-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PEp5AsxDPsN90vpqB8kTzC/6XWxrrdKYVNF6yRoPWHsmC1DrhgNyTnV5aMdH8nlU /BO8U9WreUj3jE+K7gEBJg== 0000950129-95-000142.txt : 19950612 0000950129-95-000142.hdr.sgml : 19950612 ACCESSION NUMBER: 0000950129-95-000142 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950307 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POGO PRODUCING CO CENTRAL INDEX KEY: 0000230463 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 741659398 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07792 FILM NUMBER: 95518885 BUSINESS ADDRESS: STREET 1: 5 GREENWAY PLAZA STE 2700 STREET 2: P O BOX 2504 CITY: HOUSTON STATE: TX ZIP: 77046-0504 BUSINESS PHONE: 713-651-4300 MAIL ADDRESS: STREET 1: 5 GREENWAY PLAZA SUITE 2700 STREET 2: P.O. BOX 2504 CITY: HOUSTON STATE: TX ZIP: 77046-0504 FORMER COMPANY: FORMER CONFORMED NAME: PENNZOIL OFFSHORE GAS OPERATORS INC /TX/ DATE OF NAME CHANGE: 19600201 10-K 1 POGO PRODUCING CO. 10-K DATED 12/31/95 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-7792 POGO PRODUCING COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 74-1659398 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 5 GREENWAY PLAZA, P.O. BOX 2504 HOUSTON, TEXAS 77252-2504 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS: ON WHICH REGISTERED: - ---------------------------------- ------------------------ Common Stock, $1 par value New York Stock Exchange Pacific Stock Exchange 8% Convertible Subordinated New York Stock Exchange Debentures due December 31, 2005 5 1/2% Convertible Subordinated New York Stock Exchange Notes due March 15, 2004
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Common Stock held by non-affiliates of the registrant (treating all executive officers and directors of the registrant, for this purpose, as if they may be affiliates of the registrant) was approximately $635,718,000 as of March 3, 1995 (based on $19.375 per share, the last sale price of the Common Stock as reported on the New York Stock Exchange Composite Tape on such date). 32,811,261 shares of the registrant's Common Stock were outstanding as of March 3, 1995. DOCUMENT INCORPORATED BY REFERENCE Portions of the Company's definitive Proxy Statement respecting the annual meeting of shareholders to be held on April 25, 1995 (to be filed not later than 120 days after December 31, 1994) are incorporated by reference in Part III of this Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. Pogo Producing Company (the "Company"), incorporated in 1970, is engaged in oil and gas exploration, development and production activities on its properties located offshore in the Gulf of Mexico and onshore in the United States. The Company is also engaged in exploration of its license concession in the Gulf of Thailand, and has proposed to its joint venture partners a development program in connection with its oil and gas discoveries on that concession. The Company has interests in 73 lease blocks offshore Louisiana and Texas, approximately 125,000 gross acres onshore in the United States and approximately 2,635,000 gross acres offshore in the Kingdom of Thailand. DOMESTIC OFFSHORE OPERATIONS Historically, the Company's interests have been concentrated in the Gulf of Mexico, where approximately 81% of the Company's domestic proved reserves and 63% of its total proved reserves are now located. During 1994, approximately 82% of the Company's natural gas equivalent production was from its domestic offshore properties, contributing approximately 82% of consolidated oil and gas revenues. Five offshore producing areas, Eugene Island, Main Pass, South Marsh Island, South Pass and East Cameron, account for approximately 50% of the Company's net proved natural gas reserves and approximately 56% of the Company's proved crude oil, condensate and natural gas liquids reserves. Eugene Island is the Company's largest producing area with 1994 average net revenue production (net to the Company's interest and net of royalty burdens) of approximately 81 million cubic feet ("MMcf") per day of natural gas and 5,300 barrels ("Bbls") per day of oil, condensate and natural gas liquids. The table in Item 2 of this Annual Report on Form 10-K for the year ended December 31, 1994 (this "Annual Report") summarizes the Company's offshore leasehold interests, drilling activity, and platforms set or announced as of December 31, 1994. Lease Acquisitions The Company has participated with other companies in bidding on and acquiring interests in federal leases offshore in the Gulf of Mexico since December 1970. As a result of such sales and subsequent activities, the Company owns interests in 67 federal leases offshore Louisiana and Texas. Federal leases generally have primary terms of five years, subject to extension by development and production operations. The Company also owns interests in six leases in state waters offshore Louisiana. As part of its strategy, the Company intends to continue an active lease evaluation program in the Gulf of Mexico in order to identify exploration and exploitation opportunities. During 1994, the Company was successful in acquiring interests in three lease blocks, Vermilion 335, High Island A-451 and Galveston Block A-215, through federal Outer Continental Shelf oil and gas lease sales. The Department of the Interior has announced its intention to hold two lease sales during 1995 covering federal acreage in the Central and Western portions of the Gulf of Mexico; and it is anticipated that various states will also hold sales covering offshore state acreage from time to time. As in the case of prior sales, the extent to which the Company participates in future bidding will depend on the availability of funds and its estimates of hydrocarbon deposits, operating expenses and future revenues which reasonably may be expected from available lease blocks. Such estimates typically take into account, among other things, estimates of future hydrocarbon prices, federal regulations, and taxation policies applicable to the petroleum industry. It is also the Company's objective to acquire certain producing properties where additional low-risk drilling or improved production methods by the Company can provide attractive rates of return. During 1994, the Company purchased additional working interests in portions of eight federal lease blocks in the South Pass, Mississippi Canyon, Main Pass and High Island areas of the Gulf of Mexico. In addition, the Company participated in the drilling of two wells in the South Marsh Island area which earned the Company working interests in two lease blocks, South Marsh Island Blocks 141 and 161. 1 3 Exploration and Development The scope of exploration and development programs relating to the Company's offshore interests is affected by prices for oil and gas, and by federal, state and local legislation, regulations and ordinances applicable to the petroleum industry. The Company's domestic offshore capital and exploration expenditures for 1994 were approximately $48,700,000 (excluding approximately $32,600,000 of net property acquisitions), or 20% higher than the Company's domestic offshore capital and exploration expenditures of approximately $40,600,000 for 1993 and 453% higher than the Company's domestic offshore capital and exploration expenditures of approximately $8,800,000 (excluding approximately $7,950,000 of net property acquisitions) for 1992. Development and production related projects represented 93% of the Company's 1994 domestic offshore capital and exploration expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Leases acquired by the Company and other participants in its bidding groups are customarily committed, on a block-by-block basis, to separate operating agreements under which the appointed operator supervises exploration and development operations for the account and at the expense of the group. These agreements usually contain terms and conditions which have become relatively standardized in the industry. Major decisions regarding development and operations typically require the consent of at least a majority (in working interest) of the participants. Because the Company generally has a meaningful working interest position, the Company believes it can influence decisions regarding development and operations on most of the leases in which it has a working interest even though it may not be the operator of a particular lease. The Company is currently the operator on all or a portion of 21 of the 73 offshore leases in which it has an interest. Platforms are installed on an offshore lease block when, in the judgment of the lease interest owners, the necessary capital expenditures are justified. A decision to install a platform generally is made after the drilling of one or more exploratory wells with contracted drilling equipment. Platforms are used to accommodate both development drilling and additional exploratory drilling. In recent years, the gross cost of production platforms to the joint ventures in which the Company has varying net interests has typically averaged approximately $9,100,000 per platform. Platform costs vary and more expensive platforms could be required in the future depending on, among other factors, the number of slots, water depth, currents, and sea floor conditions. During 1994, the Company completed the installation of an additional platform on Eugene Island Block 295, installed three platforms in a new field on Ship Shoal Blocks 240/256, and installed a platform on Main Pass Block 123. See "Properties -- Principal Properties." In 1989, the Company entered into a limited partnership agreement as general partner of Pogo Gulf Coast, Ltd., a Texas limited partnership ("Pogo Gulf Coast"), in which the Company agreed to be responsible for investing as much as $60,000,000 on behalf of Pogo Gulf Coast for acquisition and exploration in state and federal waters in the Gulf of Mexico. As of December 31, 1994, Pogo Gulf Coast had interests in 16 federal offshore leases, and had invested a total of approximately $55,500,000 for exploration and development of the properties owned since the partnership began. The Company owns 40% of any interest in properties acquired by the limited partnership. Unless otherwise noted, the statistical data reported in this Annual Report reflect only the Company's share of Pogo Gulf Coast's holdings. DOMESTIC ONSHORE OPERATIONS The Company has onshore division staffs in Houston and Midland, Texas. Its onshore activities are concentrated in known oil and gas provinces, principally the Permian Basin of southeastern New Mexico and West Texas and the onshore Gulf Coast area. The Company's primary drilling objective in southeastern New Mexico is the Brushy Canyon (Delaware) formation which produces oil from depths of 6,000 to 9,000 feet. Since the Company began exploring in the Brushy Canyon (Delaware) formation in October 1989, it has participated in the drilling of 209 wells through December 31, 1994, including 58 wells in 1994. During the fourth quarter of 1994, the Company's net revenue interest portion of daily liquid hydrocarbon production in New Mexico averaged approximately 3,950 Bbls which represented approximately 30% of the Company's total average daily production of oil, condensate and liquid plant products during the fourth quarter of 1994. 2 4 The Company generally conducts its onshore activities through joint ventures and other interest-sharing arrangements with major and independent oil companies. The Company operates many of its own onshore properties using independent contractors. The Company's domestic onshore capital and exploration expenditures were approximately $32,000,000 for 1994, or 7% higher than the Company's domestic onshore capital and exploration expenditures of approximately $29,800,000 for 1993 and 81% higher than the Company's domestic onshore capital and exploration expenditures of approximately $17,650,000 (excluding approximately $950,000 of net property acquisitions) for 1992. Development and production related projects represented 74% of the Company's 1994 domestic onshore capital and exploration expenditures. As of December 31, 1994, the Company held leases on 79,768 net acres onshore in the United States. Onshore reserves as of December 31, 1994, accounted for approximately 19% of the Company's domestic proved reserves and approximately 14% of its total proved reserves. During 1994, approximately 18% of the Company's natural gas equivalent production was from its domestic onshore properties, contributing approximately 18% of consolidated oil and gas revenues. INTERNATIONAL OPERATIONS The Company has conducted international exploration activities since the late 1970's in numerous oil and gas areas throughout the world. The Company pursues a strategy of evaluating potentially high return prospects in areas of the world with a stable political and financial climate such as certain European and ASEAN ("Association of Southeast Asian Nations") countries. The Company's international capital and exploration expenditures were approximately $6,350,000 for 1994, or 6% higher than the Company's international capital and exploration expenditures of approximately $6,000,000 for 1993 and 144% higher than the Company's international capital and exploration expenditures of approximately $2,600,000 for 1992. Substantially all of the Company's international capital and exploration expenditures for 1994 were related to the Company's license in the Kingdom of Thailand. However, the Company continues to evaluate other international opportunities that are consistent with the Company's international exploration strategy. In August 1991, the Company, through its wholly owned subsidiary Thaipo Limited, together with its joint venture partners, was awarded a license from the Kingdom of Thailand to explore for and produce oil and gas on Block B8/32, a 2.6 million acre tract in the Gulf of Thailand. Following an initial evaluation of the Thailand concession area, the Company and its joint venture partners have drilled eight wells on a seismic structure on a portion of the concession named Tantawan. In October 1992, the Tantawan No. 1 well was drilled. During 1993, the Company and its joint venture partners shot, processed and evaluated approximately 9,000 square kilometers of new 3-D seismic data over and around the Tantawan No. 1 well. In late 1993, the Company drilled the Tantawan No. 2 and the Tantawan No. 3 wells on the Tantawan structure. In early 1994, an additional two wells, the Tantawan No. 4 and the Tantawan No. 5 delineation wells, were successfully drilled on the Tantawan area seismic structure. This success was repeated in late 1994 with the drilling of three more delineation wells on the Tantawan area seismic structure. In March 1995, the Company reached an agreement with its partners in the concession under which the Company currently anticipates that its working interest in the Tantawan portion of the concession will increase from approximately 31.7% to approximately 46.3%, upon approval of appropriate governmental authorities in Thailand. The Company will also assume the duties of operator on the Tantawan portion of the concession, which covers approximately 76,000 acres of the Block B8/32 license concession. Development activities on the Tantawan portion of the concession are currently expected to commence in the first half of 1995. Contingent upon availability of transportation and other factors, the development program could lead to commencement of initial production from reservoirs located on the Tantawan structure within 18 to 24 months. See "-- Miscellaneous; Sales;" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." At December 31, 1994, the Company's Thailand concession accounted for approximately 23% of the Company's total estimated net proved reserves of natural gas and approximately 23% of its total estimated net proved reserves of oil, condensate and natural gas liquids. If the anticipated increase in the Company's working interest in the Tantawan portion of the concession had been effective at that date, those percentages would have been approximately 30%. All such proved reserves in Thailand are located on the Tantawan portion of the concession and are currently classified as proved undeveloped. 3 5 In addition to its continuing efforts on the Tantawan structure, the Company and its joint venture partners have shot, processed and are currently evaluating 10,500 square kilometers of new 3-D seismic data on a different portion of Block B8/32. The Company and its partners currently plan to drill at least four more wells on the non-Tantawan portion of the Thailand concession during 1995. The Company's working interest in the non-Tantawan portion of the concession, which is operated by one of its partners, remains at approximately 31.7%. Any production resulting from the concession will be subject to a royalty ranging from 5% to 15% of oil and gas sales, plus certain fixed dollar amounts payable at specified cumulative production levels. Revenue from production in Thailand will also be subject to income taxes and other governmental charges. As set forth in the August 1991 concession, the exploratory term of the concession is for a period of up to six years; provided, however, that after the expiration of four years, a portion of the acreage in Block B8/32 must be relinquished by the Company and its joint venture partners and removed from the concession license. The Company must identify and release this acreage no later than August 1, 1995. During the concession's exploratory period, the Company and its joint venture partners have certain work commitments involving the drilling of exploratory wells or the expenditure of certain sums of money on exploration activities. The Company and its joint venture partners have satisfied all of these obligations. Following the commencement of production, the initial production period of the concession is 20 years, subject to extension. See also "-- Miscellaneous; Sales." MISCELLANEOUS Other Assets The Company and a subsidiary, Pogo Offshore Pipeline Co., own minority interests in three pipelines through which offshore oil production is transported ashore. In addition, the Company owns an approximately 21% interest in a cryogenic gas processing plant near Erath, Louisiana, which entitles it to process up to 189 MMcf of gas per day. Currently, the plant is not operating at full capacity. Sales The marketing of offshore oil and gas production is subject to the availability of pipelines and other transportation, processing and refining facilities as well as the existence of adequate markets. As a result, even if hydrocarbons are discovered in commercial quantities, a substantial period of time may elapse before commercial production commences. If pipeline facilities in an area are insufficient, the Company may have to await the construction or expansion of pipeline capacity before production from that area can be marketed. The Company's domestic offshore properties are generally located in areas where a pipeline infrastructure is well developed and there is adequate availability in such pipelines to handle the Company's current and projected future production. The Company's concession in Thailand is traversed by a major natural gas pipeline that comes within approximately 25 miles of the Tantawan structure. This pipeline is currently running at or near capacity. However, construction of a second, parallel natural gas pipeline owned by an entity controlled by the government of the Kingdom of Thailand has recently commenced, with completion expected to occur during 1996. The Company is currently negotiating transportation and sale arrangements with the Petroleum Authority of Thailand for oil and gas expected to be produced from the Tantawan structure. The marketing of onshore oil and gas production is also subject to the availability of pipelines, crude oil hauling and other transportation, processing and refining facilities as well as the existence of adequate markets. Generally, the Company's onshore domestic oil and gas production is located in areas where commercial production of economic discoveries can be rapidly effectuated. Most of the Company's natural gas sales are currently made in the "spot market" for no more than one month at a time at then currently available prices. Prices on the spot market fluctuate with demand. Crude oil and condensate production is also generally sold one month at a time at the currently available prices. Other than any futures contracts referred to in "-- Miscellaneous; Competition and Market Conditions," the Company has no existing contracts that require the delivery of fixed quantities of oil or natural gas other than 4 6 on a best efforts basis. See also "Financial Statements and Supplementary Data -- Note 4 to Notes to Consolidated Financial Statements and -- Unaudited Supplementary Financial Data." Competition and Market Conditions The Company experiences competition from other oil and gas companies in all phases of its operations, as well as competition from other energy related industries. The Company's profitability and cash flow are highly dependent upon the prices of oil and natural gas, which historically have been seasonal, cyclical and volatile. In general, prices of oil and gas are dependent upon numerous factors beyond the control of the Company, including various weather, economic, political and regulatory conditions. In the past, when natural gas prices in the United States were lower than they are currently, the Company at times elected to curtail certain quantities of its production. For example, in the fourth quarter of 1994, the Company curtailed a small portion of its daily natural gas production. As of February 1, 1995, the Company was not curtailing any of its natural gas production as a result of low natural gas prices. Should natural gas prices fall in the future, the Company may again elect to curtail certain quantities of its natural gas production. Any significant decline in oil or gas prices could have a material adverse effect on the Company's operations and financial condition and could, under certain circumstances, result in a reduction in funds available under the Company's bank credit facility. Because it is impossible to predict future oil and gas price movements with any certainty, the Company from time to time enters into contracts on a portion of its production to hedge against the volatility in oil and gas prices. Such hedging transactions, historically, have not exceeded 50% of the Company's total oil and gas production on an energy equivalent basis for any given period. While intended to limit the negative effect of price declines, such transactions could effectively limit the Company's participation in price increases for the covered period, which increases could be significant. The Company has entered into a crude oil swap agreement with another party in which it had swapped the floating market price it receives from purchasers of its crude oil for a fixed price of $17.08 per barrel on 1,000 Bbls per day of the Company's production for a period ending April 30, 1995. In addition, as of January 1, 1995, the Company had entered into futures contracts with various parties on a portion of its daily natural gas production through September 30, 1995 (commencing with contracts totaling approximately 37 MMcf per day in January and decreasing on a quarterly basis to approximately 15 MMcf per day) at varying prices ranging from approximately $1.92 to $1.83 per thousand cubic feet ("Mcf"). When the Company does engage in such hedging activities, it may satisfy its obligations with its own production or by the purchase (or sale) of third party production. The Company may also cancel all delivery obligations by offsetting such obligations with equivalent agreements, thereby effecting a purely cash transaction. Operating and Uninsured Risks The Company's operations are subject to risks inherent in the exploration for and production of oil and natural gas, such as blowouts, cratering, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, pollution and other environmental risks. Offshore oil and gas operations are subject to the additional hazards of marine and helicopter operations, such as capsizing, collision and adverse weather and sea conditions. These hazards could result in substantial losses to the Company due to injury or loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. The Company carries insurance which it believes is in accordance with customary industry practices, but is not fully insured against all risks incident to its business. Drilling activities are subject to numerous risks, including the risk that no commercially productive hydrocarbon reserves will be encountered. The cost of drilling, completing and operating wells and of installing production facilities and pipelines is often uncertain. The Company's drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment. The availability of a ready market for the Company's natural gas production depends on a number of factors, including the demand for and supply of natural gas, the proximity of natural gas reserves to pipelines, the capacity of such pipelines and government regulations. 5 7 Risks of Foreign Operations Ownership of property interests and production operations in Thailand and other areas outside the United States are subject to the various risks inherent in foreign operations. These risks include, among others, currency restrictions and exchange rate fluctuations, loss of revenue, property and equipment as a result of hazards such as expropriation, nationalization, war, insurrection and other political risks, risks of increases in taxes and governmental royalties, renegotiation of contracts with governmental entities, as well as changes in laws and policies governing operations of foreign-based companies. The Company seeks to manage these risks by concentrating its international exploration efforts in areas where the Company believes that the existing government is stable and favorably disposed towards United States exploration and production companies. The Company believes that the Kingdom of Thailand currently presents favorable conditions in which to conduct international operations. EXPLORATION AND PRODUCTION DATA In the following data "gross" refers to the total acres or wells in which the Company has an interest and "net" refers to gross acres or wells multiplied by the percentage working interest owned by the Company. Acreage The following table shows the Company's interest in developed and undeveloped oil and gas acreage as of December 31, 1994:
DEVELOPED ACREAGE(A) UNDEVELOPED ACREAGE(B) ------------------- ---------------------- GROSS NET GROSS NET ------- ------- ---------- -------- ONSHORE Arkansas................................. -- -- 118 20 Colorado................................. 80 32 7,883 7,883 Louisiana................................ 869 209 537 537 New Mexico............................... 16,898 7,835 53,832 37,205 Oklahoma................................. 3,200 333 -- -- Texas.................................... 11,197 4,459 30,783 21,220 Wyoming.................................. -- -- 120 35 ------- ------- ---------- -------- Total Onshore.................... 32,244 12,868 93,273 66,900 ======= ====== ======== ======= OFFSHORE Louisiana (State)........................ 7,804 2,964 -- -- Louisiana (Federal)(c)................... 176,067 58,670 59,989 13,989 Texas (Federal).......................... 46,080 10,860 17,280 6,912 ------- ------- ---------- -------- Total Offshore................... 229,951 72,494 77,269 20,901 ------- ------- ---------- -------- TOTAL DOMESTIC............................. 262,195 85,362 170,542 87,801 ------- ------- ---------- -------- INTERNATIONAL Thailand (Offshore)...................... -- -- 2,635,116 834,541 ------- ------- ---------- -------- TOTAL COMPANY.............................. 262,195 85,362 2,805,658 922,342 ======= ====== ======== =======
- --------------- (a) "Developed acreage" consists of lease acres spaced or assignable to production on which wells have been drilled or completed to a point that would permit production of commercial quantities of oil and natural gas. (b) Approximately 16% of the Company's total offshore net undeveloped acreage is under leases that have terms expiring in 1995, if not held by production, and another approximately 29% of offshore net undeveloped acreage will expire in 1996 if not also held by production. Approximately 19% of onshore net undeveloped acreage is under leases that have terms expiring in 1995, if not held by production, and another approximately 15% of onshore net undeveloped acreage will expire in 1996 if not also held by production. 6 8 (c) The Company also owns overriding royalty interests in one federal lease offshore Louisiana totaling 5,000 gross and 1,250 net acres. Productive Wells and Drilling Activity The following table shows the Company's interest in productive oil and natural gas wells as of December 31, 1994. Productive wells are producing wells plus wells "capable of production" (e.g., natural gas wells waiting for pipeline connections or necessary governmental certification to commence deliveries and oil wells waiting to be connected to production facilities).
NATURAL GAS OIL WELLS(A) WELLS(A) --------------- -------------- GROSS NET GROSS NET ----- ----- ----- ---- Offshore United States................................ 185 45.6 166 51.7 Onshore United States................................. 210 120.0 67 25.7 ----- ----- ----- ---- Total....................................... 395 165.6 233 77.4 ==== ===== ==== ====
- --------------- (a) One or more completions in the same bore hole are counted as one well. The data in the above table includes 30 gross (7.4 net) oil wells and 16 gross (5.7 net) natural gas wells with multiple completions. The following table shows the number of successful gross and net exploratory and development wells in which the Company has participated and the number of gross and net wells abandoned as dry holes during the periods indicated. An onshore well is considered successful upon the installation of permanent equipment for the production of hydrocarbons. Successful offshore wells consist of exploratory or development wells that have been completed or are "suspended" pending completion (which has been determined to be feasible and economic) and exploratory test wells that were not intended to be completed and that encountered commercially producible hydrocarbons. A well is considered a dry hole upon reporting of permanent abandonment to the appropriate agency.
1994 1993 1992 ------------------- ------------------- ------------------ SUCCESSFUL DRY SUCCESSFUL DRY SUCCESSFUL DRY ---------- ---- ---------- ---- ---------- --- GROSS WELLS: Offshore United States Exploratory.................. 2.0 -- 5.0 1.0 -- 2.0 Development.................. 25.0 2.0 15.0 -- 5.0 -- Onshore United States Exploratory.................. 3.0 6.0 3.0 4.0 4.0 2.0 Development.................. 51.0 3.0 61.0 1.0 34.0 -- Offshore Kingdom of Thailand Exploratory.................. 5.0 -- 2.0 2.0 1.0 -- ----- ---- ----- ---- ----- --- Total................ 86.0 11.0 86.0 8.0 44.0 4.0 ======= ==== ======= ==== ======= === NET WELLS: Offshore United States Exploratory.................. 0.6 -- 1.7 0.1 -- 0.7 Development.................. 8.4 1.4 7.7 -- 1.5 -- Onshore United States Exploratory.................. 2.8 3.6 2.0 3.2 2.8 0.9 Development.................. 29.9 0.9 33.1 0.4 23.2 -- Offshore Kingdom of Thailand Exploratory.................. 1.6 -- 0.6 0.6 0.3 -- ----- ---- ----- ---- ----- --- Total................ 43.3 5.9 45.1 4.3 27.8 1.6 ======= ==== ======= ==== ======= ===
As of December 31, 1994, the Company was participating in the drilling of 4 gross (1.7 net) offshore domestic wells and 5 gross (1.8 net) onshore wells. 7 9 Production and Sales The following table summarizes the Company's average daily production, net of all royalties, overriding royalties and other outstanding interests, for the periods indicated. Natural gas production refers only to marketable production of natural gas on an "as sold" basis.
1994 1993 1992 -------- ------- -------- Production Sales: Natural Gas (Mcf per day)............................ 144,800 91,700 105,200 ======= ====== ======= Crude Oil and Condensate (Bbls per day).............. 11,100 9,851 8,699 ======= ====== ======= Natural Gas Liquids (Bbls per day): Leasehold Ownership.................................. 2,075 1,538 1,037 Plant Ownership...................................... 147 140 144 -------- ------- -------- Total........................................ 2,222 1,678 1,181 ======= ====== =======
The following table shows the average sales prices received by the Company for its production and the average production (lifting) costs per unit of production during the periods indicated. See "-- Miscellaneous; Competition and Market Conditions and Sales."
1994 1993 1992 ------- ------- ------- Sales Prices: Natural Gas (per Mcf).................................. $ 1.88 $ 1.98 $ 1.75 Crude Oil and Condensate (per Bbl)..................... $ 16.08 $ 17.81 $ 20.17 Natural Gas Liquids (per Bbl).......................... $ 11.33 $ 11.90 $ 13.50 Production (lifting) Costs(a) Natural Gas, Crude Oil, Condensate and Natural Gas Liquids (per equivalent Mcf of Natural Gas)......... $ 0.36 $ 0.45 $ 0.43
- --------------- (a) Production costs were converted to common units of measure on the basis of relative energy content. Such production costs exclude all depletion and amortization associated with property and equipment. 8 10 Reserves The following table sets forth information as to the Company's net proved developed and proved undeveloped reserves as of December 31, 1994, 1993, and 1992, and the present value as of such dates (based on an annual discount rate of 10%) of the estimated future net revenues from the production and sale of those reserves, as estimated by Ryder Scott Company Petroleum Engineers, Houston, Texas ("Ryder Scott") in accordance with criteria prescribed by the Securities and Exchange Commission (the "Commission"). The summary report of Ryder Scott on the reserve estimates, which includes definitions and assumptions, is set forth as an exhibit to this Annual Report and definitions, assumptions and descriptions of methodology following the tables are based upon the Ryder Scott report.
AS OF DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- --------- --------- Total Proved Reserves: Oil, condensate, and natural gas liquids (thousands of Bbls) -- Located in the United States.................. 26,188 22,843 19,979 Located in the Kingdom of Thailand............ 7,674 5,425 2,577 --------- --------- --------- Total Company............................ 33,862 28,268 22,556 ========= ========= ========= Natural Gas (MMcf) Located in the United States.................. 186,151 199,392 196,400 Located in the Kingdom of Thailand............ 56,739 33,474 10,668 --------- --------- --------- Total Company............................ 242,890 232,866 207,068 ========= ========= ========= Present value of estimated future net revenues, before income taxes (in thousands) Located in the United States.................. $ 330,868 $ 386,674 $ 390,893 Located in the Kingdom of Thailand............ 52,112 17,166 $ 14,208 --------- --------- --------- Total Company............................ $ 382,980 $ 403,840 $ 405,101 ========= ========= ========= Proved Developed Reserves (all located in the United States): Oil, condensate, and natural gas liquids (thousands of Bbls)........................... 24,670 20,976 18,798 Natural Gas (MMcf)............................... 178,518 183,139 175,523 Present value of estimated future net revenues, before income taxes (in thousands)............ $ 321,514 $ 375,287 $ 378,300
Natural gas liquids comprise approximately 13% of the Company's total proved liquids reserves and approximately 17% of the Company's proved developed liquids reserves. All hydrocarbon liquid reserves are expressed in standard 42 gallon Bbls. All gas volumes and gas sales are expressed in MMcf at the pressure and temperature bases of the area where the gas reserves are located. Proved reserves of crude oil, condensate, natural gas, and natural gas liquids are estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under existing conditions. Reservoirs are considered proved if economic producibility is supported by actual production or formation tests. In certain instances, proved reserves are assigned on the basis of a combination of core analysis and electrical and other type logs which indicate the reservoirs are analogous to reservoirs in the same field which are producing or have demonstrated the ability to produce on a formation test. The area of a reservoir considered proved includes (i) that portion delineated by drilling and defined by fluid contacts, if any, and (ii) the adjoining portions not yet drilled that can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of data on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir. Proved reserves are estimates of hydrocarbons to be recovered from a given date forward. They may 9 11 be revised as hydrocarbons are produced and additional data becomes available. Proved natural gas reserves are comprised of nonassociated, associated and dissolved gas. An appropriate reduction in gas reserves has been made for the expected removal of liquids, for lease and plant fuel and the exclusion of non-hydrocarbon gases if they occur in significant quantities and are removed prior to sale. Reserves that can be produced economically through the application of established improved recovery techniques are included in the proved classification when these qualifications are met: (i) successful testing by a pilot project or the operation of an installed program in the reservoir provides support for the engineering analysis on which the project or program was based, and (ii) it is reasonably certain the project will proceed. Improved recovery includes all methods for supplementing natural reservoir forces and energy, or otherwise increasing ultimate recovery from a reservoir, including, (a) pressure maintenance, (b) cycling, and (c) secondary recovery in its original sense. Improved recovery also includes the enhanced recovery methods of thermal, chemical flooding, and the use of miscible and immiscible displacement fluids. Estimates of proved reserves do not include crude oil, condensate, natural gas, or natural gas liquids being held in underground storage. Depending on the status of development, these proved reserves are further subdivided into: (i) "developed reserves" which are those proved reserves reasonably expected to be recovered through existing wells with existing equipment and operating methods, including (a) "developed producing reserves" which are those proved developed reserves reasonably expected to be produced from existing completion intervals now open for production in existing wells, and (b) "developed non-producing reserves" which are those proved developed reserves which exist behind casing of existing wells which are reasonably expected to be produced through these wells in the predictable future where the cost of making such hydrocarbons available for production should be relatively small compared to the cost of new wells; and (ii) "undeveloped reserves" which are those proved reserves reasonably expected to be recovered from new wells on undrilled acreage, from existing wells where a relatively large expenditure is required and from acreage for which an application of fluid injection or other improved recovery technique is contemplated where the technique has been proved effective by actual tests in the area in the same reservoir. Reserves from undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units are included only where it can be demonstrated with reasonable certainty that there is continuity of production from the existing productive formation. The Company has interests in certain tracts which may have substantial additional hydrocarbon quantities which cannot be classified as proved and are not included herein. The Company has active exploratory and development drilling programs which in all likelihood will result in the reclassification of significant additional quantities to the proved category. In computing future revenues from gas reserves attributable to the Company's interests, prices in effect at December 31, 1994 were used, including current market prices, contract prices and fixed and determinable price escalations where applicable. In accordance with Commission guidelines, the future gas prices that were used make no allowances for seasonal variations in gas prices which are likely to cause future yearly average gas prices to be somewhat lower than December gas prices. For gas sold under contract, the contract gas price including fixed and determinable escalations, exclusive of inflation adjustments, was used until the contract expires and then was adjusted to the current market price for the area and held at this adjusted price to depletion of the reserves. In computing future revenues from liquids attributable to the Company's interest, prices in effect at December 31, 1994 were used and these prices were held constant to depletion of the properties. With respect to the Company's Thailand properties, production was assumed to commence in 1997, at sales prices that were estimated by the Company based in part on reported sales prices for production from other producers in the area. The estimates of future net revenue from the Company's domestic and Thailand properties are based on existing law where the properties are located and are calculated in accordance with Commission guidelines. Operating costs for the leases and wells include only those costs directly applicable to the leases or wells. When applicable, the operating costs include a portion of general and administrative costs allocated directly to 10 12 the leases and wells under terms of operating agreements. Development costs are based on authorization for expenditure for the proposed work or actual costs for similar projects. The current operating and development costs were held constant throughout the life of the properties. For properties located onshore, the estimates of future net revenues and the present value thereof do not consider the salvage value of the lease equipment or the abandonment cost of the lease since both are relatively insignificant and tend to offset each other. The estimated net cost of abandonment after salvage was considered for offshore properties where such costs net of salvage are significant. No deduction was made for indirect costs such as general and administrative and overhead expenses, loan repayments, interest expenses, and exploration and development prepayments. The accumulated gas production imbalances have been taken into account. Production data used to arrive at the estimates set forth above includes estimated production for the last few months of 1994. The future production rates from reservoirs now on production may be more or less than estimated because of, among other reasons, mechanical breakdowns and changes in market demand or allowables set by regulatory bodies. Properties which are not currently producing may start producing earlier or later than anticipated in the estimates of future production rates. The future prices received by the Company for the sales of its production may be higher or lower than the prices used in calculating the estimates of future net revenues and the present value thereof as set forth herein, and the operating costs and other costs relating to such production may also increase or decrease from existing levels; however, such possible changes in prices and costs were, in accordance with rules adopted by the Commission, omitted from consideration in arriving at such estimates. There are numerous uncertainties in estimating the quantity of proved reserves and in projecting the future rates of production and timing of development expenditures. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way, and estimates of other engineers might differ materially from those of Ryder Scott, the Company's reserve engineers. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. The Company is periodically required to file estimates of its oil and gas reserve data with various governmental regulatory authorities and agencies, including the Federal Energy Regulatory Commission ("FERC") and the Federal Trade Commission. In addition, estimates are from time to time furnished to governmental agencies in connection with specific matters pending before such agencies. The basis for reporting reserves to these agencies, in some cases, is not comparable to that furnished above because of the nature of the various reports required. The major differences include differences in the time as of which such estimates are made, differences in the definition of reserves, requirements to report in some instances on a gross, net or total operator basis and requirements to report in terms of smaller geographical units. No estimates by the Company of its total proved net oil and gas reserves, however, were filed with or included in reports to any federal authority or agency other than the Commission during 1994. GOVERNMENT REGULATION The Company's operations are affected from time to time in varying degrees by political developments and federal and state laws and regulations. Rates of production of oil and gas have for many years been subject to federal and state conservation laws and regulations, and the petroleum industry has been subject to federal and state tax laws dealing specifically with it. Federal Income Tax The Company's operations are significantly affected by certain provisions of the federal income tax laws applicable to the petroleum industry. The principal provisions affecting the Company are those that permit the 11 13 Company, subject to certain limitations, to deduct as incurred, rather than to capitalize and amortize, its domestic "intangible drilling and development costs" and to claim depletion on a portion of its domestic oil and gas properties based on 15% of its oil and gas gross income from such properties (up to an aggregate of 1,000 Bbls per day of domestic crude oil and/or equivalent units of domestic natural gas) even though the Company has little or no basis in such properties. Under certain circumstances, however, a portion of such intangible drilling and development costs and the percentage depletion allowed in excess of basis will be tax preference items that will be taken into account in computing the Company's alternative minimum tax. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Environmental Matters Offshore oil and gas operations are subject to extensive federal regulation and, with respect to federal leases, to interruption or termination by governmental authorities on account of environmental and other considerations including the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") also known as the "Superfund Law." Regulations of the Department of the Interior currently impose absolute liability upon the lessee under a federal lease for the costs of clean-up of pollution resulting from a lessee's operations, and such lessee may also be subject to possible legal liability for pollution damages. The Company maintains insurance against costs of clean-up operations, but is not fully insured against all such risks. A serious incident of pollution may, as it has in the past, also result in the Department of the Interior requiring lessees under federal leases to suspend or cease operation in the affected area. The Oil Pollution Act of 1990 (the "OPA") and regulations thereunder impose a variety of regulations on "responsible parties" (which include owners and operators of offshore facilities) related to the prevention of oil spills and liability for damages resulting from such spills in United States waters. In addition it imposes ongoing requirements on responsible parties, including proof of financial responsibility to cover at least some costs in a potential spill. On August 25, 1993, the Mineral Management Service (the "MMS") published an advance notice of its intention to adopt a rule under OPA that would require owners and operators of offshore oil and gas facilities to establish $150,000,000 in financial responsibility. Under the proposed rule, financial responsibility could be established through insurance, guaranty, indemnity, surety bond, letter of credit, qualification as a self-insurer or a combination thereof. There is substantial uncertainty as to whether insurance companies or underwriters will be willing to provide coverage under OPA because the statute provides for direct lawsuits against insurers who provide financial responsibility coverage, and most insurers have strongly protested this requirement. The financial tests or other criteria that will be used to judge self-insurance are also uncertain. Recently, parties in congress and industry have been raising substantial objections to the rules as proposed by the MMS. Various proposals have been made to resolve the objections of industry while satisfying environmental concerns. The Company cannot predict the final form of the financial responsibility rule that will be adopted by the MMS, but such rule has the potential to result in the imposition of substantial additional annual costs on the Company or otherwise materially adversely affect the Company. The impact of the rule, however, should not be any more adverse to the Company than it will be to other similarly situated owners or operators in the Gulf of Mexico. The operators of the Company's properties have numerous applications pending before the Environmental Protection Agency (the "EPA") for National Pollution Discharge Elimination System water discharge permits with respect to offshore drilling and production operations. The issue generally involved is whether effluent discharges from each facility or installation comply with the applicable federal regulations. See "Legal Proceedings" for a discussion of other environmental matters. The Company's onshore operations are subject to numerous United States federal, state, and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment including CERCLA. Such regulations, among other things, impose absolute liability on the lessee under a lease for the cost of clean-up of pollution resulting from a lessee's operations, subject the lessee to liability for pollution damages, may require suspension or cessation of operations in affected areas, and impose restrictions on the injection of liquids into subsurface aquifers that may contaminate groundwater. In addition, the recent trend toward stricter standards in environmental legislation 12 14 and regulation may continue. For instance, production wastes as "hazardous wastes" which would make the reclassified exploration and production wastes subject to more stringent handling, disposal and clean-up requirements. If such legislation were to be enacted, it could have a significant impact on the operating costs of the Company, as well as the oil and gas industry in general. State initiatives to further regulate the disposal of oil and gas wastes are also pending in certain states, and these initiatives could have a similar impact on the Company. The Company is asked to comment on the costs it incurred during the prior year on capital expenditures for environmental control facilities and the amount it anticipates incurring during the coming year. The Company believes that, in the course of conducting its oil and gas operations, many of the costs attributable to environmental control facilities would have been incurred absent environmental regulations as prudent, safe oil field practice. During 1994, the Company incurred capital expenditures of approximately $2,360,000 for environmental control facilities, including the completion of four salt water disposal facilities in New Mexico. The Company currently has budgeted approximately $1,300,000 for environmental control facilities, including three salt water disposal facilities during 1995. Other Laws and Regulations Various laws and regulations often require permits for drilling wells and also cover spacing of wells, the prevention of waste of oil and gas including maintenance of certain gas/oil ratios, rates of production and other matters. The effect of these laws and regulations, as well as other regulations that could be promulgated by the jurisdictions in which the Company has production, could be to limit allowable production from the Company's properties and thereby to limit its revenues. Other Regulations and Legislative Proposals Prior to January 1, 1993 various aspects of the Company's natural gas operations were subject to regulations by the FERC under the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA") with respect to "first sales" of natural gas including price controls and certificate and abandonment authority regulations. However, as a result of the enactment of the Natural Gas Decontrol Act of 1989, the remaining "first sales" restrictions imposed by the NGA and the NGPA terminated on January 1, 1993. Commencing in late 1985, the FERC has issued a series of orders that have had a major impact on natural gas pipeline operations, services and rates and thus have significantly altered the marketing and price of natural gas. Order 636, issued in April 1992, requires each pipeline company, among other things, to "unbundle" its traditional wholesale services and create and make available on an open and nondiscriminatory basis numerous constituent services (such as gathering services, storage services, firm and interruptible transportation services, and stand-by sales services) and to adopt a new rate making methodology to determine appropriate rates for those services. To the extent the pipeline company or its sales affiliate makes gas sales as a merchant in the future, it will do so in direct competition with all other sellers pursuant to private contracts; however, pipeline companies and their affiliates are not required to remain "merchants" of gas, and some of the interstate pipelines companies have or will become "transporters only." In subsequent orders, the FERC largely affirmed Order 636 and denied a stay of the implementation of the new rules pending judicial review. In addition, the FERC has generally accepted rate filings implementing Order 636 on essentially every interstate pipeline as of the end of 1994. Order 636, as well as the FERC orders approving the individual pipeline rate filings implementing Order 636, are the subject of numerous appeals to the United States Courts of Appeals. The Company cannot predict whether the latest orders will be affirmed on appeal or what the effects will be on its business. EMPLOYEES As of December 31, 1994, the Company had 108 employees. None of the Company's employees are presently represented by a union for collective bargaining purposes. The Company considers its relations with its employees to be excellent. 13 15 ITEM 2. PROPERTIES. The information appearing in Item 1 of this Annual Report is incorporated herein by reference. PRINCIPAL PROPERTIES As of January 1, 1995, approximately 81% of the Company's domestic proved oil and gas equivalent reserves and approximately 63% of the Company's total proved oil and gas equivalent reserves were located on properties in the Gulf of Mexico. Six significant producing areas, of which five are located in the Gulf of Mexico and the sixth is located in New Mexico, accounted for approximately 56% of the estimated proved natural gas reserves and approximately 72% of the estimated oil, condensate and natural gas liquids reserves of the Company as of January 1, 1995. These producing areas accounted for approximately 83% of natural gas production and 94% of oil, condensate and natural gas liquids production for 1994. Net proved reserves, as estimated by Ryder Scott, and average net daily production data for the six significant producing areas are shown in the following table. No other major producing area accounted for more than 5% of the estimated discounted future net revenues attributable to the Company's estimated proved reserves as of January 1, 1995. However, the Company's Thailand concession, which is currently not a producing property, accounts for approximately 23% of the Company's total estimated net proved reserves of natural gas, approximately 23% of the Company's total estimated net proved reserves of oil, condensate and natural gas liquids and approximately 23% of the Company's total net proved oil and gas equivalent reserves. SIGNIFICANT PRODUCING AREAS
NET PROVED RESERVES 1994 AVERAGE NET AS OF JANUARY 1, 1995 DAILY PRODUCTION ------------------------------ ----------------------------- DISCOUNTED FUTURE NATURAL GAS LIQUIDS(A) NATURAL GAS LIQUIDS(A) NET ------------- -------------- ------------- ------------- REVENUES(B) (MMCF) % (MBBLS) % (MCF) % (BBLS) % % ------ ---- ------- ---- ------ ---- ------ ---- ----------- OFFSHORE Eugene Island............... 67,910 28.0% 9,416 27.8% 80,592 55.7% 5,269 39.6% 36.2% Main Pass................... 14,932 6.1 5,264 15.5 5,225 3.6 1,367 10.3 11.4 South Marsh Island.......... 7,939 3.3 2,639 7.8 3,340 2.3 1,439 10.8 6.6 South Pass.................. 12,510 5.2 1,435 4.2 6,290 4.3 372 2.8 4.7 East Cameron................ 17,494 7.2 132 0.4 13,537 9.4 102 0.8 4.0 ONSHORE New Mexico Lea/Eddy Counties.................. 14,621 6.0 5,410 16.0 9,638 6.7 3,935 29.5 11.6
- --------------- (a) "Liquids," includes oil, condensate and natural gas liquids. (b) Before income taxes, discounted at 10%. Set forth below are descriptions of certain of the Company's significant producing areas. Unless otherwise specifically identified, the information set forth in such descriptions, including the number of wells, platforms and blocks, is presented on a gross, rather than a net to the Company basis. Eugene Island The Company's most significant reserves and production are located in the Eugene Island area off the Louisiana coast in the Gulf of Mexico. The Eugene Island area has been an important part of the Company's operations since the first lease in that area was purchased in 1970 and production began in 1973. The Company currently holds interests in 13 blocks in the Eugene Island area. These blocks comprise eight fields containing 94 oil and gas wells producing from multiple reservoirs and horizons. The Eugene Island Block 330 field is the Company's most significant asset, with 28 productive Pleistocene horizons between 4,000 and 8,000 feet, containing multiple reservoirs. The field, located in 245 feet of water, contains three drilling and production platforms in which the Company holds a 35% working 14 16 interest, as well as an additional platform in which the Company holds a 30% working interest. There are currently 17 wells producing primarily natural gas and 36 wells producing primarily oil on the block. In 1994, a successful drilling program off of the field's "D" platform resulted in the completion of three oil wells and one high volume horizontal gas well. Since initial production in 1973, the Eugene Island Block 330 field has produced approximately 641 billion cubic feet ("Bcf ") of natural gas and 127 million barrels ("MMBbls") of oil and condensate (173 Bcf and 37 MMBbls attributable to the Company's net revenue interest). Reserves have been added to this field consistently since production commenced. These increases have been derived from new exploratory horizons, infill drilling, field expansions and higher than anticipated recovery efficiencies. Another significant field to the Company is the Eugene Island Block 295 field. On production since February 1973, this block has recorded gross production of over 416 Bcf of natural gas and over 3.0 MMBbls of oil and condensate during its twenty two-year life. In August 1993, the Company effected an exchange of working interests in Eugene Island Block 295 with another working interest owner in such block. Pursuant to this exchange, the Company increased its working interest in Eugene Island Block 295 to 100% on 3,125 acres above 3,000 feet, to 20% on 1,875 acres above 3,000 feet and to 20% on all of the block below 3,000 feet. During the fourth quarter of 1993, the Company successfully drilled and completed five horizontal wells to exploit the natural gas potential located in certain shallow reservoirs on this block in an area where it has a 100% working interest. A platform was set and production commenced from these wells in late February 1994. In September 1994, an additional horizontal well was also drilled from this platform. Production from this field is largely responsible for the substantial increase in the Company's average daily production of natural gas from the Eugene Island area for 1994, compared to 1993. The Eugene Island Block 212 field consists of Eugene Island Blocks 211 and 212 and Ship Shoal Block 175. The field contains eight productive horizons which have four oil wells and two natural gas wells producing from a platform set in 1985. The Company and its partners completed a successful three well workover and recompletion program in this field during the fourth quarter of 1994. Main Pass The Company's nine blocks in the Main Pass area are located near the mouth of the Mississippi River in the Gulf of Mexico and include leases purchased from 1974 to 1992. The primary drilling objectives in these fields are Pliocene and Miocene sandstone reservoirs with productive formation depths from 5,000 to 12,000 feet. The Company's interests in the Main Pass area include 42 producing oil and gas wells producing from six platforms. A field including Main Pass Blocks 72, 73 and 72/74 was unitized in 1982 with the Company's working interest at 14%. In late 1994, the Company increased its working interest in this field to 35% by purchasing another working interest owner's interests in the field. This field contains 23 producing oil wells and 8 producing natural gas wells from three platforms operated by one of the Company's joint venture partners. The field is located in 125 feet of water with 38 mapped horizons adjacent to and surrounding a salt dome. These horizons contain over 150 separate reservoirs between 5,000 and 12,000 feet. A successful 10 well workover program in this field was completed in 1994. In addition, the first three wells of a four well development program were drilled in 1994. The Company currently plans to continue its workover program and drill six additional wells in this field during 1995 based in part on the analysis of a proprietary 3-D seismic survey over the field that the Company acquired rights to in 1994. Main Pass Block 123 was acquired in the federal lease sale of 1990. Pogo Gulf Coast, for which the Company is the general partner, has a 75% working interest and is the operator on the block. Along with its non-operating joint venture partner, Pogo Gulf Coast drilled two discovery wells on the block in 1993. Subsequently, Pogo Gulf Coast drilled two additional wells on this block in 1994. Installation of a platform and construction of a pipeline from the platform to an existing main pipeline was completed in January 1995. Platform start-up was completed and full production from this field commenced in February 1995. 15 17 South Marsh Island The Company currently owns interests in portions of seven blocks in the South Marsh Island area, located offshore Louisiana. Three of the leases were acquired in 1974, a fourth in 1980, a fifth in 1992 and portions of two more leases were acquired in 1994 through farmins. Three blocks contain a total of five drilling and production platforms. These platforms currently have 44 oil and gas wells producing from Pleistocene age sandstone reservoirs located at depths from 5,000 to 10,000 feet. The South Marsh Island Block 128 field, in which the Company owns a 16% working interest, comprises South Marsh Island Blocks 125, 127, 128 and 141. This field primarily produces oil, with 32 oil wells and eight natural gas wells producing from 20 separate reservoirs. In 1994, a five well drilling program in this field was completed which resulted in increased oil and gas deliverability and reserves. Additional drilling is currently planned for 1995. The wells that were drilled in 1994 and those planned for 1995 have been based on the ongoing analysis of a 3-D seismic survey in conjunction with a detailed reservoir study of the field. The Company also owns a 25% working interest in the South Marsh Island Block 160 field which is producing from three oil wells at a depth of approximately 9,700 feet. A single platform was set on this block in 1983. A two-well drilling program in this field resulting from analysis of a 3-D seismic survey covering the field was completed in the fourth quarter of 1994. South Pass The Company acquired its first South Pass area leasehold interest in September 1972. The Company currently owns interests in portions of six blocks in this area on which four production platforms have been set that produce oil and gas from 27 wells which have been completed principally in Pleistocene, Pliocene and Miocene reservoirs at depths ranging from approximately 4,000 to 14,800 feet. The Company's most significant field in the South Pass area is located on South Pass Blocks 49 and 50. The Company increased its working interest in South Pass Bock 49 from 6% to 20% late in 1994. In addition, in late 1993, the Company successfully completed the drilling of a highly deviated well into two reservoirs on South Pass Block 50, in which the Company holds a 50% working interest, from a platform located on South Pass Block 49 that substantially increased the Company's production from this area. East Cameron Production commenced from the Company's first East Cameron area leasehold interest in February 1973. Presently, the Company has interests in 3 offshore blocks in this area which contain two fields and 13 producing gas wells. During 1992, the Company and its partners conducted a 3-D seismic survey of the East Cameron Block 334/335 field area where the Company has a 42% working interest. Analysis of this 3-D seismic survey resulted in the drilling of four successful development wells. As of February 1, 1995, an exploratory well was also being drilled on East Cameron Block 334. New Mexico The Company considers southeastern New Mexico to be an area of significant growth in both production and reserves as a result of recent exploration and development activities. The Company believes that during the past four years it has been one of the most active companies drilling for oil and natural gas in the southeastern New Mexico (Lea and Eddy Counties) portion of the Permian Basin where the Company has interests in over 70,000 gross acres. The Company's primary drilling objective for crude oil is the Brushy Canyon (Delaware) formation. Fields in the Brushy Canyon (Delaware) formation in the southeastern New Mexico portion of the Permian Basin are generally characterized by production from relatively shallow depths (6,000 to 9,000 feet), multiple producing zones in most wells and relatively high initial rates of production (frequently equaling the top field allowables which range from of 142 Bbls to 230 Bbls per day, depending on the depth of production from the field). The Company has achieved rapid cost recovery with respect to its New Mexico wells drilled to date because of relatively low capital costs and high initial rates of production. 16 18 Since the Company began exploring in the Brushy Canyon (Delaware) formation in October 1989, it has participated in the drilling of 209 wells through December 31, 1994, including, among others, 84 wells in the Sand Dunes field where the Company's working interest ranges from 4% to 89%, 27 wells in the East Loving field where the Company's working interest ranges from 33% to 98%, 45 wells in the Livingston Ridge field where the Company's working interest ranges from 25% to 100%; and 29 wells in the Red Tank field where the Company's working interest ranges from 89% to 100%. The oil fields in this area are generally developed on a 40 acre spacing pattern. The Company anticipates drilling many additional locations in these and other fields in southeastern New Mexico during 1995 and in future years. DOMESTIC OFFSHORE PROPERTIES The following is a listing of the Company's domestic offshore properties as of December 31, 1994.
POGO EXPLORATORY DEVELOPMENT DATE OR WORKING WELLS PLATFORMS WELLS LEASE ANTICIPATED INTEREST DRILLED OR SET OR DRILLED OR DATE EFFECTIVE DATE OF BLOCK % DRILLING ANNOUNCED DRILLING ACQUIRED DATE PRODUCTION - --------------------------------------------------------------------------------------------------------------------- OFFSHORE TEXAS -- FEDERAL Matagorda Island A-4 27.0 3 1 2 8-83 10-1-83 9-89 - --------------------------------------------------------------------------------------------------------------------- 670 30.7 1 1 2 8-83 10-1-83 10-89 - --------------------------------------------------------------------------------------------------------------------- Brazos A-104 10.8 1 1 8-89 10-1-89 6-90 - --------------------------------------------------------------------------------------------------------------------- Galveston A-215 50.0 1 8-94 12-1-94 - --------------------------------------------------------------------------------------------------------------------- 325 20.0 8-91 11-1-91 - --------------------------------------------------------------------------------------------------------------------- High Island/South Addition A-515 25.0 2 1 11-79 1-1-80 11-84 - --------------------------------------------------------------------------------------------------------------------- High Island/East Addition/South Extension A-323 1.8 4 1 17 6-73 8-1-73 6-78 - --------------------------------------------------------------------------------------------------------------------- A-325 9.9 7 2 9 6-73 8-1-73 8-81 - --------------------------------------------------------------------------------------------------------------------- A-355 33.3 1 1 5 5-74 7-1-74 7-80 - --------------------------------------------------------------------------------------------------------------------- A-356 50.0 1 1 4 5-74 7-1-74 7-80 - --------------------------------------------------------------------------------------------------------------------- A-451 50.0 1 1 8-94 12-1-94 1996 - --------------------------------------------------------------------------------------------------------------------- TOTAL TEXAS 22 10 39 - --------------------------------------------------------------------------------------------------------------------- OFFSHORE LOUISIANA -- FEDERAL West Cameron 63 20.0 3-91 5-1-91 - --------------------------------------------------------------------------------------------------------------------- 97 20.0 1 3-90 5-1-90 - --------------------------------------------------------------------------------------------------------------------- 196 [A] 3 1 2 5-83 7-1-83 12-90 - --------------------------------------------------------------------------------------------------------------------- 202 39.3 3 1 2 11-82 1-1-83 8-85 - --------------------------------------------------------------------------------------------------------------------- 252 80.0 1 Share 253 Platform 2 11-82 1-1-83 8-84 - --------------------------------------------------------------------------------------------------------------------- 253 80.0 1 1 6 6-77 8-1-77 7-84 - --------------------------------------------------------------------------------------------------------------------- 310 20.0 3-91 7-1-91 - --------------------------------------------------------------------------------------------------------------------- 352 15.0 1 1 9 10-74 12-1-74 8-79 - --------------------------------------------------------------------------------------------------------------------- 385 20.0 3-90 6-1-90 - --------------------------------------------------------------------------------------------------------------------- 532 4.0 5 Share 533 Platform 3 12-72 2-1-73 9-76 - --------------------------------------------------------------------------------------------------------------------- 533 4.0 2[B] 2 7 12-72 2-1-73 9-76 - ---------------------------------------------------------------------------------------------------------------------
(footnotes at end of table) 17 19
POGO EXPLORATORY DEVELOPMENT DATE OR WORKING WELLS PLATFORMS WELLS LEASE ANTICIPATED INTEREST DRILLED OR SET OR DRILLED OR DATE EFFECTIVE DATE OF BLOCK % DRILLING ANNOUNCED DRILLING ACQUIRED DATE PRODUCTION - --------------------------------------------------------------------------------------------------------------------- 609 16.0 1 1 7 10-74 12-1-74 7.78 - --------------------------------------------------------------------------------------------------------------------- East Cameron 270 30.0 3 2 30 12-70 1-1-71 1-73 - --------------------------------------------------------------------------------------------------------------------- 334 42.0 5[B] 1 11 12-70 2-1-71 8-77 - --------------------------------------------------------------------------------------------------------------------- 335 42.0 3 2 27 6-73 8-1-73 8-77 - --------------------------------------------------------------------------------------------------------------------- Vermilion 175 70.0 1 1 5-91 9-1-85 12-91 - --------------------------------------------------------------------------------------------------------------------- 335 37.5 3-94 5-1-94 - --------------------------------------------------------------------------------------------------------------------- South March Island 125 16.0 3 1 8 10-74 12-1-74 7-77 - --------------------------------------------------------------------------------------------------------------------- 127 16.0 Share 128 Platform 3 10-74 12-1-74 7-77 - --------------------------------------------------------------------------------------------------------------------- 128 16.0 6 3 62 3-74 5-1-74 7-77 - --------------------------------------------------------------------------------------------------------------------- +141 16.0[C] Share 128 Platform 2 3-94 12-1-74 3-94 - --------------------------------------------------------------------------------------------------------------------- 160 25.0 2 1 5 9-80 11-1-80 2-84 - --------------------------------------------------------------------------------------------------------------------- +161 25.0[C] Share 160 Platform 1 5-94 9-1-81 12-94 - --------------------------------------------------------------------------------------------------------------------- 188 25.0 5-92 9-1-92 Eugene Island - --------------------------------------------------------------------------------------------------------------------- 101 20.0 3-91 5-1-91 - --------------------------------------------------------------------------------------------------------------------- 102 20.0 3-91 5-1-91 - --------------------------------------------------------------------------------------------------------------------- 211 33.3 Share 212 Platform 3 5-83 7-1-83 1-87 - --------------------------------------------------------------------------------------------------------------------- 212 33.3 1 1 3 5-83 7-1-83 1-87 - --------------------------------------------------------------------------------------------------------------------- 256 69.2 5 1 7 12-70 2-1-71 10-79 - --------------------------------------------------------------------------------------------------------------------- 261 66.7 2 1 17 10-74 12-1-74 10-79 - --------------------------------------------------------------------------------------------------------------------- 295* 20.0/100.0 7[B] 2 30 12-70 2-1-71 2-73 - --------------------------------------------------------------------------------------------------------------------- 312 4.0 5 Share 333 Platform 8 3-74 5-1-74 7-77 - --------------------------------------------------------------------------------------------------------------------- 318 20.0 1 3-91 6-1-91 - --------------------------------------------------------------------------------------------------------------------- 330 35.0[D] 10[B] 4 94 12-70 1-1-71 4-73 - --------------------------------------------------------------------------------------------------------------------- 333 4.0 3 2 22 12-72 2-1-73 7-77 - --------------------------------------------------------------------------------------------------------------------- 337 37.5 3 1 8 2-76 3-1-76 6-85 - --------------------------------------------------------------------------------------------------------------------- Ship Shoal 175 33.3 Share EI 212 Platform 2 5-83 7-1-83 7-88 - --------------------------------------------------------------------------------------------------------------------- 240 30.0 2 2 3-89 6-1-89 12-94 - --------------------------------------------------------------------------------------------------------------------- 256 30.0 1 1 3-90 5-1-90 12-94 - --------------------------------------------------------------------------------------------------------------------- South Timbalier 198 25.0 2 1 4 5-85 9-1-85 8-90 - --------------------------------------------------------------------------------------------------------------------- +214 25.0[C] 1 Share 198 Platform 1 5-85 9-1-85 8-90 - --------------------------------------------------------------------------------------------------------------------- West Delta 59 20.0 3-90 6-1-90 - --------------------------------------------------------------------------------------------------------------------- South Pass +33 15.9[C] Share 49 Platform 2 10-74 12-1-74 2-83 - --------------------------------------------------------------------------------------------------------------------- 49 15.9[G] 5[B] 1 19 9-72 11-1-72 10-80 - --------------------------------------------------------------------------------------------------------------------- 50 50.0 1 Share 49 Platform 7-93 8-1-88 12-93 - --------------------------------------------------------------------------------------------------------------------- +57 12.0 Share 57/58 Platform 3 11-76 1-1-77 11-82 - --------------------------------------------------------------------------------------------------------------------- +78 9.0 5 1 12 9-72 10-1-72 4-81 - ---------------------------------------------------------------------------------------------------------------------
(footnotes at end of table) 18 20
POGO EXPLORATORY DEVELOPMENT DATE OR WORKING WELLS PLATFORMS WELLS LEASE ANTICIPATED INTEREST DRILLED OR SET OR DRILLED OR DATE EFFECTIVE DATE OF BLOCK % DRILLING ANNOUNCED DRILLING ACQUIRED DATE PRODUCTION - --------------------------------------------------------------------------------------------------------------------- Mississippi Canyon 63 20.0 2 1 5 5-75 7-1-75 6-84 - --------------------------------------------------------------------------------------------------------------------- Main Pass +30 25.0[E] 2 1 8[F] 10-81 12-1-81 12-87 - --------------------------------------------------------------------------------------------------------------------- 37 25.0 4 1 5 7-79 10-1-79 7-82 - --------------------------------------------------------------------------------------------------------------------- 61 24.0 1 3-90 7-1-90 - --------------------------------------------------------------------------------------------------------------------- +72 35.3 1 Share 73 Platform 2 5-75 7-1-75 8-79 - --------------------------------------------------------------------------------------------------------------------- +72/74 35.3 4 2 46 11-76 1-1-77 8-79 - --------------------------------------------------------------------------------------------------------------------- 73 35.3 4 1 16 10-74 12-1-74 8-79 - --------------------------------------------------------------------------------------------------------------------- 123 30.0 2 1 2 3-90 5-1-90 1-95 - --------------------------------------------------------------------------------------------------------------------- 131 33.33 5-92 9-1-92 - --------------------------------------------------------------------------------------------------------------------- TOTAL LOUISIANA 115 43 506 - --------------------------------------------------------------------------------------------------------------------- STATE LEASES Offshore Louisiana South Pass +57/58 12.0 3 1 13 5-74 5-13-74 7-82 - -------------------------------------------------------------------------------------------------------------------- Main Pass 31 50.0 1 1 1 3-85 3-18-85 2-90 - --------------------------------------------------------------------------------------------------------------------- Breton Sound 2 100.0 2[F] 1 1 4-80 9-15-80 8-87 - --------------------------------------------------------------------------------------------------------------------- 23 82.5 1 1 9-78 9-18-78 7-84 - --------------------------------------------------------------------------------------------------------------------- 24 22.5 1 1 1 9-78 9-18-78 7-84 - --------------------------------------------------------------------------------------------------------------------- North Lighthouse Point S/L 340 50.0 1 3 5-84 5-1-84 10-84 - --------------------------------------------------------------------------------------------------------------------- TOTAL STATE LEASES 9 5 19 - --------------------------------------------------------------------------------------------------------------------- TOTAL DOMESTIC OFFSHORE 146 58 564 - ---------------------------------------------------------------------------------------------------------------------
[A] Block farmed out -- Overriding Royalty Interest only [B] Includes offset contribution well [C] Block farmed in [D] Pogo owns 35% in "A", "B", and "C" platform area and 30% in platform "D" area [E] Portion of block farmed out [F] Includes one farmout well [G] Pogo owns 20% in a non-unit area * Pogo owns 20% in rights below 3,000 feet and 100% in rights at 3,000 feet and above in certain portions of the block [+] Represents portion of block ITEM 3. LEGAL PROCEEDINGS. In 1989, a large number of exploration and production companies, including the Company, were circularized with Special Notice Letters in accordance with CERCLA from the EPA regarding a particular waste disposal site in Louisiana known as the "Gulf Coast Vacuum Site" utilized by a trucking company. The EPA subsequently developed a list based on its investigation showing the Company bearing an approximate 1% responsibility for this site based on the trucking company's shipping records. The Company utilized the trucking company to dispose of salt water produced from a well in which the Company had an interest. The Company, however, believes that none of this salt water was delivered to the Gulf Coast Vacuum Site. In any 19 21 event, the Company believes that the trucking company shipped only oilfield waste for the Company which is exempt pursuant to CERCLA and, further, that such shipments, if any, were sent to a properly permitted waste disposal site. The Company has learned that the EPA has recently entered a consent decree, the details of which have not been made fully public, with certain parties that are believed to be responsible for a majority of the disposal occurring at the site. The Company is a party to various other legal proceedings consisting of routine litigation incidental to its businesses, but believes that any potential liabilities resulting from these proceedings are adequately covered by insurance or are otherwise immaterial at this time. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. Not Applicable. ITEM S-K 401(B). EXECUTIVE OFFICERS OF REGISTRANT. Executive officers of the Company are appointed annually to serve for the ensuing year or until their successors have been elected or appointed. The executive officers of the Company, their age as of February 1, 1995, and the year each was elected to his present position are as follows:
YEAR EXECUTIVE OFFICER EXECUTIVE OFFICE AGE ELECTED ----------------- ---------------- --- ------- Paul G. Van Wagenen.................. Chairman of the Board, President and Chief Executive Officer 49 1991 Kenneth R. Good...................... Senior Vice President -- Land and Budgets 57 1991 D. Stephen Slack..................... Senior Vice President, Chief Financial Officer and Treasurer 45 1988 Stuart P. Burbach.................... Vice President and Offshore Division Manager 42 1991 Jerry A. Cooper...................... Vice President and Western Division Manager 46 1990 Harvey L. Gold....................... Vice President -- Engineering 59 1988 Thomas E. Hart....................... Vice President and Controller 52 1988 R. Phillip Laney..................... Vice President and International Division Manager 54 1991 John O. McCoy, Jr.................... Vice President and Chief Administrative Officer 43 1989 J. D. McGregor....................... Vice President -- Sales 50 1988 Sammie M. Shaw....................... Vice President -- Operations 63 1992 Ronald B. Manning.................... Corporate Secretary and Associate General Counsel 41 1990
Prior to assuming their present positions with the Company, the business experience of each executive officer for more than the last five years was as follows: Mr. Van Wagenen was President and Chief Operating Officer of the Company since 1990, Senior Vice President and General Counsel of the Company since 1986, Vice President and General Counsel of the Company since 1982, and General Counsel of the Company since 1979; Mr. Good was Vice President -- Land of the Company since 1988 and Chief Landman of the Company since 1977; Mr. Slack was Regional Manager of Chemical Bank of New York's Southwest Energy and Minerals Division since 1982; Mr. Burbach was Vice President of Norfolk Holding Inc. since 1986 and Exploration Manager for Tricentrol Ltd. Canada and Tricentrol U.S. since 1981; Mr. Cooper was a Division Landman for the Company since 1983 and a Landman for the Company since 1979; Mr. Gold was Manager of Reservoir Engineering for the Company since 1977; Mr. Hart was Controller for the Company since 1977; Mr. Laney was International Exploration Manager for the Company since 1983 and Exploration Coordinator 20 22 for the Gulf Coast Division of the Company since 1977; Mr. McCoy was Director of Personnel and Administration for the Company since 1978; Mr. McGregor was Manager of Hydrocarbon Sales and Contracts for the Company since 1981; Mr. Shaw was Operations Manager for the Company since 1981; Mr. Manning was an Associate General Counsel for the Company since 1989 and prior thereto was an attorney with the Federal Bureau of Investigation, and Chevron U.S.A., and Assistant to the General Counsel of Primary Fuels, Inc. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. The following table shows the range of low and high sales prices of the Company's Common Stock (the "Common Stock") on the New York Stock Exchange composite tape where the Company's common stock trades under the symbol PPP. The Company's common stock is also listed on the Pacific Stock Exchange. In 1994, the Company paid $0.06 per share in dividends on its Common Stock since it commenced paying dividends in August 1994. In this regard, the Company reinstated the practice of declaring a quarterly cash dividend commencing in the third quarter of 1994. However, the declaration and payment of future dividends will depend upon, among other things, the Company's future earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate and other factors deemed relevant by the Company's Board of Directors. Pursuant to the Company's revolving credit agreement with its banks under which the Company has borrowed funds, the Company may not, subject to certain exceptions, pay any dividends on its capital stock or make any other distributions on shares of its capital stock (other than dividends or distributions payable solely in shares of such capital stock) or apply any funds, property or assets to the purchase, redemption, sinking fund or other retirement of its capital stock, if the aggregate amount of all such dividends, purchases, and redemptions would exceed an amount determined based on the consolidated income of the Company and its consolidated subsidiaries from and after a specified date plus the proceeds of the issuance of capital stock after the same specified date or if the net worth of the Company is negative. As of December 31, 1994, $64,037,000 was available for dividends under this limitation.
LOW HIGH --- ---- 1993 1st Quarter.......................................................... 9 3/ 17 1/4 2nd Quarter.......................................................... 16 1/8 21 3rd Quarter.......................................................... 13 5/8 19 1/8 4th Quarter.......................................................... 14 3/8 19 3/4 1994 1st Quarter.......................................................... 15 5/8 21 1/2 2nd Quarter.......................................................... 15 5/8 24 1/4 3rd Quarter.......................................................... 19 5/8 23 5/8 4th Quarter.......................................................... 16 1/8 23 1/8
As of March 3, 1995, there were 3,815 holders of record of the Company's Common Stock. 21 23 ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- FINANCIAL DATA (Expressed in thousands, except per share data) Revenues: Crude oil and condensate........................ $ 65,141 $ 64,042 $ 64,224 $ 54,420 $ 54,018 Natural gas..................................... 99,093 66,173 67,366 63,225 74,111 Natural gas liquids............................. 9,189 7,288 5,833 3,442 3,496 Other, net...................................... 133 (950) 1,705 3,338 794 -------- -------- -------- -------- -------- Oil and gas revenues............................ 173,556 136,553 139,128 124,425 132,419 Interest on tax refunds......................... -- 2,322 -- -- 22,499 Gains (losses) on sales......................... 52 679 1,702 44 (98) -------- -------- -------- -------- -------- Total.................................... $173,608 $139,554 $140,830 $124,469 $154,820 ========= ========= ========= ========= ========= Income before extraordinary item.................. $ 27,374 $ 25,061 $ 18,495 $ 10,322 $ 44,036 Extraordinary gains (losses)...................... (307) -- -- 1,336 -- -------- -------- -------- -------- -------- Net income........................................ $ 27,067 $ 25,061 $ 18,495 $ 11,658 $ 44,036 ========= ========= ========= ========= ========= Per share data: Primary and fully diluted earnings: Before extraordinary item..................... $ 0.82 $ 0.76 $ 0.66 $ 0.37 $ 1.69 Extraordinary item............................ (0.01) -- -- 0.05 -- -------- -------- -------- -------- -------- Net income.................................... $ 0.81 $ 0.76 $ 0.66 $ 0.42 $ 1.69 ========= ========= ========= ========= ========= Price range of common stock: High.......................................... $ 24.25 $ 21.00 $ 13.88 $ 8.25 $ 10.13 Low........................................... $ 15.63 $ 9.75 $ 5.13 $ 4.63 $ 5.75 Weighted average number of common and common equivalent shares outstanding................... 33,352 32,860 27,929 27,611 26,029 Long-term debt at year end........................ $149,249 $130,539 $129,260 $184,260 $217,000 Production payment obligation at year end......... $ -- $ -- $ 24,854 $ 45,475 $ 46,893 Shareholders' equity (deficit) at year end........ $ 64,037 $ 33,803 $ 5,648 $(56,636) $(68,429) Total assets at year end.......................... $298,826 $239,774 $206,347 $213,772 $244,226 PRODUCTION (SALES) DATA Net daily average and weighted average price: Natural gas (Mcf per day)..................... 144,800 91,700 105,200 104,200 107,300 Price (per Mcf)............................. $ 1.88 $ 1.98 $ 1.75 $ 1.66 $ 1.89 Crude oil-condensate (Bbl. per day)........... 11,100 9,851 8,699 7,108 6,209 Price (per Bbl.)............................ $ 16.08 $ 17.81 $ 20.17 $ 20.98 $ 23.84 Natural gas liquids (Bbl. per day) Leasehold ownership......................... 2,075 1,538 1,037 609 593 Plant ownership............................. 147 140 144 54 104 Price (per Bbl.)............................ $ 11.33 $ 11.90 $ 13.50 $ 14.21 $ 13.75 CAPITAL EXPENDITURES (Expressed in thousands) Oil and gas: Domestic Offshore -- Exploration................................... $ 2,800 $ 4,600 $ 1,700 $ 1,600 $ 2,900 Development................................... 44,100 33,700 5,500 23,600 24,900 Purchase of reserves.......................... 32,600 -- 8,900 5,100 -- Domestic Onshore -- Exploration................................... 6,800 5,200 4,900 4,700 2,300 Development................................... 23,700 24,300 15,600 13,900 8,100 International Exploration....................... 5,100 4,600 1,400 -- -- -------- -------- -------- -------- -------- Total oil and gas........................ 115,100 72,400 38,000 48,900 38,200 Other............................................. 1,200 200 600 2,400 -- -------- -------- -------- -------- -------- Total.................................... $116,300 $ 72,600 $ 38,600 $ 51,300 $ 38,200 ========= ========= ========= ========= =========
22 24 ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The Company reported net income for 1994 of $27,067,000 or $0.81 per share (on both a primary and fully diluted basis) compared to net income for 1993 of $25,061,000 or $0.76 per share (on both a primary and fully diluted basis) and net income for 1992 of $18,495,000 or $0.66 per share (on both a primary and fully diluted basis). Included in net income for 1994 is an extraordinary loss of $307,000 (net of taxes) or $0.01 per share in connection with the retirement of the Company's 10.25% Convertible Subordinated Notes, due 1999 (the "10.25% Notes") on April 18, 1994. Earnings per common share are based on the weighted average number of common and common equivalent shares outstanding for 1994 of 33,352,000 compared to 32,860,000 for 1993 and 27,929,000 for 1992. The increases in the weighted average number of common and common equivalent shares outstanding for 1993 resulted primarily from the issuance of 4,500,000 shares of common stock in December 1992 as set forth in the Consolidated Statements of Shareholders' Equity included in "Item 8. Financial Statements and Supplementary Data." The increases in the weighted average number of common and common equivalent shares outstanding for 1994 resulted from the issuance of shares of common stock upon the exercise of stock options pursuant to the Company's stock option plans. Earnings per common share computations on a fully diluted basis would reflect additional common shares issuable upon the assumed conversion of the Company's 5 1/2% Convertible Subordinated Notes, due 2004 (the "5 1/2% Notes") (the only convertible securities of the Company that were dilutive during the applicable periods) and the elimination of related interest requirements, as adjusted for applicable federal income taxes. However, the dilution resulting from the assumed conversion of the 5 1/2% Notes was not sufficient to change reported earnings per share. The Company's total revenues for 1994 were $173,608,000, an increase of approximately 24% from total revenues of $139,554,000 for 1993, and an increase of approximately 23% from total revenues of $140,830,000 for 1992. The increase in the Company's total revenues for 1994, compared to 1993 and 1992, resulted primarily from increased natural gas, crude oil, condensate and natural gas liquid ("NGL") production volumes. Partially offsetting volume increases were substantial decreases in the prices that the Company received for its crude oil and condensate production volumes. In addition, the Company's total revenues for 1993 and 1992 were positively affected by revenues from settlement of an issue with the Internal Revenue Service and gains related to the sale of non-strategic properties. The Company's oil and gas revenues for 1994 were $173,556,000, an increase of approximately 27% from oil and gas revenues of $136,553,000 for 1993, and an increase of approximately 25% from oil and gas revenues of $139,128,000 for 1992. The following table reflects an analysis of variances in the Company's oil and gas revenues between 1994 and the previous two years:
1994 COMPARED TO -------------------- 1993 1992 ------- -------- (IN THOUSANDS) Increase (decrease) in oil and gas revenues resulting from variances in: Natural Gas Price...................................................... $(3,380) $ 4,850 Production................................................. 36,300 26,877 ------- -------- 32,920 31,727 ------- -------- Crude oil and condensate Price...................................................... (6,228) (13,029) Production................................................. 7,327 13,946 ------- -------- 1,099 917 ------- -------- Natural gas liquids Price...................................................... (350) (937) Production................................................. 2,251 4,293 ------- -------- 1,901 3,356 ------- -------- Other, net.................................................... 1,083 (1,572) ------- -------- Increase in oil and gas revenues................................ $37,003 $ 34,428 ======= ========
23 25 Average natural gas prices received by the Company for the two years prior to 1994 were volatile and marked by non-seasonal as well as seasonal variations. The average price per Mcf that the Company received for its natural gas production increased during 1993, compared to 1992, averaging $1.75 per Mcf for 1992 and $1.98 per Mcf for 1993. Prices increased throughout 1993, partially as a result of severe late winter weather that drew down natural gas storage supplies which, coupled with relatively high crude oil prices that inhibited fuel switching from natural gas to residual heating oil at that time, created a substantial demand in the spring and the summer to replenish depleted storage facilities and to supply natural gas for the industrial and electric generation markets. Notwithstanding severe winter weather during January and February of 1994 that led to record low natural gas storage levels in March, rapid injection of natural gas into storage coupled with a mild summer contributed to a substantial decline in natural gas prices during the second half of 1994 resulting in the Company receiving an average price of $1.88 per Mcf for its natural gas production during 1994 which, while it was 5% less than the average price that the Company received in 1993, was still an increase of 7% over the average price that the Company received in 1992. See "Business -- Miscellaneous; Competition and Market Conditions." Natural gas production for 1994 averaged 144.8 MMcf per day, an increase of approximately 58% from average production of 91.7 MMcf per day in 1993, and an increase of approximately 38% from average production of 105.2 MMcf per day for 1992. The increase in the Company's average natural gas production for 1994, compared to 1993 and 1992, was related primarily to natural gas production from the Company's Eugene Island Block 295"B" platform from which production commenced in late February 1994, and the continued success of the Company's ongoing active offshore and onshore drilling and workover programs, which was partially offset by a natural decline in deliverability from some of the Company's more mature properties. As of January 1, 1995, the Company had entered into futures contracts with various parties on a portion of its daily natural gas production through September 30, 1995 (commencing with contracts totaling approximately 37 MMcf per day in January and decreasing on a quarterly basis to approximately 15 MMcf per day) at varying prices ranging from approximately $1.92 to $1.83 per Mcf. Crude oil and condensate prices received by the Company averaged $16.08 per barrel in 1994 compared to $17.81 per barrel in 1993 and $20.17 per barrel in 1992. Crude oil and condensate prices were relatively stable during 1992 and the first six months of 1993. However, commencing in July 1993, the average price per barrel that the Company received for its production began dropping until, by December 1993, the average price per barrel for crude oil and condensate that the Company received for its production during that month averaged only $13.39 per barrel. However, the average price per barrel that the Company received for its crude oil and condensate production began recovering in June 1994 and showed gradual improvement throughout the remainder of the year. For the month of December 1994, the average price per barrel that the Company received for its crude oil and condensate production was $16.44. Crude oil and condensate production for 1994 averaged 11,100 Bbls per day, an increase of approximately 13% from 9,851 Bbls per day for 1993, and an increase of approximately 28% from 8,699 Bbls per day for 1992. The increase in the Company's crude oil and condensate production for 1994, compared to 1993 and 1992, resulted primarily from ongoing development programs principally in the Main Pass, Eugene Island and South Pass areas, together with the acquisition by the Company of additional working interests in certain leases in the Main Pass area. See "Properties -- Principal Properties" and "Business -- Domestic Offshore Operations; Lease Acquisitions." As of February 1, 1995, the Company had entered into a crude oil swap agreement with another party in which it had swapped the floating market price it receives from purchasers of its crude oil for a fixed price of $17.08 per barrel on 1,000 Bbls per day of the Company's production for a period ending April 30, 1995. See "Business -- Miscellaneous; Sales." Liquid products are often extracted from natural gas streams and sold separately as NGL. The Company's NGL production averaged 2,222 Bbls per day for 1994, an increase of approximately 32% from an average of 1,678 Bbls per day for 1993 and an increase of approximately 88% from an average of 1,181 Bbls per day for 1992. The increase in the Company's NGL production during 1994, compared to 1993 and 1992, resulted primarily from extracting liquids from several new high Btu content wells and increased production generally. 24 26 The Company's total liquids production during 1994, including crude oil, condensate and NGL, averaged 13,322 Bbls per day, an increase of approximately 16% from an average total liquids production of 11,529 Bbls per day for 1993, and an increase of approximately 35% from an average total liquids production of 9,880 Bbls per day for 1992. The Company's oil and gas revenues for 1994, 1993 and 1992 also reflect adjustments for various miscellaneous items. For 1993 and 1992, the Company made adjustments to its net income to reflect the settlement of certain litigation with the State of Louisiana regarding past royalty disputes pertaining to the Company's offshore state leases. For 1993, additional adjustments were also made to reflect an agreement with the MMS to allow the Company to offset FERC Order 93A payments previously made by the Company on behalf of the MMS against FERC Order 94A obligations due from the Company and the resulting overaccrual of related interest expenses. Lease operating expenses for 1994 were $29,768,000, an increase of approximately 12% from lease operating expenses of $26,633,000 for 1993, and an increase of approximately 15% from lease operating expenses of $25,842,000 for 1992. The increase in lease operating expenses for 1994, compared to 1993 and 1992, resulted primarily from increased operating activity on existing properties, including increased operating costs related to additional properties brought on production in 1994. However, primarily as a result of increased production of natural gas, crude oil, condensate and NGLs by the Company during 1994, compared to 1993 and 1992, the Company's lease operating expenses were only $0.36 per equivalent Mcf for 1994, a decrease of 20% from lease operating expenses of $0.45 per equivalent Mcf for 1993, and a decline of approximately 16% from lease operating expenses of $0.43 per equivalent Mcf for 1992. General and administrative expenses for 1994 were $15,984,000, an increase of approximately 10% from general and administrative expenses of $14,550,000 for 1993, and an increase of approximately 22% from general and administrative expenses of $13,129,000 for 1992. The increase in general and administrative expenses for 1994, compared to 1993 and 1992, was related to, among other things, an increase in the number of Company employees resulting from the Company's increased exploration and production related activities and to normal salary and concomitant benefit expense adjustments. Exploration expenses consist primarily of delay rentals and geological and geophysical costs which are expensed as incurred. Exploration expenses for 1994 were $5,257,000, an increase of approximately 114% from exploration expenses of $2,455,000 for 1993, and an increase of approximately 69% from exploration expenses of $3,102,000 for 1992. The increase in exploration expenses for 1994, compared to 1993 and 1992, resulted primarily from increased geophysical activity by the Company, including the costs of conducting and processing several proprietary 3-D seismic surveys on Company leases in South Texas, West Texas and the Gulf of Thailand, together with the cost of acquiring several non-proprietary 3-D seismic surveys in the Gulf of Mexico. Dry hole and impairment expenses relate to costs of unsuccessful wells drilled along with impairments to the associated unproved property costs and impairments to previously proved property costs as a result of decreases in expected reserves. The Company's dry hole and impairment expenses for 1994 were $7,088,000, an increase of approximately 51% from dry hole and impairment costs of $4,690,000 for 1993, but a decrease of approximately 24% from dry hole and impairment costs of $9,314,000 for 1992. The Company accounts for its oil and gas activities using the successful efforts method of accounting. Under the successful efforts method, lease acquisition costs and all development costs are capitalized. Unproved properties are reviewed quarterly to determine if there has been impairment of the carrying value, with any such impairment charged to expense in the period. Exploratory drilling costs are capitalized until the results are determined. If proved reserves are not discovered, the exploratory drilling costs are expensed. Other exploratory costs are expensed as incurred. The provision for depreciation, depletion and amortization ("DD&A") is based on the capitalized costs mentioned in the preceding paragraph plus future costs to abandon offshore wells and platforms and is determined on a field-by-field basis using the units of production method. The Company's DD&A expense for 1994 was $63,308,000, an increase of approximately 56% from DD&A expenses of $40,693,000 for 1993, and 25 27 an increase of approximately 50% from DD&A expenses of $42,302,000 for 1992. The increases in the Company's DD&A expenses for 1994, compared to 1993 and 1992, resulted primarily from increased volumes produced (largely related to the increased natural gas production discussed above) and, to a lesser extent, an increase in the composite DD&A rate. The composite DD&A rate for all of the Company's producing fields for 1994 was $0.77 per equivalent Mcf ($4.59 per equivalent barrel), an increase of approximately 12% from a composite DD&A rate of $0.69 per equivalent Mcf ($4.11 per equivalent barrel) for 1993, and an increase of 10% from a composite DD&A rate of $0.70 per equivalent Mcf ($4.17 per equivalent barrel) for 1992. The Company produced 82,008,000 equivalent Mcf (13,668,000 equivalent barrels) in 1994, an increase of approximately 40% from the 58,718,000 equivalent Mcf (9,786 equivalent barrels) produced in 1993, and an increase of approximately 36% from the 60,189,000 equivalent Mcf (10,032,000 equivalent barrels) produced in 1992. See "Financial Statements and Supplementary Data -- Note 1 of Notes to Consolidated Financial Statements ." Interest charges for 1994 were $10,104,000, a decrease of approximately 8% from interest charges of $10,956,000 for 1993, and a decrease of approximately 47% from interest charges of $19,036,000 for 1992. The decrease in interest charges for 1994, compared to 1993 and 1992, was related primarily to decreased debt issue amortization expenses, lower average interest rate levels on the debt outstanding (as a result of refinancing certain debt discussed in "-- Liquidity and Capital Resources" below), and, as compared to 1992, a decrease in the amount of debt outstanding. These decreases in interest charges for 1994, compared to 1993 and 1992, were partially offset by increased commitment fees resulting from increased availability under the Company's bank revolving credit facility and, as compared to 1993, an increase in debt outstanding. See "Financial Statements and Supplementary Data -- Note 3 of Notes to Consolidated Financial Statement." Income tax expense for 1994 was $15,517,000, an increase of approximately 4% from income tax expense of $14,981,000 for 1993, and an increase of approximately 52% from income tax expense of $10,192,000 for 1992. The increases in income tax expense are related to increases in profitability and to the effective tax rates of 36.2% in 1994, 37.5% in 1993 and 35.5% in 1992. The variances in the effective tax rates are primarily related to the expenses incurred by the Company's subsidiary in Thailand which are not included in the Company's consolidated U.S. federal income tax returns. LIQUIDITY AND CAPITAL RESOURCES The Company's Consolidated Statement of Cash Flows for the year ended December 31, 1994, reflects net cash provided by operating activities of $99,273,000. In addition to the net cash provided by operating activities, the Company also received $3,687,000 from the exercise of stock options. Other significant cash receipts and disbursements during 1994 included the following. The Company issued and sold $86,250,000 of 5 1/2% Notes in March 1994, and had net borrowings of $7,000,000 under uncommitted money market credit lines with certain banks. The Company invested $85,375,000 of such cash flow in capital projects during 1994, purchased certain proved reserves for $32,578,000, prepaid the remaining outstanding principal and prepayment fee on its 10.25% Notes ($24,472,000), made net payments of $53,000,000 on the Company's revolving credit facility, paid $2,446,000 of issuance expenses in connection with its offering of the 5 1/2% Notes and paid $1,966,000 ($0.06 per share) in dividends to holders of the Company's common stock. Of the $85,375,000 invested in capital projects, $22,955,000 was applicable to 1993 projects and $62,420,000 was applicable to 1994 capital projects. The Company's total debt at December 31, 1994, was $150,531,000, an increase of approximately 12% from total debt of $134,539,000 at December 31, 1993. The increase in the Company's total debt resulted primarily from the purchase of certain proved reserves in the fourth quarter of 1994. As of December 31, 1994, the Company had $2,922,000 in cash and cash investments. The Company's capital and exploration budget for 1995, which does not include any amounts which may be expended for the purchase of proved reserves or any interest which may be capitalized resulting from projects in progress, was established by the Company's Board of Directors in January 1995, at $100,000,000, an increase of approximately 13% from the Company's capital and exploration expenditures (excluding purchased reserves and interest capitalized) of $88,300,000 for 1994, an increase of approximately 34% over capital and exploration expenditures (excluding capitalized interest) of $74,600,000 for 1993, and an increase of approximately 209% over capital and exploration expenditures (excluding purchased reserves and interest capitalized) of approximately $32,400,000 for 1992. 26 28 In addition to anticipated capital and exploration expenses, other material 1995 cash requirements that the Company currently anticipates include ongoing operating, general and administrative, income tax, and interest expense, sinking fund payments and the payment of dividends on its common stock, including a $0.03 per share dividend on its common stock to be paid February 28, 1995, to stockholders of record on February 10, 1995. The Company currently anticipates that cash provided by operating activities and funds available under its Credit Agreement and uncommitted money market credit lines will be sufficient to fund the Company's ongoing expenses, its 1995 capital and exploration budget and anticipated future dividend payments. In this regard, the Company reinstated the practice of declaring a quarterly dividend commencing in the third quarter of 1994. However, the declaration and payment of future dividends will depend upon, among other things, the Company's future earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate and other factors deemed relevant by the Company's Board of Directors. The Company's amended bank credit agreement (the "Credit Agreement") currently provides for a $100,000,000 revolving/term credit facility which will be fully revolving until June 29, 1996, after which the balance will be due in eight quarterly term loan installments, commencing July 31, 1996. The amount that may be borrowed under the Credit Agreement may not exceed a borrowing base, determined semiannually by the lenders in accordance with the Credit Agreement based on the discounted present value of certain of the Company's oil and gas reserves. The borrowing base currently exceeds $100,000,000. The Credit Agreement is governed by various financial and other covenants, including requirements to maintain positive working capital (excluding current maturities of debt), a fixed charge coverage ratio, and limitations on the prepayment (without refinancing) of subordinated debt, the payment of dividends, mergers and consolidations, and asset dispositions. See "Market for the Registrant's Common Stock and Related Security Holder Matters." Upon the occurrence or declaration of certain events, the banks would be entitled to a security interest in the borrowing base properties, which include most of the Company's domestic properties. Borrowings under the Credit Agreement currently bear interest at a Base (Prime) rate, a certificate of deposit rate plus 1 5/8%, or LIBOR plus 1 1/2%, at the Company's option. A commitment fee of 1/2 of 1% per annum of the unborrowed amount under the Credit Agreement is also due. The Company has also entered into separate letter agreements with two banks under which each bank may provide a $10,000,000 uncommitted money market line of credit. The two lines of credit are on an as available or offered basis and neither bank has an obligation to make any advances under its respective line of credit. Although loans made under these letter agreements are for a maximum term of 30 days, they are reflected as long-term debt on the Company's balance sheet because the Company currently has the ability and intends to reborrow such amounts under its Credit Agreement. Both letter agreements permit either party to terminate such letter agreement at any time. Under its Credit Agreement, the Company is currently limited to incurring a maximum of $10,000,000 of additional senior debt, which would include debt incurred under these lines of credit. As of December 31, 1994, indebtedness in the principal amount of $21,000,000 was outstanding under the Credit Agreement and the two letter agreements. The outstanding principal amount of 5 1/2% Notes was $86,250,000 as of December 31, 1994. The 5 1/2% Notes are convertible into Common Stock at $22.188 per share subject to adjustment upon the occurrence of certain events. The 5 1/2% Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after March 15, 1998, at a redemption price of 103.3% of their principal amount and decreasing percentages thereafter. No sinking fund payments are required on the 5 1/2% Notes. The 5 1/2% Notes are redeemable at the option of the holder, upon the occurrence of a repurchase event (a change of control as defined in the indenture governing the 5 1/2% Notes), at 100% of the principal amount. The outstanding principal amount of the 8% Convertible Subordinated Debentures, due 2005 (the "8% Debentures") was $43,281,000 as of December 31, 1994. The 8% Debentures are convertible into Common Stock at $39.50 per share, subject to adjustment in certain circumstances, including stock splits. The 8% Debentures are redeemable at the option of the Company at 102.4% of their principal amount through December 30, 1995, and decreasing percentages thereafter, and are subject to mandatory annual sinking fund requirements of $3,000,000, due each December, with a final maturity of December 31, 2005. The sinking fund requirements for the 8% Debentures will be sufficient to retire all but $15,000,000 of the issue prior to 27 29 maturity. The Company currently has purchased $1,718,000 face amount of 8% Debentures which it may tender in satisfaction of future sinking fund requirements. See "Financial Statements and Supplementary Data -- Note 3 to Notes to Consolidated Financial Statements." OTHER MATTERS Publicly held companies are asked to comment on the effects of inflation on their business. Currently annual inflation in terms of the decrease in the general purchasing power of the dollar is running much below the general annual inflation rates experienced in the past. While the Company, like other companies, continues to be affected by fluctuations in the purchasing power of the dollar, such effect is not currently considered significant. 28 30 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 POGO PRODUCING COMPANY AND SUBSIDIARIES HOUSTON, TEXAS 29 31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Pogo Producing Company: We have audited the accompanying consolidated balance sheets of Pogo Producing Company (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of Pogo's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pogo Producing Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas February 3, 1995 30 32 POGO PRODUCING COMPANY & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues: Oil and gas.............................................. $173,556 $136,553 $139,128 Interest on tax refund................................... -- 2,322 -- Gains on sales........................................... 52 679 1,702 -------- -------- -------- Total............................................ 173,608 139,554 140,830 -------- -------- -------- Operating Costs and Expenses: Lease operating.......................................... 29,768 26,633 25,842 General and administrative............................... 15,984 14,550 13,129 Exploration.............................................. 5,257 2,455 3,102 Dry hole and impairment.................................. 7,088 4,690 9,314 Depreciation, depletion and amortization................. 63,308 40,693 42,302 -------- -------- -------- Total............................................ 121,405 89,021 93,689 -------- -------- -------- Operating Income........................................... 52,203 50,533 47,141 Interest: Charges.................................................. (10,104) (10,956) (19,036) Income................................................... 53 14 191 Capitalized.............................................. 739 451 391 -------- -------- -------- Income Before Taxes and Extraordinary Item................. 42,891 40,042 28,687 -------- -------- -------- Income Tax Expense......................................... (15,517) (14,981) (10,192) -------- -------- -------- Income Before Extraordinary Item........................... 27,374 25,061 18,495 Extraordinary Loss on Early Extinguishment of Debt, net of tax...................................................... (307) -- -- -------- -------- -------- Net Income................................................. $ 27,067 $ 25,061 $ 18,495 ======== ======== ======== Primary and Fully Diluted Earnings per Common Share: Before extraordinary item................................ $ 0.82 $ 0.76 $ 0.66 Extraordinary item....................................... (0.01) -- -- -------- -------- -------- Net income............................................... $ 0.81 $ 0.76 $ 0.66 ======== ======== ======== Dividends per Common Share................................. $ 0.06 $ -- $ -- ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part hereof. 31 33 POGO PRODUCING COMPANY & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, -------------------- 1994 1993 -------- -------- (EXPRESSED IN THOUSANDS) Current Assets: Cash and cash investments............................................. $ 2,922 $ 6,713 Accounts receivable................................................... 28,915 18,480 Other receivables..................................................... 14,717 10,123 Federal income taxes and interest receivable.......................... -- 3,320 Inventories........................................................... 2,422 1,105 Other................................................................. 745 727 -------- -------- Total current assets.......................................... 49,721 40,468 -------- -------- Property and Equipment: Oil and gas, on the basis of successful efforts accounting Proved properties being amortized.................................. 913,865 817,218 Unproved properties and properties under development, not being amortized......................................................... 6,890 6,465 Other, at cost........................................................ 8,268 6,961 -------- -------- 929,023 830,644 Less -- accumulated depreciation, depletion, and amortization, including $5,040 and $4,452 respectively, applicable to other property....... 691,110 638,658 -------- -------- 237,913 191,986 -------- -------- Other................................................................... 11,192 7,320 -------- -------- $298,826 $239,774 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable...................................................... $ 8,065 $ 8,307 Other payables........................................................ 26,497 22,955 Current portion of long-term debt..................................... 1,282 4,000 Accrued interest payable.............................................. 1,583 1,202 Accrued payroll and related benefits.................................. 1,237 1,005 Other................................................................. 40 122 -------- -------- Total current liabilities..................................... 38,704 37,591 Long-Term Debt.......................................................... 149,249 130,539 Deferred Federal Income Tax............................................. 36,487 29,724 Deferred Credits........................................................ 10,349 8,117 -------- -------- Total liabilities............................................. 234,789 205,971 -------- -------- Shareholders' Equity: Preferred stock, $1 par; 2,000,000 shares authorized.................. -- -- Common stock, $1 par; 43,333,333 shares authorized, 32,825,836 and 32,449,197 shares issued, respectively............................. 32,826 32,449 Additional capital.................................................... 130,675 125,919 Retained earnings (deficit)........................................... (99,140) (124,241) Treasury stock, at cost............................................... (324) (324) -------- -------- Total shareholders' equity.................................... 64,037 33,803 -------- -------- $298,826 $239,774 ======== ========
The accompanying notes to consolidated financial statements are an integral part hereof. 32 34 POGO PRODUCING COMPANY & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- -------- -------- (EXPRESSED IN THOUSANDS) Cash flows from operating activities: Cash received from customers...................................... $ 165,549 $141,012 $135,877 Federal income taxes and interest received........................ 3,364 -- -- Operating, exploration, and general and administrative expenses paid............................................................ (50,894) (45,051) (41,360) Interest paid..................................................... (9,620) (10,912) (21,262) Payment of royalties and related interest on FERC Order 94-A refunds......................................................... -- -- (4,872) Federal income taxes paid......................................... (7,500) (2,800) (1,500) Settlement of natural gas transportation and exchange imbalance... (2,168) -- -- Other............................................................. 542 895 828 --------- -------- -------- Net cash provided by operating activities.................. 99,273 83,144 67,711 --------- -------- -------- Cash flows from investing activities: Capital expenditures.............................................. (85,375) (62,353) (30,304) Purchase of proved reserves....................................... (32,578) -- (8,924) Proceeds from the sale of property and tubular stock.............. 52 2,713 4,017 --------- -------- -------- Net cash used in investing activities...................... (117,901) (59,640) (35,211) --------- -------- -------- Cash flows from financing activities: Proceeds from issuance of new debt................................ 86,250 -- -- Net borrowings under uncommitted lines of credit with banks....... 7,000 -- -- Proceeds from exercise of stock options........................... 3,687 2,026 703 Net borrowings (payments) under revolving credit agreements....... (53,000) 8,000 (1,000) Principal payments of other long-term debt obligations............ (24,472) (7,000) (54,000) Principal payments of production payment obligation............... -- (24,854) (20,621) Proceeds from issuance of common stock............................ -- -- 43,313 Debt issue expenses paid.......................................... (2,446) -- (1,100) Payment of cash dividends on common stock......................... (1,966) -- -- Purchase of 8% debentures due 2005................................ (216) -- -- --------- -------- -------- Net cash provided by (used in) financing activities........ 14,837 (21,828) (32,705) --------- -------- -------- Net increase (decrease) in cash and cash investments................ (3,791) 1,676 (205) Cash and cash investments at the beginning of the year.............. 6,713 5,037 5,242 --------- -------- -------- Cash and cash investments at the end of the year.................... $ 2,922 $ 6,713 $ 5,037 ========== ========= ========= Reconciliation of net income to net cash provided by operating activities: Net income........................................................ $ 27,067 $ 25,061 $ 18,495 Adjustments to reconcile net income to net cash provided by operating activities............................................ Extraordinary loss on early extinguishment of debt, net of tax........................................................... 307 -- -- Gains on sales.................................................. (52) (679) (1,702) Depreciation, depletion and amortization........................ 63,308 40,693 42,302 Dry hole and impairment......................................... 7,088 4,690 9,314 Interest capitalized............................................ (739) (451) (391) Increase in deferred federal income taxes....................... 8,374 13,356 8,669 Change in assets and liabilities: (Increase) decrease in accounts receivable.................... (10,435) 4,172 (1,191) (Increase) decrease in federal income taxes and interest receivable................................................. 3,320 (3,320) -- Increase in other current assets.............................. (18) (360) (27) (Increase) decrease in other assets........................... (1,426) 838 (3,515) Increase (decrease) in accounts payable....................... (242) (1,592) 733 Increase (decrease) in accrued interest payable............... 381 80 (2,480) Increase (decrease) in accrued payroll and related benefits... 232 63 (244) Decrease in other current liabilities......................... (124) (20) (9) Increase (decrease) in deferred credits....................... 2,232 613 (2,243) --------- -------- -------- Net cash provided by operating activities........................... $ 99,273 $ 83,144 $ 67,711 ========== ========= =========
The accompanying notes to consolidated financial statements are an integral part hereof. 33 35 POGO PRODUCING COMPANY & SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
RETAINED SHAREHOLDERS' SHARES COMMON ADDITIONAL EARNINGS TREASURY EQUITY OUTSTANDING STOCK CAPITAL (DEFICIT) STOCK (DEFICIT) --------- -------- ---------- --------- -------- ------------- (DOLLARS EXPRESSED IN THOUSANDS) BALANCE AT DECEMBER 31, 1991..... 27,456,822 $ 27,457 $ 83,704 $(167,797) $ -- $ (56,636) Net income....................... -- -- -- 18,495 -- 18,495 Issuance of common stock......... 4,500,000 4,500 38,368 -- -- 42,868 Exercise of stock options........ 147,042 147 774 -- -- 921 --------- -------- ---------- --------- -------- --------- BALANCE AT DECEMBER 31, 1992..... 32,103,864 32,104 122,846 (149,302) -- 5,648 Net income....................... -- -- -- 25,061 -- 25,061 Exercise of stock options........ 345,308 345 3,072 -- -- 3,417 Acquisition of treasury stock, at cost........................... (15,575) -- -- -- (324) (324) Conversion of debenture.......... 25 -- 1 -- -- 1 --------- -------- ---------- --------- -------- --------- BALANCE AT DECEMBER 31, 1993..... 32,433,622 32,449 125,919 (124,241) (324) 33,803 Net income....................... -- -- -- 27,067 -- 27,067 Exercise of stock options........ 376,639 377 4,756 -- -- 5,133 Dividends ($0.06 per common share)......................... -- -- -- (1,966) -- (1,966) ---------- -------- ---------- --------- -------- --------- BALANCE AT DECEMBER 31, 1994..... 32,810,261 $ 32,826 $ 130,675 $ (99,140) $ (324) $ 64,037 ========== ======== ========= ========= ====== =========
The accompanying notes to consolidated financial statements are an integral part hereof. 34 36 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation -- The consolidated financial statements include the accounts of Pogo Producing Company and its wholly-owned subsidiaries (the "Company"), after elimination of all significant intercompany transactions. Inventories -- Inventories consist primarily of tubular goods used in the Company's operations and are stated at the lower of average cost or market value. Interest Capitalized -- Interest costs related to financing major oil and gas projects in progress are capitalized until the projects are evaluated. Earnings per Share -- Earnings per common and common equivalent share (primary earnings per share) are based on the weighted average number of shares of Common Stock and common equivalent shares outstanding during the periods. The dilutive effect of stock options was considered in the earnings per share reported for the periods. The 8% Debentures are common stock equivalents and were anti-dilutive in all periods. Earnings per common and common equivalent share assuming full dilution (fully diluted earnings per share) considered the 10.25% Notes (retired on April 18, 1994) which were anti-dilutive in all periods in which they were outstanding and the 5 1/2% Notes (issued on March 16, 1994) which were dilutive for the portion of 1994 in which they were outstanding, but such dilution was not sufficient to change reported earnings per share. Earnings per share are based on the following:
1994 1993 1992 ------- ------- ------- (EXPRESSED IN THOUSANDS) Earnings applicable to Common Stock: Primary -- Income before extraordinary loss................... $27,374 $25,061 $18,495 Extraordinary loss................................. (307) -- -- ------- ------- ------- Net income......................................... $27,067 $25,061 $18,495 ======= ======= ======= Fully diluted -- Income before extraordinary loss................... $29,755 $25,061 $18,495 Extraordinary loss................................. (307) -- -- ------- ------- ------- Net income......................................... $29,448 $25,061 $18,495 ======= ======= ======= Weighted average number of Common Stock and common equivalent shares outstanding: Primary............................................ 33,352 32,860 27,929 Fully diluted...................................... 36,451 32,894 28,073
Production Imbalances -- Owners of an oil and gas property often take more or less production from a property than entitled to based on their ownership percentages in the property. This results in a condition known in the industry as a production imbalance. The Company follows the "take" (cash) method of accounting for production imbalances. Under this method, the Company recognizes revenues on production as it is taken and delivered to its purchasers. The Company's crude oil imbalances are not significant. At December 31, 1994, the 35 37 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company had taken approximately 4,873 MMcf of natural gas less than it was entitled to based on its interest in certain properties, and approximately 1,994 MMcf more than its entitlement in certain other properties placing the Company at year end in a net under-delivered position of approximately 2,879 MMcf of natural gas based on its working interest ownership in the properties. Oil and Gas Activities and Depreciation, Depletion, and Amortization -- The Company follows the successful efforts method of accounting for its oil and gas activities. Under the successful efforts method, lease acquisition costs and all development costs are capitalized. Unproved properties are reviewed quarterly to determine if there has been impairment of the carrying value, with any such impairment charged to expense in the period. Exploratory drilling costs are capitalized until the results are determined. If proved reserves are not discovered, the exploratory drilling costs are expensed. Other exploratory costs are expensed as incurred. The provision for depreciation, depletion and amortization is based on the capitalized costs mentioned above plus future costs to abandon offshore wells and platforms and is determined on a field-by-field basis using the units of production method. Other properties are depreciated using a straight-line method in amounts which in the opinion of management are adequate to allocate the cost of the properties over their estimated useful lives. Consolidated Statements of Cash Flows -- For the purpose of cash flows, the Company considers all highly liquid investments with a maturity date of three months or less to be cash equivalents. Significant transactions may occur which do not directly affect cash balances and as such will not be disclosed in the Consolidated Statements of Cash Flows. Certain such noncash transactions are disclosed in the Consolidated Statements of Shareholders' Equity relating to the acquisition of treasury stock in 1993 in exchange for stock options exercised and the conversion in 1993 of a debenture into Common Stock. In addition, the Company in 1993, exchanged its working interest in thirteen Gulf of Mexico oil and gas properties for an increased working interest in five other Gulf of Mexico oil and gas properties in a noncash "like kind" exchange. The oil and gas property and accumulated depreciation, depletion and amortization accounts as reflected in the Consolidated Balance Sheets have been adjusted to reflect the appropriate amounts to record the working interests acquired and disposed of. The oil and gas reserves acquired and disposed of are reflected as purchases and sales in the "Estimates of Proved Reserves" roll forward included in the "Unaudited Supplementary Financial Data" included elsewhere herein. Commitments and Contingencies -- The Company's office rent expense was $819,000, $868,000, and $808,000 in 1994, 1993, and 1992, respectively. The Company has lease commitments for office space of $822,000 in 1995, $1,039,000 in 1996 and 1997, $1,007,000 in 1998, and $962,000 in 1999. (2) INCOME TAXES The components of income (loss) before income taxes for each of the three years in the period ended December 31, 1994, are as follows (expressed in thousands):
1994 1993 1992 ------- ------- ------- United States........................................... $44,931 $43,749 $29,872 Foreign................................................. (2,040) (3,707) (1,185) ------- ------- ------- Total......................................... $42,891 $40,042 $28,687 ======= ======= =======
36 38 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of federal income tax expense (benefit) for each of the three years in the period ended December 31, 1994, are as follows (expressed in thousands):
1994 1993 1992 ------- ------- ------- United States, current.................................. $ 7,500 $ 2,800 $ 1,500 United States, deferred(a).............................. 8,374 12,360 8,672 Foreign, current........................................ (357) (179) 20 ------- ------- ------- Total......................................... $15,517 $14,981 $10,192 ======= ======= =======
- --------------- (a) Excludes $165,000 of deferred tax benefits on a $472,000 extraordinary loss in 1994. Total federal income tax expense (benefit) for each of the three years in the period ended December 31, 1994, differs from the amounts computed by applying the statutory federal income tax rate to income before taxes as follows: (expressed as a percent of pretax income):
1994 1993 1992 ---- ---- ---- Federal statutory income tax rate............................ 35.0% 35.0% 34.0% Increases (reductions) resulting from: Statutory depletion in excess of tax basis................. (0.1) (0.4) (0.1) Foreign taxes.............................................. 0.9 2.9 1.4 Other...................................................... 0.4 -- 0.2 ---- ---- ---- 36.2% 37.5% 35.5% ==== ==== ====
The deferred federal income tax provision is the result of the difference between deferred tax liabilities determined at each balance sheet date. The deferred tax liabilities are determined by applying current tax laws to temporary differences in the recognition of revenue and expense for tax and financial purposes. The principal components of the Company's deferred income tax liability include the following at December 31, 1994 and 1993 (expressed in thousands):
DECEMBER 31, --------------------- 1994 1993 -------- -------- Temporary differences arise primarily from the following -- Intangible drilling costs, capitalized and amortized for financial statement purposes and deducted for income tax purposes.................................................. $132,500 $112,135 Differences in depletion and depreciation rates used for tangible assets for financial and income tax purposes..... (78,457) (56,136) Charges to property and equipment, expensed for financial statement purposes, and capitalized and amortized for income tax purposes....................................... (35,266) (38,243) Interest charges, capitalized and amortized for financial statement purposes and deducted for income tax purposes... 17,710 16,800 Income tax carryforward credits.............................. -- (4,832) -------- -------- Deferred tax liability....................................... $ 36,487 $ 29,724 ======== ========
37 39 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) LONG-TERM DEBT Long-term debt and the amount due within one year at December 31, 1994 and 1993, consists of the following (dollars expressed in thousands):
DECEMBER 31, --------------------- 1994 1993 -------- -------- Senior debt -- Bank revolving credit agreements debt: Prime rate based loans, borrowings at December 31, 1993 at an interest rate of 5.75%............................... $ -- $ 27,000 LIBO Rate based loans, borrowings at December 31, 1994 and 1993 at average interest rates of 7.63% and 5.20%, respectively............................................ 14,000 40,000 -------- -------- Total bank revolving credit agreement debt........... 14,000 67,000 Uncommitted credit lines with banks, borrowings at December 31, 1994 at an average interest rate of 7.21%............. 7,000 -- -------- -------- Total senior debt.............................................. 21,000 67,000 -------- -------- Subordinated debt -- 5 1/2% Convertible subordinated notes, due 2004.............. 86,250 -- 8% Convertible subordinated debentures, due 2005, $1,282 sinking fund requirement in 1995 and a $3,000 annual sinking fund requirement thereafter....................... 43,281 43,539 10.25% Convertible subordinated notes, due 1999, and retired on April 18, 1994......................................... -- 24,000 -------- -------- Total subordinated debt........................................ 129,531 67,539 -------- -------- Total debt..................................................... 150,531 134,539 -------- -------- Amount due within one year -- Current portion of long-term debt, consisting of sinking fund requirements on: 8% Debentures............................................. (1,282) -- 10.25% Notes.............................................. -- (4,000) -------- -------- Long-term debt................................................. $149,249 $130,539 ======== ========
The bank revolving credit agreement entered into in December, 1993, extends to the Company a $100,000,000 revolving/term credit facility which will be fully revolving until June 29, 1996 and will convert to a term loan with eight quarterly installments commencing July 31, 1996. The amount that may be borrowed under the facility may not exceed a borrowing base, determined semiannually by the lenders based on the discounted present value of the Company's oil and gas reserves and the provisions of the agreement. The borrowing base currently exceeds $100,000,000. The agreement provides that total debt and total debt for borrowed money, as defined, may not exceed $230,000,000 and $200,000,000, respectively. The facility is governed by various financial covenants including the maintenance of positive working capital (excluding current maturities of debt), a fixed charge ratio, as defined, of 1.7 or greater, a $10,000,000 limit on other senior debt, and a $10,000,000 limit on prepayment (without refinancing) of subordinated debt in any one year and $20,000,000 in total through July 31, 1996. Upon the occurrence of an event of default or certain other specified events, the banks would be entitled to a security interest in the borrowing base properties, which constitute substantially all of the Company's domestic oil and gas properties. Borrowings under the facility bear interest at a Base (Prime) rate, certificate of deposit rate plus 1 5/8%, or LIBOR plus 1 1/2%, at the Company's option. A commitment fee of 1/2 of 1% per annum of the unborrowed amount under the facility is 38 40 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) also due. The Company incurred commitment fees of $409,000 in 1994, $149,000 in 1993, and $80,000 in 1992 under this and a prior revolving credit agreement. The Company has entered into separate letter agreements with two banks under which each bank may provide a $10,000,000 uncommitted line of credit. The two $10,000,000 lines of credit are on an as available or offered basis and the banks have no obligations to make any advances under the lines. Loans made under the agreements are for a maximum term of 30 days and are reflected as long-term as the Company has the intent and ability to reborrow such amounts under its bank revolving credit agreement discussed above. The agreements may be terminated at any time by the Company or either bank. The 5 1/2% convertible subordinated notes, due 2004 (the "5 1/2% Notes") are convertible into Common Stock at $22.188 per share subject to adjustment upon the occurrence of certain events. The 5 1/2% Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after March 15, 1998, at a redemption price of 103.3% and decreasing percentages thereafter. No sinking fund is provided. The 5 1/2% Notes are redeemable at the option of the holder, upon the occurrence of a repurchase event (a change in control, as defined), at 100% of the principal amount. The 8% convertible subordinated debentures, due 2005 (the "8% Debentures") are convertible into Common Stock at $39.50 per share subject to adjustments under certain circumstances, including stock splits. The 8% Debentures are redeemable at the option of the Company at 102.4% through December 30, 1995, and decreasing percentages thereafter, and are subject to mandatory annual sinking fund requirements of $3,000,000 which commenced December 31, 1990. Such requirements will be sufficient to retire all but $15,000,000 of the issue prior to maturity. As of December 31, 1994, the Company has purchased $13,998,000 principal amount of the bonds at less than face value resulting in both ordinary and extraordinary gains. The Company has tendered $12,000,000 principal amount of the bonds to the trustee in satisfaction of sinking fund requirements and $280,000 principal amount of the bonds have been called by the trustee. The Company currently has $1,718,000 principal amount of bonds purchased in excess of current sinking fund requirements which may be tendered in satisfaction of future sinking fund requirements. Current maturities and sinking fund requirements during the next five years in connection with the above long-term debt are $1,282,000 in 1995, $9,300,000 in 1996, $13,500,000 in 1997, $7,200,000 in 1998 and $3,000,000 in 1999. Included in the current maturities reflected above are $6,300,000 in 1996, $10,500,000 in 1997, and $4,200,000 in 1998 relative to bank debt. The Company has established a history of refinancing its bank debt before scheduled maturities and expects to do so again before the amortization of bank debt commences in 1996. (4) SALES TO MAJOR CUSTOMERS The Company is an oil and gas exploration and production company that generally sells its oil and gas to numerous customers on a month-to-month basis. Sales to the following customers exceeded 10 percent of revenues during the years indicated (expressed in thousands):
1994 1993 1992 ------- ------- ------- Enron Corp. and its affiliate EOTT Energy Partners L.P. ................................................. $27,630 $16,437 $ -- Coastal Gas Marketing Company (an affiliate of The Coastal Corporation).................................. $27,609 $ 4,682 $ 3,830 Scurlock Permian Corp. (a subsidiary of Ashland Inc.)... $21,134 $38,510 $39,729
39 41 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) CREDIT RISK Substantially all the Company's accounts receivable at December 31, 1994, result from oil and gas sales and joint interest billings to other companies in the oil and gas industry. This concentration of customers and joint interest owners may impact the Company's overall credit risk, either positively or negatively, in that these entities may be similarly affected by industry-wide changes in economic or other conditions. Such receivables are generally not collateralized. Historically, credit losses incurred by the Company on receivables generally have not been material. No known material credit losses were experienced during 1994. (6) EMPLOYEE BENEFITS A total of 3,476,430 shares of Common Stock are reserved for issuance to key employees and non-employee directors under the Company's stock option plans. The stock option plans authorize the granting of options at prices equivalent to the market value at the date of grant. Options generally become exercisable in three annual installments commencing one year after the date granted and, if not exercised, expire 10 years from the date of grant. At January 1, 1994, 1,490,676 shares were issuable under stock options outstanding. Options for 291,000 shares were granted during 1994 at prices ranging from $19.13 to $22.25 per share. During 1994, 376,639 options were exercised at prices ranging from $4.38 to $17.44 per share and options to purchase 17,500 shares at a price of $16.25 were cancelled. At December 31, 1994, options to purchase 1,387,537 shares were outstanding (902,455 were exercisable) at prices ranging from $4.38 to $22.25. The Company has a tax-advantaged savings plan in which all salaried employees may participate. Under such plan, a participating employee may allocate up to 10% of his salary, and the Company makes matching contributions of up to 6% thereof. Funds contributed by the employee and the matching funds contributed by the Company are held in trust by a bank trustee in six separate funds. Amounts contributed by the employee and earnings and accretions thereon may be used to purchase shares of Common Stock, invest in a money market fund or invest in four stock, bond, or blended stock and bond mutual funds according to instructions from the employee. Matching funds contributed to the savings plan by the Company are invested only in Common Stock. The Company contributed $375,000 to the savings plan in 1994, $125,000 in 1993, and $288,000 in 1992. 40 42 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A trusteed retirement plan has been adopted by the Company for its salaried employees. The benefits are based on years of service and the employee's average compensation for five consecutive years within the final ten years of service which produce the highest average compensation. The Company makes annual contributions to the plan in the amount of retirement plan cost accrued or the maximum amount which can be deducted for federal income tax purposes. The following table sets forth the plan's funded status (in thousands of dollars) as of December 31, 1994, 1993, and 1992.
1994 1993 1992 ------- ------- ------- Actuarial present value (discounted at 8 1/2, 7 1/2, and 8 1/4%, respectively) of benefit obligations: Accumulated benefit obligations -- Vested............................................. $ 3,940 $ 4,019 $ 3,120 Non-vested......................................... 820 717 701 ------- ------- ------- Total accumulated benefit obligations.............. 4,760 4,736 3,821 Projected salary increases (escalated at 6%) and other changes............................................ 1,434 1,500 2,653 ------- ------- ------- Projected benefit obligations for service rendered to date............................................... 6,194 6,236 6,474 Plan assets at fair value, primarily listed securities with an expected long-term rate of return of 8 1/2%... 13,988 13,481 13,830 ------- ------- ------- Plan assets in excess of projected benefit obligations........................................... 7,794 7,245 7,356 Unrecognized: Net overfunding being recognized over 15 years........ (646) (750) (853) Net gain arising from the difference between actual experience and that assumed........................ (3,443) (3,209) (3,956) Prior service cost.................................... (430) (473) (41) ------- ------- ------- Accrued retirement plan asset........................... $ 3,275 $ 2,813 $ 2,506 ======= ======= ======= Retirement plan cost (benefit) for 1994, 1993, and 1992 included the following components: Service cost, benefits accruing each year with proration for future salary increases............ $ 499 $ 611 $ 514 Interest cost on projected benefit obligations..... 476 524 451 Actual return on plan assets....................... (1,139) (1,164) (1,141) Net amortization and deferral...................... (298) (278) (360) ------- ------- ------- Accrued retirement plan cost (benefit)............. $ (462) $ (307) $ (536) ======= ======= =======
Effective January 1, 1992, the Company adopted the provisions of the Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company currently provides full medical benefits to its retired employees and dependents. For current employees, the Company assumes all or a portion of postretirement medical and term life insurance costs based on the employee's age and length of service with the Company. The postretirement medical plan has no assets and is currently funded by the Company on a pay-as-you-go basis. 41 43 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is an analysis (in thousands of dollars) of the annual expense and activity in the deferred cost and benefits obligation accounts for 1992, 1993 and 1994. The computation assumes that future increases in medical costs will trend down from 13% to 7% per year over the next 12 years for purposes of estimating future costs. The medical cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed medical cost trend rate by one percent in each year would increase the aggregate of service and interest cost components of net periodic postretirement benefit cost for 1994 by $196,000 and the accumulated postretirement benefit obligation as of December 31, 1994, by $897,000.
ANNUAL DEFERRED BENEFIT EXPENSE COSTS OBLIGATION ------- -------- ---------- Transition obligation at January 1, 1992................. $4,263 $ (4,263) Amortization of transition costs over 14 years representing the average remaining service period of eligible employees..................................... $ 305 (305) 305 Service cost, including interest......................... 303 Interest cost on transition obligation................... 362 ------- 1992 expense............................................. $ 970 (970) ====== Current benefits paid.................................... 170 -------- ---------- Balance at December 31, 1992............................. 3,958 (4,758) Amortization of transition costs over 14 years........... $ 305 (305) 305 Service cost, including interest......................... 368 Interest cost on transition obligation................... 407 ------- 1993 expense............................................. $1,080 (1,080) ====== Current benefits paid.................................... 246 Unrecognized net loss.................................... (1,400) -------- ---------- Balance at December 31, 1993............................. 3,653 (6,687) Amortization of transition costs over 14 years........... $ 304 (304) 304 Amortization of net loss from earlier periods............ 57 57 Service cost, including interest......................... 395 Interest cost on transition obligation................... 494 ------- 1994 expense............................................. $1,250 (1,250) ====== Current benefits paid.................................... 126 Unrecognized net gain.................................... 1,963 -------- Balance at December 31, 1994............................. $3,349 ====== Plan assets at fair value................................ -- ---------- Funded status at December 31, 1994 (discounted at 8 1/2%)................................................ $ (5,487) ========
The accumulated postretirement benefit obligation (in thousands of dollars) at December 31, 1994 is attributable to the following groups: Retirees and beneficiaries................................................. $ 2,234 Dependents of retirees..................................................... 1,014 Fully eligible active employees............................................ 833 Active employees, not fully eligible....................................... 1,406 ------- $ 5,487 =======
42 44 POGO PRODUCING COMPANY & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (6) FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. Cash and Cash Investments Fair value is carrying value as no cash equivalents or cash investments are included in the balances as of December 31, 1994 and 1993. Debt
INSTRUMENT BASIS OF FAIR VALUE ESTIMATE ---------- ---------------------------- Bank revolving credit agreement Fair value is carrying value as of December 31, 1994 and 1993, based on 1993 negotiations with the lenders and the market value interest rates. Uncommitted credit lines with banks Fair value is carrying value as of December 31, 1994 based on recent negotiations with the lenders and the market value interest rates. 5 1/2% Notes Fair value is 94% of carrying value as of December 31, 1994 based on the quoted market price for this publicly traded debt. 8% Debentures Fair value is 98.75% and 99.5%, of carrying value as of December 31, 1994 and 1993, respectively, based on the quoted market prices for this publicly traded debt. 10.25% Notes Fair value is 103.7% of carrying value at December 31, 1993 based on the redemption premium.
The carrying value and estimated fair value of the Company's financial instruments at December 31, 1994 and 1993 (in thousands of dollars) are as follows:
1994 1993 -------------------- -------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE -------- -------- -------- -------- Cash and cash investments.................. $ 2,922 $ 2,922 $ 6,713 $ 6,713 Debt: Bank revolving credit agreement.......... (14,000) (14,000) (67,000) (67,000) Uncommitted credit lines with banks...... (7,000) (7,000) -- -- 5 1/2% Notes............................. (86,250) (81,075) -- -- 8% Debentures............................ (43,281) (42,740) (43,539) (43,321) 10.25% Notes............................. -- -- (24,000) (24,888)
43 45 UNAUDITED SUPPLEMENTARY FINANCIAL DATA OIL AND GAS PRODUCING ACTIVITIES The results of operations from oil and gas producing activities excludes non-oil and gas revenues, general and administrative expenses, interest charges, interest income and interest capitalized. United States income tax expense was determined by applying the statutory rates to pretax operating results with adjustments for permanent differences. Kingdom of Thailand tax expense was determined by applying the statutory tax rate to Thailand taxable income.
UNITED KINGDOM OF TOTAL STATES THAILAND -------- -------- ---------- (EXPRESSED IN THOUSANDS) 1994 ----------------------------------- Oil and gas revenues................................ $173,556 $173,518 $ 38 Lease operating expense............................. (29,768) (29,768) -- Exploration expense................................. (5,257) (3,931) (1,326) Dry hole and impairment expense..................... (7,088) (7,088) -- Depreciation, depletion and amortization expense.... (62,723) (62,690) (33) -------- -------- ---------- Pretax operating results............................ 68,720 70,041 (1,321) Income tax (expense) benefit........................ (24,262) (24,619) 357 -------- -------- ---------- Operating results................................... $ 44,458 $ 45,422 $ (964) ======== ======== ======== 1993 ----------------------------------- Oil and gas revenues................................ $136,553 $136,525 $ 28 Lease operating expense............................. (26,633) (26,633) -- Exploration expense................................. (2,455) (1,060) (1,395) Dry hole and impairment expense..................... (4,690) (2,737) (1,953) Depreciation, depletion and amortization expense.... (40,224) (40,193) (31) -------- -------- ---------- Pretax operating results............................ 62,551 65,902 (3,351) Income tax (expense) benefit........................ (22,712) (22,891) 179 -------- -------- ---------- Operating results................................... $ 39,839 $ 43,011 $ (3,172) ======== ======== ======== 1992 ----------------------------------- Oil and gas revenues................................ $139,128 $139,128 $ -- Lease operating expense............................. (25,842) (25,842) -- Exploration expense................................. (3,102) (1,876) (1,226) Dry hole and impairment expense..................... (9,314) (9,314) -- Depreciation, depletion and amortization expense.... (41,849) (41,834) (15) -------- -------- ---------- Pretax operating results............................ 59,021 60,262 (1,241) Income tax expense.................................. (20,510) (20,490) (20) -------- -------- ---------- Operating results................................... $ 38,511 $ 39,772 $ (1,261) ======== ======== ========
44 46 UNAUDITED SUPPLEMENTARY FINANCIAL DATA -- (CONTINUED) The following table sets forth the Company's capitalized costs (expressed in thousands) incurred for oil and gas producing activities during the years indicated.
1994 1993 1992 -------- ------- ------- Capitalized costs incurred: Property acquisition (United States)............... $ 36,354 $ 1,520 $11,578 Exploration -- United States................................... 5,803 8,267 3,865 Kingdom of Thailand............................. 5,022 4,583 1,412 Development (United States)........................ 67,143 57,648 20,717 Interest capitalized (United States)............... 739 451 391 -------- ------- ------- $115,061 $72,469 $37,963 ======== ======= ======= Provision for depreciation, depletion and amortization: United States...................................... $ 62,690 $40,193 $41,834 Kingdom of Thailand................................ 33 31 15 -------- ------- ------- $ 62,723 $40,224 $41,849 ======== ======= =======
The following information regarding estimates of the Company's proved oil and gas reserves, which are located offshore in United States waters of the Gulf of Mexico, onshore in the United States and offshore in the Kingdom of Thailand is based on reports prepared by Ryder Scott Company Petroleum Engineers. Their summary report dated February 3, 1995 is set forth as an exhibit to this Form 10-K and includes definitions and assumptions that served as the basis for the discussions under the caption "Item 1, Business -- Exploration and Production Data -- Reserves." Such definitions and assumptions should be referred to in connection with the following information. ESTIMATES OF PROVED RESERVES
OIL, CONDENSATE AND NATURAL GAS LIQUIDS NATURAL GAS (BBLS.) (MMCF) -------------- ----------- Proved reserves (located in the United States) as of December 31, 1991........................................ 18,818,091 202,735 Revisions of previous estimates.......................... 1,721,385 20,284 Extensions, discoveries, and other additions (including 2,576,907 barrels and 10,668 MMcf located in the Kingdom of Thailand).................................. 5,486,273 19,126 Purchase of properties................................... 335,750 10,237 Sales of properties...................................... (194,606) (4,733) Estimated 1992 production................................ (3,611,105) (40,581) -------------- ----------- Proved reserves (located in the United States except for 2,576,907 barrels and 10,668 MMcf located in the Kingdom of Thailand) as of December 31, 1992..................... 22,555,788 207,068 Revisions of previous estimates.......................... 342,022 1,148 Extensions, discoveries, and other additions (including 2,847,906 barrels and 22,806 MMcf located in the Kingdom of Thailand).................................. 9,764,408 55,626 Purchase of properties................................... 182,610 13,192 Sales of properties...................................... (356,514) (11,849) Estimated 1993 production................................ (4,219,873) (32,319) -------------- -----------
45 47 UNAUDITED SUPPLEMENTARY FINANCIAL DATA -- (CONTINUED)
OIL, CONDENSATE AND NATURAL GAS LIQUIDS NATURAL GAS (BBLS.) (MMCF) -------------- ----------- Proved reserves (located in the United States except for 5,424,813 barrels and 33,474 MMcf located in the Kingdom of Thailand) as of December 31, 1993..................... 28,268,441 232,866 Revisions of previous estimates.......................... 1,286,984 (2,558) Extensions, discoveries, and other additions (including 2,249,559 barrels and 23,265 MMcf located in the Kingdom of Thailand).................................. 6,565,442 49,517 Purchase of properties................................... 2,686,919 15,792 Sales of properties...................................... (497) (109) Estimated 1994 production................................ (4,945,677) (52,618) -------------- ----------- Proved reserves (located in the United States except for 7,674,372 barrels and 56,739 MMcf located in the Kingdom of Thailand) as of December 31, 1994..................... 33,861,612 242,890 =========== ========= Proved developed reserves (located in the United States) as of: December 31, 1991........................................ 17,549,830 188,090 December 31, 1992........................................ 18,798,149 175,523 December 31, 1993........................................ 20,976,194 183,139 December 31, 1994........................................ 24,669,755 178,518
46 48 STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED
TOTAL UNITED KINGDOM OF COMPANY STATES THAILAND --------- --------- ---------- (EXPRESSED IN THOUSANDS) 1994 ------------------------------------ Future gross revenues...................................... $ 985,888 $ 720,086 $265,802 Future production costs: Lease operating expense.................................. (253,140) (192,834) (60,306) Future development and abandonment costs................... (180,839) (86,684) (94,155) --------- --------- ---------- Future net cash flows before income taxes.................. 551,909 440,568 111,341 Discount at 10% per annum.................................. (168,929) (109,700) (59,229) --------- --------- ---------- Discounted future net cash flow before income taxes........ 382,980 330,868 52,112 Future income taxes, net of discount at 10% per annum...... (92,911) (73,602) (19,309) --------- --------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves.................. $ 290,069 $ 257,266 $ 32,803 ========= ========= ======== 1993 ------------------------------------ Future gross revenues...................................... $ 869,783 $ 744,201 $125,582 Future production costs: Lease operating expense.................................. (186,464) (158,934) (27,530) Future development and abandonment costs................... (133,258) (79,735) (53,523) --------- --------- ---------- Future net cash flows before income taxes.................. 550,061 505,532 44,529 Discount at 10% per annum.................................. (146,221) (118,858) (27,363) --------- --------- ---------- Discounted future net cash flow before income taxes........ 403,840 386,674 17,166 Future income taxes, net of discount at 10% per annum...... (103,580) (98,788) (4,792) --------- --------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves.................. $ 300,260 $ 287,886 $ 12,374 ========= ========= ======== 1992 ------------------------------------ Future gross revenues...................................... $ 856,238 $ 791,865 $ 64,373 Future production costs: Lease operating expense.................................. (179,721) (173,355) (6,366) Future development and abandonment costs................... (105,843) (80,887) (24,956) --------- --------- ---------- Future net cash flows before income taxes.................. 570,674 537,623 33,051 Discount at 10% per annum.................................. (165,573) (146,730) (18,843) --------- --------- ---------- Discounted future net cash flow before income taxes........ 405,101 390,893 14,208 Future income taxes, net of discount at 10% per annum...... (97,444) (91,848) (5,596) --------- --------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves.................. $ 307,657 $ 299,045 $ 8,612 ========= ========= ========
The standardized measure of discounted future net cash flows from the production of proved reserves is developed as follows: 1. Estimates are made of quantities of proved reserves and the future periods in which they are expected to be produced based on year end economic conditions. 2. The estimated future gross revenues from proved reserves are priced on the basis of year end prices, except in those instances where fixed and determinable natural gas price escalations are covered by contracts. 47 49 STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED -- (CONTINUED) 3. The future gross revenue streams are reduced by estimated future costs to develop and to produce the proved reserves, as well as certain abandonment costs based on year end cost estimates, and the estimated effect of future income taxes. These cost estimates are subject to some uncertainty, particularly those estimates relating to the Company's properties located in the Kingdom of Thailand. The standardized measure of discounted future net cash flows does not purport to present the fair market value of the Company's oil and gas reserves. An estimate of fair value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, a discount factor more representative of the time value of money and the risks inherent in reserve estimates. The following are the principal sources of change in the standardized measure of discounted future net cash flows. All amounts are related to changes in reserves located in the United States unless otherwise noted.
YEAR ENDED DECEMBER 31, 1994 ------------------------------------ TOTAL UNITED KINGDOM OF COMPANY STATES THAILAND --------- --------- ---------- (EXPRESSED IN THOUSANDS) Beginning balance.......................................... $ 300,260 $ 287,886 $ 12,374 Revisions to prior years' proved reserves: Net changes in prices and production costs............... (30,813) (44,948) 14,135 Net changes due to revisions in quantity estimates....... 5,947 5,947 -- Net changes in estimates of future development costs..... (45,370) (47,880) 2,510 Accretion of discount.................................... 40,384 38,667 1,717 Changes in production rate............................... 1,162 (9,574) 10,736 Other.................................................... 5,326 5,421 (95) --------- --------- ---------- Total revisions.................................. (23,364) (52,367) 29,003 New field discoveries and extensions, net of future production and development costs......................... 59,047 53,104 5,943 Purchases of properties.................................... 22,973 22,973 -- Sales of properties........................................ (4,114) (4,114) -- Sales of oil and gas produced, net of production costs..... (143,655) (143,655) -- Previously estimated development costs incurred............ 68,252 68,252 -- Net change in income taxes................................. 10,670 25,187 (14,517) --------- --------- ---------- Net change in standardized measure of discounted future net cash flows.......................... (10,191) (30,620) 20,429 --------- --------- ---------- Ending balance............................................. $ 290,069 $ 257,266 $ 32,803 ========= ========= ========
48 50 STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1993 ------------------------------------ TOTAL UNITED KINGDOM OF COMPANY STATES THAILAND --------- --------- ---------- (EXPRESSED IN THOUSANDS) Beginning balance.......................................... $ 307,657 $ 299,045 $ 8,612 Revisions to prior years' proved reserves: Net changes in prices and production costs............... (41,775) (34,842) (6,933) Net changes due to revisions in quantity estimates....... 4,066 4,066 -- Net changes in estimates of future development costs..... 662 (871) 1,533 Accretion of discount.................................... 40,510 39,089 1,421 Changes in production rate............................... 5,134 6,728 (1,594) Other.................................................... 2,278 3,935 (1,657) --------- --------- ---------- Total revisions.................................. 10,875 18,105 (7,230) New field discoveries and extensions, net of future production and development costs......................... 39,247 29,059 10,188 Purchases of properties.................................... 22,516 22,516 -- Sales of properties........................................ (19,633) (19,633) -- Sales of oil and gas produced, net of production costs..... (110,870) (110,870) -- Previously estimated development costs incurred............ 56,604 56,604 -- Net change in income taxes................................. (6,136) (6,940) 804 --------- --------- ---------- Net change in standardized measure of discounted future net cash flows.......................... (7,397) (11,159) 3,762 --------- --------- ---------- Ending balance............................................. $ 300,260 $ 287,886 $ 12,374 ========= ========= ========
YEAR ENDED DECEMBER 31, 1992 ------------------------------------ TOTAL UNITED KINGDOM OF COMPANY STATES THAILAND --------- --------- ---------- (EXPRESSED IN THOUSANDS) Beginning balance.......................................... $ 273,331 $ 273,331 $ -- Revisions to prior years' proved reserves: Net changes in prices and production costs............... 38,348 38,348 -- Net changes due to revisions in quantity estimates....... 42,829 42,829 -- Net changes in estimates of future development costs..... (21,015) (21,015) -- Accretion of discount.................................... 34,975 34,975 -- Changes in production rate............................... (5,733) (5,733) -- Other.................................................... 6,607 6,607 -- --------- --------- ---------- Total revisions.................................. 96,011 96,011 -- New field discoveries and extensions, net of future production and development costs......................... 43,760 29,552 14,208 Purchases of properties.................................... 13,870 13,870 -- Sales of properties........................................ (7,430) (7,430) -- Sales of oil and gas produced, net of production costs..... (111,581) (111,581) -- Previously estimated development costs incurred............ 20,717 20,717 -- Net change in income taxes................................. (21,021) (15,425) (5,596) --------- --------- ---------- Net change in standardized measure of discounted future net cash flows.......................... 34,326 25,714 8,612 --------- --------- ---------- Ending balance............................................. $ 307,657 $ 299,045 $ 8,612 ========= ========= ========
49 51 QUARTERLY RESULTS -- UNAUDITED Summaries of the Company's results of operations by quarter for the years 1994 and 1993 are as follows:
QUARTER ENDED ----------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- ------- ------------ ----------- (EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1994 Revenues...................................... $ 37,892 $49,734 $ 46,452 $ 39,530 Gross profit(a)............................... $ 17,355 $21,782 $ 17,762 $ 11,288 Income before extraordinary loss.............. $ 7,278 $ 9,903 $ 7,433 $ 2,760 Extraordinary loss on early extinguishment of debt........................................ -- $ (307) -- -- Net income.................................... $ 7,278 $ 9,596 $ 7,433 $ 2,760 Earnings per share: Primary -- Income before extraordinary loss......... $ 0.22 $ 0.30 $ 0.22 $ 0.08 Extraordinary loss....................... -- $ (0.01) -- -- Net income............................... $ 0.22 $ 0.29 $ 0.22 $ 0.08 Fully diluted -- Income before extraordinary loss......... $ 0.22 $ 0.29 $ 0.22 $ 0.08 Extraordinary loss....................... -- $ (0.01) -- -- Net income............................... $ 0.22 $ 0.28 $ 0.22 $ 0.08 1993 Revenues...................................... $ 34,681 $34,533 $ 37,210 $ 33,130 Gross profit(a)............................... $ 17,331 $15,391 $ 17,903 $ 14,458 Net income.................................... $ 7,160 $ 5,596 $ 7,161 $ 5,144 Earnings per share (primary and fully diluted)................. $ 0.22 $ 0.17 $ 0.22 $ 0.16
- --------------- (a) Represents revenues less lease operating, exploration, dry hole and impairment, and depreciation depletion and amortization expenses. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. Not applicable. 50 52 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information regarding nominees and continuing directors in the Company's definitive Proxy Statement for its annual meeting to be held on April 25, 1995, to be filed within 120 days of December 31, 1994 pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the Company's "1995 Proxy Statement"), is incorporated herein by reference. See also Item S-K 401(b) appearing in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. The information regarding executive compensation in the Company's 1995 Proxy Statement, other than the information regarding the Compensation Committee Report on Executive Compensation, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information regarding ownership of the Company securities by management and certain other beneficial owners in the Company's 1995 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information regarding certain relationships and related transactions with management in the Company's 1995 Proxy Statement is incorporated herein by reference. 51 53 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (A) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS 1. Financial Statements and Supplementary Data:
PAGE ---- Report of Independent Public Accountants...................... 30 Consolidated statements of income............................. 31 Consolidated balance sheets................................... 32 Consolidated statements of cash flows......................... 33 Consolidated statements of shareholders' equity............... 34 Notes to consolidated financial statements.................... 35
2. Financial Statement Schedules: All Financial Statement Schedules have been omitted because they are not required, are not applicable or the information required has been included elsewhere herein. 3. Exhibits: * 3(a) -- Restated Certificate of Incorporation of Pogo Producing Company. (Exhibit 3(a), Annual Report on Form 10-K for the year ended December 31, 1987, File No. 0-5468). * 3(a)(i) -- Certificate of Designation, Preferences and Rights of Preferred Stock of Pogo Producing Company, dated March 25, 1987. (Exhibit 3(a)(1), Annual Report on Form 10-K for the year ended December 31, 1987, File No. 0-5468). * 3(b) -- Bylaws of Pogo Producing Company, as amended and restated through July 24, 1990. (Exhibit 3(a), Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, File No. 0-5468). * 4(a)(i) -- Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. (Exhibit 10(a), Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-7792). * 4(a)(ii) -- First Amendment dated as of September 30, 1992 to Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. (Exhibit 4(a)(ii), Annual Report of Form 10-K for the year ended December 31, 1993, File No. 1-7792). * 4(a)(iii) -- Second Amendment dated as of December 31, 1993 to Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. (Exhibit 4(a)(iii), Annual Report of Form 10-K for the year ended December 31, 1993, File No. 1-7792). 4(a)(iv) -- Third Amendment dated as of June 1, 1994 to Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. * 4(b) -- Indenture dated as of October 15, 1980 to Chemical Bank, as Trustee. (Exhibit 4, File No. 2-69428).
52 54 4(c) -- Indenture dated as of March 23, 1994 to Shawmut Bank Connecticut, National Association, as Trustee. * 4(d) -- Rights Agreement dated as of April 26, 1994 between Pogo Producing Company and Harris Trust Company of New York, as Rights Agent. (Exhibit 4, Current Report on Form 8-K filed April 26, 1994, File No. 1-7792). * 4(e) -- Certificate of Designations of Series A Junior Participating Preferred Stock of Pogo Producing Company dated April 26, 1994. (Exhibit 4(d), Registration Statement on Form S-8 filed August 9, 1994, File No. 33-54969). Pogo Producing Company agrees to furnish to the Commission upon request a copy of any agreement defining the rights of holders of long-term debt of Pogo Producing Company and all its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed under which the total amount of securities authorized does not exceed 10% of the total assets of Pogo Producing Company and its subsidiaries on a consolidated basis. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS (comprising Exhib- its 10(a) through 10(f)(14)(ii), inclusive) *10(a) -- 1977 Stock Option Plan of Pogo Producing Company, as amended as of September 28, 1981 and July 24, 1984. (Exhibit 10(a), Annual Report on Form 10-K for the year ended December 31, 1984, File No. 0-5468). *10(a)(1) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (with stock appreciation rights and without employment restrictions). (Exhibit 10(a)(1), Annual Report on From 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(2) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (with stock option appreciation rights and without employment restrictions), (Exhibit 10(a)(2), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(3) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (without stock appreciation rights and with employment restrictions). (Exhibit 10(a)(3), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(4) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (without stock option appreciation rights and with employment restrictions). (Exhibit 10(a)(4), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(5) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (with stock appreciation rights and with employment restrictions). (Exhibit 10(a)(5), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(6) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (with stock option appreciation rights and with employment restrictions). (Exhibit 10(a)(6), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(7) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (without stock appreciation rights and without employment restrictions). (Exhibit 10(a)(7), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468).
53 55 *10(a)(8) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (without stock option appreciation rights and without employment restrictions). (Exhibit 10(a)(8), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(b) -- 1981 Stock Option Plan of Pogo Producing Company, as amended as of July 24, 1984. (Exhibit 10(b), Annual Report on Form 10-K for the year ended December 31, 1984, File No. 0-5468). *10(b)(1) -- Form of Stock Option Agreement under 1981 Nonqualified Stock Option Plan (with stock appreciation rights). Exhibit 10(b)(1), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(b)(2) -- Form of Stock Option Agreement under 1981 Nonqualified Stock Option Plan (without stock appreciation rights). Exhibit 10(b)(2), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(c) -- 1981 Incentive and Nonqualified Stock Option Plan of Pogo Producing Company, as amended as of July 24, 1984. (Exhibit 10(c), Annual Report on Form 10-K for the year ended December 31, 1984, File No. 0-5468). *10(c)(1) -- Form of Stock Option Agreement under 1981 Incentive Stock Option Plan. (Exhibit 10(c)(1), Annual Report of Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(d) -- 1989 Incentive and Nonqualified Stock Option Plan of Pogo Producing Company, as amended and restated effective January 25, 1994. (Exhibit 99, Definitive Proxy Statement on Schedule 14A, filed March 22, 1994, File No. 1-7792). *10(d)(1) -- Form of Stock Option Agreement under 1989 Incentive and Nonqualified Stock Option Plan, as amended and restated effective January 22, 1991. (Exhibit 10(d)(1), Annual Report on Form 10-K for the year ended December 31, 1991, File No. 0-5468). *10(d)(2) -- Form of Director Stock Option Agreement under 1989 Incentive and Nonqualified Stock Option Plan as amended and restated effective January 22, 1991. (Exhibit 10(d)(2), Annual Report on Form 10-K for the year ended December 31, 1991, File No. 0-5468). *10(e) -- Form of Letter Agreement respecting treatment of options upon change in control. (Exhibit 19(f), Quarterly Report on Form 10-Q for the quarter ended June 30, 1982. File No. 0-5468). *10(f)(1) -- Employment Agreement by and between Pogo Producing Company and Stuart P. Burbach, dated February 1, 1992. (Exhibit 19(a)(1), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(2)(i) -- Extension Agreement to Continue Employment Agreement between Stuart P. Burbach and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(2), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(2)(ii) -- Extension Agreement to Continue Employment Agreement between Stuart P. Burbach and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792).
54 56 10(f)(2)(iii) -- Extension Agreement to Continue Employment Agreement between Stuart B. Burbach and Pogo Producing Company, dated as of February 1, 1995. *10(f)(3) -- Employment Agreement by and between Pogo Producing Company and Jerry A. Cooper, dated February 1, 1992. (Exhibit 19(a)(2), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(4)(i) -- Extension Agreement to Continue Employment Agreement between Jerry A. Cooper and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(4), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(4)(ii) -- Extension Agreement to Continue Employment Agreement between Jerry A. Cooper and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(4)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(4)(iii) -- Extension Agreement to Continue Employment Agreement between Jerry A. Cooper and Pogo Producing Company, dated as of February 1, 1995. *10(f)(5) -- Employment Agreement by and between Pogo Producing Company and Kenneth R. Good, dated February 1, 1992. (Exhibit 19(a)(3), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(6)(i) -- Extension Agreement to Continue Employment Agreement between Ken- neth R. Good and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(6), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(6)(ii) -- Extension Agreement to Continue Employment Agreement between Ken- neth R. Good and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(6)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(6)(iii) -- Extension Agreement to Continue Employment Agreement between Ken- neth R. Good and Pogo Producing Company, dated as of February 1, 1995. *10(f)(7) -- Employment Agreement by and between Pogo Producing Company and R. Phillip Laney, dated February 1, 1992. (Exhibit 19(a)(4), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(8)(i) -- Extension Agreement to Continue Employment Agreement between R. Phillip Laney and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(8), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(8)(ii) -- Extension Agreement to Continue Employment Agreement between R. Phillip Laney and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(8)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(8)(iii) -- Extension Agreement to Continue Employment Agreement between R. Phillip Laney and Pogo Producing Company, dated as of February 1, 1995. *10(f)(9) -- Employment Agreement by and between Pogo Producing Company and John O. McCoy, Jr., dated February 1, 1992. (Exhibit 19(a)(5), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792).
55 57 *10(f)(10)(i) -- Extension Agreement to Continue Employment Agreement between John O. McCoy, Jr. and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(10), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(10)(ii) -- Extension Agreement to Continue Employment Agreement between John O. McCoy, Jr. and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(10)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(10)(iii) -- Extension Agreement to Continue Employment Agreement between John O. McCoy, Jr. and Pogo Producing Company, dated as of February 1, 1995. *10(f)(11) -- Employment Agreement by and between Pogo Producing Company and D. Stephen Slack, dated February 1, 1992. (Exhibit 19(a)(6), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(12)(i) -- Extension Agreement to Continue Employment Agreement between D. Stephen Slack and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(12), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(12)(ii) -- Extension Agreement to Continue Employment Agreement between D. Stephen Slack and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(12)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(12)(iii) -- Extension Agreement to Continue Employment Agreement between D. Stephen Slack and Pogo Producing Company, dated as of February 1, 1995. *10(f)(13) -- Employment Agreement by and between Pogo Producing Company and Paul G. Van Wagenen, dated February 1, 1992. (Exhibit 19(a)(7), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(14)(i) -- Extension Agreement to Continue Employment Agreement between Paul G. Van Wagenen and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(14), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(14)(ii) -- Extension Agreement to Continue Employment Agreement between Paul G. Van Wagenen and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(14)(ii), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). 10(f)(14)(iii) -- Extension Agreement to Continue Employment Agreement between Paul G. Van Wagenen and Pogo Producing Company, dated as of February 1, 1995. *10(g) -- Undertaking by Pogo Producing Company dated as of August 8, 1977. (Exhibit 10(e), Annual Report on Form 10-K for the year ended December 31, 1980, File No. 0-5468). *10(h) -- Limited partnership agreement of Pogo Gulf Coast, Ltd. (Exhibit 19, Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, File No. 0-5468). 21 -- List of Subsidiaries of Pogo Producing Company. 23(a) -- Consent of Independent Public Accountants.
56 58 23(b) -- Consent of Independent Petroleum Engineers. 24 -- Powers of Attorney from each Director of Pogo Producing Company whose signature is affixed to this Form 10-K for the year ended December 31, 1994. 27 -- Financial Data Schedule. 28 -- Summary of Reserve Report of Ryder Scott Company Petroleum Engineers dated February 3, 1995 relating to oil and gas reserves of Pogo Producing Company.
- --------------- * Asterisk indicates exhibits incorporated by reference as shown. (B) REPORTS ON FORM 8-K None 57 59 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. POGO PRODUCING COMPANY (Registrant) By: /s/ PAUL G. VAN WAGENEN ------------------------------------ Paul G. Van Wagenen Chairman of the Board, President and Chief Executive Officer Date: March 7, 1995 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 indicated on March 7, 1995.
SIGNATURES TITLE - ------------------------------------------ ----------------------------- /s/ PAUL G. VAN WAGENEN Principal Executive - ------------------------------------------ Officer and Director Paul G. Van Wagenen Chairman of the Board, President and Chief Executive Officer /s/ D. STEPHEN SLACK Principal Financial - ------------------------------------------ Officer and Director D. Stephen Slack Senior Vice President, Chief Financial Officer and Treasurer /s/ THOMAS E. HART Principal Accounting Officer - ------------------------------------------ Thomas E. Hart Vice President and Controller TOBIN ARMSTRONG* Director - ------------------------------------------ Tobin Armstrong JACK S. BLANTON* Director - ------------------------------------------ Jack S. Blanton W. M. BRUMLEY, JR.* Director - ------------------------------------------ W. M. Brumley, Jr. JOHN B. CARTER, JR.* Director - ------------------------------------------ John B. Carter, Jr. WILLIAM L. FISHER* Director - ------------------------------------------ William L. Fisher
58 60
SIGNATURES TITLE ---------- ----- WILLIAM E. GIPSON* Director - ------------------------------------------ William E. Gipson GERRIT W. GONG* Director - ------------------------------------------ Gerrit W. Gong J. STUART HUNT* Director - ------------------------------------------ J. Stuart Hunt FREDERICK A. KLINGENSTEIN* Director - ------------------------------------------ Frederick A. Klingenstein NICHOLAS R. PETRY* Director - ------------------------------------------ Nicholas R. Petry JACK A. VICKERS* Director - ------------------------------------------ Jack A. Vickers *By: /s/ THOMAS E.HART - ------------------------------------------ Thomas E. Hart Attorney-in-Fact
59 61 INDEX TO EXHIBITS EXHIBIT NO. * 3(a) -- Restated Certificate of Incorporation of Pogo Producing Company. (Exhibit 3(a), Annual Report on Form 10-K for the year ended December 31, 1987, File No. 0-5468). * 3(a)(i) -- Certificate of Designation, Preferences and Rights of Preferred Stock of Pogo Producing Company, dated March 25, 1987. (Exhibit 3(a)(1), Annual Report on Form 10-K for the year ended December 31, 1987, File No. 0-5468). * 3(b) -- Bylaws of Pogo Producing Company, as amended and restated through July 24, 1990. (Exhibit 3(a), Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, File No. 0-5468). * 4(a)(i) -- Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. (Exhibit 10(a), Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-7792). * 4(a)(ii) -- First Amendment dated as of September 30, 1992 to Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. (Exhibit 4(a)(ii), Annual Report of Form 10-K for the year ended December 31, 1993, File No. 1-7792). * 4(a)(iii) -- Second Amendment dated as of December 31, 1993 to Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. (Exhibit 4(a)(iii), Annual Report of Form 10-K for the year ended December 31, 1993, File No. 1-7792). 4(a)(iv) -- Third Amendment dated as of June 1, 1994 to Credit Agreement dated as of September 23, 1992, among Pogo Producing Company, the lenders party thereto, Bank of Montreal as Agent, and Banque Paribas as Co-Agent. * 4(b) -- Indenture dated as of October 15, 1980 to Chemical Bank, as Trustee. (Exhibit 4, File No. 2-69428).
62 4(c) -- Indenture dated as of March 23, 1994 to Shawmut Bank Connecticut, National Association, as Trustee. * 4(d) -- Rights Agreement dated as of April 26, 1994 between Pogo Producing Company and Harris Trust Company of New York, as Rights Agent. (Exhibit 4, Current Report on Form 8-K filed April 26, 1994, File No. 1-7792). * 4(e) -- Certificate of Designations of Series A Junior Participating Preferred Stock of Pogo Producing Company dated April 26, 1994. (Exhibit 4(d), Registration Statement on Form S-8 filed August 9, 1994, File No. 33-54969). Pogo Producing Company agrees to furnish to the Commission upon request a copy of any agreement defining the rights of holders of long-term debt of Pogo Producing Company and all its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed under which the total amount of securities authorized does not exceed 10% of the total assets of Pogo Producing Company and its subsidiaries on a consolidated basis. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS (comprising Exhib- its 10(a) through 10(f)(14)(ii), inclusive) *10(a) -- 1977 Stock Option Plan of Pogo Producing Company, as amended as of September 28, 1981 and July 24, 1984. (Exhibit 10(a), Annual Report on Form 10-K for the year ended December 31, 1984, File No. 0-5468). *10(a)(1) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (with stock appreciation rights and without employment restrictions). (Exhibit 10(a)(1), Annual Report on From 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(2) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (with stock option appreciation rights and without employment restrictions), (Exhibit 10(a)(2), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(3) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (without stock appreciation rights and with employment restrictions). (Exhibit 10(a)(3), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(4) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (without stock option appreciation rights and with employment restrictions). (Exhibit 10(a)(4), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(5) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (with stock appreciation rights and with employment restrictions). (Exhibit 10(a)(5), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(6) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (with stock option appreciation rights and with employment restrictions). (Exhibit 10(a)(6), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(a)(7) -- Form of Amended Nonqualified Stock Option Agreement under 1977 Stock Option Plan (without stock appreciation rights and without employment restrictions). (Exhibit 10(a)(7), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468).
63 *10(a)(8) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock Option Plan (without stock option appreciation rights and without employment restrictions). (Exhibit 10(a)(8), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(b) -- 1981 Stock Option Plan of Pogo Producing Company, as amended as of July 24, 1984. (Exhibit 10(b), Annual Report on Form 10-K for the year ended December 31, 1984, File No. 0-5468). *10(b)(1) -- Form of Stock Option Agreement under 1981 Nonqualified Stock Option Plan (with stock appreciation rights). Exhibit 10(b)(1), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(b)(2) -- Form of Stock Option Agreement under 1981 Nonqualified Stock Option Plan (without stock appreciation rights). Exhibit 10(b)(2), Annual Report on Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(c) -- 1981 Incentive and Nonqualified Stock Option Plan of Pogo Producing Company, as amended as of July 24, 1984. (Exhibit 10(c), Annual Report on Form 10-K for the year ended December 31, 1984, File No. 0-5468). *10(c)(1) -- Form of Stock Option Agreement under 1981 Incentive Stock Option Plan. (Exhibit 10(c)(1), Annual Report of Form 10-K for the year ended December 31, 1981, File No. 0-5468). *10(d) -- 1989 Incentive and Nonqualified Stock Option Plan of Pogo Producing Company, as amended and restated effective January 25, 1994. (Exhibit 99, Definitive Proxy Statement on Schedule 14A, filed March 22, 1994, File No. 1-7792). *10(d)(1) -- Form of Stock Option Agreement under 1989 Incentive and Nonqualified Stock Option Plan, as amended and restated effective January 22, 1991. (Exhibit 10(d)(1), Annual Report on Form 10-K for the year ended December 31, 1991, File No. 0-5468). *10(d)(2) -- Form of Director Stock Option Agreement under 1989 Incentive and Nonqualified Stock Option Plan as amended and restated effective January 22, 1991. (Exhibit 10(d)(2), Annual Report on Form 10-K for the year ended December 31, 1991, File No. 0-5468). *10(e) -- Form of Letter Agreement respecting treatment of options upon change in control. (Exhibit 19(f), Quarterly Report on Form 10-Q for the quarter ended June 30, 1982. File No. 0-5468). *10(f)(1) -- Employment Agreement by and between Pogo Producing Company and Stuart P. Burbach, dated February 1, 1992. (Exhibit 19(a)(1), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(2)(i) -- Extension Agreement to Continue Employment Agreement between Stuart P. Burbach and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(2), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(2)(ii) -- Extension Agreement to Continue Employment Agreement between Stuart P. Burbach and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792).
64 10(f)(2)(iii) -- Extension Agreement to Continue Employment Agreement between Stuart B. Burbach and Pogo Producing Company, dated as of February 1, 1995. *10(f)(3) -- Employment Agreement by and between Pogo Producing Company and Jerry A. Cooper, dated February 1, 1992. (Exhibit 19(a)(2), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(4)(i) -- Extension Agreement to Continue Employment Agreement between Jerry A. Cooper and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(4), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(4)(ii) -- Extension Agreement to Continue Employment Agreement between Jerry A. Cooper and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(4)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(4)(iii) -- Extension Agreement to Continue Employment Agreement between Jerry A. Cooper and Pogo Producing Company, dated as of February 1, 1995. *10(f)(5) -- Employment Agreement by and between Pogo Producing Company and Kenneth R. Good, dated February 1, 1992. (Exhibit 19(a)(3), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(6)(i) -- Extension Agreement to Continue Employment Agreement between Ken- neth R. Good and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(6), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(6)(ii) -- Extension Agreement to Continue Employment Agreement between Ken- neth R. Good and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(6)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(6)(iii) -- Extension Agreement to Continue Employment Agreement between Ken- neth R. Good and Pogo Producing Company, dated as of February 1, 1995. *10(f)(7) -- Employment Agreement by and between Pogo Producing Company and R. Phillip Laney, dated February 1, 1992. (Exhibit 19(a)(4), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(8)(i) -- Extension Agreement to Continue Employment Agreement between R. Phillip Laney and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(8), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(8)(ii) -- Extension Agreement to Continue Employment Agreement between R. Phillip Laney and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(8)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(8)(iii) -- Extension Agreement to Continue Employment Agreement between R. Phillip Laney and Pogo Producing Company, dated as of February 1, 1995. *10(f)(9) -- Employment Agreement by and between Pogo Producing Company and John O. McCoy, Jr., dated February 1, 1992. (Exhibit 19(a)(5), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792).
65 *10(f)(10)(i) -- Extension Agreement to Continue Employment Agreement between John O. McCoy, Jr. and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(10), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(10)(ii) -- Extension Agreement to Continue Employment Agreement between John O. McCoy, Jr. and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(10)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(10)(iii) -- Extension Agreement to Continue Employment Agreement between John O. McCoy, Jr. and Pogo Producing Company, dated as of February 1, 1995. *10(f)(11) -- Employment Agreement by and between Pogo Producing Company and D. Stephen Slack, dated February 1, 1992. (Exhibit 19(a)(6), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(12)(i) -- Extension Agreement to Continue Employment Agreement between D. Stephen Slack and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(12), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(12)(ii) -- Extension Agreement to Continue Employment Agreement between D. Stephen Slack and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(12)(ii), Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-7792). 10(f)(12)(iii) -- Extension Agreement to Continue Employment Agreement between D. Stephen Slack and Pogo Producing Company, dated as of February 1, 1995. *10(f)(13) -- Employment Agreement by and between Pogo Producing Company and Paul G. Van Wagenen, dated February 1, 1992. (Exhibit 19(a)(7), Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-7792). *10(f)(14)(i) -- Extension Agreement to Continue Employment Agreement between Paul G. Van Wagenen and Pogo Producing Company, dated as of February 1, 1993. (Exhibit 10(f)(14), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). *10(f)(14)(ii) -- Extension Agreement to Continue Employment Agreement between Paul G. Van Wagenen and Pogo Producing Company, dated as of February 1, 1994. (Exhibit 10(f)(14)(ii), Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-7792). 10(f)(14)(iii) -- Extension Agreement to Continue Employment Agreement between Paul G. Van Wagenen and Pogo Producing Company, dated as of February 1, 1995. *10(g) -- Undertaking by Pogo Producing Company dated as of August 8, 1977. (Exhibit 10(e), Annual Report on Form 10-K for the year ended December 31, 1980, File No. 0-5468). *10(h) -- Limited partnership agreement of Pogo Gulf Coast, Ltd. (Exhibit 19, Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, File No. 0-5468). 21 -- List of Subsidiaries of Pogo Producing Company. 23(a) -- Consent of Independent Public Accountants.
66 23(b) -- Consent of Independent Petroleum Engineers. 24 -- Powers of Attorney from each Director of Pogo Producing Company whose signature is affixed to this Form 10-K for the year ended December 31, 1994. 27 -- Financial Data Schedule. 28 -- Summary of Reserve Report of Ryder Scott Company Petroleum Engineers dated February 3, 1995 relating to oil and gas reserves of Pogo Producing Company.
- --------------- * Asterisk indicates exhibits incorporated by reference as shown. EX-4.A.IV 2 THIRD AMENDMENT TO CREDIT AGREEMENT 1 Exhibit 4.A.IV ___________________________________________________ POGO PRODUCING COMPANY _______________________ Third Amendment Dated as of June 1, 1994 to Credit Agreement Dated as of September 23, 1992 ______________________________ __________________________________________________ 2 THIS THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of June 1, 1994 (the "Amendment"), between Pogo Producing Company, a Delaware Corporation (the "Borrower"), the various financial institutions which are or may become parties to the Credit Agreement, as amended hereby (collectively, the "Lenders"), Bank of Montreal, acting through its Chicago, Illinois branch, (the "Bank"), as agent (the "Agent") for the Lenders and Banque Paribas, acting through its Houston Agency, as co-agent (the "Co-Agent"), for the Lenders, W I T N E S S E T H WHEREAS the Borrower, the Lenders, the Agent and the Co-Agent are parties to a certain Credit Agreement dated as of September 23, 1992, as amended by the First Amendment to Credit Agreement dated as of September 30, 1992 and the Second Amendment to Credit Agreement dated as of December 31, 1993, (as amended thereby, and as the same may have been further amended or modified by the parties, the "Credit Agreement"); and WHEREAS the Borrower desires to amend certain provisions of the Credit Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. DEFINITIONS. 1.1 Amendment. The following definition as set forth in the Credit Agreement is amended in its entirety as set forth below and such definition, as so amended, is hereby incorporated by reference into the Credit Agreement, as amended by this Amendment: "Applicable Margin" means, at any time that the Borrower's Implied Senior Debt Rating is equal to any rating set forth below, the percentages per annum set forth opposite such Implied Senior Debt Rating for CD Rate Loans and LIBO Rate Loans; provided, that if the Borrower's Implied Senior Debt Rating shall change at any time, the Applicable Margin set forth below shall become effective on the immediately next Quarterly Payment Date:
Minimum Implied Senior Debt Rating from Standard & Poors (or an equivalent rating from CD Rate LIBO Rate Moodys or another approved rating agency) Loans Loans - ----------------------------------------------- ------- --------- B+ or lower 1 7/8% 1 3/4% BB- 1 5/8% 1 1/2% BB 1 3/8% 1 1/4% BB+ 1 1/8% 1 % BBB- or higher 7/8% 3/4%
2 3 1.2 Use of Defined Terms. Unless otherwise defined herein or the context otherwise requires, or except as the definition may be amended by this Amendment, terms used in this Amendment, including its preamble and recitals, shall have the meanings provided in the Credit Agreement, as hereby amended. 2. AMENDMENTS TO CREDIT AGREEMENT. 2.1 Partial Amendment of Section 3.3.1(a) of the Credit Agreement. Section 3.3.1(a) of the Credit Agreement is hereby amended and partially replaced by: (a) adding the following phrase at the end of such section immediately following the phrase "plus a margin of 1/4%": "if the Borrower's Implied Senior Debt Rating is B+ or lower, or equal to the Prime Rate from time to time in effect if the Borrower's Implied Senior Debt Rating is BB- or higher; provided, that if the Borrower's Implied Senior Debt Rating shall change at any time and such change would affect the margin charged on a Prime Rate Loan, the new margin, as set forth above, shall become effective on the immediately next Quarterly Payment Date". 2.2 Partial Amendment of Section 3.4.1 of the Credit Agreement. Section 3.4.1 of the Credit Agreement is hereby amended and partially replaced by: (a) adding the following phrase at the end of the first sentence of such section immediately preceding the parenthetical "(such fees, the "Commitment Fees")": "if the Borrower's Implied Senior Debt Rating is BB- or lower, or a commitment fee at the rate of 3/8 of 1% per annum on such Lender's Percentage of the sum of the average daily unused portion of the Revolving Loan Commitment Amount if the Borrower's Implied Senior Debt Rating is BB or higher"; and (b) adding the following phrase at the end of the first sentence of such section immediately following the parenthetical "(such fees, the "Commitment Fees")": "provided, that if the Borrower's Implied Senior Debt Rating shall change at any time and such change would result in a different Commitment Fee, the new Commitment Fee shall become effective on the immediately next Quarterly Payment Date." 3. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders and the Agent to enter into this Amendment, the Borrower hereby reaffirms, as of the date hereof, its representations and warranties contained in Article VI 3 4 of the Credit Agreement (except to the extent any such representation and warranty relates solely to an earlier date) and additionally represents and warrants as follows: 3.1 Organization. The Borrower and each of its corporate Subsidiaries is a corporation validly organized and existing and in good standing under the laws of the state, or country, of its incorporation, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where failure to qualify would not have a material adverse effect on the business or financial condition of the Borrower and its Subsidiaries taken as a whole or the Borrower's ability to perform the Loan Documents, including the Credit Agreement as such may be amended hereby, or this Amendment. Each of the Borrower's Subsidiaries which is organized as a partnership is validly organized and existing and in good standing under the laws of the state of its formation, and is duly qualified to do business and is in good standing as a foreign partnership where the nature of its business requires such qualification, except where failure to qualify would not have a material adverse effect on the business or financial condition of the Borrower, or the Borrower and its Subsidiaries taken as a whole or the Borrower's ability to perform under the Loan Documents, including the Credit Agreement as such may be amended hereby, or this Amendment. The Borrower and each of its Subsidiaries has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under the Credit Agreement, as amended hereby, each other Loan Document and this Amendment and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. 3.2 Due Authorization, Non-Contravention. The execution, delivery and performance by the Borrower of this Amendment and the consummation of the transactions contemplated hereby and by the Credit Agreement as so amended, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene the Borrower's Organic Documents; (b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting the Borrower or any Subsidiary; or (c) result in, or require the creation or imposition of, any Lien on any properties of the Borrower or its Subsidiaries. 3.3 Governmental Approval. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, 4 5 delivery or performance by the Borrower of this Amendment. 3.4 Validity, etc. This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms except as such enforceability is subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization or similar law relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), including concepts of materiality, reasonableness, good faith and fair dealing. 4. EFFECT OF AMENDMENT. This Amendment shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended hereby, is hereby ratified, approved and confirmed in each and every respect. All references to the Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Credit Agreement as amended hereby. 5. GOVERNING LAW, SEVERABILITY, ETC. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. Whenever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable laws, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. THIS WRITTEN AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED BY THIS AMENDMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 6. MISCELLANEOUS. 6.1 Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 6.2 Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 6.3 Effectiveness. This Amendment shall become effective from and after the date hereof when counterparts hereof executed on 5 6 behalf of the Borrower and each Lender (or notice thereof satisfactory to the Agent) shall have been received by the Agent and notice thereof shall have been given by the Agent to the Borrower and each Lender. All modifications to the Credit Agreement effected by this Amendment, including changes in the calculation of interest rates and Commitment Fees, if any, will be given retroactive effect to the date of this Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first written above. POGO PRODUCING COMPANY By: /s/ D. STEPHEN SLACK Name: D. Stephen Slack, Title: Senior Vice President, Finance BANK OF MONTREAL, acting through its U.S. branches and agencies, including initially its Chicago Illinois branch, as Agent By: /s/ MARK M. GREEN Name: Mark M. Green Title: Director, U.S. Corporate Banking BANQUE PARIBAS acting through its Houston Agency, as Co-Agent By: /s/ BARTON D. SCHOUEST Name: Barton D. Schouest Title: Vice President By: /s/ TIMOTHY A DONNON Name: Timothy A. Donnon Title: Regional GeneralManager BANK OF MONTREAL By: /s/ MARK M. GREEN Name: Mark M. Green Title: Director, U.S. Corporate Banking 6 7 BANQUE PARIBAS By: /s/ BARTON D. SCHOUEST Name: Barton D. Schouest Title: Vice President By: /s/ TIMOTHY A DONNON Name: Timothy A. Donnon Title: Regional GeneralManager NBD BANK, N.A. By: /s/ J. L. CALDWELL Name: James L. Caldwell IV Title: First Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ H. LOUIS BAILEY Name: H. Louis Bailey Title: V.P. 7 EX-4.C 3 INDENTURE 1 Exhibit 4(c) POGO PRODUCING COMPANY TO SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Trustee ___________________ INDENTURE Dated as of March 23, 1994 ___________________ 5 1/2% Convertible Subordinated Notes due 2004 ___________________________________________ 2 Pogo Producing Company Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of March 23, 1994
Trust Indenture Act Section Indenture Section - --------------- ----------------- 310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 609 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 609 (a)(3). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (a)(4). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (a)(5). . . . . . . . . . . . . . . . . . . . . . . . . 609 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 608 . . . . . . . . . . . . . . . . . . . . . . . . . . 610 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 613 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 613 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 701 . . . . . . . . . . . . . . . . . . . . . . . . . . 702 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 702 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 702 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 703 (b)(1). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (b)(2). . . . . . . . . . . . . . . . . . . . . . . . . 703 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 703 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . 703 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 704 (a)(4). . . . . . . . . . . . . . . . . . . . . . . . . 102 1005 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (c)(1). . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(2). . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(3). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . . . . . 102 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . 102 1005
- 1 - 3 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . 514 316(a) (last sentence) . . . . . . . . . . . . . . . . . . 101 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 508 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 104 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 107 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 107
____________________ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. - 2 - 4 TABLE OF CONTENTS
Page ---- PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . 2 Board of Directors . . . . . . . . . . . . . . . . . . . . 2 Board Resolution . . . . . . . . . . . . . . . . . . . . . 2 Business Day . . . . . . . . . . . . . . . . . . . . . . . 2 Closing Price . . . . . . . . . . . . . . . . . . . . . . 2 Common Stock . . . . . . . . . . . . . . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Request or Company Order . . . . . . . . . . . . . 3 Consolidated Net Tangible Assets . . . . . . . . . . . . . 3 Corporate Trust Office . . . . . . . . . . . . . . . . . . 3 Corporation . . . . . . . . . . . . . . . . . . . . . . . 3 Defaulted Interest . . . . . . . . . . . . . . . . . . . . 4 Event of Default . . . . . . . . . . . . . . . . . . . . . 4 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . 4 Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . 4 Interest Payment Date . . . . . . . . . . . . . . . . . . 4 Issue Date . . . . . . . . . . . . . . . . . . . . . . . . 4 Maturity . . . . . . . . . . . . . . . . . . . . . . . . . 4 Officers' Certificate . . . . . . . . . . . . . . . . . . 4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . 4 Outstanding . . . . . . . . . . . . . . . . . . . . . . . 4 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . 5 Person . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Predecessor Security . . . . . . . . . . . . . . . . . . . 5 Redemption Price . . . . . . . . . . . . . . . . . . . . . 5 Regular Record Date . . . . . . . . . . . . . . . . . . . 5 Repurchase Date . . . . . . . . . . . . . . . . . . . . . 6 Repurchase Event . . . . . . . . . . . . . . . . . . . . . 6 Repurchase Price . . . . . . . . . . . . . . . . . . . . . 6
- i - 5 Responsible Officer . . . . . . . . . . . . . . . . . . . 6 Securities . . . . . . . . . . . . . . . . . . . . . . . . 6 Security . . . . . . . . . . . . . . . . . . . . . . . . . 6 Security Register and Security Registrar . . . . . . . . . 6 Senior Indebtedness . . . . . . . . . . . . . . . . . . . 6 Special Record Date . . . . . . . . . . . . . . . . . . . 7 Stated Maturity . . . . . . . . . . . . . . . . . . . . . 7 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . 7 Trading Day . . . . . . . . . . . . . . . . . . . . . . . 7 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 7 Trust Indenture Act . . . . . . . . . . . . . . . . . . . 7 Vice President . . . . . . . . . . . . . . . . . . . . . . 7 Section 102. Compliance Certificates and Opinions . . . . . . . . . . . 7 Section 103. Form of Documents Delivered to Trustee . . . . . . . . . . 8 Section 104. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . 9 Section 105. Notices, Etc., to Trustee and Company . . . . . . . . . . 9 Section 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . 10 Section 107. Conflict with Trust Indenture Act. . . . . . . . . . . . . 10 Section 108. Effect of Headings and Table of Contents . . . . . . . . . 10 Section 109. Successors and Assigns . . . . . . . . . . . . . . . . . . 11 Section 110. Separability Clause. . . . . . . . . . . . . . . . . . . . 11 Section 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . 11 Section 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 11 Section 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . 11 Section 114. Rules by Trustee, Paying Agent and Registrar . . . . . . . 11 ARTICLE TWO SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . 12 Section 202. Form of Face of Security . . . . . . . . . . . . . . . . . 12 Section 203. Form of Reverse of Security. . . . . . . . . . . . . . . . 13 Section 204. Form of Trustee's Certificate of Authentication . . . . . 18 Section 205. Form of Election to Convert. . . . . . . . . . . . . . . . 18 Section 206. Form of Assignment . . . . . . . . . . . . . . . . . . . . 19 ARTICLE THREE THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . . 19 Section 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . 20 Section 303. Execution, Authentication, Delivery and Dating . . . . . . 20
- ii - 6 Section 304. Temporary Securities . . . . . . . . . . . . . . . . . . . 21 Section 305. Registration, Registration of Transfer and Exchange . . . 21 Section 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . 22 Section 307. Payment of Interest; Interest Rights Preserved . . . . . . 23 Section 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . 25 Section 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 25 Section 310. Computation of Interest. . . . . . . . . . . . . . . . . . 25 ARTICLE FOUR SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . 26 Section 401. Satisfaction and Discharge of Indenture . . . . . . . . . 26 Section 402. Application of Trust Money . . . . . . . . . . . . . . . . 27 Section 403. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE FIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 501. Events of Default. . . . . . . . . . . . . . . . . . . . . 28 Section 502. Acceleration of Maturity; Rescission and Annulment . . . . 30 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . 31 Section 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . 31 Section 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . . . . . . 32 Section 506. Application of Money Collected . . . . . . . . . . . . . . 32 Section 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 33 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert . . . . . . . . . 34 Section 509. Restoration of Rights and Remedies . . . . . . . . . . . . 34 Section 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . 34 Section 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . 34 Section 512. Control by Holders . . . . . . . . . . . . . . . . . . . . 35 Section 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 35 Section 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 36 Section 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . 36 ARTICLE SIX THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 601. Certain Duties and Responsibilities . . . . . . . . . . . 36 Section 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 37
- iii - 7 Section 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . 37 Section 604. Not Responsible for Recitals or Issuance of Securities . . 38 Section 605. May Hold Securities. . . . . . . . . . . . . . . . . . . . 38 Section 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . 38 Section 607. Compensation and Reimbursement . . . . . . . . . . . . . . 38 Section 608. Disqualification; Conflicting Interests . . . . . . . . . 39 Section 609. Corporate Trustee Required; Eligibility . . . . . . . . . 39 Section 610. Resignation and Removal; Appointment of Successor. . . . . 40 Section 611. Acceptance of Appointment by Successor . . . . . . . . . . 41 Section 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . . . 41 Section 613. Preferential Collection of Claims Against Company . . . . 42 Section 614. Appointment of Authenticating Agent . . . . . . . . . . . 42 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . 44 Section 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . 44 Section 702. Preservation of Information; Communications To Holders . . 44 Section 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . 44 Section 704. Reports by Company . . . . . . . . . . . . . . . . . . . . 45 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . 45 Section 801. Company May Consolidate, Etc., Only on Certain Terms . . . 45 Section 802. Successor Legal Entity Substituted . . . . . . . . . . . . 46 ARTICLE NINE SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 901. Supplemental Indentures Without Consent of Holders . . . . 46 Section 902. Supplemental Indentures With Consent of Holders . . . . . 47 Section 903. Execution of Supplemental Indentures . . . . . . . . . . . 48 Section 904. Effect of Supplemental Indentures . . . . . . . . . . . . 48 Section 905. Conformity with Trust Indenture Act . . . . . . . . . . . 48 Section 906. Reference in Securities to Supplemental Indentures . . . . 48 ARTICLE TEN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
- iv - 8 Section 1001. Payment of Principal, Premium and Interest . . . . . . . 49 Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . 49 Section 1003. Money for Security Payments to Be Held in Trust . . . . . 49 Section 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 1005. Statement by Officers as to Default . . . . . . . . . . . 51 Section 1006. Waiver of Certain Covenants . . . . . . . . . . . . . . . 51 ARTICLE ELEVEN REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . 52 Section 1102. Applicability of Article. . . . . . . . . . . . . . . . . 52 Section 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . 52 Section 1104. Selection by Trustee of Securities to Be Redeemed . . . . 52 Section 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . 53 Section 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . 53 Section 1107. Securities Payable on Redemption Date . . . . . . . . . . 54 Section 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . 54 ARTICLE TWELVE RIGHT TO REQUIRE REPURCHASE. . . . . . . . . . . . . . . . . . . . . . . 55 Section 1201. Right to Require Repurchase.. . . . . . . . . . . . . . . 55 Section 1202. Notice; Method of Exercising Repurchase Right . . . . . . 55 Section 1203. Deposit of Repurchase Price . . . . . . . . . . . . . . . 56 Section 1204. Securities Not Repurchased on Repurchase Date . . . . . . 56 Section 1205. Securities Repurchased in Part. . . . . . . . . . . . . . 56 Section 1206. "Change in Control" and "Repurchase Event" Defined . . . 57 ARTICLE THIRTEEN CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 1301. Right of Conversion . . . . . . . . . . . . . . . . . . . 58 Section 1302. Issuance of Common Stock; Time of Conversion. . . . . . . 59 Section 1303. No Adjustments in Respect of Interest or Dividends. . . . 60 Section 1304. Adjustment of Conversion Price. . . . . . . . . . . . . . 60 Section 1305. No Fractional Shares. . . . . . . . . . . . . . . . . . . 64 Section 1306. Reclassification, Consolidation, Merger or Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . 64 Section 1307. Prior Notice of Certain Events. . . . . . . . . . . . . . 66 Section 1308. Shares to be Reserved; Accounting Treatment of Consideration . . . . . . . . . . . . . . . . . . . . 66 Section 1309. Registration and Listing of Shares . . . . . . . . . . . 67
- v - 9 Section 1310. Taxes and Charges . . . . . . . . . . . . . . . . . . . . 67 Section 1311. Trustee and Conversion Agents Not Liable . . . . . . . . 68 ARTICLE FOURTEEN SUBORDINATION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 68 Section 1401. Securities Subordinate to Senior Indebtedness . . . . . . 68 Section 1402. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . 68 Section 1403. Prior Payment to Senior Indebtedness Upon Acceleration of Securities . . . . . . . . . . . . . . . . . . . . . . 70 Section 1404. No Payment When Senior Indebtedness in Default. . . . . . 70 Section 1405. Acknowledgment of Reliance. . . . . . . . . . . . . . . . 71 Section 1406. Subrogation to Rights of Holders of Senior Indebtedness . 71 Section 1407. Provisions Solely to Define Relative Rights . . . . . . . 71 Section 1408. Trustee to Effectuate Subordination . . . . . . . . . . . 72 Section 1409. No Waiver of Subordination Provisions. . . . . . . . . . 72 Section 1410. Notice to Trustee . . . . . . . . . . . . . . . . . . . . 72 Section 1411. Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 1412. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . 74 Section 1413. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights . . . . . . . . . . . 74 Section 1414. Article Applicable to Paying Agents . . . . . . . . . . . 74 Section 1415. Certain Conversions Deemed Payment . . . . . . . . . . . 74
- vi - 10 INDENTURE, dated as of March 23, 1994, between POGO PRODUCING COMPANY, a corporation duly organized and validly existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 5 Greenway Plaza, Suite 2700, Houston, Texas 77046, and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 5 1/2% Convertible Subordinated Notes due 2004 (herein called the "Securities") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or defined by Commission rule under the Trust Indenture Act, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; 11 (4) the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Twelve, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York, Hartford, Connecticut or Houston, Texas are authorized or obligated by law or executive order to close. "Closing Price" for any Trading Day means the last reported sale price (or, if none on any day, the mean between the bid and asked quotations on such day) of the securities in question for such date, in either case on the New York Stock Exchange or, if the securities are not listed or admitted to trading on such exchange, on the principal national securities exchange on which such securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the National Association of Securities Dealers Automated Quotations National Market System, or if the securities are not listed or admitted to trading on any national securities exchange or quoted - 2 - 12 on such National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected by the Company for such purpose. "Common Stock" initially means the class designated as Common Stock, par value $1.00 per share, of the Company as of the date hereof. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person, and in each case shall include any other obligor upon the Securities. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Consolidated Net Tangible Assets" means the total of all assets included in a consolidated balance sheet of the Company and its Subsidiaries, prepared in accordance with generally accepted accounting principles (and as of a date not more than 90 days prior to the date as of which Consolidated Net Tangible Assets are to be determined), less the sum of the following items each as included in such balance sheet: (i) all current liabilities; (ii) all depreciation, depletion, valuation and other reserves; (iii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles; and (iv) minority interests in the equity of Subsidiaries. "Corporate Trust Office" means the principal office of the Trustee at 777 Main Street, Hartford, Connecticut 06115, at which its corporate trust business shall be administered. "Corporation" means a corporation, partnership, association, company, joint-stock company or business trust. - 3 - 13 "Defaulted Interest" has the meaning specified in Section 307. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Issue Date" means March 23, 1994. "Maturity", when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the principal executive officer and the principal financial officer or principal accounting officer, of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities in accordance with the terms of this Indenture; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and - 4 - 14 (iii) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. "Person" means any individual, Corporation or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Purchase Agreement" has the meaning specified in Section 301. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the 1st of March or 1st of September (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Repurchase Date" has the meaning specified in Section 1201. - 5 - 15 "Repurchase Event" has the meaning specified in Section 1206. "Repurchase Price" has the meaning specified in Section 1201. "Responsible Officer", when used with respect to the Trustee, means any person in the Corporate Trust Administration Department of the Trustee familiar with corporate trust matters. "Securities" has the meaning set forth in the recitals of this Indenture. "Security" means any of the Securities. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means the principal of, premium, if any, and unpaid interest (including, without limitation, any interest accruing subsequent to the commencement of a case or other proceeding under any bankruptcy or other similar law with respect to the Company) on, and other obligations in respect of, the following, whether outstanding at the date hereof or thereafter incurred or created: (a) indebtedness of the Company for money borrowed (including purchase-money obligations) evidenced by notes or other written obligations, (b) indebtedness of the Company evidenced by notes, debentures, bonds or other securities issued under the provisions of an indenture or similar instrument, (c) indebtedness secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by the Company subject to such mortgage, pledge or encumbrance, whether or not indebtedness secured thereby shall have been assumed by the Company, (d) obligations of the Company as lessee under capitalized leases and under leases of property made as part of any sale and leaseback transactions, (e) obligations of the Company in respect of letters of credit issued for its account and "swaps" of interest rates, commodity prices or foreign currencies (and other interest rate, commodity price or foreign currency hedging agreements) to which the Company is a party, (f) indebtedness of others of any of the kinds described in the preceding clauses (a) through (e) assumed or guaranteed by the Company and (g) renewals, extensions and refundings of, and indebtedness and obligations of a successor Person issued in exchange for or in replacement of, indebtedness or obligations of the kinds described in the preceding clauses (a) through (f); provided, however, that the following shall not constitute Senior Indebtedness: (i) any indebtedness or obligation which by its terms refers explicitly to the Securities and states that such indebtedness or obligation shall not be senior in right of payment thereto, (ii) any indebtedness or obligation of the Company in respect of the Securities and (iii) any indebtedness or obligation of the Company to any Subsidiary. Notwithstanding the foregoing, all indebtedness and obligations of the Company in respect of each of the following shall rank equally with the Securities and shall not constitute "Senior Indebtedness" hereunder: (x) the 8% Convertible Subordinated Debentures due 2005 and (y) the 10.25% Convertible Subordinated Notes due 1999. - 6 - 16 "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "Subsidiary" means a Corporation more than 50% of the outstanding voting stock or other voting or managing ownership interest of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trading Day", with respect to any stock exchange or securities market, means any Monday, Tuesday, Wednesday, Thursday or Friday on which such stock exchange or securities market is open for business. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905; provided, however, that in the event the Trust Indenture Act is amended after such date, Trust Indenture Act means, to the extent required by any such amendment, the Trust Indenture Act as so amended. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". Section 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. - 7 - 17 Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver - 8 - 18 or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration Department, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing - 9 - 19 and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. Section 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. If the Company mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent or co-registrar. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. - 10 - 20 Section 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law. Section 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, or on such last day for conversion, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. Section 114. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and Paying Agent may make reasonable rules for their functions. - 11 - 21 ARTICLE TWO SECURITY FORMS Section 201. Forms Generally. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. POGO PRODUCING COMPANY 5 1/2% Convertible Subordinated Note due 2004 No. _________________ $______________ POGO PRODUCING COMPANY, a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ________________, or registered assigns, the principal sum of ________________________ ___________________ Dollars on March 15, 2004, and to pay interest thereon from March 23, 1994 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on March 15 and September 15, in each year, commencing September 15, 1994, at the rate of 5 1/2% per annum until the principal hereof is paid or made available for payment. Interest on the Securities shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1st or September 1st (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such - 12 - 22 interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal and interest by check payable in such money. At the option of the Company, payment of interest may be made by check mailed on or before the due date to the address of the Person entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. The Indenture includes limitations on the right of the Holder to institute a proceeding, judicial or otherwise, with respect to the Indenture, for the appointment of a receiver or trustee, or for any other remedy under the Indenture. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: POGO PRODUCING COMPANY By:___________________________ Attest: ______________________________ Section 203. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of the Company - 13 - 23 designated as its 5 1/2% Convertible Subordinated Notes due 2004 (herein called the "Securities"), limited in aggregate principal amount to $75,000,000 (subject to increase to up to $86,250,000 aggregate principal amount), issued and to be issued under an Indenture, dated as of March 23, 1994 (herein called the "Indenture"), between the Company and Shawmut Bank Connecticut, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Indebtedness and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Subject to the provisions of the Indenture, the Holder hereof has the right, at his option, at any time prior to maturity, to convert the principal amount of this Security (or any portion of the principal amount hereof which is an integral multiple of $1,000) into fully paid and nonassessable shares of Common Stock of the Company at the conversion price of $22.188 of principal amount of this Security per share of Common Stock, subject to such adjustment, if any, of the conversion price and the securities or other property issuable upon conversion as may be required by the provisions of the Indenture (except that, in case this Security (or any portion hereof) shall be called for redemption before maturity, such right shall terminate at the close of business on the Business Day immediately preceding the Redemption Date for this Security (or such portion hereof), unless in any such case the Company shall default in payment due upon such redemption), but only upon surrender of this Security for the purpose of such conversion to the Company at the designated office or agency of the Company in New York, New York or any other office or agency designated by the Company for such purpose pursuant to the provisions of the Indenture, accompanied by written notice that the Holder elects to convert this Security or any portion hereof and specifying the name or names (with address or addresses) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Company or the Trustee) by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee duly executed by the registered Holder or his duly authorized legal representative and transfer tax stamps or funds therefor, if required pursuant to the provisions of the Indenture and, in case such surrender shall be made during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date (unless this Security or the portion thereof being converted has been called for redemption), also accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted. Subject to the aforesaid requirement with respect to payment in the event of conversion after the close of business on a Regular Record Date, no adjustment is to be made on conversion for interest accrued hereon or for dividends on shares of Common Stock issued on conversion; provided, however, that upon a call for redemption by the Company, accrued and unpaid interest to the Redemption Date shall be payable with respect to Notes converted after the redemption call and prior to the Redemption Date. No fractional shares are issuable upon any conversion, but in lieu thereof the Company shall pay therefor in cash - 14 - 24 as provided in the Indenture. The Securities are subject to redemption upon not less than 30 nor more than 60 days' notice by first-class mail, postage prepaid, at any time on or after March 15, 1998, as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): if redeemed during the 12-month period beginning March 15 of the years indicated,
Year Redemption Price Year Redemption Price ---- ---------------- ---- ---------------- 1998 . . . . . 103.30% 2001 . . . . . 101.65% 1999 . . . . . 102.75% 2002 . . . . . 101.10% 2000 . . . . . 102.20% 2003 . . . . . 100.55%
; provided, however, that in the case of any such redemption, the Redemption Price shall include accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. In the event of redemption or conversion of this Security in part only, a new Security or Securities for the unredeemed or unconverted portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. Under certain circumstances involving a Change in Control (as defined in the Indenture), the Company may be required to offer to purchase the Securities at a purchase price equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the Repurchase Date. The indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, expressly subordinate and subject in right of payment to the prior payment in full of any Senior Indebtedness of the Company or provision for such payment, whether outstanding at the date of the Indenture or thereafter incurred, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by his acceptance hereof, agrees to and shall be bound by such provisions of the Indenture and authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to effectuate such subordination and appoints the Trustee his attorney-in-fact for any and all such purposes. If an Event of Default, as defined in the Indenture, shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. - 15 - 25 The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of at least a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of at least a majority in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The Indenture provides that no Holder of any Security may enforce any remedy under the Indenture except in the case of failure of the Trustee to act after notice of default and after request by the Holders of 25% in aggregate principal amount of the Outstanding Securities and the offer and, if requested, provision to the Trustee of reasonable indemnity satisfactory to the Trustee; provided, however, that such provision shall not prevent the Holder hereof from enforcing payment of the principal of (and premium, if any) or interest on this Security after the same shall have become due. Initially, the Trustee will act as Paying Agent, Security Registrar and as the agent where notices and demands to or upon the Company in respect of the Notes may be served. The Company may appoint and change any Paying Agent, Security Registrar or agent for notices without notice, other than notice to the Trustee. The Company or one of its subsidiaries may act as Paying Agent, Security Registrar or agent for notices. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, subject to the subordination provisions, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in New York, New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar and duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in - 16 - 26 denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made to the Holder for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Security and the rights of the Holder hereof shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Article Twelve of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Article Twelve of the Indenture, state the amount (in integral multiples of $1,000): $___________ Date: ____________ Your Signature: ___________________ (Sign exactly as your name appears on the other side of this Security) Your Social Security or Tax Identification Number: ____________________________________________________ Signature Guarantee: __________________________________________________________ Note: Signature(s) must be guaranteed by an eligible guarantor institution which is a member of one of the following recognized signature Guarantee Programs: (1) The - 17 - 27 Securities Transfer Agents Medallion Program (STAMP); (2) The New York Stock Exchange Medallion Signature Program (MSP); or (3) The Stock Exchange Medallion Program (SEMP). Section 204. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Trustee By____________________________ Authorized Signatory Section 205. Form of Election to Convert. To Pogo Producing Company: The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion below designated, into shares of Common Stock of Pogo Producing Company in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: Portion of Security to be converted ($1,000 or an integral multiple thereof): $_______________ ___________________________ Signature (for conversion only) Please Print or Type Name and Address, Including Zip Code, and Social Security or Other Identifying Number: _________________________ _________________________ _________________________ - 18 - 28 Section 206. Form of Assignment. ASSIGNMENT For value received ___________________________________________ hereby sell(s), assign(s) and transfer(s) unto ____________________________________________, ______________________ [Please insert social security or other identifying number of assignee], the within Security, hereby irrevocably constituting and appointing ______________________________ attorney to transfer the said Security on the books of the Company, with full power of substitution in the premises. Date: _____________________ ________________________________ Signature(s) Note: The signature(s) to this assignment must correspond with the name as it appears upon the face of the within Security in every particular, without alteration, or enlargement or any change whatever. _________________________ Signature Guarantee Note: Signature(s) must be guaranteed by an eligible guarantor institution which is a member of one of the following recognized signature Guarantee Programs: (1) The Securities Transfer Agents Medallion Program (STAMP); (2) The New York Stock Exchange Medallion Signature Program (MSP); or (3) The Stock Exchange Medallion Program (SEMP). ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to the sum of (a) $75,000,000 and (b) such aggregate principal amount (which may not exceed $11,250,000 aggregate principal amount) of Securities, if any, as shall be purchased by the "Underwriters" at the "Second Closing Time" (both as defined in the Purchase Agreement) pursuant to and in accordance with the terms and provisions of the Purchase Agreement, dated March 16, 1994, between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, - 19 - 29 Goldman, Sachs & Co. and PaineWebber Incorporated, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906, 1108, 1205 or 1301. The Securities shall be known and designated as the "5 1/2% Convertible Subordinated Notes due 2004" of the Company. Their Stated Maturity shall be March 15, 2004 and they shall bear interest at the rate of 5 1/2% per annum, from March 23, 1994 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable semiannually on March 15 and September 15, commencing September 15, 1994, until the principal thereof is paid or made available for payment. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company in New York, New York, maintained for such purpose and at any other office or agency maintained by the Company for such purpose; provided, however, that at the option of the Company payment of interest may be made by check mailed on or before the due date to the address of the Person entitled thereto as such address shall appear in the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be subject to repurchase at the option of the Holders as provided in Article Twelve. The Securities shall be convertible as provided in Article Thirteen. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Fourteen. Section 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at the time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the - 20 - 30 authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The - 21 - 31 Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to the Holder for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1108, 1205 or 1301 not involving any transfer. Neither the Company nor the Trustee nor any agent of either shall be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security - 22 - 32 of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon a Company Request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: - 23 - 33 (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. In the case of any Security which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more - 24 - 34 Predecessor Securities) is registered at the close of business on such Regular Record Date. Upon a call for redemption by the Company, accrued and unpaid interest to the Redemption Date shall be payable with respect to Securities converted after the notice of redemption has been mailed and prior to the Redemption Date. Except as otherwise expressly provided in this paragraph, in the case of any Security which is converted, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable. Section 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of and principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. The Company shall, within 120 days of a request therefor by the Trustee, deliver a Company Order directing the destruction of cancelled Securities. If the Company fails to respond to such a request within such 120-day period, the Trustee may destroy any or all cancelled Securities, in which case the Trustee shall deliver a certificate as to such destruction to the Company. Section 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year consisting of twelve 30-day months. - 25 - 35 ARTICLE FOUR SATISFACTION AND DISCHARGE Section 401. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and - 26 - 36 (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. Section 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request. Section 403. Reinstatement. If the Trustee or Paying Agent is unable to apply any money deposited with respect to Securities of any series in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture with respect to the Securities of such series and the Securities of such series shall be revived and reinstated as though no deposit had occurred pursuant to Section 401 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 401; provided, however, that if the Company has made any payment of principal of (or premium, if any) or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. - 27 - 37 ARTICLE FIVE REMEDIES Section 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Fourteen or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security when it becomes due and payable, whether or not such payment is prohibited by the provisions of Article Fourteen, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity, whether or not such payment is prohibited by the provisions of Article Fourteen; or (3) default in the payment of the Repurchase Price in respect of any Security on the Repurchase Date and continuance of such default for more than 10 days thereafter in accordance with the provisions of Article Twelve, whether or not such payment is prohibited by the provisions of Article Fourteen; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty, a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) default under any bond, debenture, note or other evidence of indebtedness for money borrowed or under any mortgage, indenture or other instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or under any guarantee of payment by the Company of indebtedness for money borrowed, whether such indebtedness or guarantee now exists or shall hereafter be created, which default extends beyond any period of grace provided with respect thereto and which default relates to (a) the obligation to pay the principal of or interest on any such - 28 - 38 indebtedness or guarantee or (b) an obligation other than the obligation to pay the principal of or interest on any such indebtedness, if the effect of such event of default is to cause the acceleration of a principal amount of such indebtedness and such other indebtedness or guarantee shall not have been paid within ten days after there has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities a written notice specifying such event of default and stating that such notice is a "Notice of Default" hereunder; provided, however, that no default under this Section 501(5) shall exist if all such defaults do not relate to such indebtedness or such guarantees with an aggregate principal amount in excess of 5% of Consolidated Net Tangible Assets; and provided further, that if any such event of default has been cured or waived and any acceleration with respect thereto rescinded, or if such other indebtedness has been repaid or otherwise discharged, the Event of Default arising under this Section 501(5) by virtue thereof shall not be deemed to have occurred and any acceleration under this Section 501(5) pursuant to Section 502 hereof shall ipso facto be rescinded so long as such rescission does not conflict with any judgment or decree; (6) the entry by a court having jurisdiction in the premises of (a) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (b) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any - 29 - 39 such action. Section 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may declare the principal of all the Securities and the interest accrued thereon to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders) and upon any such declaration such principal and interest shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, and (D) all sums paid or advanced or liabilities incurred by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the nonpayment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. - 30 - 40 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled - 31 - 41 and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities, subject to the provisions of Article Fourteen, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, subject to the provisions of Article Fourteen, and (ii) subject to the provisions of Article Fourteen, to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. In any such proceeding brought by the Trustee, the Trustee shall be deemed to represent all Holders without the necessity of joining any Holders as parties. Section 506. Application of Money Collected. Subject to Article Fourteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in the case of the distribution of such money on account of principal (or premium, if - 32 - 42 any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all costs and expenses in connection with the collection of such money and to the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively. Section 507. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver or trustee or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer and, if requested, provision of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the - 33 - 43 Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, subject to the subordination provisions in Article Fourteen, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. - 34 - 44 Section 512. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct in writing the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall determine that the action so directed would involve the Trustee in personal liability or would be unduly prejudicial to Holders not joining in such direction. This Section 512 shall be in lieu of Section 316(a)(1)(A) of the Trust Indenture Act and said Section 316(a)(1)(A) is hereby expressly excluded from this Indenture, as permitted by the Trust Indenture Act. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. This Section 513 shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and said Section 316(a)(1)(B) is hereby expressly excluded from this Indenture, as permitted by the Trust Indenture Act. - 35 - 45 Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding more than 10% in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date) or for the enforcement of the right to convert any Security in accordance with Article Thirteen. This Section 514 shall be in lieu of Section 315(e) of the Trust Indenture Act and said Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the Trust Indenture Act. Section 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE Section 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not - 36 - 46 therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 602. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; - 37 - 47 (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, or of any supplemental indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any - 38 - 48 provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee, its agents, employees, officers, directors and shareholders for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Company under this Section the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of, premium, if any, or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(6) or (7) occurs, the expenses (including the reasonable charges and expenses of its agents, attorneys and counsel) and the compensation for services shall be preferred over the status of the Holders in any reorganization or similar proceeding and are intended to constitute expenses of administration under any reorganization, bankruptcy or similar law. Section 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such, has an office or agency in New York, New York, and has a combined capital and surplus of at least $50,000,000 (or is a member or subsidiary of a bank holding system with aggregate combined capital and surplus of at least $50,000,000). If such corporation or other Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such - 39 - 49 corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. No obligor upon any Securities issued under this Indenture or Person directly or indirectly controlling, controlled by or under common control with such obligor shall serve as Trustee under this Indenture. Section 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities specifying such removal, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such bona fide Holder described in (d)(1) above, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. - 40 - 50 (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the - 41 - 51 Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). Section 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer, partial conversion or partial redemption or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 (or being a member or subsidiary of a bank holding system with aggregate combined capital and surplus of at least $50,000,000) and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, - 42 - 52 or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving 30 days' written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving 30 days' written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first- class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities described in the within-mentioned Indenture. SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, As Trustee By ___________________________ As Authenticating Agent By ___________________________ Authorized Signatory - 43 - 53 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semiannually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 702. Preservation of Information; Communications To Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than May 15 of each year, commencing with the May 15 first following - 44 - 54 the issuance of the Securities. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange and of any delisting thereof. Section 704. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. In the event the Company is not subject to the requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Trustee (a) within 60 days after the end of each of the Company's first three fiscal quarters in each fiscal year, a report containing unaudited financial statements with respect to such fiscal quarter and (b) within 105 days after the end of the Company's fiscal year, a report containing audited financial statements with respect to such fiscal year. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer or otherwise, or which leases, the properties and assets of the Company substantially as an entirety shall be a Corporation or other legal entity, shall be organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume, by an indenture - 45 - 55 supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 1306; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, lease or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Legal Entity Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer, lease or other disposition of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities and may liquidate and dissolve. ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the - 46 - 56 Securities; or (2) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; or (3) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 1306; or (4) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action pursuant to this clause (4) shall not adversely affect the interests of the Holders in any material respect. Section 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or adversely affect the right to convert any Security as provided in Article Thirteen (except as permitted by Section 901(3)), or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1006, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the - 47 - 57 Holder of each Outstanding Security affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental Indenture, but it shall be sufficient if such Act shall approve the substance thereof. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any indenture supplemental hereto. If a record date is fixed, then those persons who were Holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such supplemental Indenture or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. Section 903. Execution of Supplemental Indentures. In executing, or accepting any additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee - 48 - 58 in exchange for Outstanding Securities. ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain in New York, New York an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company initially designates the office of the Trustee at Shawmut Bank, c/o First Chicago, 14 Wall Street, 8th Floor -- Window No. 2, New York, New York 10005, as its office or agency for these purposes. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside New York, New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in New York, New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such - 49 - 59 sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities, deposit in immediately available funds with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent; and (2) at any time during the continuance of any default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years (or such shorter period as required by applicable abandonment law with respect to the Holder entitled to payment thereof) after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, unless an applicable abandonment statute designates another Person, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in New York, New York, notice - 50 - 60 that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 1004. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if a transaction that would result in the termination of the Company's existence or any such right or franchise is permissible under Article Eight or if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 1005. Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, in each case ending after the date hereof, an Officers' Certificate, stating that a review of the activities of the Company during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such officer signing such certificate, that to the best of his knowledge the Company is not in default in the performance or observance of any of the terms, provisions and conditions hereof or, if a default or Event of Default shall have occurred, describing all such defaults or Events of Default of which he may have knowledge and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Securities are prohibited or if such event has occurred, a description of the event. Section 1006. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Section 1004, if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. - 51 - 61 ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Right of Redemption. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at any time on or after March 15, 1998, at the Redemption Prices specified in the form of Security hereinbefore set forth, together with accrued interest to the Redemption Date. Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and whether the Trustee is to give the notice of redemption. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed pursuant to Section 1101, the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method (including pro rata or by lot) as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $1,000 or any integral multiple thereof) of the principal amount of Securities of a denomination larger than $1,000. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. - 52 - 62 The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 1105. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed; (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date; (5) the conversion price, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the place or places where such Securities may be surrendered for conversion; and (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at Company Request, by the Trustee in the name and at the expense of the Company. Section 1106. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and - 53 - 63 hold in trust as provided in Section 1003) an amount of money in immediately available funds sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date other than any Securities called for redemption on that date which have been converted prior to the date of such deposit. If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to the right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 307) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. Section 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. - 54 - 64 ARTICLE TWELVE RIGHT TO REQUIRE REPURCHASE Section 1201. Right to Require Repurchase. In the event that there shall occur a Change in Control (as defined in Section 1206) which constitutes a Repurchase Event (as defined in Section 1206), then each Holder shall have the right, at such Holder's option to require the Company to purchase, and upon the exercise of such right, the Company shall, subject to the provisions of Article Fourteen, purchase all or any part of such Holder's Securities on a date (the "Repurchase Date") selected by the Company that is not more than 75 days after the date the Company gives notice of the Repurchase Event as contemplated in Section 1202(a) at a price (the "Repurchase Price") equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the Repurchase Date. Section 1202. Notice; Method of Exercising Repurchase Right. (a) On or before the 15th day after the Repurchase Event, the Company, or at Company Request, the Trustee (in the name and at the expense of the Company), shall give notice of the occurrence of the Repurchase Event and of the repurchase right set forth herein arising as a result thereof by first-class mail, postage prepaid, to each Holder of the Securities at such Holder's address appearing in the Security Register. The Company shall also deliver a copy of such notice of a repurchase right to the Trustee. Each notice of a repurchase right shall state: (1) the event constituting the Repurchase Event and the date thereof, (2) the Repurchase Date, (3) the date by which the repurchase right must be exercised, (4) the Repurchase Price, and (5) the instructions a Holder must follow to exercise a repurchase right. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. The Trustee shall have no affirmative obligation to determine if there shall have occurred a Repurchase Event. (b) To exercise a repurchase right, a Holder shall deliver to the Company - 55 - 65 (or an agent designated by the Company for such purpose in the notice referred to in (a) above) and to the Trustee on or before the close of business on the Business Day immediately preceding the Repurchase Date (i) written notice of the Holder's exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Security or Securities (or portion of a Security) to be repurchased, and a statement that an election to exercise the repurchased right is being made thereby, and (ii) the Security or Securities with respect to which the repurchase right is being exercised, duly endorsed for transfer to the Company. Such written notice shall be irrevocable. If the Repurchase Date falls between any Regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment from the Holder of an amount equal to the interest thereon which the registered Holder thereof is to receive on such Interest Payment Date. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, then subject to Article Fourteen, the Company shall on or promptly following the Repurchase Date pay or cause to be paid in cash to the Holder thereof the Repurchase Price of the Security or Securities as to which the repurchase right had been exercised. In the event that a repurchase right is exercised with respect to less than the entire principal amount of a surrendered Security, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate for issuance in the name of the Holder a new Security or Securities in the aggregate principal amount of the unrepurchased portion of such surrendered security. Section 1203. Deposit of Repurchase Price. On or prior to the Repurchase Date and subject to Article Fourteen, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money, in immediately available funds, sufficient to pay the Repurchase Price of the Securities which are to be repaid on or promptly following the Repurchase Date. Section 1204. Securities Not Repurchased on Repurchase Date. If any Security surrendered for repurchase shall not be paid by the 10th day following the Repurchase Date, the principal shall, until paid, bear interest to the extent permitted by applicable law from the eleventh day following the Repurchase Date at a rate per annum borne by such Security. Section 1205. Securities Repurchased in Part. Any Security which is to be repurchased only in part shall be surrendered at any office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the - 56 - 66 Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the repurchased portion of the principal of the Security so surrendered. Section 1206. "Change in Control" and "Repurchase Event" Defined. (a) For purposes of this Article, "Change in Control" means any of the following events that occurs after the Issue Date of the Securities and so long as any Securities are Outstanding: (1) the Company's assets are sold or otherwise disposed of substantially as an entirety to any Person or related group of Persons in any one transaction or a series of related transactions; (2) there shall be consummated any consolidation or merger of the Company (A) in which the Company is not the continuing or surviving corporation (other than a consolidation or merger with a wholly-owned Subsidiary of the Company in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into or exchanged for the same number of shares of common stock of such Subsidiary) or (B) pursuant to which the Common Stock is converted into cash, securities or other property, in each case other than a consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the common stock of the continuing or surviving Corporation immediately after such consolidation or merger; or (3) any Person, or any Persons acting together which would constitute a "group" for purposes of Section 13(d) of the Exchange Act (a "Group") (other than the Company, any Subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic dividend reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any Person holding securities of the Company for or pursuant to the terms of any such employee benefit plan, which may file or become obligated to file a report under or in response to Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act), together with any Affiliates thereof, shall acquire beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of at least 50% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors of the Company. - 57 - 67 (b) A Change in Control as described in Section 1206(a) shall constitute a "Repurchase Event" giving rise to a repurchase right on the part of each Holder of a Security unless: (1) the Current Market Price of the Common Stock on the date the Change in Control shall have occurred is at least equal to 105% of the conversion price in effect immediately preceding the time of such Change in Control, or (2) all of the consideration (excluding cash payments for fractional shares) in the transaction giving rise to such Change in Control to the holders of Common Stock consists of shares of common stock that are, or immediately upon issuance will be, listed on a national securities exchange or quoted in the NASDAQ National Market System, and as a result of such transaction the Securities become convertible solely into such shares of common stock, or (3) the consideration in the transaction giving rise to such Change in Control to the holders of Common Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted in the NASDAQ National Market System, or a combination of cash and such securities and the aggregate fair market value of such consideration (which, in the case of each such security, shall be equal to the average of the daily Closing Prices of each such security during the 10 consecutive Trading Days commencing with the sixth Trading Day following consummation of such transaction) to be received by a holder of Common Stock with respect to one share of Common Stock is at least 105% of the conversion price in effect on the date immediately preceding the closing date of such transaction. For purposes of this definition, "Current Market Price" on any date means the average daily Closing Prices for the 5 consecutive Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than, the date in question. ARTICLE THIRTEEN CONVERSION OF SECURITIES Section 1301. Right of Conversion. The Holder of any Security or Securities shall have the right at any time prior to maturity, at his option, to convert, subject to the terms and provisions of this Article - 58 - 68 Thirteen, the principal of any such Security or Securities (or any portion of the principal thereof which is $1,000 or an integral multiple of $1,000) into fully paid and nonassessable shares of Common Stock of the Company at the conversion price of $22.188 of principal amount of Securities per share of Common Stock or, in case an adjustment therein has taken place pursuant to the provisions of Section 1304, then at the price as so adjusted (except that with respect to any Security or Securities, or any such portion, which shall be called for redemption, such right shall terminate, except as provided in the last paragraph of Section 1302, at the close of business on the Business Day immediately preceding the Redemption Date for such Security or Securities or portion unless the Company shall default in payment due upon redemption thereof). Such right shall be exercised by the surrender of the Security or Securities, the principal of which is so to be converted, to the Company at any time during usual business hours at any office or agency to be maintained by it in accordance with the provisions of Section 1002, accompanied by written notice that the Holder elects to convert such Security or Securities or any portion thereof and specifying the name or names (with address) in which a certificate or certificates for Common Stock are to be issued and (if so required by the Company or the Trustee) by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder or his attorney, duly authorized in writing and transfer tax stamps or funds therefor, if required pursuant to Section 1310. For convenience, the conversion of all or a portion, as the case may be, of the principal of any Security into the Common Stock of the Company is hereinafter sometimes referred to as the conversion of such Security. All Securities surrendered for conversion shall, if surrendered to the Company or any conversion agent, be delivered to the Trustee for cancellation and cancelled by it or, if surrendered to the Trustee, shall be cancelled by it; and, subject to the next succeeding sentence, no Securities shall be issued in lieu thereof. In the case of any Security which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in an aggregate principal amount equal to the unconverted portion of the principal amount of such Security. Section 1302. Issuance of Common Stock; Time of Conversion. As promptly as practicable after the surrender, as herein provided, of any Security or Securities for conversion, the Company shall deliver or cause to be delivered at any office or agency to be maintained by it in accordance with the provisions of Section 1002 to or upon the written order of the Holder of the Security or Securities so surrendered a certificate or certificates representing the number of fully paid and nonassessable shares of Common Stock of the Company into which such Security or Securities (or portion thereof) may be converted in accordance with the provisions of this Article Thirteen. Subject to the following provisions of this paragraph and of Section 1304, such conversion shall be deemed to have been made immediately prior to the close of business on the date that such Security or Securities shall have been surrendered in satisfactory form for conversion, so that the rights of the Holder as a Holder shall cease with respect to such Security or Securities (or the portion thereof being converted) at such time, and the Person or Persons entitled to - 59 - 69 receive the shares of Common Stock deliverable upon conversion of such Security or Securities shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at such time, and such conversion shall be at the conversion price in effect at such time; provided, however, that no such surrender on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock deliverable upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are open, and such conversion shall be deemed to have been made at, and shall be made at the conversion rate in effect at, such time on such next succeeding day. If the last day for the exercise of the conversion right shall not be a Business Day, then such conversion right may be exercised on the next succeeding Business Day. Section 1303. No Adjustments in Respect of Interest or Dividends. Securities surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date shall (except in the case of Securities or portions thereof which have been called for redemption) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of Securities being surrendered for conversion. Upon a call for redemption by the Company, accrued and unpaid interest to the Redemption Date shall be payable with respect to Securities converted after the redemption notice has been mailed and prior to the Redemption Date. Except as provided in this Section 1303 and subject to the last paragraph of Section 307, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the shares of Common Stock issued upon conversion. Section 1304. Adjustment of Conversion Price. The conversion price, and consequently the number of shares of Common Stock into which a Security is convertible, shall be subject to adjustment from time to time as follows: (a) In case the Company shall (i) pay a dividend on Common Stock or make a distribution on its Common Stock that is paid or made (1) in shares of any class of capital stock of the Company or (2) in rights to purchase any stock or other securities if such rights are not separable from the Common Stock except upon the occurrence of a contingency, (ii) subdivide its outstanding shares of Common Stock - 60 - 70 into a greater number of shares or (iii) combine its outstanding shares of Common Stock into a smaller number of shares, then in each such case the conversion price in effect immediately prior thereto shall be adjusted retroactively as provided below so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock and other shares and rights to purchase stock or other securities (or, in the event of the redemption of any such shares or rights, any cash, property or securities paid in respect of such redemption) which such Holder would have owned or have been entitled to receive after the happening of any of the events described above had such Security been converted immediately prior to the happening of such event. An adjustment made pursuant to this Subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. (b) In case the Company shall issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the date fixed for determination mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (d) of this Section) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, then the conversion price in effect at the opening of business on the day following the date fixed for such determination shall be decreased by multiplying such conversion price by a fraction of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, and the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination; provided, however, in the event that all the shares of Common Stock offered for subscription or purchase are not delivered upon the exercise of such rights or warrants, upon the expiration of such rights or warrants the conversion price shall be readjusted to the conversion price which would have been in effect had the numerator and the denominator of the foregoing fraction and the resulting adjustment been made based upon the number of shares of Common Stock actually delivered upon the exercise of such rights or warrants rather than upon the number of shares of Common Stock offered for subscription or purchase. For the purposes of this paragraph (b), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. (c) In case the Company shall, by dividend or otherwise, distribute to substantially all holders of its Common Stock evidences of its indebtedness, cash - 61 - 71 (excluding quarterly cash dividends paid or to be paid on a regular basis), other assets or rights or warrants to subscribe for or purchase any securities (excluding those referred to in paragraphs (a) and (b) above), then in each such case, the conversion price shall be adjusted retroactively so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the current market price per share (determined as provided in paragraph (d) of this Section) of the Common Stock on the date fixed for such determination and the numerator shall be such current market price per share of the Common Stock less the amount of cash and the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution filed with the Trustee) of the portion of the assets, rights, warrants or evidences of indebtedness so distributed applicable to one share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. (d) For the purpose of any computation under paragraphs (b) and (c) of this Section, the current market price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive trading days commencing with the 45th trading day before the day in question. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the composite tape of the principal national securities exchange upon which the Common Stock is listed or on the NASDAQ National Market System (based on the aggregate dollar value of all securities listed or admitted to trading) or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the NASDAQ National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose, or, if such prices are not available, the fair market value set by, or in a manner established by, the Board of Directors of the Company in good faith. "Trading day" shall mean a day on which the national securities exchange or the NASDAQ National Market System used to determine the closing price is open for the transaction of business or the reporting of trades or, if the closing price is not so determined, a day on which the New York Stock Exchange is open for the transaction of business. (e) No adjustment in the conversion price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that the Company may make any such adjustment at its election; and provided, further, that any adjustments which by reason of this paragraph (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article Thirteen shall be made to the nearest cent or - 62 - 72 to the nearest one-hundredth of a share, as the case may be. (f) Whenever the conversion price is adjusted as provided in any provision of this Article Thirteen: (i) the Company shall compute the adjusted conversion price in accordance with paragraph (d) and shall prepare a certificate signed by the principal financial officer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts and calculations upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee and at each office or agency maintained for the purpose of conversion of Securities; and (ii) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Company to all Holders at their last addresses as they shall appear in the Security Register. (g) In the event that at any time, as a result of any adjustment made pursuant to this Article Thirteen, the Holder of any Security thereafter surrendered for conversion shall become entitled to receive any shares of the Company other than shares of Common Stock or to receive any other securities, the number of such other shares or securities so receivable upon conversion of any Security shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Article Thirteen with respect to the Common Stock. (h) The Company from time to time may, by Board Resolution delivered to the Trustee, decrease the conversion price by any amount for any period of time if the period is at least 20 days and if the decrease is irrevocable during the period. Whenever the conversion price is so decreased, the Company shall mail to the Holders a notice of the decrease at least 15 days before the date the decreased conversion price takes effect, and such notice shall state the decreased conversion price and the period it will be in effect. (i) The Company may make such decreases in the conversion price, in addition to those required or allowed by this Article Thirteen, as shall be determined by it, as evidenced by a Board Resolution delivered to the Trustee, to be advisable in order to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. - 63 - 73 (j) In any case in which this Section 1304 provides that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to the holder of any Security converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 1305. Section 1305. No Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the closing price per share of Common Stock as quoted on the composite tape of the principal national securities exchange upon which the Common Stock is listed or the NASDAQ National Market System or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the NASDAQ National Market System or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the NASDAQ National Market System, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose, or, if such prices are not available, the fair market value set by, or in a manner established by, the Board of Directors of the Company in good faith, all of the above to be determined as of the close of business on the day of conversion. Section 1306. Reclassification, Consolidation, Merger or Sale of Assets. In case of any reclassification of the Common Stock, any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), any sale or other disposition of the assets of the Company substantially as an entirety or any compulsory share exchange pursuant to which share exchange the Common Stock is converted into other securities, cash or other property, then the Holder of each Security then outstanding shall have the right thereafter, during the period such Security shall be convertible, pursuant to Section 1301, to convert such Security only into the kind and amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, other disposition or share exchange by a holder of the number - 64 - 74 of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such reclassification, consolidation, merger, sale, other disposition or share exchange assuming such holder of Common Stock (i) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company, to which such sale or other disposition was made or a party to such share exchange, as the case may be ("constituent Person"), or an Affiliate of a constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, other disposition or share exchange (provided that if the kind or amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, other disposition or share exchange is not the same for each share of Common Stock held immediately prior to such reclassification, consolidation, merger, sale, other disposition or share exchange by others than a constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this Article the kind and amount of securities, cash and other property receivable upon such reclassification, consolidation, merger, sale, other disposition or share exchange by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The Company or the Person formed by such consolidation or resulting from such merger or which acquires such assets or which acquires the Company's shares, as the case may be, shall execute and deliver to the Trustee a supplemental indenture to establish such right. Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section shall similarly apply to successive reclassifications, consolidations, mergers, sales, other dispositions or share exchanges. Notice of the execution of such a supplemental indenture shall be given by the Company to each Holder by mailing such notice to his last address appearing on the Security Register. Neither the Trustee nor any conversion agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind or amount of shares of stock or securities or cash or property receivable by Holders of Securities upon the conversion of their Securities after any such reclassification, change, consolidation, merger, sale or other disposition or to any such adjustment, but, subject to the provisions of Section 601, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Opinion of Counsel with respect thereto, which the Company shall cause to be furnished to the Trustee upon request. - 65 - 75 Section 1307. Prior Notice of Certain Events. In case: (a) the Company shall (i) declare any dividend (or any other distribution) on its Common Stock other than (1) a dividend payable in shares of Common Stock or (2) a quarterly cash dividend paid or to be paid on a regular basis or (ii) declare or authorize a redemption or repurchase of in excess of 10% of the then outstanding shares of Common Stock; or (b) the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or other disposition of the assets of the Company substantially as an entirety or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed with the Trustee and to be mailed to each Holder of Securities at his last address appearing on the Security Register, as promptly as possible but in any event at least 15 days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, other disposition, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, other disposition, share exchange, dissolution, liquidation or winding up. Section 1308. Shares to be Reserved; Accounting Treatment of Consideration. The Company covenants that it will at all times reserve and keep available out of its authorized but unissued Common Stock, free from preemptive rights solely for the - 66 - 76 purpose of issue upon conversion of Securities as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding Securities. The Company covenants that all shares of Common Stock which shall be so issuable shall, when issued, be duly and validly issued and fully paid and nonassessable. The Company covenants that, upon conversion of Securities as herein provided, there will be credited to the Common Stock capital account from the consideration for which the shares of Common Stock issuable upon such conversion are issued an amount per share of Common Stock so issued as determined by the Board of Directors, which amount shall not be less than the amount required by law and by the Company's certificate of incorporation, as amended, as in effect on the date of such conversion. For the purposes of this covenant the principal amount of the Securities converted, less any cash paid in respect of fractional share interests upon such conversion, shall be deemed to be the amount of consideration for which the shares of Common Stock issuable upon such conversion are issued. Section 1309. Registration and Listing of Shares. The Company covenants that if any shares of Common Stock required to be reserved for purposes of conversion of Securities hereunder require registration with or approval of any governmental authority under any federal or state law before such shares may be issued upon conversion, the Company will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered or approved, as the case may be. The Company further covenants that so long as the Common Stock of the Company is listed on any national securities exchange or on the NASDAQ National Market System, the Company will, if permitted by the rules thereof, list and keep listed thereon, upon official notice of issuance, all shares of Common Stock issuable upon conversion of Securities. Section 1310. Taxes and Charges. The issuance of certificates for shares of Common Stock upon the conversion of Securities shall be made without charge to the converting Holder of Securities for such certificates or for any tax in respect of the issuance of such certificates or the securities represented thereby, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the Holders of the Securities converted; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the Holder of the Security converted, and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. - 67 - 77 Section 1311. Trustee and Conversion Agents Not Liable. Neither the Trustee nor any conversion agent shall at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist which may require any adjustment of the conversion rate, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee nor any conversion agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or of any securities or cash or other property which may at any time be issued or delivered upon the conversion of any Security, or makes any representation with respect thereto. Neither the Trustee nor any conversion agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion, or, subject to Section 601, with any of the covenants of the Company contained in this Article Thirteen. ARTICLE FOURTEEN SUBORDINATION OF SECURITIES Section 1401. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security by his acceptance thereof likewise covenants and agrees that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of (and premium, if any) and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness. Section 1402. Payment Over of Proceeds Upon Dissolution, Etc. Upon any distribution of assets of the Company in the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in money or money's worth, before the Holders of the Securities are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Securities, and - 68 - 78 to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, which may be payable or deliverable in respect of the Securities in any such case, proceeding, dissolution, liquidation or other winding up or event. In furtherance of the foregoing, but not by way of limitation thereof, in the event of any case or proceeding described in clause (a) above with the result that the Company is excused from the obligation to pay all or any part of the interest otherwise payable in respect of any Senior Indebtedness during the period subsequent to the commencement of any such case or proceeding, all or such part, as the case may be, of such interest shall be payable out of, and to that extent shall diminish and be at the expense of, reorganization dividends or other distributions in respect of the Notes. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full or payment thereof provided for, and if such fact shall then have been made known to the Trustee, or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinated at least to the extent provided in this Article with respect to the Securities to the payment of all Senior Indebtedness which may at the time be outstanding; provided, however, that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of the Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or other disposition of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or other - 69 - 79 disposition such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or other disposition, comply with the conditions set forth in Article Eight. Section 1403. Prior Payment to Senior Indebtedness Upon Acceleration of Securities. In the event that any Securities are declared due and payable before their Stated Maturity, then and in such event the holders of Senior Indebtedness outstanding at the time such Securities so become due and payable shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all such Senior Indebtedness, or provision shall be made for such payment in money or money's worth, before the Holders of the Securities are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities) by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Securities prohibited by the foregoing provisions of this Section, and if such facts shall then have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company for the benefit of the holders of Senior Indebtedness. The provisions of this Section shall not apply to any payment with respect to which Section 1402 would be applicable. Section 1404. No Payment When Senior Indebtedness in Default. (a) In the event and during the continuation of any default in the payment of principal (or premium, if any) or interest on any Senior Indebtedness, or in the payment of any commitment or other fees in respect thereof, or in the event that any event of default with respect to any Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or event of default; then no payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities) shall be made by the Company on account of principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities. - 70 - 80 In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall then have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company for the benefit of the holders of Senior Indebtedness. The provisions of this Section shall not apply to any payment with respect to which Section 1402 would be applicable. Section 1405. Acknowledgment of Reliance. Each Holder of Notes by his acceptance thereof acknowledges and agrees that the subordination provisions included herein are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of Notes, to acquire and/or continue to hold such Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and/or continuing to hold such Senior Indebtedness. Section 1406. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the Company or to the holders of Senior Indebtedness by Holders of the Securities or the Trustee shall, as between the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Securities. Section 1407. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Indebtedness, on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general - 71 - 81 obligations of the Company, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness, or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the Trustee or such Holder. Section 1408. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 1409. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. Section 1410. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Failure to give such notice shall not affect the subordination of the Securities to Senior Indebtedness. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the - 72 - 82 Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received, at least three Business Days prior to the date upon which by the terms hereof any such money may become payable for any purpose (including without limitation, the payment of the principal of, and premium, if any, or interest on any Security), the notice with respect to such money provided for in this Section, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee on behalf of any such holder). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1411. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable - 73 - 83 thereon, the amount or amounts paid or distributed thereon and all other facts pursuant thereto or to this Article. Section 1412. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. Section 1413. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee or any predecessor Trustee under or pursuant to Section 607. Section 1414. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 1413 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1415. Certain Conversions Deemed Payment. For the purposes of this Article only, (1) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article Thirteen shall not be deemed to constitute a payment or distribution on account of the principal of or premium or interest on Securities or on account of the purchase or other acquisition of Securities, and (2) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section, the term "junior securities" means (a) shares of any stock of any class of the Company and (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such securities to substantially the - 74 - 84 same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors, other than holders of Senior Indebtedness and the Holders of the Securities, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article Thirteen. * * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. - 75 - 85 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. POGO PRODUCING COMPANY By /s/ D. STEPHEN SLACK SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Trustee By /s/ P. DE LA CANAL - 76 - EX-10.F.2.III 4 EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(2)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between Stuart P. Burbach ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ JOHN O. MCCOY, JR. Vice President and Chief Administrative Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ STUART P. BURBACH EX-10.F.4.III 5 EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(4)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between Jerry A. Cooper ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment Agreement for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ JOHN O. MCCOY, JR. Vice President and Chief Administrative Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ JERRY A. COOPER EX-10.F.6.III 6 EXTENION AGREEMENT TO CONTINUED EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(6)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between Kenneth R. Good ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment Agreement for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ JOHN O. MCCOY, JR. Vice President and Chief Administrative Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ KENNETH R. GOOD EX-10.F.8.III 7 EXTENSION AGREEMENT TO CONTINUED EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(8)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between R. Phillip Laney ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment Agreement for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ JOHN O. MCCOY, JR. Vice President and Chief Administrative Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ R. PHILLIP LANEY EX-10.F.10.III 8 EXTENSION AGREEMENT TO CONTINUED EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(10)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between John O. McCoy, Jr. ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment Agreement for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ PAUL G. VAN WAGENEN Chairman, President and Chief Executive Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ JOHN O. MCCOY, JR. EX-10.F.12.III 9 EXTENSION AGREEMENT TO CONTINUED EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(12)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between D. Stephen Slack ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment Agreement for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ JOHN O. MCCOY, JR. Vice President and Chief Administrative Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ D. STEPHEN SLACK EX-10.F.14.III 10 EXTENSION AGREEMENT TO CONTINUED EMPLOYMENT AGMT. 1 EXHIBIT 10(f)(14)(iii) EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT between Paul G. Van Wagenen ("Executive") and Pogo Producing Company, a Delaware corporation ("Company"), dated as of February 1, 1995 WHEREAS, Executive and Company are parties to an "Employment Agreement" bearing an original "Effective Date" of February 1, 1992, and an "Extension Agreement" dated as of February 1, 1993; and an "Extension Agreement" dated as of February 1, 1994; and WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to be the "Renewal Date" in that Employment Agreement; and WHEREAS, Executive and Company each wish to extend said Employment Agreement for an additional one-year period so as to terminate (unless further extended) two years thereafter, (to-wit January 31, 1997); and WHEREAS, Company desires to retain the services of Executive for the benefit of Company and its shareholders, and desires to induce Executive to remain in its employ for that extended time period; and WHEREAS, Executive has agreed to continue to serve as an employee of Company for the period specified herein from and after the date of this Extension Agreement; and WHEREAS, Company and Executive desire to enter into this Extension Agreement in order to formally secure for Company the benefit of the experience and abilities of Executive, and to set forth the agreements and understandings of Company and Executive; and WHEREAS, Company has advised Executive that execution and performance of this Extension Agreement by Company has been duly 2 authorized and approved by all requisite corporate action on the part of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements herein contained, and in consideration of the sum of $10 paid by Company to Executive, receipt whereof is hereby acknowledged by Executive, Executive and Company do hereby agree as follows: 1. The Employment Agreement between Executive and Company bearing an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed herein to be February 1, 1995, is hereby extended for an additional one-year period commencing February 1, 1996 and ending January 31, 1997, unless such employment period is hereafter further extended for an additional period by both Executive and Company. 2. All provisions of the Employment Agreement between Executive and Company dated February 1, 1992, and as it may have been and herein is amended, are continued in full force and effect without change as if the Employment Agreement had been initially effective as of February 1, 1995. POGO PRODUCING COMPANY By:/s/ JOHN O. MCCOY, JR. Vice President and Chief Administrative Officer ATTEST: /s/ BETTY HANBY EMPLOYEE: /s/ PAUL G. VAN WAGENEN EX-21 11 LIST OF SUBSIDIARIES 1 Exhibit 21 List of Subsidiaries of POGO PRODUCING COMPANY
Jurisdiction of Name Incorporation ---- --------------- 1. Thaipo Limited Kingdom of Thailand 2. Pogo Offshore Pipeline Co. Delaware 3. Pogo Gulf Coast, Ltd. Texas Limited Partnership (The Company is the general partner and a 40% limited partner) 4. Pogo Petroles Compagnie, Inc. Delaware 5. Pogo Netherlands, Inc. Delaware 6. Pogo Thailand, Inc. Delaware 7. Pogo Turkey Inc. Delaware 8. Sampack Inc. Delaware 9. Pogo British Isles, Inc. Delaware 10. Pogo Hungary Oil and Gas Kft Republic of Hungary
EX-23.A 12 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT 1 EXHIBIT 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 3, 1995 included in this Annual Report on Form 10-K, into Pogo Producing Company's previously filed Registration Statement File Nos. 2-60725, 2-62690, 2-65374, 2-79500 and 33-54969. /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP Houston, Texas March 7, 1995 EX-23.B 13 CONSENT OF INDEPENDENT PETROLEUM ENGINEER 1 EXHIBIT 23-(b) CONSENT OF INDEPENDENT PETROLEUM ENGINEERS As independent petroleum engineers, we hereby consent to the use of our name in the Annual Report on Form 10-K of Pogo Producing Company for the year ended December 31, 1994. We further consent to the inclusion of our estimate of reserves and present value of future net reserves in such Annual Report. /s/ RYDER SCOTT COMPANY PETROLEUM ENGINEERS RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas March 7, 1995 EX-24 14 POWERS OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY I, Tobin Armstrong, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ TOBIN ARMSTRONG Tobin Armstrong 2 POWER OF ATTORNEY I, Jack S. Blanton, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ JACK S. BLANTON Jack S. Blanton 3 POWER OF ATTORNEY I, W. M. Brumley, Jr., in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ W.M. BRUMLEY, JR. W. M. Brumley, Jr. 4 POWER OF ATTORNEY I, John B. Carter, Jr., in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ JOHN B. CARTER, JR. John B. Carter, Jr. 5 POWER OF ATTORNEY I, William L. Fisher, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ WILLIAM L. FISHER William L. Fisher 6 POWER OF ATTORNEY I, William E. Gipson, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ WILLIAM E. GIPSON William E. Gipson 7 POWER OF ATTORNEY I, Gerrit W. Gong, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ GERRIT W. GONG Gerrit W. Gong 8 POWER OF ATTORNEY I, J. Stuart Hunt, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ J. STUART HUNT J. Stuart Hunt 9 POWER OF ATTORNEY I, Frederick A. Klingenstein, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ FREDERICK A. KLINGENSTEIN Frederick A. Klingenstein 10 POWER OF ATTORNEY I, Nicholas R. Petry, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ NICHOLAS R. PETRY Nicholas R. Petry 11 POWER OF ATTORNEY I, Jack A. Vickers, in my individual capacity and as a director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and lawful attorney or attorneys with power to act with or without the others, and with full power of substitution and resubstitution, to prepare, execute and file, in my name, place and stead in my individual capacity and as a director of the Company, such documents, reports and filings as may be necessary or advisable under the Securities Exchange Act of 1934, as amended (the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or any other federal, state or local law regulating the Company including, without limitation, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as prescribed by the Securities and Exchange Commission (the "Commission") pursuant to the Act, and the rules and regulations promulgated thereunder, with any and all exhibits and other documents relating thereto, any and all amendments to said Annual Report and all instruments as said attorneys or any of them shall deem necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in my name and on my behalf any act whatsoever to accomplish the purpose and intent of the forgoing that said attorneys deem may be necessary or desirable to be done in the premises as fully and to all intents and purposes as I might or could do in person, and by my signature hereto, I hereby ratify and approve any and all of such acts of said attorneys and each of them. IN WITNESS WHEREOF, I have executed this instrument on this 24th day of January, 1995. /s/ JACK A. VICKERS Jack A. Vickers EX-27 15 FINANCIAL DATA SCHEDULE
5 This Financial Data Schedule contains summary financial information extracted from the Consolidated Financial Statements of Pogo Producing Company, including the Consolidated Balance Sheets as of December 31, 1994 and the Consolidated Statements of Income for the twelve months ended December 31, 1994, and is qualified in its entirety by reference to such Consolidated financial Statements. 1,000 12-MOS DEC-31-1994 DEC-31-1994 2,922 0 43,632 0 2,422 49,721 929,023 691,110 298,826 38,704 149,249 32,826 0 0 31,211 298,826 173,556 173,608 29,768 29,768 91,637 0 10,104 42,891 15,517 27,374 0 (307) 0 27,067 0.81 0.81 This amount is not disclosed on the face of the Consolidated Financial Statements due to lack of materiality, but is included as a contra-asset in Accounts Receivable. Does not include Gains on Property Sales. Includes Lease Operating Expense, but excludes General and Administrative, Exploration, Dry Hole and Impairment and Depreciation, Depletion and Amortization Expenses. Includes General and Administrative, Exploration, Dry Hole and Impairment and Depreciation, Depletion and Amortization Expenses. This amount is not disclosed on the face of the Consolidated financial Statements due to lack of materiality, but is included in Oil and Gas Revenues.
EX-28 16 REPORT OF RYDER SCOTT 1 (RYDER SCOTT COMPANY LETTERHEAD) EXHIBIT 28 February 3, 1995 Pogo Producing Company Post Office Box 2504 Houston, Texas 77252-2504 Gentlemen: At your request we have prepared an estimate of the reserves, future production, and income attributable to certain leasehold and royalty interests of Pogo Producing Company and its wholly owned subsidiaries (the Company) as of December 31, 1994. In accordance with the requirements of FASB 69, our estimates of the Company's net proved reserves as of December 31, 1991, 1992, 1993, and 1994, as contained in this report and our previous reports, are presented in attached Table No. 1 together with a tabulation of the components of the differences in the estimates as of such dates. The Company's reserves in the United States are located in the states of Colorado, Louisiana, New Mexico, Oklahoma, Texas, and in state and federal waters offshore Louisiana and Texas. The Company's foreign reserves are located offshore Thailand. The estimated reserve volumes and future income amounts presented in this report are related to hydrocarbon prices. December 1994 hydrocarbon prices were used in the preparation of this report as required by Securities and Exchange Commission (SEC) and Financial Accounting Standards Bulletin No. 69 (FASB 69) guidelines; however, actual future prices may vary significantly from December 1994 prices. Therefore, volumes of reserves actually recovered and amounts of income actually received may differ from the estimated quantities presented in this report. Our estimates of the proved net reserves attributable to the interests of the Company as of December 31, 1994 are shown below:
Proved Net Reserves As of December 31, 1994 ------------------------------------ Liquid, Barrels Gas, MMCF --------------- --------- Developed and Undeveloped United States 26,187,240 186,151 Foreign 7,674,372 56,739 ----------- -------- Total Worldwide 33,861,612 242,890 Developed United States 24,669,755 178,518 Foreign 0 0 ----------- -------- Total Worldwide 24,669,755 178,518
The "Liquid" reserves shown above are comprised of crude oil, condensate, and natural gas liquids. Natural gas liquids comprise 17 percent of the Company's developed liquid reserves and 13 percent of the Company's developed and undeveloped liquid reserves. All hydrocarbon liquid reserves are expressed in standard 42 gallon barrels. All gas volumes are sales gas expressed in MMCF at the pressure and temperature bases of the area where the gas reserves are located. 2 Pogo Producing Company February 3, 1995 Page 2 The proved reserves presented in this report comply with the SEC's Regulation S-X Part 210.4-10 Sec. (a) as clarified by subsequent Commission Staff Accounting Bulletins, and are based on the following definitions and criteria: Proved reserves of crude oil, condensate, natural gas, and natural gas liquids are estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under existing conditions. Reservoirs are considered proved if economic producibility is supported by actual production or formation tests. In certain instances, proved reserves are assigned on the basis of a combination of core analysis and electrical and other type logs which indicate the reservoirs are analogous to reservoirs in the same field which are producing or have demonstrated the ability to produce on a formation test. The area of a reservoir considered proved includes (1) that portion delineated by drilling and defined by fluid contacts, if any, and (2) the adjoining portions not yet drilled that can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of data on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir. Proved reserves are estimates of hydrocarbons to be recovered from a given date forward. They may be revised as hydrocarbons are produced and additional data become available. Proved natural gas reserves are comprised of non-associated, associated, and dissolved gas. An appropriate reduction in gas reserves has been made for the expected removal of natural gas liquids, for lease and plant fuel, and the exclusion of non- hydrocarbon gases if they occur in significant quantities and are removed prior to sale. Reserves that can be produced economically through the application of improved recovery techniques are included in the proved classification when these qualifications are met: (1) successful testing by a pilot project or the operation of an installed program in the reservoir provides support for the engineering analysis on which the project or program was based, and (2) it is reasonably certain the project will proceed. Improved recovery includes all methods for supplementing natural reservoir forces and energy, or otherwise increasing ultimate recovery from a reservoir, including (1) pressure maintenance, (2) cycling, and (3) secondary recovery in its original sense. Improved recovery also includes the enhanced recovery methods of thermal, chemical flooding, and the use of miscible and immiscible displacement fluids. Estimates of proved reserves do not include crude oil, natural gas, or natural gas liquids being held in underground storage. Depending on the status of development, these proved reserves are further subdivided into: (i) "developed reserves" which are those proved reserves reasonably expected to be recovered through existing wells with existing equipment and operating methods, including (a) "developed producing reserves" which are those proved developed reserves reasonably expected to be produced from existing completion intervals now open for production in existing wells, and (b) "developed non-producing reserves" which are those proved developed reserves which exist behind the casing of existing wells which are reasonably expected to be produced through these wells in the predictable future where the cost of making such hydrocarbons available for production should be relatively small compared to the cost of a new well; and (ii) "undeveloped reserves" which are those proved reserves reasonably expected to be recovered from new wells on undrilled acreage, from existing wells where a relatively large expenditure is required, and from acreage for which an application of fluid injection or other improved recovery technique is contemplated where the technique has been proved effective by actual tests in the area in the same reservoir. Reserves 3 Pogo Producing Company February 3, 1995 Page 3 from undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units are included only where it can be demonstrated with reasonable certainty that there is continuity of production from the existing productive formation. Because of the direct relationship between volumes of proved undeveloped reserves and development plans, we include in the proved undeveloped category only reserves assigned to undeveloped locations that we have been assured will definitely be drilled and reserves assigned to the undeveloped portions of secondary or tertiary projects which we have been assured will definitely be developed. The Company has interests in certain tracts which have substantial additional hydrocarbon quantities which cannot be classified as proved and consequently are not included herein. The Company has active exploratory and development drilling programs which may result in the reclassification of significant additional volumes to the proved category. In accordance with the requirements of FASB 69, our estimates of future cash inflows, future costs, and future net cash inflows before income tax as of December 31, 1994 from this report and as of December 31, 1993 from our previous report are presented below.
As of December 31 ----------------------------------------- 1994 1993 ------------- ------------- Future Cash Inflows 985,887,955 $895,060,044 Future Costs Production $253,140,202 $211,741,925 Development 180,838,861 133,257,042 ------------- ------------- Total Costs $433,979,063 $344,998,967 Future Net Cash Inflows Before Income Tax $551,908,892 $550,061,077 Present Value at 10% Before Income Tax $382,979,729 $403,840,199
Our estimates as of December 31, 1994 and 1993 of future cash inflows, future costs, future net cash inflows before income tax, and present value at 10 percent before income tax are shown individually for total worldwide, total United States (onshore and offshore), and foreign areas in Table No. 2 which is attached. The future cash inflows are gross revenues before any deductions. The production costs were based on current data and include production taxes, ad valorem taxes, and certain other items such as transportation costs in addition to the operating costs directly applicable to the individual leases or wells. The development costs were based on current data and include dismantlement and abandonment costs net of salvage for properties where such costs are relatively significant. The Company furnished us with gas prices in effect at December 31, 1994 and with its forecasts of future gas prices which take into account SEC guidelines, current market prices, contract prices, and fixed and determinable price escalations where applicable. In accordance with SEC guidelines, the future gas prices used in this report make no allowances for future gas price increases 4 Pogo Producing Company February 3, 1995 Page 4 which may occur as a result of inflation nor do they account for seasonal variations in gas prices which may cause future yearly average gas prices to be somewhat lower than December gas prices. For gas sold under contract, the contract gas price including fixed and determinable escalations exclusive of inflation adjustments, was used until the contract expires and then was adjusted to the current market price for the area and held at this adjusted price to depletion of the reserves. The Company furnished us with liquid prices in effect at December 31, 1994 and these prices were held constant to depletion of the properties. In accordance with SEC guidelines, changes in liquid prices subsequent to December 31, 1994 were not considered in this report. The estimates of future net revenue from the Company's foreign property are based on existing law. Operating costs for the leases and wells in this report were based on the operating expense reports of the Company and include only those costs directly applicable to the leases or wells. When applicable, the operating costs include a portion of general and administrative costs allocated directly to the leases and wells under terms of operating agreements. Development costs were furnished to us by the Company and are based on authorizations for expenditure for the proposed work or actual costs for similar projects. The current operating and development costs were held constant throughout the life of the properties. For properties located onshore, this study did not consider the salvage value of the lease equipment or the abandonment cost since both are relatively insignificant and tend to offset each other. The estimated net cost of abandonment after salvage was included for offshore properties where abandonment costs net of salvage are significant. The estimates of the offshore net abandonment costs furnished by the Company were accepted without independent verification. No deduction was made for indirect costs such as general administration and overhead expenses, loan repayments, interest expenses, and exploration and development prepayments. The Company supplied data on accumulated gas production imbalances which were taken into account in our estimates of future production and income. The estimates of reserves presented herein are based upon a detailed study of the properties in which the Company owns an interest; however, we have not made any field examination of the properties. No consideration was given in this report to potential environmental liabilities which may exist nor were any costs included for potential liability to restore and clean up damages, if any, caused by past operating practices. The Company has informed us that they have furnished us all of the accounts, records, geological and engineering data and reports, and other data required for this investigation. The ownership interests, prices, and other factual data furnished by the Company were accepted without independent verification. The estimates presented in this report are based on data available through December 1994. The reserves included in this report are estimates only and should not be construed as being exact quantities. They may or may not be actually recovered, and if recovered, the revenues therefrom and the actual costs related thereto could be more or less than the estimated amounts. Moreover, estimates of reserves may increase or decrease as a result of future operations. In general, we estimate that future gas production rates will continue to be the same as the average rate for the latest available 12 months of actual production until such time that the well or wells are incapable of producing at this rate. The well or wells were then projected to decline at their decreasing delivery capacity rate. Our general policy on estimates of future gas production rates is adjusted when necessary to reflect actual gas market conditions in specific cases. The future production rates from wells now on production may be more or less than estimated because of changes in market demand or allowables set by regulatory bodies. Wells or locations which are not currently producing may start producing earlier or later than anticipated in our estimates of their future production rates. 5 Pogo Producing Company February 3, 1995 Page 5 While it may reasonably be anticipated that the future prices received for the sale of production and the operating costs and other costs relating to such production may also increase or decrease from existing levels, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation. Neither we nor any of our employees have any interest in the subject properties and neither the employment to make this study nor the compensation is contingent on our estimates of reserves and future cash inflows for the subject properties. Very truly yours, RYDER SCOTT COMPANY PETROLEUM ENGINEERS /s/ FRED P. RICHOUX Fred P. Richoux, P.E. Group Vice President FPR/sw 6 TABLE NO. 1 POGO PRODUCING COMPANY Proved Net Resere Data
United States Foreign Total Worldwide Total Onshore and Offshore Thailand Offshore ---------------------------------- ---------------------------------- -------------------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- ---------- --------- --------- --------- Net Proved Liquid(1) Reserves, Barrels - ------------------ Developed and Undeveloped Beginning of Year 28,268,441 22,555,788 18,818,091 22,843,628 19,978,881 18,818,091 5,424,813 2,576,907 0 Revisions 1,286,984 342,022 1,721,385 1,286,984 342,022 1,721,385 0 0 0 Extensions and Discoveries 6,565,442 9,764,408 5,486,273 4,315,883 6,916,502 2,909,366 2,249,559 2,847,906 2,576,907 Improved Recovery 0 0 0 0 0 0 0 0 0 Estimated Production -4,945,677 -4,219,873 -3,611,105 -4,945,677 -4,219,873 -3,611,105 0 0 0 Purchase of Reserves In-Place 2,686,919 182,610 335,750 2,686,919 182,610 335,750 0 0 0 Sales of Reserves In-Place -497 -356,514 -194,606 -497 -356,514 -194,606 0 0 0 ---------- ---------- ---------- ---------- ---------- ---------- --------- --------- --------- End of Year 33,861,612 28,268,441 22,555,788 26,187,240 22,843,628 19,978,881 7,674,372 5,424,813 2,576,907 Developed Beginning of Year 20,976,194 18,798,149 17,549,830 20,976,194 18,798,149 17,549,830 0 0 0 End of Year 24,669,755 20,976,194 18,798,149 24,669,755 20,976,194 18,798,149 0 0 0 Net Proved Gas Reserves, Millions of Cubic Feet - ------------------------ Developed and Undeveloped Beginning of Year 232,866 207,068 202,735 199,392 196,400 202,735 33,474 10,668 0 Revisions -2,558 1,148 20,284 -2,558 1,148 20,284 0 0 0 Extensions and Discoveries 49,517 55,626 19,126 26,252 32,820 8,458 23,265 22,806 10,668 Improved Recovery 0 0 0 0 0 0 0 0 0 Estimated Production -52,618 -32,319 -40,581 -52,618 -32,319 -40,581 0 0 0 Purchase of Reserves In-Place 15,792 13,192 10,237 15,792 13,192 10,237 0 0 0 Sales of Reserves In-Place -109 -11,849 -4,733 -109 -11,849 -4,733 0 0 0 ---------- ---------- ---------- ---------- ---------- ---------- --------- --------- --------- End of Year 242,890 232,866 207,068 186,151 199,392 196,400 56,739 33,474 10,668 Developed Beginning of Year 183,139 175,523 188,090 183,139 175,523 188,090 0 0 0 End of Year 178,518 183,139 175,523 178,518 183,139 175,523 0 0 0
_______________________________ (1) Liquid reserves shown above are comprised of crude oil, condensate and natural gas liquids. 7 TABLE NO. 2 POGO PRODUCING COMPANY Cash Inflow and Cost Data (U.S. Dollars)
United States Total Worldwide Onshore and Offshore Thailand Offshore As of December 31 As of December 31 As of December 31 ---------------------------- ---------------------------- ---------------------------- 1994 1993 1994 1993 1994 1993 ------------ ------------ ------------ ------------ ------------ ------------ Future Cash Inflows(1) $985,887,955 $895,060,044 $720,085,779 $744,200,701 $265,802,176 $150,859,343 Future Costs Production(2) $253,140,202 $211,741,925 $192,833,675 $158,934,102 $ 60,306,527 $ 52,807,823 Development(3) 180,838,861 133,257,042 86,683,951 79,734,742 94,154,910 53,522,300 ------------ ------------ ------------ ------------ ------------ ------------ Total Costs $433,979,063 $344,998,967 $279,517,626 $238,668,844 $154,461,437 $106,330,123 Future Cash Inflows Before Income Tax $551,908,892 $550,061,077 $440,568,153 $505,531,857 $111,340,739 $ 44,529,220 Present Value @ 10% Before Income Tax $382,979,729 $403,840,199 $330,867,582 $386,673,722 $ 52,112,147 $ 17,166,477
_______________________________ (1) Gross revenues before any deductions. (2) Includes production taxes in the U.S.A., SRB taxes in Thailand, ad valorem taxes and certain other items such as transportation charges. (3) Includes future abandonment costs net of salvage for offshore properties where such costs are relatively significant. -----END PRIVACY-ENHANCED MESSAGE-----