ITEM 3. LEGAL PROCEEDINGS.
Information presented in Note 15 under the heading "Notes to Consolidated Financial Statements" in the Company's Annual Report to Shareholders for 1993 (page 24 of Exhibit 13 filed herewith) is incorporated herein by reference. See also "Environmental Matters."
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITIONS _________________________________________________________________
H. Leighton Steward (59) Chairman of the Board, President and Chief Executive Officer since 1989.
Richard A. Bachmann (49) Director since 1989. Executive Vice President, Finance and Administration and Chief Financial Officer since 1985.
John F. Greene (53) Director since 1989. Executive Vice President, Exploration and Production since 1985.
Jerry D. Carlisle (48) Vice President and Controller since 1984.
Robert J. Chebul (46) Vice President since July, 1991. Held various managerial positions, including District Manager from 1988 to 1991.
E. J. Leidner, Jr. (57) Vice President since 1986.
John O. Lyles (48) Vice President since 1992. Vice President and Treasurer from 1984 to 1992.
Joel M. Wilkinson (58) Vice President since 1988.
John A. Williams (49) Vice President since 1988.
Frederick J. Plaeger, II (40) General Counsel and Corporate Secretary since 1992. Corporate Secretary and Senior Counsel from 1989 to 1992. Partner in the law firm of Milling, Benson, Woodward, Hillyer, Pierson and Miller from 1985 to 1989.
Louis A. Raspino (42) Treasurer since 1992. Assistant Treasurer from 1984 to 1992.
Each officer holds office until the first meeting of the Board of Directors following the annual meeting of shareholders and until his successor shall have been elected and qualified, or until he shall have resigned or been removed as provided in the LL&E By- Laws. No family relationship exists between any of the above listed executive officers or between any such executive officer and any Director of LL&E.
PART II
Index
Page Number __________________________________________________________________
25 Item 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information presented under the caption "Capital Stock, Dividends and Other Market Data" in the Company's Annual Report to Shareholders for 1993 (page 35 of Exhibit 13 filed herewith) and information presented under the caption "Market Price and Dividend Data" in the Company's Annual Report to Shareholders for 1993 (page 49 of Exhibit 13 filed herewith) are incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Information presented under the caption "Selected Financial Data" in the Company's Annual Report to Shareholders for 1993 (page 48 of Exhibit 13 filed herewith) is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information presented under the heading "Financial Review" in the Company's Annual Report to Shareholders for 1993 (under the heading "Management's Discussion and Analysis" on page 29 of Exhibit 13 filed herewith) is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of The Louisiana Land and Exploration Company and Subsidiaries, together with the report thereon of KPMG Peat Marwick dated February 9, 1994, and the supplementary data referred to in Item 14(a)(1) hereof, which are contained in the Company's Annual Report to Shareholders for 1993 (Exhibit 13 filed herewith), are incorporated herein by reference. The report of KPMG Peat Marwick covering the aforementioned consolidated financial statements refers to the adoption of the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statement of Financial Accounting Standards Nos. 109 and 106, respectively. The consolidated financial statements of MaraLou Netherlands Partnership and Subsidiary (a 50%-owned affiliate accounted for under the equity method), together with the report thereon of KPMG Peat Marwick dated January 28, 1994, as referred to in Item 14(a)(1) hereof, are included herein and filed herewith. The report of KPMG Peat Marwick covering the aforementioned consolidated financial statements refers to the adoption of the method of accounting for income taxes prescribed by Statement of Financial Accounting Standard No. 109.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Index
Page Number __________________________________________________________________
27 Item 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to directors of the Registrant will be contained in the definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 12, 1994, which the Registrant will file pursuant to Regulation 14A not later than 120 days after December 31, 1993, and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. Information relating to executive officers of the Registrant appears at page 23 of this Annual Report on Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to the compensation of the Registrant's executive officers and directors will be contained in the definitive Proxy Statement referred to above in "Item 10. Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to beneficial ownership of securities will be contained in the definitive Proxy Statement referred to above in "Item 10. Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to transactions with management and others and certain business relationships regarding directors will be contained in the definitive Proxy Statement referred to above in "Item 10. Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K.
PART IV
Index
Page Number __________________________________________________________________
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
29 (a)(1) Financial Statements and Supplementary Data 49 Independent Auditors' Report
50 (a)(2) Financial Statement Schedules: 50 Schedule V - Property, Plant and Equipment 51 Schedule VI - Accumulated Depletion, Depreciation and Amortization 52 Schedule X - Supplementary Earnings Statement Information
All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
53 (a)(3) Index to Exhibits
56 (b) Reports on Form 8-K
57 Signatures
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Financial Statements and Supplementary Data (Item 14 (a)(1))
The following financial statements and supplementary data included in the Company's Annual Report to Shareholders for 1993 are incorporated herein by reference in response to Item 8:
Page in Exhibit 13 filed herewith
Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Earnings (Loss) 4 Consolidated Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Report of Management 26 Independent Auditors' Report 27
Unaudited Supplemental Data: Data on Oil and Gas Activities 36 Quarterly Data 50
The following financial statements of 50% or Less Owned Persons required by Regulation S-X, Rule 3-09, are included herein and filed herewith in response to Item 8:
Page herein
MaraLou Netherlands Partnership and its wholly-owned consolidated subsidiary, CLAM Petroleum Company:
Independent Auditors' Report 31 Consolidated Balance Sheets 32 Consolidated Statements of Income 33 Consolidated Statements of Partners' Capital 34 Consolidated Statements of Cash Flows 36 Notes to Consolidated Financial Statements 38
MARALOU NETHERLANDS PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
Independent Auditors' Report
The Partners MaraLou Netherlands Partnership:
We have audited the accompanying consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1993 and 1992, and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of MaraLou Netherlands Partnership and subsidiary as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in note 4 to the consolidated financial statements, the Partnership adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" in 1993.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
Houston, Texas January 28, 1994
(Continued)
(Continued)
MARALOU NETHERLANDS PARTNERSHIP
Notes to Consolidated Financial Statements
December 31, 1993, 1992 and 1991
1. Organization and summary of significant accounting policies
Organization and ownership: MaraLou Netherlands Partnership (MaraLou), a Texas general partnership, was formed on March 27, 1985 by LL&E (Netherlands), Inc. (LL&E Netherlands) and Marathon Petroleum Netherlands, Ltd. (Marathon Netherlands) for the purpose of owning their interests in CLAM Petroleum Company (CLAM) and for the purpose of purchasing the outstanding shares of CLAM held by Netherlands-Cities Services, Inc. On March 27, 1985 both partners agreed to contribute their respective ten thousand shares of CLAM to MaraLou. These shares were transferred to MaraLou on June 21, 1985. The remaining shares held by Netherlands-Cities Services, Inc. were acquired by MaraLou for $85,381,881 on March 29, 1985. The acquisition has been accounted for using the purchase method of accounting effective January 1, 1985.
On December 6, 1991 an agreement was concluded whereby LL&E Netherlands Petroleum Company, an affiliated company to LL&E Netherlands - both of which are wholly owned subsidiaries of Louisiana Land and Exploration Company, contributed Netherlands North Sea license interests and other assets valued at $11,629,000 for five hundred newly issued shares of CLAM stock. For financial reporting purposes, the contribution made by LL&E Netherlands Petroleum Company in excess of its calculated minority interest is reflected in Partners' capital as an addition to the LL&E Netherlands capital balance. MaraLou made a cash contribution of $11,629,000 for an additional five hundred newly issued shares of CLAM stock. The contributed cash is to be used to develop the North Sea license interest contributed by LL&E Netherlands Petroleum Company. MaraLou subsequently sold all of its newly issued shares of CLAM stock to Marathon Netherlands, a partner in MaraLou, which purchased the shares with a note valued at $11,629,000, on which $6,000,000 was paid in 1991 and $6,000,000, inclusive of interest, was paid in 1992. These newly issued shares of CLAM stock have been pledged as security for MaraLou and CLAM's revolving credit agreement (see Note 6).
CLAM Petroleum Company, a Delaware Corporation, was formed in October 1975 by LL&E Netherlands, Marathon Netherlands and Netherlands-Cities Service, Inc. (stockholders) for the purpose of owning their interest in certain licenses and agreements covering hydrocarbon operations in The Netherlands and for the purpose of entering into agreements with lending institutions to finance such interest. Effective May 24, 1976 the stockholders assigned their interests and obligations under the licenses and related agreements to CLAM. CLAM has no operations outside the oil and gas industry or in areas other than The Netherlands North Sea.
The financial statements reflect the consolidation of CLAM Petroleum Company (the Company) with MaraLou for the period from January 1, 1985. The financial statements also reflect the interests and earnings of the minority shareholders, LL&E Netherlands Petroleum Company and Marathon Netherlands. Currently, MaraLou has no interests other than in the operation of CLAM.
Cash equivalents: Cash equivalents of $11,133,745, $18,721,023 and $23,638,318 at December 31, 1993, 1992 and 1991 respectively, consist of Eurodollar and Euroguilder investments. For purposes of the statements of cash flows, MaraLou considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.
Joint venture agreements: CLAM, together with unrelated parties, has interests in certain prospecting and production licenses and related operating agreements which provide for the joint conduct of seismic, geological, exploration and development activities on the continental shelf of The Netherlands. The accompanying financial statements include CLAM's share of operations as reported to it by the operator of the joint venture. The amounts reported by the operator of the joint venture are subject to an annual audit by the non-operators. The audit for the year 1992 has been conducted with the non-operators awaiting the operator's initial response to the audit report.
Petroleum exploration and development costs: CLAM follows the successful efforts method of accounting for oil and gas properties. Exploration expenses, including geological and geophysical costs, prospecting costs, carrying costs and exploratory dry hole costs are charged against income as incurred. The acquisition costs of unproved properties are capitalized with appropriate provision for impairment based upon periodic assessments of such properties. All development costs, including development dry hole costs, are capitalized. Capitalized costs are adjusted annually for cash adjustments relating to changes in CLAM's share in gas reserve estimates (see Note 7).
Depletion, amortization and depreciation: Depletion is provided under the unit-of-production method based upon estimates of proved developed reserves. Depreciation is based on estimated useful life. Reserve determinations are management's best estimates and generally are related to economic and operating conditions. Depletion and depreciation rates are adjusted for future estimated salvage values.
CLAM property, plant and equipment retirements: Upon sale or retirement of property, plant and equipment, the cost and related accumulated depletion, amortization and depreciation are eliminated from the accounts and the gain or loss is reflected in income.
CLAM platform abandonment amortization: Platform abandonment amortization is provided under the unit- of-production method based upon estimates of proved-developed reserves. Amortization rates are adjusted for future estimated abandonment costs. Platform abandonment amortization is charged to operating expense.
2. Related party transactions
CLAM transactions with related parties consisted of charges for geological, geophysical and administrative services rendered by an affiliate under two service contracts and administrative services rendered by another affilate. Such charges were approximately $2,512,536, $2,530,608 and $2,267,479 for 1993, 1992 and 1991, respectively. Salaries and related social charges included therein amounted to $1,685,046, $1,858,876 and $1,512,633 for 1993, 1992 and 1991, respectively.
MaraLou transactions with related parties consisted of charges for administrative services rendered by an affiliate amounting to $55,800, $58,200 and $57,600 in 1993, 1992 and 1991, respectively.
3. Property, plant and equipment
Changes in property, plant and equipment for the years ended December 31, 1993, 1992 and 1991 are as follows (in thousands of U.S. dollars):
4. Federal and foreign income taxes
MaraLou is a partnership and, therefore, does not pay income taxes. Since CLAM (wholly owned by MaraLou) is a corporation, income taxes included in the accompanying consolidated financial statements have been determined utilizing applicable domestic and foreign tax rates.
The FASB has issued Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes" which superseded SFAS No. 96. "Accounting for Income Taxes." The adoption of SFAS 109 caused an additional deferred income tax liability of $6,003,589 as of January 1, 1993, which has been recorded as a cumulative effect of change in accounting principle. Prior year consolidated financial statements have not been adjusted and are based on SFAS No. 96.
SFAS 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method. Under the new method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable to those years in which the temporary differences between financial statement carrying amounts and tax bases are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted.
Under the deferred method of accounting for income taxes which was applied in 1992 and prior years, deferred income taxes applicable to each year's net temporary differences were provided based on the tax rates in effect during that year and no adjustments were made to the deferred income tax liability amounts for subsequent changes in tax rates.
Dutch investment incentive premiums (WIR) are credited to foreign income tax in the year in which they are claimed. CLAM incurred WIR premium expense of $60,331 and $371,771 in 1993 and 1992, respectively.
Details of federal and foreign income taxes (in thousands of U.S. dollars) are as follows:
Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35 and 34 percent for 1993 and 1992, respectively, to income before income taxes of CLAM as a result of the following (in thousands of U.S. dollars):
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1993 and 1992 relate to the following (in thousands of U.S. dollars):
The Company's 1993 and 1992 current tax liability was determined on a regular tax basis.
The amount of unused foreign tax credit carryforward available on an alternative minimum tax (AMT) basis was $23,354,336 at December 31, 1993. The carryforward expires $5,660,000 in 1994, $5,417,000 in 1995, $5,117,000 in 1996, $3,355,000 in 1997 and $3,805,000 in 1998. The Company did not pay any AMT in 1992 or 1993.
5. CLAM foreign currency translation adjustment
As of January 1, 1983 CLAM adopted Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" (SFAS No. 52), under which the functional currency is deemed to be the Dutch guilder. Effective January 1, 1987 CLAM changed its functional currency from the Dutch guilder to the U.S. dollar. The change was precipitated by the significant effect on CLAM's operation of a new dollar-driven gas sales contract which was effective January 1, 1987 and the Tax Reform Act of 1986. In accordance with SFAS No 52 there is no restatement of prior years' financial statements and the translated amounts for nonmonetary assets as of December 31, 1986 have become the accounting basis for those assets in the year of the change.
6. Debt
On July 25, 1985 MaraLou and CLAM entered into a revolving credit agreement, which was amended and restated as of June 19, 1992, with a syndicate of major international banks to fund the purchase by MaraLou of CLAM shares previously owned by Netherlands-Cities Service, Inc. and to provide working capital for CLAM. The banks' total commitment as of December 31, 1993 and December 31, 1992 was $110,000,000. Interest is paid, at the borrower's option, based on the prime rate, the London Interbank Offered Rate (LIBOR), or an adjusted CD rate. A contractual margin is added to LIBOR and CD based borrowings. The all-in interest rates for CLAM for December 31, 1993 and December 31, 1992 were 3.9375% and 4.125%, respectively. During the revolving credit period, the borrowers are obligated to pay a commitment fee of 1/4% on the unused committed portion of the facility. All of the CLAM common stock held by MaraLou has been pledged as security for the facility. In addition, under certain circumstances MaraLou can exercise an option to purchase the shares held by LL&E Netherlands Petroleum Company and Marathon Petroleum Netherlands, Ltd. for a nominal amount. The option agreement has been assigned to the banks as security for the facility.
The credit agreement permits CLAM and MaraLou to incur total debt up to an agreed borrowing base which at December 31, 1993 and December 31, 1992 was $145,000,000. The agreement provides that the borrowing base is reduced periodically over the term of the facilty which is currently scheduled to expire on January 1, 2000. The borrowing base and the scheduled reductions may be adjusted based on a redetermination of the net present value of the projections of certain cash flows included in an Engineering Report prepared by petroleum engineers.
The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $87,800,000, at December 31, 1993 of which $-0- was due within one year. The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $97,800,000 at December 31, 1992. At December 31, 1993, the required
reductions to the borrowing base in each of the next five years are $-0- in 1994, $-0- in 1995, $-0- in 1996, $19,800,000 in 1997, $30,000,000 in 1998 and $38,000,000 thereafter.
CLAM has an unsecured combined short-term loan and overdraft facility of Dfl. 80,000,000 ($41,152,263 at year-end exchange rate). On December 31, 1993 and December 31, 1992 the outstanding balances relating to this facility were $-0-. Interest rates are determined at the time borrowings are made.
7. Annual evaluation of gas reserves
Under the provisions of the Joint Development Operating Agreement to which CLAM is a party, an annual estimate of gas reserves is to be made and agreed upon by the Area Management Committee. Based upon such estimate, each participant's investment in the area properties, as defined, is to be adjusted so that a participant's investment is in proportion to its interest in the remaining reserves. Adjustments to the investments are made in cash in the year following the date the reserve revision is agreed upon.
In 1992, the Area Management Committee agreed to freeze each participant's interest through 1994, at the level agreed upon in 1992. A new gas reserve estimate will be agreed upon in 1995.
8. Reserves of oil and gas (unaudited)
CLAM's share of proven gas reserves at January 1, 1994 and 1993 are 317,737 MMCF and 343,432 MMCF, respectively.
9. Major customer
CLAM has one major customer from which it derives 98% of its sales revenue. CLAM was required under its production license to offer its production first to this customer, which is partially owned by The Netherlands government.
Unitization and natural gas sales agreements were executed July 29, 1987 for the K12 - K15 "B" structure. CLAM is a K15 Block participant, however this property is operated by a K12 Block participant. This gas is also sold to the major customer.
10. Net profits interest agreement
CLAM entered into an agreement dated November 1, 1981 which requires CLAM to pay a portion of its net profits ("net profits interest") to an unrelated party in exchange for a 7-1/2% participation interest in certain blocks. The "net profits interest" is equal to one twenty-fourth (1/24) of CLAM's revenues from the contract area, after various deductions, as defined in the agreement.
11. Issuance of production licenses
In March 1990, a production license was granted by the Minister of Economics Affairs of the Netherlands covering the L12a and L12b/L15b blocks. As a result, the Dutch Government, through Energie Beheer Nederland (EBN) (a Dutch company wholly-owned by the Dutch Government) exercised its option to participate 40% in the L12a block and 50% in the L12b/L15b block. CLAM was subsequently reimbursed $10,628,572 during 1990, all of which was included in income because there were costs associated with these blocks which had been written-off in prior years. Components of the reimbursement were:
Exploration well cost (previously written off as dry wells) $ 5,595,076
Exploration administrative expense 1,818,220
Interest 3,215,276
Total reimbursement $10,628,572
In 1991, it was determined that the portion of the above noted reimbursement allocable to trapping unit L12-FC, within blocks L12b/l15b, would be refunded to EBN as production on this trapping unit is not expected to commence within the 48-month requirement stipulated by the contractual agreement with EBN (the Agreement). The refundable amount, which CLAM expects to repay in 1994, was recorded as a long-term receivable of $3.6 million, interest expense of $1.5 million and an accrued liability of $5.1 million. The Agreement calls for EBN to reimburse the funds to CLAM net of interest upon first production from trapping unit L12-FC, which is expected to occur in 1997.
In 1992, it was determined that the portion of the above noted reimbursement allocable to trapping units L12-FA and L12-FB, within blocks L12a and L12b/L15b, would be refunded to EBN as production on these trapping units are not expected to commence within the 48-month requirement stipulated by the Agreement. The refundable amount for L12-FA and L12-FB, which CLAM expects to repay in 1994, was recorded as a long-term receivable of $0.5 and $1.6 million, respectively, interest expense $0.2 million and $0.6 million, respectively and an accrued liability of $0.7 million and $2.2 million respectively. The Agreement calls for EBN to reimburse the respective funds to CLAM net of interest upon first production from trapping units L12-FA and L12-FB, which is expected to occur in 2000 and 1998, respectively.
12. Disclosures about fair value of financial instruments
Cash and Cash Equivalents, Receivables, Due from Operator of Joint Venture, Due to Affiliated Company, Accounts Payable, and Due to Operator of Joint Venture
- The carrying amount approximates fair value because of the short maturity of these instruments.
Long-Term Receivable
- The estimated fair value of the Company's long-term receivable is as follows (in thousands of U.S. Dollars):
At December 31, 1992 Carrying Estimated Amount Fair Value Long-term receivable $5,620 $3,681
The fair value of the long-term receivable was based on discounted cash flows.
Long-Term Debt Due to Banks
- The carrying amount approximates fair value because of the variable rate of interest associated with this debt.
Independent Auditors' Report
The Board of Directors and Stockholders The Louisiana Land and Exploration Company:
Under date of February 9, 1994, we reported on the consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the Annual Report to Shareholders for 1993. As discussed in Notes 11 and 12 to the consolidated financial statements, the Company adopted the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statements of Financial Accounting Standards Nos. 109 and 106, respectively. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement Schedules V, VI and X. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
New Orleans, Louisiana February 9, 1994
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (Item 14(a)(3))
The following Exhibits have been filed with the Securities and Exchange Commission:
Exhibit 2.1 Stock Purchase Agreement, dated as of July 18, 1993, between NERCO, Inc. and The Louisiana Land and Exploration Company (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.).
Exhibit 2.2 Sale and Purchase Agreement, dated as of August 19, 1993, between British Gas Exploration and Production Limited and LL&E (U.K.) Inc. (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.).
Exhibit 2.3 Amendment, dated October 12, 1993, to Sale and Purchase Agreement in Exhibit 2.2 herein.
Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Registrant's Registration Statement No. 2-45541 on Form S-1); Articles Supplementary pursuant to Section 3- 603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.).
Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1- 959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (continued) (Item 14(a)(3))
Exhibit 4(a) Rights Agreement dated as of May 25, 1986 among the Registrant and The Bank of New York (as Rights Agent) - (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated May 25, 1986 - Commission File No. 1-959.).
Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.).
Exhibit 10(a) Form of Termination Agreement with Senior Management Personnel (Incorporated by reference to Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982) and the amendment thereto dated December 8, 1982 (Incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993).
Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(e) Pension Agreement, dated November 10, 1988 (Incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988 - Commission File No. 1-959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (continued) (Item 14(a)(3))
Exhibit 10(f) The Louisiana Land and Exploration Company 1990 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1990).
Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(i) The LL&E Special Termination Benefit Plan (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(l) Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1993 among the Registrant, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10 to the Registrant's Registration Statement No. 33-50161 on Form S-3, as amended.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (continued) (Item 14(a)(3))
Exhibit 11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share - Years Ended December 31, 1993, 1992 and 1991.
Exhibit 13 Annual Report to Shareholders for 1993.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Consent of Experts.
Exhibit 24 Powers of Attorney.
Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request.
Reports on Form 8-K Quarter Ended December 31, 1993 (Item 14(b))
A Current Report on Form 8-K was filed on September 2, 1993, Items 5 and 7 of which were amended on Form 8-K/A filed on October 7, 1993. A Current Report on Form 8-K dated October 29, 1993 was filed containing the press release relating to the unaudited financial results for the Registrant's fiscal quarter ended September 30, 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.
THE LOUISIANA LAND AND EXPLORATION COMPANY (Registrant)
Date: February 18, 1994 By /s/ Frederick J. Plaeger, II __________________________________ Frederick J. Plaeger, II General Counsel and Corporate Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: February 18, 1994 *H. Leighton Steward _____________________________________ H. Leighton Steward Director, Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
Date: February 18, 1994 *Leland C. Adams _____________________________________ Leland C. Adams Director
Date: February 18, 1994 *Richard A. Bachmann _____________________________________ Richard A. Bachmann Director, Executive Vice President, Finance and Administration (Principal Financial Officer)
Date: February 18, 1994 *John F. Greene _____________________________________ John F. Greene Director, Executive Vice President, Exploration and Production
Date: February 18, 1994 *Eamon M. Kelly _____________________________________ Eamon M. Kelly Director
Date: February 18, 1994 *Victor A. Rice _____________________________________ Victor A. Rice Director
Date: February 18, 1994 *Orin R. Smith _____________________________________ Orin R. Smith Director
Date: February 18, 1994 *Arthur R. Taylor _____________________________________ Arthur R. Taylor Director
Date: February 18, 1994 *W. R. Timken, Jr. _____________________________________ W. R. Timken, Jr. Director
Date: February 18, 1994 *Carlisle A.H. Trost _____________________________________ Carlisle A.H. Trost Director
Date: February 18, 1994 *E. L. Williamson _____________________________________ E. L. Williamson Director
Date: February 18, 1994 *Jerry D. Carlisle _____________________________________ Jerry D. Carlisle Vice President and Controller (Principal Accounting Officer)
*/s/ Frederick J. Plaeger, II _________________________________________ Frederick J. Plaeger, II General Counsel and Corporate Secretary (As attorney-in-fact for each of the persons indicated)
________________________________________________________________ ________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
__________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
__________________________
THE LOUISIANA LAND AND EXPLORATION COMPANY (Exact name of registrant as specified in its charter)
EXHIBITS
________________________________________________________________ ________________________________________________________________
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (Item 14(a)(3))
The following Exhibits have been filed with the Securities and Exchange Commission:
Exhibit 2.1 Stock Purchase Agreement, dated as of July 18, 1993, between NERCO, Inc. and The Louisiana Land and Exploration Company (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.).
Exhibit 2.2 Sale and Purchase Agreement, dated as of August 19, 1993, between British Gas Exploration and Production Limited and LL&E (U.K.) Inc. (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.).
Exhibit 2.3 Amendment, dated October 12, 1993, to Sale and Purchase Agreement in Exhibit 2.2 herein.
Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Registrant's Registration Statement No. 2-45541 on Form S-1); Articles Supplementary pursuant to Section 3- 603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.).
Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1- 959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (continued) (Item 14(a)(3))
Exhibit 4(a) Rights Agreement dated as of May 25, 1986 among the Registrant and The Bank of New York (as Rights Agent) - (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated May 25, 1986 - Commission File No. 1-959.).
Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.).
Exhibit 10(a) Form of Termination Agreement with Senior Management Personnel (Incorporated by reference to Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982) and the amendment thereto dated December 8, 1982 (Incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993).
Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(e) Pension Agreement, dated November 10, 1988 (Incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988 - Commission File No. 1-959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (continued) (Item 14(a)(3))
Exhibit 10(f) The Louisiana Land and Exploration Company 1990 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1990).
Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(i) The LL&E Special Termination Benefit Plan (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(l) Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1993 among the Registrant, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10 to the Registrant's Registration Statement No. 33-50161 on Form S-3, as amended.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits (continued) (Item 14(a)(3))
Exhibit 11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share - Years Ended December 31, 1993, 1992 and 1991.
Exhibit 13 Annual Report to Shareholders for 1993.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Consent of Experts.
Exhibit 24 Powers of Attorney.
Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request.
EXHIBIT 2.3
Exhibit 2.3
AMENDMENT TO SALE AND PURCHASE AGREEMENT
THIS AGREEMENT is made on the 12th day of October, 1993 BETWEEN:-
(1) BRITISH GAS EXPLORATION AND PRODUCTION LIMITED (registered in England under number 902239) whose registered office is at Rivermill House, 152 Grosvenor Road, London SW1V 3JL (the "Seller");
(2) LL&E (U.K.) INC. whose principal place of business is at LL&E House, 40A Dover Street, London W1X 3RB ("LL&E"); and
(3) MURPHY PETROLEUM LIMITED (registered in England under number 811102) whose registered office is at Winston House, Dollis Park, Finchley, London N3 1HZ ("Murphy").
WHEREAS:
(A) By a sale and purchase agreement dated 12th August, 1993 between the Seller and LL&E (the "SPA"), the Seller agreed to sell to LL&E, subject to certain conditions contained in the SPA, certain Assets (as defined in the SPA) referable to a fourteen percent interest under the Operating Agreement (as defined in the SPA).
(B) LL&E and Murphy have requested the Seller to suspend the SPA for the time being to enable the Seller to sell to Murphy that portion of the Assets referable to a two point seven four percent. (2.74%) interest under the Operating Agreement (the "Murphy interest") and to LL&E that portion of the Assets referable to an eleven point two six percent. (11.26%) interest under the Operating Agreement (the "LL&E interest") and the Seller has agreed, subject to and on the terms and conditions of this Agreement, so to suspend the SPA.
(C) It is the intention of the parties that the Seller be in no worse position as a result of entering into this Agreement than if it had proceeded with the SPA in the form entered into by it with LL&E on 12th August, 1993.
(D) All relevant pre-emption rights pursuant to the Operating Agreement in respect of the transactions contemplated in this Agreement have been waived.
IN CONSIDERATION of the mutual promises and undertakings herein contained on the part of the parties hereto IT IS AGREED as follows:
1. Definitions
In this Agreement terms and expressions defined in either the LL&E Agreement or the Murphy Agreement, as appropriate, shall, unless the context otherwise requires, bear the same meanings herein.
2. Undertaking
2.1 LL&E and Murphy acknowledge and are aware that the Seller, in entering into this Agreement, is relying on the following undertaking.
LL&E and Murphy hereby undertake for themselves or either of them that as a result of the Seller entering into this Agreement they will put the Seller fully and effectively into a position which is no worse than it would have been in had it proceeded with the SPA with LL&E, such undertaking to include without limitation payment of all costs (including legal costs), charges and expenses whatsoever which are necessarily suffered or incurred by the Seller in relation to the enforcement of this Agreement, the LL&E Agreement or the Murphy Agreement (each as defined below) or any related or subsequent agreement (including those referred to as Further Documentation in the LL&E Agreement and the Murphy Agreement). The Seller shall not be entitled to make a claim under this undertaking unless it has first served on LL&E and Murphy written notice of the matter complained of within 30 days of becoming aware of the same (giving such outline details as shall then be reasonably practicable).
2.2 The undertaking contained in clause 2.1 above shall expire twenty four (24) months after the later of the Completion Dates (as revised pursuant to this Agreement, if appropriate) save in respect of claims made prior to such expiry date, such claims to be pursued with reasonable expedition.
2.3 Murphy shall not be obligated under the undertaking contained in clause 2.1 above for the failure of LL&E to complete the sale and purchase under the LL&E Agreement, save and to the extent that such failure is caused or contributed to by a breach by Murphy of its obligations under clause 6.4 below.
2.4 LL&E shall not be obligated under the undertaking contained in clause 2.1 above for the failure of Murphy to complete the sale and purchase under the Murphy Agreement, save and to the extent that such failure is caused or contributed to by a breach by LL&E of its obligations under clause 6.4 below.
3. SPA
3.1 The SPA shall not be terminated by the execution of this Agreement but shall be suspended and it shall remain suspended until either (a) the Seller is to enforce its rights under the SPA in accordance with clause 6.2.1, 6.2.2 or 6.3.1 below (whereupon it shall come into full force and effect again) or (b) Completion (except a Completion which is deemed not to have occurred pursuant to the provisions of clause 6 below) occurs of either the LL&E Agreement or the Murphy Agreement (whereupon the SPA shall terminate automatically). Neither the Seller nor LL&E shall have any obligations to each other or to any other person under the SPA while it so suspended.
3.2 During such period as the SPA is not in full force and effect (being when it is either suspended or terminated the provisions of Parts 1 and 2 of the Schedule hereto shall apply as agreements in place of the SPA as provided in clauses 4 and 5 below.
4. LL&E Agreement
In respect of the sale to LL&E there shall be in effect an agreement on the terms as set out in Part 1 of the Schedule hereto, and the provisions applying to that Schedule shall be called the "LL&E Agreement".
5. Murphy Agreement
In respect of the sale to Murphy there shall be in effect an agreement on the terms as set out in Part 2 of the Schedule hereto, and the provisions applying to that Schedule shall be called the "Murphy Agreement".
6. Completion
6.1 Completion of each of the LL&E Agreement and the Murphy Agreement (each and "Agreement" and together the "Agreement") will take place simultaneously and, notwithstanding anything in each of the Agreements, Completion of each Agreement shall, except as provided below, be dependent upon Completion of the other save only for the provisions of this clause.
Upon each of the LL&E Agreement and the Murphy Agreement being completed in all respects subject only to the inter-dependence provision in this clause, this clause shall automatically fall away and Completion of each of the Agreements shall be deemed to have occurred.
If, but for the provisions of this clause, and except as provided below, one of the Agreements would have been completed but not the other, the first such Agreement shall be deemed not to have been completed, all documents which may have been executed as a part of such Completion shall be null and void and any amounts transferred to the Seller shall be returned immediately without interest.
6.2 The exceptions referred to in clause 6.1 above are:
6.2.1 If LL&E has not for whatsoever reason completed the sale and purchase under the LL&E Agreement (ignoring, for this purpose, the inter-dependence provision in clause 6.1 above) but, save for such provision, Murphy would have completed the Murphy Agreement, any amounts transferred to the Seller shall be returned immediately without interest and the Seller shall have the option exercisable within 7 days following the date when Murphy would have completed the Murphy Agreement (ignoring for this purpose the inter-dependence provision in clause 6.1 above) by notice in writing to the parties hereto either: (a) to declare that the inter- dependence provision in clause 6.1 above is waived and that the sale and purchase under the Murphy Agreement is to be completed, or (b) to declare that the inter-dependence provision in clause 6.1 above is not waived. If the Seller does not give a notice within 7 days exercising either option (a) or (b) above, it shall at the expiry of such 7 day period be deemed to have exercised option (b).
If the Seller exercises option (a) above, the Murphy Agreement shall be completed (the "revised Completion Date"), as soon as the relevant Further Documentation is available and shall contain such amendments as are reasonably necessary to reflect that Completion of only one Agreement is taking place, and on the revised Completion Date Murphy shall transfer to the Seller all amounts due under the Murphy Agreement (save that the Completion Date for the purposes of clause 3.2.3 of the Murphy Agreement shall be the actual date of Completion), the Seller shall be entitled to enforce its rights against LL&E under the LL&E Agreement and the SPA shall terminate. If the Seller exercises or is deemed to have exercised option (b) above, this Agreement shall be deemed to have rescinded and the Seller shall be entitled to enforce its rights against LL&E under the SPA. For the avoidance of doubt, LL&E and Murphy shall upon such deemed rescission be released from the undertaking given by them under clause 2.1 above.
6.2.2 If Murphy has not for whatsoever reason completed the sale and purchase under the Murphy Agreement (ignoring, for this purpose, the inter-dependence provision in clause 6.1 above) but, save for such provision, LL&E would have completed the sale and purchase under the LL&E Agreement, any amounts transferred to the Seller shall be returned immediately without interest and the Seller shall have the option exercisable within 7 days following the date when LL&E would have completed the LL&E Agreement (ignoring for this purpose the inter- dependence provision in clause 6.1 above) by notice in writing to the parties hereto either: (a) to declare that the inter-dependence provision in clause 6.1 above is waived and that the sale and purchase under the LL&E Agreement is to be completed, or (b) to declare that the inter- dependence provision in clause 6.1 above is not waived. If the Seller does not give a notice within 7 days exercising either option (a) or (b) above, it shall at the expiry of such 7 day period be deemed to have exercised option (b).
If the Seller exercises option (a) above, the LL&E Agreement shall be completed (the "revised Completion Date"), as soon as the relevant Further Documentation is available and shall contain such amendments as are reasonably necessary to reflect that Completion of only one Agreement is taking place, and on the revised Completion Date LL&E shall transfer to the Seller all amounts due under the LL&E Agreement (save that the Completion Date for the purposes of clause 3.2.3 of the LL&E Agreement shall be the actual date of Completion), the Seller shall be entitled to enforce its rights against Murphy under the Murphy Agreement and the SPA shall terminate. If the Seller exercises or is deemed to have exercised option (b) above, this
Agreement shall be deemed to have been rescinded and the Seller shall be entitled to enforce its rights against LL&E under the SPA. For the avoidance of doubt, LL&E and Murphy shall upon such deemed rescission be released from the undertaking given by them under clause 2.1 above.
6.3 If Completion has not taken place under either the Murphy Agreement or the LL&E Agreement by 1st December 1993 (or such later date as the parties may agree in writing) the Seller shall have the option exercisable by written notice to the parties hereto or either:
6.3.1 rescinding this Agreement and enforcing the Seller's rights against LL&E under the SPA and for the avoidance of doubt LL&E and Murphy shall thereupon be released from the undertaking given by them under clause 3.1 above; or
6.3.2 enforcing its rights against LL&E under the LL&E Agreement and against Murphy under the Murphy Agreement.
6.4 Each of the parties shall use reasonable endeavors with all due despatch to procure the satisfaction of the conditions necessary for Completion to be achieved including the obtaining of any amended version of the Further Documents.
7. Notices
7.1 Any notice or other document to be served under or in connection with this Agreement may be delivered or sent by first class recorded delivery post or telex or facsimile process to the party to be served at his address, to his telex or facsimile number appearing below or at such other address or to such other number as he may have notified to the other parties in accordance with this clause.
British Gas Exploration Address: 100 Thames Valley Park Drive and Production Limited Reading Barks RG6 1PT Fax No: 0434 292100 Telex: 846231 Attention: Dr. Y. O. Barton
LL&E (U.K.) Inc. Address: LL&E House 48A Dover Street London W1X 3RB Fax No: 071 499 0677 Telex: 267436 Attention: Dr. J. A. Williams
Murphy Petroleum Limited Address: Winston House Dollis Park London N3 1HZ Fax No: 081 349 4443 Telex: 21970 Attention: Managing Director
7.2 Any notice or document shall be deemed to have been served:
7.2.1 if delivered, at the time of delivery; or
7.2.2 if posted, at 10:00 a.m. on the second business day after it was put into the post; or
7.2.3 if sent by telex or facsimile process, at the expiration of two hours after the time of despatch, if despatched before 3:00 p.m. on any business day, and in any other case at 10:00 a.m. on the business day following the date of despatch.
7.3 In proving service of a notice or document it shall be sufficient to prove that delivery was made or that the envelope containing the notice or document was properly addressed and posted as a prepaid first class recorded delivery letter or that the telex or facsimile message was properly addressed and despatched as the case may be.
7.4 For the purposes of this paragraph, a business day is a day other than a Saturday or statutory holiday on which banks are or, as the context may require, were generally open for business in England and New York.
8. Counterpart Execution
This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any party may enter into this agreement by executing a counterpart.
9. Supremacy
if any conflict or inconsistency arises between provisions in the body of this Agreement and those contained in Parts 1 and 2 of the Schedule hereto or the SPA, then the provisions in the body of this Agreement shall prevail.
10. Proper Law
This Agreement shall be governed by and construed in accordance with English law. The parties hereto submit to the exclusive jurisdiction of the English courts.
IN WITNESS whereof the parties hereto have executed this Agreement the day and year first above written.
Signed by J. G. REID ) for and on behalf of ) BRITISH GAS EXPLORATION ) J. G. REID AND PRODUCTION LIMITED )
Signed by B. WRATHMELL ) for and on behalf of ) LL&E (U.K.) INC. ) B. WRATHMELL
Signed by I. IQBAL ) for and on behalf of ) MURPHY PETROLEUM LIMITED) I. IQBAL
EXHIBIT 11
EXHIBIT 13
EXHIBIT 13
1993 ANNUAL REPORT TO SHAREHOLDERS
(INCORPORATED BY REFERENCE INTO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993)
_________________________________________________________________ FINANCIAL REPORT:
Page herein
Consolidated Balance Sheets 3
Consolidated Statements of Earnings (Loss) 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Report of Management 26
Independent Auditors' Report 27
Unaudited Supplemental Data 28
_________________________________________________________________ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Louisiana Land and Exploration Company and Subsidiaries December 31, 1993, 1992 and 1991 _________________________________________________________________ 1. Summary of Significant Accounting Policies a. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Investments in affiliates are accounted for under the equity method. Certain amounts have been reclassified to conform to the current period's presentation.
b. Petroleum Operations The Company uses the successful efforts method of accounting for its oil and gas operations. The costs of unproved leaseholds are capitalized pending the results of exploration efforts. Significant unproved leasehold costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, that the cost of the property has been impaired. The costs of individually insignificant unproved leaseholds estimated to be nonproductive are amortized over estimated holding periods based on historical experience. Exploratory dry holes and geological and geophysical charges are expensed. Depletion of proved leaseholds and amortization and depreciation of the costs of all development and successful exploratory drilling are provided by the unit-of- production method based upon estimates of proved and proved-developed oil and gas reserves, respectively, for each property. The estimated costs of dismantling and abandoning offshore and significant onshore facilities are provided currently using the unit-of-production method; such costs for other onshore facilities are insignificant and are expensed as incurred. The costs of refining and processing equipment and facilities are depreciated on a straight-line basis over their estimated useful lives.
The Company uses the entitlement method for recording natural gas sales revenues. Under the entitlement method of accounting, revenue is recorded based on the Company's net working interest in field production. Deliveries of natural gas in excess of the Company's working interest are recorded as liabilities while under- deliveries are recorded as receivables. Such amounts are immaterial.
The Company's anticipated purchases and sales of crude oil and refined petroleum products and its committed foreign currency expenditures may be hedged against market risks through the use of forward/futures contracts. The gains and losses on these contracts are recognized upon the expiration of the contract and are included in the valuation of the anticipated transactions being hedged. A default by a counterparty to a contract would expose the Company to
market risks for the quantity of the contract. There is no material risk to the Company as a result of these contracts and the Company does not anticipate nonperformance by any of the counterparties.
c. Functional Currency The foreign exploration and production operations of the Company's subsidiaries and its foreign affiliate, CLAM Petroleum Company, are considered an extension of the parent company's operations. The assets, liabilities and operations of these companies are therefore measured using the United States dollar as the functional currency. As a result, foreign currency translation/transaction adjustments (which were not material) are included in net earnings.
d. Income Taxes The Company and its domestic subsidiaries file a consolidated federal income tax return.
The Company adopted, effective January 1, 1988, Statement of Financial Accounting Standards No. 96 ("SFAS No. 96") - "Accounting For Income Taxes". Under the liability method specified by SFAS No. 96, the deferred tax liability is determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by existing tax rates which are presumed to be in effect when these differences reverse. Deferred tax expense is the result of changes in the liability for deferred taxes.
In February 1992, Statement of Financial Accounting Standards No. 109 ("SFAS No. 109") - "Accounting for Income Taxes" was issued. SFAS No. 109 supersedes SFAS No. 96. SFAS No. 109 was adopted effective as of January 1, 1993. The Company applied the provisions of the SFAS No. 109 without restating prior years' financial statements. For the Company, the most significant change in SFAS No. 109 as compared to SFAS No. 96 is that deferred tax assets will now be recognized and measured based on the likelihood of realization of a tax benefit in future years. Under SFAS No. 109, deferred tax assets are initially recognized for differences between the financial statement carrying amounts and tax bases of assets and liabilities that will result in future deductible amounts and operating loss and tax credit carryforwards. A valuation allowance would then be established to reduce that deferred tax asset if it is more likely than not that the related tax benefits will not be realized. Under SFAS No. 96, the recognition of deferred tax benefits was limited to benefits that would offset deferred tax liabilities and benefits that could be realized through carryback to recover taxes paid for the current year or prior years.
e. Earnings (Loss) Per Share Primary earnings (loss) per share are calculated on the weighted average number of shares outstanding during each period for capital stock and, when dilutive, capital stock equivalents, which assumes
exercise of stock options. Fully diluted earnings (loss) per share are calculated on the same basis, but also assumes conversion, when dilutive, of the convertible subordinated debentures for the period outstanding prior to the call for redemption on September 25, 1992, and elimination of the related interest expense, net of income taxes.
2. 1993 Acquisitions and Dispositions In September 1993, the Company completed the acquisition of all of the issued and outstanding common stock of NERCO Oil & Gas, Inc. ("NERCO") for a cash purchase price of approximately $354 million plus associated expenses. The acquisition was financed initially through the credit facility discussed in Note 8. The cost of the acquisition was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed.
The results of NERCO's operations were consolidated with the Company's effective October 1, 1993. Pro forma combined results of operations of the Company and NERCO, including appropriate purchase accounting adjustments for the years ending December 31, 1993 and 1992, as though the acquisition had taken place on January 1 of the respective years, are as follows:
In December 1993, the Company acquired an 11.26% working interest in Block 16/17 in the U.K. North Sea ("T-Block") from British Gas Exploration and Production Limited for approximately $187 million in cash. The purchase was financed initially through the credit facility discussed in Note 8. Initial production from T-Block came onstream in late 1993 and had an insignificant impact on results of operations.
In December 1993, the Company completed the sale of certain oil and gas producing properties, undeveloped acreage and seismic data located in southern Alberta, Canada for approximately $42.8 million resulting in a gain, net of associated expenses, of approximately $23.5 million (before income taxes of $10.3 million). The properties sold generated revenues of $12.1 million and $15.3 million and pretax earnings of $1.2 million and $1.6 million in 1993 and 1992, respectively.
3. Cash Flows All of the Company's cash investments are highly liquid short-term debt instruments and are considered to be cash equivalents. These cash investments are carried in the accompanying balance sheets at cost plus accrued interest, which approximates fair value. Cash flows related to hedging activities through forward/futures contracts are classified in the same categories as that from the items being hedged.
In 1992, the Company acquired certain proved properties for approximately $36 million and incurred a short-term liability which was outstanding at year end, the settlement of which is included in 1993 cash flows from investing activities.
4. Restructuring and Other Nonrecurring Charges/Credits In 1992, the Company recorded a charge of $52.4 million (before income tax benefits of approximately $17.8 million) against earnings to provide for the restructuring of its oil and gas operations. This charge included provisions for estimated losses on the disposition of selected domestic properties of $47.6 million (both developed and undeveloped) and costs associated with staff retirements, reductions and related transition expenses of $4.8 million. The Company completed the sale of substantially all of the selected properties for a purchase price of $48.1 million.
In addition, during 1992 the Company reduced its litigation accrual for the State of Louisiana gas royalty claim by $25 million (before an income tax charge of $8.5 million). See Note 15.
5. Inventories
At December 31, 1993, the LIFO cost of refinery inventories exceeded their current market values which resulted in a non-cash charge to earnings of $6.5 million (before income tax benefits of $2.3 million) which is included in "Refinery Cost of Sales and Operating Expenses" in the accompanying Consolidated Statements of Earnings (Loss).
The Company's equity in earnings of affiliates, which is included in "Other Revenues" in the accompanying Consolidated Statements of Earnings (Loss), amounted to $2.4 million, $6.9 million and $15 million in 1993, 1992 and 1991, respectively. Cash dividends received from MaraLou/CLAM in 1993, 1992 and 1991 totaled $10 million, $7.5 million and $18.5 million, respectively.
The consolidated financial position of MaraLou and its wholly owned subsidiary, CLAM, as of December 31, 1993 and 1992 and the results of their operations for each of the years in the three-year period ended December 31, 1993 are summarized below.
MaraLou applied the provisions of SFAS No. 109 as of January 1, 1993 without restating prior years' financial statements. Upon adoption, MaraLou recorded a non-cash charge to earnings of $6 million ($3 million net to the Company's interest).
The common stock of CLAM is pledged as collateral under a revolving credit agreement between MaraLou and a group of banks. The credit agreement is nonrecourse to the partners of MaraLou.
7. Property, Plant and Equipment
8. Long-term Debt
The fair value of the Company's long-term debt as of December 31, 1993 is estimated to be approximately $744 million based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of similar maturities.
Debt maturities for the next five years follows.
To finance the aforementioned NERCO and T-Block acquisitions (see Note 2), refinance certain existing indebtedness and fund general corporate activities, the Company entered into a $790 million credit facility with a syndicate of banks in September 1993. Commitments under the agreement originally consisted of (i) a $540 million Revolving Credit Facility and (ii) a $250 million Term Loan Facility (which was utilized and repaid and is no longer available to the Company). The Revolving Credit Facility was subsequently reduced to $450 million and will be reduced by approximately $24 million quarterly from June 1994 through September 1999. Amounts outstanding under the Revolving Credit Facility bear interest at fluctuating rates subject to certain options chosen in advance by the Company. Borrowings under the Revolving Credit Facility and the Term Loan Facility during 1993 were at an average interest rates of 5%. A commitment fee of 1/4% is charged on the unused portion of the facility. Bank fees and other costs associated with this facility totaled $8.1 million of which $6.7 million was charged to interest and debt expenses in the fourth quarter of 1993. The balance will be written off during the first quarter of 1994, at which time the Company intends to renegotiate the facility.
In June 1992, the Company registered under the Securities and Exchange Commission's shelf registration rules $300 million of senior unsecured debt securities to be issued from time to time on terms to be then determined. In June 1992, the Company sold $100 million of 8-1/4% Notes due 2002. In April 1993, the Company completed its second $100 million public offering of debt securities under the existing shelf registration filed in 1992 with the issuance of 7-5/8% Debentures due 2013. In November 1993, the Company registered up to $500 million of senior unsecured debt securities under the Securities and Exchange Commission's shelf registration rules, which included the $100 million available under the shelf registration filed in 1992. In December 1993, the Company completed a $200 million public offering with the issuance of 7.65% Debentures due 2023.
The Company's $20 million Loan Agreement, the $15 million balance of which was repaid in December 1993, was with a group of banks in the form of a revolving credit loan. The interest rate varied with time and market conditions and was determined by the banks subject to certain options chosen in advance by the Company. A commitment fee of 1/4% was charged on the unused portion of the loan during the revolving credit period. Borrowings under this agreement during 1993 and 1992 were at average interest rates of 4% and 4.5%, respectively.
In November 1987, the Company created a leveraged employee stock ownership plan (ESOP) within an existing employee savings plan. To fund the ESOP, in 1987 and 1988 the Company borrowed $10.2 million and $14 million, respectively, from a bank (unsecured) and loaned the proceeds to the ESOP. The ESOP then used the proceeds to acquire shares of the Company's capital stock (374,678 in 1987;
461,690 in 1988) at average market prices of $27.125 and $30.25, respectively. The capital stock issued was taken from the Company's treasury at a cost of $30 per share; the differences between treasury stock cost and value were recorded in additional paid-in capital. The loans to the ESOP are on substantially the same terms and conditions as the Company's bank loans and, in addition, are secured by the Company's capital stock owned by the ESOP. The ESOP will repay the loans (plus interest) with the proceeds from the Company's monthly contributions and quarterly dividends paid on the capital stock. The Company's bank loans will be similarly repaid monthly through 1995. The interest rates vary with time and market conditions and are determined by the bank subject to certain options chosen in advance by the Company. The average interest rates for both loans in 1993 and 1992 were 3.1% and 3.7%, respectively.
During 1993, the average monthly balance of commercial paper notes outstanding was $38.8 million; the maximum amount outstanding during that period was $94 million. Commercial paper borrowings during 1993 and 1992 were at average interest rates of 3.3% and 4.3%, respectively. The Company's commercial paper program was supported by a $100 million revolving line of credit, which required a commitment fee of 1/4% per annum. No borrowings were made under the line of credit. As of September 1993, the commercial paper program is supported by the unused portion of the aforementioned Revolving Credit Facility.
In September 1992, the Company announced the call for early retirement of the 8-1/2% Convertible Subordinated Debentures due September 2000. The redemption completed at a price of 101.66% of principal and the premium, along with unamortized discount, resulted in an extraordinary loss of $5.6 million, after income tax benefits of $2.8 million. The Term Loan with banks, which was retired in January 1994, bore interest at 8.92% (discounted to yield 10.7%), was unsecured and was payable in July 1994. The balance has been excluded from current liabilities as the Company refinanced the balance due on a long-term basis utilizing the Revolving Credit Facility. The early retirement was completed at a price of 102.4% of principal and the premium, along with unamortized discount, resulted in an extraordinary loss of $3.3 million, after income tax benefits of $1.7 million.
9. Interest and Debt Expenses For the years ended December 31, 1993, 1992 and 1991, interest costs incurred, which were essentially the same as interest payments, were $47 million, $37.5 million and $39.5 million, respectively, of which $18.7 million, $12.9 million and $22.6 million, respectively, were capitalized as part of the cost of property, plant and equipment.
In 1992 and 1993, the Company participated in interest rate swaps (which were to terminate in 1994 and 1996, respectively) having a notional principal amount totaling $200 million. Under the agreements, the Company received an annual fixed rate and paid a variable rate based on the six-month London Interbank Offering Rate. The rates payable were recalculated in June and December of each year and the amounts received/paid were credited/charged to interest expense. In September 1993, the Company terminated both agreements and deferred a gain of approximately $3.6 million which will be recognized over the remaining terms of the respective agreements as reductions of interest expense.
10. Foreign Currency Contracts The Company hedges its committed British pound expenditures in the U.K. North Sea through the purchase of forward contracts. At December 31, 1993, forward contracts outstanding totaled $24.6 million. The fair value of these contracts, which represents the Company's cost to offset its forward position, is estimated to be approximately $1 million as of December 31, 1993.
11. Income Taxes As explained in Note 1(d), the Company adopted SFAS No. 109 effective January 1, 1993. Upon adoption, the Company recorded a non-cash credit to earnings of $13.7 million which represented the recognition of deferred tax assets existing at December 31, 1992.
With the enactment of the Budget Reconciliation Act of 1993, the Federal statutory corporate income tax rate was increased from 34% to 35% retroactive to January 1, 1993. As a result, the Company increased its deferred income tax liabilities as of January 1, 1993 with a non-cash charge to income tax expense of $3 million.
The components of earnings (loss) before income taxes were taxed under the following jurisdictions:
Components of income tax expense (benefit) are as follows:
Tax expense (benefit) differs from the amounts computed by applying the U.S. Federal tax rate (1993 - 35%; 1992-91 - 34%) to earnings (loss) before income tax. The reasons for the differences are as follows:
As a result of the prospective adoption of SFAS No. 109 effective January 1, 1993, the following additional disclosures are presented as of and for the year ended December 31, 1993.
Total income tax expense (benefit) was allocated as follows:
The significant components of deferred income tax expense attributable to income from continuing operations are as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
The net change in the valuation allowance for the year ended December 31, 1993 was an increase of $3 million. This change was made to provide for uncertainties surrounding the realization of certain foreign tax credit carryforwards. The remaining balance of the deferred tax assets should be realized through future operating results and the reversal of taxable temporary differences.
Deferred tax expense (benefit) included the following components, the disclosure of which was prescribed by the now-superseded SFAS No. 96:
For the years ended December 31, 1993, 1992 and 1991, the Company's net cash payments (refunds) of income taxes totaled $7.1 million, $(.6) million and $6.5 million, respectively.
At December 31, 1993 the Company has foreign tax credit carryforwards for Federal income tax purposes of $10.2 million which are available through 1998 to offset future Federal income taxes, if any. The Company also has alternative minimum tax credit carryforwards of $5.2 million which are available to reduce Federal regular income taxes, if any, over an indefinite period.
12. Retirement Benefits The Company has a noncontributory defined benefit pension plan covering all eligible employees, with benefits based on years of service and the employee's highest three-year average monthly earnings. The Company's funding policy is intended to provide for both benefits attributed to service to-date and for those expected to be earned in the future. Plan assets consist primarily of stocks, bonds and short-term cash investments. Since the spin-off of the pension plan of a discontinued subsidiary in 1985 and the contribution of excess assets remaining after purchasing annuities for affected employees, the pension plan did not require funding through the year ended December 31,1992. A minimum amount of funding was required in 1993.
As a result of an early retirement incentive program and a reduction in force in 1992, benefit obligations of $4.2 million were settled from plan assets, including $1.1 million of early retirement incentive costs included in the restructuring charge described in Note 4. The settlement of the pension obligations related to the restructuring program resulted in a loss of $.3 million, which was also included in the restructuring charge.
The following tables set forth the plan's funded status and amounts recognized in the statements of financial position and results of operations at December 31:
The Company has postretirement medical and dental care plans for all eligible retirees and their dependents with eligibility based on age and years of service upon retirement. The Company also maintains a Medicare Part B reimbursement plan and life insurance coverage for a closed group of retirees of a former subsidiary for which estimated benefits of approximately $4.7 million were accrued at December 31, 1992. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106) - "Employers' Accounting for Postretirement Benefits Other than Pensions", which changed the Company's practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. Upon adoption, the Company recorded a transition liability of approximately $20.5 million ($13.5 million after income taxes) as a one-time, non-cash charge against earnings.
The postretirement benefit plans are unfunded and the Company continues to fund claims on a cash basis. The following tables set forth the amounts recognized in the statements of financial position and results of operations.
Assumptions utilized to measure the accumulated postretirement obligation at December 31, and January 1, 1993 were: discount rates of 7.25% and 8.5%, respectively; health care cost trend rates of 14% declining over 10 years to 5% and 6%, respectively, and held constant thereafter. A 1% increase in the assumed trend rates would have resulted in increases in the accumulated postretirement benefit obligation at December 31, and January 1, 1993 of $2.6 million and $2.1 million, respectively; the aggregate of service cost and interest cost for the year ended December 31, 1993 would have increased by $.4 million.
13. Capital Stock, Options and Rights In November 1993, the Company completed a public offering of 4.4 million shares of capital stock at a price of $44.625 per share. The capital stock was taken from the Company's treasury at an average cost of $33.125 per share. The excess of net proceeds over the cost of treasury stock issued was credited to additional paid- in-capital. The net proceeds of the offering, after underwriting commissions and expenses, were approximately $188.8 million.
In May 1988, the 1988 Long-term Stock Incentive Plan (1988 Plan) was approved by the shareholders to replace the 1982 Stock Option Plan (1982 Plan). Under the 1988 Plan, as amended, the Company may grant to officers and key employees stock options, stock appreciation rights, performance shares, performance units, restricted stock or restricted stock units for up to 2.8 million shares (plus the 22,274 shares not awarded under the 1982 Plan) of the Company's capital stock. As prescribed by both Plans, stock
options are exercisable at the market price on the date of the grant, generally over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant; all options expire ten years from the date of grant. In 1993 and 1992, options for 277,700 shares and 600,400 shares were granted, respectively. The restricted stock and performance shares awarded under the 1988 Plan entitle the grantee to the rights of a shareholder, including the right to receive dividends and to vote such shares, but the shares are restricted as to sale, transfer or encumbrance. Restricted stock is issued to the grantee over varying periods after a one-year waiting period has expired. In 1993, awards were granted for 34,250 shares of restricted stock. In 1992, no awards were granted. The performance cycle consists of a three-year period, beginning with the year of grant, at the end of which certain performance goals must be attained by the Company for the unrestricted performance shares to be issued to the grantee. Awards granted in 1993 and 1992 for performance shares amounted to 18,900 shares and 26,600 shares, respectively. Performance shares issued in 1993 and 1992 amounted to 15,257 shares and 19,000 shares, respectively. Restricted stock and performance share awards are "compensatory" awards and the Company accrued compensation expense of $.7 million, $1 million and $.8 million in 1993, 1992 and 1991, respectively.
In May 1990, the 1990 Stock Option Plan for Non-Employee Directors (1990 Plan) was approved by the shareholders, under which the Company will grant stock options to non-employee directors for up to 150,000 shares of the Company's capital stock. As prescribed by the 1990 Plan, the options are exercisable at the market price at the date of grant over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant; all options expire ten years from the date of grant. Awards for 20,000 shares were granted in both 1993 and 1992.
At December 31, 1993, 1,254,638 shares of capital stock were reserved for future grants under all Plans.
Total grants outstanding under the Plans and the changes therein for the periods indicated follows.
In 1986, the Company's Board of Directors declared a dividend to shareholders consisting of one Capital Stock Purchase Right on each outstanding share of capital stock. A Right will also be issued with each share of capital stock that becomes outstanding prior to the time the Rights become exercisable or expire. If a person or group acquires beneficial ownership of 20% or more, or announces a tender offer that would result in beneficial ownership of 20% or more, of the shares of outstanding capital stock, the Rights become exercisable ten days thereafter and each Right will entitle its holder to purchase one share of capital stock for $90.
If the Company is acquired in a business combination transaction, each Right not owned by the 20% holder will entitle its holder to purchase, for $90, common shares of the acquiring company having a market value of $180. Alternatively, if a 20% holder were to acquire the Company by means of a reverse merger in which the Company and its capital stock survive or were to engage in certain "self- dealing" transactions, or if a person or group were to acquire 30% or more of the outstanding capital stock (other than pursuant to a cash offer for all shares), each Right not owned by the acquiring person would entitle its holder to purchase, for $90, capital stock of the Company having a market value of $180. Each Right can be redeemed by the Company for $.05, subject to the occurrence of certain events and other restrictions, and expires in 1996. These Rights may cause substantial ownership dilution to a person or group who attempts to acquire the Company without approval of the Company's Board of Directors. The Rights should not interfere with a business combination transaction that has been approved by the Board of Directors.
The table below sets forth estimates of the domestic sulphur reserves attributable to the interests of the Company as of December 31:
_________________________________________________________________ Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves
The following supplemental data on the Company's oil and gas activities were prepared in accordance with the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards No. 69 - "Disclosures About Oil and Gas Producing Activities." Estimated future net cash flows are determined by: (1) applying the respective year-end oil and gas prices to the Company's estimates of future production of proved reserves; (2) deducting estimates of the future costs of development and production of proved reserves based on the assumed continuation of the cost levels and economic conditions existing at the respective year-end; and (3) deducting estimates of future income taxes based on the respective year-end and future statutory tax rates. Present value is determined using the FASB-prescribed discount rate of 10% per annum.
Although the information presented is based on the Company's best estimates of the required data, the methods and assumptions used in preparing the data were those prescribed by the FASB. Although unrealistic, they were specified in order to achieve uniformity in assumptions and to provide for the use of reasonably objective data. It is important to note here that this information is neither fair market value nor the present value of future cash flows and it does not reflect changes in oil and gas prices experienced since the respective year-end. It is primarily a tool designed by the FASB to allow for a reasonable comparison of oil and gas reserves and changes therein through the use of a standardized method. Accordingly, the Company cautions that this data should not be used for other than its intended purpose.
EXHIBIT 21
EXHIBIT 23
Exhibit 23
The Board of Directors The Louisiana Land and Exploration Company:
We consent to incorporation by reference in Registration Statements No. 2-79097, No. 2-98948, No. 33-22108, No. 33-22338 and No. 33-37814 on Form S-8, No. 33-48339 and No. 33-50991 on Form S-3 and No. 33-6593 on Form S-4 of The Louisiana Land and Exploration Company of our reports dated February 9, 1994, relating to the consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993 which reports appear or are incorporated by reference in the December 31, 1993 annual report on Form 10-K of The Louisiana Land and Exploration Company. Our reports refer to the adoption of the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statement of Financial Accounting Standards Nos. 109 and 106, respectively.
We also consent to incorporation by reference in the previously referred to Registration Statements of our report dated January 28, 1994, relating to the consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1993 and 1992 and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1993 which report appears in the December 31, 1993 annual report on Form 10-K of The Louisiana Land and Exploration Company. Our report refers to the adoption of the method of accounting for income taxes prescribed by Statement of Financial Accounting Standard No. 109.
/s/ KPMG Peat Marwick
KPMG PEAT MARWICK
New Orleans, Louisiana February 18, 1994
EXHIBIT 24
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director and the principal executive officer of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director and the principal executive officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ H. Leighton Steward _____________________________ H. Leighton Steward
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Leland C. Adams _____________________________ Leland C. Adams
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director and the principal financial officer of The Louisiana Land and Exploration Company hereby appoints Frederick J. Plaeger, II and Jerry D. Carlisle his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director and the principal financial officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Richard A. Bachmann _____________________________ Richard A. Bachmann
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ John F. Greene _____________________________ John F. Greene
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Eamon M. Kelly _____________________________ Eamon M. Kelly
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Victor A. Rice _____________________________ Victor A. Rice
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Orin R. Smith _____________________________ Orin R. Smith
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Arthur R. Taylor _____________________________ Arthur R. Taylor
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ W. R. Timken, Jr. _____________________________ W. R. Timken, Jr.
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Carlisle A.H. Trost _____________________________ Carlisle A.H. Trost
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ E. L. Williamson _____________________________ E. L. Williamson
THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY
WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as the principal accounting officer of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann and Frederick J. Plaeger, II and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as the principal accounting officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994.
/s/ Jerry D. Carlisle _____________________________ Jerry D. Carlisle
[TYPE] COVER
THE LOUISIANA LAND AND EXPLORATION COMPANY 909 Poydras Street New Orleans, LA 70112
February 22, 1994
Securities and Exchange Commission Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
Sincerely,
THE LOUISIANA LAND AND EXPLORATION COMPANY
s/Frederick J. Plaeger, II
Frederick J. Plaeger, II General Counsel and Corporate Secretary