<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Rule 14a-12
UNION PACIFIC RESOURCES GROUP INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies.
(2) Aggregate number of securities to which transaction applies.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction: $[_____________]
(5) Total fee paid: $[_________]
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
Participant Information
Union Pacific Resources Group Inc. ("Union Pacific Resources") and certain
other persons named below may be deemed to be participants in the solicitation
of proxies of Union Pacific Resources shareholders to approve the merger of
Union Pacific Resources and Anadarko Petroleum Corporation.
The participants in this solicitation may include (i) the following
directors of Union Pacific Resources: H. Jesse Arnelle, Lynne V. Cheney, Preston
M. Geren III, Lawrence M. Jones, Drew Lewis, George Lindahl III, Claudine B.
Malone, John W. Poduska, Sr., Michael E. Rossi, Jeff Sandefer, Samuel K.
Skinner, and James R. Thompson; and (ii) the following officers and employees of
Union Pacific Resources: George Lindahl III (Chairman, President and Chief
Executive Officer); Morris B. Smith (Vice President, Chief Financial Officer and
Treasurer); Thomas R. Blank (Vice President-State Regulatory and Public
Affairs); Patrick R. Mooney (Vice President-Investor Relations); David R. Larson
(Director Investor Relations); John M. Colglazier (Director Planning and
Financial Reporting); and Dan Sullivan (Director of Public Affairs). As of the
date of this communication, none of the foregoing participants individually
beneficially owns in excess of 1% of Union Pacific Resources's common stock, or
in the aggregate in excess of 1.5% of Union Pacific Resources's common stock.
Certain of the directors, officers, and employees of Union Pacific
Resources named above may become directors, officers, or employees of Anadarko
Petroleum Corporation following the merger. In addition, certain of the
directors, officers, or employees of Union Pacific Resources named above may
have employment or severance agreements or interests in employee benefits plans
that may be modified or triggered as a result of the merger.
Except as discussed above, to the knowledge of Union Pacific Resources,
none of the directors, officers, or employees of Union Pacific Resources named
above has any interest, direct or indirect, by security holdings or otherwise in
the solicitation.
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ANADARKO TO MERGE WITH UNION PACIFIC RESOURCES GROUP
THE NEW ANADARKO WILL HAVE BROADER GROWTH PORTFOLIO
AND MORE FINANCIAL STRENGTH
HOUSTON AND FORT WORTH, TEXAS, APRIL 3, 2000 -- Anadarko Petroleum
Corporation (NYSE:APC) and Union Pacific Resources Group Inc. (NYSE:UPR) today
announced a merger that will create one of the largest independent exploration
and production companies in the world in terms of 1999 reserves, production and
drilling activity. The combined company will be called Anadarko Petroleum
Corporation and will be headquartered in Houston.
Under the agreement, which was unanimously approved by each company's board
of directors, UPR shareholders will receive 0.4550 Anadarko common shares for
each UPR common share they own. As a result, Anadarko shareholders will hold
approximately 53 percent of the combined company and UPR shareholders
approximately 47 percent. Based on the Anadarko closing price of 38.6875 on
March 31, 2000, the combined company will have about 243 million shares
outstanding and a market capitalization over $9 billion. Based on this closing
price, the transaction has an implied value to UPR shareholders of $17.60 per
share, representing a 21% premium to UPR's closing price on Friday, March 31,
2000. The stock-for-stock deal is subject to approval by shareholders of both
UPR and Anadarko and customary regulatory approval. Following the merger, UPR
will be a wholly owned subsidiary of Anadarko.
Anadarko expects the merger to be treated as a tax-free reorganization and
accounted for as a purchase. The merger agreement includes a provision under
which UPR and Anadarko granted each other the right to purchase 19.9% of each
other's outstanding shares. Anadarko believes the proposed merger will be
immediately accretive to both cash flow and earnings.
1
<PAGE> 4
Robert J. Allison, Jr. will continue to be Chairman and Chief Executive
Officer of Anadarko. George Lindahl III, Chairman, President and Chief Executive
Officer of UPR, will become Vice Chairman of Anadarko after the merger. Five
members of UPR's Board of Directors will join the Anadarko board, subject to
Anadarko shareholder approval of the larger board.
Comments by Bob Allison: "This merger is an excellent fit for both
companies. We blend Anadarko's strengths in exploration with what UPR does best
- - profitable exploitation with industry-leading drilling and completion
technology. The new Anadarko will have the financial strength to aggressively
pursue a broader portfolio of projects. We can accelerate activity in the most
prospective areas offering the best returns for shareholders. We do expect some
modest cost reductions with the merger, but that's not what drives this deal.
It's about complementary skills and assets that can give us dramatic growth and
profitability. We expect to grow faster and beyond the levels either company
could achieve individually. Given the current outlook for energy markets, now is
the time to step up the pace of drilling for new energy reserves -- particularly
North American natural gas. More energy for America is good news for our
shareholders and it's good news for consumers as well."
Comments by George Lindahl: "The merger provides significant benefits to
UPR shareholders. It recognizes the value of our core producing assets and our
portfolio of projects throughout the Americas. We bring to the new Anadarko
skills and experience that are complementary to their exploration strength. UPR
is an industry leader in drilling and completion technology. That expertise can
now be applied to a larger asset base with stronger capital resources than ever
before. This deal offers UPR's shareholders an exciting future - marked by
significant increases in production, earnings and cash flow - starting this
year. We will have more exposure to high-potential exploration and increased
opportunity for growth in the near-term. The combined companies share a
commitment to organic growth through exploration and exploitation strategies
that will continue to build value for shareholders in the future."
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Comments by Anadarko President and Chief Operating Officer John Seitz:
"Anadarko has spent years developing what I believe to be the best team of
energy explorers in the business and providing them the best available
technology. Our team has delivered consistent growth in production and reserves
and found a dozen giant oil and gas fields over the past 20 years. In recent
years, our team has identified more outstanding drilling opportunities than we
could fund with available cash flows. This merger gives us more capital and
talented people, so we can immediately go to work finding new reserves of oil
and gas. With the best people in the business, we expect to generate even more
impressive growth and returns for our shareholders!"
Anadarko said the company's Growth Portfolio would be well balanced around
three types of worldwide activity -- Exploration, Development and Exploitation.
The new Company would also have more Financial Strength than was previously
offered by either company alone.
GROWTH PORTFOLIO
Proved Reserves -- The combined companies' proved reserves would be equally
split between crude oil and natural gas and equivalent to 1.94 billion barrels
of oil (BOE) or about 11.65 Trillion cubic feet of gas (Tcfe). About 80 percent
of total reserves are in North America and 20 percent in international areas. At
current expected production rates, the reserve life index of the combined
companies would be 10.8 years.
Exploration -- The merger combines exploration projects now underway in
both companies in some of the highest potential areas of the world today. To
date, Anadarko has identified over 100 exploration prospects from the combined
companies' portfolio with over 11 billion barrels of net un-risked reserve
potential. In the U.S., significant reserve potential exists in a number of
exploration plays in Texas, the Gulf of Mexico (conventional, sub-salt and
deepwater plays), Alaska and the Rocky Mountain areas. In foreign exploration,
the new portfolio will include projects in Canada, the Sahara Desert of Tunisia,
the North Atlantic Margin, and Latin America. The new Anadarko will now have the
financial strength to aggressively pursue additional exploration ventures
worldwide.
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Development -- Near-term cash flow will benefit from a broad portfolio of
development projects. Construction and development drilling are already underway
to commercialize recently discovered oil and gas fields in Alaska (Alpine &
Moquawkie fields), Algeria (the HBN and HBNS fields) and the Gulf of Mexico
(Tanzanite & Hickory fields). In addition, large development drilling projects
are planned to increase oil and gas production in Texas (the Carthage, Ozona and
Giddings Fields); in Wyoming (the Wamsutter Field); and in Canada (the Hatton
and Jedney fields). In 2001, these development projects should generate over 10
million BOE of new production with even higher levels in 2002.
Exploitation -- Significant growth opportunity has been identified in
existing fields, where in-fill and step-out drilling, state-of-the-art
technologies in reservoir engineering, drilling, completion and production can
be used to extend field limits, increase production and recover more reserves.
Many projects represent a blend of exploration and development such as the
Bossier Play in East Texas. To date, Anadarko has identified over 50 such
projects in the inventory of the combined company. Net potential reserves from
these projects are one billion BOE (un-risked).
The new company will play a major role in the growing North American
natural gas market.(1) Based on 1999 data for all energy companies (independents
and majors), Anadarko will now rank as the 6th largest natural gas producer in
North America, and the 5th largest holder of natural gas reserves. (See
Attachments). The new Anadarko will hold significant acreage positions and
drilling opportunity in most of the high-potential, gas-rich basins of North
America, including Western Canada, and the U.S. basins of the Rocky Mountains,
the Mid-continent, Texas, and the Gulf of Mexico. These basins today account for
90% of U.S. gas supply.
- ------------
(1) A 1999 study by the National Petroleum Council predicted US natural gas
consumption would grow from 22 Tcf in 1998 to 26 Tcf in 2005 and reach 31 Tcf in
2015.
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FINANCIAL STRENGTH
Earnings and Cash Flow -- Anadarko believes the proposed merger will be
immediately accretive to both cash flow and earnings. Anadarko estimates that if
the companies were combined for the year 2000, cash flow would have been about
$1.8 billion (or about $7.50 per share). For the year 2001, given the current
outlook for commodity prices, cash flow is expected to increase further, to more
than $2 billion (or about $9.00 per share).
Balance Sheet -- The new Anadarko will have a stronger balance sheet than
either company had individually. This increased financial strength should give
the new Anadarko continued access to capital markets to continue its drilling
and development projects around the world. Anadarko will utilize full-cost
accounting for the combined company. On a pro-forma consolidated basis as of
year-end 1999, the combined companies would have had a total capitalization of
$10 billion, comprised of $5.9 billion of equity and $4.1 billion of debt. The
debt to total capitalization ratio would be 41%. The average maturity life of
the debt would be 21 years, and the average annual interest rate would be 7.11%.
Credit Suisse First Boston and Wachtell, Lipton, Rosen & Katz served as
advisors to Anadarko for this transaction. Advisors to UPR were the firms of
Simmons and Company, Goldman Sachs, and Morgan, Lewis and Bockius.
SUMMARY TRANSACTION TERMS
o Exchange Ratio 0.4550 APC shares for each UPR Share
o Accounting Structure Purchase Accounting/Full Cost
o Tax Structure Tax Free Merger
o Capitalization Debt-Cap Est. @ 41%
o Company Name Anadarko Petroleum Corporation
o Headquarters Houston, Texas
o Board of Directors 8 APC, 5 UPR (proposed)
o Target Closing Date July 2000
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<PAGE> 8
FORWARD LOOKING STATEMENTS
Except for historical information, all other information in this news
release consists of forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties, which could cause actual results to differ
materially from those projected, anticipated or implied. The most significant of
these risks and uncertainties are described in Anadarko's and UPR's SEC filings
and reports and exhibits to those reports, and include (but are not limited to),
the costs and difficulties related to the integration of acquired businesses,
commodity pricing and demand, exploration and operating risks, development
risks, and the costs and other effects of governmental regulation and legal and
administrative proceedings. Anadarko and UPR undertake no obligation to publicly
update or revise any forward-looking statements.
All stockholders should read the proxy statement/prospectus concerning the
merger that will be filed with the SEC and mailed to stockholders. The proxy
statement/prospectus will contain important information that stockholders should
consider before making any decision regarding the merger. Stockholders will be
able to obtain the proxy statement/prospectus, as well as other filings
containing information about Anadarko Petroleum Corporation and Union Pacific
Resources Group Inc., without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the proxy statement/prospectus
can also be obtained, without charge, from the Corporate Secretary of the
appropriate company.
CERTAIN INFORMATION CONCERNING PARTICIPANTS
Anadarko Petroleum Corporation ("Anadarko") and certain other persons named
below may be deemed to be participants in the solicitation of proxies of
Anadarko's stockholders to approve the issuance of Anadarko's common stock.
6
<PAGE> 9
The participants in this solicitation may include the directors of
Anadarko: Conrad P. Albert, Robert J. Allison, Jr., John N. Seitz, Larry Barcus,
James L. Bryan, Ronald Brown, John R. Butler, Jr., and John R. Gordon; the
following executive officers of Anadarko: Robert J. Allison, Jr., (Chairman and
Chief Executive Officer), John N. Seitz (President and Chief Operating Officer),
Michael E. Rose (Senior Vice President, Finance), Charles G. Manley (Senior Vice
President, Administration) and William D. Sullivan (Vice President,
International Operations); and the following other members of management and
employees of Anadarko: A. Paul Taylor, Jr. (Investor Relations) and James A.
Canino (Public Affairs). As of the date of this communication, none of the
foregoing participants individually beneficially owns in excess of 1.5% of
Anadarko's common stock, or in the aggregate in excess of 4% of Anadarko's
common stock.
Except as disclosed above, to the knowledge of Anadarko, none of the
directors or executive officers of Anadarko or the employees or other
representatives of Anadarko named above, has any interest, direct or indirect,
by security holdings or otherwise in Anadarko.
# # # # # # #
For additional information, contact:
<TABLE>
<CAPTION>
Analysts and Investors: Media:
- ----------------------- ------
<S> <C>
A. Paul Taylor - Anadarko Tony Canino - Anadarko
Phone: 281-874-3471 Phone: 281-873-3855
Patrick Mooney - UPR Dan Sullivan - UPR
Phone: 817-321-7169 Phone: 817-307-6286
David Larson - UPR
Phone: 817-321-7294
</TABLE>
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<PAGE> 10
[ANADARKO PETROLEUM CORPORATION LOGO]
THE NEW ANADARKO
NORTH AMERICAN GAS PRODUCTION
[Bar graph illustrating the following data:
<TABLE>
<CAPTION>
COMPANY GAS PRODUCTION, BCF/YEAR
- ------- ------------------------
<S> <C>
XON/MOB 1,479
BPA 1,082
SHL** 787
BR 699
CHV 669
New APC 634
TX* 550
ARC 540
UPR 464
VRI 401
P 380
UCL* 329
COCa 316
EOG 281
MRO 275
OXY 242
APA 205
DVN 199
KMG 191
APC 170]
</TABLE>
* Data for U.S. only, Canadian data unavailable
** Data for 1998, total North American data for 1999 unavailable
<PAGE> 11
[ANADARKO PETROLEUM CORPORATION LOGO]
THE NEW ANADARKO
NORTH AMERICAN GAS RESERVES
[Bar graph illustrating the following data:
<TABLE>
<CAPTION>
COMPANY PROVED GAS RESERVES, TCF
- ------- ------------------------
<S> <C>
XON/MOB 16.3
BPA* 12.0
BR 7.4
SHL** 7.0
New APC 5.8
ARC 5.2
TX* 4.2
P 3.9
CHV* 3.8
UPR 3.3
VRI 2.7
EOG 2.5
APC 2.5
COCa 2.2
MRO 2.1
DVN 1.9
OXY 1.8
UCL 1.7
APA 1.6
KMG 1.2]
</TABLE>
* Data for U.S. only, Canadian data unavailable
** Data for 1998, total North American data for 1999 unavailable
<PAGE> 12
[ANADARKO PETROLEUM CORPORATION LOGO]
THE NEW
ANADARKO -
NORTH
AMERICAN
GAS ASSETS
[Map of North America showing activity areas and land grant]
<PAGE> 13
[ANADARKO PETROLEUM CORPORATION LOGO]
THE NEW ANADARKO
WORLDWIDE ACTIVITY
[Map of the world highlighting Company's core areas and other activity areas.]
<PAGE> 14
SCHEDULE OF INVESTOR MEETINGS
ANADARKO AND UNION PACIFIC RESOURCES
MONDAY, APRIL 3, 2000 - NEW YORK CITY
9:00 a.m. (EDST) Simulcast Conference Call
St. Regis Dial 913-981-5509
Fontainebleau Room - Second Floor Confirmation: 531722
5th @ 55th Street Replays @ 402-220-6969
New York, NY
TUESDAY, APRIL 4, 2000 - NEW ORLEANS (HOWARD WEIL CONFERENCE)
Presentation Time To Be Announced
Sheraton Hotel
500 Canal Street
New Orleans, LA
WEDNESDAY, APRIL 5, 2000 - BOSTON
9:30 a.m. (EDST)
Four Seasons Hotel
Ballroom, Salon B - Second Floor
200 Boyston Street
Boston, MA
THURSDAY, APRIL 6, 2000 - DENVER
12:30 p.m. (MDST)
Top of the Rockies - Denver Petroleum Club
Bell Creek Room, 37th Floor
555 17th Street
Denver, CO
FOR MORE INFORMATION CALL
281/874-3491
<PAGE> 15
CONFERENCE CALL INSTRUCTIONS:
To participate in the Conference Call:
1) MONDAY, APRIL 3, 2000
2) DIAL 913-981-5509 ABOUT 20 MINUTES PRIOR TO 9:00 A.M. (EST)
3) REFER TO CONFIRMATION #531722, AND YOU WILL BE CONNECTED.
COMPUTER ACCESS TO CONFERENCE CALL
Anadarko will offer graphics during the call that may be viewed on your computer
over the Internet. To view these graphics, please visit Anadarko's home page at
www.anadarko.com. However, you will need to advance them during the call. A
password will be given at the beginning of the call for access to the
presentation materials.
<PAGE> 16
ROAD SHOW SCRIPT
1. APC/UPR LOGOS ON SCREEN
2. APC LOGO -- RJA/TITLE
(Remarks by: RJA Anadarko Chairman &CEO -- Slides #2 through #5)
Welcome and Introductions
This is an exciting day for Anadarko. It's the biggest day in our history since
the spin-off from Panhandle in 1986.
To get started, let me tell you what this merger is about ... and what it's NOT
about.
Today we announce a merger that creates one of the largest independent E&P
Companies in the world in terms of reserves and production, drilling activity
and lease acreage. But this is NOT about "being" the BIGGEST company. It's about
being the BEST company ... in terms of growth and profitability.
By combining the companies, we expect to create some cost savings. But, this
deal is NOT about cost savings. It's about combining two companies with
complementary skills ... complementary portfolios ... complementary strengths.
And forming one company with a common vision. And that vision is growth and
profitability that we can achieve by drilling.
Those of you who know Anadarko, know that we have enjoyed tremendous growth.
We've tripled our reserves in 10 years -- mostly with the drill-bit and not
through acquisitions. And, this deal does NOT mean we've changed our stripes. We
will still be an exploration company. We've looked at a lot of potential
acquisitions, and I never saw a combination I liked better than Anadarko. Until
now.
So, if you are looking for "invest-able" ideas in today's meeting ... here it
is. This merger is about a new Anadarko. One that has ... more assets ... more
financial strength and more growth and profitability. I know that's what
shareholders want. We can ... and we will deliver.
<PAGE> 17
3. SUMMARY FINANCIAL TERMS
By now, you've all read the details of this merger. It's a stock-for-stock
transaction using purchase accounting. We issue .455 Anadarko shares for each
share of UPR. The merger is accretive to Anadarko's earnings and cash flow. We
expect to have shareholder approval and close the transaction in July. Those
details are in the news release.
And, I know you came to this meeting to learn MORE than what's printed in the
news release. One issue is how much we paid per barrel. We look at their
reserves ... and carve out over $1 billion for the value of the minerals ... and
believe we paid just over $6 per Barrel for UPR.
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To give you some other information, today we're going to do two things. First we
will look "backwards" -- at the factors that led both companies to this
decision. Then, we'll look "forward" - and show you the terrific assets that we
will have in NEWCO ... the new Anadarko.
4. THE ROAD TO HERE -- ANADARKO ISSUES (WORD SLIDE)
Let's start with a quick review of the issues that led Anadarko to this
decision.
You know of our long-standing commitment to Exploration. We put together the
best team of energy explorers in the business ...never had a general layoff ...
and gave our people the best technology available. And, we have been very
successful.
Anadarko has discovered more than a dozen giant oil fields in the past 20 years.
We have more than replaced production with new reserves for 18 years in a row --
and, there's not another company in the business that comes close to that
record. Our finding costs are among the lowest in the industry. But when you
have success in exploration, you have to develop what you find. More and more
capital went to get big fields on line as fast as possible. We set out a 5-year
plan to double production from 1997 to 2002.
Meanwhile, our exploration team continued to generate great ideas for drilling.
These were projects we WANTED to drill, but didn't have the funds to drill. I
have often described our situation as: OPPORTUNITY RICH AND CASH FLOW POOR! We
had to "throttle back" on exploration -- and defer prospects. We wanted to "rev"
things up ... not "throttle back" ... because to continue double digit growth
beyond 2002 means that we need to make discoveries NOW! One of the questions
every analyst would ask us was, "HOW ARE YOU GOING TO KEEP ON GROWING PAST
2002?"
Well, this year we begin to turn the corner. We're in the 3rd year of that
5-year plan and our growing production is giving us more revenue and cash flow.
At current strip prices we expect record cash flow this year. We are increasing
our budget -- drilling more wells. We are doing a lot to move forward on our
own. But combined with UPR, we can do even more.
So those are the factors that led us to this decision. We see this merger as a
3-year fast forward for Anadarko. It gives us a broader and more-balanced
portfolio of drilling projects. And, it gives us the cash flow we need to attack
that portfolio. It is "the" company we need to be ... to continue long term
growth.
5. GEORGE LINDAHL III -- UPR CEO
That's a quick summary of Anadarko's thinking. Now, I would like to turn the
program over to George Lindahl, UPR Chairman, President and CEO to say a few
words.
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6. THE ROAD TO HERE - UPR ISSUES
(Remarks by GL -- UPR CEO -- Slides #6 through #10)
Today, I want to share with you some of our thinking about this deal. And tell
you why we think it's a great deal for shareholders of BOTH companies.
Bob talked about getting to this decision from a position of strength and
incredible success with the drillbit. We look at it the same way. First -- look
at UPR's attributes.
We are a leader in drilling and technology. We've drilled ___ wells in the past
____ years. We set the industry standards for horizontal drilling. We help to
develop and perfect geo-steering. We have an excellent track record applying
technology in oil fields and in low-permeability gas reservoirs. And, you're
going to hear more about that in a moment.
We have a terrific asset base. We have a land position unmatched in the
industry. In a moment, you'll see just how well our asset base fits with
Anadarko's. We have experienced and dedicated people. They've demonstrated their
success year after year.
We have strong cash flow. You've heard us predict that cash flow in 2000 will be
$1 billion. But we've been hamstrung with a high debt load. We've lowered costs
and reduced our net debt by $1.8 billion in the last two years ... and that's
great progress. But the fact is we were like Anadarko ... we also had to
"throttle back" and defer drilling on a lot of great prospects in our portfolio.
7. THE NEW ANADARKO
We like the "new" Anadarko because we put together two companies with
complementary assets and complementary strengths. We create a capital structure
that will let us drill more wells and accelerate growth. Both companies come to
this merger with a common vision -- to grow with the drill-bit and build value
for shareholders.
On behalf of all the UPR employees and management, I can tell you we like this
deal and we look forward to being a part of the new Anadarko. And we expect
great things from this new company.
That completes the "background" part of today's meeting. We felt that you needed
to know the thinking that brought us to today's announcement. The rest of the
presentation will look to the future and look at NEWCO -- the Company we are
creating today.
The first issue to point out is the significant exposure we will have to the
North American gas story.
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<PAGE> 20
8. APC/UPR NORTH AMERICAN NATURAL GAS ASSETS
Here's a map showing the largest gas producing basins of North America. These
basins account for 90% of total U.S. gas supply.
I'm sure all of you are aware that gas demand is growing -- particularly in the
power generation sector -- and supplies are falling because of the industry's
lack of drilling. The NYMEX "strip" is within pennies of averaging $3/Mcf for
the next 12 months. We plan to be a big part of the natural gas "story." Just
how big is shown on the next two slides.
9. THE "NEW" ANADARKO - RANK IN 1999 NORTH AMERICAN GAS PRODUCTION
Here's a list of companies ranked by 1999 production. You can see that the
combined company would be the 6th largest natural gas producer in North America.
This year the combined gas production would be about 1.7 Bcf/day and we expect
higher levels next year. You can see we are one of the biggest independent
producers -- right up there with the majors -- and, we expect to stay there a
long time.
10. THE "NEW" ANADARKO - RANK IN 1999 NORTH AMERICAN GAS RESERVES
Here's the same comparison done on the basis of gas reserves. You can see the
combined company would rank 5th in that group with a total of 5.8 Tcf of proved
reserves. We start out among the largest companies -- ahead of some majors. But,
we expect to move up.
When we put these two companies together, we identified prospects on our lease
acreage that we could start drilling right away ... prospects that would
increase gas production and reserves. If you add up the resource potential for
the combined companies on our existing leases -- the potential reserves are 48
Tcf of gas! We are serious when we say we expect to be a major player in the
North American gas story!
That concludes my part of the program. We are excited about the future for the
"new" Anadarko. Now, I'll turn the podium back over to Bob to look at some more
details out the new Anadarko.
11. PROFILE OF THE "NEW" ANADARKO (Production-Reserves-Financial-Portfolio)
(Remarks by RJA -- Slides #10 through #15)
In the next few minutes we will show you what the "new" Anadarko looks like from
the standpoint of reserves, production, financial data. Then John Seitz will
take you through the exploration and development-drilling portfolio. We'll start
with Production.
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<PAGE> 21
12. THE "NEW" ANADARKO -- OIL & GAS PRODUCTION BY REGION
This slide shows the various sources of production for the "new" Anadarko. You
can see how much production comes from the US and Canada and so forth. We like
this production portfolio because it gives us better balance. But no single area
has that big an effect on production or performance.
13. THE "NEW" ANADARKO -- OIL & GAS RESERVES BY REGION
Now, look at the mix of oil and gas reserves. Again, you see a nice blend of
balance and diversity. We like the balance between North America reserves (about
80% of the mix) and international reserves (about 20%). We see an even balance
- -- 50:50 -- between crude oil and natural gas.
14. THE "NEW" ANADARKO - FINANCIAL
That's a quick look at the Reserves and Production of the combined companies.
Now let's look at some of the important financial issues of the new company.
15. THE "NEW" ANADARKO - FINANCIAL PROFILE
There are several issues to mention here. One is earnings -- we expect to have
competitive cost structure ... and the merger is accretive to earnings, even
with purchase accounting.
Another important issue to mention is cash flow, and the growth we expect in
cash flow in future years. Start with last year ... IF the companies were
combined for the year 2000, cash flow would be about $1.8 billion or about $7.50
per share. For the year 2001, given the current outlook for commodity prices,
the combined cash flow would be about $2 billion or about $9.00 per share.
Another important issue is the balance sheet, which will be considerably
stronger than either company had individually. On a pro-forma consolidated basis
as of year-end 1999, the combined companies would have total capitalization of
$10 billion, comprised of $5.9 billion of equity and $4.1 billion of debt. The
debt-to-capitalization ratio would be 41:59. The average maturity life of that
debt is 21 years and the average annual interest rate would be 7.11%.
The bottom line on financial issues is this: the combined companies will have
the cash flow and the financial strength to aggressively fund the opportunities
we have in our portfolio.
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16. THE "NEW" ANADARKO - ASSET PORTFOLIO
Finally, let's move on to take a look at the portfolio of exploration and
development drilling opportunities that we create with this merger. I think it's
fantastic. This portfolio is the KEY to the whole deal ... because what we can
do with this set of prospects will generate growth and profitability for years
to come. And to talk about those projects, we have John Seitz, President and
Chief Operating Officer of Anadarko.
17. JOHN SEITZ -- PRESIDENT AND COO - APC
(Remarks by JNS -- Slides #17 through #28)
Thanks Bob. I want to echo the comments of Bob and George and say that we are
very excited about the "new" Anadarko. I'm going to show you some of the
projects that cause all this excitement.
Most of you know that we run our exploration and development projects at
Anadarko like a stock portfolio. We apply the same principles you use -- things
like ... relative weighting ... portfolio theory ... option theory ... and I
think that's one reason for Anadarko's consistent success, year in and year out.
I mention that because I love this new portfolio. I like it even better than the
old portfolio.
My staff put these exhibits together in only a few days. But I think when you
see it ... you'll agree with me: the "new Anadarko has great assets and great
opportunities. And, as Bob said earlier, NOW we've got the cash flow to get the
job done.
18. KEY FACTORS FOR SUCCESS (People, Skill Sets, Access & Critical Mass)
I want you to look at the new portfolio with these 4 issues in mind. I mention
them because, I believe, they are the critical issues for success for E&P
companies. These are the issues that the other companies must come to grips
with, if they are going to compete with us. Plus, if you analyze this merger ...
with these 4 issues in mind ... I think you'll see that on every single issue we
are a stronger company AFTER the merger than before.
One is PEOPLE. Most companies laid off their senior and most experienced
explorers and they don't have the talent "in-house" to launch a major
development drilling campaign or a large-scale exploration program. Bob
mentioned that we kept our people. And, with this merger, I think we'll have the
best team of geologists and engineers in the industry!
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The second issue is SKILL SETS. This is both a "people" issue and a "technology"
issue. Both companies have good people. But more important than that, is the
fact that both companies have "mastered" the technology. Whether you're talking
about: exploration or development ... whether it's tough seismic imaging
problems ...or horizontal drilling ...or micro-fractures in low-permeability gas
reservoirs. Whatever the issue ... we've got people who know how to apply
today's technology. We've got a track record from day one. The two companies
complement each other in so many ways. I think we're putting together two of the
best.
The third issue is ACCESS. You've heard me talk about this issue before. I
contend that it's EASY to find oil and gas ... but it's HARD to make money at
it. There are simply fewer and fewer places in the world to find hydrocarbons
and make the kind of economic returns that shareholders demand. This merger
gives is more opportunity ... and a broader portfolio of projects to choose from
... for years to come.
The last issue to mention is CRITICAL MASS. By that I mean, focus your efforts
on a few key basins or play areas where you are big enough to control your own
destiny. If you don't have the right scale ... you can find yourself at the
mercy of an operator who has different priorities than you do. Your margins get
squeezed ... returns get lower. With this portfolio, we have the right scale in
more basins around the world.
So keep those four issues in mind as we look at the "new" portfolio.
19. SEVEN "CORE" AREAS FOR THE "NEW" ANADARKO
(Algeria, Latin America, Canada/Alaska, Land-grant, Mid-Continent;
Texas/Louisiana and Gulf of Mexico)
Here's a list of the seven core areas in the "new" portfolio. They range from
the burning sands of the Sahara Desert to the frozen Tundra on the North Slope
- -- from the Gulf of Mexico to the Rocky Mountains. It is a fabulous opportunity
set.
Let me tell you how good it is. In these basins, on our combined acreage, we
have identified exploration, exploitation and development opportunity that could
add 15 Billion barrels (BOE) of potential reserves. That's an un-risked number
... and it will take us several years to drill up the inventory; but that's the
level of opportunity we're looking at. The "new Anadarko will have proved
reserves of nearly 2 billion barrels ... and a prospect inventory that's seven
times larger than the current assets.
Let's look at each area in more detail.
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20. NORTH AFRICA
One core area is North Africa where we are developing 12 oil fields. We have one
production train operating today and two more under construction. We expect to
begin construction later this year on another production facility at the ORD
field. Net production for Anadarko was about 6 MM barrels in 1999 and will grow
to more than 25 MM barrels in the next few years. The project has excellent
margins. And, we're just beginning to chase the play to the northeast into
Tunisia and will drill our first well on that trend acreage this year.
21. LATIN AMERICA MAP
Another core area will be South and Central America. We have projects in
Venezuela, Guatemala, Brazil and Argentina. The largest project and the
cornerstone of this area is our 45% interest in the Ortupano-Leona Block in
Venezuela -- which is currently producing 40,000 barrels per day and we expect
production to double over 5-6 years. In Guatemala, current production is 20,000
B/d with lots of room to grow. UPR was one of the first companies to operate in
Argentina and they have excellent relations with Petrobras. We have a start-up
project in Brazil (SES-107).
All of these projects have favorable fiscal terms. All of them have potential
for reserves and production growth. But, most importantly, these projects are
making enough money to fund additional exploration and development investments
in the area. It's a nice part of the portfolio.
22. CANADA & ALASKA
This next map is an interesting view of the "north" country showing where Alaska
stands in relation to Canada. We haven't come up with a clever name for this
"core" holding -- because it's so big. We have both gas and oil projects. We
have exploration ... exploitation and development projects. It's both foreign
and domestic.
In Alaska, we are developing a gas discovery in the Cook Inlet, and a giant oil
field on the North Slope. Alpine should go on production this fall at 40,000 B/d
(gross). Anadarko has access to more exploration acreage in the state than any
other company. We hold interests in 12 exploration prospects with NET reserve
potential to Anadarko of 3 billion barrels. We started drilling the first
prospects last month -- and have two rigs running today.
In Canada, we have a new leasehold position in the Western Basins and to the
north in the McKenzie Delta/Beaufort Sea area. Canada has huge potential
reserves. On our leased acreage we have already identified 58 potential projects
with 290 MM Bbls of potential. Our Canadian cash flow is about $300 MM per year,
and we can use those funds to aggressively drill and compete for new
opportunities.
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23. NORTH AMERICAN GAS ASSETS
Now we're moving south into the Lower 48 and I want to show this map again to
emphasize that a lot of the holdings we have in the states are in "gas" prone
areas. Please pay particular attention to the area shown in yellow. It's called
the land grant or the strip. It's every odd section, 20 miles either side of the
railroad tracks. It's a great asset. We own mineral rights on 7.5-MM fee acres
... royalty free ... forever.
Over 1 Billion BOE has been produced to date. There have been 7 giant fields
discovered. And, the whole land-grant area is less than 10% developed. In
addition to oil and gas it hold giant deposits of minerals - such a trona and
coal. And, because we own it forever, it's worth a boatload of money. Right now,
we see 2 basic "core" areas along the strip.
24. LAND-GRANT -- WYOMING-UTAH
One of the richest parts of the "strip" sits in Southern Wyoming and UPR. This
map shows 4.5 MM acres in the heart of the prolific Green River Basin and the
Over-Thrust belt. These areas have already produced several Tcf of gas and the
remaining resource potential estimated by the USGS puts the mean remaining
recoverable reserves at about 24 Tcf! And that's NET to the "strip" land.
We see a great mix of plays. There's exploitation drilling we can do in Coalbed
Methane ... and in the Wamsutter Field. There is exploration potential in plays
like Basin-center gas ... horizontal drilling ... complex structural and shallow
coal-bed methane plays. This area has long-term, multi-pay potential where we
can use the combined strengths of both companies to grow reserves and
production.
One great thing about the strip comes from owning 7.5 million acres royalty
free. What an asset! As a practical matter, other operators have a tough time
matching our economic returns.
25. MID-CONTINENT
The other core area of activity for the "new" Anadarko is on the eastern end of
the land grant in Colorado. On the map you can see Anadarko's extensive acreage
position in southwest Kansas. We hold a big position "shallow" in the Hugoton
gas field ... but we've been the most active operator drilling "deep" wells
looking for both oil and gas in zones such as the Chester, the Morrow, the St
Louis and so forth. In the past 5 years, we've drilled 400 wells and found about
20 MM barrels per year at very low finding costs.
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These same channel sands exist just across the state line into Colorado. We
intend to aggressively chase the 80 prospects we have already identified. In
this area, field sizes range from 1 to 40 MM barrels. Dry hole costs are about
$100,000. This is exploration, but with our proven track record using 3-D
seismic to find channel sands in Kansas, we like our chances with the same kind
of play in Colorado. We intend to expand on this legacy asset.
26. TEXAS/LOUISIANA
Moving farther south, this next map shows some of our holdings in Texas ... and
that part of Texas located just across the Sabine (sah'-beeen) River in
Louisiana. This is a great concentration of assets ... both oil and gas ... both
exploitation and exploration.
One asset that stands out is the Austin Chalk, which surprisingly accounts for
less than 5% of the combined companies' reserves. The chalk will continue to
generate cash and attractive drilling projects. At Anadarko, we've been looking
for a long time at the exploration potential "below" the chalk, but we couldn't
get a big enough land position to try the play. It is virtually untested and NOW
we hold 750,000 acres of prime real estate in the heart of this play.
The Bossier Play has been a great one for Anadarko. Three years ago, our
production was just 2 Bcf per year and three years from now production could hit
90 Bcf per year. It appears to be a "basin-center" type gas play, with lots of
running room. We have 19 rigs running now and expect to ramp up throughout the
year.
27. GULF OF MEXICO
On this map you see that the combined companies will be one of the largest
players the Gulf of Mexico. The "new" Anadarko will hold interests in 390
blocks. But the important thing is we have the cash flow to accelerate drilling
activity in the Gulf. Plus we have the drilling expertise to get wells drilled
quicker and for less money than ever before. The recent Hickory example proved
that. We have a great acreage position in 3 plays:
The first play would be "conventional" projects -- these are usually new wells
drilled from existing platforms with new seismic data. They could be
re-completions or work-over projects. They usually have short cycle times and
because of the existing infrastructure we can get on production within a year.
The second example is sub-salt exploration. We now hold 25 sub-salt exploration
projects with potential reserves of over 1 billion barrels. We expect to drill 4
or 5 wells this year in the play ... starting with Hickory (which is drilling
now) and Tanzanite (which should spud in a few weeks). These are projects that
can be brought on production about two years from discovery.
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The last example is deep-water exploration. We now hold 26 deep-water
exploration prospects with potential reserves of 2 billion barrels (net
un-risked). Most of our prospects and most of the industry activity in the
deep-water is related to salt -- and we have more experience in the sub-salt
play than any other company. The first of these (Marco Polo) is currently
drilling @ 7000 feet.
28. THE "NEW" ANADARKO -- WORLDWIDE ACTIVITY MAP
This last map is just a summary of the prior maps. It shows ALL the projects in
the worldwide portfolio -- not just the seven core areas. The key to long term
success is having enough options in the portfolio, and having the capital to
test those projects. This merger gives us both.
That concludes my portion of the program. Now, I'll turn it back over to Bob
Allison for closing remarks.
29. APC LOGO
We like this deal. We will have more capital and more talented people, so we can
immediately go to work finding new reserves of oil and gas. It guarantees us
access to more opportunities and a more-balanced portfolio of prospects. We've
got the best people in the business. We know how to use the best technology in
the business. And, we expect to generate impressive growth and returns for our
shareholders.
Thank you for your interest in Anadarko. And, now we will be happy to answer any
questions you may have.
30. FORWARD LOOKING STATEMENT LANGUAGE
Question & Answer Session
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All stockholders should read the proxy statement/prospectus concerning the
merger that will be filed with the SEC and mailed to stockholders. The proxy
statement/prospectus will contain important information that stockholders should
consider before making any decision regarding the merger. You will be able to
obtain the proxy statement/prospectus, as well as other filings containing
information about Anadarko Petroleum Corporation and Union Pacific Resources
Group Inc., without charge, at the SEC's Internet site (http://www.sec.gov).
Copies of the proxy statement/prospectus and the SEC filings that will be
incorporated by reference in the proxy statement/prospectus can also be
obtained, without charge, from the Corporate Secretary of the appropriate
company. Information regarding the participants in the solicitation and a
description of their direct or indirect interests, by security holdings or
otherwise, is contained in Anadarko Petroleum Corporation's filing of its press
release with the SEC under Rule 425 on April 3, 2000.
