieved by the Company from its drilling program (87% in
1996 versus 72% in 1995).
General and Administrative Expense. General and administrative expense
increased to $6.9 million in 1996 compared to $4.3 million in 1995. This
increase reflected the impact of a full year of expenses subsequent to the
acquisition of COG and the continued expansion of the Company's operations.
Depreciation, Depletion and Amortization Expense. Depreciation, depletion
and amortization ("DD&A") for 1996 was $23.4 million compared to $15.2 million
for 1995. The Company's DD&A expense per Mcfe increased from $.68 in 1995 to
$.76 in 1996. These increases are mainly due to higher production levels in 1996
compared to 1995 and the result of increased DD&A rates resulting from the
adjustment of such rates to incorporate the book allocated basis to proved oil
and gas properties acquired from COG, which bear a higher unit of production
DD&A rate than the Company's other producing properties.
Interest Expense. Interest expense was $6.1 million for 1996 compared to
$5.1 million for 1995. This increase is attributable to a higher average
long-term debt balance outstanding during 1996, principally as a result of
funding the COG and other acquisitions.
Income Taxes. For 1996, the Company recorded a tax provision of $3.3
million compared to a $1.4 million benefit recorded in 1995. The effective tax
rate for 1996 was 44.1% as compared to 28.3% in 1995. The provision recorded in
1996 exceeds a normal tax rate primarily as a result of the amortization of
certain non-deductible property costs arising from the purchase allocation
related to the COG acquisition.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Loss and Cash Flow from Operating Activities. For the year ended
December 31, 1995, the Company reported a net loss of $3.7 million, or $.27 per
share, on total revenue of $34.2 million. This compares to a net loss of $0.7
million, or $.07 per share, on total revenue of $25.6 million for the year ended
December 31, 1994. Cash flows from operating activities for 1995 increased by 9%
to $11.4 million from $10.4 million in 1994. The increase in the net loss for
1995 was largely due to the charge to earnings of $2.7 million related to the
decoupling of the Company's natural gas swap contracts during the fourth quarter
of 1995 (see Note 11 of the Company's Notes to the Consolidated Financial
Statements), losses incurred on the sale of oil and gas properties of $0.6
million during 1995 and an increase in the charge for expired leases of $0.9
million. The increase in revenues for 1995 is attributable to an increase in the
price per Mcfe received by the Company ($1.72 in 1995 versus $1.61 in 1994) and
the impact of the addition of the properties acquired in the COG acquisition
completed in September 1995.
Oil and Gas Revenues. Revenues from oil and gas operations increased by 52%
to $35.9 million in 1995, compared to $23.7 million during 1994. The increase
from 1994 to 1995 was largely attributable to the inclusion of the COG and other
acquisition properties for four and six months, respectively, and the continued
success of the Company's drilling activities. The Company's 1995 gas production
increased by 17% and oil production increased by 176% over 1994 production.
Production Expense. Production expense for 1995 increased by 54% to $11.6
million compared to $7.5 million in 1994. The increase reflects the addition of
a substantial number of wells (through the COG and Mobil acquisitions and the
Company's drilling program), and the increase in the oil component of the
Company's production.
Exploration Expense. Exploration expense decreased from $3.0 million in
1994 to $2.2 million in 1995. The decrease was due largely to the higher success
rate achieved by the Company from its drilling program (72% in 1995 versus 62%
in 1994) and a fewer number of wells drilled by the Company (39 gross wells in
1995 compared to 78 gross wells in 1994).
18
<PAGE> 19
General and Administrative Expense. General and administrative expense
increased to $4.3 million in 1995 compared to $3.1 million in 1994. This
increase reflected the continued expansion of the Company's operation and the
associated costs of additional personnel; however; these expenses declined when
expressed as a percentage of revenues reflecting the Company's efforts to
acquire properties that can be incorporated into its existing property base with
minimal incremental general and administrative expense.
Depreciation, Depletion and Amortization Expense. DD&A for 1995 was $15.2
million compared to $8.7 million for 1994. The Company's DD&A expense per Mcfe
increased from $.54 in 1994 to $.68 in 1995. These increases were mainly due to
higher production levels in 1995 compared to 1994 and the result of increased
DD&A rates resulting from the application of such rates to the book allocated
basis to proved oil and gas properties acquired from COG in September 1995,
which bear a higher unit of production DD&A rate than the Company's other
producing properties.
Interest Expense. Interest expense was $5.1 million for 1995 compared to
$3.1 million for 1994. This increase was attributable to a higher average
long-term debt balance outstanding during 1995, principally as a result of
funding the COG and other acquisitions.
Income Taxes. For 1995, the Company recorded a tax benefit of $1.4 million
compared to a $.07 million benefit recorded in 1994. The benefit recorded in
1995 recognized the effect of the COG acquisition, whereby the Company accounted
for the acquisition under the purchase method of accounting, and as required by
FAS 109, the basis differences between the allocated fair value for book
purposes and the assumed historical tax bases required the Company to establish
the necessary deferred tax liabilities for these temporary differences. As such,
the Company's deferred net tax liability position allowed the Company to
recognize a tax benefit for the pre-tax operating losses generated in the period
subsequent to the acquisition date of COG. During 1995, the pre-tax losses
incurred by the Company prior to the acquisition of COG were not tax benefited
because the Company was in a net deferred tax asset position which required such
benefits to be reduced by valuation allowances.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position increased by $2.5 million from
year-end 1995 to $8.5 million at December 31, 1996. Cash decreased by $0.2
million and accounts receivable increased by $4.1 million. The Company's ratio
of current assets to current liabilities was 2.0 to 1.0 at December 31, 1996 and
1.8 to 1.0 at December 31, 1995.
Capital Expenditures. The Company's primary needs for cash are for
exploration, development and acquisitions of oil and gas properties, payment of
interest on outstanding indebtedness and working capital obligations. The
Company's 1997 capital expenditure budget has been set at $75 million of which
approximately $50 million is committed to drilling, $10 million for 3-D seismic
and land costs and $15 million for small strategic acquisitions. Funding for the
Company's exploration and development activities and its working capital
obligations is provided primarily by internally-generated cash flow. The Company
budgets its capital expenditures based on projected cash flows and routinely
adjusts the level of its capital expenditures in response to anticipated changes
in cash flows.
Capital Resources. The Company's capital resources consist of cash flow
from operating activities and funds available under the credit facility. On
September 7, 1995, the Company arranged a new bank credit facility,
simultaneously with the closing of the COG acquisition. The new facility is an
unsecured $250 million revolving credit agreement that is due September 7, 1999.
The facility is provided by seven banks, led by Bank One, Texas as agent and
Texas Commerce Bank National Association as co-agent. The Borrowing Base, as
defined in the loan agreement, is currently set at $135 million, and is subject
to semi-annual redetermination based upon an evaluation of the Company's oil and
gas reserves. Outstanding borrowings were $95 million at December 31, 1996.
The credit facility provides the option of borrowing at floating interest
rates based on Bank One's base rate or at a Eurodollar option based on the
London Interbank Offered Rate ("LIBOR") plus 3/4 of 1% to 1.25% per annum,
depending on the outstanding loan balance. Interest is paid quarterly or at the
end of each
19
<PAGE> 20
interest period. The Company also incurs a commitment fee of 1/4 of 1% on the
unused portion of the Borrowing Base. In addition, the credit facility also
contains customary restrictive covenants, including restrictions on the payment
of dividends in excess of 50% of the Company's annual net income, and requires
the Company to maintain certain financial ratios.
At December 31, 1996, the Company was a party to one interest rate swap
agreement that was entered into on December 11, 1995 for $25 million in notional
principal amount. The effect of this agreement is to provide the Company with an
interest rate on $25 million in notional principal amount for the three-year
term of the agreement of 5.445% plus a margin of 3/4 of 1% to 1.25%. Under
market conditions at December 31, 1996, the aggregate effective annual interest
rate after giving effect to the swap agreement was 6.542%.
The Company has historically funded its operations and capital spending
programs with cash flow from operations and borrowings under bank credit
facilities. The Company believes that cash flow from operations and the
borrowing availability under the credit facility will be sufficient to meet its
anticipated capital requirements for 1997. However, because future cash flows
and the availability of financing are subject to a number of variables, such as
the level of production and the prices received for oil and natural gas, there
can be no assurance that the Company's capital resources will be sufficient to
maintain currently planned levels of capital expenditures.
Hedging Transactions. With the objective of achieving more predictable
revenues and cash flows and reducing the exposure to fluctuations in oil and
natural gas prices, the Company has entered into hedging transactions of various
kinds with respect to both oil and natural gas. While the use of these hedging
arrangements limits the downside risk of adverse price movements, it may also
limit future revenues from favorable price movements.
At December 31, 1996, the Company had entered into swap agreements fixing
the price of 70,000 barrels per month, for the first three months of its oil
production for 1997 at a weighted average price of $24.25 per Bbl. In addition,
the Company has entered into a forward sale of 20 MMcf of natural gas per day
for the first three months of 1997 at a net price to the Company of $3.68 per
Mcf. The Company continues to evaluate whether to enter into additional hedging
transactions for 1997 and future years. In addition, the Company may determine
from time to time to terminate its then existing hedging positions. (See Note 11
of the Company's Notes to the Consolidated Financial Statements).
The Company's net income, cash flows and average sales prices for 1996 were
all significantly impacted by the Company's oil and natural gas swap contracts,
resulting in pre-tax income and the average sales price per Mcfe being reduced
by $8.7 million and $.30, respectively, for the year ended December 31, 1996.
The reduction was caused in part by an unusually high volatility of natural gas
prices and the widening of the differential or correlation between the cash
prices for the Company's production and the NYMEX contract settlement prices.
INFLATION AND CHANGES IN PRICES
The Company's revenues and the value of its oil and natural gas properties
have and will continue to be affected by changes in oil and natural gas prices.
The Company's ability to maintain current borrowing capacity and to obtain
additional capital on attractive terms is also substantially dependent on oil
and natural gas prices. Oil and natural gas prices are subject to significant
seasonal and other fluctuations that are beyond the Company's ability to control
or predict. Although certain of the Company's costs and expenses are affected by
the level of inflation, inflation did not have a significant effect on the
Company's operations during 1996 or 1995.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements and supplementary data listed in
the accompanying Index to Financial Statements and Supplemental Data and
Financial Statement Schedules on page A-1 herein. Information required by other
schedules required under Regulation S-X is either not applicable or is included
in the financial statements or notes thereto.
20
<PAGE> 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Reference is made to the disclosure under the captions, "Board of
Directors," "Proposal I -- Election of Directors," "Executive Officers" and
"Section 16 Reporting," in the Company's definitive Proxy Statement to be filed
on or about April 10, 1997, pursuant to Regulation 14A in connection with its
Annual Meeting of Shareholders to be held May 16, 1997, which is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the disclosure under the captions, "Executive
Compensation and Other Matters," "Option Grants Table," and "Option Exercise
Table" in the Company's definitive Proxy Statement to be filed on or about April
10, 1997, pursuant to Regulation 14A in connection with its Annual Meeting of
Shareholders to be held May 16, 1997, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the disclosure under the captions, "Security Ownership
of Certain Beneficial Owners and Management" in the Company's definitive Proxy
Statement to be filed on or about April 10, 1997, pursuant to Regulation 14A in
connection with its Annual Meeting of Shareholders to be held May 16, 1997,
which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the disclosure under the captions, "Certain
Relationships and Related Transactions" in the Company's definitive Proxy
Statement to be filed on or about April 10, 1997, pursuant to Regulation 14A in
connection with its Annual Meeting of Shareholders to be held May 16, 1997,
which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) and (2) Financial Statements and Schedule:
See Index to Financial Statements, Supplemental Data, and Financial
Statement Schedule which appears on page A-1 herein.
(3) Exhibits: The following documents are filed as exhibits to this
report.
<TABLE>
<C> <S>
2.1 -- Agreement and Plan of Merger, dated May 26, 1995, by and
among Hugoton Energy Corporation, Oil & Gas, Inc. and
Hugoton Exploration Corporation (Incorporated by
reference to Exhibit 4.4 of the Registration Statement on
Form S-3, Registration No. 33-97366)
2.2 -- Amendment to Agreement and Plan of Merger, dated August
3, 1995 by and among Hugoton Energy Corporation,
Consolidated Oil & Gas, Inc. and Hugoton Exploration
Corporation (Incorporated by reference to Exhibit 4.4 of
the Registration Statement on Form S-3, Registration No.
33-97366)
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C>
3.1 -- Restated Articles of Incorporation of the Company, as
amended (Incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form S-1, Registration No.
33-70924)
3.2 -- Bylaws of the Company, as amended (Incorporated by
reference to Exhibit 3.2 of the Registration Statement on
Form S-1, Registration No. 33-70924)
4.1 -- Specimen Common Stock certificate (Incorporated by
reference to Exhibit 4.1 of the Registration Statement on
Form S-1, Registration No. 33-70924)
10.1 -- Employment Agreement, dated September 1, 1995 between the
Company and Floyd C. Wilson (Incorporated by reference to
Exhibit 10.1 of the Company's 1995 Annual Report on Form
10-K)
10.2* -- Employment Agreement, dated September 7, 1995 between the
Company and Jay W. Decker
10.3* -- Employment Agreement, dated December 16, 1996 between the
Company and W. Mark Womble
10.4 -- 1993 Stock Option Plan (Incorporated by reference to
Exhibit 10.12 of the Registration Statement on Form S-1,
Registration No. 33-70924)
10.5 -- 401(k) Employee Benefit Plan (Incorporated by reference
to Exhibit 10.13 of the Registration Statement on Form
S-1, Registration No. 33-70924)
10.6 -- Nonemployee Directors' Stock Option Plan (Incorporated by
reference to Exhibit 10.14 of the Registration Statement
on Form S-1, Registration No. 33-70924)
10.7 -- 1995 Stock Option Plan (Incorporated by reference to
Exhibit 4.1 of the Registration Statement on Form S-8,
Registration No. 33-97092)
10.8 -- Loan Agreement, dated September 7, 1995, by and among the
Company, Amgas Corporation, Hugoton Exploration
Corporation, Tiffany Gathering Inc., Bank One, Texas
N.A., Texas Commerce Bank National Association, Bank of
Montreal, Wells Fargo Bank, National Association,
Meespierson N.V., Credit Lyonnais Cayman Island Branch
and Bank of Scotland, and Bank One, Texas N.A. as Agent,
and Texas Commerce Bank National Association as Co-agent
(Incorporated by reference to Exhibit 10.8 of the
Company's 1995 Annual Report on Form 10-K)
10.9 -- First Amendment to Loan Agreement dated January 22, 1996,
by and among the Company, Amgas Corporation, Hugoton
Exploration Corporation, HEC Trading Company, Tiffany
Gathering, Inc., Bank One, Texas N.A., Texas Commerce
Bank National Association, Bank of Montreal, Wells Fargo
Bank, National Association, Meespierson N.V., Credit
Lyonnais Cayman Island Branch and Bank of Scotland, and
Bank One, Texas N.A. as Agent, and Texas Commerce Bank
National Association as Co-agent (Incorporated by
reference to Exhibit 10.9 of the Company's 1995 Annual
Report on Form 10-K)
10.10* -- Second Amendment to Loan Agreement dated June 11, 1996,
by and among the Company, Amgas Corporation, Hugoton
Exploration Corporation, HEC Trading Company, Tiffany
Gathering, Inc., Bank One, Texas N.A., Texas Commerce
Bank National Association, Bank of Montreal, Wells Fargo
Bank, National Association, Meespierson N.V., Credit
Lyonnais Cayman Island Branch and Bank of Scotland, and
Bank One, Texas N.A. as Agent, and Texas Commerce Bank
National Association as Co-Agent
10.11 -- Purchase and sale agreement dated June 1, 1995 by and
between Mobil Oil Corporation and the Company
(Incorporated by reference to Exhibit 10.10 of the
Company's 1995 Annual Report on Form 10-K)
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C>
10.12 -- Shareholder Agreement dated May 26, 1995, by and among
the Company, Consolidated Oil & Gas, Inc. and Odyssey
Partners, L.P. (Incorporated by reference to Exhibit
10.11 of the Company's 1995 Annual Report on Form 10-K)
10.13 -- Agreement of Shareholders dated September 7, 1995, by and
among the Company, First Reserve Fund V, Limited
Partnership, First Reserve Secured Energy Assets Fund,
Limited Partnership, American Gas & Oil Investors,
Limited Partnerships, AmGO II, Limited Partnership, AmGO
III, Limited Partnership, J. W. Decker, COMDISCO, Inc.,
Odyssey Partners, L. P. and Floyd C. Wilson (Incorporated
by reference to Exhibit 10.12 of the Company's 1995
Annual Report on Form 10-K)
10.14 -- Registration Rights Agreement dated September 7, 1995, by
and among the Company Hugoton Energy Corporation, Odyssey
Partners, L.P., Cramer, Rosenthal, McGlynn, Inc.,
American Gas & Oil Investors, AmGO II, AmGO III, First
Reserve Secured Energy Assets Fund, First Reserve Fund V,
COMDISCO, Inc. and Floyd C. Wilson (Incorporated by
reference to Exhibit 10.13 of the Company's 1995 Annual
Report on Form 10-K)
10.15* -- Purchase and Sale Agreement dated December 28, 1995 by
and between Shield Petroleum Incorporated, P&M Properties
and the Company
10.16* -- Purchase and Sale Agreement dated June 18, 1996 by and
between Shield Petroleum Incorporated and the Company
21.1 -- List of subsidiaries of the Company (Incorporated by
reference to Exhibit 21.1 of the Company's 1995 Annual
Report on Form 10-K)
23.1* -- Consent of Ernst & Young LLP
23.2* -- Consent of Ryder Scott Company
- ---------------
* Filed herewith
</TABLE>
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 21st day of
February, 1997.
HUGOTON ENERGY CORPORATION
(Registrant)
By /s/ FLOYD C. WILSON
-----------------------------------
Floyd C. Wilson
Chairman of the Board, 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 and in the capacities indicated on the 21st day of February 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ FLOYD C. WILSON Chairman of the Board, President February 21, 1997
- ----------------------------------------------------- and Chief Executive Officer
Floyd C. Wilson
/s/ W. MARK WOMBLE Executive Vice President, Chief February 21, 1997
- ----------------------------------------------------- Financial Officer (Principal
W. Mark Womble Financial Officer) and Director
/s/ J.W. DECKER Executive Vice President and February 21, 1997
- ----------------------------------------------------- Director
J.W. Decker
/s/ SHANE M. BAYLESS Controller (Principal Accounting February 21, 1997
- ----------------------------------------------------- Officer)
Shane M. Bayless
/s/ STEPHEN BERGER Director February 21, 1997
- -----------------------------------------------------
Stephen Berger
/s/ DAVID S. ELKOURI Director February 21, 1997
- -----------------------------------------------------
David S. Elkouri
/s/ JOHN T. MCNABB II Director February 21, 1997
- -----------------------------------------------------
John T. McNabb II
/s/ ALAN J. ANDREINI Director February 21, 1997
- -----------------------------------------------------
Alan J. Andreini
Director
- -----------------------------------------------------
William E. Macaulay
/s/ JONATHAN LINKER Director February 21, 1997
- -----------------------------------------------------
Jonathan Linker
</TABLE>
24
<PAGE> 25
HUGOTON ENERGY CORPORATION
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTAL
DATA AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Report of Independent Auditors.............................. A-2
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... A-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994......................... A-4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994.............. A-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.......................... A-6
Notes to Consolidated Financial Statements.................. A-7
Unaudited Supplemental Oil and Gas Information.............. A-21
Consolidated Financial Statement Schedule for the years
ended December 31, 1996, 1995 and 1994:
II - Valuation and Qualifying Accounts................. A-24
</TABLE>
A-1
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Hugoton Energy Corporation
We have audited the accompanying consolidated balance sheets of Hugoton
Energy Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Hugoton Energy Corporation at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Wichita, Kansas
February 7, 1997
A-2
<PAGE> 27
HUGOTON ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 3,732 $ 3,914
Accounts receivable, less allowance for doubtful accounts
of $146 ($155 in 1995)................................. 12,985 8,859
Other..................................................... 568 1,096
-------- --------
Total current assets.............................. 17,285 13,869
-------- --------
Properties and equipment, at cost (successful efforts
method)
Proved properties......................................... 253,419 232,173
Unproved properties....................................... 24,696 7,314
Gas plant and gathering system............................ 1,478 2,976
Other..................................................... 6,303 5,612
-------- --------
285,896 248,075
Less accumulated depreciation, depletion and
amortization.................................... (53,118) (30,440)
-------- --------
232,778 217,635
-------- --------
Other assets, net........................................... 1,866 3,151
-------- --------
Total Assets...................................... $251,929 $234,655
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6,534 $ 4,439
Other accrued liabilities................................. 1,104 831
Accrued swap contract liability........................... -- 1,646
Accrued property taxes payable............................ 505 529
Accrued interest payable.................................. 597 341
-------- --------
Total current liabilities......................... 8,740 7,786
-------- --------
Long-term debt.............................................. 95,000 88,000
Deferred income taxes....................................... 16,142 10,795
Other deferred liabilities.................................. 520 750
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 10,000 shares authorized,
none issued and outstanding............................ -- --
Common Stock, no par value, 100,000 shares authorized,
19,702 shares issued and outstanding (19,697 in
1995).................................................. 197 197
Paid-in capital........................................... 134,541 134,541
Retained deficit.......................................... (3,211) (7,414)
-------- --------
Total shareholders' equity........................ 131,527 127,324
-------- --------
Total Liabilities and Shareholders' Equity........ $251,929 $234,655
======== ========
</TABLE>
See accompanying notes.
A-3
<PAGE> 28
HUGOTON ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Oil and gas............................................... $66,292 $35,906 $23,696
Gas plant................................................. 1,914 1,638 1,945
Loss on certain gas swap contracts........................ 10 (2,712) --
Gain (loss) on sale of properties......................... -- (603) (11)
------- ------- -------
Total revenues.................................... 68,216 34,229 25,630
------- ------- -------
Expenses:
Production
Lease operations....................................... 16,460 9,214 5,664
Production and severance tax........................... 3,639 1,974 1,367
Gathering, transportation and other.................... 1,568 382 497
Gas plant................................................. 1,420 978 1,189
Exploration............................................... 1,711 2,239 3,036
General and administrative................................ 6,872 4,346 3,117
Depreciation, depletion and amortization.................. 23,423 15,234 8,677
------- ------- -------
Total expenses.................................... 55,093 34,367 23,547
------- ------- -------
Operating income (loss)..................................... 13,123 (138) 2,083
------- ------- -------
Other income (expenses):
Interest.................................................. (6,070) (5,108) (3,077)
Other..................................................... 466 319 252
------- ------- -------
Total other income (expenses)..................... (5,604) (4,789) (2,825)
------- ------- -------
Income (loss) before income taxes and extraordinary item.... 7,519 (4,927) (742)
(Provision) benefit for income taxes........................ (3,316) 1,394 66
------- ------- -------
Income (loss) before extraordinary item..................... 4,203 (3,533) (676)
Extraordinary item -- loss from early extinguishment of
debt, net of income tax................................... -- (136) --
------- ------- -------
Net income (loss)........................................... $ 4,203 $(3,669) $ (676)
======= ======= =======
Income (loss) per common share:
Income (loss) before extraordinary item..................... $ 0.21 $ (0.26) $ (0.07)
======= ======= =======
Extraordinary item.......................................... $ -- $ (0.01) $ --
======= ======= =======
Net income (loss) per common share.......................... $ 0.21 $ (0.27) $ (0.07)
======= ======= =======
Weighted average number of common shares outstanding........ 19,698 13,460 10,310
======= ======= =======
</TABLE>
See accompanying notes.
A-4
<PAGE> 29
HUGOTON ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
PREFERRED ---------------- PAID-IN RETAINED
STOCK NUMBER AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ------ ------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1996,
1995 AND 1994:
BALANCE, DECEMBER 31, 1993....... -- 7,143 $ 71 $ 22,994 $(3,070) $ 19,995
Proceeds from issuance of common
stock.......................... -- 3,450 35 30,736 -- 30,771
Stock options exercised.......... -- 13 -- 135 -- 135
Net loss......................... -- -- -- -- (675) (675)
--- ------ ---- -------- ------- --------
BALANCE, DECEMBER 31, 1994....... -- 10,606 106 53,865 (3,745) 50,226
Issuance of common stock in
connection with the acquisition
of Consolidated Oil & Gas,
Inc............................ -- 9,091 91 80,695 -- 80,786
Tax effect of stock options
exercised...................... -- -- -- (19) -- (19)
Net loss......................... -- -- -- -- (3,669) (3,669)
--- ------ ---- -------- ------- --------
BALANCE, DECEMBER 31, 1995....... -- 19,697 197 134,541 (7,414) 127,324
Stock options exercised.......... -- 5 -- 40 -- 40
Tax effect of stock options
exercised...................... -- -- -- (40) -- (40)
Net income....................... -- -- -- -- 4,203 4,203
--- ------ ---- -------- ------- --------
BALANCE, DECEMBER 31, 1996....... -- 19,702 $197 $134,541 $(3,211) $131,527
=== ====== ==== ======== ======= ========
</TABLE>
See accompanying notes.
A-5
<PAGE> 30
HUGOTON ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 4,203 $ (3,669) $ (676)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss........................................ -- 136 --
Depreciation, depletion, and amortization................. 23,423 15,234 8,677
Leasehold abandonments.................................... 225 886 --
Deferred income taxes..................................... 3,316 (1,504) --
(Gain) loss on sale of proved properties and other
assets................................................. (85) 582 (80)
Gain on sale of marketable securities..................... -- (73) --
Other non-cash charges.................................... 230 462 --
Changes in operating assets and liabilities net of effects
from acquisitions:
Accounts receivable....................................... (4,126) (1,577) 1,138
Other current assets...................................... 528 530 (114)
Other..................................................... 1,046 99 (15)
Accounts payable.......................................... 2,095 567 967
Accrued liabilities....................................... 505 (2,452) 284
Accrued swap contract liability........................... (1,646) 1646 --
Deferred liabilities...................................... (230) 500 250
-------- -------- --------
Net cash provided by operating activities................. 29,484 11,367 10,431
Cash flows from investing activities:
Payment for business acquisition, net of cash acquired.... -- (28,799) --
Proceeds from sale of proved properties and other
assets................................................. 7,407... 3,357 --
Additions to properties and equipment..................... (44,091) (22,578) (25,964)
Purchase of marketable securities available for sale...... -- -- (11,085)
Proceeds from sale of marketable securities............... -- 11,158 --
Purchase of rights relating to operating agreements....... -- -- (2,000)
Net change in note receivable............................. (22) (7) (67)
-------- -------- --------
Net cash used in investing activities..................... (36,706) (36,869) (39,116)
Cash flows from financing activities:
Increase in debt issue costs.............................. -- (250) --
Proceeds from long-term debt.............................. 25,000 113,000 29,500
Repayment of long-term debt............................... (18,000) (85,000) (32,000)
Net proceeds from issuance of common stock................ -- -- 32,085
Initial public offering costs paid........................ -- -- (1,037)
Proceeds from exercised stock options..................... 40 -- 135
-------- -------- --------
Net cash provided by financing activities................. 7,040 27,750 28,683
-------- -------- --------
Net increase (decrease) in cash............................. (182) 2,248 (2)
Cash at beginning of year................................... 3,914 1,666 1,668
-------- -------- --------
Cash at end of year......................................... $ 3,732 $ 3,914 $ 1,666
======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 6,140 $ 5,714 $ 2,860
Income taxes paid......................................... -- 38 15
Common stock issued in connection with the acquisition of
COG.................................................... -- 80,786 --
</TABLE>
During 1996 the Company determined that it was necessary to adjust the
deferred tax liability related oil and gas properties acquired in connection
with the acquisition of COG. The effect of the adjustment was to increase
deferred income tax liability and properties and equipment by $1,991.
See accompanying notes.
A-6
<PAGE> 31
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS FOR DOLLAR AMOUNTS)
1. ORGANIZATION AND ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statements include the accounts of Hugoton Energy
Corporation and its wholly owned subsidiaries, AmGas, Corporation. (AmGas),
which was formed on December 19, 1991, Hugoton Exploration Corporation (HEX),
which was formed on November 9, 1993, Tiffany Gathering, Inc. (TGI), which was
acquired as a result of the acquisition of Consolidated Oil & Gas, Inc. on
September 7, 1995 and HEC Trading Company (HTC), which was formed December 14,
1995. All significant intercompany accounts and transactions have been
eliminated in consolidation.
ORGANIZATION, LINE OF BUSINESS, AND CREDIT CONCENTRATION
Hugoton Energy Corporation (HEC), incorporated April 23, 1987, and its
wholly owned subsidiaries, Amgas, HEX, TGI and HTC, (hereinafter referred to as
the "Company") are engaged in the acquisition of, exploration for and the
development and production of, natural gas and oil. In addition, the Company
owns and operates a gas gathering system and a gas processing plant. The
principal markets for the Company's natural gas and oil production are
Mid-Continent-based oil and gas marketing and crude oil refining companies. The
Company grants credit to certain first purchasers of oil and gas. The Company
also grants credit to certain oil and gas property owners related to lease
operating expenses paid on their behalf by the Company. Such first purchasers
and property owners are principally located in the United States.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make certain estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
HEDGING ACTIVITIES
Commodity Hedges. The Company manages the risk associated with the
fluctuations in the prices of oil and natural gas primarily through short-term
fixed-priced energy swap contracts. Each energy swap contract is designated to
existing natural gas or oil production of the Company and involves the exchange
of amounts based on a fixed commodity price for amounts based on an average of
quoted index prices of the commodity.
Gains and losses from hedging transactions are recognized in income and
reflected in the accompanying statements of cash flows as operating activities
in the periods for which the underlying commodity was hedged (the accrual
accounting method). The fair value of the swap agreements are not recognized in
the financial statements. Gains and losses on terminations of energy swap
contracts are deferred and amortized as an adjustment to income over the
remaining term of the original contract life of the terminated swap agreement.
If the necessary correlation to the commodity being hedged ceases during the
contract period, the basis differential attributable to such contracts is
recognized as a gain or loss and is no longer deferred, but recognized in
current operating results in the period the loss of correlation was identified
(see Note 11).
Interest-Rate Swap Agreement. The Company has also entered into an interest
rate swap agreement to effectively convert a portion of its floating-rate
borrowings into fixed-rate obligations and manage its exposure to interest rate
fluctuations. The accrual accounting method is used and the interest rate
differential to be received or paid is being accrued and recognized as an
adjustment to interest expense related to the debt.
A-7
<PAGE> 32
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
OIL AND GAS PROPERTIES
The Company accounts for its oil and gas activities using the successful
efforts method. Under the successful efforts method, all costs incurred to
purchase, lease, or otherwise acquire a property are capitalized when incurred.
Costs to drill and equip all development wells and successful exploratory wells
are capitalized. All other exploration costs including geological and
geophysical costs, lease rentals, impaired acreage costs and the cost of
unsuccessful exploratory wells are charged to expense.
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying amount. The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount. The Company elected early adoption of Statement No. 121 in 1995 and,
based on available estimates and current circumstances, has determined that no
impairment loss has occurred during the years ended December 31, 1996 and 1995.
Impairment is recognized for undeveloped properties by providing a
valuation allowance based on such factors as lease term, prior experience and
anticipated plans of the Company to develop the properties.
Depreciation, depletion and amortization of proved properties, wells, and
related equipment is provided on a unit-of-production method based upon
estimated recoverable proved oil and gas reserves.
With respect to normal dispositions, the cost of properties retired or
otherwise disposed of, and the applicable accumulated depreciation, depletion
and amortization are removed from the accounts, and the resulting profit or
loss, if any, is reflected in current operations.
OTHER PROPERTY AND EQUIPMENT
Other property and equipment are depreciated by the straight-line method
over the following estimated useful lives:
<TABLE>
<S> <C>
31 1/2
Building.................................................... years
Gas plant................................................... 10 years
Vehicles.................................................... 3 years
Office furniture and equipment.............................. 3 years
</TABLE>
DEBT ISSUE COSTS
The debt issue costs which are included in other assets are being amortized
by the straight-line method over the four-year term of the bank revolving note
agreement.
RIGHTS RELATED TO OPERATING AGREEMENT
Costs to acquire rights related to operating agreements for which the
Company is the operator of producing properties for unrelated third parties are
included in other assets and are being amortized on a straight-line basis over
the estimated life of the managed properties, which approximates 10 years.
OIL AND GAS SALES AND GAS IMBALANCES
Oil and gas revenues are recognized as production and sales take place. The
Company uses the sales method of accounting for gas imbalances in those
circumstances where the Company has underproduced or overproduced its ownership
percentage in a property. Under this method, a liability is recorded to the
extent that the Company's overproduced position in a reservoir cannot be
recouped through the production of
A-8
<PAGE> 33
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
remaining reserves. The Company's net overproduced position at December 31, 1996
and 1995 was not significant.
EARNINGS PER COMMON SHARE
Earnings per common share are based upon the weighted average number of
common shares outstanding during each period. The weighted average number of
common shares does not include any common stock equivalents because (1) shares
issuable pursuant to options that will be satisfied with shares held by the
principal shareholder are already included in shares outstanding and (2) the
remaining stock options outstanding are not materially dilutive.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Valuation allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
STOCK BASED COMPENSATION
In October 1995, the FASB issued Statement No. 123, Accounting for
Stock-Based Compensation, which prescribed accounting and reporting standards
for all stock-based compensation plans, including employee stock options,
restricted stock, and stock appreciation rights. Statement No. 123 did not
require companies to change their existing accounting for employee stock options
under APB Opinion No. 25, Accounting for Stock Issued to Employees, but instead
encouraged companies to recognize expense for stock-based awards on their
estimated fair value on the date of grant. Companies electing to continue to
follow present account rules under APB 25 are required to provide pro forma
disclosures of what net income and earnings per share would have been had the
new fair value method been used. The Company has elected to continue to apply
the existing accounting rules contained in APB 25 and the required pro forma
disclosures under the new method have been presented (see Note 7).
RECLASSIFICATION
Certain prior year amounts have been classified to conform with the 1996
presentation.
2. ACQUISITIONS
1996 ACQUISITIONS
On June 20, 1996, the Company purchased a 50% working interest for $12.9
million in approximately 95,000 gross acres in the Austin Chalk Trend in
Louisiana. This acreage acquisition, coupled with the January 1, 1996 acreage
acquisition mentioned below and various acreage acquired in the third quarter,
presents the Company with a total of 148,000 gross acres in the Austin Chalk
Trend to explore.
On January 1, 1996, the Company purchased an undivided interest in a group
of producing oil and gas properties and undeveloped acreage for $9.7 million
from a privately-held company that owns an undivided interest in and operates
the properties. The producing properties and acreage are located in Southeast
Texas and established a presence for the Company in the Austin Chalk trend. The
acquisition included eight producing wells and 35,000 gross acres, of which the
Company's working interest is 25% and 50% respectively.
A-9
<PAGE> 34
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
ACQUISITION OF CONSOLIDATED OIL & GAS, INC.
On September 7, 1995, the Company closed its acquisition (effective
September 1, 1995) of Consolidated Oil & Gas, Inc. ("COG"). The acquisition was
financed by cash on hand, bank borrowings under the Company's credit facility
(see Note 4) and by the issuance of 9,090,736 shares of the Company's common
stock.
The acquisition has been accounted for as a purchase and, accordingly, the
acquired underlying assets and liabilities have been recorded at their estimated
fair values at the date of acquisition. The purchase price was allocated to the
assets and liabilities acquired as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash........................................................ $ 9,062
Accounts receivable......................................... 3,595
Other current assets........................................ 353
Properties and equipment.................................... 118,419
Other assets................................................ 1,383
Deferred income tax liabilities............................. (12,299)
Accrued liabilities......................................... (1,866)
--------
Net allocated fair value of assets.......................... $118,647
Less:
Value of common stock issued net of offering costs
incurred of $2,167..................................... (80,786)
Cash acquired............................................... (9,062)
--------
Cash paid................................................... $ 28,799
========
</TABLE>
The operations of COG are included in the Company's consolidated financial
statements from the effective date of the acquisition.
OTHER 1995 ACQUISITIONS
On June 30, 1995, the Company purchased a group of producing oil and
natural gas properties from Mobil Corporation for $13.6 million of cash. These
properties, which produce predominately natural gas, are located in southwestern
Kansas and the Oklahoma panhandle. The effective date of the acquisition was
July 1, 1995.
The operations of the Mobil acquisition is included in the Company's
consolidated financial statements from the effective date of the acquisition.
1994 ACQUISITIONS
During 1994, the Company acquired producing properties, undeveloped acreage
and the rights to operate a group of properties for a total purchase price of
approximately $14 million in three separate acquisitions. The undeveloped
acreage acquired gives the Company a 50% interest in approximately 186,000
undeveloped mineral acres (below the depth of 3,500 feet) in the Kansas Hugoton
Producing Area. One of the acquisitions was a stock purchase with underlying
assets consisting of producing properties and undeveloped acreage. In connection
with a portion of the interests acquired in undeveloped acreage, the Company
entered into a joint exploration agreement for the exploration of this acreage
block with Oxy USA, whereby Oxy was granted a carried interest in certain costs
in the drilling of an agreed upon number of wells (see Note 11). The operations
of the acquisitions are included in the Company's consolidated financial
statements from the effective date of the acquisitions.
A-10
<PAGE> 35
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
PRO FORMA RESULTS OF OPERATIONS
The accompanying unaudited pro forma results of operations gives effect to
the COG and Mobil Acquisitions as if the transactions had occurred on January 1,
1994 under the purchase method of accounting. The unaudited pro forma results of
operations data is presented for illustrative purposes and is not necessarily
indicative of the actual results that would have occurred had the acquisitions
been consummated as of January 1, 1994 or of future results of operations. The
data reflects adjustments for (a) the mark to market of open hedging contracts
held by COG at the time of acquisition, (b) the estimated change in general and
administrative expenses giving effect to integration of the administrative
functions of the combined companies, (c) the estimated increase in depreciation,
depletion and amortization relating to the acquisitions, (d) the estimated
increase in interest expense resulting from the increased borrowings relating to
the acquisitions and (e) the estimated provision for income taxes for the change
in income taxes resulting from the inclusion of the historical results of
operations of the acquisitions and the adjustments in (a) through (d) above. The
pro forma effects of the property acquisitions for 1996 are not presented as
such amounts are not significant.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1995 1994
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Unaudited pro forma information:
Revenues.................................................. $58,307 $73,002
Net income (loss) before extraordinary item............... $(4,239) $ 4,899
Net income (loss)......................................... $(4,375) $ 3,426
Net income (loss) per share............................... $ (.22) $ .17
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
The Company accounts for transactions with the Company's Chairman and CEO
for his pro rata share of revenues and expenses in association with his
interests in certain oil and gas prospects he personally has participated in,
since the formation of the Company. The Company believes that the terms of the
principal shareholder's participation are comparable to those by other
non-affiliated working interest owners.
4. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995, consists of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Bank credit facility with a group of seven banks, principal
payable at September 7, 1999, interest payable at Bank
One's base rate and LIBOR rates at various Eurodollar
maturity dates (6.45% to 8.25% at December 31, 1996)...... $95,000 $88,000
------- -------
Less current maturities..................................... -- --
------- -------
$95,000 $88,000
======= =======
</TABLE>
On September 7, 1995, the Company arranged a new bank credit facility,
simultaneously with the closing of the COG acquisition. The new facility is an
unsecured $250 million revolving credit agreement that is due September 7, 1999.
The facility is provided by seven banks, led by Bank One, Texas, N.A. ("Bank
One") as agent and Texas Commerce Bank National Association as Co-agent. The
Borrowing Base, as defined in the loan agreement, is currently set at $135
million, and is subject to semi-annual redetermination. In connection
A-11
<PAGE> 36
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
with the arrangement of the new bank credit facility, during 1995 the Company
recorded an extraordinary loss of $220 ($136 after income taxes) which
represented the write-off of the related unamortized loan costs.
At December 31, 1996, the Company was a party to one interest rate swap
agreement that was entered into on December 11, 1995 for $25 million in notional
principal amount. The effect of this agreement is to provide the Company with an
interest rate on $25 million in notional principal amount for the three-year
term of the agreement of 5.445% plus a margin of 3/4 of 1 % to 1.25%. Under
market conditions at December 31, 1996, the aggregate effective annual interest
rate after giving effect to the swap agreement was 6.542%.
The credit facility provides the option of borrowing at floating interest
rates based on Bank One's base rate or at a Eurodollar option based on the
London Interbank Offered Rate ("LIBOR") plus 3/4 of 1% to 1.25% per annum,
depending on the outstanding loan balance. Interest is payable quarterly or at
the end of each interest period. The Company also incurs a commitment fee of
1/4 of 1% on the unused portion of the Borrowing Base.
In addition, the bank credit facility contains restrictive covenants
requiring, among other things, the maintenance of a specified current ratio,
tangible net worth and a limitation of the declaration or payment of dividends
on the Company's stock to 50% of net income for any fiscal year. The Company is
in compliance with these covenants at December 31, 1996.
Principal maturities of long-term debt over the next five years are as
follows (in thousands):
<TABLE>
<S> <C>
1997..................................................... $ --
1998..................................................... --
1999..................................................... 95,000
2000..................................................... --
2001..................................................... --
-------
$95,000
=======
</TABLE>
5. INCOME TAXES
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995 1994
------ ------- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................. $ -- $ -- $(66)
State................................................... -- -- --
------ ------- ----
Total........................................... -- -- (66)
Deferred:
Federal................................................. 2,967 (1,247) --
State................................................... 349 (147) --
------ ------- ----
Total........................................... 3,316 (1,394) --
------ ------- ----
Total income tax expense (benefit).............. $3,316 $(1,394) $(66)
====== ======= ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. During 1995 and 1994, in
connection with transactions involving the purchase price allocations relating
to acquisitions of businesses, the Company recorded deferred tax liabilities net
of valuation allowance of approximately
A-12
<PAGE> 37
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
$12,300 and $650, respectively for the financial statement/tax bases difference
in the underlying assets. Such taxable differences enabled the Company to reduce
its valuation allowance by approximately $999 and $650 in 1995 and 1994,
respectively. The benefit of reducing the valuation allowance was recorded as a
reduction to the property and equipment or intangibles recorded in the
acquisitions in accordance with SFAS No. 109.
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Compensatory stock option expense......................... $ 309 $ 698
Allowance for doubtful accounts........................... 56 59
Accrued liabilities....................................... -- 23
Net operating loss carryforward........................... 7,091 6,002
Swap contract loss........................................ -- 626
AMT credit carryforward................................... 550 550
------- -------
Net deferred tax assets........................... 8,006 7,958
------- -------
Deferred tax liabilities:
Book basis of oil and gas properties in excess of tax
basis.................................................. 24,148 18,400
Other..................................................... -- 353
------- -------
Total deferred tax liabilities.................... 24,148 18,753
------- -------
Net deferred tax liabilities...................... $16,142 $10,795
======= =======
</TABLE>
The reconciliation of income tax expense (benefit) computed at the U.S.
federal statutory tax rates to the actual income tax expense (benefit) is:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994
-------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory
rate................................................. $ 2,557 $(1,675) $(252)
State income taxes, net of federal benefit............. 301 (197) (45)
Utilization of loss carryback.......................... -- -- (66)
Nondeductible amortization............................. 443 -- --
Various accruals and expenses not deductible for tax... 14 102 --
Valuation allowance.................................... -- 376 310
Other.................................................. 1 -- (13)
-------- ------- -----
Actual income tax expense (benefit).................... $ 3,316 $(1,394) $ (66)
======== ======= =====
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $18,600, which can be carried forward to reduce future federal
income taxes payable. Net operating loss carryforwards expire beginning in 2009
if not utilized.
A-13
<PAGE> 38
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
6. PREFERRED STOCK
The Company has authorized a class of undesignated preferred stock
consisting of 10,000,000 shares, none of which are issued and outstanding. The
Board of Directors has not determined the rights and privileges of holders of
such preferred stock and the Company has no present plans to issue any shares of
preferred stock.
7. STOCK OPTIONS
The Company has various stock plans (the "Plans") whereby options to
purchase shares of common stock have been or may be granted to officers,
employees, and non-employee directors. The vesting periods and expiration of
options are determined on a plan by plan, or grant by grant basis. Expiration
dates of the options outstanding at December 31, 1996, range from July 25, 1997
to October 24, 2002.
In 1993 the Company adopted an employee stock option plan and a Nonemployee
Directors stock option plan which was amended during 1996 that provide for the
issuance of incentive and non-qualified options to purchase common stock. The
employee stock option plan provides for the issuance of up to 600,000 shares and
the Nonemployee Director plan provides for the issuance of up to 150,000 shares.
In 1995 the Company and its shareholders approved the 1995 Stock Option
Plan for employees whereby 500,000 shares were reserved for issuance.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting For Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
The following is a summary of stock option activity, and related
information for the years ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
EMPLOYEE NON-EMPLOYEE
------------------------- ------------------------
NUMBER OF PRICE RANGE NUMBER OF PRICE RANGE
SHARES PER SHARE SHARES PER SHARE
--------- ------------- --------- ------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1993...... 579,852 $.10- 10.00 75,000 $10.00
Stock options granted............. 10,000 11.50 20,000 12.25
Stock options exercised........... (39,085) .10- 10.00 --
Stock options expired or
canceled....................... -- --
--------- -------
Outstanding, December 31, 1994...... 550,767 .10- 11.50 95,000 10.00-12.25
Stock options granted............. 582,500 8.00-9.0938 4,000 8.41
Stock options exercised........... (101,190) .10 -- --
Stock options expired or
canceled....................... (53,000) 8.00- 10.00 (6,000) 8.41-12.25
--------- -------
Outstanding, December 31, 1995...... 979,077 .10- 11.50 93,000 8.41-12.25
Stock options granted............. 339,000 7.125- 8.50 40,000 8.75
Stock options exercised........... (115,890) .10- 8.00 -- --
Stock options expired or
canceled....................... (112,500) 7.125- 11.50 -- --
--------- -------
Outstanding, December 31, 1996...... 1,089,687 $.10- 11.50 133,000 $8.41-12.25
========= =======
</TABLE>
A-14
<PAGE> 39
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
<TABLE>
<S> <C> <C> <C> <C>
Exercisable at December 31,
1994............................... 59,500 $.10-11.50 27,500 $10.00-12.25
1995............................... 316,900 $.10-11.50 55,500 8.41-12.25
1996............................... 470,350 .10-11.50 125,500 8.41-12.25
</TABLE>
Stock options granted during 1996 include 125,000 shares at a price of
$8.34 to an officer which have been approved by the Board of Directors, but are
subject to approval by the Company's shareholders.
At December 31, 1996, 1995 and 1994, there were 96,148, 162,648, and 65,148
shares, respectively, reserved for future grants under existing plans.
Pursuant to the 1993 Stock Option Plan, a principal shareholder entered
into an agreement with the Company whereby, upon any exercise of an outstanding
option with a $.10 exercise price, he will deliver to the Company the number of
shares to which the optionee is entitled to such exercise and the Company will
pay to the principal shareholder the exercise price paid for such shares by the
optionee. This agreement does not pertain to any future options granted under
the Plan.
Additionally, the principal shareholder entered into an agreement with the
Company, whereby, upon the exercise of certain of the non-employee stock options
at $10 per share (which were not granted under the 1993 Stock Option Plan), he
will deliver to the Company the number of shares to which the optionee is
entitled pursuant to such exercise and the Company will pay to the principal
shareholder the exercise price paid for such shares by the optionee.
At December 31, 1996 the number of shares subject to options which will be
delivered to the Company by the Company's Chairman and CEO are as follows:
<TABLE>
<CAPTION>
OPTION NUMBER OF
PRICE SHARES
- ------ ---------
<C> <C>
$ .10 88,185
10.00 75,000
</TABLE>
FAS 123 PRO FORMA INFORMATION
Pro forma information regarding net income and earnings per share is
required by Statement 123 which also requires that the information be
determined, as if the Company had accounted for its employee stock option
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following range of
assumptions for 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Expected life of options (years)........................... 2-4 2-4
Expected stock price volatility............................ .316% .316%
Risk-free interest rate.................................... 5.13-5.30% 5.68-6.11%
</TABLE>
The range of assumptions for the expected life and the interest rate is
caused by the separation of the grants into portions based on their vesting
terms.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimated, in
A-15
<PAGE> 40
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1996 1995
--------- ----------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income (loss) -- as reported............................ $4,203 $(3,669)
Net income (loss) -- pro forma.............................. $3,505 $(4,195)
Earnings (loss) per share -- as reported.................... $ .21 $ (.27)
Earnings (loss) per share -- pro forma...................... $ .18 $ (.31)
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.
The weighted-average remaining contractual life of options outstanding as
of December 31, 1996, 1995, and 1994 were 3.0 years, 3.3 years, and 3.3 years
respectively. The weighted-average option exercise price information for the
years 1996, 1995, and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Outstanding January 1...................................... $7.35 $5.49 $5.07
Stock options granted...................................... $8.15 $8.39 $12.00
Stock options exercised.................................... $.44 $.10 $3.52
Stock options expired or canceled.......................... $9.94 $9.74 $ --
Outstanding, December 31................................... $8.00 $7.35 $5.49
Exercisable at December 31................................. $8.03 $8.38 $9.76
Weighted-average fair value of options granted during the
year..................................................... $2.23 $2.20
</TABLE>
8. EMPLOYEE BENEFIT PLANS
During 1994, the Company adopted a qualified 401(k) Profit Sharing Plan
which permits eligible employees to defer up to 10% of their compensation. The
Company may make matching contributions related to an employee's deferral on a
discretionary basis.
Prior to the adoption of the qualified 401(k) Profit Sharing Plan, the
Company had a discretionary profit sharing plan. During the years ended December
31, 1996, 1995 and 1994, the Company incurred expenses of $215,786, $138,277 and
$25,345, respectively, related to these plans.
A-16
<PAGE> 41
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
9. OIL AND GAS PROPERTY COSTS
Capitalized costs relating to the Company's oil and gas producing
activities and the related amounts of accumulated depreciation, depletion and
amortization are shown below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Proved properties.................................. $253,419 $232,173 $ 97,382
Unproved properties................................ 24,696 7,314 9,104
-------- -------- --------
Total property costs..................... 278,115 239,487 106,486
Accumulated depreciation, depletion and
amortization..................................... (49,921) (28,377) (15,038)
-------- -------- --------
Net property costs....................... $228,194 $211,110 $ 91,448
======== ======== ========
</TABLE>
Costs incurred (all of which were incurred in the United States) in the
Company's oil and gas activities were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Acquisition of Properties:
Proved............................................. $ 5,355 $129,962 $ 5,092
Unproved........................................... 17,382 1,526 8,795
Exploration.......................................... 9,168 5,530 7,644
Development.......................................... 7,756 2,313 3,589
------- -------- -------
$39,661 $139,331 $25,120
======= ======== =======
</TABLE>
10. MAJOR CUSTOMERS
The Company markets its oil and gas production to numerous purchasers under
a combination of short-and long-term contracts. During 1996, 1995 and 1994, the
Company's largest three purchasers accounted for 38%, 55% and 60%, respectively,
of oil and gas revenues of the Company. The Company had no other purchasers that
accounted for greater than 10% of its oil and gas revenues. The Company believes
that the loss of any single customer would not have a material adverse effect on
the results of operations of the Company.
11. COMMITMENTS AND CONTINGENCIES
LEGAL CONTINGENCIES
The Company is not a defendant in any significant pending legal proceedings
other than routine litigation incidental to its business. While the ultimate
results of these proceedings cannot be predicted with certainty, the Company
does not believe that the outcome of these matters will have a material adverse
effect on the Company.
A-17
<PAGE> 42
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
LEASE AGREEMENTS
The Company leases office facilities under noncancellable operating leases.
Future minimum rental commitments as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
(IN
THOUSANDS)
<S> <C>
1997........................................................ $ 459
1998........................................................ 459
1999........................................................ 459
2000........................................................ 459
2001........................................................ 459
Thereafter.................................................. 1,864
------
Total............................................. $4,159
======
</TABLE>
Approximately $520 of such rental commitments is included in Other Deferred
Liabilities as of December 31, 1996.
DRILLING OBLIGATION
During 1994, the Company entered into an agreement with Oxy USA whereby a
carried interest for certain costs of drilling a specified number of wells would
be borne by the Company. The carried interest arose in connection with the
acquisition of rights to certain undeveloped acreage acquired from OXY USA (see
Note 2). In order to maintain its acquired rights in the undeveloped acreage,
the Company was obligated to drill 20 wells by September 1, 1995 and 20
additional wells by January 1, 1997. The Company satisfactorily complied with
both the September 1, 1995 and January 1, 1997 drilling obligation.
HEDGING TRANSACTIONS
With the objective of achieving more predictable revenues and cash flows
and reducing the exposure to fluctuation in gas and oil prices, the Company has
entered into hedging transactions of various kinds with respect to both gas and
oil. While the use of these hedging arrangements limits the downside risk of
adverse price movements, it may also limit future revenues from favorable price
movements. As of December 31, 1996, the Company had entered into hedging
transactions with respect to a portion of its estimated production for 1997. The
Company continues to evaluate whether to enter into additional hedging
transactions for future years. In addition, the Company may determine from time
to time to terminate its then existing hedging positions. Generally, either the
Company or the counter party to the agreements is required to make a settlement
payment to the other equal to the difference between the specified contract
amount and the settlement amount. The following is a summary of the Company's
hedging transactions in effect as of December 31, 1996 and 1995:
Natural Gas -- at December 31, 1996, the Company had entered into a
formal sale contract for 20 MMcf of natural gas per day for the first three
months of 1997 at a net price of $3.68 per Mcf.
At December 31, 1995, the Company was a party to natural gas swap
agreements which ran from November 1995 through October 1996 NYMEX natural
gas futures contract month for a quantity of 39,000 MMBTU per day at an
average price of $1.80 per MMBTU.
Oil -- at December 31, 1996, the Company was a party to swap
agreements fixing the price of 70,000 barrels per month, for the first
three months of its oil production for 1997 at a weighted average price of
$24.25/barrel.
A-18
<PAGE> 43
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
At December 31, 1995, the Company was a party to oil swap agreements
which ran from the January 1996 through December 1996 NYMEX WTI crude oil
futures contract month for a quantity of 40,000 barrels per month at an
average price of $17.28 per BBL.
During 1995, though its acquisition of COG, the Company assumed certain
hedge contract obligations for crude oil futures. The crude oil futures
obligation was comprised of several swap agreements with fixed prices ranging
from $18.00 to $20.80 per BBL on an aggregate volume of 40,000 to 100,000 BBLS
per month. Of the assumed contracts, only two remained in effect at December 31,
1995, representing a total of 40,000 BBLS at a price range of $18.00 to $20.80
per BBL. Differences between the monthly amortization and the contract
settlement amount was reflected in the Company's oil and gas revenues.
The Company is required to post margin in the form of cash when projected
commodity prices exceed the scheduled fixed prices in the contract less any
amount of agreed upon open credit. The amount of margin cash posted at December
31, 1996 and 1995 was $-0- and $325 respectively.
In 1995, a realized hedging loss of $250 was included in oil and gas sales.
The Company had net deferred losses of $1,283 for settled derivative contracts
at December 31, 1995, relative to future production periods. During 1995, the
Company recorded a charge to earnings of $2.7 million related to the
"decoupling" of the basis correlation between the Company's cash price and NYMEX
contract settlement price.
In 1996, a realized hedging loss of $8,698 was included in oil and gas
sales. The Company had no deferred gain or losses at December 31, 1996.
12. FINANCIAL INSTRUMENTS
The following information is provided regarding the estimated fair value of
certain on and off-balance sheet financial instruments employed by the Company
as of December 31, 1996 and the methods and assumptions used to estimate the
fair value of such financial instruments:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed-price natural gas energy swaps........ $ -- $ -- $ (1,646) $(1,349)
Fixed-price crude oil swaps................. -- (251) -- 301
Long-term debt (1).......................... 95,000 95,000 88,000 88,000
Interest rate swaps......................... -- 59 -- 158
</TABLE>
- ---------------
(1) Carrying amount does not include capitalized debt issue costs (see Note 1).
Cash, accounts receivable, other current assets, accounts payable and
accrued liabilities are each estimated to have a fair value approximating
carrying amount due to the short maturity of those instruments, or to the
criteria used to determine carrying value in the financial instruments.
The "fair value" of the Company's fixed-price natural gas and crude oil
swaps as of December 31, 1995 were estimated based on quoted market prices of
natural gas and crude oil for the periods covered by the contracts. The net
differential between the fixed prices in each contract and the quoted market
prices for future periods, as adjusted for estimated basis, has been applied to
the volumes covered by each contract to arrive at an estimated future value.
The fair value of the Company's long-term debt is estimated to approximate
the carrying amount at December 31, 1996.
A-19
<PAGE> 44
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS FOR DOLLAR AMOUNTS)
The fair value of the Company's interest rate swap at December 31, 1996 is
based on quoted market prices as of such dates.
13. ADDITIONAL CASH FLOW INFORMATION
For purposes of cash flows, the Company considers cash to include currency
on hand and demand deposits with banks or other financial institutions.
14. INITIAL PUBLIC OFFERING
On January 25, 1994, the Company sold 3,450,000 shares of common stock in
an initial public offering for proceeds of approximately $32 million, exclusive
of offering costs. The Company used the proceeds to pay down borrowings on its
bank credit facility. Supplemental loss per share would be $0.05 giving affect
to the public offering as if it had occurred January 1, 1994 with the proceeds
of the offering used to retire debt. For the computation, shares issued in the
public offering were included in the weighted average shares outstanding from
the beginning of the year end and, accordingly, the net loss was reduced by the
interest expense on the debt retired.
15. YEAR-END ADJUSTMENTS
The aggregate effect of adjustments recorded in the fourth quarter of 1995
and 1994, had the effect of increasing the net loss and decreasing the net loss
by approximately $783 and $534, respectively. The principal adjustment was
related to revisions of previous estimates of depreciation, depletion and
amortization of proved properties as a result of revisions to the underlying oil
and gas reserves.
A-20
<PAGE> 45
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL OIL AND GAS INFORMATION
(UNAUDITED)
OIL AND GAS RESERVES
The following information summarizes the Company's net proved reserves of
oil and natural gas and the present values thereof for each of the three years
ended December 31, 1996. The December 31, 1994, 1995 and 1996 reserve estimates
were based on the reports by the independent engineering firm of Ryder Scott
Company. All studies have been prepared in accordance with regulations
prescribed by the Securities and Exchange Commission. Future net revenue is
estimated by such engineers using oil and gas prices in effect as the end of
each respective year with price escalations permitted only for those properties
which have contracts allowing specific increases. Future operating costs are
based on the level of operating expenses incurred during each such year. The
reliability of any reserve estimate is a function of the quality of available
information and of engineering interpretation and judgment. Such estimates are
susceptible to revision in light of subsequent drilling and production history
or as a result of economic conditions.
Estimated Quantities of Oil and Gas Reserves (unaudited). The following
table sets forth the Company's estimated proved reserves for each of the three
years ended December 31, 1995. All of the Company's reserves are located within
the United States:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
OIL GAS OIL GAS OIL GAS
(MBBLS) (MMCF) (MBBLS) (MMCF) (MBBLS) (MMCF)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PROVED RESERVES
Beginning of year................... 13,884 192,962 4,982 139,694 3,035 138,512
Acquisition of proved reserves...... 49 4,829 9,923 60,564 222 8,669
Extensions and discoveries.......... 4,489 45,199 401 3,093 803 5,278
Revisions of previous estimates..... (106) 4,293 (391) 8,733 1,291 (274)
Sales of reserves in place.......... (438) (3,076) (13) (4,471) -- --
Production.......................... (1,700) (19,026) (1,018) (14,651) (369) (12,491)
------ ------- ------ ------- ------- -------
End of year......................... 16,178 225,181 13,884 192,962 4,982 139,694
====== ======= ====== ======= ======= =======
PROVED DEVELOPED PRODUCING RESERVES
Beginning of year................... 12,746 189,434 4,745 132,230 2,844 117,064
====== ======= ====== ======= ======= =======
End of year......................... 11,200 180,610 12,746 189,434 4,745 132,230
====== ======= ====== ======= ======= =======
</TABLE>
A-21
<PAGE> 46
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL OIL AND GAS INFORMATION
(UNAUDITED)
Standardized Measure of Discounted Future Net Cash Flows (unaudited). The
following table reflects the standardized measure of discounted future net cash
flows relating to the Company's interests in proved oil and gas reserves. The
future net cash inflows were developed as follows:
(1) Estimates were made of quantities of proved reserves and the future
period during which they are expected to be produced based on year-end
economic conditions.
(2) The estimated cash flows from future production of proved reserves were
prepared on the basis of prices received at December 31, 1996, 1995,
1994, as follows: 1996-$24.53 per BBL, $3.79 per MCF; 1995-$18.01 per
BBL, $1.76 per MCF; and 1994-$15.56 per BBL, $1.25 per MCF.
(3) The resulting future gross revenue streams were reduced by estimated
future costs to develop and to produce the proved reserves, based on
year-end cost estimates.
(4) Future income taxes were computed by applying the appropriate statutory
tax rates to the future pre-tax net cash flows less the current tax
basis of the properties involved and related carryforwards, giving
effect to permanent differences and tax credits.
(5) The resulting future net revenue streams were reduced to present value
amounts by applying a 10% discount factor.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
---------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Future cash inflows............................... $1,267,988 $ 583,236 $250,584
Future costs:
Production...................................... 354,996 233,098 103,471
Development..................................... 44,120 3,779 2,015
---------- --------- --------
Future net cash flows before income taxes......... 868,872 346,359 145,098
Discount at 10% per annum......................... (404,432) (154,853) (64,169)
Discounted future income taxes.................... (129,004) (18,256) (847)
---------- --------- --------
Standardized measure of discounted future net cash
flows........................................... $ 335,436 $ 173,250 $ 80,082
========== ========= ========
</TABLE>
A-22
<PAGE> 47
HUGOTON ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL OIL AND GAS INFORMATION
(UNAUDITED)
The following are the principal sources of change in the standardized
measure of discounted future net cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Standardized measure of discounted future net cash
flows, beginning of period........................ $ 173,250 $ 80,082 $ 84,116
Net changes in prices and production costs.......... 169,025 27,837 (18,820)
Revisions in quantity estimates..................... 10,507 (6,057) 2,905
Accretion in discount............................... 19,151 8,093 8,860
New field discoveries and extensions, net of future
production and development costs.................. 120,561 7,173 11,105
Purchases of reserves in-place...................... 9,648 101,430 5,199
Sales of reserves in-place.......................... (2,634) (2,904) --
Sales of oil and gas produced, net of production
costs............................................. (53,323) (24,995) (16,924)
Net change in income taxes.......................... (110,749) (17,409) 3,641
--------- -------- --------
Standardized measure of discounted future net cash
flows, end of period.............................. $ 335,436 $173,250 $ 80,082
========= ======== ========
</TABLE>
A-23
<PAGE> 48
SCHEDULE II
HUGOTON ENERGY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts................ $155 $ -- $ (9) $146
Year ended December 31, 1995:
Allowance for doubtful accounts................ 159 --(B) (4) 155
Valuation allowance for deferred tax assets.... 623 376 (999) --
Year ended December 31, 1994:
Allowance for doubtful accounts................ 326 -- (167) 159
Valuation allowance for deferred tax assets.... 963 310(A) (650) 623
</TABLE>
- ---------------
(A) During 1994, in connection with a stock acquisition, the Company recorded a
deferred tax liability of $650,000 for the financial statement/tax bases
difference in the underlying assets. Such taxable differences enabled the
Company to reduce its valuation allowance by the same amount. The benefit of
reducing the valuation allowance was recorded as a reduction to the
intangibles recorded in the acquisition in accordance with SFAS 109.
(B) At December 31, 1995, the Company decreased its valuation allowance to zero
as a result of the Company's acquisition of COG, whereby the allocated value
of the acquired assets exceeded the historical tax basis by an amount which
will enable the Company to realize the deferred assets recorded.
A-24
<PAGE> 49
INDEX TO EXHIBITS
<TABLE>
<C> <S>
2.1 -- Agreement and Plan of Merger, dated May 26, 1995, by and
among Hugoton Energy Corporation, Oil & Gas, Inc. and
Hugoton Exploration Corporation (Incorporated by
reference to Exhibit 4.4 of the Registration Statement on
Form S-3, Registration No. 33-97366)
2.2 -- Amendment to Agreement and Plan of Merger, dated August
3, 1995 by and among Hugoton Energy Corporation,
Consolidated Oil & Gas, Inc. and Hugoton Exploration
Corporation (Incorporated by reference to Exhibit 4.4 of
the Registration Statement on Form S-3, Registration No.
33-97366)
3.1 -- Restated Articles of Incorporation of the Company, as
amended (Incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form S-1, Registration No.
33-70924)
3.2 -- Bylaws of the Company, as amended (Incorporated by
reference to Exhibit 3.2 of the Registration Statement on
Form S-1, Registration No. 33-70924)
4.1 -- Specimen Common Stock certificate (Incorporated by
reference to Exhibit 4.1 of the Registration Statement on
Form S-1, Registration No. 33-70924)
10.1 -- Employment Agreement, dated September 1, 1995 between the
Company and Floyd C. Wilson (Incorporated by reference to
Exhibit 10.1 of the Company's 1995 Annual Report on Form
10-K)
10.2* -- Employment Agreement, dated September 7, 1995 between the
Company and Jay W. Decker
10.3* -- Employment Agreement, dated December 16, 1996 between the
Company and W. Mark Womble
10.4 -- 1993 Stock Option Plan (Incorporated by reference to
Exhibit 10.12 of the Registration Statement on Form S-1,
Registration No. 33-70924)
10.5 -- 401(k) Employee Benefit Plan (Incorporated by reference
to Exhibit 10.13 of the Registration Statement on Form
S-1, Registration No. 33-70924)
10.6 -- Nonemployee Directors' Stock Option Plan (Incorporated by
reference to Exhibit 10.14 of the Registration Statement
on Form S-1, Registration No. 33-70924)
10.7 -- 1995 Stock Option Plan (Incorporated by reference to
Exhibit 4.1 of the Registration Statement on Form S-8,
Registration No. 33-97092)
10.8 -- Loan Agreement, dated September 7, 1995, by and among the
Company, Amgas Corporation, Hugoton Exploration
Corporation, Tiffany Gathering Inc., Bank One, Texas
N.A., Texas Commerce Bank National Association, Bank of
Montreal, Wells Fargo Bank, National Association,
Meespierson N.V., Credit Lyonnais Cayman Island Branch
and Bank of Scotland, and Bank One, Texas N.A. as Agent,
and Texas Commerce Bank National Association as Co-agent
(Incorporated by reference to Exhibit 10.8 of the
Company's 1995 Annual Report on Form 10-K)
10.9 -- First Amendment to Loan Agreement dated January 22, 1996,
by and among the Company, Amgas Corporation, Hugoton
Exploration Corporation, HEC Trading Company, Tiffany
Gathering, Inc., Bank One, Texas N.A., Texas Commerce
Bank National Association, Bank of Montreal, Wells Fargo
Bank, National Association, Meespierson N.V., Credit
Lyonnais Cayman Island Branch and Bank of Scotland, and
Bank One, Texas N.A. as Agent, and Texas Commerce Bank
National Association as Co-agent (Incorporated by
reference to Exhibit 10.9 of the Company's 1995 Annual
Report on Form 10-K)
</TABLE>
<PAGE> 50
<TABLE>
<S> <C>
10.10* -- Second Amendment to Loan Agreement dated June 11, 1996,
by and among the Company, Amgas Corporation, Hugoton
Exploration Corporation, HEC Trading Company, Tiffany
Gathering, Inc., Bank One, Texas N.A., Texas Commerce
Bank National Association, Bank of Montreal, Wells Fargo
Bank, National Association, Meespierson N.V., Credit
Lyonnais Cayman Island Branch and Bank of Scotland, and
Bank One, Texas N.A. as Agent, and Texas Commerce Bank
National Association as Co-Agent
10.11 -- Purchase and sale agreement dated June 1, 1995 by and
between Mobil Oil Corporation and the Company
(Incorporated by reference to Exhibit 10.10 of the
Company's 1995 Annual Report on Form 10-K)
10.12 -- Shareholder Agreement dated May 26, 1995, by and among
the Company, Consolidated Oil & Gas, Inc. and Odyssey
Partners, L.P. (Incorporated by reference to Exhibit
10.11 of the Company's 1995 Annual Report on Form 10-K)
10.13 -- Agreement of Shareholders dated September 7, 1995, by and
among the Company, First Reserve Fund V, Limited
Partnership, First Reserve Secured Energy Assets Fund,
Limited Partnership, American Gas & Oil Investors,
Limited Partnerships, AmGO II, Limited Partnership, AmGO
III, Limited Partnership, J. W. Decker, COMDISCO, Inc.,
Odyssey Partners, L. P. and Floyd C. Wilson (Incorporated
by reference to Exhibit 10.12 of the Company's 1995
Annual Report on Form 10-K)
10.14 -- Registration Rights Agreement dated September 7, 1995, by
and among the Company Hugoton Energy Corporation, Odyssey
Partners, L.P., Cramer, Rosenthal, McGlynn, Inc.,
American Gas & Oil Investors, AmGO II, AmGO III, First
Reserve Secured Energy Assets Fund, First Reserve Fund V,
COMDISCO, Inc. and Floyd C. Wilson (Incorporated by
reference to Exhibit 10.13 of the Company's 1995 Annual
Report on Form 10-K)
10.15* -- Purchase and Sale Agreement dated December 28, 1995 by
and between Shield Petroleum Incorporated, P&M Properties
and the Company
10.16* -- Purchase and Sale Agreement dated June 18, 1996 by and
between Shield Petroleum Incorporated and the Company
21.1 -- List of subsidiaries of the Company (Incorporated by
reference to Exhibit 21.1 of the Company's 1995 Annual
Report on Form 10-K)
23.1* -- Consent of Ernst & Young LLP
23.2* -- Consent of Ryder Scott Company
- ---------------
</TABLE>
* Filed herewith
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 7th day of September, 1995, by and between HUGOTON ENERGY CORPORATION, a
Kansas corporation (hereinafter referred to as the "Company") and JAY W. DECKER
(hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, the Company is engaged in the oil and gas business;
WHEREAS, the Company desires to employ Employee as Executive
Vice-President of the Company and Employee desires to be employed by the
Company in that capacity; and
WHEREAS, the Company and Employee desire to set forth in writing the
terms and conditions of their agreements and understandings;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. Term of Employment The Company shall employ Employee in the
capacity set forth herein for a term of three (3) years commencing on September
8, 1995, and ending on September 7, 1998 (the "Employment Period"), unless
sooner terminated as hereinafter provided on the terms and subject to the
conditions set forth in this Agreement
2. Responsibilities of Employee.
(a) In employment by the Company, Employee shall undertake and
assume the responsibility of performing for and on behalf of the Company any
and all duties as determined from time to time by the Chief Executive Officer
of the Company and shall report only to the Chief Executive Officer.
(b) Employee agrees to devote eighty percent (80%) of his
time and effort to his duties as an employee of the Company. Employee may
devote his other time to other business and financial interests, provided that
such other activities do not interfere with the performance of Employee's
responsibility as Executive Vice-President and are not in violation of
paragraph 6 hereof.
<PAGE> 2
3. Compensation. As compensation for the services to be rendered
by Employee for the Company under this Agreement, Employee shall be entitled to
the following:
(a) The Company shall pay Employee during the period in
which Employee is employed by the Company an annual salary of not less than One
Hundred Sixty Thousand Dollars ($160.000.00), payable periodically for such
periods as may be established by the Company for payment of its employees under
its normal payroll practices. Such salary shall be adjusted annually to take
into consideration fluctuations in the Consumer Price Index. The term "Consumer
Price Index" shall mean the Consumer Price Index for All Urban Consumers (1982
to 1984 = 100) released by the United States Department of Labor. Bureau of
Labor Statistics, relating to consumer prices for all items in the city of
Wichita, Kansas..
(b) Employee may receive a bonus and fringe benefits each
year in amounts to be determined by the Company's Board of Directors (the
"Board"). Such bonus may, in the discretion of the Board, be based, in part,
upon the Company meeting certain financial goals, which goals may be agreed
upon by the Board and Employee.
(c) On September 8, 1995, the Company shall grant
Employee the option to purchase 125,000 shares of stock of the Company at a
purchase price of $8.25 per share ("Option 1"). Option I shall vest as follows:
the option to purchase twenty-five percent (25%) of such shares shall vest
immediately on the date of grant. the option to purchase twenty-five percent
(25%) of such shares shall vest twelve (12) months after the date of grant, the
option to purchase twenty-five percent (25%) of such shares shall vest
twenty-four (24) months after the date of grant and twenty-five percent (25%)
of such shares shall vest thirty-six (36) months after the date of grant;
provided however, such vesting shall only occur if Employee is still employed
by the Company.
(d) In addition, if Employee is still employed by Company
on September 8, 1996:
(i) the Company shall grant Employee the option to
purchase an additional I 125,000 shares of stock of
the Company at a price equal to the fair market
value of such shares on the date of the grant
("Option 2"). Option 2 shall vest as follows: the
option to purchase twenty-five percent (25%) of such
shares shall vest immediately on the date of grant,
the option to purchase twenty-five percent (25%) of
such shares shall vest twelve (12) months after the
date of grant, the option to purchase twenty-five
percent (25%) of such shares shall vest twenty- four
(24) months after the date of grant and twenty-five
percent (25%) of such shares shall vest thirty-six
(36) months after the date of grant, provided.
however. such vesting shall only occur if Employee
is still employed by the Company.
2
<PAGE> 3
(ii) Employee shall be entitled to receive a
bonus from the Company equal to the difference
between the fair market value on the date of grant
of the shares covered by Option 2 and $1,031-250.00
($8.25 times 125,000 shares).
4. Expenses. Employee shall be reimbursed for all reasonable
business expenses incurred by him in connection with or incident to the
performance of his duties and responsibilities hereunder upon the Employee's
submission to the Company of vouchers or expense statements evidencing such
expenses in such form or format as the Company may reasonably require.
5. Vacation and Other Benefits.
(a) Vacation. Employee shall be entitled to six (6) weeks
of paid vacation per year during the Employment Period. In addition, Employee
shall be entitled to participate in all other present and future benefit plans
provided by the Company to its employees and for which Employee meets the
eligibility requirements thereof
(b) Medical Insurance. The Company shall provide Employee
and his dependents with medical insurance coverage under the Company's medical
insurance plan, and such coverage shall be consistent with Employer's current
medical insurance coverage offered to its executive officers.
6. Non-Competition and Non-Disclosure- Injunctive Relief.
Employee acknowledges that the services he is to render are of a special and
unusual character with unique value to the Company. In view of the value to
the Company of the services of Employee for which the Company has contracted
hereunder, because of certain confidential information to be obtained by or
disclosed to Employee, and as a inducement to the Company to enter into this
Agreement and to pay to Employee the compensation stated herein, Employee
covenants and agrees as follows:
(a) During the period in which Employee is employed by
the Company and for a period of up to ninety (90) days thereafter in
which Employee is not employed by the Company but is receiving any
payment from the Company, Employee shall not, without the consent of
the Company (which shall not be unreasonably withheld), directly or
indirectly be employed by or render consulting or other services in
connection with any business enterprise or person which operates a
business in the oil and gas industry in those states in which the
Company or its subsidiaries owns or operates properties.
(b) During the period in which Employee is employed by
the Company, Employee shall not, directly or indirectly, in any
capacity (including, without limitation, as a proprietor investor.
director or officer), be financially interested in or engage in any
business similar to or related to the business of the Company
3
<PAGE> 4
if such business is in competition with the Company in those states in
which the Company or its subsidiaries owns or operates properties;
however, it is specifically agreed between the parties that Employee
may continue to be financially interested in and engage in any
business similar to or related to the Company's business which he is
interested in or engaged in on the date of this Agreement, including
the ownership of oil and gas interests. Notwithstanding for foregoing,
Employee may own up to ten percent (10%) of the equity or debt of any
company or entity as a personal investment.
(c) During the period in which Employee is employed by the
Company and thereafter. Employee will not disclose to any, third party
or directly or indirectly make use of, other than in connection with
the business and affairs of the Company, any knowledge or information
pertaining to the Company or any of its subsidiaries, their business
or personnel or policies for any reason without the prior consent of
the Company's Board.
(d) During the Employment Period, Employee may not
solicit, raid, entice or induce 1) any person, firm or corporation
that is a customer of the Company to become a customer of another
firm, corporation or person; or 2) any person that is employed by the
Company or its subsidiaries to become employed by any, other person,
firm or company.
(e) Employee acknowledges and agrees that the services to
be rendered by him are of a special, unique and extraordinary,
character and, in connection with such services, he will have access
to confidential and proprietary information vital to the Company's and
its subsidiaries' businesses. By reason of this, Employee consents and
agrees that if he violates any of the provisions of this Section 6,
the Company and its subsidiaries would sustain irreparable harm and.
therefore, in addition to any other remedies which the Company may
have under this Agreement or otherwise, the Company shall be entitled
to an injunction restraining Employee from committing or continuing
any such violation of this Agreement.
7. Termination By the Company For Cause.
(a) The Company may terminate Employee's employment under this
Agreement for Cause. The termination shall be evidenced by written notice
thereof to the Employee and shall specify the Cause for termination. For
purposes hereof. the term "Cause" shall mean (i) the inability of Employee.
through sickness or other incapacity. to perform his duties under this
Agreement for a period of six (6) months. (ii) dishonesty, theft, or conviction
of a crime involving moral turpitude, in each case only if it could reasonably
effect his ability to perform assigned duties for the Company or cause a
material adverse effect on the Company, (iii) commission of a material act of
fraud against the Company or its subsidiaries. or (iv) failure of Employee to
observe or perform his material duties and obligations as an employee of
4
<PAGE> 5
Company or a material breach of this Agreement, after thirty (30) days advance
written notice of such failure which has not been cured.
(b) If Employee's employment with the Company is terminated for
Cause, Employee shall be paid his salary through the month of his termination.
8. Termination By the Company Without Cause
(a) The Company may terminate Employee's employment under this
Agreement without Cause. The termination shall be evidenced by written notice
thereof to the Employee and shall specify that the termination was without
Cause. An involuntary transfer of Employee shall be considered termination
without Cause.
(b) If Employee's employment with the Company is terminated
without Cause, Employee shall be entitled to receive, within a time frame and
upon a payment schedule to be mutually agreed upon by the Company and
Employee (but not to exceed one (1) year), the amount of his entire salary for
the remaining term of this Agreement; provided, however, the period for
receiving such payment shall not exceed one (1) year or the remaining term of
this Agreement, whichever is less. Notwithstanding the foregoing, if the
payment referred to above is not made within thirty (30) days of Employee's
termination, all unpaid amounts shall bear interest at a rate equal to the New
York Prime (as published in the Wall Street Journal) on the date of such
termination. In addition, he shall become immediately vested in the options
described in paragraph (3) (c) and (d) if they have been previously granted.
9. Burden and Benefit. This Agreement shall be binding upon. and
shall inure to the benefit of, the Company and Employee, and their respective
heirs, personal and legal representatives, successors and permitted assigns.
Employees rights and obligations may not be assigned without the proper
written consent of the Company.
10. Governing Law It is understood and agreed that the
construction and interpretation of this Agreement shall at all times and in all
respects be governed by the laws of the State of Kansas.
11. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability
of the other provisions.
12. Notice. Any notice required to be given shall be sufficient if
it is in writing and sent BY certified or registered mail, return receipt
requested, first-class postage prepaid to his last known residence in the case
of Employee, and to its principal office in the State of Kansas in the case of
the Company.
5
<PAGE> 6
13. Entire Agreement. This Agreement contains the entire agreement
and understanding by and between the Company and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No waiver of any provision of this Agreement shall be valid unless it
is in writing and signed by the party against whom the waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement at such time or any
other time.
14. Modification. No amendment, alteration or modification to any
of the provisions of this Agreement shall be valid unless made in writing and
signed by both parties.
15. Paragraph Headings. The paragraph headings have been inserted
for convenience only and are not to be considered when construing the
provisions of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the day and year first above written.
"COMPANY" "EMPLOYEE"
HUGOTON ENERGY CORPORATION
/s/ JAY W. DECKER
----------------------------
JAY W. DECKER
By: /s/ W. MARK WOMBLE
-------------------------
NAME: W. Mark Womble
-------------------------
Title: Executive Vice President
-------------------------
ATTEST:
/s/ [ILLEGIBLE]
- ---------------------------------
6
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 16th day of
December, 1996, by and between HUGOTON ENERGY CORPORATION, a Kansas corporation
(hereinafter referred to as the "Company") and W. MARK WOMBLE (hereinafter
referred to as "Employee").
WITNESSETH:
WHEREAS, the Company is engaged in the oil and gas business;
WHEREAS, Employee has been employed by the Company continuously since
October 1, 1993;
WHEREAS, the Compensation Committee (the "Compensation Committee") of
the Company's Board of Directors (the "Board") has determined that it is in the
best interests of the Company and its stockholders to continue to employ
Employee and Employee desires to continue to be employed by the Company;
WHEREAS, the Company and Employee desire to set forth in writing the
terms and conditions of their agreements and understandings;
WHEREAS, the terms of this Agreement were duly approved and authorized
for and on behalf of the Company by the Board at a meeting held on December 16,
1996, at which meeting a quorum was present and voted, and were also duly
approved by the Compensation Committee at a meeting held on October 21, 1996,
at which meeting a quorum was present and voted;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. Term of Employment. The Company shall employ Employee in the
capacity set forth herein for a term of three (3) years commencing on October
1, 1996, and ending on September 30, 1999 (the "Employment Period").
2. Responsibilities of Employee.
(a) In accepting employment by the Company, Employee
shall undertake and assume the responsibility of performing for and on behalf
of the Company any and all duties customarily associated with the position of
Executive Vice President and Chief Financial Officer of the Company.
<PAGE> 2
(b) Employee agrees to devote his full time and effort to
his duties as an employee of the Company. Employee may devote a reasonable
amount of his time to civic and community affairs, and subject to the
provisions of paragraph 6 hereof, to other business and financial interests;
provided that such other activities do not interfere with the performance of
Employee's responsibility as Executive Vice President and Chief Financial
Officer of the Company.
3. Compensation. As compensation for the services to be rendered
by Employee for the Company under this Agreement, Employee shall be entitled to
the following (collectively referred to hereinafter as "Total Compensation"):
(a) The Company shall pay Employee during the period in
which Employee is employed by the Company an annual salary of One Hundred Fifty
Thousand Dollars ($150,000.00) or in such amount as may be determined by the
Company from time to time (but in no event shall such amount decrease) ("Base
Compensation"), payable periodically for such periods as may be established by
the Company for payment of its employees under its normal payroll practices.
(b) Employee may receive a bonus and fringe benefits each year
in amounts to be determined by the Company. Such bonus may, in the discretion
of the Company, be based, in part, upon the Company meeting certain financial
goals, which goals may be agreed upon by the Company and Employee.
4. STOCK OPTIONS, Incentive, Savings and Retirement Plans and
Welfare Benefit Plans.
(a) During the period in which Employee is employed by
the Company, all stock options heretofore granted to Employee under any of the
Company's stock option plans or employee benefit plans as of the date of this
Agreement shall continue in effect, vesting as therein provided, and Employee
shall have the right to exercise any vested stock option, whenever granted,
until it expires by its terms under the applicable option agreement.
(b) During the period in which Employee is employed by
the Company, Employee shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other employees of the Company.
(c) During the period in which Employee is employed by
the Company, Employee and/or Employee's family, as the case may be, shall be
eligible for participation and shall receive all benefits under welfare benefit
plans, practices and policies and programs provided by the Company to the
extent applicable generally to other employees of the Company, including,
without limitation, medical and dental insurance coverage under the Company's
medical and dental insurance plans.
2
<PAGE> 3
5. Expenses. Employee shall be reimbursed for all reasonable
business expenses incurred by him in connection with or incident to the
performance of his duties and responsibilities hereunder upon the Employee's
submission to the Company of vouchers or expense statements evidencing such
expenses in such form or format as the Company may reasonably require.
6. Non-Competition and Non-Disclosure:, Injunctive Relief.
Employee acknowledges that the services he is to render are of a special and
unusual character with unique value to the Company. The Company recognizes that
Employee is expected to be a factor in the growth and success of the Company.
The Company recognizes that the continued success of the Company depends, in
part, upon the effective performance of Employee's duties as employee of the
Company. Therefore, one of the primary purposes of this Agreement is to
provide for the long-term financial security of Employee and his family so that
he will be better able to direct his undivided attention to the successful
performance of his duties on behalf of the Company. In view of the value to the
Company of the services of Employee for which the Company has contracted
hereunder, because of certain confidential information to be obtained by or
disclosed to Employee, and as a inducement to the Company to enter into this
Agreement and to pay to Employee the compensation stated herein, Employee
covenants and agrees as follows:
(a) During the period in which Employee is employed by
the Company, Employee shall not directly or indirectly be employed by or render
advisory, consulting or other services in connection with any business
enterprise or person which operates a business in the oil and gas industry in
those states in which the Company or its subsidiaries owns or operates
properties.
(b) During the period in which Employee is employed by
the Company, Employee shall not, directly or indirectly, in any capacity
(including, without limitation, as a proprietor, investor, director or
officer), be financially interested in or engage in any business similar to or
related to the business of the Company if such business is in competition with
the Company in those states which the Company or its subsidiaries owns or
operates properties; however, it is specifically agreed between the parties
that Employee may continue to be financially interested in and engage in any
business similar to or related to the Company's business which he is interested
in or engaged in on the date of this Agreement, provided, that such activities
do not materially detract from the Employee's performance of his
responsibilities as Executive Vice President and Chief Financial Officer,
provided, further that, nothing contained in this subparagraph shall relieve
the Employee of his obligations contained in paragraph 6(a) above.
(c) During the period in which Employee is employed by
the Company and thereafter, Employee will not disclose to any third party or
directly or indirectly make use of, other than in connection with the business
and affairs of the Company, any knowledge or information pertaining to the
Company or any of its subsidiaries, their business or personnel or policies for
any reason without the prior consent of the Company.
3
<PAGE> 4
(d) During the period in which Employee is employed by
the Company, Employee may not solicit, raid, entice or induce 1) any person,
firm or corporation that is a customer to become a customer of another firm,
corporation or person; or 2) any person that is employed by the Company or its
subsidiaries to become employed by any other person, firm or company.
(e) Employee acknowledges and agrees that the services to
be rendered by him are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential and
proprietary information vital to the Company's and its subsidiaries'
businesses. By reason of this, Employee consents and agrees that if he violates
any of the provisions of this paragraph 6, the Company and its subsidiaries
would sustain irreparable harm and, therefore, in addition to any other
remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction restraining Employee from committing
or continuing any such violation of this Agreement.
7. Termination of Employment
(a) Death. Employee's employment shall terminate automatically
upon Employee's death.
(b) Termination of Employment By the Company For Cause. The
Company may terminate Employee's employment under this Agreement for Cause. For
purposes hereof, the term "Cause" shall mean (i) the inability of Employee,
through sickness or other incapacity, to perform his duties under this
Agreement for a period of six (6) months, (ii) dishonesty, theft, or conviction
of a crime involving moral turpitude, in each case only if it could reasonably
effect his ability to perform assigned duties for the Company or cause a
material adverse effect on the Company, (iii) commission of a material act of
fraud against the Company or its subsidiaries, or (iv) failure of Employee to
observe or perform his material duties and obligations as an employee of the
Company or a material breach of this Agreement, after thirty (30) days advance
written notice of such failure which has not been cured.
(c) Termination By the Company Without Cause. The Company may also
terminate Employee's employment under this Agreement without Cause.
(d) Termination By Employee for Good Reason. If a Change of
Control (as defined hereafter) in the Company has occurred, Employee may
terminate his employment during the Employment Period for Good Reason (defined
hereafter) upon thirty (30) days' notice to the Company. For purposes of this
Agreement, the term "Good Reason" shall mean the occurrence, without Employee's
express written consent, of any one or more of the following events:
(i) A change in Employee's duties or a change in the title or
offices held by Employee, or any occurrence which causes Employee to
have his principal place of employment somewhere other than Wichita,
Kansas.
4
<PAGE> 5
(ii) A reduction in Employee's compensation or the failure by the
Company to continue to provide prompt payment (or reimbursement to
Employee) of all reasonable expenses incurred by Employee in
connection with Employee's professional and business activities.
(iii) A failure by the Company to waive any and all restrictions
that might exist on the exercise of any stock options held by Employee
under the Company's stock option plans as of the date of a Change of
Control.
(iv) The failure of the Company to obtain the assumption of this
Agreement, without limitation or reduction, by any successor to the
Company.
(e) Voluntary Termination By Employee. Employee shall have the
right at any time after the date hereof to voluntarily terminate his employment
with the Company (a "Voluntary Termination") for any reason in the sole
discretion of Employee by not less than thirty (30) days' prior written notice
to the Company; provided however, a termination without Cause or a termination
for Good Reason shall not be treated for any purpose hereunder as a Voluntary
Termination.
(f) Change of Control. A "Change of Control" shall have occurred
if:
(i) fifty percent (50%) or more of the outstanding common stock of
the Company has been acquired by any person or persons (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Act")),
provided such person(s) is not a current stockholder(s) of the Company
currently holding ten percent (10%) or more of the outstanding common
stock of the Company. For purposes of this paragraph 7, such person
shall include affiliated persons (as defined in the Act).);
(ii) there has been a merger or equivalent combination involving
the Company after which fifty percent (50%) or more of the voting
stock of the surviving corporation is held by persons other than those
persons who were stockholders holding ten percent (10%) or more of the
outstanding stock of the Company immediately prior to the date of such
merger or equivalent combination; or
(iii) there has been a merger or equivalent combination or stock sale
involving the Company and after such transaction fifty percent (50%)
or more of the members of the Board elected by stockholders are
persons who were not directors immediately prior to such transaction.
8. Termination Procedures and Certain Definitions.
(a) Notice of Termination. Any termination by the Company for
Cause, without Cause or by Employee for Good Reason or in a Voluntary
Termination, shall be communicated by Notice of Termination to the other party
hereto given in accordance with paragraph 13 of this
5
<PAGE> 6
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of Employee's employment under the provision so indicated and (iii) if the Date
of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date. The failure by Employee or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
Employee or the Company, respectively, hereunder or preclude Employee or the
Company, respectively, from asserting such fact or circumstance in enforcing
Employee's or the Company's rights hereunder. Employee's continued employment
with the Company, after a Notice of Termination is provided, shall not
constitute consent to, or a waiver of any rights with respect to, any
circumstance constituting Good Reason hereunder.
(b) Date of Termination. "Date of Termination" means (i) if
Employee's employment is terminated by the Company for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be, (ii) if Employee's employment is terminated by the Company
other than for Cause, the Date of Termination shall be the date not less than
thirty (30) days after the date on which the Company notifies Employee of such
termination, and (iii) if Employee terminates his employment for Good Reason or
in a Voluntary Termination, the Date of Termination shall be the date, not less
than thirty (30) days after the date on which Employee notifies the Company of
such termination.
9. Obligations of the Company on Termination.
(a) If during the Employment Period, Employee's employment is
terminated with Cause, upon Employee's death or upon a Voluntary
Termination, the Company shall immediately pay Employee in cash the
amount of his Total Compensation previously earned but not yet paid.
(b) If during the Employment Period, Employee's
employment is terminated by the Company without Cause or by Employee
for Good Reason:
(i) In General. The Company shall immediately pay
Employee in cash the amount of his Total Compensation
previously earned but not yet paid.
(ii) Severance Benefits.
(a) All stock options of Employee under the
Company's stock option plans, which have not already
vested, shall immediately vest and be exercisable.
(b) Employee shall continue to participate in all
of the Company's welfare benefit plans, including
health and medical plans, for six (6) months after
termination and shall be entitled to reimbursement of
COBRA
6
<PAGE> 7
payments to maintain medical and dental insurance up
to twelve (12) additional months for said coverage.
(c) The Company shall pay Employee in a lump sum a
"Severance Benefit" in cash equal to three (3) times
the following:
(i) Employee's Base Compensation as of
the date of such termination, provided such
Base Compensation for this purpose shall not
be less than $175,000; and
(ii) The amount which the Company has
contributed to Employee's account in the
Company's 401(k) plan attributable to the
last full fiscal year.
Such payment shall be made within thirty (30) days following
said termination.
10. Payment of Legal Fees and Expenses. The Company shall pay to
Employee all legal fees and expenses incurred by Employee in successfully
obtaining or enforcing any right or benefit provided under this Agreement.
11. Burden and Benefit. This Agreement shall be binding upon, and
shall inure to the benefit of, the Company and Employee, and their respective
heirs, personal and legal representatives, successors and permitted assigns.
Employee's rights and obligations may not be assigned without the proper
written consent of the Company.
12. Governing Law. It is understood and agreed that the
construction and interpretation of this Agreement shall at all times and in all
respects be governed by the laws of the State of Kansas.
13. Notice. Any notice required to be given shall be sufficient if
it is in writing and sent by certified or registered mail, return receipt
requested, first-class postage prepaid, to his last know residence in the case
of Employee, and to its principal office in the State of Kansas in the case of
the Company.
14. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability
of the other provisions.
15. Entire Agreement. This Agreement contains the entire agreement
and understanding by and between the Company and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No waiver of any provision of this Agreement shall be valid unless it
is in writing and signed by the party against whom the waiver is sought
7
<PAGE> 8
to be enforced. No valid waiver of any provision of this Agreement at any time
shall be deemed a waiver of any other provision of this Agreement at such time
or any other time.
16. Modification. No amendment, alteration or modification to any
of the provisions of this Agreement shall be valid unless made in writing and
signed by both parties.
17. Paragraph Headings. The paragraph headings have been inserted
for convenience only and are not to be considered when construing the
provisions of this Agreement.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the day and year first above written.
"COMPANY" "EMPLOYEE"
HUGOTON ENERGY CORPORATION
/s/ W. MARK WOMBLE
------------------------------
W. MARK WOMBLE
BY: /s/ FLOYD C. WILSON
-------------------
NAME: Floyd C. Wilson
-------------------
TITLE: President and CEO
-------------------
ATTEST:
/s/ [ILLEGIBLE]
- -----------------------------
8
<PAGE> 1
EXHIBIT 10.10
SECOND AMENDMENT TO
LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (hereinafter referred to as
the "Amendment") executed as of the 11th day of June, 1996, by and among the
HUGOTON ENERGY CORPORATION, a Kansas corporation ("Hugoton"), HUGOTON
EXPLORATION CORPORATION, a Kansas corporation ("Exploration"), AMGAS
CORPORATION, a Kansas corporation ("AmGas"), TIFFANY GATHERING, INC., a
Delaware corporation ("Tiffany") and HEC TRADING COMPANY, a Texas corporation
("Trading") (Hugoton, Exploration, AmGas, Tiffany and Trading being hereinafter
referred to as the "Borrowers" and individually as a "Borrower") and BANK ONE,
TEXAS, N.A., a national banking association ("Bank One"), TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association ("TCB"), BANK OF MONTREAL
("BOM"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association
("Wells Fargo"), MEESPIERSON N.V., a company incorporated under the laws of the
Netherlands ("Mees"), CREDIT LYONNAIS CAYMAN ISLAND BRANCH ("CL") and BANK OF
SCOTLAND, a Scottish banking corporation ("BOS") (Bank One, TCB, BOM, Wells
Fargo, Mees, CL and BOS each in their capacity as a lender hereunder together
with each and every future holder of any note issued pursuant to this Agreement
are hereinafter collectively referred to as "Banks", and individually as
"Bank") and Bank One, as "Agent" and TCB, as "Co-Agent".
W I T N E S S E T H:
WHEREAS, as of September 7, 1995 the Borrowers and the Banks entered
into a Loan Agreement (the "Loan Agreement"), pursuant to the terms of which
the Banks agreed to provide a reducing revolver facility to Borrowers in
amounts of up to $250,000,000.00;
WHEREAS, as of January 22, 1996, Borrowers and Bank entered into a
First Amendment to Loan Agreement (the "First Amendment") to add Trading as a
Borrower hereunder and make certain other changes to the Loan Agreement; and
WHEREAS, Borrowers and Banks have agreed to make certain additional
amendments to the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. Unless otherwise defined herein, terms used in this Amendment
shall have the meanings assigned to such terms in the Loan Agreement.
2. Section 12(f) of the Loan Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
"(f) Dividends. The Borrowers will not declare or pay any
dividend, purchase, redeem or otherwise acquire for value any of its
stock now or hereafter outstanding, return any capital to
stockholders, or make any
<PAGE> 2
distribution of its assets to its stockholders as such, or permit any
of its Subsidiaries to purchase or otherwise acquire for value any of
its stock, except the foregoing shall not apply to (i) dividends by
Hugoton, not exceeding in any fiscal year an amount equal to 50% of
Hugoton's net income for such fiscal year as determined in accordance
with GAAP, and (ii) purchase by Hugoton of up to 1,000,000 shares of
its common stock for a price per share of not more than $10.00;
provided, however, that immediately before and after giving effect to
any such transaction no (i) default or Event of Default or (ii)
Borrowing Base Deficiency, shall exist."
3. As of the date of this Amendment, the Borrowing Base shall be
$135,000,000 and the Monthly Commitment Reduction shall be $0; provided,
however, that for the period beginning on the date of this Amendment and ending
on the next Determination Date, the last $5,000,000 of availability under the
Revolving Commitment may be used by Borrowers only for the acquisition of
proved-developed producing oil and gas reserves.
4. The obligation of the Banks hereunder to amend the Loan
Agreement as set forth above shall be subject to the following conditions
precedent:
(i) Execution and Delivery. Borrowers shall have executed
and delivered to Agent this Amendment and other required documents,
all in form and substance satisfactory to Banks;
(ii) Corporate Resolution. Agent shall have received
appropriate certified corporate resolutions for the Borrowers;
(iii) Other Documents. Agent shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
satisfactory to Agent; and
(iv) Legal Matters Satisfactory. All legal matters incident
to the consummation of the transactions contemplated hereby shall be
satisfactory to special counsel for Agent retained at the expense of
Borrowers.
5. The representations, warranties and affirmative and negative
covenants of Borrowers contained in Sections 9, 11 and 12 of the Loan
Agreement are incorporated herein by reference for all purposes. Except as
modified by this Amendment, Borrowers hereby restate and reaffirm each such
representation, warranty and affirmative and negative covenants.
6. Except to the extent its provisions are specifically amended,
modified or superseded by the First Amendment or this Amendment, the Loan
Agreement and all
- 2 -
<PAGE> 3
provisions thereof shall remain in full force and effect, and the same are in
all respects hereby ratified, confirmed and approved by Borrowers and the
Banks.
7. The Borrowers agree to indemnify and hold harmless the Banks
and their respective officers, employees, agents, attorneys and representatives
(singularly, an "Indemnified Party", and collectively, the "Indemnified
Parties") from and against any loss, cost, liability, damage or expense
(including the reasonable fees and out-of-pocket expenses of counsel to the
Banks, including all local counsel hired by such counsel) ("Claim") incurred by
the Banks in investigating or preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of any
commenced or threatened litigation, administrative proceeding or investigation
under any federal securities law, federal or state environmental law, or any
other statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon any acts,
practices or omissions or alleged acts, practices or omissions of the Borrowers
or their agents or arises in connection with the duties, obligations or
performance of the Indemnified Parties in negotiating, preparing, executing,
accepting, keeping, completing, countersigning, issuing, selling, delivering,
releasing, assigning, handling, certifying, processing or receiving or taking
any other action with respect to the Loan Documents and all documents, items
and materials contemplated thereby even if any of the foregoing arises out of
an Indemnified Party's ordinary negligence. The indemnity set forth herein
shall be in addition to any other obligations or liabilities of the Borrowers
to the Banks hereunder or at common law or otherwise, and shall survive any
termination of this Agreement, the expiration of the Loan and the payment of
all indebtedness of the Borrowers to the Banks hereunder and under the Notes,
provided that the Borrowers shall have no obligation under this Section 7 to
the Bank with respect to any of the foregoing arising out of the gross
negligence or willful misconduct of the Banks. The parties intend for the
provisions of this Section 7 to apply to and protect each Indemnified Party
from the consequences of strict liability imposed or threatened to be imposed
on any Indemnified Party as well as from the consequences of its own
negligence, whether or not that negligence is the sole, contributing, or
concurring cause of any Claim.
8. THIS WRITTEN SECOND AMENDMENT TO LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9. This Amendment may be executed in a number of identical
separate counterparts, each of which for all purposes is to be deemed an
original, but all of which shall constitute, collectively, one agreement. No
party to this Amendment shall be bound hereby until a counterpart of the
Amendment has been executed by all parties hereto.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed on the date first above written.
BORROWERS:
----------
HUGOTON ENERGY CORPORATION
By: /s/ W. MARK WOMBLE
------------------------------------------
W Mark Womble
Executive Vice President and
Chief Financial Officer
HUGOTON EXPLORATION CORPORATION
By: /s/ W. MARK WOMBLE
------------------------------------------
W. Mark Womble
Executive Vice President and
Chief Financial Officer
AMGAS CORPORATION
By: /s/ W. MARK WOMBLE
------------------------------------------
W. Mark Womble
Executive Vice President and
Chief Financial Officer
TIFFANY GATHERING, INC.
By: /s/ W. MARK WOMBLE
------------------------------------------
W. Mark Womble,
Executive Vice President and
Chief Financial Officer
- 4 -
<PAGE> 5
HEC TRADING COMPANY
By: /s/ W. MARK WOMBLE
------------------------------------------
W. Mark Womble
Executive Vice President and
Chief Financial Officer
AGENT:
------
BANK ONE, TEXAS, N.A
By: /s/ MYNAN C. FELDMAN
------------------------------------------
Mynan C. Feldman, Vice President
CO-AGENT:
---------
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ PAUL J. NIDOH
------------------------------------------
Paul J. Nidoh, Vice President
BANKS:
------
BANK ONE, TEXAS, N.A.
a national banking association
By: /s/ MYNAN FELDMAN
------------------------------------------
Mynan Feldman, Vice President
- 5 -
<PAGE> 6
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ PAUL NIDOH
------------------------------------------
Paul Nidoh, Vice President
BANK OF MONTREAL
BY: /s/ MICHAEL P. STUCKEY
------------------------------------------
Michael P. Stuckey, Director
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ KIRK M. SCOGGINS
------------------------------------------
Kirk M. Scoggins, Vice President
MEESPIERSON N.V.
By: /s/ KAREL LOUMAN
------------------------------------------
Karel Louman, Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ PASCAL POUPELLE
------------------------------------------
Pascal Poupelle, Senior Vice President
- 6 -
<PAGE> 7
BANK OF SCOTLAND
By: /s/ CATHERINE ONIFFREY
--------------------------------------
Catherine Oniffrey, Vice President
- 7 -
<PAGE> 1
EXHIBIT 10.15
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is dated the 28TH
day of December, 1995, between SHIELD PETROLEUM INCORPORATED, a Texas
corporation, ("Shield"), 1303 FM 2818 E, College Station, Texas 77840, and P&M
Properties, a Texas general partnership, ("P&MP"), 2703 Pierre, College
Station, Texas 77845, (Shield and P&MP are sometimes collectively referred to
as "Seller"), and HUGOTON ENERGY CORPORATION, a Kansas corporation, ("Buyer"),
301 N. Main, Suite 1900, Wichita, Kansas 67202. EAGLE OIL & GAS CO.
("Eagle"), 8111 Preston Road, Suite 900, Dallas, Texas 75225, joins herein for
the limited purpose described in Section 1.05.
In consideration of their mutual promises, Buyer and Seller agree to
the sale of the Leases and Assets (both defined below) under the terms of this
Agreement.
ARTICLE I
SALE AND PURCHASE
1.01 Purchase and Sale. Subject to the terms and conditions of
this Agreement, Seller shall sell and Buyer shall purchase and pay for, at the
Closing, as defined herein, the rights, titles and interests of Seller
described in this Article I (collectively the "Assets"). Shield is selling the
Brazos County Assets described below in Section 1.02, except for those certain
Brazos County Undeveloped Leases described below. P&MP is selling the Brazos
County Undeveloped Leases.
1.02 Brazos County Assets. An undivided twenty-five percent (25%)
interest in and to the oil and gas leases described on Exhibit "A-1" (the
"Brazos Leases"), including that portion of the Brazos Leases which lie outside
of the producing units described under Section B. of Exhibit A-1 (the "Brazos
County Undeveloped Leases"), which shall be the operating interests and net
revenue interests in the Brazos Leases shown on Exhibit "A-1," INSOFAR and ONLY
INSOFAR as said Brazos Leases cover the lands described on Exhibit "A-1" (the
"Brazos Lands"), together with an undivided twenty- five percent (25%)
interest in the following:
(a) all rights in respect of any pooled or unitized acreage
located in whole or in part within the Brazos Lands by virtue
of the Brazos Leases, including rights to production from the
pooled unit allocated to any lease being a part thereof,
regardless of whether such production is from the Brazos
Lands.
(b) the seven (7) existing producing wells and the one (1)
drilling well described on Exhibit "A-2."
(c) all production sales contracts, transportation agreements,
operating agreements, pooling or unitization agreements,
farmin agreements, leases of equipment or facilities, surface
leases, permits, rights-of- way, easements and licenses, AMI
<PAGE> 2
agreements, salt water disposal agreements, salt water
disposal permits, damage settlement agreements (surface or
otherwise), and other contracts and agreements of Seller that
are appurtenant to or used in connection with the Brazos
Leases and Lands, (collectively the "Brazos Contracts"),
including, without limitation, those described on Exhibit
"A-3," but only to the extent the same may be transferred
without violating the provisions thereof.
(d) all personal property, equipment and fixtures located on and
used in the operation of the Brazos Leases and Lands,
including, without limitation, that which is described on
Exhibit "A-4."
(e) copies, made at Buyer's expense, of files, records, documents
and data in the possession of Seller related to the Brazos
Leases and Lands or the other assets described in (a), (b) and
(d) above, the transfer or disclosure of which would not
violate the terms of any existing agreement(s) with a third
party.
1.03 Washington, Grimes, Montgomery and Austin County Assets. An
undivided fifty percent (50%), before Payout (as hereinafter defined in Section
6.03(b)) and an undivided forty-two and one half percent (42.5%), after Payout,
of Seller's interest in the oil, gas and mineral leases described in Exhibit
"B" (the "WGMA Leases"), insofar as the lands covered thereby (the "WGMA
Lands"); provided, however, that Seller may amend Exhibit "B," within ten (10)
days of the date hereof, to include additional oil, gas and mineral leases
covering up to 8,000 Mineral Acres (the "Additional WGMA Leases"), provided
Seller has obtained such leases by the expiration of the 10 day period. A
Mineral Acre is defined as the full mineral interest in one acre of land.
Seller shall furnish Buyer at the end of said 10 day period with an amendment,
if any, to Exhibit "B," showing the Additional WGMA Leases. A lease shall be
considered to have been obtained, for the purpose of this Section 1.03, when
payment is made to the lessor of the lease, or when the lease and a bank draft
representing payment of the bonus consideration for the lease are deposited for
collection with Seller's bank. Any lease obtained after 5:00 p.m. on January
2, 1996, shall not be an Additional WGMA Lease.
1.04 Excluded Assets. The following rights, titles and interests
of Seller are not included in the Assets and are expressly reserved to Seller
(collectively the "Excluded Assets"), to wit:
(a) all rights and choses in action arising, occurring or existing
in favor of Seller prior to the Effective Time (hereinafter
defined) or arising out of operation of or production from the
Assets prior to the Effective Time, including, but not limited
to, any and all contract rights, claims, receivables,
recoupment rights (including gas imbalances), accounting
adjustments, mispayments, erroneous payments or other claims
of any nature in favor of Seller and relating and accruing to
any time prior to the Effective Time, including, without
limitation, any such claims which Seller has against
Chesapeake Operating, Inc.
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<PAGE> 3
(b) Seller's rights in software, patents, licenses, processes,
intellectual property, depictions, designs, flow charts,
hardware, and all other like or similar property connected
with location diagnostics, target zone identification or
horizontal drilling and production procedures or technology.
1.05 Eagle Joinder. The WGMA Leases are subject to that certain
Letter Agreement dated December 13, 1994, as amended July 26,
1995, between Reata Oil and Gas Corporation and Eagle (the
"Letter Agreement"), pursuant to which Eagle advanced certain
monies to Shield for the acquisition of the WGMA Leases. Also
pursuant to the Letter Agreement, Eagle is entitled to
reimbursement of certain monies advanced, is granted an
unrecorded security interest in the WGMA Leases to secure said
reimbursement, and has an option to participate in ownership
of the WGMA Leases. Eagle joins in this Agreement for a
limited purpose, which is to evidence its consent to the sale
of the interest in the WGMA Leases described in Section 1.03
above, free and clear of: (i) any claim to reimbursement from
Seller for, (ii) any security interest in, and (iii) any
option to participate in the ownership of, the interest in the
WGMA Leases to be sold to Buyer hereunder (collectively the
"Eagle Claims"), subject to the satisfaction of the conditions
described in Section 3.03.
1.06 Effective Time. The purchase and sale shall be effective as
to oil runs and deliveries of gas and for all other purposes as of 7:00 a.m.
Central Time, on the 1st day January 1996 (the "Effective Time").
ARTICLE II
PURCHASE PRICE
2.01 Purchase Price. Subject to Section 2.03 below, the Purchase
Price for the Assets shall be as follows:
(a) Brazos County Assets described in Section 1.02 - Five Million
Two Hundred Fifty Thousand Dollars ($5,250,000.00).
(b) WGMA Leases described in Section 1.03 - Three Million Three
Hundred Thousand Dollars ($3,300,000.00).
(c) Additional WGMA Leases Described in Section 1.03 - One Million
One Hundred Thousand Dollars ($1,100,000.00), subject to the
adjustment to purchase price provisions of Section 2.03 and
3.02(f) below.
2.02 Payment of Purchase Price. The Purchase Price shall be paid
at the Closing by wire transfer or in other immediately available funds as may
be requested by Seller.
3
<PAGE> 4
2.03 Adjustment to Purchase Price. The Purchase Price shall be
subject to the following adjustments; which shall be made in proportion to the
interest transferred to Buyer:
(a) The Purchase Price shall be adjusted upward by the following:
(1) the value of all merchantable, allowable oil in
storage above the pipeline connection at the
Effective Time that is credited to the Assets, the
value to be the EOTT Energy Operating Limited
Partnership posted price in effect for such oil at
the respective wells described on Exhibit "A-2" as of
the Effective Time, less applicable taxes, and
adjusted for gravity, transportation and other
customary adjustments; and
(2) the amount of all actual direct operating
expenditures (including royalties and production
taxes paid with respect to the Assets, and also
including Seller's administrative overhead as
provided for in the applicable operating agreements)
paid by Seller that are attributable to the Assets
during the period of time between the Effective Time
and the Closing Date (as defined in Section 9.01
below).
(b) The Purchase Price shall be adjusted downward by the
following:
(1) any proceeds of production received by Seller that
are attributable to the Assets during the period of
time between the Effective Time and the Closing Date;
(2) an amount equal to all unpaid ad valorem, property,
production, severance and similar taxes and
assessments based upon or measured by the ownership
of property or the production of hydrocarbons or the
receipt of proceeds therefrom accruing to the Assets
prior to the Effective Time, which amount shall be
based upon such taxes assessed against the applicable
portion of the Assets for the preceding calendar year
or, in cases where such taxes are assessed on other
than a calendar year basis, for the tax related year
last ended;
(3) an amount equal to the actual monitory consideration
received by Seller and attributable to the Assets,
prior to closing, for the sale of any gas from the
Brazos Leases which is attributable to the ownership
of another party; and
(4) an amount equal to the aggregate value of Defects, as
determined in Section 3.02.
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<PAGE> 5
ARTICLE III
TITLE MATTERS
3.01 Access to Records. From the date hereof until the Closing,
Seller will give Buyer reasonable access during Seller's normal business hours
to all information related to the Assets, presently in Seller's custody at the
present location of those documents, and Seller will either copy such
information for the account of Buyer, in which event Buyer shall reimburse
Seller for the reasonable costs of such copying, or make the information
available to copying within the confines of Seller's offices.
3.02 Title Procedure. If any of the information or materials
supplied by Seller pursuant to this Agreement or any other information or data
reflects the existence of any Defect (defined below) Buyer shall notify Seller
in accordance with Section 3.02(b).
(a) Definition of Defect. For purposes of this Agreement,
"Defect" shall refer to any of the following (except to the
extent that any of them shall constitute a "Permitted
Encumbrance," as hereinafter defined): (i) liens securing
unpaid indebtedness or taxes, including all mortgages, deeds
of trusts or other adverse claims not shown on Exhibit C; (ii)
calls on production, preferential rights, consents to
assignment and similar provisions of this type commonly
encountered in the oil and gas industry; (iii) matters that
would increase the operating interest (without an accompanying
increase in net revenue interest) or reduce the net revenue
interest, each as set forth on Exhibits "A-1" and "B" (without
regard to whether such matters have arisen by, through or
under Seller); (iv) information indicating that title to any
part of the Assets is not vested in Seller; (v) differences
between the information and data supplied by Seller to Buyer
concerning the payout status of wells, the existence of
reversionary, back-in or other similar rights in favor of
third persons as of the Effective Time and the information and
data concerning such items, if any, contained in the Exhibits
or schedules to this Agreement; (vi) differences between the
operating interests or net revenue interests set forth on
Exhibits "A-1" and "B" and the operating interests and net
revenue interests determined by Buyer pursuant to its review
of title; and (vii) notice contained in any instrument
recorded in a county in which any of the Assets are located,
reflecting Seller's noncompliance with the terms and
provisions of any contract, lease, license, and/or any rule
or order promulgated by a state or federal authority having
regulatory jurisdiction over the Assets.
(b) Notice of Defects. Buyer shall give Seller notice of any
Defect. The Notice shall: (i) be in writing; (ii)
describe in sufficient detail the nature of the Defect(s);
(iii) state the amount by which each Defect has diminished the
value of the Asset(s) (which amount will be determined by the
Buyer in good faith and in a commercially reasonable manner on
the basis of the market value of the Assets affected and the
provision of Section 3.02(e) or 3.02(f)); and (iv) be
delivered to
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<PAGE> 6
Seller as soon as possible, but in no event later than 5:00
p.m., local time, on January 8, 1996. If Seller does not
agree with the value assigned to any Defect by Buyer, then
Buyer and Seller shall proceed in good faith to reach
agreement regarding the value. If Buyer and Seller are not
able to reach agreement concerning the value of any Defect on
or before January 10, 1996, then the Closing with respect to
the Asset(s) affected shall be the Delayed Closing Date as
more particularly provided for in Section 9.01. If Buyer and
Seller are not able to reach agreement concerning the value of
any Defect on or before the Delayed Closing Date, then the
Asset(s) affected shall be deleted from the sale contemplated
hereby and the Purchase Price shall be adjusted accordingly.
All Defects which are not identified to Seller as described
above are waived by Buyer.
(c) Remedies for Defects. Seller shall have until the Closing
Date to attempt to cure any Defect at its sole expense. If
Seller is unable to cure any Defect by the Closing Date, then
the Closing with respect to Asset(s) affected shall be the
Delayed Closing Date as more particularly provided for in
Section 9.01. If Seller is unable to cure any Defect by the
Delayed Closing Date, then Buyer may, at its option, elect:
(i) to accept the affected Asset(s) and cure the Defect
itself; or (ii) to delete the Asset(s), or the proportionate
part thereof, affected by the Defect from the sale
contemplated hereunder (it being understood that, in such
event, the Purchase Price shall be reduced in accordance with
Section 3.02(e) or 3.02(f), whichever is applicable).
Notwithstanding the remedies for Defects set forth above, if
the amount stated by Buyer by which the Defects reduce or
increase the value of the Assets does not exceed One Hundred
Thousand Dollars ($100,000.00), then Seller and Buyer shall
nevertheless proceed to the Delayed Closing without a
reduction or increase in the Purchase Price.
(d) Permitted Encumbrances. "Permitted Encumbrances" shall mean:
(i) minor Defects in title which do not require the payment of
money or are such as would normally be accepted by a
reasonable buyer of producing and/or non-producing oil and gas
leases using standards generally applied by such buyers in the
area in which the Assets are located; (ii) liens for labor,
services, materials or supplies furnished to the Assets which
are not delinquent and which will be paid or discharged in the
ordinary course of business; (iii) liens for taxes or
assessments not yet due and not delinquent; (iv) lessors'
royalties, overriding royalties, division orders, reversionary
interests and similar burdens that do not operate to reduce
the net revenue interest in any of the Assets to less than the
amount set forth on Exhibits "A-1" and "B"; (v) production
sale contracts, unitization and pooling declarations and
agreements and operating agreements, insofar as such contracts
and agreements do not operate to increase the operating
interest as set forth on Exhibits "A-1" and "B," or decrease
the net revenue interest as set forth on said Exhibits; (vi)
preferential rights to purchase and consents to assign for
which waivers have been obtained or preferential rights to
purchase for which the
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<PAGE> 7
applicable time period, after receipt of notice, for exercise
of the right has expired; and (vii) the matters subject to the
provisions of Section 3.03.
(e) Value of Brazos County Producing and Undeveloped Assets. For
the purpose of this Section 3.02, Buyer and Seller have
attached Schedule 3.02(e), which allocates the Purchase Price
among the Brazos County Producing Assets for the sole purpose
of adjusting the Purchase Price allocable to the Brazos County
Assets to reflect the maximum reduction in value of these
Assets caused by one or more Defects. The Purchase Price
shall be reduced dollar-for-dollar by the amount of any Defect
which is liquidated, provided that, in no case, can the value
of the Asset(s) affected be reduced below zero. If the amount
of any Defect is not liquidated, then Buyer and Seller shall
reduce the Purchase Price allocable to the affected Asset(s)
by an amount which they reasonably believe reflects the
reduction in value of the Asset(s) resulting from such
Defect(s).
(f) Value of WGMA Leases and Additional WGMA Leases. For the
purpose of this Section 3.02, Buyer and Seller have agreed
that the WGMA Leases cover 24,000 Mineral Acres and that the
value of each Mineral Acre covered by said WGMA Leases is Two
Hundred Seventy-five Dollars ($275.00) per Mineral Acre. For
the purpose of adjusting the Purchase Price, however, the
value of each Mineral Acre is proportionately reduced to the
interest to be assigned to Buyer, being One Hundred
Thirty-seven and 50/00 Dollars ($137.50). The Purchase Price
shall be reduced dollar-for-dollar by the amount of any Defect
which is liquidated, provided that, in no case, can the value
of the Asset(s) affected be reduced below zero. If the amount
of any Defect is not liquidated, then Buyer and Seller shall
reduce the Purchase Price allocable to the affected Asset(s)
by an amount which they reasonably believe reflects the
reduction in value of the Asset(s) resulting from such
Defect(s). After the date of this Agreement, Seller may
acquire Additional WGMA Leases covering up to an additional
8,000 Mineral Acres. If, at the Closing, it is determined
that the Additional WGMA Leases purchased on or before 5:00
p.m. on January 2, 1996, pursuant to Section 1.03 above, do
not cover 8,000 Mineral Acres, then the Purchase Price shall
be reduced dollar-for-dollar by an amount equal to the
difference between 8,000 Mineral Acres and the number of
Mineral Acres covered by the Additional WGMA Leases multiplied
by One Hundred Thirty-seven and 50/00 Dollars ($137.50) plus
the amount of any Defects valued in the same manner as
provided above for the WGMA Leases.
3.03 Certain Title Matters Subject to Escrow. All or portions of
the Assets are, or may be, subject to the liens described in
Exhibit "C" (the "Liens"). Seller is currently negotiating
with each of the holders of the Liens a liquidated payoff
amount, which Seller shall cause Buyer to deposit into an
escrow at the Closing, and in consideration of which
liquidated payoff amount each stated lien holder shall deposit
into said escrow a release, in a form satisfactory to Buyer,
insofar as each of the Liens cover the Assets to be
transferred to Buyer hereunder.
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<PAGE> 8
3.04 Casualty Loss--Brazos County Assets. If, prior to the
Closing, all or any portion of Assets comprised of the
producing wells described on Exhibit A-2 shall be destroyed by
fire or other casualty ("Casualty Defect"), Seller shall
notify Buyer promptly after Seller learns of such event.
Seller shall have the right, but not the obligation, to cure
any Casualty Defect by repairing such damage or, in the case
of personal property or fixtures, replacing them with
equivalent items, no later than the date of Closing, all to
Buyer's reasonable satisfaction. If any uncured Casualty
Defect exists at the Closing, Buyer shall proceed to purchase
the Assets affected thereby, and the Purchase price shall be
reduced by the aggregate reduction in value of the Assets on
account of such Casualty Defect, as determined by mutual
agreement of the parties. If the parties fail for any reason
to agree prior to the Closing on the amount of any Purchase
Price adjustments on account of Casualty Defects, Buyer shall
accept the affected Assets and the Purchase Price shall be
reduced by an amount determined by a mutually acceptable
independent appraiser, equal in value of all Casualty Defects
not accounted for at Closing.
ARTICLE IV
REPRESENTATIONS OF SELLER
Shield and P&MP, each individually, as applicable, and collectively,
as Seller, to the extent applicable to both Shield and P&MP, represent and
warrant to Buyer:
4.01 Existence. Shield is a corporation duty organized, validly
existing and in good standing under the laws of the State of Texas. P&MP is a
Texas general partnership duly organized and existing under the laws of the
State of Texas and comprised only of Ray Powell, general partner, and Ken
Martin, general partner.
4.02 Power and Authorization. Shield has all corporate power,
authority and capacity to enter into and perform this Agreement and the
transactions contemplated hereby. P&MP has the power, capacity and authority
to enter into and perform this Agreement and the transactions contemplated
hereby. The consummation of the transactions contemplated by this Agreement
will not violate, nor be in conflict with, any provision of Seller's charter,
bylaws, or governing documents, or any agreement or instrument to which Seller
is a party or is bound, or any judgment, decree, order, statute, rule or
regulation applicable to Seller. The execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate or partnership action, as the
case may be, on the part of Seller.
4.03 Valid, Binding and Enforceable. This Agreement has been duly
executed and delivered on behalf of Seller, and at the Closing all documents
and instruments required
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<PAGE> 9
hereunder to be executed and delivered by Seller shall have been duly executed
and delivered. This Agreement does, and such documents and instruments shall,
constitute legal and valid obligations of Seller.
4.04 Brokers. Seller has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement for which Buyer is or will be in any way
liable.
4.05 No Defaults. Seller, to the best of its knowledge, is not in
default under any contract or agreement pertaining to the Assets.
4.06 Title and Validity of Leases. Seller owns the Assets and has
full power and right to sell and convey the same. To the best of Seller's
knowledge, the Leases are in full force and effect, are valid and subsisting,
cover the entire estates they purport to cover, and are not subject to
forfeiture or termination from any cause.
4.07 Payment of Rents and Royalties. To the best of Seller's
knowledge, all royalties, rentals and other payments due under the Leases have
been properly and timely paid, and all conditions necessary to keep the Leases
in force have been fully performed.
4.08 Taxes. To the best of Seller's knowledge, all ad valorem,
property, production, severance, excise and similar taxes and assessments based
on or measured by the ownership of property or the production of hydrocarbons
or the receipt of proceeds therefrom on the Assets that have become due and
payable have been properly and timely paid.
4.09 Litigation. To the best of Seller's knowledge, no suit,
action, investigation or other legal proceeding is pending before any court or
governmental agency and no set of facts or cause of action exists that relates
to the Assets that might result in impairment or loss of Seller's title to any
portion of the Assets or the value thereof or that might hinder or impede the
operation or enjoyment of the Leases.
4.10 Compliance With Laws. To the best of Seller's knowledge, all
laws, rules, regulations, ordinances and orders of all local, state and federal
governmental bodies, authorities and agencies having jurisdiction over the
Assets have been complied with.
4.11 Environmental Condition. Seller, to the best of its knowledge,
with respect to the Assets, is not in violation of or subject to any existing,
pending or threatened investigation or inquiry by any governmental authority or
to any remedial obligations under any applicable laws pertaining to health or
the environment as such laws now exist and are defined in Section 10.05 and
sometimes collectively called "Applicable Environmental Laws." To the best of
Seller's knowledge, no Hazardous Substances or Waste Material (as those terms
are defined in Applicable Environmental Laws or in regulations promulgated
thereunder) have been disposed of or otherwise released on or to the Assets.
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4.12 Preferential Rights and Consents. There are no existing
agreements, options, preferential rights to purchase, or required consents to
assignment, commitments or rights with, to or in any third party to acquire any
interest of Seller in any portion of the Assets. Further, Seller does not
require any consent or approval of third parties or governmental agencies to
enter into this Agreement or to consummate the transactions contemplated
herein.
4.13 Prepayments, Non-Consent Operations and Calls. Seller is not
obligated to deliver any quantities of oil, gas or other hydrocarbon substances
at some future time without thereafter receiving full payment therefor in the
ordinary course of business. No operations have been conducted pursuant to any
agreement to which Seller is a party and that affect the Assets which would
result in Seller relinquishing, permanently or temporarily, any interests or
ownership rights in any portion of its Assets, or under which Seller has become
a "non-consenting" party. Seller has not granted any person, firm or entity
any call upon, option to purchase or similar rights with respect to any oil,
gas or other hydrocarbon substances to be produced from or which is allocable
to the Assets.
4.14 Gas Imbalances and Production Allowables. There are no gas
imbalances relating to any well included in the Assets and no well included in
the Assets is subject to penalty because it has produced in excess of any
production allowable prescribed by any governmental authority having
jurisdiction.
4.15 Disclaimers. THE REPRESENTATIONS AND WARRANTIES OF SELLER
CONTAINED IN THIS AGREEMENT (OR IN THE ASSIGNMENT) AND IN ANY OTHER TRANSACTION
DOCUMENTS TO WHICH SELLER IS A PARTY ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND
SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND
WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, EXCEPT AS SET FORTH IN ANY
OTHER TRANSACTION DOCUMENTS, THE ASSETS SHALL BE CONVEYED PURSUANT HERETO
WITHOUT ANY WARRANTY OR REPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, AND, WITH RESPECT TO THE PERSONAL PROPERTY AND EQUIPMENT, WITHOUT
ANY REPRESENTATION RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A
PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR
MERCHANTABILITY OF ANY PORTION OF THE PROPERTY OR ITS FITNESS FOR ANY PURPOSE,
AND, EXCEPT AS PROVIDED OTHERWISE IN ANY TRANSACTION DOCUMENTS, WITHOUT ANY
OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION
WHATSOEVER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE TRANSACTION
DOCUMENTS, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA,
REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR
HEREAFTER FURNISHED OR MADE AVAILABLE TO THE BUYER IN CONNECTION WITH THIS
AGREEMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO
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PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO
PRODUCE HYDROCARBONS.
ARTICLE V
REPRESENTATIONS OF BUYER
Buyer represents and warrants to Seller that:
5.01 Existence. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas, and Buyer
is duly qualified to carry on its business in the State of Texas.
5.02 Power and Authorization. Buyer has all corporate power,
authority and capacity to enter into and perform this Agreement and the
transactions contemplated hereby. The consummation of the transactions
contemplated by this Agreement will not violate, nor be in conflict with, any
provision of Buyer's charter, bylaws, or governing documents, or any agreement
or instrument to which Buyer is a party or is bound, or any judgment, decree,
order, statute, rule or regulation applicable to Buyer. The execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite corporate action
on the part of Buyer.
5.03 Valid, Binding and Enforceable. This Agreement has been duly
executed and delivered on behalf of Buyer, and at the Closing all documents and
instruments required hereunder to be executed and delivered by Buyer shall have
been duly executed and delivered. This Agreement does, and such documents and
instruments shall, constitute legal and valid obligations of Buyer.
5.04 Brokers. Buyer has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement for which Seller is or will be in any
way liable.
5.05 Governmental Requirements. By the Closing, Buyer shall have
received or procured all required bonds, governmental approvals, consents,
licenses and permits required in the ownership of the Assets except for those
approvals, consents, licenses and permits ordinarily acquired after the
Closing.
5.06 Independent Investigation and Disclaimer. Prior to the
Closing of this Agreement, Buyer has been afforded the opportunity to inspect
the Assets and to examine the records of Seller at Seller's offices with
respect to the Assets, and has been afforded access to all information in
Seller's possession with respect to the Assets. BUYER ACKNOWLEDGES THAT SELLER
HAS MADE NO REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF
SUCH INFORMATION, OR AS TO ANY OTHER
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INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR
ON BEHALF OF SELLER (INCLUDING, WITHOUT LIMITATION, THE EXISTENCE OR EXTENT OF
OIL, GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF
RECOVERING ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCTION
PRICING ASSUMPTION, PRESENT OR PAST PRODUCTION RATES, THE CONDITION OF ANY
WELL, AND THE ABILITY TO SELL OIL OR GAS PRODUCTION AFTER THE CLOSING). IN
ENTERING INTO AND PERFORMING THIS AGREEMENT, BUYER HAS RELIED SOLELY UPON ITS
INDEPENDENT INVESTIGATION OF, AND JUDGMENT WITH RESPECT TO, THE ASSETS, AND
THEIR VALUE.
ARTICLE VI
COVENANTS
6.01 Operations. From the date of this Agreement until the
Closing, Seller (i) shall permit Buyer to have reasonable access to the Assets;
and (ii) shall operate the Assets as a reasonably prudent operator.
Specifically:
(a) Seller shall not enter into any contractual commitments or
other arrangements, including AFE's for any single operation
involving amounts exceeding On Hundred Thousand Dollars
($100,000.00), or for any single operation having a projected
duration exceeding thirty (30) days, which would continue
beyond the Closing and which would be after the Closing
binding upon Buyer, without the prior written consent of
Buyer.
(b) Seller shall not sell, transfer, convey or encumber any
portion of the Assets, or create or permit to exist any
security interest, liens or encumbrances on any of the
Assets, except for Permitted Encumbrances.
(c) Seller shall not release any of the Brazos Leases or the WGMA
Leases, without the prior written consent of Buyer.
6.02 Confidentiality. Until the Closing, Buyer shall cause the
information and data furnished or made available by Seller to Buyer and its
officers, employees, and representatives in connection with this Agreement or
Buyer's investigation of the Assets to be maintained in strict confidence.
6.03 Development Agreement. As a condition to the Closing, Buyer
and Seller will negotiate in good faith a mutually acceptable agreement for the
exploration and development of the undeveloped Brazos Leases, and the WGMA
Leases, including the Additional WGMA Leases (the "Development Agreement").
Among other provisions, to be negotiated and agreed upon by the parties, the
Development Agreement shall provide:
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(a) The lands subject to the Development Agreement shall be
operated pursuant to the terms of a mutually acceptable form
of Operating Agreement naming Reata Oil and Gas Corporation as
Operator (the "Operating Agreement").
(b) Payout shall be on a well-by-well basis with respect to each
proration unit or pooled unit then authorized or prescribed by
statewide or special field rules, as the case may be, for the
reservoir in which the first well is completed and which
includes all or a portion of any of the non-productive leases
described above (the "Unit"). Payout shall occur on the first
day of the month following the date on which the gross
proceeds of production actually received by Operator from the
Unit, less (i) applicable production taxes or severance taxes;
and less (ii) all royalties, overriding royalties, and other
payments out of production which as of the Effective Time
burden the Leases included in the Unit; and less any
overriding royalty reserved by Seller under this Agreement,
shall equal the costs incurred by Operator in drilling,
testing, completing, equipping and operating the first well
completed for production on said Unit, which costs shall be
calculated in accordance with the accounting procedure
attached to the Operating Agreement. If prior to completion
of the first well on a Unit for production, a prior well is
commenced, but is not completed for production, but is plugged
and abandoned, then the costs of such a well shall be included
in the amounts to be recovered for payout to occur. It is the
intent of the parties hereto that only the costs, as set out
above, incurred in connection with the initial well drilled on
a Unit shall be used in the calculation of payout of a well.
No such costs incurred in any subsequent operations within the
Unit, including but not limited to the drilling of additional
wells within the Unit, reworking or redrilling of the initial
well, or drilling of additional horizontal laterals within
said well, whether undertaken prior to or subsequent to the
payout of a well, shall be counted in the calculation of the
payout of a well.
(c) As additional consideration for the sale and purchase of the
non-producing leases described above, Buyer will pay to
Operator for the account of Seller, on a well-by-well basis,
an amount equal to five percent (5%) of all of the costs
incurred by Operator in drilling, testing, completing, and
initially equipping the initial well completed for production
or plugged and abandoned on each Unit, limited, however, to
one hundred ten percent (110%) of such costs as shown on the
AFE approved by Buyer for each such well, proportionately
reduced to Buyer's operating interest in such well.
(d) As further additional consideration for the sale and purchase
of the non-producing leases described above, Buyer will pay to
Operator for the account of Seller, on a well-by-well basis,
an amount equal to three and three quarters percent (3.75%) of
all of the costs incurred by Operator in drilling, testing,
completing, and initially equipping and operating the initial
well completed for production or
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plugged and abandoned on each Unit which includes all or a
portion of the WGMA Leases
The foregoing Sub-Sections 6.03(b) and 6.03(d) shall have no application to
any well or Unit comprised in whole or in part of the Brazos Leases.
ARTICLE VII
ASSIGNMENT AND BILL OF SALE
7.01 Assignment and Bill of Sale. As a condition to the Closing,
Buyer and Seller will negotiate in good faith a mutually acceptable assignment
and bill of sale (the "Assignment"), which shall be made with a general
warranty of title, limited, however, to return of the Purchase Price allocable
to the Asset or the portion thereof with respect to which there is a failure of
title. SELLER SHALL MAKE NO WARRANTY OR REPRESENTATION, EXPRESSED OR IMPLIED,
AS TO THE MERCHANTABILITY OF ANY OF THE PERSONAL PROPERTY AND EQUIPMENT RELATED
TO THE ASSIGNED INTERESTS OR THEIR FITNESS FOR ANY PURPOSE, BUYER HAVING
SATISFIED ITSELF AS TO THE CONDITION OF SAME, AND BUYER AGREEING THAT IT
ACCEPTS THE SAME "AS IS, WHERE IS, WITH ALL FAULTS."
7.02 Reserved Overriding Royalty. With respect to the WGMA Leases,
including the Additional WGMA Leases, if the net revenue for any of the WGMA
Leases is eighty percent (80%) or greater, then Seller shall reserve in the
Assignment an overriding royalty equal to five percent (5%) of 8/8
proportionately reduced to the interest assigned to Buyer and proportionately
reduced to the extent that any of the WGMA Leases covers less than the entire
oil and gas leasehold estate in the lands covered thereby. If the net revenue
for any of the WGMA Leases is less than eighty percent (80%), then Seller shall
reserve an overriding royalty equal to the difference between twenty-five
percent (25%) and existing lease burdens at the Effective Time, proportionately
reduced as described above. With respect to the Brazos Leases, Seller shall
reserve an overriding royalty equal to the difference, if any, between
twenty-five percent (25%) and lease burdens existing at the Effective Time,
proportionately reduced as described above. Notwithstanding the foregoing,
Seller's reserved overriding royalty shall be reduced to the extent necessary
so that Buyer receives not less than a seventy-five percent (75%) net revenue
interest in each of the leases, proportionately reduced as described above,
unless the net revenue for any lease was, at the Effective Time, seventy-five
percent (75%) or less, in which case Seller will assign the lease at its
existing net revenue interest. In no event shall Seller retain an overriding
royalty on any lease in excess of 5% of 8/8ths, proportionately reduced as set
out above.
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ARTICLE VIII
CONDITIONS OF CLOSING
8.01 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver of Seller, of the following condition:
(a) All representations and warranties of Buyer in this Agreement
shall be true in all material respects at and as of the
Closing as if such representations and warranties were made at
and as of the Closing, and Buyer shall have performed and
satisfied all covenants and agreements required by this
Agreement to be performed and satisfied by Buyer at or prior
to the Closing.
8.02 Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the transactions contemplated by this Agreement are subject to
the satisfaction or waiver by Buyer, of the following conditions:
(a) all representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of
the Closing as if such representations and warranties were
made at and as of the Closing, and Seller shall have performed
and satisfied all agreements required by this Agreement to be
performed and satisfied by Seller at or prior to the Closing.
(b) there shall have been no material adverse change in the
physical condition of the properties and no event, unremedied
or unwaived, shall have occurred which causes a material
reduction in the value of the Assets considered as a whole,
since the date of this Agreement, excluding, however, any
reduction in value as a result of changes in the sales price
of oil and or gas.
8.03 Conditions to Obligations of Both Parties. The obligations of
Seller and Buyer to consummate the transactions contemplated by this Agreement
are subject to the satisfaction or waiver by both parties, of the following
conditions:
(a) There shall not be pending or instituted, threatened or
proposed, any action or proceeding by or before any court,
administration agency, or any other person, challenging or
complaining of, or seeking to collect damages or other relief
in connection with the transactions contemplated by this
Agreement.
(b) no state or federal statute, rule, regulation or action shall
exist or shall have been adopted or taken and no judicial or
administrative decision shall have been entered (whether on a
preliminary or final basis), that would prohibit, restrict or
delay the consummation of the transactions contemplated by
this Agreement or make the payments due hereunder illegal.
(c) Seller shall have reached agreement with the holders of the
Liens reflected on the attached Exhibit C concerning the
liquidated amount to be deposited in escrow by Buyer for each
at the Closing, and each holder of the Liens shall have
deposited
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in escrow a release of their respective claims, in a form
satisfactory to Buyer, all as more particularly described in
Section 3.03 above.
(d) Buyer and Seller shall have agreed upon the terms of a
mutually acceptable Development Agreement and Operating
Agreement, as provided for in Section 6.03 above, and a
mutually acceptable Assignment as provided for in Section 7.01
above.
ARTICLE IX
CLOSING
9.01 Date of Closing. Subject to the conditions stated in this
Agreement, the consummation of the transactions contemplated by this Agreement
(the "Closing") shall be held on January 10, 1996, at 9:00 a.m., or in such
other date as the parties shall agree in writing. Said date, if amended, shall
be referred to as the "Closing Date." Provided, however, if on the Closing
Date, either or both of the following conditions (called the "Delayed Closing
Conditions") exist with respect to any Asset(s), then the Closing shall occur
only with respect to all Asset(s) not affected by either of the Delayed Closing
Conditions. Delayed Closing Conditions exist if: (i) an Asset is affected by a
Defect which Seller has elected to cure, but the Defect has not been cured to
Buyers satisfaction on the Closing Date; or (ii) an Asset is affected by a
Defect and on the Closing Date Buyer and Seller have been unable to reach
agreement about the value of the Defect. The Closing with respect to the
remaining Asset(s), being those affected by Delayed Closing Conditions, shall
be held on January 31, 1996 (the "Delayed Closing Date"). If there is a
Delayed Closing Date, then the Closing with respect to those Assets shall take
place in the same manner and with the same effect as if the Closing had
occurred on the Closing Date.
9.02 Place of Closing. The Closing shall be held at the offices of
Seller, 1303 FM 2818 E, College Station, Texas, or at such other place as Buyer
and Seller may agree upon in writing.
9.03 Closing Obligations. At the Closing the following events
shall occur, each being a condition precedent to the others and each being
deemed to have occurred simultaneously with the others:
(a) Seller shall execute, acknowledge and deliver to the Buyer (in
sufficient counterparts to facilitate recording) the
Assignment. If any Assets are subject to Delayed Closing
Conditions, then the Assignment with respect to the affected
Assets shall be delivered on the Delayed Closing Date.
(b) Seller and Buyer shall execute, acknowledge and deliver, each
to the other, an original counterpart of (i) the Operating
Agreement described in Section 6.03(a);
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(ii) the Development Agreement described in Section 6.03; and
the Assignment described in Section 7.01.
(c) Buyer shall make payment of the Purchase Price to Seller. If
any Assets are subject to Delayed Closing Conditions, then the
Purchase Price with respect to those Assets shall be paid on
the Delayed Closing Date.
(d) Seller and Buyer shall execute and deliver a settlement
statement (the "Preliminary Settlement Statement") prepared by
Seller that shall set forth the Preliminary Amount (as
hereinafter defined) and each adjustment and the calculation
of such adjustments used to determine such amount. The term
"Preliminary Amount" shall mean the Purchase Price adjusted as
provided in Section 2.03 using for such adjustments the best
information then available.
ARTICLE X
POST-CLOSING RIGHTS, OBLIGATIONS
AND INDEMNITIES
10.01 Post-Closing Adjustments. Within sixty (60) days after the
Closing, Seller shall make available to Buyer all accounting records necessary
for Buyer to prepare, in accordance with this Agreement, a statement (the
"Final Settlement Statement") setting forth each adjustment or payment which
was not finally determined as of the Closing and showing the calculation of
such adjustments. As soon as practicable after the receipt of the Final
Settlement Statement, Seller shall deliver to Buyer a written report containing
any changes which Seller proposes be made to the Final Settlement Statement.
The parties shall undertake to agree with respect to the amounts due pursuant
to such post- closing adjustment no later than one-hundred twenty (120) days
after the Closing Date. If such post-closing adjustment has not been agreed to
within one-hundred eighty (180) days after the Closing Date, either party may
seek to enforce any rights it claims hereunder. The date upon which such
agreement is reached or upon which the Adjusted Purchase Price is established,
shall be referred to as the "Final Settlement Date." In the event that (i) the
Adjusted Purchase Price is more than the Preliminary Amount, Buyer shall
deliver to Seller or to Seller's account the amount of such difference in
immediately available funds; or (ii) the Adjusted Purchase Price is less than
the Preliminary Amount, Seller shall deliver to Buyer or to Buyer's account the
amount of such difference in immediately available funds. Payment by Buyer or
Seller shall be made within ten (10) days of the Final Settlement Date.
10.02 Indemnification by Seller. Seller agrees to indemnify and
hold Buyer harmless from and against any and all Claims and Environmental
Claims (each as hereinafter defined) of any nature arising out of the
ownership, use, sale, condition or operation of the Assets accruing, occurring
or existing before the Effective Time, except as otherwise provided herein.
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10.03 Assumption of Obligations and Indemnification. From and after
the Closing, Buyer assumes and agrees to timely pay and perform, and to
indemnify and hold Seller harmless from and against, Buyer's proportionate
share of all duties, obligations, and liabilities relating to the ownership,
use or operation of the Assets after the Effective Time, including, without
limitation, (i) express or implied covenants and obligations relating to the
Assets provided for in any agreements affecting the Assets; (ii) expenses and
costs of plugging and abandoning wells and the restoration of well or operation
sites located on lands included in the Assets, all in accordance with the
applicable laws, regulations and contractual provisions; and (iii)
Environmental Claims.
10.04 Claims. For the purposes of this Agreement, and particularly
this Article X, "Claims" shall mean all demands, claims, actions, causes of
action, judgments, assessments, losses, liabilities, damages, (including, but
not limited to, actual, consequential, incidental, exemplary, punitive, and
statutory) and costs (including reasonable attorney's fees and all other
litigation expenses), whether known or unknown, asserted or unasserted, founded
in contract or tort, and whether statutory or common-law.
10.05 Environmental Claims. For the purposes of this Agreement, and
particularly this Article X, "Environmental Claims" shall mean any loss,
liability, claims, fines, expenses, costs (including attorney's fees and
expenses) and causes of action caused by or arising out of any federal, state
or local laws, rules, orders and regulations applicable to any Waste Material
or Hazardous Substances on or included with the Assets for the presence,
disposal, release or threatened release of waste material or hazardous
substance from the Leases and other Assets into the atmosphere or into of upon
land or any water course or body of water, including ground water, whether or
not attributable to Seller's activities or the activities of Seller's officers,
employees or agents, or to the activities of Buyer, or Buyer's officers,
employees or agents or to the activities of any third parties, including
liability for voluntary environmental response actions undertaken pursuant to
the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") or any other federal, state or local law. For purposes of this
Agreement, "Waste Material" shall mean any substance harmful to the atmosphere,
land, water courses, bodies of water, or groundwater that does not come within
the definition of "Hazardous Substance." "Hazardous Substance" shall mean the
following: (1) any "hazardous waste" or "solid waste" as defined by the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections 6901, et
seq.) ("RCRA"), and regulations promulgated thereunder; (2) any "hazardous
substance" being "released" in "reportable quantity" as such terms are defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Sections 69601, et seq.) ("CERCLA"), and regulations
promulgated thereunder, (3) asbestos; (4) polychlorinated biphenyls; (5) area
foraldehyde insulation; (6) "hazardous chemicals" or "extremely hazardous
substances," in quantities sufficient to require reporting, registration,
notification and/or special treatment or handling under the Emergency Planning
and Community Right-To-Know Act of 1986 (42 U.S.C. Sections 11001, et seq.)
("EPCRA"), and regulations promulgated thereunder; (7) any "hazardous
chemicals" in levels that would result in exposures greater than those allowed
by permissible exposure limits established pursuant to the Occupational Safety
and Health Act of 1970 (29 U.S.C. Sections 651, et seq.) ("OSHA"), and
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regulations promulgated thereunder; (8) any substance which requires reporting,
registration, notification, removal, abatement and/or special treatment,
storage, handling or disposal under Section 6, 7 and 8 of the Toxic Substance
Control Act (15 U.S.C. Sections 2601, et seq.) ("TSC"), and regulations
promulgated thereunder; (9) any toxic or hazardous substances described in
Occupational Safety and Health Standards (29 C.F.R. Sections 1910.1000, et
seq.) in levels which would result in exposures greater than those allowed by
the permissible exposure limits pursuant to such regulations; (10) the contents
of any storage tanks, whether above or below ground, including, without
limitation, refined petroleum products, gasoline, diesel, used oil, and their
constituents; (11) associated equipment related to those materials described in
clauses (1) through (10) of this definition; (12) any "pollutant" as defined by
the Federal Water Pollution Act (33 U.S.C. Sections 1251, et seq.); and (13)
any "air pollutant" as defined by the Federal Clean Air Act (42 U.S.C. Sections
7401, et seq.) as such laws are in effect as of the Closing Date. For the
purpose of this Agreement "Applicable Environmental Laws" shall mean the
statutes identified in clauses (1), (2), (6), (7), (8), (12) and (13) of the
Texas Water Code, the Texas Solid Waste Disposal Act and similar laws and
regulations promulgated thereunder.
ARTICLE XI
TERMINATION
11.01 Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) By mutual consent of the parties.
(b) By either party if the Closing shall not have occurred by
February 2, 1996.
(c) By either Seller or Buyer if the Conditions to the Closing
described for that party in Article VIII have not been
satisfied or waived at the time of the Closing with respect to
the Assets affected by the Closing.
(d) By Buyer in the event that before the Closing, Buyer
demonstrates that there is an existing Environmental Claim
affecting the Assets, which Seller has not remedied or caused
to be remedied.
Notwithstanding the foregoing provisions concerning termination, neither party
shall exercise any right of termination pursuant to this Section 11.01 if the
event giving rise to such termination right shall be due to the willful failure
of such party to perform or observe in any material respect any of the
covenants or agreements set forth herein to be performed or observed by such
party.
11.02 Return of Information. If this Agreement is terminated Buyer
shall return to Seller all information and material delivered to Buyer by
Seller pursuant to the terms of this Agreement.
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11.03 Liabilities Upon Termination. If this Agreement is terminated
for any reason or is breached, nothing contained herein shall be construed to
limit Seller's or Buyer's legal or equitable remedies including, without
limitation, damages for the breach or failure of any representation, warranty,
covenant or agreement contained herein and the right to enforce specific
performance of this Agreement.
11.04 Effect of Termination. If this Agreement is terminated, as
provided above, this Agreement shall become void and of no further force or
effect.
ARTICLE XII
MISCELLANEOUS
12.01 Expenses. Except as otherwise specifically provided in this
Agreement, all fees, costs and expenses incurred by Buyer or Seller in
negotiating this Agreement or in consummating the transactions contemplated by
this Agreement shall be paid by the party incurring the same, including,
without limitation, legal and accounting fees, costs and expenses.
12.02 Notices. All notices and communications required or permitted
under this Agreement shall be in writing and shall be effective when delivered
addressed as follows:
If to Seller:
------------
Shield Petroleum Incorporated
1303 FM 2818 E.
College Station, Texas 77840
Attn: Ray Powell
(409) 696-0481 (Fax)
If to Buyer:
-----------
Hugoton Energy Corporation
301 N. Main, Suite 1900
Wichita, Kansas 67202
Attn: Floyd Wilson
(316) 269-6870 (Fax)
Either party may, by written notice so delivered to the other, change the
address to which delivery shall thereafter be made.
12.03 Amendment and Waiver. This Agreement may not be altered or
amended, nor any rights hereunder be waived, except by an instrument in writing
executed by the party or
20
<PAGE> 21
parties to be charged with such amendment or waiver. No waiver of any term,
provision or condition of this Agreement, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
12.04 Assignment. Neither Seller nor Buyer may assign any portion
of its rights or delegate any portion of its duties or obligations under this
Agreement without the prior written consent of the other party.
12.05 Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of Texas.
12.06 Entire Agreement. This Agreement (including Exhibits hereto)
constitutes the entire understanding between the parties with respect to the
subject matter hereof and supersedes all negotiations, prior discussions and
prior agreements and understandings relating to such subject matter. No
material representation, warranty, covenant, agreement, promise, inducement or
statement, whether oral or written, has been made by Seller or Buyer and relied
upon by the other that is not set forth in this Agreement or in the instruments
referred to herein, and neither Seller nor Buyer shall be bound by or liable
for any alleged representation, warranty, covenant, agreement, promise,
inducement or statement not so set forth.
12.07 Parties in Interest. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and, except as otherwise
prohibited, their respective successors and assigns. Nothing contained in this
Agreement, express or implied, is intended to confer upon any other person or
entity any benefits, rights or remedies.
12.08 Arbitration. Notwithstanding any other provision herein to
the contrary, all claims, demands, disputes, controversies and differences in
connection with this Agreement that may arise between the parties to this
Agreement shall be settled by arbitration as set forth herein. Such
arbitration shall be governed by the provisions of the Texas General
Arbitration Act, Article 224, et seq., of the Revised Civil Statutes of Texas.
Either party may make a demand for arbitration concerning a controversy that
has arisen that is subject to this Agreement by delivering written notice
thereof to the other parties. The parties hereto may agree upon one (1)
arbitrator, but in the event that they cannot so agree within ten (10) days
after a demand for arbitration has been made, then there shall be three (3)
arbitrators, one named in writing by each of the parties within fifteen (15)
days after demand for arbitration is made, and the third to be chosen by the
two (2) arbitrators so named. Should either party refuse or neglect to join in
the appointment of the arbitrators, they shall be appointed in accordance with
the provisions of Article 226 of the Revised Civil Statutes of Texas. Any
arbitrator so chosen shall be independent and shall not be affiliated in any
way with the parties to this Agreement or their agents, accountants or
attorneys. All arbitration hearings conducted hereunder shall take place in
Brazos County, Texas. All judicial proceedings to enforce any of the
provisions hereof and/or any decision or award of the arbitrators or any
challenge to the arbitration shall take place in the United States District
Court for the Southern District of Texas, Houston Division.
21
<PAGE> 22
The hearing before the arbitrators of the matter to be arbitrated shall be at
the time and place within said county as is selected by the arbitrators. The
arbitration hearings shall be held within thirty (30) days after all
arbitrators have been appointed. Notice shall be given and the hearing
conducted in accordance with the provisions of Articles 228, 229 and 230 of the
Revised Civil Statutes of Texas. At the hearing, any relevant evidence may be
presented by either party, and the formal rules of evidence applicable to
judicial proceedings shall not govern. Evidence may be admitted or excluded in
the sole discretion of the arbitrators. If there is only one (1) arbitrator,
his or her decision shall be binding and conclusive on the parties. If there
are three (3) arbitrators, the decision of any two (2) shall be binding and
conclusive. The arbitrators shall hear and determine the matter and shall
execute and acknowledge the award in writing and deliver a copy thereof to each
of the parties by registered or certified mail. A judgment confirming the
award of the arbitrators may be rendered by the United States District Court
for the Southern District of Texas, Houston Division.
12.09 Survival. The warranties, representations and indemnities of
the parties under this Agreement and the right to enforce same shall terminate
at the Closing and the delivery of the Assignment except those expressed in
Articles 4.01, 4.02, 4.03, 4.04, 5.01, 5.02, 5.03 and 5.04, which shall survive
for two (2) years. The warranty, indemnities and assumptions under Articles
7.01, 10.02 and 10.03 shall survive the Closing indefinitely.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.11 Construction of Agreement. In construing this Agreement, the
following rules shall apply:
(a) Captions. No consideration shall be given to the captions,
which are inserted only for convenience in locating provisions
of this Agreement and not as an aid in its construction.
(b) Control of Drafting. No consideration shall be given to the
fact or presumption that one party has had a greater or lesser
hand in drafting this Agreement than any other party.
(c) Defined Terms. A defined term has its defined meaning
everywhere in this Agreement, regardless of whether the term
appears before or after the place in this Agreement where the
term is defined.
12.12 Further Assurances. After the Closing, Seller shall execute
and deliver or shall otherwise caused to be executed and delivered, from time
to time, such further instruments, notices, division orders, transfer orders,
and other documents and do such other and further acts and things as may be
reasonably necessary, as may be reasonably requested by Buyer, to more fully
and effectively transfer the Assets to the Buyer.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first set forth above.
SHIELD PETROLEUM INCORPORATED
By:
---------------------------------
Ray Powell, President
P&M PROPERTIES
By:
---------------------------------
Ray Powell, General Partner
By:
---------------------------------
Ken Martin, General Partner
EAGLE OIL & GAS CO.
By:
---------------------------------
Pat Bolin, President
HUGOTON ENERGY CORPORATION
By:
---------------------------------
Printed Name:
-----------------------
Title:
------------------------------
23
<PAGE> 24
EXHIBIT "A-1"
BRAZOS LEASES
An undivided 25% interest in the following described Oil and Gas Leases and no
less than a 75% Net Revenue Interest in each such lease,with the exception of
Lease Nos. 61, 62, 63, 64, 65 and 66 (all of which comprise the Kathleen Unit
described below in B.7.), in which no less than 70% Net Revenue Interest shall
be delivered, pursuant to the terms of the foregoing Purchase and Sale
Agreement.
A. OIL AND GAS LEASES:
1. Oil, Gas, and Mineral Lease dated May 12, 1993, between William S.
Thornton, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1855, Page 161, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
2. Oil, Gas, and Mineral Lease dated May 12, 1993, between Billy M.
Payne, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1855 Page 156, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
3. Oil, Gas, and Mineral Lease dated May 12, 1993, between John M.
Lawrence, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1855 Page 151, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
4. Oil, Gas, and Mineral Lease dated May 12, 1993, between Lucille
Dougherty, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1855 Page 146, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
5. Oil, Gas, and Mineral Lease dated May 12, 1993, between Jay Don
Watson, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1855 Page 166, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
6. Oil, Gas, and Mineral Lease dated May 12, 1993, between Mills Prentice
Walker Trust, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1879 Page 231, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
7. Oil, Gas, and Mineral Lease dated December 15, 1992, corrected by
Correction of and Amendment to Oil and Gas Lease dated January 25,
1993, but effective December 15, 1992, between Jean Walton Vilas,
joined pro forma by her husband, John R. Vilas, and John Walton Vilas,
as Lessor, and Shield Petroleum Incorporated, as Lessee, a Memorandum
of Lease is recorded in Volume 1672, Page 346, and Memorandum of
Correction of and Amendment to Oil and Gas Lease is recorded in Volume
1778, Page 72 of the Real Property Records of Brazos County, Texas, to
which reference is here made for all purposes.
8. Oil, Gas, and Mineral Lease dated December 15, 1992, between Jean
Walton Vilas, joined pro forma by her husband, John R. Vilas, and John
Walton Vilas, as Lessor, and Shield Petroleum Incorporated, as Lessee,
a Memorandum of Oil and Gas Lease is recorded in Volume 1680, Page
_______________________________
Exhibit "A-1" - Page 1
<PAGE> 25
176, of the Real Property Records of Brazos County, Texas, to which
reference is here made for all purposes.
9. Oil, Gas, and Mineral Lease dated December 15, 1992, between Jean
Walton Vilas, joined pro forma by her husband, John R. Vilas, and John
Walton Vilas, as Lessor, and Shield Petroleum Incorporated, as Lessee,
a Memorandum of Oil and Gas Lease is recorded in Volume 2062, Page
139, of the Real Property Records of Brazos County, Texas, to which
reference is here made for all purposes.
10. Oil, Gas, and Mineral Lease dated February 4, 1993, between Adell
Jericho, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1719, Page 206, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
11. Oil, Gas, and Mineral Lease dated February 4, 1993, between Richard C.
Jericho and wife, Doris Jericho, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded in Volume 1719, Page 200, of the
Real Property Records of Brazos County, Texas, to which reference is
here made for all purposes.
12. Oil, Gas, and Mineral Lease dated September 15, 1993, between Fletcher
L. Pool, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1933, Page 261, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
13. Oil, Gas, and Mineral Lease dated January 3, 1994, between Thomas
Brooks Moore, R. Michael Moore, and Grace Moore Payne, as Lessor, and
Shield Petroleum Incorporated, as Lessee, recorded in Volume 2003,
Page 276, of the Real Property Records of Brazos County, Texas, to
which reference is here made for all purposes.
14. Oil, Gas, and Mineral Lease dated March 17, 1993 between Thomas R.
Saving, et ux, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 1798, Page 198, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
15. Oil, Gas, and Mineral Lease dated February 11, 1993 between Ann L.
Wallace, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1754, Page 266, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
16. Oil, Gas, and Mineral Lease dated March 11, 1993 between Storm
Associates, a Texas partnership, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded in Volume 1798, Page 201, of the
Real Property Records of Brazos County, Texas, to which reference is
here made for all purposes.
17. Oil, Gas, and Mineral Lease dated March 17, 1994, between Bambi
Lookabaugh Hill, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 2098, Page 288, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
18. Oil, Gas, and Mineral Lease dated March 17, 1994, between Robert A.
Morrow, Trustee of Elizabeth L. Morrow Marital Trust, as Lessor, and
Shield Petroleum Incorporated, as Lessee,
_______________________________
Exhibit "A-1" - Page 2
<PAGE> 26
recorded in Volume 2098, Page 292, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
19. Oil, Gas, and Mineral Lease dated May 24, 1993, between Thomas Brooks
Moore, R. Michael Moore, and Grace Moore Payne, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in Volume 1807, Page 144,
of the Real Property Records of Brazos County, Texas, to which
reference is here made for all purposes.
20. Oil, Gas and Mineral Lease dated January 20, 1993, between Evie H.
Sorsby, Inc., as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1719, Page 197, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
21. Oil, Gas and Mineral Lease dated January 22, 1993, between Dora May
Langford, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1700, Page 238, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
22. Oil, Gas and Mineral Lease dated January 26, 1993, between Carson V.
Baker, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1754, Page 260, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
23. Oil, Gas and Mineral Lease dated January 26, 1993, between Gregor
Vernon Baker, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1719, Page 191, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
24. Oil, Gas and Mineral Lease dated January 26, 1993, between Gwendolyn
R. Williams, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1743, Page 113, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
25. Oil, Gas and Mineral Lease dated February 4, 1993, between Donald
Carey, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1728, Page 1, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
26. Oil, Gas and Mineral Lease dated February 4, 1993, between Marilyn
McWhorter, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1728, Page 4, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
27. Oil, Gas and Mineral Lease dated February 4, 1993, between Clyde W.
Carey, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1743, Page 101, of the
_______________________________
Exhibit "A-1" - Page 3
<PAGE> 27
Real Property Records of Brazos County, Texas, to which reference is
here made for all purposes.
28. Oil, Gas and Mineral Lease dated February 4, 1993, between James &
Wilma Carey, as Lessors, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1719, Page 203, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
29. Oil, Gas and Mineral Lease dated February 4, 1993, between Lonnie
Carey, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1743, Page 104, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
30. Oil, Gas and Mineral Lease dated February 4, 1993, between Margaret F.
Carey, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1719, Page 209, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
31. Oil, Gas and Mineral Lease dated February 4, 1993, between Melvin E. &
Carolyn Sue Carey, as Lessors, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 1719, Page 212, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
32. Oil, Gas and Mineral Lease dated February 4, 1993, between Juanita
Jones, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1727, Page 345, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
33. Oil, Gas and Mineral Lease dated February 4, 1993, between Ruby Joy,
as Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in
Volume 1727, Page 348, of the Real Property Records of Brazos County,
Texas, to which reference is here made for all purposes.
34. Oil, Gas and Mineral Lease dated February 10, 1993, between William
Giles & Jennifer McCredie Adkins, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in Volume 1754, Page 257, of the
Real Property Records of Brazos County, Texas, to which reference is
here made for all purposes.
35. Oil, Gas and Mineral Lease dated February 10, 1993, between Caroline
Elizabeth Florence, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 1743, Page 107, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
36. Oil, Gas and Mineral Lease dated February 10, 1993, between Pamela
Gray & Jarvis Holland Porter, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in Volume 1754, Page 263, of the
Real Property Records of Brazos County, Texas, to which reference is
here made for all purposes.
_______________________________
Exhibit "A-1" - Page 4
<PAGE> 28
37. Oil, Gas and Mineral Lease dated February 10, 1993, between Marianne &
Stephen S. Roop, as Lessors, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 1743, Page 110, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
38. Oil, Gas and Mineral Lease dated February 4, 1993, between Constance
Beltrand, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1981, Page 227, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
39. Oil, Gas and Mineral Lease dated February 4, 1993, between Thomas
Beltrand, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1981, Page 223, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
40. Oil, Gas and Mineral Lease dated February 4, 1993, between Marilyn &
Jeffrey McWhorter, as Lessors, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 1981, Page 231, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
41. Oil, Gas and Mineral Lease dated March 17, 1994, between Lynn Waters
Hickey, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2139, Page 176, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
42. Oil, Gas and Mineral Lease dated March 17, 1994, between James A.
Waters, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2122, Page 302, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
43. Oil, Gas and Mineral Lease dated March 17, 1994, between Shannon Marie
Wallace Johnson Chamberlain, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded in Volume 2122, Page 298, of the
Real Property Records of Brazos County, Texas, to which reference is
here made for all purposes.
44. Oil, Gas and Mineral Lease dated March 17, 1994, between Kimberly
Waters Tubb, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2141, Page 50, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
45. Oil, Gas and Mineral Lease dated August 25, 1994, between Robert Ewing
Armstrong and William Norwood Armstrong, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in Volume 2203, Page 58,
of the Real Property Records of Brazos County, Texas, to which
reference is here made for all purposes.
46. Oil, Gas and Mineral Lease dated March 17, 1994, between Peri
Lookabaugh Weaks, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 2243, Page
_______________________________
Exhibit "A-1" - Page 5
<PAGE> 29
179, of the Real Property Records of Brazos County, Texas, to which
reference is here made for all purposes.
47. Oil, Gas and Mineral Lease dated December 6, 1994, between Pauline W.
Buckley, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 344, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
48. Oil, Gas and Mineral Lease dated December 9, 1994, between Sellers
Boynton Rogers, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 2279, Page 342, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
49. Oil, Gas and Mineral Lease dated December 6, 1994, between Ralph H.
Wallace, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 338, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
50. Oil, Gas and Mineral Lease dated December 9, 1994, between Stell
Rogers Campbell, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 2279, Page 332, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
51. Oil, Gas and Mineral Lease dated December 9, 1994, between William H.
Rogers, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 330, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
52. Oil, Gas and Mineral Lease dated December 9, 1994, between Clare
Rogers Geuy, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 334, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
53. Oil, Gas and Mineral Lease dated December 9, 1994, between Lucy
Shevenell, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2280, Page 1, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
54. Oil, Gas and Mineral Lease dated December 9, 1994, between Katharine
Lindow, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 348, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
55. Oil, Gas and Mineral Lease dated December 9, 1994, between Richard
Hinton Rogers, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in Volume 2279, Page 346, of the Real Property
Records of Brazos County, Texas, to which reference is here made for
all purposes.
_______________________________
Exhibit "A-1" - Page 6
<PAGE> 30
56. Oil, Gas and Mineral Lease dated December 9, 1994, between Edgar M.
Guild, Attorney- in- Fact for Rosa Rogers Guild, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded in Volume 2279, Page 311,
of the Real Property Records of Brazos County, Texas, to which
reference is here made for all purposes.
57. Oil, Gas and Mineral Lease dated December 9, 1994, between Ruth Moses
Easterly, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 340 and Ratification and Amendment to
Oil and Gas Lease recorded in Volume 2279, Page 317, of the Real
Property Records of Brazos County, Texas, to which reference is here
made for all purposes.
58. Oil, Gas and Mineral Lease dated December 9, 1994, between Leslie
Rogers, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 336, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
59. Oil, Gas and Mineral Lease dated December 12, 1994, between The Sons
of the Republic of Texas, a non- profit organization, as Lessor, and
Shield Petroleum Incorporated, as Lessee, recorded in Volume 2294,
Page 212, of the Real Property Records of Brazos County, Texas, to
which reference is here made for all purposes.
60. Oil, Gas and Mineral Lease dated December 9, 1994, between The
University of Georgia Foundation, a non- profit organization, as
Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in
Volume 2319, Page 56, of the Real Property Records of Brazos County,
Texas, to which reference is here made for all purposes.
61. 117.50 acres, more or less, in the Robert Millican Survey, A-42, being
all of the lands described in the Oil, Gas and Mineral Lease dated
February 6, 1978, recorded in Volume 30, Page 294 of the Oil & Gas
Lease Records of Brazos County, Texas, as amended by instruments
recorded in Volume 1036, Page 115, of the Official Records of Brazos
County, Texas, from First National Bank of Navasota, Trustee, as
Lessor, to Randall S. Shawell, as Lessee, being all of the lands
described therein LESS AND EXCEPT that portion included within the
areal confines of the Daleco Resources Terrell Gas Unit No. 3 as
created by instruments recorded in Volume 675, page 156 of the Records
of Brazos County, Texas, as amended.
62. 214.22 acres, more or less, in the Robert Millican Survey, A-42, being
all of the lands described in the Oil, Gas and Mineral Lease dated
April, 26, 1983 from T.T. Walton, Sr. Trust et al, as Lessor, to Dov
Amir and Louis Erlich, as Lessee, recorded in Volume 672, Page 584 of
the Deed Records of Brazos County, Texas, as amended, AND, Oil, Gas
and Mineral Lease dated April 26, 1983 from William J. Terrell et ux,
as Lessor, to Daleco Resources, as Lessee, recorded in Volume 86, Page
362 of the Oil & Gas Records of Brazos County, Texas, as amended, said
leases covering 545.22 acres, more fully described therein, LESS AND
EXCEPT that portion included within the areal confines of the Daleco
Resources Terrell Gas Unit No. 3 as created by instrument recorded in
Volume 675, Page 156 of the Records of Brazos County, Texas, as
amended.
_______________________________
Exhibit "A-1" - Page 7
<PAGE> 31
63. 336.3 acres, more or less, being designated as Tract 1 in each of said
leases, described in the Robert Millican Survey, A-42, and the J. D.
Millican Survey, A-41, as being all of the lands described in the Oil,
Gas and Mineral Lease dated February 6, 1978 from William J. Terrell,
Independent Executor and Trustee under the Will of J.P. Terrell,
Deceased, et al, as Lessor, to Randall S. Shawell, as Lessee, recorded
in Volume 30, Page 302 of the Oil & Gas Records of Brazos County,
Texas, as amended, said lease covering 1,652.16 acres, more or less,
AND, Oil, Gas and Mineral Lease dated February 6, 1978 from Mary S.
Terrell, as Lessor, to Randall S. Shawell, as Lessee, recorded in
Volume 30, Page 441 of the Oil & Gas Lease Records of Brazos County,
Texas, as amended, said lease covering 1,652.16 acres, more or less.
64. Oil, Gas and Mineral Lease dated July 15, 1977, between Harry H. Moore
and wife, Louise Moore, as Lessors, and Randall S. Shawell, as Lessee,
recorded in Volume 27, Page 356, of the Real Property Records of
Brazos County, Texas, as such lease may have been amended by
instruments of record in the office of the County Clerk of Brazos
County, Texas: insofar only as such lease covers and includes the
following lands:
a. 815.73 acres of land, more or less, out of the Robert
Millican Survey, A-42, Brazos County, Texas, and
being all of that certain 1043.73 acres of land, more
or less, described as (1) Tract 1, First Tract,
containing 290.00 acres: (2) Tract 1, Second Tract,
containing 22 acres; (3) Tract 1, Third Tract,
containing 208 acres; (4) Tract 2, Second Tract,
containing 303-1/3 acres; (5) Tract 2, Third Tract,
containing 125 acres; and (6) Tract 3, First Tract,
containing 95.4 acres; as described in that certain
Deed dated December 31, 1969, from Robert T. Moore,
Individually and as Trustee, and L. C. Frede and
wife, Joyce Ann Frede, as Grantors, to H. H. Moore
and wife, Louise T. Moore, as Grantee, recorded in
Volume 283, Page 104, of the Deed Records of Brazos
County, Texas; SAVE AND EXCEPT from said 1043.73
acres that certain 228 acres of land, more or less,
described in the Daleco Resources-Terrell Gas Unit
No. 3, Gas Unit Designation, recorded in Volume 675,
Page 156, as amended in Volume 681, Page 724, of the
Deed Records of Brazos County, Texas; leaving a net
815.73 acres of land.
b. 170 acres, more or less, described as Second Tract in
Tract 3 as described in that certain Deed dated
December 31, 1969, from Robert T. Moore, Individually
and as Trustee, and L. C. Frede and wife, Joyce Ann
Frede, as Grantors, to H. H. Moore and wife, Louise
T. Moore, as Grantee, recorded in Volume 283, Page
104, of the Deed Records of Brazos County, Texas.
_______________________________
Exhibit "A-1" - Page 8
<PAGE> 32
c. 146 acres, more or less, described as First Tract in
Tract 2 in that certain Deed dated December 31,
1969, from Robert T. Moore, Individually and as
Trustee, and L. C. Frede and wife, Joyce Ann Frede,
as Grantors, to H. H. Moore and wife, Louise T.
Moore, as Grantee, recorded in Volume 283, Page 104,
of the Deed Records of Brazos County, Texas.
65. Oil, Gas and Mineral Lease dated February 6, 1978, between William J.
Terrell, Independent Executor and Trustee under the will of J. P.
Terrell, Deceased; and William J. Terrell Independent Executor of the
Estate of Ruth L. Terrell, Deceased, as Lessor, and Randall S.
Shawell, as Lessee, recorded in Volume 30, Page 302, of the Real
Property Records of Brazos County, Texas, as such lease may have been
amended by instruments of record in the office of the County Clerk of
Brazos County, Texas; insofar only as such lease covers the following
described lands:
a. 381.6 acres, more or less, out of and a part of the
Robert Millican Survey, A-42, being the same lands
described as Tracts No. 1, 2, 3 and 4, containing
95.4 acres each, in deed dated July 12, 1940 from J.
P. Terrell, Executor of Estate of E. H. Terrell,
deceased, to J. P. Terrell, recorded in Volume 104,
Page 126, Deed Records, Brazos County, Texas.
b. 167-1/3 acres, more or less, out of and a part of the
Robert Millican Survey, A-42, being the same lands
described in deed dated March 17, 1925, from Mrs.
S.H. Monroe, to J.P. Terrell recorded in Volume 66,
Page 438, Deed Records, Brazos County, Texas, SAVE
AND EXCEPT, for 25 acres in the Terrell Gas Unit No.
3 described in the Gas Unit Designation recorded in
Volume 675, Page 156, Deed Records, Brazos County,
Texas.
66. Oil, Gas and Mineral Lease dated February 6, 1978, between Mary S.
Terrell, as Lessor, and Randall S. Shawell, as Lessee, recorded in
Volume 30, Page 441, of the Real Property Records of Brazos County,
Texas, as such lease may have been amended by instruments of record in
the office of the County Clerk of Brazos County, Texas; insofar only
as such lease covers the following described lands:
173 acres, more or less, out of and a part of the Robert
Millican Survey, A-42, more particularly described as Tract
No. 2 in that certain deed dated July 12, 1940, executed by J.
Percy Terrell, Executor of the Estate of E.H. Terrell,
Deceased, to Mary Terrell, recorded in Volume 104, Page 129,
Deed Records, Brazos County, Texas, to which reference is here
made for descriptive purposes.
_______________________________
Exhibit "A-1" - Page 9
<PAGE> 33
67. Oil, Gas and Mineral Lease dated March 17, 1994, between Cathey Waters
Hall, as Lessor and Shield Petroleum Incorporated, as Lessee, recorded
in Volume 2436, Page 308, of the Real Property Records of Brazos
County, Texas, to which reference is here made for all purposes.
68. Oil, Gas and Mineral Lease dated February 4, 1993, between Mary
Martin, as Lessor and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 1719, Page 194, of the Real Property Records of
Brazos County, Texas, to which reference is here made for all
purposes.
B. PRODUCING UNITS:
The following producing units which consist of all or portions of
leases described above:
1. Vilas No. 1 Gas Unit:
All those lands included in the Vilas No. 1 Gas Unit, as described in
that certain First Amended Designation of Pooled Unit, dated February
23, 1994, recorded in Volume 2043, Page 246, Real Property Records of
Brazos County, Texas.
2. Jericho-Vilas No. 1 Gas Unit:
All those lands included in the Jericho-Vilas No. 1 Gas Unit, as
designated in that certain Designation of Pooled Unit, dated December
15, 1993, recorded in Volume 1990, Page 161, Real Property Records of
Brazos County, Texas.
3. Vilas-Moore No. 1 Gas Unit:
All those lands included in the Vilas-Moore No. 1 Gas Unit, as
designated in that certain Designation of Pooled Unit, dated February
23, 1994, recorded in Volume 2043, Page 253, Real Property Records of
Brazos County, Texas.
4. Moore No. 1-H Gas Unit:
All those lands included in the Moore No. 1-H Gas Unit, as designated
in that certain Designation of Unit, dated October 26, 1995, recorded
in Volume 2470, Page 217, Real Property Records of Brazos County,
Texas.
5. Walton O.L. No. 1-H Gas Unit:
_______________________________
Exhibit "A-1" - Page 10
<PAGE> 34
All those lands included in the Walton O.L. No. 1-H Gas Unit, as
designated in that certain Designation of Pooled Unit, dated June 26,
1995, recorded in Volume 2379, Page 146, Real Property Records of
Brazos County, Texas.
6. Westlands No. 1-H Gas Unit:
All those lands included in the Westlands No. 1-H Gas Unit, as
designated in that certain Designation of Pooled Unit, dated March 30,
1989, recorded in Volume 1112, Page 712, Real Property Records of
Brazos County, Texas.
7. Kathleen O.L. No. 1-H Gas Unit:
All those lands included in the Kathleen O.L. No. 1-H Well Unit, as
designated in that certain Designation of Pooled Unit, dated May 4,
1995, recorded in Volume 2346, Page 60, Real Property Records of
Brazos County, Texas.
8. T.J.M. O.L. No. 1 Gas Unit:
All those lands included in the T.J.M. O.L. No. 1-H Gas Unit, as
designated in that certain Designation of Pooled Unit, dated June 26,
1995, recorded in Volume 2379, Page 154, Real Property Records of
Brazos County, Texas.
C. ALLEN FARMS OL NO 1-H EXCEPTION:
SAVE AND EXCEPT 1005.18 acres of land included in the Allen Farm OL
#1-H Unit described in that certain assignment of Undivided interest
in Oil and Gas Lease between Reata Oil and Gas Corp. And Shield
Petroleum Incorporated as assignor and Chesapeake Operating,
Incorporated, as assignee, dated December 5, 1995 recorded in Volume
2499, Page 234, Real Property Records of Brazos County, Texas.
_______________________________
Exhibit "A-1" - Page 11
<PAGE> 35
EXHIBIT "A-2"
PRODUCING BRAZOS COUNTY TEXAS WELLS:
1. Vilas No. 1 Well
2. Jericho-Vilas No. 1 Well
3. Vilas-Moore No. 1 Well
4. Moore No. 1-H Well
5. Walton O.L. No. 1-H Well
6. Westland No. 1-H Well
7. Kathleen O.L. No. 1-H Well
8. T.J.M. O.L. No. 1 Well
_______________________
Exhibit "A-2" - Page 1
<PAGE> 36
EXHIBIT "A-3"
A. JOINT OPERATING AGREEMENTS:
1. Joint Operating Agreement dated May 21, 1993, between Reata Oil & Gas
Corp., as Operator and Carl W. Winfrey, et al, as Non-Operator, covering
leases in Brazos, Washington, Grimes and Montgomery Counties, Texas.
2. Joint Operating Agreement dated May 16, 1994 between Reata Oil & Gas
Corp., as Operator and Cheasapeake operating, Inc., as Non-Operator,
covering the Moore 3121.923 acre lease in Brazos County, Texas.
3. Joint Operating Agreement dated June 10, 1994, between Reata Oil & Gas
Corp., as Operator and Chesapeake Operating, Inc., as Non-Operator,
covering the Moore #1-H unit leases in Brazos County, Texas.
4. Joint Operating Agreement dated June 10, 1994, between Reata Oil & Gas
Corp., as Operator and Chesapeake Operating, Inc., as Non-Operator,
covering the T.J.M. #1-H, Dallum OL #1-H, Big Creek OL #1-H and Allen
Farm OL #1-H unit leases in Brazos County, Texas.
5. Joint Operating Agreement dated September 13, 1994, between Reata Oil &
Gas Corp., as Operator and Chesapeake Operating, Inc. as Non-Operator,
covering the Westlands #1-H unit leases in Brazos County, Texas.
6. Joint Operating Agreement dated April 19, 1995, between Reata Oil & Gas
Corp., as Operator and Chesapeake Operating, Inc., as Non-Operator,
convering the Kathleen OL #1-H unit leases in Brazos County, Texas.
7. Joint Operating Agreement dated April 19, 1995, between Reata Oil & Gas
Corp., as Operator and Miller Energy, Ltd. as Non-Operator, covering
leases in Brazos, Washington, Grimes and Montgomery Counties, Texas.
8. Joint Operating Agreement dated May 25, 1995, between Reata Oil & Gas
Corp., as Operator and Bronco Petroleum, L.C., as Non-Operator, covering
leases in Brazos, Washington, Grimes and Montgomery Counties, Texas.
B. GAS PURCHASE CONTRACTS:
1. Gas Purchase Contract dated March 4, 1993, between Shield Petroleum
Incorporated and GPM Gas Services Company covering the Vilas #1 Well.
2. Gas Purchase Contract dated August 31, 1994, between Shield Petroleum
Incorporated and GPM Gas Sevices Company covering the Moore #1-H Well.
3. Gas purchase Contract dated November 29, 1994, between Shield Petroleum
Incorporated and Aquila Southwest Pipeline Corporation covering the
Westlands #1-H Well.
4. Comprehensive Gas Purchase Contract dated February 6, 1995, between
Shield petroleum Incoporated and GPM Gas Services company, covering all
of the wells and lands described in the preceding Exhibit A-1.
<PAGE> 37
EXHIBIT "A-4"
All personal property, equipment and fixtures located upon the following
described lands:
1. Vilas No. 1 Gas Unit:
All those lands included in the Vilas No. 1 Gas Unit, as described in
that certain First Amended Designation of Pooled Unit, dated February
23, 1994, recorded in Volume 2043, Page 246, Real Property Records of
Brazos County, Texas.
2. Jericho-Vilas No. 1 Gas Unit:
All those lands included in the Jericho-Vilas No. 1 Gas Unit, as
designated in that certain Designation of Pooled Unit, dated December
15, 1993, recorded in Volume 1990, page 161 Real Property Records of
Brazos County, Texas.
3. Vilas-Moore No. 1
Gas Unit: All those lands included in the Vilas-Moore No. 1 Gas Unit, as
designated in that certain Designation of Pooled Unit, dated February
23, 1994, recorded in Volume 2043, Page 253, Real Property Records of
Brazos County, Texas.
4. Moore No.1-H Gas Unit:
All those lands included in the Moore No. 1-H Gas Unit, as
designated in that certain Designation of Pooled Unit, dated June 26,
1995, recorded in Volume 2379, Page 146, Real Property Records of Brazos
County, Texas.
5. Walton O. L. No. 1-H Gas Unit:
All those lands included in the Walton O.L. No. 1-H Gas Unit, as
designated in that certain Designation of Pooled Unit, dated June 26,
1995, recorded in Volume 2379, Page 146, Real Property Records of Brazos
County, Texas.
6. Westlands No. 1-H Gas Unit:
All those lands included in the Westlands No. 1-H Gas Unit, as designated
in that certain Designation of Pooled Unit, dated March 30, 1989,
recorded in volume 1112, Page 712, Real Property Records of Brazos
County, Texas.
7. Kathleen O.L. No. 1-H Unit:
All those lands included in the Kathleen O.L. No. 1-H Well Unit, as
designated in that certain Designation of Pooled Unit, dated May 4, 1995,
recorded in Volume 2346, Page 60, Real Property Records of Brazos
County, Texas.
8. T.J.M. O.L. No. 1 Gas Unit:
All those lands included in the T.J.M. O.L. No. 1-H Gas Unit, as
designated in that certain Designation of Pooled Unit, dated October 26,
1995, recorded in Volume 2470, Page 217, Real Property Records of
Brazos county, Texas.
<PAGE> 38
EXHIBIT "B"
An undivided 50% before payout and 46.25% after payout interest in the
following described Oil and Gas Leases, and no less than a 75% Net Revenue
Interest in all of said leases, pursuant to the terms of the foregoing Purchase
and Sale Agreement.
MONTGOMERY COUNTY, TEXAS
1. Oil, Gas and Mineral Lease dated January 27, 1995, between Lucy B.
Grissom, a widow, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No. 9514937 and Microfilm No. 051-00-0144 ,
of the Real Property Records of Montgomery County, Texas, to which
reference is here made for all purposes.
2. Oil, Gas and Mineral Lease dated January 27, 1995, between James C.
Grissom, Individually and as Agent for Thomas C. Grissom, as Lessors,
and Shield Petroleum Incorporated, as Lessee, recorded in File No.
9514940 and Microfilm No. 051-00-0151, of the Real Property Records of
Montgomery County, Texas, to which reference is here made for all
purposes.
3. Oil, Gas and Mineral Lease dated February 1, 1995, between Otis Henry,
as Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in
File No. 9514936 and Microfilm No. 051-00-0141 of the Real Property
Records of Montgomery County, Texas, to which reference is here made
for all purposes.
4. Oil, Gas and Mineral Lease dated February 1, 1995, between Kalantzakis
Family Partnership, L.L.C., as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9514943 and Microfilm
No. 051-00-0169, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
5. Oil, Gas and Mineral Lease dated February 1, 1995, between Joseph
Henry, Jr., as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 9514942 and Microfilm No. 051-00-0165, of the
Real Property Records of Montgomery County, Texas, to which reference
is here made for all purposes.
6. Oil, Gas and Mineral Lease dated February 7, 1995, between Bybee W.
Weisinger, dealing with his separate property, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9514934 and
Microfilm No. 051-00-0130, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
7. Oil, Gas and Mineral Lease dated February 7, 1995, between Charles R.
Harrison and wife, Katherine W. Harrison, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9514931 and
Microfilm No. 051-00-0114, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
__________________________
Exhibit "B" - Page 1
<PAGE> 39
8. Oil, Gas and Mineral Lease dated February 8, 1995, between James
Pinkney Brown, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No. 9514930 and Microfilm No. 051-00-0111, of
the Real Property Records of Montgomery County, Texas, to which
reference is here made for all purposes.
9. Oil, Gas and Mineral Lease dated February 8, 1995, between A. Wynne
Brown, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 9514933 and Microfilm No. 051-00-0127, of the
Real Property Records of Montgomery County, Texas, to which reference
is here made for all purposes.
10. Oil, Gas and Mineral Lease dated February 11, 1995, between S. W.
Yarborough and wife, Linda E. Yarborough, Individually and on behalf
of and dba TOKI PROPERTIES, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9514935 and Microfilm
No. 051-00-0134, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
11. Oil, Gas and Mineral Lease dated February 21, 1995, between Risher
Randall and wife, Fairfax C. Randall, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9514929 and
Microfilm No. 051-00-0102, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
12. Oil, Gas and Mineral Lease dated March 1, 1995, between Louise Green
and husband, Earl Green, Lessors, and Shield Petroleum Incorporated,
as Lessee, recorded in File No. 9519626 and Microfilm No. 056-00-
1743, of the Real Property Records of Montgomery County, Texas, to
which reference is here made for all purposes.
13. Oil, Gas and Mineral Lease dated March 1, 1995, between Edwin Yargo,
Jr. and wife, Joeann Yargo, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519623 and Microfilm
No. 056-00-1734, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
14. Oil, Gas and Mineral Lease dated February 24, 1995, between Wayne
Ketkoski and wife, Sandra Ketkoski, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519629 and Microfilm
No. 056-00-1756, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
15. Oil, Gas and Mineral Lease dated March 1, 1995, between Leo L. Medley,
and wife, Rebecca Herron Medley, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519624 and Microfilm
No. 056-00-1737, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
16. Oil, Gas and Mineral Lease dated February 24, 1995, between Leon J.
Ketkoski, Jr. and wife, Kelleyane Ketkoski, Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9519628 and
Microfilm No. 056-00-1749, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
__________________________
Exhibit "B" - Page 2
<PAGE> 40
17. Oil, Gas and Mineral Lease dated February 24, 1995, between Wanda
Ketkoski Nesmith, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No. 9519630 and Microfilm No. 056-00-1763, of
the Real Property Records of Montgomery County, Texas, to which
reference is here made for all purposes.
18. Oil, Gas and Mineral Lease dated March 8, 1995, between Edna Marie
Moriarty, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 9519627 and Microfilm No. 056-00-1746, of the
Real Property Records of Montgomery County, Texas, to which reference
is here made for all purposes.
19. Oil, Gas and Mineral Lease dated March 1, 1995, between Elbie Y'Barbo,
and wife, Dorothy Y'Barbo, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519622 and Microfilm
No. 056-00-1731, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
20. Oil, Gas and Mineral Lease dated February 21, 1995, between Risher
Randall, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 9514932 and Microfilm No. 051-00-0118, of the
Real Property Records of Montgomery County, Texas, to which reference
is here made for all purposes.
21. Oil, Gas and Mineral Lease dated March 1, 1995, between Eloise Watson
Garrett and husband, Robert M. Garrett, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9519618 and
Microfilm No. 056-00-1716, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
22. Oil, Gas and Mineral Lease dated March 1, 1995, between Reba Watson
Hawkins and husband, Thomas C. Hawkins, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9519617 and
Microfilm No. 056-00-1713, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
23. Oil, Gas and Mineral Lease dated March 1, 1995, between Patsy Watson
Hemenway et vir George Hemenway, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519616 and Microfilm
No. 056-00-1710, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
24. Oil, Gas and Mineral Lease dated March 1, 1995, between Marvin H.
Watson, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 9519615 and Microfilm No. 056-00-1707, of the
Real Property Records of Montgomery County, Texas, to which reference
is here made for all purposes
25. Oil, Gas and Mineral Lease dated March 1, 1995, between Gladys Brown
Watson, Odis William Watson, Jr., Warren Wade Watson, Larry Randolph
Watson and Timothy Wayne Watson, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519621 and Microfilm
No. 056-00-1728, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
__________________________
Exhibit "B" - Page 3
<PAGE> 41
26. Oil, Gas and Mineral Lease dated March 1, 1995, between Christine
Pratt and husband, Charles M. Pratt, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9519632 and Microfilm
No. 056-00-1774, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
27. Oil, Gas and Mineral Lease dated March 1, 1995, between Donald Ray
Yargo, Lessor, and Shield Petroleum Incorporated, as Lessee, recorded
in File No. 9519625 and Microfilm No. 056-00-1740, of the Real
Property Records of Montgomery County, Texas, to which reference is
here made for all purposes.
28. Oil, Gas and Mineral Lease dated March 10, 1995, between Hayne J.
Sheffield and wife, Patricia L. Sheffield, as Lessors, and Shield
Petroleum Incorporated, as Lessee, recorded in File No. 9519631 and
Microfilm No. 056-00-1770, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
29. Oil, Gas and Mineral Lease dated March 28, 1995, between Cecil A.
Whitley Individually and as Attorney-in-fact for Eva Lora Whatley, as
Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in
File No. 9519619 and Microfilm No. 056-00-1720, of the Real Property
Records of Montgomery County, Texas, to which reference is here made
for all purposes.
30. Oil, Gas and Mineral Lease dated April 1, 1995, between Joseph Henry,
Jr. as Agent and Attorney-in-fact for Lloyd Nauls et al, as Lessor,
and Shield Petroleum Incorporated, as Lessee, recorded in File No.
9519620 and Microfilm No. 056-00-1725, of the Real Property Records of
Montgomery County, Texas, to which reference is here made for all
purposes.
31. Oil, Gas and Mineral Lease dated March 1, 1995, between Harold D.
Watson and wife, Clara Watson, Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No.9526479 and Microfilm
No.064-00-2380, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
32. Oil, Gas and Mineral Lease dated March 15, 1995, between Faye Bookman
Metzler, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No.9526477 and Microfilm No.064-00-2372, of the Real
Property Records of Montgomery County, Texas, to which reference is
here made for all purposes.
33. Oil, Gas and Mineral Lease dated March 15, 1995, between Lavonne
Kooken, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No.9526478 and Microfilm No.064-00-2376, of the Real
Property Records of Montgomery County, Texas, to which reference is
here made for all purposes.
34. Oil, Gas and Mineral Lease dated February 1, 1995, between Amelia
Moriarty, et al, as Lessor, and Shield Petroleum Incorporated, as
Lessee, unrecorded and Memorandum of Oil and Gas Lease recorded in
File No. 9526476 and Microfilm No.064-00-2367, of the Real Property
Records of Montgomery County, Texas, to which reference is here made
for all purposes.
__________________________
Exhibit "B" - Page 4
<PAGE> 42
35. Oil, Gas and Mineral Lease dated May 18, 1995, between W. S.
Weisinger, Jr., Ind. & as Trustee of Diane H. Silverman & Thomas W.
Hunter, Test. Trusts, as Lessors, and Shield Petroleum Incorporated,
as Lessee, recorded in File No.9533157 and Microfilm No.073- 00-1088,
of the Real Property Records of Montgomery County, Texas, to which
reference is here made for all purposes.
36. Oil, Gas and Mineral Lease dated April 12, 1995, between Winifred Ann
Spencer, Ind. & as A/F for Lillian B. Weisinger, as Lessors, and
Shield Petroleum Incorporated, as Lessee, recorded in File No.9533158
and Microfilm No.073-00-1101, of the Real Property Records of
Montgomery County, Texas, to which reference is here made for all
purposes.
37. Oil, Gas and Mineral Lease dated May 23, 1995, between John Earl
Weisinger, Ind. Executor of Estate of Mildred W. Riddell, Deceased, as
Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in File
No.9533156 and Microfilm No.073-00-1075, of the Real Property Records
of Montgomery County, Texas, to which reference is here made for all
purposes.
38. Oil, Gas and Mineral Lease dated April 3, 1995, between David H.
Murdock, dba International Mining Company, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded in File No.9533155 and
Microfilm No.073-00-1061, of the Real Property Records of Montgomery
County, Texas, to which reference is here made for all purposes.
39. Oil, Gas and Mineral Lease dated July 15, 1995, between Risher Randall
and wife, Fairfax C. Randall, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 9559564 and Microfilm
No.106-00-0923, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
40. Oil, Gas and Mineral Lease dated March 15, 1995, between Amelia
McComb, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 9559565 and Microfilm No.106-00-0932, of the
Real Property Records of Montgomery County, Texas, to which reference
is here made for all purposes.
41. Oil, Gas and Mineral Lease dated July 31, 1995, between Alton Hues, as
Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in File
No. 9559563 and Microfilm No.106-00-0918, of the Real Property Records
of Montgomery County, Texas, to which reference is here made for all
purposes.
GRIMES COUNTY, TEXAS
42. Oil, Gas and Mineral Lease dated January 18, 1995, between Thomas P.
Reidy and wife, Leanna Reidy, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in Volume 774, Page 795, of the Real
Property Records of Grimes County, Texas, to which reference is here
made for all purposes.
43. Oil, Gas and Mineral Lease dated March 7, 1995, between William S.
Leigh and wife, Karen H. Leigh, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded under
__________________________
Exhibit "B" - Page 5
<PAGE> 43
File No. 133984 in Volume 782, Page 582, of the Real Property Records
of Grimes County, Texas, to which reference is here made for all
purposes.
44. Oil, Gas and Mineral Lease dated March 9, 1995, between Charles I.
Kaplan, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 133983 in Volume 782, Page 578, of the Real
Property Records of Grimes County, Texas, to which reference is here
made for all purposes.
45. Oil, Gas and Mineral Lease dated March 9, 1995, between Richard D.
Handy, Jr., Individually and as Trustee of the Mary Alice Handy Trust,
as Lessor, and Shield Petroleum Incorporated, as Lessee, recorded
under File No. 133978 in Volume 782, Page 557, of the Real Property
Records of Grimes County, Texas, to which reference is here made for
all purposes.
46. Oil, Gas and Mineral Lease dated March 9, 1995, between George S.
Heyer, Jr., Henri L. Tallichet and George S. Tallichet, as Lessors,
and Shield Petroleum Incorporated, as Lessee, a Memorandum of Lease is
recorded under File No. 133981 in Volume 782, Page 567, of the Real
Property Records of Grimes County, Texas, to which reference is here
made for all purposes.
47. Oil, Gas and Mineral Lease dated March 9, 1995, between, Jerry D.
Jackson and wife, Deborah G. Jackson, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 133979 in Volume 782,
Page 560, of the Real Property Records of Grimes County, Texas, to
which reference is here made for all purposes.
48. Oil, Gas and Mineral Lease dated March 9, 1995, between, Joseph Hogue,
Jr. and wife Reba N. Hogue, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 134936 in Volume 787,
Page 560, of the Real Property Records of Grimes County, Texas, to
which reference is here made for all purposes.
49. Oil, Gas and Mineral Lease dated March 9, 1995, between John Dean
Nantz and wife Yasuko Nantz, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 134995 in Volume787,
Page 751 &754, of the Real Property Records of Grimes County, Texas,
to which reference is here made for all purposes.
50. Oil, Gas and Mineral Lease dated March 9, 1995, between, Jessie Nantz,
Jr. and wife, Iris B. Nantz, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 134937 in Volume 787,
Page 563, of the Real Property Records of Grimes County, Texas, to
which reference is here made for all purposes.
51. Oil, Gas and Mineral Lease dated March 13, 1995, between, Lorraine M.
DeBose, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 133980 in Volume 782, Page 563, of the Real
Property Records of Grimes County, Texas, to which reference is here
made for all purposes.
52. Oil, Gas and Mineral Lease dated April 11, 1995, between Marion Floyd
Podraza, as Lessor, and Yegua Oil & Gas Co., as Lessee, recorded in
File No.134305 and Volume
__________________________
Exhibit "B" - Page 6
<PAGE> 44
784, Page 257, of the Real Property Records of Grimes County, Texas,
to which reference is here made for all purposes.
53. Oil, Gas and Mineral Lease dated April 12, 1995, between Thomas Lee
Podraza, as Lessor, and Yegua Oil & Gas Co., as Lessee, recorded in
File No.134306 and Volume 784, Page 261, of the Real Property Records
of Grimes County, Texas, to which reference is here made for all
purposes.
54. Oil, Gas and Mineral Lease dated April 12, 1995, between Clara
Christine Podraza Klawinsky, as Lessor, and Yegua Oil & Gas Co., as
Lessee, recorded in File No.134307 and Volume 784, Page 265, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
55. Oil, Gas and Mineral Lease dated April 18 1995, between James Matthew
Podraza, as Lessor, and Yegua Oil & Gas Co., as Lessee, recorded in
File No.134308 and Volume 784, Page 269, of the Real Property Records
of Grimes County, Texas, to which reference is here made for all
purposes.
56. Oil, Gas and Mineral Lease dated January 16, 1995, between Willie
Raglin, Jr. by Power of Attorney for Will F. Raglin & wife, Robbie
Raglin, as Lessors, and Yegua Oil & Gas Co., as Lessee, recorded in
File No.131843 and Volume 772, Page 401, of the Real Property Records
of Grimes County, Texas, to which reference is here made for all
purposes.
57. Oil, Gas and Mineral Lease dated January 13, 1995, between W. E.
Kreitz and Delores M. Kreitz, as Lessors, and Yegua Oil & Gas Co., as
Lessee, recorded in File No.133360 and Volume 779, Page 652, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
58. Oil, Gas and Mineral Lease dated January 17, 1995, between John
Baranowski and Joan Baranowski, as Lessors, and Yegua Oil & Gas Co.,
as Lessee, recorded in File No.131408 and Volume 770, Page 248, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
59. Oil, Gas and Mineral Lease dated April 3, 1995, between David H.
Murdock, dba International Mining Company as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded in File No.135957 and
Volume 792, Page 405, of the Real Property Records of Grimes County,
Texas, to which reference is here made for all purposes.
60. Oil, Gas and Mineral Lease dated June 20, 1995, between Benny Lewis
and wife, Annette Lewis, Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No. 139183 and Volume 808, Page 25, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
61. Oil, Gas and Mineral Lease dated October 6, 1995, between Florence M.
Stoneham, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 139182 and
__________________________
Exhibit "B" - Page 7
<PAGE> 45
Volume 808, Page 17, of the Real Property Records of Grimes County,
Texas, to which reference is here made for all purposes.
62. Oil, Gas and Mineral Lease dated October 6, 1995, between John Oscar
Stoneham, III, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No.139178 and Volume 807, Page 836, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
63. Oil, Gas and Mineral Lease dated October 6, 1995, between Stoneham
Company, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 139180 and Volume 808, Page 01, of the Real
Property Records of Grimes County, Texas, to which reference is here
made for all purposes.
64. Oil, Gas and Mineral Lease dated October 6, 1995, between John Haynie
Stoneham, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in File No. 139179 and Volume 807, Page 844, of the Real
Property Records of Grimes County, Texas, to which reference is here
made for all purposes.
65. Oil, Gas and Mineral Lease dated October 6, 1995, between Florence M.
Stoneham Company, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No. 139181 and Volume 808, Page 09, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
66. Oil, Gas and Mineral Lease dated October 6, 1995, between Josh Bryant
Stonehman Trust, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded in File No. 139177 and Volume 807, Page 828, of the
Real Property Records of Grimes County, Texas, to which reference is
here made for all purposes.
GRIMES/MONTGOMERY COUNTIES, TEXAS
67. Oil, Gas and Mineral Lease dated December 30, 1994, between William P.
Thomas, Jr., as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 767, Page 815, of the Real Property Records of
Grimes County, Texas, and recorded in File No. 9514941 and Microfilm
No. 051-00-0154, of the Real Property Records of Montgomery County,
Texas, to which reference is here made for all purposes.
68. Oil, Gas and Mineral Lease dated February 1, 1995, between Imperial
Oil Company, dba Imperial Oil Company of California, as Lessor, and
Shield Petroleum Incorporated, as Lessee, recorded in Volume 774, Page
802, of the Real Property Records of Grimes County, Texas, and
recorded in File No. 9519611 and Microfilm No. 056-00-1684, of the
Real Property Records of Montgomery County, Texas to which reference
is here made for all purposes.
69. Oil, Gas and Mineral Lease dated January 12, 1995, between Vivian
Walker, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded Volume 774, Page 786, of the Real Property Records of Grimes
County, Texas, and recorded in File No. 9519614 and
__________________________
Exhibit "B" - Page 8
<PAGE> 46
Microfilm No. 056-00-1698, of the Real Property Records of Montgomery
County, Texas to which reference is here made for all purposes.
70. Oil, Gas and Mineral Lease dated February 20, 1995, between Joy M.
Montgomery, and Robin N. Montgomery, by and through his agent and
attorney-in-fact, Joy M. Montgomery, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 133982 in Volume
782, Page 569, of the Real Property Records of Grimes County, Texas,
and recorded in File No. 9514928 and Microfilm No. 051-00-0093, of the
Real Property Records of Montgomery County, Texas to which reference
is here made for all purposes.
71. Oil, Gas and Mineral Lease dated February 9, 1995, between Chipper
Ricky Hogue, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded Volume 776, Page 253, of the Real Property Records of
Grimes County, Texas, and recorded in File No. 9519613 and Microfilm
No. 056-00-1693, of the Real Property Records of Montgomery County,
Texas to which reference is here made for all purposes.
72. Oil, Gas and Mineral Lease dated February 9, 1995, between Virginia
Ann Ross and husband, Morris Bay, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded Volume 776, Page 258, of the Real
Property Records of Grimes County, Texas, and recorded in File No.
9519612 and Microfilm No. 056-00- 1688, of the Real Property Records
of Montgomery County, Texas to which reference is here made for all
purposes.
73. Oil, Gas and Mineral Lease dated February 21, 1995, between Risher
Randall, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 133985 in Volume 782, Page 585, of the Real
Property Records of Grimes County, Texas and recorded in File No.
9514946 and Microfilm No. 051-00- 0177, of the Real Property Records
of Montgomery County, Texas, to which reference is here made for all
purposes.
WASHINGTON COUNTY, TEXAS
74. Oil, Gas and Mineral Lease dated November 16, 1994, between Bintliff
Properties Limited Partnership, a Texas Limited Partnership, as
Lessor, and Shield Petroleum Incorporated, as Lessee, recorded in
Volume 771, Page 308, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
75. Oil, Gas and Mineral Lease dated December 13, 1994, between Deseret
Trust Company, Trustee for the Olive W. Nielson Living Trust, Lessor,
and Shield Petroleum Incorporated, as Lessee, recorded under File No.
2888 in Volume 778, Page 586, of the Real Property Records of
Washington County, Texas, to which reference is here made for all
purposes.
76. Oil, Gas and Mineral Lease dated December 15, 1994, between Zama
Blanchard McArthur, Moral Randall McArthur, Jr. and Pamela Blanchard
McArthur Neff, Lessors, and Shield Petroleum Incorporated, as Lessee,
recorded in Volume 2279, Page 313, of
__________________________
Exhibit "B" - Page 9
<PAGE> 47
the Real Property Records of Washington County, Texas, to which
reference is here made for all purposes.
77. Oil, Gas and Mineral Lease dated January 6, 1995, between Thomas
Brooks Moore, R. Michael Moore and Grace Moore Payne, as Lessors, and
Shield Petroleum Incorporated, as Lessee, recorded in Volume 771, Page
297, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
78. Oil, Gas and Mineral Lease dated March 31, 1995, between Glenwood
Wendler and Jason Wendler, as Lessors, and Shield Petroleum
Incorporated, as Lessee, recorded in File No. 3780, Volume 782, Page
661, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
79. Oil, Gas and Mineral Lease dated July 26, 1995, between Thomas P.
Duncan, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 6402, Volume 794, Page 81, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
80. Oil, Gas and Mineral Lease dated August 18, 1995, between Florian J.
Meleski, Sr. and wife Vivian Meleski, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7930, Volume 799,
Page 989, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
81. Oil, Gas and Mineral Lease dated August 19, 1995, between Edward
Stempuhowski and wife Mary Ann Stempuhowski, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded under File No. 7931,
Volume 799, Page 992, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
82. Oil, Gas and Mineral Lease dated August 25, 1995, between Alvin
Malinowski, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 7943, Volume 800, Page 43, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
83. Oil, Gas and Mineral Lease dated August 25, 1995, between Father John
Malinowski, as Lessor, and Shield Petroleum Incorporated, as Lessee,
Filed for record on January 9, 1996d under File No. 236 , of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
84. Oil, Gas and Mineral Lease dated August 25, 1995, between Lula V.
Elliot, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 7923, Volume 799, Page 959, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
85. Oil, Gas and Mineral Lease dated October 17, 1995, between Josephine
Petrosky Smith, as Lessor, and Shield Petroleum Incorporated, as
Lessee, Filed for record under File No 236, of the Real Property
Records of Washington County, Texas, to which reference is here made
for all purposes.
__________________________
Exhibit "B" - Page 10
<PAGE> 48
86. Oil, Gas and Mineral Lease dated August 15, 1995, between Bernice S.
Shaver, as Lessor, and Shield Petroleum Incorporated, as Lessee,
Memorandum of Lease is recorded under File No. 7929, Volume 799,
Page 986, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
87. Oil, Gas and Mineral Lease dated August 17, 1995, between Jerry J.
Gurka and wife, Tracey D. Gurka, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7932, Volume 800,
Page 1, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
88. Oil, Gas and Mineral Lease dated August 20, 1995, between Elizabeth
Laskowski Mikeska and husband, Frank Mikeska, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded under File No. 7944,
Volume 800, Page 47, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
89. Oil, Gas and Mineral Lease dated August 30, 1995, between Julia
Derkowski and husband, Albin Derkowski, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded under File No. 7940,
Volume 800, Page 31, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
90. Oil, Gas and Mineral Lease dated September 1, 1995, between Rodney
Hanath and wife, Rebecca Hanath, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7942, Volume 800,
Page 39, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
91. Oil, Gas and Mineral Lease dated August 30, 1995, between Johnie
Hintzel and wife, Ester Hintzel, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7938, Volume 800,
Page 24, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
92. Oil, Gas and Mineral Lease dated August 28, 1995, between Jarvis Earl
Elliott, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 7924, Volume 799, Page 964, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
93. Oil, Gas and Mineral Lease dated August 28, 1995, between Ernestine L.
Elliott, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 7921, Volume 799, Page 949, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
94. Oil, Gas and Mineral Lease dated August 21, 1995, between Andrew
Janukowski, Jr., and wife, Theresa Janukowski, as Lessor, and Shield
Petroleum Incorporated, as Lessee, recorded under File No. 7941,
Volume 800, Page 35, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
95. Oil, Gas and Mineral Lease dated September 6, 1995, between Olga M.
Carroll, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 7939,
__________________________
Exhibit "B" - Page 11
<PAGE> 49
Volume 800, Page 28, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
96. Oil, Gas and Mineral Lease dated August 28, 1995, between Cloyce M.
Elliott, as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 7922, Volume 799, Page 954, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
97. Oil, Gas and Mineral Lease dated August 28, 1995, between Andrew H.
Elliott, III, Attorney-In-Fact for Anna A. Elliott, as Lessor, and
Shield Petroleum Incorporated, as Lessee, recorded under File No.
7928, Volume 799, Page 982, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
98. Oil, Gas and Mineral Lease dated August 28, 1995, between Andrew H.
Elliott, III, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded under File No. 7926, Volume 799, Page 969, of the
Real Property Records of Washington County, Texas, to which reference
is here made for all purposes.
99. Oil, Gas and Mineral Lease dated August 21, 1995, between Victoria
Bolcerek and husband, Aline Bolcerek and Marie Anderson, as Lessors,
and Shield Petroleum Incorporated, as Lessee, recorded under File
No. 7926, Volume 799, Page 974, of the Real Property Records of
Washington County, Texas, to which reference is here made for all
purposes.
100. Oil, Gas and Mineral Lease dated August 25, 1995, between Clement
Laskowski and wife, Marie Laskowksi, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7927, Volume 799,
Page 978, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
101. Oil, Gas and Mineral Lease dated September 15, 1995, between HHR
Corporation, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded under Volume 802, Page 764, of the Real Property
Records of Washington County, Texas, to which reference is here made
for all purposes.
102. Oil, Gas and Mineral Lease dated July 13, 1995, between LeRoy Melcher,
Sr. and wife, Lucile Melcher, as Lessor, and Shield Petroleum
Incorporated, as Lessee, Memorandum of Lease is recorded under File
No. 6574, Volume 794, Page 771, of the Real Property Records of
Washington County, Texas, to which reference is here made for all
purposes.
103. Oil, Gas and Mineral Lease dated July 13, 1995, between Janice D.
Melcher, as Lessor, and Shield Petroleum Incorporated, as Lessee,
Memorandum of Lease is recorded under File No. 6575, Volume 794,
Page 775, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
104. Oil, Gas and Mineral Lease dated July 18, 1995, between Mary Gene
Mabry Schlenker, as Lessor, and Shield Petroleum Incorporated, as
Lessee, Memorandum of Lease is
__________________________
Exhibit "B" - Page 12
<PAGE> 50
recorded under File No. 6573, Volume 794, Page 767, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
105. Oil, Gas and Mineral Lease dated July 20, 1995, between Josephine
Lockhart Reid, as Lessor, and Shield Petroleum Incorporated, as
Lessee, Memorandum of Lease is recorded under File No. 6782, Volume
795, Page 532, of the Real Property Records of Washington County,
Texas, to which reference is here made for all purposes.
106. Oil, Gas and Mineral Lease dated July 20, 1995, between Frances
Lockhart Jackson, as Lessor, and Shield Petroleum Incorporated, as
Lessee, Memorandum of Lease is recorded under File No. 6783, Volume
795, Page 539, of the Real Property Records of Washington County,
Texas, to which reference is here made for all purposes.
107. Oil, Gas and Mineral Lease dated July 18, 1995, between Thomas M.
Schlenker, as Lessor, and Shield Petroleum Incorporated, as Lessee,
Memorandum of Lease is recorded under File No. 6576, Volume 794,
Page 778, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
108. Oil, Gas and Mineral Lease dated July 20, 1995, between Yorba Oil
Company, Ltd., as Lessor, and Shield Petroleum Incorporated, as
Lessee, Memorandum of Lease is recorded under Volume 795, Page 546,
and Volume 800, Page 13, of the Real Property Records of Washington
County, Texas, to which reference is here made for all purposes.
109. Oil, Gas and Mineral Lease dated July 27, 1995, between V (Five),
Inc., as Lessor, and Shield Petroleum Incorporated, as Lessee,
recorded under File No. 6403, Volume 794, Page 87, of the Real
Property Records of Washington County, Texas, to which reference is
here made for all purposes.
110. Oil, Gas and Mineral Lease dated July 26, 1995, between Ganchan-Rice
Partnership, as Lessor, and Shield Petroleum Incorporated, as
Lessee, Memorandum of Lease is recorded under File No. 7937, Volume
800, Page 21, of the Real Property Records of Washington County,
Texas, to which reference is here made for all purposes.
111. Oil, Gas and Mineral Lease dated July 24, 1995, between Bruno J.
Cegielski and wife, Regina Cegielski, as Lessor, and Shield Petroleum
Incorporated, as Lessee, Memorandum of Lease is recorded under File
No. 6577, Volume 794, Page 781, of the Real Property Records of
Washington County, Texas, to which reference is here made for all
purposes.
112. Oil, Gas and Mineral Lease dated July 25, 1995, between John Richard
Duffy and wife, Theoginia K. Duffy, as Lessor, and Shield Petroleum
Incorporated, as Lessee, Memorandum of Lease is recorded under File
No. 6578, Volume 794, Page 784, of the Real Property Records of
Washington County, Texas, to which reference is here made for all
purposes.
113. Oil, Gas and Mineral Lease dated July 27, 1995, between Johnnie
Stegent and wife, Florence Stegent, Johnnie Mark Stegent, Jr., Suzie
Klodzinski, Florence Clay, David Stegent, Donovan Pavlock, Shelly
Pavlock, Kimberly McGrath, and Marion Stegent, as
__________________________
Exhibit "B" - Page 13
<PAGE> 51
Lessors, and Shield Petroleum Incorporated, as Lessee, Memorandum of
Lease is recorded under File No. 6579, Volume 794, Page 787, of the
Real Property Records of Washington County, Texas, to which reference
is here made for all purposes.
114. Oil, Gas and Mineral Lease dated August 1, 1995, between Harry L.
Faterkowski and wife, Doris M. Faterkowski, as Lessor, and Shield
Petroleum Incorporated, as Lessee, Memorandum of Lease is recorded
under File No. 6784, Volume 795, Page 543, of the Real Property
Records of Washington County, Texas, to which reference is here made
for all purposes.
115. Oil, Gas and Mineral Lease dated August 2, 1995, between Tom Jankowiak
and wife, Eva Jankowiak, as Lessor, and Shield Petroleum
Incorporated, as Lessee, Memorandum of Lease is recorded under File
No. 7936, Volume 800, Page 18, of the Real Property Records of
Washington County, Texas, to which reference is here made for all
purposes.
116. Oil, Gas and Mineral Lease dated August 8, 1995, between C. J.
Wiseniskie and wife, Virigina L. Wiseniske, as Lessor, and Shield
Petroleum Incorporated, as Lessee, Memorandum of Lease is recorded
under File No. 6781, Volume 795, Page 529, of the Real Property
Records of Washington County, Texas, to which reference is here made
for all purposes.
117. Oil, Gas and Mineral Lease dated August 22, 1995, between Philip A.
Laskowski and wife Susan Laskowski, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7934, Volume 800,
Page 9, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
118. Oil, Gas and Mineral Lease dated August 22, 1995, between Philip A.
Laskowski and wife Susan Laskowski, as Lessor, and Shield Petroleum
Incorporated, as Lessee, recorded under File No. 7933, Volume 800,
Page 4, of the Real Property Records of Washington County, Texas, to
which reference is here made for all purposes.
119. Oil, Gas and Mineral Lease dated August 29, 1995, between Carolyn
Rosenstock-Ellis, as Lessor, and Shield Petroleum Incorporated, as
Lessee, recorded under File No. 7920, Volume 799, Page 943, of the
Real Property Records of Washington County, Texas, to which reference
is here made for all purposes.
120. Oil, Gas and Mineral Lease dated September 20, 1995, between
Bay-Houston Towing Co., as Lessor, and Shield Petroleum Incorporated,
as Lessee, recorded under File No. 8095, Volume 800, Page 617, of
the Real Property Records of Washington County, Texas, to which
reference is here made for all purposes.
121. Oil, Gas and Mineral Lease dated October 7, 1995, between Johny B.
Kopycinski and wife, Riva J. Kopycinski, as Lessor, and Shield
Petroleum Incorporated, as Lessee, memorandum of Oil, Gas and Mineral
Lease filed for record January 9, 1996 under File No.234__________,
of the Real Property Records of Washington County, Texas, to which
reference is here made for all purposes.
__________________________
Exhibit "B" - Page 14
<PAGE> 52
ADDITIONAL WMGA LEASES
WASHINGTON COUNTY, TEXAS
122. Oil, Gas and Mineral Lease dated December 28, 1995, between Harper
Bryan Trammell 1976 Trust, et al , as Lessor, and Shield Petroleum
Incorporated, as Lessee covering the following property:
Tract One : 61.329 Acres out of the Samuel Gates Survey, Abstract 44
in Washington County, Texas, and being the same tract of land
described in a deed from Tomie Bowden to W. Bryan Trammell Jr., dated
October 6, 1961, recorded in Vol. 236, Page 229, Deed Records of
Washington County, Texas, to which reference is hereby made for more
complete description.
Tract Two: 2,021.644 Acres out of the Samuel Gates Survey, Abstract
#44, and the William Gates Survey, Abstract #46, Washington County,
Texas, and being the same tract of land described in a Deed from S. R.
Buchanan, Jr. et. ux. To W. Bryan Trammell, Jr. Dated August 14,
1961, recorded in Vol. 235, Page 416, Deed Records of Washington
County, Texas, to which reference is hereby made for more complete
description.
Tract Three:23.491 Acres out of the Samuel Gates Survey, Abstract 44
in Washington County, Texas and being the same tract of land described
in a Deed from S. R. Buchanan, Jr. et. al. to W. Bryan Trammell, Jr.,
dated August 9, 1961, recorded in Vol. 235, Page 424, Deed Records of
Washington County, Texas, to which reference is hereby made for more
complete description.
Tract Four: 74.293 Acres out of the William Gates Survey, Abstract 46
in Washington County, Texas, and being the same tract of land
described in a deed from John C. Jackson, Trustee, and W. B. Trammell
to W. Bryan Trammell, Jr., and wife, Ann Gordon Trammell, dated July
24, 1967, recorded in Vol. 272, Page 64, Deed Records of Washington
County, Texas, to which reference is hereby made for more complete
description.
Tract Five: 351.45 Acres out of the William Gates Survey, Abstract 46,
Washington County, Texas, and being the same tract of land described
in a Deed from Milton L. Routt, et. ux. To W. Bryan Trammell, Jr.,
dated September 28, 1961, recorded in Vol. 236, Page 184, Deed Records
of Washinton County, Texas, to which reference is hereby made for a
more complete description.
123. Oil, Gas and Mineral Lease dated December 7, 1995 between Texas
Commerce Bank, Jean Sheesley Barnhart, John M. Sheesley, Jr. and
Martha T. Sheesley Co-trustees of the Johanna Moore Sheesley 1989
Trust and the Martha Anne Sheesley 1989 Trust , as Lessor, and Shield
Petroleum, Incorporated as Lessee, covering the following property:
351.689 acres of land, more or less, out of the David Lawerence
Survey, A-75, Washington County, Texas, and being the same land
described in Deed dated July 13, 1993 from Texas Commerce Bank, Jean
Sheesley Barnhart, John M. Sheesley, Jr. and Martha T. Sheesley
Co-Trustees of the Johanna Moore Sheesley 1989 Trust and Martha Anne
Sheesley 1989 Trust to Alan K. Meinen et ux, Jane Meinen, as recorded
in Volume 706, Page 631 of the Deed Records of Washington County,
Texas.
__________________________
Exhibit "B" - Page 15
<PAGE> 53
124. Oil, Gas and Mineral Lease dated December 29, 1995, between Sigmund
L. Koteras and wife, Frances Koteras as Lessors and Shield Petroleum,
Incorporated as Lessee, covering the following property:
116 acres of land, more or less, being a part of and out of the Gibson
Kuykendall Survey, A-71 more fully described in a Deed dated November
10, 1947, from Steve Koteras and wife, Wanda Koteras, to Sigmund L.
Koteras, recorded in Volume 153, Page 528 of the Deed Records of
Washington County, Texas.
125. Oil, Gas and Mineral Lease dated November 10, 1995 between R. P.
Ganchan and wife, Mildred D. Ganchan; B. Stephen Rice and wife, Meg
Rice; David Hannah, III and wife, Kinsey Hannah; Richard P. Ganchan
Jr. as Lessor and Shield Petroleum, Incorporated as Lessee, covering
the following property:
49.221 acres of land, more or less, out of the James Stevens Survey,
A-101, Washington County, Texas, being the same land described in two
(2) tracts as follows:
Tract One: 50.0 acres of land, more or less, being the same land
described in Deed dated December 10, 1985 from Thomas L. Matthews To
R. P. Ganchan, recorded in Volume 524, Page 895 of the Deed Records of
Washington County, Texas; LESS AND EXCEPT 1.044 acres of land, more or
less, being the same land described in Deed dated November 21, 1962
from Dr. Russell Scott, Jr. et al, to Harvie R. Matthews et ux.,
recorded in Volume 245, Page 46 of the Deed Records of Washington
County Texas; and
Tract Two: 0.374 acres of land, more or less, being the same land
described in deed dated December 10, 1985 from Thomas L. Matthews to
R. P. Ganchan, recorded in Volume 524, Page 895 of the Deed Records of
Washington County, Texas; LESS AND EXCEPT 0.109 acres of land, more or
less, being the same land described in Deed dated October 7, 1974 from
Thomas L. Matthews to Nick Zientak et ux., recorded in Volume 331,
Page 763 of the Deed Records of Washington County, Texas.
126. Oil, Gas and Mineral Lease dated December 30, 1995, between Johnnie
Mae Kubeczka Zientek, a widow, as Lessor and Shield Petroleum,
Incorporated as Lessee, covering the following property:
Tract One: 40.7 acres of land, more or less, out of the Wm. Munson
Survey A-90, located in Washington County, Texas, being the same land
described in Deed from Joe Kubeczka and wife, Annie Kubeczka to
Johnnie Mae Kubeczka Zientek, A Widow, dated March 27, 1952, recorded
in Volume 188, Page 387 of the Deed Records of Washington County,
Texas.
Tract Two: 40.7 acres of land, more or less out of the Wm. Munson
Survey A-90, located in Washington County, Texas, being the same land
described in deed from Joe Kubeczka and wife, Annie Kubeczka to
Johnnie Mae Kubeczka Zientek, a feme sole, dated April 12, 1957,
recorded in Volume 211, Page 307 of the Deed Records of Washington
County, Texas.
127. Oil, Gas and Mineral Lease dated December 30, 1995 between Lillian
Sechelski and husband, Alfred Sechelski as Lessor, and Shield
Petroleum, Incorporated as Lessee, covering the following property:
__________________________
Exhibit "B" - Page 16
<PAGE> 54
40.7 acres of land, more or less, being a part of and out of the Wm.
Munson Survey, A-90, Being more particularly described in a certain
Partition by Joe Kubeczka and wife, Annie Kubeczka recorded in Volume
188, Page 371, dated October 11, 1951 of the Deed Records of
Washington County, Texas.
128. Oil, Gas and Mineral Lease dated December 29, 1995 between Betty J.
Davis as lessor, and Shield Petroleum, Incorporated as Lessee,
covering the following property:
146.134 acres, more or less, located in the Gibson Kuykendall Survey,
A-71 and being the same land described in Deed dated April 29, 1968
from Willie Kmiec, et al. To Dr. A. Ross Davis recorded in Volume 276,
Page 196 of the Deed Records of Washington County, Texas.
129. Oil, Gas and Mineral Lease dated December 29, 1995 between Leonard E.
Addicks and wife, Josephine I. Addicks as lessor and Shield Petroleum,
Incorporated as Lessee, covering the following property:
146.134 acres, more or less, located in the Gibson Kuykendall Survey,
A-71 and being the same land described in Deed dated April 29, 1968
from Willie Kmiec, et al. To Dr. A. Ross Davis recorded in Volume 276,
Page 196 of the Deed Records of Washington County, Texas.
130. Oil, Gas and Mineral Lease dated December 28, 1995 between Joyce
Matthews McCorkle as Lessor, and Shield Petroleum, Incorporated as
Lessee, covering the following property:
392.684 acres of land, more or less, out of the James Stevens Survey,
A-101, Washington County, Texas, Being the same land described in five
(5) tracts as follows:
Tract One: 10.767 acres of land, more or less, being the same land
described in Deed dated October 13, 1980 from Anne Berry Matthews et
al. To R. P. Ganchan, recorded in Volume 403, Page 313 of the Deed
Records of Washington County, Texas; and
Tract Two: 2.491 acres of land, more or less, being the same land
described in deed dated October 13, 1980 from Anne Berry Matthews et
al. To R. P. Ganchan, recorded in Volume 403, Page 318 of the Deed
Records of Washington County, Texas; LESS AND EXCEPT 1.005 acres of
land, more or less, being the same-land described in Deed dated
September 2, 1969 from Southern Pacific Railroad Company to H. R.
Matthews, recorded in Volume 294, Page 456 of the Deed Records of
Washington County, Texas; and
Tract Three:170.804 acres of land, more or less, being the same land
described in Deed dated October 13, 1980 from Anne Berry Matthews et
al. To R. P. Ganchan, recorded in Volume 403, Page 318 of the Deed
Records of Washington County, Texas; LESS AND EXCEPT 10.767 acres of
land, more or less, being the same land described in Deed dated
October 13, 1980 from Anne Berry Matthews et al. To R. P. Ganchan,
recorded in Volume 403, Page 313 of the Deed Records of Washington
County, Texas.
Tract Four: 50.293 acres of land, more or less, being the same land
described in Deed dated March 6, 1971 from Harvie R. Matthews, et al.
To LeRoy Melcher recorded in Volume 303, Page 806 of the Deed
Records of Washington County, Texas.
__________________________
Exhibit "B" - Page 17
<PAGE> 55
Tract Five: 171.095 acres of land, more or less, and being the same
land described in Deed dated March 6, 1971 from Thomas L. Matthews, et
al to LeRoy Melcher recorded in Volume 303, Page 809 of the Deed
Records of Washington County, Texas; LESS AND EXCEPT 1.044 acres of
land, more or less, being the same land described in deed dated
December 21, 1962 from Dr. Russell Scott et al. To H. R. Matthews et
al., recorded in Volume 245, Page 46 of the Deed Records of Washington
County, Texas.
131. Oil, Gas and Mineral Lease dated December 28, 1995 between Daniel
Harvie Matthews as Lessor, and Shield Petroleum, Incorporated as
Lessee, covering the following property:
392.684 acres of land, more or less, out of the James Stevens Survey,
A-101, Washington County, Texas, Being the same land described in five
(5) tracts as follows:
Tract One: 10.767 acres of land, more or less , being the same land
described in Deed dated October 13, 1980 from Anne Berry Matthews et
al. To R. P. Ganchan, recorded in Volume 403, Page 313 of the Deed
Records of Washington County, Texas; and
Tract Two: 2.491 acres of land, more or less, being the same land
described in deed dated October 13, 1980 from Anne Berry Matthews et
al. To R. P. Ganchan, recorded in Volume 403, Page 318 of the Deed
Records of Washington County, Texas; LESS AND EXCEPT 1.005 acres of
land, more or less, being the same-land described in Deed dated
September 2, 1969 from Southern Pacific Railroad Company to H. R.
Matthews, recorded in Volume 294, Page 456 of the Deed Records of
Washington County, Texas; and
Tract Three:170.804 acres of land, more or less, being the same land
described in Deed dated October 13, 1980 from Anne Berry Matthews et
al. To R. P. Ganchan, recorded in Volume 403, Page 318 of the Deed
Records of Washington County, Texas; LESS AND EXCEPT 10.767 acres of
land, more or less, being the same land described in Deed dated
October 13, 1980 from Anne Berry Matthews et al. To R. P. Ganchan,
recorded in Volume 403, Page 313 of the Deed Records of Washington
County, Texas.
Tract Four: 50.293 acres of land, more or less, being the same land
described in Deed dated March 6, 1971 from Harvie R. Matthews, et al.
To LeRoy Melcher recorded in Volume 303, Page 806 of the Deed
Records of Washington County, Texas.
Tract Five: 171.095 acres of land, more or less, and being the same
land described in Deed dated March 6, 1971 from Thomas L. Matthews, et
al to LeRoy Melcher recorded in Volume 303, Page 809 of the Deed
Records of Washington County, Texas; LESS AND EXCEPT 1.044 acres of
land, more or less, being the same land described in deed dated
December 21, 1962 from Dr. Russell Scott et al. To H. R. Matthews et
al., recorded in Volume 245, Page 46 of the Deed Records of Washington
County, Texas.
132. Oil, Gas and Mineral Lease dated October 12, 1995 between Durward R.
Anderson and wife, Margaret J. Anderson as Lessor, and Shield
Petroleum, Incorporated as Lessee, covering the following property:
__________________________
Exhibit "B" - Page 18
<PAGE> 56
Tract One : 107.40 acres of land, more or less, lying and being
situated in Washington County, Texas, being parts of the Wm. Munson,
Simon Miller and Gibson Kuykendall Leagues, being part of the 250.96
acre tract conveyed by J. L. Routt to Ben Theimer by Deed recorded in
Volume 161, Page 76, Washington County Deed Records, and being the
same property conveyed to Durward R. Anderson by the Texas Veterans'
Land Program, dated March 4, 1954, recorded in Volume 198, Page 131,
of the Deed Records of Washington County, Texas.
Tract Two: 48.416 acres of land, more or less lying and being situated
in Washington County, Texas, an undivided 1/2 conveyed by Durward L.
Anderson and Ruth Anderson to Durward R. Anderson and wife, Margaret
Jarvis Anderson, dated October 24, 1975, recorded in Volume 340, Page
201 of the Deed Records of Washington County, Texas; and an undivided
1/2 interest conveyed by Durward L. Anderson and wife, Ruth Miller
Anderson to Durward R. Anderson and wife, Margaret Jarvis Anderson by
Deed dated January 20, 1976, recorded in Volume 343, Page 72 of the
Deed Records of Washington County, Texas; and being the same lands
described in the following two deeds:
1. Willie Hintzel and Mary Hintzel to D. L. Anderson, dated July
3, 1965, recorded in Volume 260, Page 251, of the Deed Records
of Washington County, Texas; and
2. Southern Pacific Transportation Company to D. L. Anderson,
dated November 5, 1970, recorded in volume 303, Page 109 of
the Deed Records of Washington County, Texas.
133. Oil, Gas and Mineral Lease dated November 1, 1995 between Ruth Miller
Anderson as Lessor, and Shield Petroleum, Incorporated as Lessee,
covering the following property:
Tract One: 11.213 acres, more or less, out of and a part of the
William Munson Survey, A-90, Washington County, Texas and being the
same land described in the certain Deed dated October 27, 1960 from
John Lockhart et al to Durward L. Anderson and recorded in volume 232,
Page 42 of the Deed Records of Washington County, Texas.
Tract Two: 19.62 acres, more or less, out of and a part of the Simon
Miller Survey A-88 and the William Munson Survey, A-90, Washington
county, Texas and being the same land described in that certain Deed
dated February 21, 1959 from Lawton Deats to Durward L. Anderson and
recorded in Volume 221, Page 291 of the Deed Records of Washington
County, Texas.
Tract Three:3.944 acres, more or less, out of and a part of the Simon
Miller Survey A-88, Washington County, Texas and being the same land
described in that certain Deed dated July 8, 1967 from A. M. Hernandez
to Durward L. Anderson and recorded in volume 271, Page 536 of the
Deed records of Washington County, Texas.
MONTGOMERY COUNTY, TEXAS
134. Oil, Gas and Mineral Lease dated December 27, 1995 between Sam L.
Olson, Jr as Lessor, and Shield Petroleum, Incorporated as Lessee,
covering the following property:
__________________________
Exhibit "B" - Page 19
<PAGE> 57
All Lessor's interest in 2,195 acres of land, more or less, in the
Francis A. B. Wheeler Survey, A-623, John Wheeler Survey, A-631, James
Matthews Survey, A-358, James Bridgeman Survey, A-102, Samuel Grimmett
Survey, A- 237, Robert Hutchinson survey, A-276, David Stewart Survey,
A-504, Robert P. Stewart Survey, A-474, and Daniel Roper Survey, A-444
Montgomery county, Texas, being the same land described in twelve (12)
tracts in deed dated June 23, 1943, from J. V. Scott to Sam L. Olson,
recorded in volume 236, Page 105 of the Deed Records of Montgomery
County, Texas.
WASHINGTON/AUSTIN COUNTIES, TEXAS
135. Oil, Gas and Mineral Lease dated December 30, 1995 between Julian A.
Laskowski and Gilbert Laskowski as Lessor, and Shield Petroleum,
Incorporated as Lessee, covering the following property:
51.5 acres of land, more or less, being a part of and out of the F.
Grimes Survey, A-51, Washington County, Texas; F. Grimes Survey, A-43,
Austin County, Texas; Silas Clark Survey, A-28, Washington County,
Texas and the James Stevens Survey, A-101, Washington County, Texas,
more fully described in a Deed from Ernest O. Wiesner, et ux to Isidor
Laskowski, dated December 19, 1944 and recorded in volume 141, Page
106 of the Deed Records of Washington County, Texas.
136. Oil, Gas and Mineral Lease dated December 28, 1995 between Kathyrine
Reese Jones, Martha R. Sterling, and James Reese Jones, Individually
and as Agent-In-Fact for Kathyrine Reese Jones Simank and Francis
LeGrand Jones Spradley, and Shield Petroleum, Incorporated as Lessee,
covering the following property:
Tract One: 232.53 acres, Jas. Stephenson League, Austin County,
Texas, and being the same land described in deed dated October 4, 1945
from Mrs. Katherine Reese to Katherine Reese Jones, et vir, recorded
at Volume 205, Page 41, Deed Records of Austin County, Texas;
Tract Two: 283.10 (.20) acres of land out of the James Stephenson
League of Austin, County, Texas, and being the same parcel of land
cited and described as Tract One (1) in a deed from Kathyrine Reese, a
widow, to Kathyrine Reese Jones, dated April 1, 1955, and recorded in
volume 219, Page 107, of the Deed Records of Austin County, Texas;
Tract Three: 0.58 acre tract or parcel of land out of the James
Stephenson League, known as the "old Reese Homestead", and being the
same land reserved by Kathyrine Reese out of the "first tract" in a
deed dated April 1, 1955, to Kathyrine Reese Jones, recorded in Volume
219, Page 107, of the Deed Records of Austin County, Texas;
Tract Four: 25.30 acres of land out of the James Stevens League, and
being located in the Counties of Washington and Austin, State of
Texas, being the same land described as the "2nd Tract" in a deed from
Kathyrine Reese, a widow to Katherine (Kathyrine) Reese Jones dated
April 1, 1955, and recorded in Volume 219, Page 107, of the Deed
Records of Austin County, Texas, and in Volume 340, Page 285, of the
Deed Records of Washington County, Texas;
__________________________
Exhibit "B" - Page 20
<PAGE> 58
LESS AND EXCEPT THE SURFACE ONLY of that certain 1.4 acre tract as
described in deed dated July 12, 1985, from James Reese Jones et al to
Troy Byler, recorded in the public records of Austin County, Texas;
Tract Five: 308.44 acres, more or less out of and a part of F. Grimes
Survey, A-43, James Stevens Survey, A- 94, James Stephenson Survey,
A-92 and Wm. P. Bird Survey, A-134, Austin County, Texas and being the
same land as described in that partition deed dated November 10, 1975
from Martha Reese Sterling et al to Erette Reese Red, as recorded in
volume 374, Page 945, of the Deed Records of Austin County, Texas,
reference for descriptive purpose only;
Tract Six: 36.7 acres, more or less out of and a part of the James
Stevens Survey, A-94, Austin County, Texas, and being the same land as
described in that certain deed dated August 12, 1964, from Mrs H. L.
Reese, a feme sole, to Erette Reese Red, as recorded in Volume 276,
Page 327, of the Deed Records of Austin County, Texas;
Tract Seven: That certain 308.41 acre tract of land out of the James
Stephenson League and the James Stevens League, Austin County, Texas
and being the same land described in Deed from Kathyrine Reese, a
widow, to Martha Reese Sterling, dated April 11, 1955, recorded at
volume 219, Page 114, Deed Records of Austin County, Texas;
Tract Eight: That certain 5.77 acres, James Stephenson League, Austin
County, Texas, being the same land described in deed from Martha
Sterling to Martha Sterling, et al, dated September 30, 1988, recorded
at Volume 591, Page 658, Official Records of Austin County, Texas;
Tract Nine: That certain 7.23 acres, James Stephenson Survey, A-92,
Austin County, Texas, being the same land described in deed dated
February 3, 1989, from Katie Meleski to Martha Reese Sterling, et al,
recorded at Volume 597, Page 727, Official Records of Austin County,
Texas;
Tract Ten: All that certain tract of land situated in Washington
county, Texas, on the North prong of Caney Creek being the North part
of an 18 acre tact out of the Jas. Stevens League deeded to S. A.
Haley;
Beginning at a stake in the centre of North fork of Caney Creek where
the W boundary line of the former Spann tract crosses said creek the
old bearing tree disappeared marked X a pecan 20 inches in diameter
bearing N. 88 E 16 varas distant;
THENCE with the West boundary line of said 18 acre tract S. 10 E 246
varas to a stake for corner from which a large red oak 30 inches in
dia. Marked X bears N. 29 W 8-1/2 varas and an elm 14 inches in dia
marked X bears N. 8 W. 20-3/5 varas distant;
THENCE N 80 E 151 varas to a stake in the centre of the creek for
corner an elm 24 inches dia marked X bears S. 46 W8-4/5 varas
distant;
THENCE up said Creek in the centre thereof with all its meanders N. 10
varas N. 7 W 82.4 varas N. 11-1/2 E41.2 N 60 W 60.5 varas West 23
varas S 69 W153 vrs to beginning containing 9 acres of land; and being
the same land described in deed from A. W. Watson to West Telford,
dated
__________________________
Exhibit "B" - Page 21
<PAGE> 59
December 15, 1901, recorded at Volume 42, Page 614, Deed Records of
Washington County, Texas.
AUSTIN COUNTY, TEXAS
137. Oil, Gas and Mineral Lease dated December 30, 1995 between Eugenia
Jozwiak, as her separate property; et al, as Lessor and Shield
Petroleum, Incorporated as Lessee, covering the following property:
62-3/4 acres, more or less, being a part of and out of the James
Stephenson Survey, A-92, described in a Deed from Tony Jaworski, et ux
to Edwin Jaworski dated September 24, 1970 and recorded in Volume 322,
Page 20 of the Austin County Deed Records.
138. Oil, Gas and Mineral Lease dated December 30,1995 between Clement
Laskowski and wife Marie Laskowski as Lessor and Shield Petroleum,
Incorporated as Lessee, covering the following property:
Tract One: 4.996 acres of land, more or less, being out of and part
of the James Stephenson League, A-92, Austin County, Texas, by
executor's deed dated August 3, 1987, from Floyd Jaworski, independent
executor of the estate of Edwin Jaworski, deceased to Marie Laskowski,
recorded in Volume 568, Page 368 of the Deed Records of Austin County,
Texas.
Tract Two: 4.996 acres of land, more or less, out of and a part of
the James Stephenson League, A-92, Austin County, Texas conveyed by
Victoria Pitts, by and through her legal guardian, Barbara Calderon to
Clem Laskowski, et ux, Marie Laskowski, dated December 20, 1993,
recorded in Volume 696, Page 497, of the Deed Records of Austin
County, Texas.
138. Oil, Gas and Mineral Lease dated December 30, 1995 between Clement
Laskowski and wife, Marie Laskowski as Lessor and Shield Petroleum,
Incorporated as Lessee, covering the following property:
Tract One: 5.893 acres of land, more or less, out of and a part of
the James Stephenson Survey, A-92, located in Austin County, Texas,
more particularly described in partition deed (and referred to in said
Partition Deed as "First"), dated September 4, 1981, from Marie
Laskowski, et al to Marie Laskowski, joined herein pro forma by her
husband, Clem Laskowski, recorded in Volume 448, Pages 784-797, deed
records of Austin County, Texas.
Tract Two: 5.893 acres of land out of the James Stephenson League,
A-92, lying and being situated in Austin County, Texas, referred to as
Tract No. 2 in partition deed, dated September 4, 1981, between Marie
Laskowski, Eugenia Jozwiak, Anna Yezak, Vicki Pitts and Florian
Jaworski, as joint owners, recorded in Volume 448, Page 784-797; and
being the same 5.893 acre tract of land out of the James Stephenson
League, A-92, Austin County, Texas, conveyed by Victoria Pitts, by and
through her legal guardian, Barbara Calderon
__________________________
Exhibit "B" - Page 22
<PAGE> 60
to Clem Laskowski, et ux, Marie Laskowski, dated December 20, 1993,
recorded in Volume 696, Page 497, of the Deed Records of Austin
County, Texas.
139. Oil, Gas and Mineral Lease dated December 30, 1995 between W. T.
Byler, Sr. and wife, Merlene Ann Byler, and W. T. Byler, Sr.as
Managing Partner of WTB, Ltd., A Texas Partnership as Lessor and
Shield Petroleum, Incorporated as Lessee, covering the following
property:
42.349 acres of land, more or less, being part of and out of the F.
Grimes One-Quarter League, Abst. No. 43 and James Stevens League,
Abst. No. 94, Austin County, Texas, more fully described in Special
Warranty Deed dated October 26, 1994 from W. T. Byler and wife Merlene
Byler to WTB, Ltd., A Texas Partnership, recorded in Volume 717, Page
368 of the Deed Records of Austin County, Texas.
140. Oil, Gas and Mineral Lease dated December 30, 1995 between W. T.
Byler, Sr., and wife Merlene Ann Byler, and W. T. Byler, Sr. as
Managing Partner of WTB, Ltd., A Texas Partnership as Lessor and
Shield Petroleum, Incorporated as Lessee, covering the following
property:
38.178 acres of land, more or less, out of the James Shephenson
League, A-92, Austin County, Texas and being out of the northern
portion of a 90.567 acre tract described in Deed from E. B. Tieman, et
ux, to William C. Liedtke, Jr., dated December 18, 1968, recorded in
Volume 306, Page 177, Deed Records, Austin County, Texas, said 38.178
acres being more particularly described as follows:
BEGINNING at an iron pin and fence corner in the south line of a
public road at the Northeast Corner of the 8.04 acre tract conveyed to
Willie Saxon by Henry Jaworski;
THENCE with said road line North 73 degrees 42' East, 393.78' to an
iron pin and fence corner at the Northwest Corner of the 256.6 acre
tract now or formerly owned by James Lewandoski;
THENCE with West Line of said tract as fenced South 15 degrees 15' East
approximately 2,700' or to a point in the center of Muddy Branch;
THENCE along said Muddy Branch in a westerly direction to a fence
corner, being the Southeast Corner of a 118.226 acre tract described
in Deed dated June 14, 1975 from Florian Jaworski, et al, to William
Troy Byler and wife, Merlene A. Byler, recorded in Volume 371, Page
951, Deed Records of Austin County, Texas;
THENCE with said fence North 19 degrees 17' West, 1072.92' to an iron
pin and fence corner at the Southwest Corner of the Willie Saxon 8.04
acre tract;
THENCE North 70 degrees 52' East, 200.53' to the Southeast Corner of
said tract;
THENCE with the East Line of said 8.04 acre tract as fenced North 16
degrees 05' West 317.38'; North 3 degress 55' West 728.91' to the
Point of Beginning and containing approximately 38.178 acres of land,
less.
__________________________
Exhibit "B" - Page 23
<PAGE> 61
141. Oil, Gas and Mineral Lease dated December 30, 1995 between William
Troy Byler and wife, Merlene A. Byler as Lessor and Shield Petroleum,
Incorporated as Lessee, covering the following property:
118.226 acres of land, more or less, out of and being a part of the
James Stephenson Survey, A-92, Austin County, Texas, and being the
same land described in that certain deed dated June 14, 1975, from
Florian Jaworski, et al, to William Troy Byler, as recorded in Volume
371, Page 951 of the Deed Records of Austin County, Texas.
142. Oil, Gas and Mineral Lease dated August 19, 1995 covering 174.055
acres of land from Richard Z. Hundley et al. to Lone Star Production
Company, Memorandum of Lease recorded in Volume 739, Page 627, of the
Official Records of Austin County, Texas.
143. Oil, Gas and Mineral Lease dated August 19, 1995 covering 87.392 acres
of land from Erline Sommerfeld, et vir., to Lone Star Production
Company, Memorandum of Lease recorded in Volume 739, Page 630 of the
Official Records of Austin County, Texas.
144. Oil, Gas and Mineral Lease dated August 19, 1995 covering 49.0 acres
of land from Fred Henry Heidemann et ux. to Lone Star Gas Production
Company, Memorandum of Lease recorded in Volume 739, Page 633 of the
Official Records of Austin County, Texas.
145. Oil, Gas and Mineral Lease dated August 19, 1995 covering 26.055 acres
of land from T. Grant Johnson to Lone Star Production Company,
Memorandum of Lease recorded in Volume 743, Page 720 of the Official
Records of Austin County, Texas.
146. Oil, Gas and Mineral Lease dated November 10, 1995 covering 26.055
acres of land from Richard Lee Hundley, et al. to Lone Star Production
Company, Memorandum of Lease recorded in Volume 743, Page 717 of the
Official Records of Austin County, Texas.
GRIMES COUNTY, TEXAS
147. Oil, Gas and Mineral Lease dated December 29, 1995 between John P.
Smith Trust with Alma Smith, Frances Smith Merek et al as Trustees, as
Lessors and Shield Petroleum Incorporated as Lessee, covering 438.91
acres, more or less, being out of the M. McIntire Survey, A-41, and
the William McIntire Survey, A-40, Grimes County, Texas, and recorded
in Volume __________, Page __________ of the Real Property Records of
Grimes County, Texas and being the same land as described in Special
Warranty Deed dated February 16, 1995 from Alma Lee Smith, Frances
Marie Marek, and Jeanette Smith Raines Independent Co-Executors of the
Estate of John P. Smith to Alma Lee Smith and Jeanette Smith Raines as
Co-Trustees of the John P. Smith Trust dated April 12, 1989 and land
described in deed recorded in Volume 232, Page 71. All references
herein are in the Deed Records of Grimes County, Texas.
148. Oil, Gas and Mineral Lease dated December 29, 1995 between Alma Smith,
dealing in her separate property, as Lessor and Shield Petroleum
Incorporated as Lessee, covering 438.91 acres, more or less, being out
of the M. McIntire Survey, A-41, and the William McIntire Survey,
A-40,
__________________________
Exhibit "B" - Page 24
<PAGE> 62
Grimes County, Texas, and recorded in Volume __________, Page
__________ of the Real Property Records of Grimes County, Texas and
being the same land as described in Special Warranty Deed dated
February 16, 1995 from Alma Lee Smith, Frances Marie Marek, and
Jeanette Smith Raines Independent Co-Executors of the Estate of John
P. Smith to Alma Lee Smith and Jeanette Smith Raines as Co-Trustees of
the John P. Smith Trust dated April 12, 1989 and land described in
deed recorded in Volume 232, Page 71. All references herein are in the
Deed Records of Grimes County, Texas.
149. Oil, Gas and Mineral Lease dated December 29, 1995 between Charles
Floyd and wife, Geraldine Floyd, as Lessors and Shield Petroleum
Incorporated as Lessee, covering 322.37 acres, more or less, being out
of the M. McIntire Survey, A-41, the William McIntire Survey, A-40,
and the William McIntire Survey, A-321, Grimes County, Texas, and
recorded in Volume __________, Page __________ of the Real Property
Records of Grimes County, Texas and covering the following property:
Tract One: 156.5 acres of land, more or less, being in the Margaret
McIntire Survey, Abstract No. 41, as recorded in Volume 110, Page 639,
of the Deed Records of Grimes County, Texas.
Tract Two: 41.00 acres of land, more or less, being in the William
McIntire Survey, Abstract No. 40, as recorded in Volume 110, Page 639,
of the Deed Records of Grimes County, Texas.
Tract Three:41.00 acres of land, more or less, being in the William
McIntire Survey, Abstract No. 40, as recorded in Volume 137, Page 497,
of the Deed Records of Grimes County, Texas.
Tract Four: 66.42 acres of land, more or less, being in the J. B. Tong
Survey, Abstract No. 446, as recorded in Volume 333, Page 447 in the
Deed Records of Grimes County, Texas.
Tract Five: 10.886 acres of land, more or less, being in the William
McIntire Survey, Abstract No. 321, as recorded in Volume 796, Page
802, of the Deed Records of Grimes County, Texas.
Tract Six: 6.774 acres of land, more or less, being in the William
McIntire Survey, Abstract No. 321, as recorded in Volume 796, Page 804
of the Deed Records of Grimes County, Texas.
150. Oil, Gas and Mineral Lease dated December 30, 1995 between Angeline
McLaurin, dealing in her separate property, as Lessor and Shield
Petroleum Incorporated as Lessee, covering 9.12 acres, more or less,
being out of the William McIntire Survey, A-321, Grimes County, Texas,
and recorded in Volume __________, Page __________ of the Real
Property Records of Grimes County, Texas, and the same land as
described in Partition Deed dated November 4, 1980 from Lois Finke,
Pauline Boehm, Lucille Gerwe and Hilda Nichols to Angeline McLaurin
known as Tract #2 of the Agnes Noski Estate Division said deed being
recorded in Volume 409, Page 835 of the Deed Records of Grimes County,
Texas.
151 Oil, Gas and Mineral Lease dated December 30, 1995 between Cyril S.
Adams, Jr., Trustee of the Simone Louise Adams Trust and Trustee of
the Susan Michelle Adams Trust, as Lessors and Shield Petroleum
Incorporated as Lessee, covering 259.3075 acres, more or less, being
out of the
__________________________
Exhibit "B" - Page 25
<PAGE> 63
A. U. Springer Survey, A-405, Grimes County, Texas, and recorded in
Volume __________, Page __________ of the Real Property Records of
Grimes County, Texas, being the same land as the first tract described
in deed from Dora Behrens to C. S. Adams dated August 22, 1950 and
recorded in Volume 196, Page 291 of the Deed Records of Grimes County,
Texas.
152. Oil, Gas and Mineral Lease dated December 31, 1995 between Mark M.
Garnett, Residuary Trust, Carol Garnett, Trustee, as Lessor and Shield
Petroleum Incorporated as Lessee, covering 556.657 acres, more or
less, being out of the M. McIntire Survey, A-41, Grimes County, Texas,
and recorded in Volume ___________, Page __________ of the Real
Property Records of Grimes County, Texas, covering the following
property:
556.657 acres of land, more or less, located in the Margaret McIntire
Survey Abstract No. 41 and being part of a 629 acre tract of land
described in deed dated August 31, 1954 from John O. Stoneham to Mark
M. Garnett, recorded in Volume 220, Page 627, of the Deed Records of
Grimes County, Texas. SAVE AND EXCEPT 34.706 acres of land, more or
less, in the Margaret McIntire Survey Abstract No. 41, and being the
same land described in a gift deed dated January 4, 1982 from Mark M.
Garnett et ux, to Carol Garnett recorded in Volume 437, Page 331, of
the Deed Records of Grimes County, Texas. SAVE AND EXCEPT 37.637
acres of land, more or less, being in the Margaret McIntire League
Abstract No. 41 and being the same land, described in a gift deed
dated January 4, 1982 from Mark M. Garnett et ux, to Linda Garnett
Elkins recorded in Volume 437, Page 334, of the Deed Records of Grimes
County Texas. Leaving a net acreage of 556.657 acres of land from the
original 629 acre tract.
153. Oil, Gas and Mineral Lease dated December 31, 1995 between Pauline
Reedy Freeman, Individually and as Attorney-in-Fact for Roy E.
Freeman, as Lessor and Shield Petroleum Incorporated as Lessee,
covering 753.033 acres, more or less, being out of the William
McIntire Survey, A-40, Grimes County, Texas, and recorded in Volume
__________ , Page _________ of the Real Property Records of Grimes
County, Texas and being the same property described in Deed dated
April 1, 1974 from Paul E. Bice, Trustee to Howard G. Singer, Trustee,
recorded in Volume 320, Page 793 of the Deed Records of Grimes County,
Texas.
__________________________
Exhibit "B" - Page 26
<PAGE> 64
AMENDMENT TO PURCHASE AND SALE AGREEMENT
Reference is made to that certain Purchase and Sale Agreement dated
December 28, 1995 (the "Purchase and Sale Agreement"), between Shield Petroleum
Incorporated and P&M Properties, as Sellers, and Hugoton Energy Corporation, as
Buyer, covering certain oil and gas leases and wells in Brazos County, Texas
(the "Brazos Leases") and certain oil and gas leases in Washington, Grimes,
Montgomery, and Austin Counties, Texas (the "WGMA Leases").
Sellers and Buyer desire to amend the terms of the Purchase and Sale
Agreement to (i) correct Article 1.03 to provide for a sale to Buyer of a
46.25% interest in the WGMA Leases after payout as therein provided; to (ii)
to add to Article 7.01 a provision for the return of the purchase price
allocable to any Asset on which there is a failure of title within 90 days of
such failure of title; and (iii) to delete from Exhibit "A-1" attached to the
Purchase and Sale the oil and gas lease numbered "45." from Robert Ewing
Armstrong, dated August 25, 1994, and recorded in Volume 2203, Page 58, of the
Real Property Records of Brazos County, Texas (the "Armstrong Lease").
Now therefore, for adequate consideration, Sellers and Buyer do hereby
amend the Purchase and Sale Agreement as follows:
1. Article 1.03 is hereby amended to delete, in the second and
third line of said article, the words "and an undivided
forty-two and one half percent (42.5%), after Payout," and
substitute in their place the following: "and an undivided
forty-six and one-quarter percent (46.25%), after Payout,".
2. Article 7.01 is hereby amended to add at the end of the
paragraph the following: "Sellers agree that they shall
return to Buyer, within ninety (90) days of any failure of
title to any Asset, the purchase price or the portion thereof
which is allocable to the Asset."
3. Exhibit "A-1" is hereby amended to delete the Armstrong Lease.
Except as hereby amended, the Purchase and Sale Agreement shall
continue in full force and effect under the terms thereof.
Executed this 10th day of January, 1996
SHIELD PETROLEUM INCORPORATED
By:
-----------------------------------
Ray Powell, President
<PAGE> 65
P&M PROPERTIES, A TEXAS GENERAL PARTNERSHIP
By:
---------------------------
Ray Powell, General Partner
By:
---------------------------
Ken Martin, General Partner
HUGOTON ENERGY CORPORATION
By:
---------------------------
Floyd Wilson, President
<PAGE> 66
EXHIBIT C
LIENS
1. Deed of Trust dated September 29, 1995, executed by Shield, as
mortgagor, in favor of Fidelity Bank, N.A., University Park, Texas, as
mortgagee, recorded in Volume 2457, Page 128-157 of the Real Property Records
of Brazos County, Texas, covering the Brazos County producing wells described
in the preceding Exhibit A-1.
2. Security Interest of Eagle Oil & Gas Co. ("Eagle") claimed under Letter
Agreement dated December 13, 1994, as amended by letter dated July 26, 1995,
between Eagle and Reata Oil and Gas Corp., securing certain reimbursement
rights of Eagle and certain options to participate, in the WGMA Leases
described in the preceding Exhibit B.
<PAGE> 67
EXHIBIT "D"
ASSIGNMENT OF UNDIVIDED INTEREST IN OIL AND GAS LEASES
For valuable consideration, the receipt and sufficieny of which is
hereby acknowledged, (Name of Assignor) . ("Assignor"), whose
mailing address is ________________________________________, does hereby assign
and convey unto HUGOTON ENERGY CORPORATION ("Assignee"), whose mailing address
is 301 N. Main, Suite 1900, Wichita, Kansas 67202, subject to the terms of this
Assignment, an undivided (state fractional interest) interest in the
Oil and Gas Leases described in Exhibit "A" (the "Leases"), made a part hereof
for all purposes, together with a similar interest in all personal property and
equipment used or obtained in connection therewith.
Assignor reserves an overriding royalty interest equal to the
difference, if any, between (state formula for overriding royalty
reservation) of 8/8 of the oil, gas and, if applicable, other minerals
produced and saved from the lands covered by the Leases. Said overriding
royalty interest shall be free of all costs and expenses of exploration,
development and operation of Leases, but shall bear its proportionate share of
taxes. Said overriding royalty interest shall apply to any renewals or
extensions of the Leases which may be taken by Assignees or its successors or
assign within one year form termination of the Leases. If the Leases covers
less than the full interest in the lands described therein and covered by
this Assignment, then said overriding royalty interest shall be proportionately
reduced.
The interest assigned herein is subject proportionately to the
following:
(a) All royalty, overriding roalty and other Lease burdens of
record, as of the date of this Assignment, in Brazos County, Texas, affecting
the assigned premises;
(b) The terms and conditions of all existing orders, rules, and
regulations of Federal, State, and other governmental agencies having
jurisdiction;
(c) Any valid and subsisting oil, casinghead gas and gas sales
contracts and agreements, insofar and only insofar as the same are pertinent or
relate to the property and interest conveyed herein.
(d) The terms and conditions contained in that certain Letter
Agreement dated (state date of letter agreement) , between Assignor and
Assignee.
Assignor specifically warrants and agrees to defend the title to the
Leases against the claims and demands of all persons claiming the same or any
part thereof, limited to the consideration paid by Assignee for such portion of
the Leases in which there is a failure of title. ASSIGNOR EXPRESSLY DISCLAIMS
AND NEGATES AS TO PERSONAL PROPERTY AND FIXTURES; (a) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY; (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE; AND ANY IMPLIED (c) OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS.
This Assignment shall be binding upon and shall inure to the benefit of
Assignor and Assignee and their respective heirs, successors and assigns.
Executed this _______ day of _______________, 1996.
<PAGE> 68
(NAME OF ASSIGNOR)
By:
-------------------
Name:
Title:
(Add acknowledgment)
--------------------
<PAGE> 69
SCHEDULE 3.02(e)
VALUE OF BRAZOS COUNTY, TEXAS
PRODUCING & UNDEVELOPED ASSETS
<TABLE>
<CAPTION>
Well Names Value
---------- -----
<S> <C>
1. Vilas No. 1 Well $ 0.00
2. Jericho-Vilas No. 1 Well $ 0.00
3. Vilas-moore No.1 Well $ 0.00
4. Moore No. 1-H Well $1,239,000.00
5. Walton O.L. No. 1-H Well $1,470,000.00
6. Westlands No. 1-H Well $ 45,500.00
7. Kathleen O.L. No. 1-H Well $1,83,000.000
8. T.J.M. O.L. No. 1 Well $ 262,500.00
9. Big Creek Location $ 583,333.33
10. Vilas-Walton Location $ 583,333.33
11. Cawthon O.L. Location $ 583,333.34
-------------
Total Value $5,250.000.00
</TABLE>
- --------------------------------
Schedule 3.02 (e) - Page 1
<PAGE> 70
(c) Defined Terms. A defined term has its defined meaning
everywhere in this Agreement, regardless of whether the term
appears before or after the place in this Agreement where the
term is defined.
12.12 Further Assurances. After the Closing, Seller shall execute and
deliver or shall otherwise caused to be executed and delivered, from time to
time, such further instruments, notices, division orders, tansfer orders, and
other documents and do such other and further acts and things as may be
reasonably necessary, as may be reasonably requested by Buyer, to more fully
and effectively transfer the Assets to the Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
SHIELD PETROLEUM INCORPORATED
By:
---------------------------
Ray Powell, President
P & M PROPERTIES
By:
---------------------------
Ray Powell, General Partner
By:
---------------------------
Ken Martin, General Partner
EAGLE OIL & GAS CO.
By:
---------------------------
Pat Bolin, President
HUGOTON ENERGY CORPORATION
By:/s/ [ILLELIGBLE]
---------------------------
Printed Name:
-----------------
Title:
------------------------
<PAGE> 1
EXHIBIT 10.16
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is dated the 18th
day of June, 1996, between SHIELD PETROLEUM INCORPORATED, a Texas corporation,
("Shield"), whose address is 1303 FM 2818 E, College Station, Texas 77840,
("Seller"), and HUGOTON ENERGY CORPORATION, a Kansas corporation, ("Buyer"),
whose address is 301 N. Main, Suite 1900, Wichita, Kansas 67202.
In consideration of their mutual promises, Buyer and Seller agree to
the sale of the Leases (defined below) under the terms of this Agreement.
ARTICLE I
SALE AND PURCHASE
1.01 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Seller shall sell and Buyer shall purchase and pay for, at the
Closing, as defined herein, the rights, titles and interests of Seller
described in this Article I (collectively the "Assets").
1.02 Leases. An undivided fifty percent (50%) interest in the oil,
gas and mineral leases and lease option agreements described in Exhibit "A"
(collectively referred to as the "Leases"), subject to the terms of the
Development Agreement attached hereto as Exhibit "B" which is to be executed by
the Parties at Closing.
1.03 Files. Copies, made at Buyer's expense, of files, records,
documents and data in the possession of Seller related to the Leases, the
transfer or disclosure of which would not violate the terms of any existing
agreements) with a third party. However, Hugoton shall have no right of access
to any file, record, or document which relates in any way to any of the
Excluded Assets (defined below), whether in the possession of Shield or in the
possession of any third party.
1.04 Excluded Assets. The following rights, titles and interests of
Seller are not included in the Assets and are expressly reserved to Seller
(collectively the "Excluded Assets"), to wit:
(a) all right's and choses in action arising, occurring or
existing in favor of Seller prior to the Closing (hereinafter
defined) including, but not limited to, any and all contract
rights, claims, receivables, recoupment rights, accounting
adjustments, mispayments, erroneous payments or other claims
of any nature in favor of Seller and relating and accruing to
any time prior to the Closing.
(b) Seller's rights in software, patents, licenses, processes,
intellectual property, depictions, designs, flow charts,
hardware, and all other like or similar property connected
with location diagnostics, target zone identification or
horizontal drilling and production procedures or technology.
Purchase and Sale Agreement -Page 1
<PAGE> 2
ARTICLE II
PURCHASE PRICE
2.01 Purchase Price. The Purchase Price for the Assets shall be
$11,249,698.78.
2.02 Payment of Purchase Price. The Purchase Price shall be paid
at the Closing by wire transfer or in other immediately available funds as may
be requested by Seller.
ARTICLE III
TITLE MATTERS
3.01 Access to Records. From the date hereof until thirty days
after Closing, Seller will give Buyer reasonable access during Seller's normal
business hours to all information related to the Assets, presently in Seller's
custody at the present location of those documents, and Seller will either copy
such information for the account of Buyer, in which event Buyer shall reimburse
Seller for the reasonable costs of such copying, or make the information
available for copying within the confines of Seller's offices.
3.02 Value of the Leases. Buyer and Seller have agreed that the
value of each Mineral Acre (defined below) covered by the Leases is Two
Hundred Seventy-five Dollars ($275.00) per Mineral Acre. However, for the
purpose of calculating the return of the Purchase Price to Buyer in the event
of a failure of title to the Asset(s), or the loss of any of the Leases due to
a failure of title (defined below in Article 7.01), the value of each Mineral
Acre is proportionately reduced to the interest to be assigned to Buyer, being
One Hundred Thirty- seven and 50/00 Dollars ($137.50), it being the intent
hereof that the Buyer would receive actual costs paid for said Leases. A
Mineral Acre is defined as the full mineral interest in one acre of land.
ARTICLE IV
REPRESENTATIONS OF SELLER
Seller represents and warrants to Buyer:
4.01 Existence. Shield is a corporation duty organized, validly
existing and in good standing under the laws of the State of Texas.
4.02 Power and Authorization. Shield has all corporate power,
authority and capacity to enter into and perform this Agreement and the
transactions contemplated hereby. The consummation of the transactions
contemplated by this Agreement will not violate, nor be in conflict with, any
provision of Seller's charter, bylaws, or governing documents, or any agreement
or instrument to which Seller is a party or is bound, or any judgment, decree,
order, statute, rule or regulation applicable to Seller. The execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite corporate or
partnership action, as the case may be, on the part of Seller.
Purchase and Sale Agreement -Page 2
<PAGE> 3
4.03 Valid, Binding and Enforceable. This Agreement has been duly
executed and delivered on behalf of Seller, and at the Closing all documents
and instruments required hereunder to be executed and delivered by Seller shall
have been duly executed and delivered. This Agreement does, and such documents
and instruments shall, constitute legal and valid obligations of Seller:
4.04 Brokers. Seller has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement for which Buyer is or will be in any way
liable.
4.05 No Defaults. Seller, to the best of its knowledge, is not in
default under any contract or agreement pertaining to the Assets.
4.06 Title and Validity of Leases. Seller owns the Assets and has
full right to sell and convey the same. To the best of Seller's knowledge, the
Leases are in full force and effect, are valid and subsisting, cover the entire
estates they purport to cover, and are not subject to forfeiture or termination
from any cause.
4.07 Payment of Rents and Royalties. To the best of Seller's
knowledge, all royalties, rentals and other payments due under the Leases have
been properly and timely paid, and all conditions necessary to keep the Leases
in force have been fully performed.
4.08 Taxes. To the best of Seller's knowledge, all ad valorem,
property, production, severance, excise and similar taxes and assessments based
on or measured by the ownership of property or the production of hydrocarbons
or the receipt of proceeds therefrom on the Assets that have become due and
payable have been properly and timely paid.
4.09 Litigation. To the best of Seller's knowledge, no suit,
action, investigation or other legal proceeding is pending before any court or
governmental agency and no set of facts or cause of action exists that relates
to the Assets that might result in impairment or loss of Seller's title to any
portion of the Assets or the value thereof or that might hinder or impede the
operation or enjoyment of the Leases.
4.10 Compliance With Laws. To the best of Seller's knowledge, all
laws, rules, regulations, ordinances and orders of all local, state and federal
governmental bodies, authorities and agencies having jurisdiction over the
Assets have been complied with.
4.11 Preferential Rights and Consents. There are no existing
agreements, options, preferential rights to purchase, or required consents to
assignment, commitments or rights with, to or in any third party to acquire any
interest of Seller in any portion of the Assets. Further, Seller does not
require any consent or approval of third parties or governmental agencies to
enter into this Agreement or to consummate the transactions contemplated
herein.
4.12 Prepayments, Non-Consent Operations and Calls. Seller is not
obligated to deliver any quantities of oil, gas or other hydrocarbon substances
at some future time without thereafter receiving full
Purchase and Sale Agreement -Page 3
<PAGE> 4
payment therefor in the ordinary course of business. No operations have been
conducted pursuant to any agreement to which Seller is a party and that affect
the Assets which would result in Seller relinquishing, permanently or
temporarily, any interests or ownership rights in any portion of its Assets, or
under which Seller has become a "non- consenting" party. Seller has not granted
any person, firm or entity any call upon, option to purchase or similar rights
with respect to any oil, gas or other hydrocarbon substances to be produced
from or which is allocable to the Assets.
4.13 Disclaimers. THE REPRESENTATIONS AND WARRANTIES OF SELLER
CONTAINED IN THIS AGREEMENT (OR IN THE ASSIGNMENT) AND IN ANY OTHER TRANSACTION
DOCUMENTS TO WHICH SELLER IS A PARTY ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND
SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND
WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, EXCEPT AS SET FORTH IN ARTICLE
3.02, 4.06, AND 4.12 HEREOF AND IN ANY OTHER TRANSACTION DOCUMENTS, THE ASSETS
SHALL BE CONVEYED PURSUANT THERETO WITHOUT ANY WARRANTY OR REPRESENTATION
EXCEPT AS SET OUT HEREIN WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND,
WITH RESPECT TO THE PERSONAL PROPERTY AND EQUIPMENT, WITHOUT ANY REPRESENTATION
RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE,
CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY
PORTION OF THE PROPERTY OR ITS FITNESS FOR ANY PURPOSE, AND, EXCEPT AS PROVIDED
OTHERWISE IN ANY TRANSACTION DOCUMENTS, WITHOUT ANY OTHER EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR
MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO THE BUYER
IN CONNECTION WITH THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO
PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO
PRODUCE HYDROCARBONS.
ARTICLE V
REPRESENTATIONS OF BUYER
Purchase and Sale Agreement -Page 4
<PAGE> 5
Buyer represents and warrants to Seller that:
5.01 Existence. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas, and Buyer
is duly qualified to carry on its business in the State of Texas.
5.02 Power and Authorization. Buyer has all corporate power,
authority and capacity to enter into and perform this Agreement and the
transactions contemplated hereby. The consummation of the transactions
contemplated by this Agreement will not violate, nor be in conflict with, any
provision of Buyer's charter, bylaws, or governing documents, or any agreement
or instrument to which Buyer is a party or is bound, or any judgment, decree,
order, statute, rule or regulation applicable to Buyer. The execution, delivery
and performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite corporate action on the part
of Buyer.
5.03 Valid, Binding and Enforceable. This Agreement has been duly
executed and delivered on behalf of Buyer, and at the Closing all documents and
instruments required hereunder to be executed and delivered by Buyer shall have
been duly executed and delivered. This Agreement does, and such documents and
instruments shall, constitute legal and valid obligations of Buyer.
5.04 Brokers. Buyer has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement for which Seller is or will be in any
way liable.
5.05 Governmental Requirements. By the Closing, Buyer shall have
received or procured all required bonds, governmental approvals, consents,
licenses and permits required in the ownership of the Assets except for those
approvals, consents, licenses and permits ordinarily acquired after the
Closing.
5.06 Independent Investigation and Disclaimer. Prior to the Closing
of this Agreement, Buyer has been afforded the opportunity to inspect the
Assets and to examine the records of Seller at Seller's offices with respect to
the Assets, and has been afforded access to all information in Seller's
possession with respect to the Assets. BUYER ACKNOWLEDGES THAT SELLER HAS MADE
NO REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION, OR AS TO ANY OTHER INFORMATION, DATA OR OTHER MATERIALS (WRITTEN
OR ORAL) FURNISHED TO BUYER BY OR ON BEHALF OF SELLER (INCLUDING, WITHOUT
LIMITATION, THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE
RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUCH RESERVES, THE VALUE OF
SUCH RESERVES, ANY PRODUCTION PRICING ASSUMPTION, PRESENT OR PAST PRODUCTION
RATES, THE CONDITION OF ANY WELL, AND THE ABILITY TO SELL OIL OR GAS PRODUCTION
AFTER THE CLOSING). IN ENTERING INTO AND PERFORMING THIS AGREEMENT, BUYER HAS
RELIED
Purchase and Sale Agreement -Page 5
<PAGE> 6
SOLELY UPON ITS INDEPENDENT INVESTIGATION OF, AND JUDGMENT WITH RESPECT TO, THE
ASSETS, AND THEIR VALUE.
ARTICLE VI
COVENANTS
6.01 Operations. From the date of this Agreement until the Closing,
Seller (i) shall permit Buyer to have reasonable access to the Assets; and (ii)
shall operate the Assets as a reasonably prudent operator. Specifically:
(a) Seller shall not enter into any contractual commitments or
other arrangements, including AFE's for any single operation
involving amounts exceeding One Hundred Thousand Dollars
($100,000.00), or for any single operation having a projected
duration exceeding thirty (30) days, which would continue
beyond the Closing and which would be after the Closing
binding upon Buyer, without the prior written consent of
Buyer.
(b) Seller shall not sell, transfer, convey or encumber any
portion of the Assets, or create or permit to exist any
security-interest, liens or encumbrances on any of the
Assets, except for Permitted Encumbrances.
(c) Seller shall not release any of the Leases, without the prior
written consent of Buyer.
6.02 Confidentiality. Until the Closing, Buyer shall cause the
information and data furnished or made available by Seller to Buyer and its
officers, employees, and representatives in connection with this Agreement or
Buyer's investigation of the Assets to be maintained in strict confidence.
6.03 Development Agreement. As a condition to the Closing, Buyer
and Seller will enter into the exploration and development of the attached
hereto as Exhibit "B" (the "Development Agreement").
ARTICLE VII
ASSIGNMENT
7.01 Assignment. As a condition to the Closing, Buyer and Seller
will execute an assignment of the Leases upon the form of assignment attached
hereto as Exhibit "C"(the "Assignment"), which shall be made with a general
warranty of title, limited, however, to return of the Purchase Price allocable
to the Asset or the portion thereof with respect to which there is a failure of
title. "Failure of title" includes, without limitation, the failure of Seller
to (i) drill the well provided for in the Oil and Gas Lease Agreement effective
May 28, 1996, between the Long-Bell Petroleum Company, Inc., as Lessor, and
Eagle Oil & Gas Co., as Lessee, covering portions of Section 26, 27, 33, 34,
35, and 36, T4S, R8W, and Sections 1, 2, 3, 4, 5, 9, 10, 12, and 16, T5S, R8W,
Beauregard Parish, Louisiana, which well must be commenced before August 1,
1996,
Purchase and Sale Agreement -Page 6
<PAGE> 7
as provided therein, or (ii) pay a delay rental, shut-in well payment(s) or
royalty payment(s) causing all or a portion of a lease to terminate when one of
the parties hereto should desire that such interest continue in effect.
ARTICLE VIII
CONDITIONS OF CLOSING
8.01 Conditions to Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated by this Agreement are subject to
the satisfaction or waiver of Seller, of the following condition:
(a) All representations and warranties of Buyer in this Agreement
shall be true in all material respects at and as of the
Closing as if such representations and warranties were made at
and as of the Closing, and Buyer shall have performed and
satisfied all covenants and agreements required by this
Agreement to be performed and satisfied by Buyer at or prior
to the Closing.
8.02 Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the transactions contemplated by this Agreement are subject to
the satisfaction or waiver by Buyer, of the following conditions:
(a) all representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of
the Closing as if such representations and warranties were
made at and as of the Closing, and Seller shall have performed
and satisfied all agreements required by this Agreement to be
performed and satisfied by Seller at or prior to the Closing.
(b) there shall have been no material adverse change in the
physical condition of the properties and no event, unremedied
or unwaived, shall have occurred which causes a material
reduction in the value of the Assets considered as a whole,
since the date of this Agreement, excluding, however, any
reduction in value as a result of changes in the sales price
of oil and or gas.
8.03 Conditions to Obligations of Both Parties. The obligations of
Seller and Buyer to consummate the transactions contemplated by this Agreement
are subject to the satisfaction or waiver by both parties, of the following
conditions:
(a) There shall not be pending or instituted, threatened or
proposed, any action or proceeding by or before any court,
administration agency, or any other person, challenging or
complaining of, or seeking to collect damages or other relief
in connection with the transactions contemplated by this
Agreement.
(b) no state or federal statute, rule, regulation or action shall
exist or shall have been adopted or taken and no judicial or
administrative decision shall have been entered (whether on a
preliminary or final basis), that would prohibit, restrict or
delay the consummation of the transactions contemplated by
this Agreement or make the payments due hereunder illegal.
Purchase and Sale Agreement -Page 7
<PAGE> 8
ARTICLE IX
CLOSING
9.01 Date of Closing. Subject to the conditions stated in this
Agreement, the consummation of the transactions contemplated by this Agreement
(the "Closing") shall be held on June 18, 1996, at 9:00 a.m., or at such other
date as the parties shall agree in writing (the "Closing Date."
9.02 Place of Closing. The Closing shall be held at the offices of
Seller, 1303 FM 2818 E, College Station, Texas, or at such other place as Buyer
and Seller may agree upon in writing.
9.03 Closing Obligations. At the Closing the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
(a) Seller shall execute, acknowledge and deliver to the Buyer (in
sufficient counterparts to facilitate recording) the
Assignment.
(b) Seller and Buyer shall execute, acknowledge and deliver, each
to the other, an original counterpart of (i) the Development
Agreement described in Section 6.03; and (ii) the Assignment
described in Section 7.01.
(c) Buyer shall make payment of the Purchase Price to Seller.
(d) Seller shall provide to Buyer original copies of all consents
to assign any of the Leases.
ARTICLE X
POST-CLOSING RIGHTS, OBLIGATIONS
AND INDEMNITIES
10.01 Indemnification by Seller. Seller agrees to indemnify and hold
Buyer harmless from and against any and all Claims (each as hereinafter
defined) of any nature arising out of the ownership, use, sale, condition or
operation of the Assets accruing, occurring or existing before the Effective
Time, except as otherwise provided herein.
10.02 Assumption of Obligations and Indemnification. From and after
the Closing, Buyer assumes and agrees to timely pay and perform, and to
indemnify and hold Seller harmless from and against, Buyer's proportionate
share of all duties, obligations, and liabilities relating to the ownership,
use or operation of the Assets after the Effective Time, including, without
limitation, (i) express or implied covenants and obligations relating to the
Assets provided for in any agreements affecting the Assets; and (ii) expenses
and costs of plugging and abandoning wells and the restoration of well or
operation sites located on lands included in the Assets, all in accordance with
the applicable laws, regulations and contractual provisions.
10.03 Claims. For the purposes of this Agreement, and particularly
this Article X, "Claims" shall mean all demands, claims, actions, causes of
action, judgments, assessments, losses, liabilities, damages,
Purchase and Sale Agreement -Page 8
<PAGE> 9
(including, but not limited to, actual, consequential, incidental, exemplary,
punitive, and statutory) and costs (including reasonable attorney's fees and
all other litigation expenses), whether known or unknown, asserted or
unasserted, founded in contract or tort, and whether statutory or common-law.
ARTICLE XI
TERMINATION
11.01 Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) By mutual consent of the parties.
(b) By either party if the Closing shall not have occurred by June
18, 1996, at 5:00 p.m. Central Standard Time.
(c) By either Seller or Buyer if the Conditions to the Closing
described for that party in Article VIII have not been
satisfied or waived at the time of the Closing with respect to
the Assets affected by the Closing.
Notwithstanding the foregoing provisions concerning termination, neither party
shall exercise any right of termination pursuant to this Section 1.01 if the
event giving rise to such termination right shall be due to the willful failure
of such party to perform or observe in any material respect any of the
covenants or agreements set forth herein to be performed or observed by such
party.
11.02 Return of Information. If this Agreement is terminated Buyer
shall return to Seller all information and material delivered to Buyer by
Seller pursuant to the terms of this Agreement.
11.03 Liabilities Upon Termination. If this Agreement is terminated
for any reason or is breached, nothing contained herein shall be construed to
limit Seller's or Buyer's legal or equitable remedies including, without
limitation, damages for the breach or failure of any representation, warranty,
covenant or agreement contained herein and the right to enforce specific
performance of this Agreement.
11.04 Effect of Termination. If this Agreement is terminated, as
provided above, this Agreement shall become void and of no further force or
effect.
ARTICLE XII
MISCELLANEOUS
12.01 Expenses. Except as otherwise specifically provided in this
Agreement, all fees, costs and expenses incurred by Buyer or Seller in
negotiating this Agreement or in consummating the transactions contemplated by
this Agreement shall be paid by the party incurring the same, including,
without limitation, legal and accounting fees, costs and expenses.
Purchase and Sale Agreement -Page 9
<PAGE> 10
under this Agreement shall be in writing and shall be effective when delivered
addressed as follows:
If to Seller:
-------------
Shield Petroleum Incorporated
1303 FM 2818 E.
College Station, Texas 77840
Attn: Ray Powell
(409) 696-0481 (Fax)
If to Buyer:
------------
Hugoton Energy Corporation
301 N. Main, Suite 1900
Wichita, Kansas 67202
Attn: Floyd Wilson
(316) 269-6870 (Fax)
Either party may, by written notice so delivered to the other, change
the address to which delivery shall thereafter be made.
12.03 Amendment and Waiver. This Agreement may not be altered or
amended, nor any rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
No waiver of any term, provision or condition of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.
12.04 Assignment. Neither Seller nor Buyer may assign any portion of
its rights or delegate any portion of its duties or obligations under this
Agreement without the prior written consent of the other party. However, the
Parties hereby consent to the assignment by Shield of all or any part of the
Assets, and the corresponding rights and obligations appurtenant thereto, to
Eagle Oil & Gas Co. and/or Reata Oil & Gas Corp.
12.05 Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of Texas.
12.06 Entire Agreement. This Agreement (including Exhibits hereto)
constitutes the entire understanding between the parties with respect to the
subject matter hereof and supersedes all negotiations, prior discussions and
prior agreements and understandings relating to such subject matter. No
material representation, warranty, covenant, agreement, promise, inducement or
statement, whether oral or written, has been made by Seller or Buyer and relied
upon by the other that is not set forth in this Agreement or in the instruments
referred to herein, and neither Seller nor Buyer shall be bound by or liable
for any alleged representation, warranty, covenant, agreement, promise,
inducement or statement not so set forth.
Purchase and Sale Agreement -Page 10
<PAGE> 11
12.07 Parties in Interest. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and, except as otherwise
prohibited, their respective successors and assigns. Nothing contained in this
Agreement, express or implied, is intended to confer upon any other person or
entity any benefits, rights or remedies.
12.08 Arbitration. Notwithstanding any other provision herein to the
contrary, all claims, demands, disputes, controversies and differences in
connection with this Agreement that may arise between the parties to this
Agreement shall be settled by arbitration as set forth herein. Such arbitration
shall be governed by the provisions of the Texas General Arbitration Act,
Article 224, et seq., of the Revised Civil Statutes of Texas. Either party may
make a demand for arbitration concerning a controversy that has arisen that is
subject to this Agreement by delivering written notice thereof to the other
parties. The parties hereto may agree upon one (1) arbitrator, but in the event
that they cannot so agree within ten (10) days after a demand for arbitration
has been made, then there shall be three (3) arbitrators, one named in writing
by each of the parties within fifteen (15) days after demand for arbitration is
made, and the third to be chosen by the two (2) arbitrators so named. Should
either party refuse or neglect to join in the appointment of the arbitrators,
they shall be appointed in accordance with the provisions of Article 226 of the
Revised Civil Statutes of Texas. Any arbitrator so chosen shall be independent
and shall not be affiliated in any way with the parties to this Agreement or
their agents, accountants or attorneys. All arbitration hearings conducted
hereunder shall take place in Brazos County, Texas. All judicial proceedings to
enforce any of the provisions hereof and/or any decision or award of the
arbitrators or any challenge to the arbitration shall take place in the United
States District Court for the Southern District of Texas, Houston Division. The
hearing before the arbitrators of the matter to be arbitrated shall be at the
time and place within said county as is selected by the arbitrators. The
arbitration hearings shall be held within thirty (30) days after all
arbitrators have been appointed. Notice shall be given and the hearing
conducted in accordance with the provisions of Articles 228, 229 and 230 of the
Revised Civil Statutes of Texas. At the hearing, any relevant evidence may be
presented by either party, and the formal rules of evidence applicable to
judicial proceedings shall not govern. Evidence may be admitted or excluded in
the sole discretion of the arbitrators. If there is only one (1) arbitrator,
his or her decision shall be binding and conclusive on the parties. If there
are three (3) arbitrators, the decision of any two (2) shall be binding and
conclusive. The arbitrators shall hear and determine the matter and shall
execute and acknowledge the award in writing and deliver a copy thereof to each
of the parties by registered or certified mail. A judgment confirming the award
of the arbitrators may be rendered by the United States District Court for the
Southern District of Texas, Houston Division.
12.09 Survival. The warranties, representations and indemnities of
the parties under this Agreement and the right to enforce same shall terminate
at the Closing and the delivery of the Assignment except those
Purchase and Sale Agreement -Page 11
<PAGE> 12
expressed in Articles 4.01, 4.02, 4.03, 4.04, 4.12, 4.13, 5.01, 5.02, 5.03 and
5.04, which shall survive for two (2) years. The warranty, indemnities and
assumptions under Articles 4.06, 7.01, 10.02, and 10.03 shall survive the
Closing indefinitely.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.11 Construction of Agreement. In construing this Agreement, the
following rules shall apply:
(a) Captions. No consideration shall be given to the captions,
which are inserted only for convenience in locating provisions
of this Agreement and not as an aid in its construction.
(b) Control of Drafting. No consideration shall be given to the
fact or presumption that one party has had a greater or lesser
hand in drafting this Agreement than any other party.
(C) Defined Terms. A defined term has its defined meaning
everywhere in this Agreement, regardless of whether the term
appears before or after the place in this Agreement where the
term is defined.
12.12 Further Assurances. After the Closing, Seller shall execute
and deliver or shall otherwise caused to be executed and delivered, from time
to time, such further instruments, notices, division orders, transfer orders,
and other documents and do such other and further acts and things as may be
reasonably necessary, as may be reasonably requested by Buyer, to more fully
and effectively transfer the Assets to the Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
SHIELD PETROLEUM INCORPORATED
By: /s/ RAY POWELL
-----------------------------
Ray Powell, President
HUGOTON ENERGY CORPORATION
By: /s/ FLOYD C. WILSON
-----------------------------
Printed Name: FIoyd C. Wilson
-------------------
Title: President
--------------------------
Chief Executive Officer
Purchase and Sale Agreement -Page 12
<PAGE> 13
EXHIBIT "A"
A. BEAUREGARD PARISH
1. Seismic Option Agreement dated April 1, 1996 by and between Cavenham
Energy Resources Division, Hanson Natural Resources Company and Shield
Petroleum Incorporated, covering 11, 465.90 acres, more or less, as amended by
Amendment To Seismic Option Agreement dated April 25, 1996, covering 4,046.79
acres, Notice of Execution of Seismic Option Agreement filed for record bearing
File No. 389698 Book 626 Page 461 of Conveyance Records, Office of Clerk Court,
Beauregard Parish Louisiana, and Amendment To Notice Of Execution Of Seismic
Option Agreement filed for record bearing File No. 389889 Book 626 Page _ of
Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to
which reference is heremade for all purposes. (Covering 15,512.69 Net Mineral
Acres)
2. Option and Commitment to Acquire Oil, Gas and Mineral Lease dated
April 16, 1996, by and between William Doornbos Louisiana Trust, et al, as
Lessors, and Shield Petroleum, Inc., as Lessee, covering 6,651.40 acres, Notice
of Execution of Option and Commitment to Acquire Oil, Gas and Mineral recorded
bearing File No. 390758 Book 630 Page, of Conveyance Records, Office of Clerk
of Court, Beauregard Parish, Louisiana, to which reference is heremade for all
purposes. (Covering 6,651.40 Net Mineral Acres)
3. Oil and Gas Lease and Limited Royalty Deed dated June 14, 1996, by and
between Hayes Lumber Company, Inc., as Lessor, and Shield Petroleum
Incorporated, as Lessee, covering 1705.00 acres, Notice of Execution of Oil
and Gas Lease and Limited Royalty Deed recorded bearing File No.390810 Book
Page, of Conveyance Records, Office of Clerk of Court, Beauregard Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 1,705.00
Net Mineral Acres)
4. Oil and Gas Lease and Limited Royalty Deed dated June 11, 1996, by and
between PWK Timberland Corporation, as Lessor, and Shield Petroleum
Incorporated, as Lessee, covering 1,676.30 acres, Notice of Execution of Oil
and Gas Lease and Limited Royalty Deed recorded bearing File No. 390775 Book
630 Page _, of Conveyance Records, Office of Clerk of Court, Beauregard Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 1,676.30
Net Mineral Acres)
5. Oil, Gas and Mineral Lease dated April 18, 1996 between William C.
Beatty as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.08 acres,
recorded bearing File No. 390665 Book 630 Page 247 of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 10.0266 Net Mineral Acres)
Page 1
<PAGE> 14
6. Oil, Gas and Mineral Lease dated April 18, 1996 between Faye Betty
Slye as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.08 acres, recorded
bearing File No. 390666 Book 630 Page 251 of the Conveyance Records of Office
of Clerk of Court of Beauregard Parish, Louisiana, to which reference is here
made for all purposes. (Covering.10.0266 Net Mineral Acres)
7. Oil, Gas and Mineral Lease dated April 22, 1996 between Ruby Mattwell
as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.0 acres, recorded
bearing File No. 390670 Book 630 Page 272 of the Conveyance Records of Office
of Clerk of Court of Beauregard Parish, Louisiana, to which reference is here
made for all purposes. (Covering 6.00 Net Mineral Acres)
8. Oil, Gas and Mineral Lease dated April 19, 1996 between Temple-Inland
Forest Products Corporation as Lessor and Eagle Oil & Gas Co. as Lessee
covering lands as follows:
Township 4 South, Range 10 West:
Section 12: S/2SW/4 (80 acres) and NW/4SW/4 (40 acres)
Section 13: NW/4 (160 acres); N/2SW/4 (80 acres); SW/4SW/4
(40 acres);
Section 14: NW/4NW/4 (40 acres) and S/2 (320 acres);
Section 15: SE/4NE/4 (40 acres) and NE/4SE/4 (40 acres);
Section 23: N/2N/2 (160 acres);
Section 24: W/2NW/4 (80 acres)
recorded bearing File No.390935 Book 631 Page ______ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 1,080.00 Net Mineral Acres)
9. Oil, Gas and Mineral Lease dated April 29, 1996 between John M.
Grunden and wife, Rita Grunden as Lessors and Eagle Oil & Gas Co. as Lessee
covering 40 acres, recorded bearing File No. 390675 Book 630 Page 292 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 40.00 Net Mineral
Acres)
10. Oil, Gas and Mineral Lease dated April 29, 1996 between Louis E.
Grantham and wife, Linda Gail Grantham as Lessors and Eagle Oil & Gas Co. as
Lessee covering 40 acres, recorded bearing File No. 390669 Book 630 Page 268 of
the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 40.00
Net Mineral Acres)
11. Oil, Gas and Mineral Lease dated April 29, 1996 between Marvin L.
Slaydon and wife, Norma Slaydon as Lessors and Eagle Oil & Gas Co. as Lessee
covering 21 acres, recorded bearing File No. 390671 Book 630 Page 276 of the
Conveyance Records of Office of Clerk of
Page 2
<PAGE> 15
Court of Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 21.00 Net Mineral Acres)
12. Oil, Gas and Mineral Lease dated April 29, 1996 between Joseph E. Roy
and wife, Frances Elizabeth Roy as Lessors and Eagle Oil & Gas Co. as Lessee
covering 43.80 acres, recorded bearing File No. 390663 Book 630 Page 239 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 43.80 Net Mineral
Acres)
13. Oil, Gas and Mineral Lease dated May 1, 1996 between Herbert N. Van
Winkle and wife, Earline T. Van Winkle as Lessors and Eagle Oil & Gas Co. as
Lessee covering 40 acres, recorded bearing File No. 390673 Book 630 Page 284 of
the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 40.00
Net Mineral Acres)
14. Oil, Gas and Mineral Lease dated May 13, 1996 between Ivan A. Wagner
and wife, Mary Lee Wagner as Lessors and Eagle Oil & Gas Co. as Lessee covering
88.0 acres as follows:
Township 4 South, Range 10 West: Section 33: 88.0 acres, more
or less, being the S/2 of the NW/4 of the SE/4; the SW/4 of
the SE/4, LESS the West 412 feet; the SE/4 of the SEA, LESS
1/2 acre in the NE corner of the SE/4 of the SE/4, all in
Beauregard Parish, Louisiana.
recorded bearing File No. 390916 Book 631 Page _____ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes (Covering 88.00 Net Mineral Acres)
15. Oil, Gas and Mineral Lease dated May 1, 1996 between Cleadieus L.
McLeod, dealing in his separate property as Lessor and Eagle Oil & Gas Co. as
Lessee covering 152.0 acres, recorded bearing File No. 390674 Book 630 Page 288
of the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 152.0
Net Mineral Acres)
16. Oil, Gas and Mineral Lease dated May 2, 1996 between Creighton Pugh,
dealing in his separate property as Lessor and Eagle Oil & Gas Co. as I-,Lessee
covering 150.0 acres, recorded bearing File No. 390672 Book 630 Page 280 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 75.00 Net Mineral
Acres)
Page 3
<PAGE> 16
17. Oil, Gas and Mineral Lease dated May 2, 1996 between Walter H. Pugh,
dealing in his separate property as Lessor and Eagle Oil & Gas Co. as Lessee
covering 150.0 acres, as follows:
Township 4 South, Range 10 West: 150.0 acres, more or less,
being the E/2 of the NE/4 lying North of the K.C.S. RR,
Section 32; The W/2 of the NW/4, LESS 3 acres in the SW
Corner, Section 33, all in Beauregard Parish, Louisiana.
recorded bearing File No.390915 Book 631 Page _______ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 75.00 Net Mineral Acres)
18. Oil, Gas and Mineral Lease dated May 2, 1996 between Stephen M.
Reasoner, dealing in his separate property as Lessor and Eagle Oil & Gas Co. as
Lessee covering 40.0 acres, recorded bearing File No. 390677 Book 630 Page 300
of the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 40.00
Net Mineral Acres)
19. Oil, Gas and Mineral Lease dated May 3, 1996 between Milford Gray, Jr.
and wife, Marie Gray as Lessors and Eagle Oil & Gas Co. as Lessee covering 40.0
acres, recorded bearing File No. 390664 Book 630 Page 243 of the Conveyance
Records of Office of Clerk of Court of Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 40.00 Net Mineral Acres)
20. Oil, Gas and Mineral Lease dated May 7, 1996 between James H. Boyette
and wife, Annie Marie Boyette as Lessors and Eagle Oil & Gas Co. as Lessee
covering 220.0 acres, more or less, being the NE/4 of Section 33, and the
N/2NW/4 and the NE/4SW/4 of Section 33, all in Township 4 South, Range 10 West
recorded bearing File No.390914 Book 631 Page - of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 150.00 Net Mineral Acres)
21. Oil, Gas and Mineral Lease dated May 8, 1996 between Denise West
Berry, Madeline West Thompson, Harry Paul Thompson, Lucille West Nichols,
Robert B. Nichols, Ronald L. Nichols, Rebecca A. Nichols, John R. Nichols,
Jennifer A. Nichols as Lessors and Eagle Oil & Gas Co. as Lessee covering
898.793 acres, recorded bearing File No. 390668 Book 630 Page 260 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 852.959 Net Mineral
Acres)
22. Oil, Gas and Mineral Lease dated May 8, 1996 between P.W. West Estate
Partnership as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.74 acres,
recorded bearing File No. 390678 Book 630 Page 304 of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 30.74 Net Mineral Acres)
Page 4
<PAGE> 17
23. Oil, Gas and Mineral Lease dated May 8, 1996 between Nichols Inter
Vivos Trust as Lessor and Eagle Oil & Gas Co. as Lessee covering 40.0 acres,
recorded bearing File No. 390679 Book 630 Page 3 10 of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 40.00 Net Mineral Acres)
24. Oil, Gas and Mineral Lease dated May 9, 1996 between William 0. Behan,
Jr. and wife, Velva T. Behan as Lessors and Eagle Oil & Gas Co. as Lessee
covering 40 acres, more or less, being the NE/4SW/4 of Section 22, Township 4
South, Range 10 West recorded bearing File No.390913 Book 631 Page - of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 20.00 Net Mineral
Acres)
25. Oil, Gas and Mineral Lease dated May 9, 1996 between Forest
Technology, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering 90
acres, more or less, being the SW/4NE/4; SE/4NW/4; and a parcel of land
described as follows: Beginning at the SE comer of the NE/4 of the NW/4, Thence
West 220 yards, Thence North 220 yards, Thence East 220 yards, Thence South 220
yards to Point of Beginning, all in Section 22, Township 4 South, Range 10
West; 60 acres, more or less, being the SW/4NE/4 and the N/2NW/4SE/4, Section
11, Township 4 South, Range 9 West recorded bearing File No.390912 Book 631
Page - of the Conveyance Records of Office of Clerk of Court of Beauregard
Parish, Louisiana, to which reference is here made for all purposes. (Covering
120.00 Net Mineral Acres)
26. Oil, Gas and Mineral Lease dated May 10, 1996 between Truett L.
Mitchell and wife, Linda Mitchell as Lessors and Eagle Oil & Gas Co. as Lessee
covering 48.0 acres, recorded bearing File No. 390676 Book 630 Page 296 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 48.00 Net Mineral
Acres)
27. Oil, Gas and Mineral Lease dated May 21, 1996 between Paul Cooley and
wife, Mary Frances Cooley as Lessors and Eagle Oil & Gas Co. as Lessee covering
77.0 acres, recorded bearing File No. 390667 Book 630 Page 255 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 77.00 Net Mineral
Acres)
28. Oil, Gas and Mineral I-ease dated May 21, 1996 between Benjamin F.
Hudson, Jr. and wife, Barbara Edith Hudson as Lessors and Eagle Oil & Gas Co.
as Lessee covering 75 acres, more or less, out of Section 34, Township 4 South,
Range 10 West, being more particularly described as follows:
Township 4 South, Range 10 West: 75.0 acres, more or less,
being described as Beginning at the SE corner of the S/2 of
the NEA of the SE/4 of Section 33, Thence North 285.0 feet;
Thence West 40 feet to centerline of road; Thence
South-Southwest along center line of road, 285.5 feet; Thence
East 60.0 feet to the Point
Page 5
<PAGE> 18
of Beginning, containing 0.33 acres, more or less. The
NW/4SW/4; the SW/4SW/4 LESS. AND SAVE AND EXCEPT 3.0 acres in
the NW corner sold to Dan Burge, and LESS 2.0 acres in the SE
comer sold to Walter Bryan Hudson, Sr., Section 34, Township 4
South, Range 10 West, all in Beauregard Parish, Louisiana,
recorded bearing File No.390911 Book 631 Page - of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 75.00 Net Mineral Acres)
29. Oil, Gas and Mineral Lease dated May 24, 1996 between Irwin Carroll
Stine and wife, Betty Stine as Lessors and Eagle Oil & Gas Co. as Lessee
covering 60 acres, more or less, being the E/2SE/4SW/4; the SW/4SE/4, Section
35, Township 4 South, Range 10 West recorded bearing File No.390910 Book 631
Page ___ of the Conveyance Records, Office of Clerk of Court, Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 60.00
Net Mineral Acres)
30. Oil, Gas and Mineral Lease dated May 25, 1996 between Kenward D. Stine
and wife, Lee Stine as Lessors and Eagle Oil & Gas Co. as Lessee covering 70.0
acres, more or less, being the S/2SE/4SE/4 of Section 35; the S/2SW/4SW/4 and
the S/2SE/4SW/4 of Section 36; the SW/4NE/4SW/4, Section 36; all in Township 4
South, Range 10 West recorded bearing File No.390909 Book 631 Page __ of the
Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to
which reference is here made for all purposes. (Covering 70.00 Net Mineral
Acres)
31. Oil, Gas and Mineral Lease dated April 18, 1996 between Jay Ralph
Beatty, Jr. as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.08 acres,
more or less, being part of the SE/4SW/4 of Section 19, Township 3 South, Range
10 West, lying South of the right-of-way of the Jasper-Eastern Railway Company
recorded bearing File No.390908 Book 631 Page ___ of the Conveyance Records,
Office of Clerk of Court, Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 10.0266 Net Mineral Acres)
32. Oil, Gas and Mineral Lease dated June 5, 1996 between Mamie Dozier
Cooley, dealing in her separate property as Lessor and Eagle Oil & Gas Co. as
Lessee covering 25.0 acres, more or less, being the S/2NE/4NE/4; the
N/AN/2SE/4NE/4, Section 9, Township 4 South, Range 10 West recorded bearing
File No. 390907 Book 631 Page ___ of the Conveyance Records, Office of Clerk of
Court, Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 25.00 Net Mineral Acres)
33. Oil, Gas and Mineral Lease dated June 4, 1996 between Johnnie Ronald
Jeffares and wife, Helen Jeffares as Lessors and Eagle Oil & Gas Co. as Lessee
covering 23.0 acres, more or less, being described as the West 28 acres of the
SE/4NE/4 of Section 2, Township 4 South, Range 10 West, LESS, SAVE AND EXCEPT
1.0 acres, more or less in the SE corner thereof, and LESS,
Page 6
<PAGE> 19
SAVE AND EXCEPT 4.0 acres, more or less, in the Southwest corner thereof
recorded bearing File No.390906 Book 631 Page __ of the Conveyance Records,
Office of Clerk of Court, Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 23.00 Net Mineral Acres)
34. Oil, Gas and Mineral Lease dated May 31, 1996 between Lee Marsalise
and wife, Bele Willene Marsalise as Lessors and Eagle Oil & Gas Co. as Lessee
covering 40.0 acres, more or less, being the NE/4NW/4 of Section 3, Township 4
South, Range 10 West recorded bearing File No.390905 Book 631 Page of the
Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to
which reference is here made for all purposes. (Covering 40.00 Net Mineral
Acres)
35. Oil, Gas and Mineral Lease dated April 22, 1996 between Ella Dee
Watson and husband, Robert B. Watson as Lessors and Eagle Oil & Gas Co. as
Lessee covering 30.0 acres, more or less, being the E/2NE/4SW/4 and the
NW/4NE/4SW/4 of Section 36, Township 4 South, Range 10 West recorded bearing
File No.390904 Book 631 Page of the Conveyance Records, Office of Clerk of
Court, Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 18.00 Net Mineral Acres)
36. Oil, Gas and Mineral Lease dated June 5, 1996 between Gary L. Foshee
and wife, Holly L. Foshee as Lessors and Eagle Oil & Gas Co. as Lessee covering
666.0 acres, more or less, being all of that certain tract of 986.0 acres, more
or less, described as follows:
The following land located in Township 4 South, Range 9 West:
All of the W/2NE/4NW/4 and the NW/4 NW/4 lying South and East
of the KCS Railroad ROW, Section 7;
All of that portion of the S/2NW/4 lying South and East of the
KCS Railroad ROW; The S/2NE/4SW/4, Section 7;
The NW/4 of Section 18;
The following land located in Township 4 South, Range 10 West:
The SE/4NE/4 lying South and East of the KCS Railroad ROW,
Section 12; The NE/4 of Section 13;
LESS, SAVE AND EXCEPT FROM THE ABOVE DESCRIBED PROPERTY, the
NW/4 of Section 18, Township 4 South, Range 9 West; and the
NE/4 of Section 13, Township 4 South, Range 10 West, leaving a
total of 666.0 acres, more or less.
recorded bearing File No.390939 Book 631 Page______ of the Conveyance Records,
Office of Clerk of Court, Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 333.00 Net Mineral Acres)
Page 7
<PAGE> 20
37. Oil, Gas and Mineral Lease dated June 3, 1996 between Glenn H. Stine,
dealing in his separate property as Lessor and Eagle Oil & Gas Co. as Lessee
covering 60.0 acres, more or less, being the SW/4SW; the W/2SE/4SW/4, Section
35, Township 4 South, Range 10 West recorded bearing File No.390903 Book 631
Page __ of the Conveyance Records, Office of Clerk of Court, Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 60.00
Net Mineral Acres)
38. Oil, Gas and Mineral Lease dated May 24, 1996 between Temple-Inland
Forest Products Corporation as Lessor and Eagle Oil & Gas Co. as Lessee
covering 7,438.10 acres, more or less, described as follows:
Township 4 South, Range 9 West:
Section 25: SW/4 of the NW/4 (40 acres); SE/4 of the SE/4
(40 acres); E/2 of the SW/4 (80 acres); S/2
of the SE/4 (80 acres); SE/4 of the NW/4 (40
acres)
Section 28: W/2 of the NW/4 (80 acres); SE/4 of the NW/4
(40 acres); SW/4 (160 acres)
Section 29: E/2 of the NE/4 (80 acres); E/2 of the SE/4
(160 acres)
Section 32: E/2 of the NW/4 (80 acres); W/2 of the SE/4
(80 acres); E/2 of SW/4 (80 acres); NE/4 (160
acres)
Section 33: N/2 of SW/4 (80 acres); SE/4 of SW/4 (40
acres); SEA (160 acres); N/2 (320 acres)
Section 34: Entire (640 acres)
Section 35: W/2 of NW/4 (80 acres); W/2 of SW/4 (80
acres); SE/4 of SW/4 (40 acres)
Section 36: NE/4 of SE/4 (40 acres); NE/4 (160 acres)
Township 5 South, Range 9 West:
Section 2: W/2 of NW/4 (80 acres); S/2 of NW/4 (80
acres); SW/4 of NEA (40 acres); W/2 of SE/4
(80 acres); SW/4 (160 acres)
Section 3: Entire (640 acres)
Page 8
<PAGE> 21
Section 4: E/2 of SW/4 (80 acres); E/2 of NW/4 (80
acres); E/2 (320 acres)
Section 5: E/2 of NW/4 (80 acres); W/2 of NE/4 (80 acres)
Section 6: S/2 of NE/4 (80 acres)
Section 9: NE/4 (160 acres)
Section 10: NE/4 (160 acres); N/2 of NW/4 (80 acres);
SE/4 of NW/4 (40 acres); N/2 of SE/4 (80
acres) SE/4 of SE/4 (40 acres); N/2 of SW/4
(80 acres) SW/4 of SW/4 (40 acres)
Section 11: NW/4 (160 acres); W/2 of NE/4 (80 acres);
W/2 of SW/4 (80 acres); SEA of SW/4 (40
acres); W/2 of SE/4 (80 acres)
Section 14: NW/4 (160 acres); NW/4 of NE/4 (40 acres);
W/2 of SE/4 (80 acres); N/2 of SW/4 (80
acres)
Section 15: N/2 of NE/4 (80 acres); SE/4 of NE/4 (40
acres); NE/4 of SE/4 (40 acres)
Township 5 South, Range 8 West
Section 6: NE/4 of SW/4 (40 acres); SE/4 of SW/4 (40
acres); SW/4 of SE/4 (40 acres); NW/4 of
SE/4 less 1.9 acre for Church (38.1 acres)
Section 7: NE/4 (160 acres); E/2 of SEA (80 acres)
Section 8: SW/4 of NW/4 (40 acres); NW/4 of SW/4 (40
acres)
Section 15: S/2 of SW/4 (80 acres); N/2 of SE/4 (80 acres)
; SW/4 of SE/4 (40 acres)
Section 17: E/2 (320 acres); NW/4 of NW/4 (40 acres)
Section 18: SE/4 of NE/4 (40 acres); N/2 of SE/4 (80
acres)
recorded bearing File No.390936 Book 631 Page_____ of the Conveyance Records,
Office of Clerk of Court, Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 7,438.10 Net Mineral Acres)
Page 9
<PAGE> 22
39. Oil and Gas Lease dated May 28, 1996, between The Long-Bell Petroleum
Company, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering 3,270.33
acres, more or less, described as follows:
The following land located in Township 4 South, Range 9 West:
Section 18: All
Section 19: All
Section 29: W/2E/2; W/2
Section 30: All
Section 31: All
Section 32: W/2 W/2
INSOFAR AND ONLY INSOFAR as the Leased Premises cover depths from the surface
to 100' below the base of the Austin Chalk formation, for which a notice of
Execution of Oil and Gas Lease is recorded bearing File No.390933, Book 631,
Page ____ of the conveyance Records, Office of Clerk of Court, Beauregard
Parish, Louisianan, to which reference is here made for all purposes.
(Covering 3270.33 Net Mineral Acres)
40. Oil and Gas Lease dated May 28, 1996 between The Long-Bell Petroleum
Company, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering 3,573.17
acres, more or less, described as follow:
The following land located in Township 4 South, Range 10 West:
Section 13: E/2, SE/4SW/4
Section 22: E/2NE/4
Section 23: S 3/4
Section 24: All except W/2NW/4
Section 25: All
Section 26: All
Section 27: SE/4NE/4, NE/4SE/4, S/2SE/4
Section 35: E/2NE/4, NE/4SE/4
Section 36: N/2, NW/4SW/4, SE/4
INSOFAR AND ONLY INSOFAR as the Leased Premises cover depths
from the surface to 100' below the base of the Austin chalk
formation,
for which a Notice of Execution of Oil and Gas lease is recorded bearing File
No.390934 Book 631 Page ______ of the Conveyance Records, Office of Clerk of
Court, Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 3573.17 Net Mineral Acres)
41. Oil, Gas and Mineral Lease dated may 22, 1996 between Charles Franklin
Hudson, et ux, as lessors, and Eagle Oil & Gas Co. as Lessee, covering 240.00
acres, more or less, covering the
Page 10
<PAGE> 23
SW/4; The NW/4 of the SEA, Section 27; the NW/4 of the SW/4, Section 34, all in
Township 4 South, Range 10 West, Beauregard Parish, Louisiana, recorded bearing
File No. 390937 Book 631 Page _ of the Conveyance Records, Office of Clerk of
Court, Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 120.00 Net Mineral Acres)
42. Oil, Gas and Mineral Lease dated June 4, 1996 between Kenneth R. Dunn,
et ux, as Lessors, and Eagle Oil and Gas Co., as lessee, covering 40.0 acres,
more or less, being the SW/4 of the NE/4, Section 15; Township 4 South, Range
10 West, Beauregard Parish, Louisiana, recorded bearing File No.390938, Book
631, Page _ of the Conveyance Records, Office of Clerk of Court, Beauregard
Parish, Louisiana, to which reference is here made for all purposes. (Covering
40.00 Net Mineral Acres)
43. Letter Agreement dated June 12, 1996, between William Doornbos Louisiana
Trust, et al and Shield Petroleum Incorporated covering an Offer to purchase
Option to Acquire Oil, Gas and Mineral Lease covering 14,093.75 acres located
in Beauregard Parish, Lousisana and described as follows: (Covering 6,650.28
Net Mineral Acres)
44. Oil and Gas Lease Agreement dated May 28, 1996 between The Long-Bell
Petroleum Company, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering
6740.0 acres, more or less, covering all or portions of Sections 26, 27, 33,
34, 35, 36, Township 4 South, Range 8 West and Sections 1, 2, 3, 4, 9, 10, 12,
16, Township 5 South, Range 8 West. (Covering 6740.00 Net Mineral Acres)
B. EAST FELICIANA PARISH
1. Oil, Gas and Mineral Lease dated May 22, 1996 between T. Chalmers
McKowen, III, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 2060.619 acres, recorded bearing File No.143 500 Book ___ Page___ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 2,060.619 Net
Mineral Acres)
2. Oil, Gas and Mineral Lease dated May 28, 1996 between Adolphus
deBretton McKowen, et ux, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 173.15 acres, recorded bearing File No.143501 Book___ Page ___
of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 173.15
Net Mineral Acres)
3. Oil, Gas and Mineral Lease dated May 23, 1996 between Alex C. McKowen,
Jr., et al, as Lessors, and Shield Petroleum Incorporated, as Lessee, covering
1306.94 acres, recorded bearing File No.143502 Book Page of Conveyance Records,
Office of Clerk of Court, East Feliciana Parish, Louisiana, to which reference
is here made for all purposes. (Covering l,306.94 Net Mineral Acres)
Page 11
<PAGE> 24
4. Oil, Gas and Mineral Lease dated May 23, 1996 between Alex C. McKowen,
III, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee, covering
1.47 acres, recorded bearing File No.143503 Book Page of Conveyance Records,
Office of Clerk of Court, East Feliciana Parish, Louisiana, to which reference
is heremade for all purposes. (Covering 1.47 Net Mineral Acres)
5. Oil, Gas and Mineral Lease dated May 23, 1996 between John Griffith
McKowen, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 1,206.32 acres, recorded bearing File No.143 5 04 Book Page of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 1,055.53 Net
Mineral Acres in East Feliciana Parish)
6. Oil, Gas and Mineral Lease dated May 23, 1996 between Robert Michael
McKowen, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
1,206.32 acres, recorded bearing File No.143644 Book Page of Conveyance
Records, Office of Clerk of Court, East Feliciana Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 150.79 Net Mineral Acres)
7. Oil, Gas and Mineral Lease dated May 23, 1996 between John Griffith
McKowen and Marilyn Messer McKowen Irrevocable Real Estate Trust, et al, as
Lessors, and Shield Petroleum Incorporated, as Lessee, covering 386.38 acres,
recorded bearing File No.143505 Book Page of Conveyance Records, Office of
Clerk of Court, East Feliciana Parish, Louisiana, to which reference is
heremade for all purposes. (Covering 338.0825 Net Mineral Acres)
8. Oil, Gas and Mineral Lease dated May 23, 1996 between Robert Michael
McKowen. as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
386.38 acres, recorded bearing File No.143645 Book Page of Coneyance Records,
Office of Clerk of Court, East Feliciana Parish, Louisiana, to which reference
is heremade for all purposes. (Covering 48.2975 Net Mineral Acres)
9. Oil, Gas and Mineral Lease dated May 28,1996 between Bebe McNeely
Kalencki, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
30.11 acres, recorded bearing File No.143506 Book Page of Conveyance Records,
Office of Clerk of Court, East Feliciana Parish, Louisiana, to which reference
is heremade for all purposes. (Covering 30.11 Net Mineral Acres)
10. Oil, Gas and Mineral Lease dated May 28, 1996 between William Lynn
Kalencki, Jr., Trust, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 30.11 acres, recorded bearing File No.143507 Book Page I of Conveyance
Records, Office of Clerk of Court, East Feliciana Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 30.11 Net Mineral Acres)
11. Oil, Gas and Mineral Lease dated May 28, 1996 between Mansel S.
Slaughter, Jr., et at, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 244.75 acres, recorded bearing File
Page 12
<PAGE> 25
No.143508 Book __ Page __ of Conveyance Records, Office of Clerk of Court, East
Feliciana Parish, Louisiana, to which reference is heremade for all purposes.
(Covering 244.25 Net Mineral Acres)
12. Oil, Gas and Mineral Lease dated May 23, 1996 between Alex C.
McKowen, Jr, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 333.72 acres, recorded bearing File No.143509 Book ___ Page ___ of
Conveyance Records, Office of Clerk of Court, East Feliciana. Parish, Louisiana
to which reference is heremade for all purposes. (Covering 166.86 Net Mineral
Acres)
13. Oil, Gas and Mineral Lease dated May 28, 1996 between Patricia McNeely
Davidson, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
30.11 acres, recorded bearing File No.143510 Book ___ Page ___ of Conveyance
Records, Office of Clerk of Court, East Feliciana Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 15.055 Net Mineral Acres)
14. Oil, Gas and Mineral Lease dated May 3 0, 1996 between Adolphus
deBretton McKowen, et ux, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 44.34 acres, recorded bearing File No.14363 8 Book __ Page __
of Conveyance Records, Office of Clerk of Court, East Feliciana, Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 44.34 Net
Mineral Acres)
15. Oil, Gas and Mineral Lease dated June 3, 1996 between Lerline McNeely
Bickham, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 520.24 acres, recorded bearing File No.143639 Book ___ Page ___ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 520.24 Net Mineral
Acres)
16. Oil, Gas and Mineral Lease dated June 3, 1996 between Lerline McNeely
Bickham, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
30.11 acres, recorded bearing File No.143640 Book ___ Page ___ of Conveyance
Records, Office of Clerk of Court, East Feliciana Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 30.11 Net Mineral Acres)
17. Oil, Gas and Mineral Lease dated June 3, 1996 between Ewell D.
Bickham, Jr., and Carolyn Phillips Bickham, as Lessors, and Shield Petroleum
Incorporated, as Lessee, covering 1,433.00 acres, recorded bearing File
No.143641 Book ___ Page ___ of Conveyance Records, Office of Clerk of Court,
East Feliciana Parish, Louisiana, to which reference is heremade for all
purposes. (Covering 1,433.00 Net Mineral Acres)
18. Oil, Gas and Mineral Lease dated June 3, 1996 between The Lerline M.
and Ewell D. Bickham Trust for their Grandchildren, as Lessors, and Shield
Petroleum Incorporated, as Lessee, covering 117.00 acres, recorded bearing File
No.143642 Book ___ Page ___ of Conveyance Records, Office of Clerk of Court,
East Feliciana Parish, Louisiana, to which reference is heremade for all
purposes. (Covering II 7.00 Net Mineral Acres)
Page 13
<PAGE> 26
19. Oil, Gas and Mineral Lease dated June 6, 1996 between Harry S. Morris,
Jr., Individually and as Agent and Attorney-in-Fact for Keith C. Morris and
Cindy Godwin Morris, et al, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 160.00 acres, recorded bearing File No.143643 Book__ Page__ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 160.00 Net Mineral
Acres)
20. Oil, Gas and Mineral Lease dated May 2 8, 1996 between Henrietta
McKowen, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
172.052 acres, recorded bearing File No.143646 Book Page. of Conveyance
Records, Office of Clerk of Court, East Feliciana Parish, Louisiana, to which
reference is heremade for all purposes. (Covering l72.052 Net Mineral Acres)
21. Oil, Gas and Mineral Lease dated June 10, 1996 between John Keller
McKowen, Jr., as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 420.69 acres, recorded bearing File No.143647 Book__ Page__ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 420.69 Net Mineral
Acres)
22. Oil, Gas and Mineral Lease dated June 10, 1996 between Henrietta
McKowen, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 282.59 acres, recorded bearing File No.143648 Book__ Page__ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 282.59 Net Mineral
Acres)
C. WEST FELICIANA PARISH
1. Oil, Gas and Mineral Lease dated June 6, 1996 between The Lerline M.
and Ewell D. Bickharn Trust For Their Grandchildren, as Lessors, and Shield
Petroleum Incorporated, as Lessee, covering 424.41 acres, recorded bearing File
No.70591 Book __ Page __ of Conveyance Records, Office of Clerk of Court, West
Feliciana Parish, Louisiana, to which reference is heremade for all purposes.
(Covering 424.41 Net Mineral Acres in West Feliciana Parish).
2. Oil, Gas and Mineral Lease dated May 23, 1996 between John Griffith
McKowen, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 1206.32 acres, recorded bearing File No. 70558 Book __ Page __ of
Conveyance Records, Office of Clerk of Court, West Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (All Net Mineral Acres for
this lease are reported under East Feliciana Parish, under Lease 5).
D. ST. JOHN THE BAPTIST PARISH
I. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company, L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessee, covering 3,173.40 acres, described
as follows:
Page 14
<PAGE> 27
Township 9 South - Range 8 East
<TABLE>
<CAPTION>
Description Section Net Acres
<S> <C> <C>
Eastern portion of Lot # 1, and
all of Lots # 2, 3, 4, & 5, Less
and Except that portion of Lot
#1 of the "ROGERS TRACT" lying
West of 1-55 Interstate Highway
Right-of-way, and that portion
of Lot #1 lying East of ICRR
Right-of-Way being Tracts
A and B retained in sale to
LWL & FC dated January 24, 1977 and
recorded COB 106, Folio 206, Act
No. 56114 37 3,064.03
</TABLE>
All as shown on that certain original Township Map of T9S - R8&9E, South
Eastern Land District, Louisiana, East of the Mississippi River, approved by
the Surveyor General's Office, New Orleans, Louisiana, January 20, 1873 and as
more particularly shown on plat made by William H. Wilder dated July 16, 1855.
<TABLE>
<S> <C> <C>
That portion of Lot# I of the
"ROGERS TRACT" lying West
of 1-55 Interstate Highway
Right-of-way, and that portion
lying East of ICRR Right-of-Way
being a portion of Tract A and
all of Tract B retained in sale
to LWL&FC dated January 24, 1977
and recorded COB 106, Folio 206,
Act No. 56114 37 109.37
</TABLE>
All as shown on that certain original Township Map of T9S - R8&9E, South
Eastern Land District, Louisiana, East of the Mississippi River, approved by
the Surveyor General's Office. New Orleans, Louisiana, January 20, 1873 and as
more particularly shown on plat made by William H. Wilder dated July 16, 1855.
Total Acreage: 3,173.40
Notice of Lease recorded bearing File No.________ Book________ Page_______ of
the Conveyance Records, Office of Clerk of Court, St John the Baptist Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 3,173.40
Net Mineral Acres)
Page 15
<PAGE> 28
E. TANGIPAHOA PARISH, LOUISIANA
I. Oil, Gas and Mineral Lease dated June 13, 1996, between Charles J.
Fulda, III, et al, as Lessors, and Gulf Explorer, L. L. C., as Lessee, covering
223.08 acres, recorded bearing File No. 488858 Book 818 Page 69 of Conveyance
Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 223.88 Net Mineral Acres)
2. Oil, Gas and Mineral Lease dated June 13, 1996, between Gloria
Bradley McFadden, et ux, as Lessor, and Gulf Explorer, L. L. C., as Lessee,
covering 206.29 acres, recorded bearing File No. ______Book____Page____ _, of
Conveyance Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to
which reference is heremade for all purposes. (Covering 206.29 Net Mineral
Acres)
3. Oil, Gas and Mineral Lease dated June 12, 1996, between Mary
Elizabeth Robinson Stansell, et al, as Lessors, and Richie Land Company, Inc.,
as Lessee, covering 2,340.00 acres, recorded bearing File No. Book Page _, of
Conveyance Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to
which reference is heremade for all purposes. (Covering 2,340.00 Net Mineral
Acres)
4. Oil, Gas and Mineral Lease dated June 13, 1996, between Manchac
Equities, L. L. C., as Lessor, and Gulf Explorer, L. L. C., as Lessee, covering
1, 194.13 acres, recorded bearing File No. 488859 Book 818 Page 75 of
Conveyance Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to
which reference is heremade for all purposes. (Covering 1, 1 94.13 Net Mineral
Acres)
5. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessee, covering 2,630.95 acres described as
follows:
<TABLE>
<S> <C> <C>
WITHIN CITY OF PONCHATOULA
--------------------------
Township 7 South - Range 7 East
-------------------------------
Description Section Net Acres
S/2 24 23.19
E/2 of SE/4 37 59.29
-----
82.48
OUTSIDE CITY OF PONCHATOULA
---------------------------
Township 7 South - Range 7 East
-------------------------------
SE/4 of NE/4; SEA of NW/4;
SE/4; and NE/4 of SW/4 34 280.00
</TABLE>
Page 16
<PAGE> 29
<TABLE>
<S> <C> <C>
Entire 35 641.28
Entire 36 640.38
--------
1,561.66
Township 7 South - Range 8 East
-------------------------------
NW/4 of SE/4; S/2 of SE/4; 30 267.75
and SW/4 31 625.00
Entire 32 68.00
All west of I.C.R.R. 45 26.06
Portion of Lot #6 986.81
TOTAL ACREAGE: 2,630.95
</TABLE>
for which a Notice of Lease is recorded bearing File No. _______ Book_______
Page______ of the Conveyance Records, Office of Clerk of Court, Tangipahoa
Parish, Louisiana, to which reference is heremade for all purposes. (Covering
2630.95 Net Mineral Acres)
6. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company, L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessee, covering 2,941.78 acres, described
as follows:
<TABLE>
<S> <C> <C>
Township 8-South - Range 7 East
-------------------------------
Description Section Net Acres
All east of River 9 69.85
N/2; SE/4; and Sw/4 north and
east of River 10 479.65
Entire 11 638.80
Entire 12 666.48
1,854.78
Township 8 South - Range 8 East
-------------------------------
Entire 7 672.00
All west of I.C.R.R. 8 415.00
1,087.00
Total Acreage: 2,941.78
</TABLE>
Page 17
<PAGE> 30
for which a Notice of Lease recorded bearing File No._____ Book_______ Page___
of the Conveyance Records, Office of Clerk of Court, Tangipahoa Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 2,941.78
Net Mineral Acres)
7. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company, L.L.C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessees, covering 2,688.98 acres, described
as follows:
Township 8 South - Range 8 East
<TABLE>
<CAPTION>
Description Section Net Acres
<S> <C> <C>
Entire 19 672.00
Entire 20 633.00
All west of I.C.R.R. 21 64.82
NW/4; SE/4; and Frac. SW/4 29 415.80
Entire 30 343.36
Part north of North Pass 34 ---
Part north of North Pass 35 ---
Part north of North Pass 36 560.00
--------
Total Acreage: 2,688.98
</TABLE>
for which a Notice of Lease recorded bearing File No._______ Book _______
Page_______ of the Conveyance Records, Office of Clerk of Court, Tangipahoa
Parish, Louisiana, to which reference is here made for all purposes. (Covering
2,688.98 Net Mineral Acres)
Page 18
<PAGE> 31
EXHIBIT "C"
ASSIGNMENT OF OIL AND GAS LEASES
This ASSIGNMENT is made this 19th day of June, 1996, by and between
SHIELD PETROLEUM INCORPORATED, whose mailing address is 2818 East, College
Station, Texas 77840 ("Assignor"), and HUGOTON ENERGY CORPORATION, whose
mailing address is 301 N. Main, Suite 1900, Wichita, Kansas 67202 ("Assignee").
1. Assignment. For adequate consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor does hereby assign and convey to
Assignee, an undivided 50% interest in the oil and gas leases described in
Exhibit "A" (the "Leases"), attached hereto and made a part of this Assignment.
TO HAVE AND TO HOLD the interest assigned in the Leases unto
Assignee, its successors and assigns forever, subject to the following terms
and conditions.
2. Reservations and Exceptions: Assignor reserves from the interest
conveyed to Assignee, and excepts from this Assignment and the warranty
provided below, the following:
a. Definitions:
(i) "Carried Interest" means an ownership interest in the Leases
which does not bear any part of the Well Costs of a particular
well.
(ii) "Initial Unit Well" means the first horizontal or vertical
well drilled upon a Unit after the Effective Date under this
Agreement completed successfully for commercial production in
the Austin Chalk or a deeper formation, or plugged and
abandoned as a dry hole, but shall not mean any subsequent
operation upon such Unit under the terms of the Operating
Agreement.
(iii) "Operating Agreement" means the operating agreement governing
joint operations for all Units to be drilled on the lands
covered by the Leases, a notice of which is executed on this
date by the Parties and is or shall be recorded in the
Parishes in which the Leases are located.
(iv) "Payout" shall be on a well-by-well basis with respect to each
Unit which includes all or a portion of any of the Leases.
Payout shall occur on the first day of the month following
the date on which the gross proceeds of production actually
received by Operator from the Unit, less (i) applicable
production taxes or severance taxes; (ii) all royalties,
overriding royalties, and other payments out of production
which as of the date of this Assignment burden the Leases
included in the Unit, (iii) any overriding royalty reserved by
Assignor under this Assignment; (iv) the purchase price paid
by Assignee for that portion of the Leases included in the
Unit, (v) all Carried Interests borne by Assignee under the
terms of this Agreement attributable to said Unit; and (vi)
operating costs incurred in connection with operations of the
initial unit well as provided under the unit operating
agreement during the time to reach payout, shall equal the
Well Costs incurred by Operator in the first well completed
for production on said Unit. If prior to completion of the
first well on a Unit for production, a prior well is
commenced, but is not completed for production,
Assignment of Oil and Gas Leases - Page 1
<PAGE> 32
but is plugged and abandoned, then the costs of such a well
shall be included in the amounts to be recovered for payout to
occur. It is the intent of the parties hereto that only the
costs, as set out above, incurred in connection with the
initial well drilled on a Unit shall be used in the
calculation of payout of awell. No such costs incurred in any
subsequent operations, begun after completion of the Initial
Unit Well as a commercial producer of oil or gas, including
but not limited to costs for the drilling of additional wells
within the Unit, reworking or redrilling of the Initial Unit
Well, or drilling of additional horizontal laterals within
said well, whether undertaken prior to or subsequent to the
payout of a well, shall be counted in the calculation of the
payout of a well.
(v) "Unit" means acreage comprised in whole or in part of the lands
covered by the Leases and (i) pooled according to the terms of
said leases for the drilling of an oil or gas well under this
Agreement, as such pooled acreage is identified by an
instrument filed in the real property records of the Parish
where the lands covered by said leases are situated, as such
instrument may be reformed or (ii) refiled prior to the time of
first production sales; or in the absence of such pooling
designation, the area prescribed or permitted by order or rule
of the Louisiana Office of Conservation.
(vi) "Well Costs" means out-of-pocket costs of preparing to drill
after leases are acquired, title costs, location costs and
costs of drilling, completing, testing, equipping and pipeline
installation and construction costs and all other costs borne
and incurred by the Operator under the terms of the Operating
Agreement in connection with the drilling and completion of a
well, as all such costs and charges are determined in
accordance with the COPAS Accounting Procedures attached to
the Operating Agreement, up until the time of first sales from
the well for which such costs are calculated, unless such
sales occur prior to the completion of the well, and in the
latter event such costs shall be calculated up until the time
of final completion of the well and connection of the wellhead
to the gathering pipeline system of a third party oil and/or
gas purchaser.
b. Carried Working Interest. Assignor reserves an undivided 3.75%
Carried Interest in the lands covered by the Leases included in each
Unit upon which an Initial Unit Well is drilled. Hugoton shall bear
and pay for the account of Shield, on a well-by-well basis, all of
the costs attributable to said 3.75% Carried Interest which are
incurred by the operator under the Operating Agreement in drilling,
testing, completing, and initially equipping and operating of such
Initial Unit Well through the point of being completed for
production or plugged and abandoned on each Unit, proportionally
reduced to the extent that the Leases comprise only a portion of the
Unit.
c. Back-in Interest After Payout. Assignor reserves, after the Payout
of each Initial Unit Well drilled and completed upon the Leases or
any portion thereof, an undivided 3.75% interest (the "After Payout
Interest") in the Leases and lands included within the Unit for each
such Initial Unit Well, proportionately reduced to the extent that
the Leases comprise only a portion of such unit. It is the intent of
the Parties hereto that the above stated After Payout Interest of
Assignor in the Leases shall automatically revert to and vest in
Assignor upon the Payout of each Initial Unit Well without the
necessity of the execution of an assignment from Assignee to
Assignor. The foregoing After Payout Interest of Assignor shall
only apply to wells defined in this Assignment as "Initial Unit
Wells," and operations upon such wells. Assignor hereby reserves an
undivided 3.75% interest in the Leases included in any Unit as to
any operation upon lands covered by the Leases which do not
constitute Initial Unit Well operations, and Shield shall further be
currently
Assignment of Oil and Gas Leases - Page 2
<PAGE> 33
vested with said "After Payout Interest" as to any subsequent
operation, under the provisions of Article VI.B. of the Operating
Agreement, upon the lands covered by any Unit, including a
subsequent operation upon an existing Initial Unit Well, after the
drilling of the Initial Unit Well.
d. Overriding Royalty Reservation. Assignor has previously assigned to
certain third parties an overriding royalty interest in the oil,
gas, and other minerals produced and saved from the lands covered by
the Leases, equal to the following:
(i) As to any of the Leases which provide for a net revenue
interest to the Lessee of 78% or greater, an overriding
royalty interest equal to 3% of 8/8 of the oil, gas and, if
applicable, other minerals produced and saved from the lands
covered by each of such Leases; and
(ii) As to any of the Leases which provide for a net revenue
interest to the Lessee of less than 78%, an overriding royalty
interest equal to the difference, if any, between 25% and the
lease royalty burden as set forth in the lease.
(iii) It is Assignor's intent to assign to Assignee in this
Assignment at least a 75% net revenue interest in the Leases.
Said assignments have or will be recorded in the Parishes where the
lands covered by the Leases are located, and Assignor excepts from
this conveyance said overriding royalty interest.
3. Unrecorded Agreements. This Assignment is subject to the terms and
conditions of the following unrecorded agreements between Assignor and
Assignee:
a. Purchase and Sale Agreement. Purchase and Sale Agreement between
Assignor and Assignee dated June 18, 1996 (the "Purchase and Sale
Agreement").
b. Joint Exploration and Development Agreement. Joint Exploration and
Development Agreement between Assignor and Assignee dated June 18,
1996 (the "Joint Exploration and Development Agreement").
4. Warranty of TITLE. Assignor specifically warrants and agrees to defend the
title to the Leases against the claims and demands of all persons claiming the
same or any part thereof, limited to the consideration paid by Assignee for
such portion of the Leases in which there is a failure of title.
5. Liabilities. Assignor shall be responsible for and agrees to indemnify and
hold Assignee harmless from any and all claims and environmental claims, as
such claims are more fully defined in the Purchase and Sale Agreement between
Assignor and Assignee executed on this date, of any nature arising out of the
ownership, sale, condition or operation of the Leases arising out of the
ownership, use, sale, condition or operation of the Leases prior to the date of
this Assignment. From and after this date, Assignee assumes and agrees to
timely pay and perform, and to indemnify and hold Assignor harmless from and
against, Assignee's proportionate share of all duties, obligations, and
liabilities relating to the ownership, use or operation of the Leases,
including without limitation (i) express or implied covenants and obligations
relating to the Leases provided for in any agreement affecting the Leases; (ii)
expenses and costs of plugging and abandoning wells and the restoration of well
or operation sites located on lands included in the Leases, all in accordance
with the
Assignment of Oil and Gas Leases - Page 3
<PAGE> 34
applicable laws, regulations and contractual provisions; and (iii) any
environmental claim as such claims are more fully defined in the Purchase and
Sale Agreement between Assignor and Assignee.
6. Further Assurance. Each party agrees to execute and deliver all such other
and additional instruments, notices, releases, acquittance, and other documents
and will do all such other acts and things as may be necessary to more fully
assure to the parties the rights and interests herein and hereby conveyed or
excepted and reserved or intended so to be.
This Assignment shall be binding upon and shall inure to the benefit of
Assignor and Assignee and their respective heirs, successors and assigns.
Executed and delivered on the date first written above.
Witnesses: SHIELD PETROLEUM INCORPORATED
- ------------------------------------- By:/s/ RAY POWELL
--------------------------------
Ray Powell, President
- -------------------------------------
(acknowledgment)
STATE OF TEXAS
COUNTY OF BRAZOS
This instrument was acknowledged before me on this _______ day
of________________, 1996, by Ray Powell, President of Shield Petroleum
Incorporated, a Texas Corporation, on behalf of said corporation.
-------------------------------------
Notary Public, State of Texas
Assignment of Oil and Gas Leases - Page 4
<PAGE> 35
EXHIBIT "A"
A . BEAUREGARD PARISH
1. Seismic Option Agreement dated April 1, 1996 by and between Cavenham
Energy Resources Division, Hanson Natural Resources Company and Shield
Petroleum Incorporated, covering 11, 465.90 acres, more or less, as amended by
Amendment To Seismic Option Agreement dated April 25, 1996, covering 4,046.79
acres, Notice of Execution of Seismic Option Agreement filed for record bearing
File No. 389698 Book 626 Page 461 of Conveyance Records, Office of Clerk Court,
Beauregard Parish Louisiana, and Amendment To Notice Of Execution Of Seismic
Option Agreement filed for record bearing File No. 389889 Book 626 Page _____
of Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 15,512.69 Net
Mineral Acres)
2. Option and Commitment to Acquire Oil, Gas and Mineral Lease dated
April 16, 1996, by and between William Doornbos Louisiana Trust, et al, as
Lessors, and Shield Petroleum, Inc., as Lessee, covering 6,651.40 acres, Notice
of Execution of Option and Commitment to Acquire Oil, Gas and Mineral recorded
bearing File No. 390758 Book 630 Page _____, of Conveyance Records, Office of
Clerk of Court, Beauregard Parish, Louisiana, to which reference is heremade
for all purposes. (Covering 6,651.40 Net Mineral Acres)
3. Oil and Gas Lease and Limited Royalty Deed dated June 14, 1996, by and
between Hayes Lumber Company, Inc., as Lessor, and Shield Petroleum
Incorporated, as Lessee, covering 1705.00 acres, Notice of Execution of Oil and
Gas Lease and Limited Royalty Deed recorded bearing File No.390810 Book _____
Page _____, of Conveyance Records, Office of Clerk of Court, Beauregard Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 1,705.00
Net Mineral Acres)
4. Oil and Gas Lease and Limited Royalty Deed dated June 11, 1996, by and
between PWK Timberland Corporation, as Lessor, and Shield Petroleum
Incorporated, as Lessee, covering 1,676.30 acres, Notice of Execution of Oil
and Gas Lease and Limited Royalty Deed recorded bearing File No. 390775 Book
630 Page _____, of Conveyance Records, Office of Clerk of Court, Beauregard
Parish, Louisiana, to which reference is heremade for all purposes. (Covering
1,676.30 Net Mineral Acres)
5. Oil, Gas and Mineral Lease dated April 18, 1996 between William C.
Beatty as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.08 acres,
recorded bearing File No. 390665 Book 630 Page 247 of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 10.0266 Net Mineral Acres)
Page 1
<PAGE> 36
6. Oil, Gas and Mineral Lease dated April 18, 1996 between Faye Betty
Slye as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.08 acres, recorded
bearing File No. 390666 Book 630 Page 251 of the Conveyance Records of Office
of Clerk of Court of Beauregard Parish, Louisiana, to which reference is here
made for all purposes. (Covering 10.0266 Net Mineral Acres)
7. Oil, Gas and Mineral Lease dated April 22, 1996 between Ruby Mattwell
as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.0 acres, recorded
bearing File No. 390670 Book 630 Page 272 of the Conveyance Records of Office
of Clerk of Court of Beauregard Parish, Louisiana, to which reference is here
made for all purposes. (Covering 6.00 Net Mineral Acres)
8. Oil, Gas and Mineral Lease dated April 19, 1996 between Temple-Inland
Forest Products Corporation as Lessor and Eagle Oil & Gas Co. as Lessee
covering lands as follows:
Township 4 South, Range 10 West:
Section 12: S/2SW/4 (80 acres) and NW/4SW/4 (40 acres)
Section 13: NW/4 (160 acres); N/2SW/4 (80 acres); SW/4SW/4 (40 acres);
Section 14: NW/4NW/4 (40 acres) and S/2 (320 acres);
Section 15: SE/4NE/4 (40 acres) and NE/4SE/4 (40 acres);
Section 23: N/2N/2 (160 acres);
Section 24: W/2NW/4 (80 acres)
recorded bearing File No.390935 Book 631 Page _______ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 1,080.00 Net Mineral Acres)
9. Oil, Gas and Mineral Lease dated April 29, 1996 between John M.
Grunden and wife, Rita Grunden as Lessors and Eagle Oil & Gas Co. as Lessee
covering 40 acres, recorded bearing File No. 390675 Book 630 Page 292 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 40.00 Net Mineral
Acres)
10. Oil, Gas and Mineral Lease dated April 29, 1996 between Louis E.
Grantham and wife, Linda Gail Grantham as Lessors and Eagle Oil & Gas Co. as
Lessee covering 40 acres, recorded bearing File No. 390669 Book 630 Page 268 of
the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 40.00
Net Mineral Acres)
11. Oil, Gas and Mineral Lease dated April 29, 1996 between Marvin L.
Slaydon and wife, Norma Slaydon as Lessors and Eagle Oil & Gas Co. as Lessee
covering 21 acres, recorded bearing File No. 390671 Book 630 Page 276 of the
Conveyance Records of Office of
Page 2
<PAGE> 37
Clerk of Court of Beauregard Parish, Louisiana, to which reference is here made
for all purposes. (Covering 21.00 Net Mineral Acres)
12. Oil, Gas and Mineral Lease dated April 29, 1996 between Joseph E. Roy
and wife, Frances Elizabeth Roy as Lessors and Eagle Oil & Gas Co. as Lessee
covering 43.80 acres, recorded bearing File No. 390663 Book 630 Page 239 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 43.80 Net Mineral
Acres)
13. Oil, Gas and Mineral Lease dated May 1, 1996 between Herbert N. Van
Winkle and wife, Earline T. Van Winkle as Lessors and Eagle Oil & Gas Co. as
Lessee covering 40 acres, recorded bearing File No. 390673 Book 630 Page 284
of the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 40.00
Net Mineral Acres)
14. Oil, Gas and Mineral Lease dated May 13, 1996 between Ivan A. Wagner
and wife, Mary Lee Wagner as Lessors and Eagle Oil & Gas Co. as Lessee covering
88.0 acres as follows:
Township 4 South, Range 10 West: Section 33: 88.0 acres, more
or less, being the S/2 of the NW/4 of the SE/4; the SW/4 of
the SE/4, LESS the West 412 feet; the SE/4 of the SE/4, LESS
1/2 acre in the NE corner of the SE/4 of the SE/4, all in
Beauregard Parish, Louisiana.
recorded bearing File No.390916 Book 631 Page ______ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 88.00 Net Mineral Acres)
15. Oil, Gas and Mineral Lease dated May 1, 1996 between Cleadieus L.
McLeod, dealing in his separate property as Lessor and Eagle Oil & Gas Co. as
Lessee covering 152.0 acres, recorded bearing File No. 390674 Book 630 Page 288
of the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 152.0
Net Mineral Acres)
16. Oil, Gas and Mineral Lease dated May 2, 1996 between Creighton Pugh,
dealing in his separate property as Lessor and Eagle Oil & Gas Co. as Lessee
covering 150.0 acres, recorded bearing File No. 390672 Book 630 Page 280 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 75.00 Net Mineral
Acres)
Page 3
<PAGE> 38
17. Oil, Gas and Mineral Lease dated May 2, 1996 between Walter H. Pugh,
dealing in his separate property as Lessor and Eagle Oil & Gas Co. as Lessee
covering 150.0 acres, as follows:
Township 4 South, Range 10 West: 150.0 acres, more or less,
being the E/2 of the NE/4 lying North of the K.C.S. RR,
Section 32; The W/2 of the NW/4 , LESS 3 acres in the SW
Corner, Section 33, all in Beauregard Parish, Louisiana.
recorded bearing File No.390915 Book 631 Page _______ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 75.00 Net Mineral Acres)
18. Oil, Gas and Mineral Lease dated May 2, 1996 between Stephen M.
Reasoner, dealing in his separate property as Lessor and Eagle Oil & Gas Co. as
Lessee covering 40.0 acres, recorded bearing File No. 390677 Book 630 Page 300
of the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 40.00
Net Mineral Acres)
19. Oil, Gas and Mineral Lease dated May 3, 1996 between Milford Gray, Jr.
and wife, Marie Gray as Lessors and Eagle Oil & Gas Co. as Lessee covering 40.0
acres, recorded bearing File No. 390664 Book 630 Page 243 of the Conveyance
Records of Office of Clerk of Court of Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 40.00 Net Mineral Acres)
20. Oil, Gas and Mineral Lease dated May 7, 1996 between James H. Boyette
and wife, Annie Marie Boyette as Lessors and Eagle Oil & Gas Co. as Lessee
covering 220.0 acres, more or less, being the NE/4 of Section 33, and the
N/2NW/4 and the NE/4SW/4 of Section 33, all in Township 4 South, Range 10 West
recorded bearing File No.390914 Book 631 Page ____ of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 150.00 Net Mineral Acres)
21. Oil, Gas and Mineral Lease dated May 8, 1996 between Denise West
Berry, Madeline West Thompson, Harry Paul Thompson, Lucille West Nichols,
Robert B. Nichols, Ronald L. Nichols, Rebecca A. Nichols, John R. Nichols,
Jennifer A. Nichols as Lessors and Eagle Oil & Gas Co. as Lessee covering
898.793 acres, recorded bearing File No. 390668 Book 630 Page 260 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 852.959 Net
Mineral Acres)
22. Oil, Gas and Mineral Lease dated May 8, 1996 between P.W. West Estate
Partnership as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.74 acres,
recorded bearing File No. 390678 Book 630 Page 304 of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 30.74 Net Mineral Acres)
Page 4
<PAGE> 39
23. Oil, Gas and Mineral Lease dated May 8, 1996 between Nichols Inter
Vivos Trust as Lessor and Eagle Oil & Gas Co. as Lessee covering 40.0 acres,
recorded bearing File No. 390679 Book 630 Page 310 of the Conveyance Records of
Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference is
here made for all purposes. (Covering 40.00 Net Mineral Acres)
24. Oil, Gas and Mineral Lease dated May 9, 1996 between William O. Behan,
Jr. and wife, Velva T. Behan as Lessors and Eagle Oil & Gas Co. as Lessee
covering 40 acres, more or less, being the NE/4SW/4 of Section 22, Township 4
South, Range 10 West recorded bearing File No.390913 Book 631 Page _______ of
the Conveyance Records of Office of Clerk of Court of Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 20.00
Net Mineral Acres)
25. Oil, Gas and Mineral Lease dated May 9, 1996 between Forest
Technology, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering 90
acres, more or less, being the SW/4NE/4; SE/4NW/4; and a parcel of land
described as follows: Beginning at the SE corner of the NE/4 of the NW/4,
Thence West 220 yards, Thence North 220 yards, Thence East 220 yards, Thence
South 220 yards to Point of Beginning, all in Section 22, Township 4 South,
Range 10 West; 60 acres, more or less, being the SW/4NE/4 and the N/2NW/4SE/4,
Section 11, Township 4 South, Range 9 West recorded bearing File No.390912 Book
631 Page _______ of the Conveyance Records of Office of Clerk of Court of
Beauregard Parish, Louisiana, to which reference is here made for all purposes.
(Covering 120.00 Net Mineral Acres)
26. Oil, Gas and Mineral Lease dated May 10, 1996 between Truett L.
Mitchell and wife, Linda Mitchell as Lessors and Eagle Oil & Gas Co. as Lessee
covering 48.0 acres, recorded bearing File No. 390676 Book 630 Page 296 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 48.00 Net Mineral
Acres)
27. Oil, Gas and Mineral Lease dated May 21, 1996 between Paul Cooley and
wife, Mary Frances Cooley as Lessors and Eagle Oil & Gas Co. as Lessee covering
77.0 acres, recorded bearing File No. 390667 Book 630 Page 255 of the
Conveyance Records of Office of Clerk of Court of Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 77.00 Net Mineral
Acres)
28. Oil, Gas and Mineral Lease dated May 21, 1996 between Benjamin F.
Hudson, Jr. and wife, Barbara Edith Hudson as Lessors and Eagle Oil & Gas Co.
as Lessee covering 75 acres, more or less, out of Section 34, Township 4 South,
Range 10 West, being more particularly described as follows:
Township 4 South, Range 10 West: 75.0 acres, more or less,
being described as Beginning at the SE corner of the S/2 of
the NE/4 of the SE/4 of Section 33, Thence North 285.0 feet;
Thence West 40 feet to centerline of road; Thence
South-Southwest along center line of road, 285.5 feet; Thence
East 60.0 feet to
Page 5
<PAGE> 40
the Point of Beginning, containing 0.33 acres, more or less.
The NW/4SW/4; the SW/4SW/4, LESS AND SAVE AND EXCEPT 3.0 acres
in the NW corner sold to Dan Burge, and LESS 2.0 acres in the
SE corner sold to Walter Bryan Hudson, Sr., Section 34,
Township 4 South, Range 10 West, all in Beauregard Parish,
Louisiana,
recorded bearing File No.390911 Book 631 Page ______ of the Conveyance Records
of Office of Clerk of Court of Beauregard Parish, Louisiana, to which reference
is here made for all purposes. (Covering 75.00 Net Mineral Acres)
29. Oil, Gas and Mineral Lease dated May 24, 1996 between Irwin Carroll
Stine and wife, Betty Stine as Lessors and Eagle Oil & Gas Co. as Lessee
covering 60 acres, more or less, being the E/2SE/4SW/4; the SW/4SE/4, Section
35, Township 4 South, Range 10 West recorded bearing File No.390910 Book 631
Page _______ of the Conveyance Records, Office of Clerk of Court, Beauregard
Parish, Louisiana, to which reference is here made for all purposes. (Covering
60.00 Net Mineral Acres)
30. Oil, Gas and Mineral Lease dated May 25, 1996 between Kenward D. Stine
and wife, Lee Stine as Lessors and Eagle Oil & Gas Co. as Lessee covering 70.0
acres, more or less, being the S/2SE/4SE/4 of Section 35; the S/2SW/4SW/4 and
the S/2SE/4SW/4 of Section 36; the SW/4NE/4SW/4, Section 36; all in Township 4
South, Range 10 West recorded bearing File No.390909 Book 631 Page _______ of
the Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 70.00 Net Mineral
Acres)
31. Oil, Gas and Mineral Lease dated April 18, 1996 between Jay Ralph
Beatty, Jr. as Lessor and Eagle Oil & Gas Co. as Lessee covering 30.08 acres,
more or less, being part of the SE/4SW/4 of Section 19, Township 3 South, Range
10 West, lying South of the right-of-way of the Jasper-Eastern Railway Company
recorded bearing File No.390908 Book 631 Page _____ ____ of the Conveyance
Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 10.0266 Net Mineral Acres)
32. Oil, Gas and Mineral Lease dated June 5, 1996 between Mamie Dozier
Cooley, dealing in her separate property as Lessor and Eagle Oil & Gas Co. as
Lessee covering 25.0 acres, more or less, being the S/2NE/4NE/4; the
N/4N/2SE/4NE/4, Section 9, Township 4 South, Range 10 West recorded bearing
File No.390907 Book 631 Page __________ of the Conveyance Records, Office of
Clerk of Court, Beauregard Parish, Louisiana, to which reference is here made
for all purposes. (Covering 25.00 Net Mineral Acres)
33. Oil, Gas and Mineral Lease dated June 4, 1996 between Johnnie Ronald
Jeffares and wife, Helen Jeffares as Lessors and Eagle Oil & Gas Co. as Lessee
covering 23.0 acres, more or less, being described as the West 28 acres of the
SE/4NE/4 of Section 2, Township 4 South, Range 10 West, LESS, SAVE AND EXCEPT
1.0 acres, more or less in the SE corner thereof, and LESS, SAVE AND EXCEPT 4.0
acres, more or less, in the Southwest corner thereof
Page 6
<PAGE> 41
recorded bearing File No.390906 Book 631 Page ___________ of the Conveyance
Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 23.00 Net Mineral Acres)
34. Oil, Gas and Mineral Lease dated May 31, 1996 between Lee Marsalise
and wife, Bele Willene Marsalise as Lessors and Eagle Oil & Gas Co. as Lessee
covering 40.0 acres, more or less, being the NE/4NW/4 of Section 3, Township 4
South, Range 10 West recorded bearing File No.390905 Book 631 Page _________ of
the Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana,
to which reference is here made for all purposes. (Covering 40.00 Net Mineral
Acres)
35. Oil, Gas and Mineral Lease dated April 22, 1996 between Ella Dee
Watson and husband, Robert B. Watson as Lessors and Eagle Oil & Gas Co. as
Lessee covering 30.0 acres, more or less, being the E/2NE/4SW/4 and the
NW/4NE/4SW/4 of Section 36, Township 4 South, Range 10 West recorded bearing
File No.390904 Book 631 Page ________of the Conveyance Records, Office of Clerk
of Court, Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 18.00 Net Mineral Acres)
36. Oil, Gas and Mineral Lease dated June 5, 1996 between Gary L. Foshee
and wife, Holly L. Foshee as Lessors and Eagle Oil & Gas Co. as Lessee covering
666.0 acres, more or less, being all of that certain tract of 986.0 acres, more
or less, described as follows:
The following land located in Township 4 South, Range 9 West:
All of the W/2NE/4NW/4 and the NW/4 NW/4 lying South and East
of the KCS Railroad ROW, Section 7;
All of that portion of the S/2NW/4 lying South and East of the
KCS Railroad ROW; The S/2NE/4SW/4, Section 7;
The NW/4 of Section 18;
The following land located in Township 4 South, Range 10 West:
The SE/4NE/4 lying South and East of the KCS Railroad ROW,
Section 12; The NE/4 of Section 13;
LESS, SAVE AND EXCEPT FROM THE ABOVE DESCRIBED PROPERTY, the
NW/4 of Section 18, Township 4 South, Range 9 West; and the
NE/4 of Section 13, Township 4 South, Range 10 West, leaving a
total of 666.0 acres, more or less.
recorded bearing File No.390939 Book 631 Page ____________ of the Conveyance
Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 333.00 Net Mineral Acres)
37. Oil, Gas and Mineral Lease dated June 3, 1996 between Glenn H. Stine,
dealing in his separate property as Lessor and Eagle Oil & Gas Co. as Lessee
covering 60.0 acres, more or
Page 7
<PAGE> 42
less, being the SW/4SW; the W/2SE/4SW/4, Section 35, Township 4 South, Range 10
West recorded bearing File No.390903 Book 631 Page ___________ of the
Conveyance Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to
which reference is here made for all purposes. (Covering 60.00 Net Mineral
Acres)
38. Oil, Gas and Mineral Lease dated May 24, 1996 between Temple-Inland
Forest Products Corporation as Lessor and Eagle Oil & Gas Co. as Lessee
covering 7,438.10 acres, more or less, described as follows:
Township 4 South, Range 9 West:
Section 25: SW/4 of the NW/4 (40 acres); SE/4 of the SE/4 (40
acres); E/2 of the SW/4 (80 acres); S/2 of the SE/4
(80 acres); SE/4 of the NW/4 (40 acres)
Section 28: W/2 of the NW/4 (80 acres); SE/4 of the NW/4 (40
acres); SW/4 (160 acres)
Section 29: E/2 of the NE/4 (80 acres); E/2 of the SE/4 (160 acres
Section 32: E/2 of the NW/4 (80 acres); W/2 of the SE/4 (80
acres); E/2 of SW/4 (80 acres); NE/4 (160 acres)
Section 33: N/2 of SW/4 (80 acres); SE/4 of SW/4 (40 acres);
SE/4 (160 acres); N/2 (320 acres)
Section 34: Entire (640 acres)
Section 35: W/2 of NW/4 (80 acres); W/2 of SW/4 (80 acres);
SE/4 of SW/4 (40 acres)
Section 36: NE/4 of SE/4 (40 acres); NE/4 (160 acres)
Township 5 South, Range 9 West:
Section 2: W/2 of NW/4 (80 acres); S/2 of NW/4 (80 acres);
SW/4 of NE/4 (40 acres); W/2 of SE/4 (80 acres);
SW/4 (160 acres)
Section 3: Entire (640 acres)
Section 4: E/2 of SW/4 (80 acres); E/2 of NW/4 (80 acres); E/2
(320 acres)
Section 5: E/2 of NW/4 (80 acres); W/2 of NE/4 (80 acres)
Page 8
<PAGE> 43
Section 6: S/2 of NE/4 (80 acres)
Section 9: NE/4 (160 acres)
Section 10: NE/4 (160 acres); N/2 of NW/4 (80 acres); SE/4 of
NW/4 (40 acres); N/2 of SE/4 (80 acres) SE/4 of
SE/4 (40 acres); N/2 of SW/4 (80 acres) SW/4 of
SW/4 (40 acres)
Section 11: NW/4 (160 acres); W/2 of NE/4 (80 acres); W/2 of
SW/4 (80 acres); SE/4 of SW/4 (40 acres); W/2 of
SE/4 (80 acres)
Section 14: NW/4 (160 acres); NW/4 of NE/4 (40 acres); W/2 of
SE/4 (80 acres); N/2 of SW/4 (80 acres)
Section 15: N/2 of NE/4 (80 acres); SE/4 of NE/4 (40 acres);
NE/4 of SE/4 (40 acres)
Township 5 South, Range 8 West
Section 6: NE/4 of SW/4 (40 acres); SE/4 of SW/4 (40 acres);
SW/4 of SE/4 (40 acres); NW/4 of SE/4 less 1.9 acre
for Church (38.1 acres)
Section 7: NE/4 (160 acres); E/2 of SE/4 (80 acres)
Section 8: SW/4 of NW/4 (40 acres); NW/4 of SW/4 (40 acres)
Section 15: S/2 of SW/4 (80 acres); N/2 of SE/4 (80 acres);
SW/4 of SE/4 (40 acres)
Section 17: E/2 (320 acres); NW/4 of NW/4 (40 acres)
Section 18: SE/4 of NE/4 (40 acres); N/2 of SE/4 (80 acres)
recorded bearing File No.390936 Book 631 Page ___________ of the Conveyance
Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 7,438.10 Net Mineral Acres)
39. Oil and Gas Lease dated May 28, 1996 between The Long-Bell Petroleum
Company, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering 3,270.33
acres, more or less, described as follows:
The following land located in Township 4 South, Range 9 West:
Section 18: All
Page 9
<PAGE> 44
Section 19: All
Section 29: W/2E/2; W/2
Section 30: All
Section 31: All
Section 32: W/2 W/2
INSOFAR AND ONLY INSOFAR as the Leased Premises cover depths from the surface
to 100' below the base of the Austin Chalk formation, for which a notice of
Execution of Oil and Gas Lease is recorded bearing File No.390933, Book 631,
Page ______ ____ of the Conveyance Records, Office of Clerk of Court,
Beauregard Parish, Louisiana, to which reference is here made for all purposes.
(Covering 3270.33 Net Mineral Acres)
40. Oil and Gas Lease dated May 28, 1996 between The Long-Bell Petroleum
Company, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering 3,573.17
acres, more or less, described as follows:
The following land located in Township 4 South, Range 10 West:
Section 13: E/2, SE/4SW/4
Section 22: E/2NE/4
Section 23: S 3/4
Section 24: All except W/2NW/4
Section 25: All
Section 26: All
Section 27: SE/4NE/4, NE/4SE/4, S/2SE/4
Section 35: E/2NE/4, NE/4SE/4
Section 36: N/2, NW/4SW/4, SE/4
INSOFAR AND ONLY INSOFAR as the Leased Premises cover depths
from the surface to 100' below the base of the Austin Chalk
formation,
for which a Notice of Execution of Oil and Gas Lease is recorded bearing File
No.390934 Book 631 Page ___________ of the Conveyance Records, Office of Clerk
of Court, Beauregard Parish, Louisiana, to which reference is here made for all
purposes. (Covering 3573.17 Net Mineral Acres)
41. Oil, Gas and Mineral Lease dated May 22, 1996 between Charles Franklin
Hudson, et ux, as Lessors, and Eagle Oil & Gas Co. as Lessee, covering 240.00
acres, more or less, covering the SW/4; The NW/4 of the SE/4, Section 27; the
NW/4 of the SW/4, Section 34, all in Township 4 South, Range 10 West,
Beauregard Parish, Louisiana, recorded bearing File No. 390937 Book 631 Page
_____ of the Conveyance Records, Office of Clerk of Court, Beauregard Parish,
Louisiana, to which reference is here made for all purposes. (Covering 120.00
Net Mineral Acres)
42. Oil, Gas and Mineral Lease dated June 4, 1996 between Kenneth R. Dunn,
et ux, as Lessors, and Eagle Oil and Gas Co., as lessee, covering 40.0 acres,
more or less, being the SW/4 of the NE/4, Section 15; Township 4 South, Range
10 West, Beauregard Parish, Louisiana,
Page 10
<PAGE> 45
recorded bearing File No.390938, Book 631, Page _____ of the Conveyance
Records, Office of Clerk of Court, Beauregard Parish, Louisiana, to which
reference is here made for all purposes. (Covering 40.00 Net Mineral Acres)
43. Letter Agreement dated June 12, 1996, between William Doornbos
Louisiana Trust, et al and Shield Petroleum Incorporated covering an Offer to
purchase Option to Acquire Oil, Gas and Mineral Lease covering 14,093.75 acres
located in Beauregard Parish, Lousisana and described as follows: (Covering
6,650.28 Net Mineral Acres)
44. Oil and Gas Lease Agreement dated May 28, 1996 between The Long-Bell
Petroleum Company, Inc. as Lessor and Eagle Oil & Gas Co. as Lessee covering
6740.0 acres, more or less, covering all or portions of Sections 26, 27, 33,
34, 35, 36, Township 4 South, Range 8 West and Sectiona 1, 2, 3, 4, 9, 10,
12, 16, Township 5 South, Range 8 West. (Covering 6740.00 Net Mineral Acres)
B. EAST FELICIANA PARISH
1. Oil, Gas and Mineral Lease dated May 22, 1996 between T. Chalmers
McKowen, III, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 2060.619 acres, recorded bearing File No.143500 Book _____ Page _____
of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 2,060.619
Net Mineral Acres)
2. Oil, Gas and Mineral Lease dated May 28, 1996 between Adolphus
deBretton McKowen, et ux, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 173.15 acres, recorded bearing File No. 143501 Book _____ Page
_____ of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 173.15
Net Mineral Acres)
3. Oil, Gas and Mineral Lease dated May 23, 1996 between Alex C. McKowen,
Jr., et al, as Lessors, and Shield Petroleum Incorporated, as Lessee, covering
1306.94 acres, recorded bearing File No.143502 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 1,306.94 Net Mineral
Acres)
4. Oil, Gas and Mineral Lease dated May 23, 1996 between Alex C. McKowen,
III, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee, covering
1.47 acres, recorded bearing File No.143503 Book _____ Page _____ of Conveyance
Records, Office of Clerk of Court, East Feliciana Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 1.47 Net Mineral Acres)
5. Oil, Gas and Mineral Lease dated May 23, 1996 between John Griffith
McKowen, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 1,206.32 acres, recorded bearing File No.143504 Book _____ Page _____
of Conveyance Records, Office of Clerk of
Page 11
<PAGE> 46
Court, East Feliciana Parish, Louisiana, to which reference is heremade for all
purposes. (Covering 1,055.53 Net Mineral Acres in East Feliciana Parish)
6. Oil, Gas and Mineral Lease dated May 23, 1996 between Robert Michael
McKowen, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
1,206.32 acres, recorded bearing File No.143644 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 150.79 Net Mineral
Acres)
7. Oil, Gas and Mineral Lease dated May 23, 1996 between John Griffith
McKowen and Marilyn Messer McKowen Irrevocable Real Estate Trust, et al, as
Lessors, and Shield Petroleum Incorporated, as Lessee, covering 386.38 acres,
recorded bearing File No. 143505 Book _____ Page _____ of Conveyance Records,
Office of Clerk of Court, East Feliciana Parish, Louisiana, to which reference
is heremade for all purposes. (Covering 338.0825 Net Mineral Acres)
8. Oil, Gas andMineral Lease dated May 23, 1996 between Robert Michael
McKowen. as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
386.38 acres, recorded bearing File No. 143645 Book ______ Page ______ of
Coneyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 48.2975 Net Mineral
Acres)
9. Oil, Gas and Mineral Lease dated May 28, 1996 between Bebe McNeely
Kalencki, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
30.11 acres, recorded bearing File No.143506 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 30.11 Net Mineral
Acres)
10. Oil, Gas and Mineral Lease dated May 28, 1996 between William Lynn
Kalencki, Jr., Trust, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 30.11 acres, recorded bearing File No.143507 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 30.11 Net Mineral
Acres)
11. Oil, Gas and Mineral Lease dated May 28, 1996 between Mansel S.
Slaughter, Jr., et al, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 244.75 acres, recorded bearing File No.143508 Book _____ Page
_____ of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 244.25
Net Mineral Acres)
12. Oil, Gas and Mineral Lease dated May 23, 1996 between Alex C. McKowen,
Jr, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee, covering
333.72 acres, recorded bearing File No. 143509 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 166.86 Net Mineral
Acres)
Page 12
<PAGE> 47
13. Oil, Gas and Mineral Lease dated May 28, 1996 between Patricia McNeely
Davidson, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
30.11 acres, recorded bearing File No.143510 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 15.055 Net Mineral
Acres)
14. Oil, Gas and Mineral Lease dated May 30, 1996 between Adolphus
deBretton McKowen, et ux, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 44.34 acres, recorded bearing File No. 143638 Book _____ Page
_____ of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 44.34
Net Mineral Acres)
15. Oil, Gas and Mineral Lease dated June 3, 1996 between Lerline McNeely
Bickham, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 520.24 acres, recorded bearing File No. 143639 Book _____ Page _____
of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 520.24
Net Mineral Acres)
16. Oil, Gas and Mineral Lease dated June 3, 1996 between Lerline McNeely
Bickham, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
30.11 acres, recorded bearing File No. 143640 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 30.11 Net Mineral
Acres)
17. Oil, Gas and Mineral Lease dated June 3, 1996 between Ewell D.
Bickham, Jr., and Carolyn Phillips Bickham, as Lessors, and Shield Petroleum
Incorporated, as Lessee, covering 1,433.00 acres, recorded bearing File No.
143641 Book _____ Page _____ of Conveyance Records, Office of Clerk of Court,
East Feliciana Parish, Louisiana, to which reference is heremade for all
purposes. (Covering 1,433.00 Net Mineral Acres)
18. Oil, Gas and Mineral Lease dated June 3, 1996 between The Lerline M.
and Ewell D. Bickham Trust for their Grandchildren, as Lessors, and Shield
Petroleum Incorporated, as Lessee, covering 117.00 acres, recorded bearing File
No. 143642 Book _____ Page _____ of Conveyance Records, Office of Clerk of
Court, East Feliciana Parish, Louisiana, to which reference is heremade for all
purposes. (Covering 117.00 Net Mineral Acres)
19. Oil, Gas and Mineral Lease dated June 6, 1996 between Harry S. Morris,
Jr., Individually and as Agent and Attorney-in-Fact for Keith C. Morris and
Cindy Godwin Morris, et al, as Lessors, and Shield Petroleum Incorporated, as
Lessee, covering 160.00 acres, recorded bearing File No.143643 Book _____ Page
_____ of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 160.00
Net Mineral Acres)
20. Oil, Gas and Mineral Lease dated May 28, 1996 between Henrietta
McKowen, as Lessor, and Shield Petroleum Incorporated, as Lessee, covering
172.052 acres, recorded bearing File No. 143646 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana
Page 13
<PAGE> 48
Parish, Louisiana, to which reference is heremade for all purposes.
(Covering 172.052 Net Mineral Acres)
21. Oil, Gas and Mineral Lease dated June 10, 1996 between John Keller
McKowen, Jr., as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 420.69 acres, recorded bearing File No.143647 Book _____ Page _____ of
Conveyance Records, Office of Clerk of Court, East Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (Covering 420.69 Net Mineral
Acres)
22. Oil, Gas and Mineral Lease dated June 10, 1996 between Henrietta
McKowen, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 282.59 acres, recorded bearing File No. 143648 Book _____ Page _____
of Conveyance Records, Office of Clerk of Court, East Feliciana Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 282.59
Net Mineral Acres)
C. WEST FELICIANA PARISH
1. Oil, Gas and Mineral Lease dated June 6, 1996 between The Lerline M.
and Ewell D. Bickham Trust For Their Grandchildren, as Lessors, and Shield
Petroleum Incorporated, as Lessee, covering 424.41 acres, recorded bearing File
No.70591 Book _____ Page _____ of Conveyance Records, Office of Clerk of Court,
West Feliciana Parish, Louisiana, to which reference is heremade for all
purposes. (Covering 424.41 Net Mineral Acres in West Feliciana Parish).
2. Oil, Gas and Mineral Lease dated May 23, 1996 between John Griffith
McKowen, et al, as Lessors, and Shield Petroleum Incorporated, as Lessee,
covering 1206.32 acres, recorded bearing File No. 70558 Book ____ Page ____ of
Conveyance Records, Office of Clerk of Court, West Feliciana Parish, Louisiana,
to which reference is heremade for all purposes. (All Net Mineral Acres for
this lease are reported under East Feliciana Parish, under Lease 5).
D. ST. JOHN THE BAPTIST PARISH
1. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company, L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessee, covering 3,173.40 acres, described
as follows:
Township 9 South - Range 8 East
Description Section Net Acres
Eastern portion of Lot #1, and
all of Lots # 2, 3, 4, & 5, Less
and Except that portion of Lot
#1 of the "ROGERS TRACT" lying
West of I-55 Interstate Highway
Page 14
<PAGE> 49
Right-of-way, and that portion
of Lot #1 lying East of ICRR
Right-of-Way being Tracts
A and B retained in sale to
LWL&FC dated January 24, 1977 and
recorded COB 106, Folio 206, Act
No. 56114 37 3,064.03
All as shown on that certain original Township Map of T9S - R8&9E, South
Eastern Land District, Louisiana, East of the Mississippi River, approved by
the Surveyor General's Office, New Orleans, Louisiana, January 20, 1873 and as
more particularly shown on plat made by William H. Wilder dated July 16, 1855.
That portion of Lot #1 of the
"ROGERS TRACT" lying West
of I-55 Interstate Highway
Right-of-way, and that portion
lying East of ICRR Right-of-Way
being a portion of Tract A and
all of Tract B retained in sale
to LWL&FC dated January 24, 1977
and recorded COB 106, Folio 206,
Act No. 56114 37 109.37
All as shown on that certain original Township Map of T9S - R8&9E, South
Eastern Land District, Louisiana, East of the Mississippi River, approved by
the Surveyor General's Office. New Orleans, Louisiana, January 20, 1873 and as
more particularly shown on plat made by William H. Wilder dated July 16, 1855.
Total Acreage: 3,173.40
Notice of Lease recorded bearing File No. ________ Book ____ Page ____ of the
Conveyance Records, Office of Clerk of Court, St John the Baptist Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 3,173.40
Net Mineral Acres)
E. TANGIPAHOA PARISH, LOUISIANA
1. Oil, Gas and Mineral Lease dated June 13, 1996, between Charles J.
Fulda, III, et al, as Lessors, and Gulf Explorer, L. L. C., as Lessee, covering
223.08 acres, recorded bearing File No. 488858 Book 818 Page 69 of Conveyance
Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 223.88 Net Mineral Acres)
Page 15
<PAGE> 50
2. Oil, Gas and Mineral Lease dated June 13, 1996, between Gloria Bradley
McFadden, et ux, as Lessor, and Gulf Explorer, L. L. C., as Lessee, covering
206.29 acres, recorded bearing File No. ________ Book ____ Page ____, of
Conveyance Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to
which reference is heremade for all purposes. (Covering 206.29 Net Mineral
Acres)
3. Oil, Gas and Mineral Lease dated June 12, 1996, between Mary Elizabeth
Robinson Stansell, et al, as Lessors, and Richie Land Company, Inc., as Lessee,
covering 2,340.00 acres, recorded bearing File No. ________ Book ____ Page
____, of Conveyance Records, Office of Clerk of Court, Tangipahoa Parish,
Louisiana, to which reference is heremade for all purposes. (Covering 2,340.00
Net Mineral Acres)
4. Oil, Gas and Mineral Lease dated June 13, 1996, between Manchac
Equities, L. L. C., as Lessor, and Gulf Explorer, L. L. C., as Lessee, covering
1,194.13 acres, recorded bearing File No. 488859 Book 818 Page 75 of Conveyance
Records, Office of Clerk of Court, Tangipahoa Parish, Louisiana, to which
reference is heremade for all purposes. (Covering 1,194.13 Net Mineral Acres)
5. Mineral Lease dated May 23, 1996, between The Joyce Foundation, as
Lessor, and Shield Petroleum Incorporated and Hugoton Energy Corporation, as
Lessees, covering 13,659.92 acres described as follows:
Township 7 South, Range 8 East
Section 32: Southwest quarter of the Northwest quarter, and Southwest quarter
of section bounded on the West, now or formerly, by lands of
Williams, Inc., including that beneath the Illinois Central
Gulf Railroad R/W 119.54
32: South Half of Northeast quarter 81.60
32: Southeast quarter of Northwest quarter 40.80
32: Southeast quarter of section 163.20
33: South half of section 322.72
Township 8 South, Range 8 East
Section 1: North half of section 336.00
1: South half of Southwest quarter 84.00
2: North half of section 325.52
2: Southwest quarter of section 163.76
2: South half of Southeast quarter 81.38
3: Entire section 656.00
Page 16
<PAGE> 51
4: Entire section 647.36
5: All that part of section bounded on the
West, now or formerly, by lands of Joseph
Rathborne Land & Lumber Company, Inc.,
including that beneath the Illinois
Central Gulf Railroad R/W 383.42
8: All that part of section lying East of
Illinois Central Railroad R/W 220.92
9: Entire section 640.00
10: Entire section 640.00
11: Entire section 640.00
12: Entire section 656.00
13: Entire section 656.00
14: Entire section 640.00
15: Entire section 640.00
16: Entire section 640.00
17: All that part of section bounded on the West,
now or formerly, by lands of Joseph Rathborne
Land & Lumber Company, Inc., including that
beneath the Illinois Central Gulf
Railroad R/W 85.78
21: All that part of section bounded on the
West, now or formerly, by lands of
Williams, Inc., including that beneath
the Illinois Central Gulf Railroad R/W 580.42
22: Entire section 640.00
23: Entire section 640.00
24: Northwest quarter of Northeast quarter 41.00
24: Northwest quarter of section 164.00
Township 8 South, Range 9 East
Section 5: Northeast quarter of Southwest quarter 39.33
5: South half of Southwest quarter 78.66
5: West half of Southeast quarter 78.66
7: South half of North half of section 164.00
7: South half of section 328.00
8: Northwest quarter of Northeast quarter 39.51
8: South half of Northeast quarter 79.02
8: Northwest quarter of section 158.04
8: South half of section 316.08
16: West half of West half of section 161.20
17: Entire section 632.00
18: Entire section 656.00
---------
Total Acreage 13,659.92
Page 17
<PAGE> 52
for which a Notice of Execution of Mineral Lease is recorded bearing File No.
________ Book ____ Page ____ of the Conveyance Records, Office of Clerk of
Court, Tangipahoa Parish, Louisiana, to which reference is heremade for all
purposes (Covering 13,659.92 Net Mineral Acres)
6. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessee, covering 2,630.95 acres described as
follows:
WITHIN CITY OF PONCHATOULA
Township 7 South - Range 7 East
<TABLE>
<CAPTION>
Description Section Net Acres
<S> <C> <C>
S/2 24 23.19
E/2 of SE/4 37 59.29
-----
82.48
</TABLE>
OUTSIDE CITY OF PONCHATOULA
Township 7 South - Range 7 East
<TABLE>
<S> <C> <C>
SE/4 of NE/4; SE/4 of NW/4;
SE/4; and NE/4 of SW/4 34 280.00
Entire 35 641.28
Entire 36 640.38
--------
1,561.66
</TABLE>
Township 7 South - Range 8 East
<TABLE>
<S> <C> <C>
NW/4 of SE/4; S/2 of SE/4;
and SW/4 30 267.75
Entire 31 625.00
All west of I.C.R.R. 32 68.00
Portion of Lot #6 45 26.06
--------
986.81
TOTAL ACREAGE: 2,603.95
</TABLE>
Page 18
<PAGE> 53
for which a Notice of Lease is recorded bearing File No. ________ Book ____
Page ____ of the Conveyance Records, Office of Clerk of Court, Tangipahoa
Parish, Louisiana, to which reference is heremade for all purposes. (Covering
2630.95 Net Mineral Acres)
7. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company, L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessee, covering 2,941.78 acres, described
as follows:
<TABLE>
<CAPTION>
Township 8 South - Range 7 East
Description Section Net Acres
<S> <C> <C>
All east of River 9 69.85
N/2; SE/4; and Sw/4 north and
east of River 10 479.65
Entire 11 638.80
Entire 12 666.48
--------
1,854.78
</TABLE>
<TABLE>
<CAPTION>
Township 8 South - Range 8 East
<S> <C> <C>
Entire 7 672.00
All west of I.C.R.R. 8 415.00
--------
1,087.00
Total Acreage: 2,941.78
</TABLE>
for which a Notice of Lease recorded bearing File No. ________ Book ____
Page ____of the Conveyance Records, Office of Clerk of Court, Tangipahoa
Parish, Louisiana, to which reference is heremade for all purposes.
(Covering 2,941.78 Net Mineral Acres)
8. Oil, Gas and Other Hydrocarbon Lease dated June 14, 1996, between
Williams Land Company, L. L. C., as Lessor, and Shield Petroleum Incorporated
and Hugoton Energy Corporation, as Lessees, covering 2,688.98 acres, described
as follows:
<TABLE>
<CAPTION>
Township 8 South - Range 8 East
Description Section Net Acres
<S> <C> <C>
Entire 19 672.00
Entire 20 633.00
All west of I.C.R.R. 21 64.82
NW/4; SE/4; and Frac. SW/4 29 415.80
Entire 30 343.36
Part north of North Pass 34 ---
Part north of North Pass 35 ---
Part north of North Pass 36 560.00
--------
Total Acreage: 2,688.98
</TABLE>
for which a Notice of Lease recorded bearing File No. ________ Book ____ Page
____ of the Conveyance Records, Office of Clerk of Court, Tangipahoa Parish,
Louisiana, to which reference is here made for all purposes. (Covering
2,688.98 Net Mineral Acres)
Page 19
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-83442) pertaining to the Hugoton Energy Corporation 1993 Stock
Option Plan, Hugoton Energy Corporation 1993 Nonemployee Directors Stock Option
Plan, John T. McNabb, II Nonstatutory Stock Option Agreement, and David S.
Elkouri Nonstatutory Stock Option Agreement of our report dated February 7,
1997, with respect to the consolidated financial statements and schedule of
Hugoton Energy Corporation included in the Annual Report (Form 10-K) for the
year ended December 31, 1996.
We also consent to the incorporation by reference in (1) the Registration
Statement (Form S-8 No. 33-97092) pertaining to the 1995 Stock Option Plan of
Hugoton Energy Corporation, (2) the Registration Statement (Form S-8 No.
33-83440) pertaining to the Hugoton Energy Corporation 401(k) Profit Sharing
Plan and (3) the Registration Statement (Form S-8 No. 333-15095) pertaining to
the Hugoton Energy Corporation Amended and Restated 1993 Nonemployee Directors
Stock Option Plan and the Jay W. Decker Nonstatutory Stock Option Agreement of
our report dated February 7, 1997, with respect to the consolidated financial
statements and schedule of Hugoton Energy Corporation included in the Annual
Report (Form 10-K) for the year ended December 31, 1996.
ERNST & YOUNG LLP
Wichita, Kansas
February 20, 1997
<PAGE> 1
EXHIBIT 23.2
[RYDER SCOTT COMPANY PETROLEUM ENGINEERS LETTERHEAD]
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the use of our
name in the Annual Report on Form 10-K of Hugoton Energy Corporation for the
year ended December 31, 1996. We further consent to the inclusion of our
estimate of reserves and present value of future net reserves at December 31,
1994, 1995 and 1996 in such Annual Report.
/s/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
-----------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
February 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,372
<SECURITIES> 0
<RECEIVABLES> 12,985
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,285
<PP&E> 285,896
<DEPRECIATION> 53,118
<TOTAL-ASSETS> 251,929
<CURRENT-LIABILITIES> 8,740
<BONDS> 0
<COMMON> 197
0
0
<OTHER-SE> 131,330
<TOTAL-LIABILITY-AND-EQUITY> 251,929
<SALES> 68,206
<TOTAL-REVENUES> 68,216
<CGS> 23,087
<TOTAL-COSTS> 23,087
<OTHER-EXPENSES> 32,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,070
<INCOME-PRETAX> 7,519
<INCOME-TAX> 3,316
<INCOME-CONTINUING> 4,203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,203
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
