<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 1998
UNION PACIFIC RESOURCES GROUP INC.
----------------------------------
(Exact name of registrant as specified in charter)
Utah 1-13916 13-2647483
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
P.O. Box 7, 801 Cherry Street, Fort Worth, Texas 76101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 817-877-6000
------------
(Former name or former address, if changed since last report)
Not applicable
<PAGE> 2
ITEM 5. OTHER EVENTS.
Acquisition of Norcen Energy Resources Limited
On January 26, 1998, the Registrant announced by press release that
its Board of Directors and the Board of Directors of Norcen Energy Resources
Limited, a Canadian corporation ("Norcen"), had unanimously approved the
acquisition of Norcen by Union Pacific Resources Inc., an Alberta corporation
("UPRI"), the Registrant's indirect wholly-owned subsidiary. The Registrant
hereby incorporates by reference herein the press release attached hereto as
Exhibit 99.1, which is made a part of this Item 5.
Year-End Earnings Release
On January 26, 1998, the Registrant issued a press release with
respect to its 1997 operating revenues, net income and certain other financial
information. The Registrant hereby incorporates by reference herein the press
release attached hereto as Exhibit 99.2, which is made a part of this Item 5.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
Exhibit No. Exhibit
99.1 Press Release dated January 26, 1998.
99.2 Press Release dated January 26, 1998.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION PACIFIC RESOURCES GROUP INC.
/s/ JOSEPH A. LASALA, JR.
------------------------------------------
By: Joseph A. LaSala, Jr.
Vice President, General Counsel and
Secretary
DATED: January 27, 1998
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit Page
- ------- ------- ----
<S> <C> <C>
99.1 Press Release dated January 26, 1998.
99.2 Press Release dated January 26, 1998.
</TABLE>
4
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
MONDAY, JANUARY 26, 1998
UNION PACIFIC RESOURCES ANNOUNCES
ACQUISITION AGREEMENT FOR
NORCEN ENERGY
US$2.6 BILLION TRANSACTION WILL GIVE UPR MAJOR POSITIONS IN CANADA AND
LATIN AMERICA AND SIGNIFICANT EXPANSION IN THE GULF OF MEXICO
NORANDA, OWNER OF 49.5 PERCENT OF NORCEN STOCK, SIGNS IRREVOCABLE
COMMITMENT TO TENDER NORCEN INTEREST TO UPR
FORT WORTH, Texas -- Union Pacific Resources Group Inc. (NYSE-UPR) today
announced that its Board and the Board of Norcen Energy Resources Limited
(Norcen) have unanimously approved the acquisition of Norcen by UPR. The US$2.6
billion all cash transaction will increase UPR's estimated 1998 revenues to
US$2.7 billion from US$1.9 billion. UPR is offering C$19.80 per share
(US$13.65) for all outstanding shares of Norcen stock which represents a 29
percent premium over Norcen's closing price on January 23, 1998 of C$15.30 per
share. UPR will also assume Norcen's outstanding net debt of approximately
US$900 million, giving the overall transaction a US$3.5 billion value. Based on
consensus estimates, this transaction is accretive to UPR's 1998 discretionary
cash flow per share by 25-30 percent and is approximately 60-70 percent
dilutive to 1998 earnings per share based on purchase accounting adjustments.
UPR expects to eliminate this earnings dilution within three years.
The transaction will involve a cash tender offer for all Norcen shares at
C$19.80 per share. A prominent feature of the transaction is the irrevocable
commitment by Noranda to sell its 49.5 percent interest in Norcen to UPR in the
tender offer, thus assuring UPR the right to obtain effective control of
Norcen.
"With UPR's leadership position in the United States and Norcen's strong
position in Western Canada and Latin America, this combination will create a
well balanced North American company. The assets are diversified and there is
substantial reserve and production upside which will generate significant,
long-term value for our shareholders," said Jack L. Messman, UPR's Chairman and
CEO. "These two companies form a North American mega-independent with quality
opportunities in Latin America. UPR anticipates few changes in operating
personnel or office locations. Canadian operations will remain headquartered in
Calgary and Norcen's Gulf of Mexico operations offers UPR the opportunity to
create
5
<PAGE> 2
a presence in Houston. Norcen's Guatemala operations will also stay in place.
Our similar corporate cultures will create energy and enthusiasm to pursue the
many opportunities we see ahead. Grant Billing and his management team have
done an outstanding job in transforming Norcen into a highly focused and well
run company poised for substantial growth. The Norcen team will be a welcome
addition to UPR."
Based on 1997 year-end figures for UPR and UPR's estimates for Norcen's
proved reserves of approximately 550 million barrels of oil on an equivalent
basis (MMBOE), the new enterprise will have proved reserves in excess of 1.23
billion barrels of oil on an equivalent basis (where one barrel of oil is
equivalent to six thousand cubic feet (MCF) of gas), an 80 percent increase
over UPR's proved reserves on a stand-alone basis. The reserve mix of the
combined company will be 57 percent natural gas and 43 percent oil and natural
gas liquids. Based on fourth quarter 1997 rates, the combined company's daily
production would have been in excess of 436 thousand barrels of oil equivalent
(MBOE), which represents a 63 percent increase over UPR's daily fourth quarter
production of 268 MBOE. Norcen's reserve to production ratio (R/P) of 9.9 years
will increase UPR's R/P from 6.8 to 7.9 years on a combined basis.
UPR estimates it is paying approximately US$5.63 per barrel of oil
equivalent for Norcen's proved reserves. This number is derived from an
acquisition cost for proved reserves of US$3.10 billion, based on the total
cost of US$3.5 billion less approximately US$400 million for the value of
undeveloped land and other assets.
"This acquisition gives UPR new core areas in Canada and Latin America
plus a significant strategic expansion in the Gulf of Mexico including the deep
water," said George Lindahl III, UPR's President and COO. "While we currently
have a presence in Canada and the Gulf of Mexico, this acquisition will make us
a significant player in these regions."
Norcen's properties are located in four major areas which include Western
Canada, the Gulf of Mexico, Venezuela and Guatemala. In addition, Norcen owns
producing properties in Argentina and offshore Australia. Norcen's proved
reserves and production in these areas, on a percentage basis, are as follows:
<TABLE>
<CAPTION>
PROVED
RESERVES (%) PRODUCTION (%)
------------ --------------
<S> <C> <C>
WESTERN CANADA 62 60
GULF OF MEXICO 11 14
GUATEMALA 12 12
VENEZUELA 13 11
OTHER 2 3
</TABLE>
6
<PAGE> 3
"Norcen's properties fit well with our North American drillsite strategy
and create new core areas including Latin America. We are excited about our
entry into Latin America," Messman said. "The Norcen properties possess the
high ownership percentage and high level of operatorship which are key elements
of our business model. Norcen's properties in Canada, Venezuela and Guatemala
also include substantial production volumes and substantial growth potential.
Norcen also has a net undeveloped land position in excess of five million acres
which we find very attractive."
Both companies have properties in the prolific Louisiana shelf portion of
the Gulf of Mexico and are expanding in the deep water Gulf. UPR is beginning
development of its twenty block Mississippi Canyon Gomez discovery, and Norcen
is evaluating the Boomvang discovery involving five blocks in the East Breaks
area. Further, Norcen is drilling on the five block Betelguese prospect in the
Mississippi Canyon area. Combined, the two companies will have an interest in
37 tracts in the deep water, two deep water discoveries and commitments for
three deep water drilling rigs.
Lindahl said, "Norcen's properties are very attractive to us. They offer
significant low risk drilling inventory and high impact exploration potential
in the deep water Gulf of Mexico, Canada, Venezuela and Guatemala. It is a
quality portfolio of drillsite opportunities."
UPR plans to finance the all-cash transaction with a fully committed bank
facility underwritten by Chase Manhattan and Bank of Montreal. After consulting
with the ratings agencies, the Company will begin a deleveraging program
targeting a debt structure that will maintain no lower than a BBB+/Baa1 credit
rating. The program will include asset divestitures and, possibly, the issuance
of some equity.
UPR expects to initiate the tender offer within the next 5-7 business
days. The tender period will last thirty days unless extended by UPR and is
subject to normal regulatory approvals.
Nesbitt Burns and Salomon Smith Barney provided financial advisory
services to UPR in connection with the acquisition and will act as
dealer-managers in the tender offer.
Union Pacific Resources is one of the nation's largest domestic
independent oil and gas exploration and production companies. Based in Fort
Worth, Texas, UPR has been the #1 domestic driller for the past 6 years.
7
<PAGE> 4
THIS PRESS RELEASE, OTHER THAN HISTORICAL FINANCIAL
INFORMATION, CONTAINS FORWARD LOOKING STATEMENTS REGARDING
DILUTION, CASH FLOW, PLANNED DRILLING ACTIVITY, ASSET
DIVESTITURES, EQUITY ISSUANCES, EXPECTED PRODUCTION EFFORTS
AND VOLUMES THAT ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES WHICH ARE DESCRIBED IN THE COMPANY'S SEC
REPORTS, INCLUDING THE REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997. ACTUAL RESULTS MAY VARY MATERIALLY.
Media Contact: Analyst Contact:
Pat Doyle Mike Liebschwager
Director, Public Affairs Director, Investor Relations
817-877-6527 817-877-6531
Internet:www.upr.com
8
<PAGE> 1
Exhibit 99.2
FOR IMMEDIATE RELEASE
JANUARY 26, 1998
UNION PACIFIC RESOURCES GROUP INC.
SETS RECORDS IN 1997 FOR DISCRETIONARY CASH FLOW, EARNINGS, CAPITAL
INVESTED,
SALES VOLUMES AND RESERVES
1998 CAPITAL BUDGET ANNOUNCED
FORT WORTH, Texas -- Union Pacific Resources Group Inc. (NYSE-UPR) today
announced that 1997 was a record year for the Company in discretionary cash
flow, earnings, capital invested, sales volumes and proved reserves.
Discretionary cash flow for 1997 was $1,225 million or $4.88 per share, an 18
percent increase compared to 1996 while capital invested in 1997 equaled $1.5
billion, a 74 percent increase over 1996's total of $880 million. Earnings
increased 4 percent over 1996 to $333 million or $1.33 per share, while proved
reserves increased 593 billion cubic feet on an equivalent (Bcfe) basis to
4,100 Bcfe, a 17 percent increase year-over-year. In 1997, the Company
replaced 199 percent of production at an "all-in" finding and development cost
of approximately $.99 per million cubic feet on a gas equivalent basis.
Further, producing property volumes for 1997 averaged 1,599 million cubic feet
equivalent per day (MMcfed) of natural gas, an increase of 10 percent over
1996.
"Our performance in 1997 demonstrates that UPR is committed to growth in
volumes and reserves, and adding value to our shareholders. We have now
increased proved reserves for 10 consecutive years," said Jack L. Messman,
UPR's Chairman and CEO. "In 1998, we will continue with our core strategy of
growing through both drilling and producing property purchases. We also plan to
continue our aggressive growth in the gathering, processing and marketing
business unit."
In 1997, five of the Company's six business units increased production
volumes over the previous year. The increases were led by the Gulf
Onshore/Offshore business unit and the East Texas business unit which
experienced increases of 15 percent and 17 percent respectively. The Gulf
Onshore/Offshore business unit's increase is primarily the result of
exploration success in the Kings Bayou area.
East Texas growth was the result of exploration success in the Cotton
Valley reef play, development drilling in the Carthage field and the
9
<PAGE> 2
aggressive drilling program which is underway on the properties acquired from
Castle Energy.
In addition, Austin Chalk average volumes increased 4 percent to 524
MMcfed.
Sales prices averaged $2.17 per Mcfe in 1997 slightly above the 1996
average of $2.14 per Mcfe.
UPR continued to be the nation's number one domestic driller for the sixth
straight year. The Company averaged 50.6 operated rigs for the year and
participated in the drilling approximately of 800 gross wells. In December, the
Company set another record by operating 64 rigs.
FOURTH QUARTER
In the fourth quarter, discretionary cash flow increased 5 percent to
$343.8 million or $1.37 per share, compared to the same period in 1996, while
net income declined 35 percent year-over-year to $74.2 million or $.30 per
share primarily as a result of lower hydrocarbon prices. Average sales prices
totaled $2.12 per Mcfe in the fourth quarter of 1997 as compared to $2.58 per
Mcfe in 1996.
The decline in average price was partially offset as producing property
volumes for the fourth quarter of 1997 increased 6 percent to 1,606 MMcfed.
The Gulf Onshore/Offshore business unit registered a 51 percent increase in
volumes over the same period in 1996 adding over 50 MMcfed in the quarter as
the result of exploration success at Ship Shoal 105 (16 MMcfed) and additional
volumes from Matagorda Island 623 field (18 MMcfed).
Fourth quarter results included seven non-recurring items which
collectively increased net income by $8 million or $.03 per share. Other oil
and gas revenue included approximately $13 million related to gains recognized
in connection with the sale of assets and $6 million related to the favorable
resolution of potential claims associated with the Columbia Gas Transmission
Company bankruptcy settlement received in 1995. Other income included: $10
million related to the favorable resolution of a number of environmental
issues; a gain of approximately $7 million resulting from the sale of certain
marketable securities; favorable settlements totaling $13 million in connection
with a prior period property sale and expenses of approximately $17 million
incurred in connection with UPR's offer to purchase Pennzoil Company, which was
terminated in the fourth quarter. Finally, a FASB 121 asset impairment charge
of approximately $20 million was recorded in the fourth quarter related to four
small non-core fields.
10
<PAGE> 3
1998 CAPITAL BUDGET
In addition to its fourth quarter and year end results, the Company also
announced its 1998 capital budget of $1.6 billion. Of this amount, UPR plans
to invest approximately $1.4 billion on exploration and production activities
with the remaining $200 million allocated to plants, pipelines and marketing
projects.
Union Pacific Resources is one of the nation's largest domestic
independent oil and gas exploration and production companies. Based in Fort
Worth, Texas, UPR has been the #1 domestic driller for the past six years.
THIS PRESS RELEASE, OTHER THAN HISTORICAL FINANCIAL
INFORMATION, CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES INCLUDING PLANNED CONSTRUCTION AND
DRILLING ACTIVITY, EXPECTED PRODUCTION EFFORTS AND VOLUMES AND
BUDGETED CAPITAL EXPENDITURES AND OTHER RISKS AND
UNCERTAINTIES DETAILED IN THE COMPANY'S SEC REPORTS, INCLUDING
THE REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,
1997. ACTUAL RESULTS MAY VARY MATERIALLY.
Media Contact: Analyst Contact:
Pat Doyle Mike Liebschwager
Director, Public Affairs Director, Investor Relations
817-877-6527 817-877-6531
Internet:www.upr.com
11
<PAGE> 4
UNION PACIFIC RESOURCES GROUP INC.
STATEMENT OF INCOME
For the Period Ended December 31
(Dollars in Millions, Except Per Share Figures)
<TABLE>
<CAPTION>
FOURTH QUARTER % TWELVE MONTHS %
1997 1996 Inc(Dec) 1997 1996 Inc(Dec)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Oil and gas operations:
Producing properties $ 314.4 $ 352.7 $1,281.2 $1,133.3
Plants, pipelines and marketing 123.9 139.8 443.3 503.8
Other oil and gas revenues 26.5 41.5 60.4 65.0
------- ------- -------- --------
Total oil and gas operations 464.8 534.0 1,784.9 1,702.1
Minerals 34.6 32.3 139.8 128.9
------- ------- -------- --------
Total operating revenues 499.4 566.3 (12)% 1,924.7 1,831.0 5%
------- ------- -------- --------
Operating expenses:
Production 75.9 69.7 292.6 259.5
Exploration 54.1 50.5 204.7 144.6
Plants, pipelines and marketing 89.6 91.0 285.2 290.0
Minerals (0.4) 1.9 3.4 8.0
Depreciation, depletion and amortization 163.8 149.8 568.1 533.9
General and administrative 17.1 21.5 75.5 68.4
------- ------- -------- --------
Total operating expenses 400.1 384.4 4% 1,429.5 1,304.4 10%
------- ------- -------- --------
Operating income 99.3 181.9 (45)% 495.2 526.6
Other income (expense) - net 14.7 (1.5) 24.3 (3.4)
Interest expense (17.6) (12.6) (53.1) (50.6)
------- ------- -------- --------
Income before income taxes 96.4 167.8 466.4 472.6
Income taxes (22.2) (53.5) (133.4) (151.8)
------- ------- -------- --------
Net income $ 74.2 $ 114.3 (35)% $ 333.0 $ 320.8 4%
======= ======= ======== ========
Discretionary cash flow (1) $ 343.8 $ 326.1 5% $1,225.5 $1,036.3 18%
======= ======= ======== ========
Basic earnings per share $ 0.30 $ 0.46 (35)% $ 1.33 $ 1.29 3%
Diluted earnings per share $ 0.30 $ 0.46 (35)% $ 1.33 $ 1.28 4%
Discretionary cash flow per share $ 1.37 $ 1.30 5% $ 4.88 $ 4.14 18%
Average shares outstanding (millions) 249.7 249.8 250.0 249.2
</TABLE>
(1) Discretionary cash flow for any period means the sum of net income;
depreciation, depletion and amortization; exploration expenses; and
deferred taxes.
<PAGE> 5
UNION PACIFIC RESOURCES GROUP INC.
OPERATING STATISTICS
For the Period Ended December 31
<TABLE>
<CAPTION>
FOURTH QUARTER % AS OF DECEMBER 31 %
1997 1996 Inc(Dec) 1997 1996 Inc(Dec)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMBINED OIL AND GAS OPERATIONS
Average daily sales volumes:
Natural gas (MMcfd) 1,120.6 1,053.8 6% 1,132.8 1,007.0 12%
Natural gas liquids (MBbld) 73.2 71.7 2% 71.6 68.3 5%
Crude oil (MBbld) 57.4 50.2 14% 52.9 50.6 4%
Total (MMcfed) 1,904.4 1,785.4 7% 1,879.3 1,720.2 9%
Average sales prices:
Natural gas (per Mcf) $ 1.93 $ 2.33 (17)% $ 2.01 $ 1.86 8%
Natural gas liquids (per Bbl) 11.61 16.36 (29)% 11.61 12.42 (7)%
Crude oil (per Bbl) 17.89 19.60 (9)% 18.36 18.84
Total (per Mcfe) 2.12 2.58 (18)% 2.17 2.14
OPERATIONS DETAIL
Producing properties:
Average daily production:
Natural gas (MMcfd) 1,077.7 1,029.9 5% 1,102.3 980.3 12%
Natural gas liquids (MBbld) 30.6 31.0 29.9 28.5 5%
Crude oil (MBbld) 57.4 50.2 14% 52.9 50.6 4%
Total (MMcfed) 1,605.5 1,517.1 6% 1,598.8 1,454.9 10%
Average sales prices:
Natural gas (per Mcf) $ 1.90 $ 2.32 (18)% $ 2.00 $ 1.86 8%
Natural gas liquids (per Bbl) 11.34 14.87 (24)% 11.20 11.39
Crude oil (per Bbl) 17.89 19.60 (9)% 18.36 18.84
Average costs:
Production costs (per Mcfe) $ 0.51 $ 0.50 $ 0.50 $ 0.49
DD&A (per Mcfe) 0.96 0.94 0.84 0.87
General and administrative cost (per Mcfe) 0.10 0.13 (25)% 0.11 0.11
Plants, pipelines and marketing:
Average daily sales volumes attributable
to gas plant ownership:
Natural gas (MMcfd) 42.9 23.9 79% 30.5 26.7 14%
Natural gas liquids (MBbld) 42.7 40.7 5% 41.7 39.8 5%
Total (MMcfed) 298.8 268.3 11% 280.5 265.4 6%
Average sales prices:
Natural gas (per Mcf) $ 2.75 $ 2.56 7% $ 2.40 $ 2.01 19%
Natural gas liquids (per Bbl) 11.81 17.49 (32)% 11.91 13.16 (9)%
</TABLE>
<PAGE> 6
UNION PACIFIC RESOURCES GROUP INC.
STATEMENT OF CASH FLOWS
For the Period Ended December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
FOURTH QUARTER % AS OF DECEMBER 31 %
1997 1996* Inc(Dec) 1997 1996* Inc(Dec)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by operations:
Net income $ 74.2 $114.3 (35)% $ 333.0 $ 320.8 4%
Depreciation, depletion and amortization 163.8 149.8 568.1 533.9
Exploration expenses 54.1 50.5 204.7 144.6
Deferred taxes 51.7 11.5 119.7 37.0
------ ------ --------- --------
Discretionary cash flow 343.8 326.1 5% 1,225.5 1,036.3 18%
Working capital changes and other (181.5) (65.4) (256.7) (45.9)
------ ------ --------- --------
Cash provided by operations 162.3 260.7 (38)% 968.8 990.4 (2)%
------ ------ --------- --------
Investing activities:
Capital investments and exploratory
expenditures (342.0) (264.6) 29% (1,352.3) (880.3) 54%
Acquisition of Highlands Gas Corporation -- -- (179.4) --
Proceeds from sales of properties 22.3 5.3 44.6 30.2
Other investing activities - net (11.3) (1.0) (17.7) (2.8)
------ ------ --------- --------
Cash used by investing activities (331.0) (260.3) 27% (1,504.8) (852.9) 76%
------ ------ --------- --------
Financing activities:
Dividends paid (12.5) (12.5) (50.0) (49.8)
Advances from (to) Union Pacific Corporation -- (444.4) -- (567.8)
Debt Financings 255.2 553.1 563.5 646.9
Debt Repaid (2.6) (9.5) (3.9) (77.5)
Purchase of Treasury Stock (49.9) (2.4) (52.4) (3.4)
Other financings - net 5.4 6.8 30.5 5.4
------ ------ --------- --------
Cash provided(used) by financing activities 195.6 91.1 487.7 (46.2)
------ ------ --------- --------
Net change in cash $ 26.9 $ 91.5 (71)% $ (48.3) $ 91.3 (153)%
====== ====== ========= ========
</TABLE>
* Certain classifications have been restated to conform with current year
presentation.
<PAGE> 7
UNION PACIFIC RESOURCES GROUP INC.
STATEMENT OF FINANCIAL POSITION
As of December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Assets:
Current assets $ 576.8 $ 586.3
Properties - net 3,665.4 2,972.4
Intangible and other assets 230.0 90.2
-------- --------
Total $4,472.2 $3,648.9
======== ========
Liabilities and shareholders' equity:
Current liabilities $ 557.7 $ 612.8
Debt due after one year 1,230.6 670.9
Deferred income taxes 552.9 434.7
Other liabilities 370.3 416.2
Shareholders' equity 1,760.7 1,514.3
-------- --------
Total $4,472.2 $3,648.9
======== ========
</TABLE>
