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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 31, 1999
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)
777 MAIN STREET, FORT WORTH, TEXAS 76102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE 817-321-6000
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
NOT APPLICABLE
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 31, 1999, Union Pacific Resources Group Inc. ("Registrant" or
"Company") and Duke Energy Field Services Inc. ("Duke") completed the previously
announced sale to Duke of the Registrant's domestic natural gas gathering,
processing, pipeline and marketing business ("GPM") for $1.35 billion. The sales
price was determined in an arms length negotiation with Duke following a
competitive bid process. Prior to closing, under a process provided for in the
Merger and Purchase Agreement, Duke asserted environmental claims for costs to
remediate alleged environmental conditions related to the GPM Assets. These
environmental claims are in excess of a $40 million deductible that Duke has
assumed for environmental conditions. Registrant has the right to contest such
claims through arbitration. If it is determined that there are valid
environmental claims in excess of the $40 million deductible, then Registrant
will be required to pay Duke such excess amount. The transaction includes
five-year contracts under which Duke will market most of the Registrant's
natural gas and natural gas liquids ("NGL") production and an agreement whereby
Duke will gather and process the Registrant's domestic gas production for the
productive life of a field or for 10 years. The proceeds from the sale will be
used to reduce the Registrant's debt.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(b) Pro Forma Financial Information.
The unaudited pro forma consolidated statement of financial position and the
unaudited pro forma consolidated statement of income have been prepared to give
effect to certain transactions as described below.
The unaudited pro forma consolidated statement of financial position of the
Company as of December 31, 1998, has been prepared to give effect to the sale of
the GPM segment as if the sale had occurred on December 31, 1998.
The unaudited pro forma consolidated statement of income of the Company for the
year ended December 31, 1998, has been prepared to give effect to the sale of
the GPM segment as if the sale had occurred on January 1, 1998.
In addition, the unaudited pro forma consolidated statement of income has been
prepared to give effect to the March 3, 1998, acquisition of Norcen Energy
Resources Limited ("Norcen") as if the acquisition had occurred on January 1,
1998. The historical results of Norcen for the two months ended February 28,
1998, were adjusted for conversion to U.S. generally accepted accounting
principles and for the application of successful efforts method of accounting
for oil and gas operations.
The unaudited pro forma financial statements included herein are not necessarily
indicative of the results that might have occurred had the transaction and other
events taken place at the beginning of the period specified and are not intended
to be a projection of future results. In addition, future results may vary
significantly from the results reflected in the accompanying unaudited pro forma
combined financial statements because of normal production declines, changes in
product prices, future acquisitions and
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divestitures, future development and exploration activities, and other factors
beyond the control of the Company.
The following unaudited pro forma financial statements should be read in
conjunction with the Consolidated Financial Statements (and related notes) of
the Company in its Annual Report on Form 10-K for the year ended December 31,
1998.
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UNION PACIFIC RESOURCES GROUP INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 1998
(in millions)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments As Adjusted
---------- ----------- -----------
Assets (a)
------
<S> <C> <C> <C>
Current assets:
Cash and temporary investments $ 8.8 $ 8.8
Accounts receivable 261.0 261.0
Inventories 64.6 64.6
Other current assets 107.0 107.0
--------- ---------
Total current assets 441.4 441.4
Properties - cost 11,078.2 11,078.2
Accumulated depreciation, depletion and amortization (4,984.9) (4,984.9)
--------- ---------
Total properties - net 6,093.3 -- 6,093.3
Intangible and other assets 180.8 180.8
Net assets of discontinued operations 926.9 (926.9) --
--------- ---------
Total assets $ 7,642.4 $ 6,715.5
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 270.5 $ 270.5
Accrued taxes payable 64.9 238.3 303.2
Other current liabilities 157.5 157.5
Short-term debt 853.8 (851.9) 1.9
--------- --------- ---------
Total current liabilities 1,346.7 (613.6) 733.1
Debt due after one year 3,744.9 (310.1) 3,434.8
Deferred income taxes 1,291.6 (151.3) 1,140.3
Other long-term liabilities 531.0 531.0
Shareholders' equity 728.2 148.1 876.3
--------- ---------
Total liabilities and shareholders' equity $ 7,642.4 $ 6,715.5
========= =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
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UNION PACIFIC RESOURCES GROUP INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Two Months Adjustments
------------------------
Norcen Purchase Adjusted Pro Forma Pro Forma
Historical Operations Accounting Historical Adjustments As Adjusted
---------- ---------- ---------- ---------- ----------- -----------
(b)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Producing properties $ 1,539.2 $ 102.8 $ (3.0)(c) $ 1,639.0 $ 1,639.0
Other oil and gas revenues 160.7 -- -- 160.7 160.7
---------- ---------- ---------- ----------
Minerals 141.1 -- -- 141.1 141.1
---------- ---------- ---------- ----------
Total operating revenues 1,841.0 102.8 (3.0) 1,940.8 1,940.8
---------- ---------- ---------- ----------
Operating expenses:
Production 444.3 28.1 -- 472.4 472.4
Exploration 339.0 13.5 -- 352.5 352.5
Minerals 3.5 -- -- 3.5 3.5
Depreciation, depletion and amortization 2,125.6 45.4 39.8 (d) 2,210.8 2,210.8
General and administrative 104.8 4.2 -- 109.0 109.0
Restructuring charge 17.0 -- -- 17.0 17.0
---------- ---------- ---------- ----------
Total operating expenses 3,034.2 91.2 39.8 3,165.2 3,165.2
---------- ---------- ---------- ---------- ----------
Operating income (loss) (1,193.2) 11.6 (42.8) (1,224.4) (1,224.4)
Other income (expense) - net (45.3) -- -- (45.3) (45.3)
Interest expense (249.8) (8.1) (26.4)(e) (284.3) 69.7 (g) (214.6)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (1,488.3) 3.5 (69.2) (1,554.0) 69.7 (1,484.3)
Income taxes (expense) benefit 605.2 (2.1) 26.3 (f) 629.4 (25.8)(f) 603.6
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations $ (883.1) $ 1.4 $ (42.9) $ (924.6) $ 43.9 $ (880.7)
========== ========== ========== ========== ========== ==========
Earnings per share:
Continuing operations - basic $ (3.57) $ (3.56)
Continuing operations - diluted $ (3.57) $ (3.56)
Weighted average shares
outstanding - basic and diluted 247.7 247.7
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
statements.
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UNION PACIFIC RESOURCES GROUP INC.
NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
1. Basis of Presentation
In accordance with the Merger and Purchase Agreement between the Company and
Duke, the Company sold its GPM segment to Duke for $1.35 billion.
The unaudited pro forma consolidated statement of financial position of the
Company as of December 31, 1998, has been prepared to give effect to the sale of
the GPM segment and the Company's decrease in debt as if such transactions had
occurred on December 31, 1998. Prior to the sale, the GPM segment had been
classified as net assets held for sale.
The unaudited pro forma consolidated statement of income of the Company for the
year ended December 31, 1998, has been prepared to give effect to the sale and
certain other events described below as if such events had occurred on January
1, 1998.
The Historical columns included in these unaudited pro forma financial
statements represent the consolidated statement of financial position of the
Company as of December 31, 1998, and the consolidated statement of income of the
Company for the year ended December 31, 1998, as included in the Company's
Annual Report on Form 10-K.
2. Pro Forma Entries
The following adjustments are included in the preparation of the pro forma
financial statements:
(a) To reflect the sale of the GPM segment to Duke. In accordance with APB No.
30, the assets and liabilities of the GPM segment were classified as net
assets held for sale.
(b) On March 3, 1998, UPR completed the acquisition of Norcen. This column
reflects the historical results of Norcen for the two months ended February
28, 1998, as adjusted for conversion to generally accepted accounting
principles of the United States and for the application of the successful
efforts method of accounting for oil and gas operations, and to U.S.
dollars using the January and February 1998 average foreign currency
exchange rates.
(c) To amortize the value of Norcen marketing and transportation contracts and
derivative positions recorded at fair value as of the date of the
acquisition of Norcen.
(d) To increase depreciation, depletion and amortization expense for the
additional basis allocated to the oil and gas properties acquired and
accounted for using the successful efforts method of accounting.
(e) To record additional interest expense resulting from the borrowing of the
funds necessary to consummate the acquisition of Norcen, using an
incremental borrowing rate of six percent.
(f) To adjust income tax expense for pro forma adjustments by tax jurisdiction.
(g) To reduce interest expense to reflect the paydown of debt with the net
proceeds from the sale of the GPM segment, using an incremental borrowing
rate of six percent.
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3. Income Taxes
The Company will continue to account for income taxes in accordance with the
provisions of SFAS No. 109. The Company will prepare separate tax calculations
for each tax jurisdiction in which the Company will be subject to income taxes.
4. Earnings per Share
Earnings per share is computed in accordance with SFAS No. 128, "Earnings Per
Share" ("EPS"). Basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
(c) Exhibits. Exhibits not incorporated herein by reference to a prior
filing are designated by an asterisk (*) and are filed herewith.
Exhibit No. Exhibit
10.1(a) Merger and Purchase Agreement, dated November 20, 1998, among
Union Pacific Resources Company, Union Pacific Fuels, Inc.,
Duke Energy Services, Inc. and DEFS Merger Sub Corp
(incorporated herein by reference to Exhibit 10.23(a) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.1(b) Amendment, dated February 1, 1999, to Merger and Purchase
Agreement, dated November 20, 1998, among Union Pacific
Resources Company, Union Pacific Fuels, Inc., Duke Energy
Services, Inc. and DEFS Merger Sub Corp (incorporated herein
by reference to Exhibit 10.23(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998).
*10.2 Amendment No. 2, dated March 5, 1999, to Merger and Purchase
Agreement, dated November 20, 1998, among Union Pacific
Resources Company, Union Pacific Fuels, Inc., Duke Energy
Services, Inc. and DEFS Merger Sub Corp.
99.1 Press Release dated November 22, 1998 (incorporated herein by
reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K filed on December 4, 1998).
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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: April 12, 1999
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AMENDMENT NO. 2
TO
MERGER AND PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO MERGER AND PURCHASE AGREEMENT (the "Second Amendment")
is made as of the fifth day of March, 1999, among Union Pacific Resources
Company, a Delaware corporation, Union Pacific Fuels, Inc., a Delaware
corporation and a wholly owned subsidiary of Seller, Duke Energy Field Services,
Inc., a Colorado corporation, and DEFS Merger Sub Corp., a Delaware corporation
and a wholly owned subsidiary of Buyer.
WHEREAS, the parties heretofore entered into a Merger and Purchase
Agreement dated November 20, 1998 which was amended by the First Amendment dated
as of February 1, 1999 (collectively, the "Amended Agreement") (capitalized
terms not otherwise defined herein have the same meanings ascribed to such terms
in the Amended Agreement);
WHEREAS, the parties hereto desire to amend the Amended Agreement as
described below by entering into this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. In Section 1.01 (Definitions), the definitions for "Merger Price"
and "Purchased Assets Purchase Price" are deleted in their entirety and the
following substituted in its place:
"Merger Price" means $1,091,138,000 (the "Base Merger Price"), plus
(i) Estimated Gas Storage Inventory, plus (ii) the cost incurred
subsequent to the date hereof and prior to the Closing of any
capital expenditures (allocable to the Assets other than the
Purchased Assets) mutually agreed by Buyer and Seller pursuant to
Section 5.01(b), minus (iii) any adjustment related to Environmental
Conditions (allocable to the Assets other than the Purchased Assets)
effected prior to the Closing Date as contemplated by Section
8.02(c), minus (iv) any reductions on account of Title Defects with
respect to any Asset other than any Purchased Asset pursuant to
Section 9.02(e)(1)(ii), and minus (v) any reduction pursuant to
Section 2.07(a).
"Purchased Assets Purchase Price" means $258,862,000 (the "Base
Purchased Assets Purchase Price"), plus (i) the cost incurred
subsequent to the date hereof and prior to the Closing of any
capital expenditures (allocable to the Purchased Assets) mutually
agreed by Buyer and Seller pursuant to Section 5.01(b), minus (ii)
any adjustment related to Environmental Conditions (allocable to the
Purchased Assets) effected prior to the Closing Date as contemplated
by Section 8.02(c), and minus (iii) any reductions on account of
Title Defects with respect to any Purchased Asset pursuant to
Section 9.02(e)(1)(ii).
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2. The first sentence of Section 2.03 (Closing) is deleted in its
entirety and the following substituted in its place: "The closing (the
"CLOSING") of the transactions contemplated by this Agreement shall take place
at the offices of Seller, 777 Main Street, Fort Worth, Texas on March 31, 1999,
effective as of 11:59 p.m. central time on March 31, 1999, or at such other time
or place as Buyer and Seller may agree."
3. Three new sections are added to Article 7 as follows:
SECTION 7.11. GULF PLAINS PLANT. With respect to the fire which
occurred at the Gulf Plains Gas Plant on November 30, 1998, Seller
shall be obligated to pay for the cost and installation of two new
compressors to replace the two destroyed compressors and the cost of
constructing a new building to house the compressors, whether such
payment obligation arises before or after the Closing. Seller shall be
entitled to all insurance proceeds and amounts paid by third parties
with respect to the fire, whether paid before or after the Closing.
SECTION 7.12. GAS STORAGE SALES AND PURCHASES. Schedule 7.12 hereto
sets forth the storage facilities where Seller has gas in storage. The
parties agree that effective March 1, 1999 through the Closing Date
("REIMBURSEMENT PERIOD") the Company may make purchases into and sales
from such storage facilities in the ordinary course of business
provided, however, that the term of such sales shall not extend beyond
the Closing Date. Buyer agrees to pay Seller for all storage gas sold
during the Reimbursement Period by paying Seller the Index Price in
effect for the storage facility where the gas is sold. Seller agrees to
pay Buyer all storage gas purchased during the Reimbursement Period by
paying Buyer the Index Price in effect for the storage facility where
the gas is purchased. As used herein, the term "Index Price" shall mean
the price of gas in effect on the day the gas is delivered to the
Company by a seller of such gas or delivered to the company by a seller
of such gas or delivered by the Company to a buyer of such gas, as
published by Gas Daily in the section and at the index point set forth
in Schedule 7.12. Seller shall send Buyer a statement for gas storage
sales and purchases, setting forth by storage facility the volumes
purchased and sold, and the applicable Index Price. If a net amount on
the statement is due Buyer, then Seller shall remit the amount due with
the statement. If the net amount on the statement is due Seller, Buyer
shall pay Seller within fifteen days of receipt of Seller's statement.
SECTION 7.13. CERTAIN PLANT EXPENDITURES. Schedule 7.13 hereto lists
certain gas plant construction projects and categorizes types of
expenses due or to become due to third parties, and adjustments or
reimbursements due by third parties. The parties agree that Seller
shall be liable for the payment of amounts related to the matters set
forth on Schedule 7.13, whether due or paid before or after Closing.
The parties further agree that Seller shall be entitled to all amounts
received for adjustments and reimbursements related to the matters set
forth on Schedule 7.13, whether received before or after Closing by
Seller, the Company, a Subsidiary or Buyer provided, in the case of a
retention, Seller shall not release or credit such funds to the third
party after Closing until authorized to do so by Buyer in accordance
with the terms of the applicable purchase order. In some cases, Seller
may accept an irrevocable letter of credit from a third party in lieu
of a retainer pending
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performance testing, which letter of credit, to the extent not issued
prior to the date of this amendment, shall be issued on terms and
conditions reasonably acceptable to Buyer. Seller will either transfer
such letters of credit to Buyer or if not transferable, Seller will
exercise such letters of credit in favor of Buyer and remit to Buyer
any amounts drawn on the letters of credit upon written notice from
Buyer. Such notice will be executed by and contain the same
certifications, representations and other statements required by the
applicable letter of credit, and Seller shall be entitled to rely
conclusively on such notice.
4. Exhibit B (Restructuring Activities), Schedules 1.01 (1) (Excluded
Businesses and Assets) and 1.01(4) (Purchased Assets) are hereby amended and
restated in their entirety as attached hereto.
5. The last sentence of Section 12.01 (Survival) is deleted in its
entirety and the following substituted in its place: "Notwithstanding the
foregoing, claims for breach of the agreements or representations and warranties
contained in Sections 2.01(b), 2.04(a)(1)-(3), 2.05, 3.13, 3.18, 5.02, 5.03,
5.04, Article 6, Sections 7.01, 7.02, 7.04, 7.05, 7.06, 7.07, 7.08, 7.11, 7.12,
7.13, 8.01(b), 8.02(d), 8.03, Article 9, Article 11, this Article 12 and Article
14 shall survive for the full period of any applicable statute of limitations.
6. This Second Amendment is executed, and shall be considered, as an
amendment to the Amended Agreement and shall form a part thereof, and the
provisions of the Amended Agreement, as amended by this Second Amendment, are
hereby ratified and confirmed in all respects.
7. This Second Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute but one and the same instrument. This Agreement shall become binding
only when each party hereto has executed and delivered to the other parties one
or more counterparts.
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment or have cause this Agreement to be duly executed by their respective
authorized officers as of the day and year first written above.
UNION PACIFIC RESOURCES COMPANY
By: /s/ JOSEPH A. LASALA
-----------------------------------
Name: Joseph A. LaSala
Title: Vice President, General Counsel
And Corporate Secretary
UNION PACIFIC FUELS, INC.
By: /s/ KERRY R. BRITTAIN
-----------------------------------
Name: Kerry R. Brittain
Title: Vice President
DUKE ENERGY FIELD SERVICES, INC.
By: /s/ J.W. MOGG
-----------------------------------
Name: J.W. Mogg
Title: President
DEFS MERGER SUB CORP.
By: /s/ J.W. MOGG
-----------------------------------
Name: J.W. Mogg
Title: President
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