ITEM 3. LEGAL PROCEEDINGS
The Partnership is involved in a number of legal and administrative proceedings arising in the ordinary course of its oil and gas business. Although the ultimate outcome of these proceedings cannot be ascertained at this time, it is reasonably possible that some of the proceedings could be resolved unfavorably to the Partnership. Management of the Company believes that any liabilities which may arise would not be material in relation to the financial position of the Partnership at December 31, 1993. The Company intends to maintain liability and other insurance for the Partnership of the type customary in the oil and gas business with such coverage limits as the Company deems prudent.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS
The depositary units of Sun Energy Partners, L.P. are traded on the New York Stock Exchange, Inc. The following table sets forth the high and low sales prices per unit, as reported on the New York Stock Exchange Composite Transactions quotations, for the periods indicated:
The Partnership had approximately 3,074 holders of record of depositary units as of February 28, 1994.
During 1993 and 1992, the quarterly cash distributions per unit paid to unitholders were as follows:
The first quarterly cash distribution for 1994 in the amount of $.08 per unit was paid in March 1994. Future quarterly cash distributions to unitholders are expected to be paid on or about the 10th day of March, June, September and December in each year. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Cash Distribution Policy.")
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the Partnership's financial position and results of operations follows. This discussion should be read in conjunction with the Consolidated Financial Statements and Selected Financial Data included in this report.
BUSINESS CLIMATE
The Partnership's production is approximately 60 percent gas and 40 percent oil on an equivalent basis. The fundamentals in the U.S. gas market are better today than they have been since the mid 1980's. Excess deliverability is no longer a problem due to solid growth in demand and reduced supply, although oil prices have constrained the upward movement of gas prices. The Partnership's realized gas price in 1993 was $1.96 per mcf or 14 percent higher than the $1.72 per mcf realized in 1992.
The fundamentals in worldwide oil markets continue to reflect an excess of supply over demand. OPEC members have not restrained their production in a weak global economy and prices have fallen to five-year lows. The Partnership's realized oil price in 1993 fell by $2.55 per barrel to $15.96 per barrel, or 14 percent less than the 1992 price. The crude price in the fourth quarter of 1993 was $5.59 per barrel lower than the fourth quarter of 1992. Prices in early 1994 have not shown any significant improvement from levels realized in late 1993.
RESULTS OF OPERATIONS
The Partnership's net income in 1993 was $44 million, or $.11 per unit, as compared to net income of $120 million, or $.29 per unit, in 1992 and net income of $114 million, or $.28 per unit in 1991.
Lower net income in 1993 as compared to 1992 was caused by lower production volumes and a lower average oil price partially offset by a higher average price for gas and lower costs and expenses. Additionally, results for 1992 include $115 million in gains from the sale of assets while results for 1993 include $7 million in losses from asset disposals. Oil volumes were 13 percent lower and gas volumes were 11 percent lower in 1993 resulting from divestments of producing properties in 1992. The Partnership's hedging activities decreased the overall price it received by $.09 per mcf of gas in 1993 and by $.06 per barrel of oil and $.02 per mcf in 1992. Total costs and expenses decreased $185 million or 23 percent to $632 million in 1993 from $817 million in 1992. The Partnership is continuing to review its cost structure in an effort to further reduce costs at all levels.
The improvement in net income for 1992 as compared to 1991 is reflective of a $148 million decrease in costs and expenses, substantially offset by a $142 million decrease in total revenues. The decrease in costs and expenses was driven by the cost cutting provisions of the restructuring which began in 1991, but were partially offset by a $62 million provision recognized in 1992 for the early relinquishment of non-producing properties. The decrease in total revenues was comprised of a $146 million, or 16 percent, decrease in oil and gas revenues, partially offset by a $4 million increase in other revenues. The decrease in oil and gas revenues is reflective of a 13 percent decline in volumes, due to asset sales and normal declines, and continued price volatility. The increase in other revenues is essentially comprised of a $40 million increase in gains on sales of assets, partially offset by a $27 million decrease in gas plant margins caused by the sale of substantially all of the Partnership's gas processing plants.
Average net production of oil in 1993 was 55 thousand barrels daily, or 13 percent lower than the average net production in 1992 of 63 thousand barrels daily. The average price received for the Partnership's oil production in 1993 was $15.96 per barrel, representing a 14 percent decrease from the 1992 average price of $18.51.
Average net production of oil in 1992 was 63 thousand barrels daily, or 16 percent lower than average net production in 1991 of 75 thousand barrels daily. The average price received for the Partnership's oil production in 1992 was $18.51 per barrel, representing a 11 percent decrease from the 1991 average price of $20.88.
Average net production of gas in 1993 was 517 million cubic feet daily, or 11 percent lower than average net production for 1992 of 578 million cubic feet daily. The Partnership received an average price of $1.96 per thousand cubic feet for its gas production in 1993 compared to an average price of $1.72 per thousand cubic feet in 1992, representing a 14 percent increase.
Average net production of gas in 1992 was 578 million cubic feet daily, or 10 percent lower than average net production of 644 for 1991. The average price received for the Partnership's gas production in 1992 was $1.72 per thousand cubic feet compared to $1.55 per thousand cubic feet in 1991, representing an 11 percent increase.
LIQUIDITY AND CAPITAL RESOURCES
In 1991, cash flow from operating activities decreased $102 million compared to 1990 primarily due to lower oil prices offset by favorable increases in working capital components. Investing activities provided $371 million more cash and cash equivalents in 1991 largely due to a $325 million increase in divestment proceeds and a $52 million reduction in capital expenditures. In 1991, financing activities used $725 million more cash and cash equivalents due to an increase in debt repayments of $547 million and a reduction in the sale of limited partnership units of $163 million.
In 1992, cash flow from operating activities decreased $208 million compared to 1991 primarily due to lower sales volumes and oil prices, and reductions in current liabilities, offset in part by an increase in gas prices and reductions in costs and expenses. Cash flow provided from investing activities declined by $28 million, reflecting a $258 million decrease in proceeds from divestments, partially offset by a $206 million decrease in capital expenditures. Cash flow used for financing activities decreased by $445 million in 1992, principally reflective of declines of $361 million and $175 million in cash used for repayments of long-term debt and cash distributions paid to unitholders, offset in part by a $101 million decrease in cash flow provided from the sale of limited partnership units.
In 1993, cash flow from operating activities increased $68 million from 1992 primarily due to favorable increases in cash from working capital components, a higher average price for gas and lower costs and expenses partially offset by lower production volumes and a lower average price for oil. Cash flow from investing activities used $148 million in 1993 compared to providing $252 million in 1992. Proceeds from divestments were $298 million lower in 1993 while capital expenditures increased by $99 million. Cash flow used for financing activities decreased by $305 million in 1993 primarily because of the repayment of $239 million in long-term debt in 1992 compared to repayment of $19 million in 1993.
In the fourth quarter of 1993, the Company's Board of Directors elected to change its investment policy concerning ownership of the Partnership. Effective in 1994, the policy of distributing all cash to unitholders and then selling newly issued Partnership units to the Company to fund capital outlays was changed. The Partnership now funds its capital outlays from internally generated funds and makes distributions of only that cash remaining after such outlays.
The Partnership's spending levels will be governed by its cash flow from operating activities which will continue to be affected by prevailing oil and gas prices, cost levels and production volumes. A shortfall in expected cash flow from operating activities may require adjustment of the business plans. Options include deferral of discretionary capital expenditures and the sale of Partnership units. The Partnership's long-term cash generation capability is ultimately tied to the value of its proved reserve base.
RESERVE REPLACEMENT
The ability to sustain cash flow is dependent, among other things, on the level of the Partnership's oil and gas reserves, oil and gas prices and cost containment. Replacement of proved reserves through extensions and discoveries, improved recovery, purchases and revisions to prior reserve estimates in 1993 was 74 percent of liquids production and 93 percent of gas production. Reserve replacement rates of liquids and gas were 17 and 68 percent in 1992 and 79 and 81 percent in 1991.
ENVIRONMENTAL
The Partnership's oil and gas operations are subject to stringent environmental regulations. The Company is dedicated to the preservation of the environment and has committed significant resources
to comply with such regulations. Although the Partnership has been named as a potentially responsible party at sites related to past operations, the Company believes the Partnership is in general compliance with applicable governmental regulations and that the potential costs to it, in the aggregate, are not material to its financial condition. However, risks of substantial costs and liabilities are inherent in the oil and gas business. Should other developments occur, such as increasingly strict environmental laws, regulations and enforcement policies or claims for damages resulting from the Partnership's operations, they could result in additional costs and liabilities in the future. See Note 12 to the Consolidated Financial Statements.
CASH DISTRIBUTION POLICY
In the fourth quarter of 1993, the Company's Board of Directors elected to change the Company's investment policy concerning purchase of additional Partnership units. Effective in 1994, the Company will no longer routinely purchase newly issued Partnership units to fund capital outlays. As a result, the Partnership now funds its capital outlays from internally generated funds and make distributions of only that cash remaining after such outlays. The newly adopted policy will reduce the cash paid to unitholders, but will also end the ownership dilution caused by the issuance of additional units.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION AND FINANCIAL STATEMENT SCHEDULES
SUN ENERGY PARTNERS, L.P. REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Energy Partners, L.P. and the Board of Directors of Oryx Energy Company:
We have audited the consolidated balance sheets of Sun Energy Partners, L.P. and its Subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of Oryx Energy Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sun Energy Partners, L.P. and its Subsidiaries as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Dallas, Texas February 19, 1994
SUN ENERGY PARTNERS, L.P CONSOLIDATED STATEMENTS OF INCOME (MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
(See Accompanying Notes)
SUN ENERGY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (MILLIONS OF DOLLARS)
ASSETS
(See Accompanying Notes)
SUN ENERGY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (MILLIONS OF DOLLARS)
(See Accompanying Notes)
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CONTROL
Sun Energy Partners, L.P. (Sun Energy Partners), a Delaware limited partnership, was formed on October 1, 1985 and prior to December 1, 1985 had no operations and nominal assets and equity. Effective as of December 1, 1985, Sun Energy Partners succeeded to all the domestic oil and gas operations of Oryx Energy Company and certain of its affiliates (collectively, the Company). These operations consist of the exploration and development of oil and natural gas reserves in the United States.
Sun Energy Partners is controlled by the Company, which is the managing general partner. As of December 31, 1993, the Company had a partnership interest of 98 percent in Sun Energy Partners. The remaining two percent limited partnership interest is held by public unitholders in the form of depositary units. Eighty-five percent of the Company's Board of Directors must approve any additional issuance, sale or transfer of units which would reduce the Company's holdings in Sun Energy Partners below eighty-five percent.
Sun Energy Partners operates through Sun Operating Limited Partnership, a Delaware limited partnership, and several other operating partnerships (collectively, the Operating Partnerships). In all of the partnerships which comprise the Operating Partnerships, Sun Energy Partners holds a 99 percent interest as the sole limited partner, while the Company holds a one percent interest as the managing general partner.
Sun Energy Partners and the Operating Partnerships (collectively, the Partnership) have no officers or employees. The officers and employees of the Company perform all management functions.
BASIS OF PRESENTATION
The Partnership's consolidated financial statements have been prepared using the proportionate method of consolidation for Sun Energy Partners and its 99 percent interest in the Operating Partnerships. Such financial statements are prepared in accordance with generally accepted accounting principles which is different from the basis used for reporting taxable income or loss to unitholders.
CASH AND SHORT-TERM INVESTMENTS
The Partnership considers highly liquid investments with original maturities of less than three months to be cash equivalents. Cash equivalents are stated at cost which approximates market value.
PROPERTIES, PLANTS AND EQUIPMENT
The successful efforts method of accounting is followed for costs incurred in oil and gas operations.
CAPITALIZATION POLICY. Acquisition costs are capitalized when incurred. Costs of unproved properties are transferred to proved properties when proved reserves are added. Exploration costs, including geological and geophysical costs and costs of carrying unproved properties, are charged against income as incurred. Exploratory drilling costs are capitalized initially; however, if it is determined that an exploratory well did not find proved reserves, such capitalized costs are charged to expense, as dry hole costs, at that time. Development costs are capitalized. Costs incurred to operate and maintain wells and equipment are expensed.
LEASEHOLD IMPAIRMENT AND DEPRECIATION, DEPLETION AND AMORTIZATION. Periodic valuation provisions for impairment of capitalized costs of unproved properties are expensed.
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The acquisition costs of proved properties are depleted by the unit-of-production method based on proved reserves by field. Capitalized exploratory drilling costs which result in the addition of proved reserves and development costs are amortized by the unit-of-production method based on proved developed reserves by field.
DISMANTLEMENT, RESTORATION AND ABANDONMENT COSTS. Estimated costs of future dismantlement, restoration and abandonment are accrued as a component of depreciation, depletion and amortization expense; actual costs are charged to the accrual.
RETIREMENTS. Gains and losses on the disposals of fixed assets are generally reflected in income. For certain property groups, the cost less salvage value of property sold or abandoned is charged to accumulated depreciation, depletion and amortization except that gains and losses for these groups are taken into income for unusual retirements or retirements involving an entire property group.
CAPITALIZED INTEREST
The Partnership capitalizes interest costs incurred as a result of the acquisition and installation of significant assets.
INCOME TAXES
The Operating Partnerships and Sun Energy Partners are treated as partnerships for income tax purposes and, as a result, income or loss of the Partnership is includable in the tax returns of the individual unitholders. Accordingly, no recognition has been given to income taxes in the financial statements.
At December 31, 1993, 1992 and 1991, the Partnership's financial reporting bases of assets and liabilities exceeded the tax bases of its assets and liabilities (net temporary differences) by $1,049 million, $1,077 million and $1,121 million.
CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents includes cash, highly liquid investments with remaining maturities of less than three months (see "Cash and Short-Term Investments", above) and advances to/from affiliate.
Associated with the sale of the Midway-Sunset Field and related facilities in 1991, the purchaser assumed $53 million of Partnership debt. In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," non-cash transactions are not reflected within the accompanying Consolidated Statements of Cash Flows (see Note 3 to the Consolidated Financial Statements). Interest paid totaled $13 million, $45 million and $57 million in 1993, 1992 and 1991.
SALES OF OIL AND GAS
Sales of oil and gas are recorded on the entitlement method. Differences between actual production and entitlements result in amounts due when underproduction occurs and amounts owed when overproduction occurs.
During 1993, sales of oil to the Partnership's top two purchasers totaled approximately 21 and 16 percent of oil revenue. During 1992, sales of oil to the Partnership's top purchasers totaled approximately 13, 11 and 10 percent. During 1993 and 1992, no individual customer accounted for more than 5 percent of the Partnership's gas sales. The Partnership believes that the loss of any major purchaser would not have a material adverse effect on its business.
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FINANCIAL INSTRUMENTS
The difference between the values calculated as prescribed by Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial Instruments," of the Partnership's financial instruments and their carrying value is not material.
FUTURES TRADING ACTIVITY
The Partnership, from time to time, enters into futures contracts to hedge the impact of price fluctuations on crude and natural gas production. Futures trading activity decreased oil and gas revenue by $17 million in 1993 and $7 million in 1992. At December 31, 1993, the Partnership had hedged about 30 percent of its gas production at an average floor of $2.04 per mmbtu and an average ceiling of $2.28 per mmbtu.
ENVIRONMENTAL COSTS
The Partnership establishes reserves for environmental liabilities as such liabilities are incurred (Note 12).
CEILING TESTS
For ceiling test purposes, the Partnership compares its undiscounted standardized measure of future net cash flows from estimated production of proved oil and gas reserves to its net properties, plants and equipment related to oil and gas operations.
STATEMENT PRESENTATION
Certain items in years prior to 1993 have been reclassified to conform to the 1993 presentation.
2) RELATED PARTY TRANSACTIONS
ADVANCES TO/FROM AFFILIATE
The Company has served as the Partnership's lender and borrower of funds and a clearing-house for the settlement of intercompany receivables and payables. Deposits earn interest at a rate equal to the rate paid by a major money market fund. Demand loans bear interest at a rate based on the prime rate.
LONG-TERM DEBT DUE AFFILIATE
The Partnership is indebted to the Company under a 9.75% note due 1994-2001. In 1992 and 1991 the Partnership prepaid $213 million and $575 million of such debt from proceeds of asset sales (see Note 8 to the Consolidated Financial Statements).
DIRECT AND INDIRECT COSTS
The Company is reimbursed by the Partnership for all direct costs incurred in performing management functions and indirect costs (including payroll and payroll related costs and the cost of postemployment benefits and management incentive plans) allocable to the Partnership. The full cost of direct and indirect costs incurred on behalf of the Partnership by the Company is allocated to the Partnership based on services rendered and extent of use. Such costs, which are charged principally to production cost, exploration cost and general and administrative expense, totaled $104 million, $127 million and $176 million for the years 1993, 1992 and 1991. The Company does not receive any carried interests, promotions, back-ins or other similar compensation as the general partner of the Partnership.
INTEREST INCOME
Interest income received from the Company, which is reflected in other income in the consolidated statements of income, was earned on advances to the Company and totaled $5 million, $9 million and $11 million during the years 1993, 1992 and 1991.
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2) RELATED PARTY TRANSACTIONS (CONTINUED) INTEREST COST
Interest cost paid to the Company, which is included in interest and debt expense in the consolidated statements of income, was primarily incurred on long-term debt due the Company and totaled $12 million, $43 million and $55 million during the years 1993, 1992 and 1991 (see Note 8 to the Consolidated Financial Statements).
3) CHANGES IN BUSINESS Effective January 31, 1991, the Partnership sold its interest in the Midway-Sunset Field producing oil and gas assets and a steam cogeneration facility. Net proceeds of $529 million from the sale, including $53 million of debt assumed by the purchaser, were used to fund capital expenditures and prepay $575 million of debt.
In 1991, the Company commenced a major restructuring program (Restructuring) to reduce the Company's and Partnership's cost structures. The program outlined a plan to sell substantially all of the Partnership's gas plant business (Note 4) and certain onshore producing oil and gas properties.
Associated with the Restructuring, the Partnership recognized a $62 million provision for the early relinquishment of certain non-producing properties in 1992. At December 31, 1992, the asset disposal program was substantially complete although from time to time the Partnership will have divestments. In 1993, the Partnership completed asset disposals that generated $59 million in proceeds and generated a loss of $7 million.
4) OTHER REVENUES The components of other revenues were as follows:
5) PRODUCTION TAXES Production taxes consisted of the following:
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6) PROPERTIES, PLANTS AND EQUIPMENT At December 31, the Partnership's properties, plants and equipment and accumulated depreciation, depletion and amortization were as follows:
7) ACCRUED LIABILITIES At December 31, the Partnership's accrued liabilities were comprised of the following:
8) LONG-TERM DEBT At December 31, the Partnership's long-term debt consisted of the following:
Under the Partnership's existing capitalized lease and other long-term debt obligations, the Partnership is obligated to make annual payments of $5 million, $2 million and $2 million in 1994, 1995 and 1996.
Repayment obligations under the Partnership's long-term debt due affiliate are $9 million, $10 million, $11 million, $12 million and $13 million in 1994, 1995, 1996, 1997 and 1998.
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9) COMMITMENTS AND CONTINGENT LIABILITIES The Partnership has operating leases for property and equipment. Total rental expense for such leases for the years 1993, 1992 and 1991 was $28 million, $28 million and $38 million. Under contracts existing as of December 31, 1993, future minimum annual rentals applicable to noncancellable operating leases that have initial or remaining lease terms in excess of one year were as follows (in millions of dollars):
Several legal and administrative proceedings are pending against the Partnership. Although the ultimate outcome of these proceedings cannot be ascertained at this time, and it is reasonably possible that some of them could be resolved unfavorably to the Partnership, management believes that any liabilities which may arise would not be material in relation to the financial position of the Partnership at December 31, 1993.
10) PARTNERS' CAPITAL
11) CASH DISTRIBUTIONS Beginning with the fourth quarter 1993, Distributable Cash will be reduced by the cash needed for capital outlays. This policy change will reduce the cash paid to unitholders but will eliminate the ongoing ownership dilution faced by unitholders due to Oryx Energy's purchase of newly issued partnership units to fund Sun Energy's capital outlays. Distributable Cash is defined as revenues (including interest income) less production cost; seismic, geological and geophysical costs (including related costs); payments of principal and interest on debt; general and administrative expenses including reimbursements of the Company as managing general partner; adjustments for capital
SUN ENERGY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11) CASH DISTRIBUTIONS (CONTINUED) expenditures (net of proceeds from divestments); and cash exploration costs. No deduction will be made for depreciation, depletion and amortization, for property acquisition and development expenditures.
Sun Energy Partners' quarterly cash distributions per unit for the years 1993, 1992 and 1991 were as follows:
12) DEFERRED CREDITS AND OTHER LIABILITIES
At December 31, the Partnership's deferred credits and other liabilities were comprised of the following:
Environmental cleanup costs have been accrued in response to the identification of several sites that require cleanup based on environmental pollution, some of which have been designated as superfund sites by the Environmental Protection Agency (EPA). The Partnership has been designated as a Potentially Responsible Party (PRP) at a site in southern California where the EPA is requiring the PRP's to undertake remediation of the site in several phases. The Partnership is a member of the group that is responsible for carrying out the first phase of the work, which is expected to take 5 to 8 years. Completion of all phases is estimated to take up to 30 years. The maximum liability of the group, which is joint and several for each member of the group, is expected to range from approximately $450 million to $600 million, of which the Partnership's share is expected to be approximately $10 million (net of $3 million in recoveries from third parties). Cleanup costs are payable over the period that the work is completed.
SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
OIL AND GAS DATA CAPITALIZED COSTS
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
EXPLORATION COSTS
ESTIMATED NET QUANTITIES OF PROVED OIL AND GAS RESERVES
Proved reserves are the estimated quantities which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from reservoirs under existing economic and operating conditions. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods. These reserve estimates were principally prepared by Company engineers and are based on current technology and economic conditions. The Partnership considers such estimates to be reasonable; however, due to inherent uncertainties and the limited nature of reservoir data, estimates of underground reserves are imprecise and subject to change over time as additional information becomes available.
There has been no major discovery or other favorable or adverse event that has caused a significant change in estimated proved reserves since December 31, 1993. The Partnership has no long-term supply agreements or contracts with governments or authorities in which it acts as producer nor does it have any interest in oil and gas operations accounted for by the equity method. All reserves are located onshore and offshore within the United States.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM ESTIMATED PRODUCTION OF PROVED OIL AND GAS RESERVES
The standardized measure of discounted future net cash flows from estimated production of proved oil and gas reserves is presented in accordance with the provisions of Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities" (SFAS No. 69). In
computing this data, assumptions other than those mandated by SFAS No. 69 could produce substantially different results. The Partnership cautions against viewing this information as a forecast of future economic conditions or revenues.
The standardized measure has been prepared assuming year-end selling prices adjusted for future fixed and determinable contractual price changes, year-end development, production and direct general and administrative costs and a ten percent annual discount rate. No future income tax expense has been provided for the Partnership since it incurs no income tax liability. (See Summary of Significant Accounting Policies -- Income Taxes in the Notes to Consolidated Financial Statements.)
SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM ESTIMATED PRODUCTION OF PROVED OIL AND GAS RESERVES
QUARTERLY FINANCIAL INFORMATION
QUARTERLY OPERATING INFORMATION
SUN ENERGY PARTNERS, L.P. REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Energy Partners, L.P. and the Board of Directors of Oryx Energy Company:
Our report on the consolidated financial statements of Sun Energy Partners, L.P. and its Subsidiaries is included on page 13 of this Form 10-K Annual Report. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 12 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND
Dallas, Texas February 19, 1994
SUN ENERGY PARTNERS, L.P. SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
SUN ENERGY PARTNERS, L.P. SCHEDULE V -- PROPERTIES, PLANTS AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
SUN ENERGY PARTNERS, L.P. SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTIES, PLANTS AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
SUN ENERGY PARTNERS, L.P. SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no employees. The Company, as the managing general partner of the Partnership, has the responsibility for the Partnership's conduct of operations. Set forth below is information concerning the ten current directors of the Company and the 11 current executive officers of the Company. All executive officers of the Company are elected annually by the Board of Directors of the Company. The directors are divided into three classes with approximately one-third of the directors constituting the Board being elected each year to serve a three-year term. Class I directors (whose term expires in 1995) are Mr. Gill, Mr. Hollingsworth and Mr. Pistor. Class II directors (whose term expires in 1996) are Mr. Keiser, Mr. Seegers and Mr. White-Thomson. Class III directors (whose term expires in 1994) are Mr. Bradford, Ms. Dinkins, Dr. Grayson and Mr. Hauptfuhrer. Dr. Grayson will retire from the Board at the expiration of his term.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The directors, officers, and employees of the Company (the managing general partner) receive no direct compensation from the Partnership for their services to the Partnership. Such persons receive compensation from the Company, a substantial portion of which is generally reimbursed to the Company by the Partnership as costs allocable to it. (See Note 2 to the Consolidated Financial Statements.)
The Partnership reimburses the Company for all direct costs and indirect costs associated with the Partnership's activities. For the year 1993, the Company received $104 million as reimbursement of costs allocable to the Partnership. Such amounts included salaries of employees and allocations of certain executive and administrative expenses. The aggregate amount reimbursed by the Partnership to the Company for salaries paid to the Chief Executive Officer of the Company and the four most highly compensated executive officers of the Company other than the Chief Executive Officer was approximately $1,310,000 for 1993. (See Note 2 to the Consolidated Financial Statements.)
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information regarding beneficial ownership of the limited partnership units of Sun Energy Partners, L.P. as of December 31, 1993:
UNITS OF SUN ENERGY PARTNERS, L.P.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In its capacity as managing general partner of the Partnership, the Company controls the Partnership and its operations, and has served as a lender and borrower of funds for the Partnership. Following is a table which summarizes lending activities between the Partnership and the Company during the year ended December 31, 1993:
During 1993, the largest balance owed to the Partnership by the Company for variable rate advances was $20 million; the largest balance owed to the Company by the Partnership for variable rate advances was $69 million. The largest balance owed to the Company by the Partnership during 1992 under the 9.75% Note Payable was $99 million. Certain information required by this section is included in Notes to the Consolidated Financial Statements. See Notes 1, 2 and 8 and Schedules II, included elsewhere in this Form 10-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following Documents are filed as a part of this report:
1. Financial Statements:
See Index to Financial Statements, Supplementary Financial and Operating Information and Financial Statement Schedules on page 12.
2. Financial Statement Schedules:
See Index to Financial Statements, Supplementary Financial and Operating Information and Financial Statement Schedules on page 12. Other schedules are omitted because the information is shown elsewhere in this report, is not required or is not applicable.
3. Exhibits:
(b) Reports on Form 8-K:
The Partnership did not file any reports on Form 8-K during the quarter ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SUN ENERGY PARTNERS, L.P.
By: ORYX ENERGY COMPANY (MANAGING GENERAL PARTNER)
*By: _____/s/_EDWARD W. MONEYPENNY____ Edward W. Moneypenny SENIOR VICE PRESIDENT, FINANCE, AND CHIEF FINANCIAL OFFICER Date March 14, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by or on behalf of the following persons on behalf of the Registrant and in the capacities with Oryx Energy Company, Managing General Partner, and on the date indicated:
PRINCIPAL OFFICERS AND DIRECTORS OF ORYX ENERGY COMPANY
MANAGING GENERAL PARTNER
Jerry W. Box Senior Vice President, Exploration and Production William E. Bradford Director David F. Chavenson Treasurer Carol E. Dinkins Director Sherri T. Durst General Auditor Robert B. Gill Director C. Jackson Grayson, Jr. Director Robert P. Hauptfuhrer Chairman of the Board and Chief Executive Officer David S. Hollingsworth Director Robert L. Keiser President, Chief Operating Officer and Director Thomas W. Lynch Vice President and General Counsel Edward W. Moneypenny Senior Vice President, Finance, and Chief Financial Officer Charles H. Pistor, Jr. Director Paul R. Seegers Director William P. Stokes, Jr. Vice President, Corporate Development and Human Relations Barry L. Strong Comptroller Frank B. Sweeney Corporate Secretary Ian L. White-Thomson Director William F. Whitsitt Vice President, Marketing and Public Affairs
EXECUTIVE OFFICES
13155 Noel Road Dallas, TX 75240-5067 Telephone (214) 715-4000
DEPOSITORY UNITS
The depositary units are traded on the New York Stock Exchange, Inc. under the symbol SLP.
MARKET PRICE RANGES:
CASH DISTRIBUTIONS PAID PER UNIT:
TRANSFER AGENT, DEPOSITARY AND REGISTRAR
Chemical Bank Shareholder Relations Department P.O. Box 24935 New York, NY 10249 1-800-648-8393
FOR UNITHOLDER ASSISTANCE, PLEASE CONTACT:
Unitholder Relations Sun Energy Partners, L.P. c/o Oryx Energy Company Managing General Partner P.O. Box 2880 Dallas, TX 75221-2880 1-800-846-ORYX