-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PiduOj/ftQfyPYY//R7UG0Lg2SukICVuypHofl8VcAwGQCeJhBsUnXLgrT+k94AF yP+bDJi7h926MhnZCy6S5w== /in/edgar/work/20001102/0000320321-00-000014/0000320321-00-000014.txt : 20001106 0000320321-00-000014.hdr.sgml : 20001106 ACCESSION NUMBER: 0000320321-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCEAN ENERGY INC /TX/ CENTRAL INDEX KEY: 0000320321 STANDARD INDUSTRIAL CLASSIFICATION: [1311 ] IRS NUMBER: 741764876 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08094 FILM NUMBER: 751805 BUSINESS ADDRESS: STREET 1: 1001 FANNIN STE 1600 CITY: HOUSTON STATE: TX ZIP: 77002-6714 BUSINESS PHONE: 7132656000 MAIL ADDRESS: STREET 1: 1001 FANNIN, SUITE 1600 CITY: HOUSTON STATE: TX ZIP: 77002-6714 FORMER COMPANY: FORMER CONFORMED NAME: SEAGULL ENERGY CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SEAGULL PIPELINE CORP DATE OF NAME CHANGE: 19830815 10-Q 1 0001.txt THIRD QUARTER 2000 10-Q =============================================================================== Securities And Exchange Commission Washington, D.C. 20549 Form 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ------- SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ------- SECURITIES EXCHANGE ACT OF 1934 Commission file number: 1-8094 Ocean Energy, Inc. (Exact name of registrant as specified in its charter) Texas 74-1764876 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1001 Fannin, Suite 1600, Houston, Texas 77002-6714 (Address of principal executive offices) (Zip code) (713) 265-6000 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) 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 Exchange 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 . As of October 27, 2000, 167,520,788 shares of Common Stock, par value $0.10 per share, were outstanding. ================================================================================ Ocean Energy, Inc. Index
Page Number Part I. Financial Information Item 1. Unaudited Consolidated Financial Statements Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2000 and 1999...................................... 1 Consolidated Balance Sheets - September 30, 2000 and December 31, 1999.............................................................. 2 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999.................................................. 3 Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended September 30, 2000 and 1999 .......................... 4 Notes to Consolidated Financial Statements......................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 10 Item 3. Quantitative and Qualitative Disclosures about Market Risks............................ 16 Part II. Other Information.......................................................................... 17 Signatures........................................................................................... 18
(i) Item. 1 Unaudited Consolidated Financial Statements Ocean Energy, Inc. Consolidated Statements Of Operations (Amounts in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- --------------------------------- 2000 1999 2000 1999 --------------- --------------- --------------- ---------------- Revenues......................................................$ 261,089 $ 214,393 $ 743,586 $ 516,293 Costs of Operations: Operating expenses......................................... 57,330 54,672 172,040 165,278 Depreciation, depletion and amortization................... 76,886 85,615 229,918 233,732 Impairment of oil and gas properties....................... - - - 28,500 General and administrative................................. 6,231 4,955 21,303 18,038 --------------- --------------- --------------- ---------------- 140,447 145,242 423,261 445,548 --------------- --------------- --------------- ---------------- Operating Profit.............................................. 120,642 69,151 320,325 70,745 Other (Income) Expense: Interest expense........................................... 19,756 30,410 57,850 86,601 Merger and integration costs............................... - 3,176 3,273 43,828 Interest income and other.................................. (915) (269) (1,747) (383) --------------- --------------- --------------- ---------------- Income (Loss) Before Income Taxes............................. 101,801 35,834 260,949 (59,301) Income Tax Expense (Benefit).................................. 43,932 6,404 114,609 (9,269) --------------- --------------- --------------- ---------------- Income (Loss) from Continuing Operations...................... 57,869 29,430 146,340 (50,032) Loss from Discontinued Operations, Net of Income Taxes............................................... - (625) - (78) --------------- --------------- --------------- ---------------- Net Income (Loss)............................................. 57,869 28,805 146,340 (50,110) Preferred Stock Dividend...................................... 813 819 2,438 2,456 --------------- --------------- --------------- ---------------- Net Income (Loss) Available to Common Shareholders............$ 57,056 $ 27,986 $ 143,902 $ (52,566) =============== =============== =============== ================ Earnings (Loss) Per Common Share: Basic: Income (Loss) from Continuing Operations................. $ 0.34 $ 0.17 $ 0.86 $ (0.36) Income from Discontinued Operations...................... - - - - --------------- --------------- --------------- ---------------- Net Income (Loss)........................................ $ 0.34 $ 0.17 $ 0.86 $ (0.36) =============== =============== =============== ================ Diluted: Income (Loss) from Continuing Operations................. $ 0.33 $ 0.16 $ 0.83 $ (0.36) Income from Discontinued Operations...................... - - - - --------------- --------------- --------------- ---------------- Net Income (Loss)........................................ $ 0.33 $ 0.16 $ 0.83 $ (0.36) =============== =============== =============== ================ Weighted Average Number of Common Shares Outstanding: Basic.................................................... 167,125 166,680 167,061 145,670 =============== =============== =============== ================ Diluted.................................................. 177,035 170,629 176,448 145,670 =============== =============== =============== ================
See accompanying Notes to Consolidated Financial Statements. 1 Ocean Energy, Inc. Consolidated Balance Sheets (Amounts in Thousands, Except Share Data) (Unaudited)
September 30, December 31, 2000 1999 ----------------- ------------------ Assets Current Assets: Cash and cash equivalents.................................................... $ 25,915 $ 64,889 Accounts receivable, net..................................................... 205,158 170,034 Inventories.................................................................. 26,244 28,723 Prepaid expenses and other................................................... 32,108 26,304 ----------------- ------------------ Total Current Assets....................................................... 289,425 289,950 Property, Plant and Equipment, at cost, full cost method for oil and gas properties: Evaluated oil and gas properties............................................. 4,020,772 3,706,288 Unevaluated oil and gas properties excluded from amortization................ 546,910 507,197 Other........................................................................ 145,619 84,410 ----------------- ------------------ 4,713,301 4,297,895 Accumulated Depreciation, Depletion and Amortization............................ (2,414,119) (2,094,885) ----------------- ------------------ 2,299,182 2,203,010 Deferred Income Taxes........................................................... 167,669 233,406 Other Assets.................................................................... 56,453 56,777 ----------------- ------------------ Total Assets.................................................................... $ 2,812,729 $ 2,783,143 ================= ================== Liabilities And Shareholders' Equity Current Liabilities: Accounts and notes payable................................................... $ 296,989 $ 275,629 Accrued interest payable..................................................... 17,774 41,119 Accrued liabilities.......................................................... 20,309 65,193 ----------------- ------------------ Total Current Liabilities.................................................. 335,072 381,941 Long-Term Debt.................................................................. 1,073,104 1,333,410 Deferred Income Taxes........................................................... 33,981 - Other Noncurrent Liabilities and Deferred Revenue............................... 275,580 120,097 Commitments and Contingencies................................................... - - Shareholders' Equity: Preferred stock, $1.00 par value; authorized 10,000,000 shares; issued 50,000 shares....................................................... 50 50 Common stock, $.10 par value; authorized 230,000,000 shares; issued 169,614,114 and 166,979,981 shares, respectively....................................... 16,961 16,699 Additional paid-in capital................................................... 1,511,605 1,484,688 Accumulated deficit.......................................................... (403,314) (547,216) Less - treasury stock, at cost; 2,103,753 and 378,171 shares, respectively... (26,538) (3,114) Less - Other................................................................. (3,772) (3,412) ----------------- ------------------ Total Shareholders' Equity................................................. 1,094,992 947,695 ----------------- ------------------ Total Liabilities and Shareholders' Equity...................................... $ 2,812,729 $ 2,783,143 ================= ==================
See accompanying Notes to Consolidated Financial Statements. 2 Ocean Energy, Inc. Consolidated Statements Of Cash Flows (Amounts in Thousands) (Unaudited)
Nine Months Ended September 30, --------------------------------------- 2000 1999 ----------------- ------------------ Operating Activities: Net income (loss)...................................................... $ 146,340 $ (50,110) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization............................. 229,918 233,732 Impairment of oil and gas properties................................. - 28,500 Deferred income taxes................................................ 99,833 (24,702) Noncash merger and integration costs................................. - 21,047 Other................................................................ 9,678 11,674 Changes in operating assets and liabilities, net of acquisitions..... (85,621) (13,211) ----------------- ------------------ Net Cash Provided by Operating Activities............................ 400,148 206,930 ----------------- ------------------ Investing Activities: Capital expenditures of continuing operations.......................... (413,349) (231,976) Capital expenditures of discontinued operations........................ - (5,040) Acquisition costs, net of cash acquired................................ (3,036) (2,345) Proceeds from sales of property, plant and equipment................... 86,125 390,479 Other ................................................................. (2,327) - ----------------- ------------------ Net Cash Provided by (Used in) Investing Activities.................. (332,587) 151,118 ----------------- ------------------ Financing Activities: Proceeds from debt..................................................... 1,043,412 989,999 Principal payments on debt ............................................ (1,291,324) (1,400,823) Proceeds from sales of common stock.................................... 20,600 2,572 Purchase of treasury stock............................................. (23,401) - Increase in deferred revenue........................................... 74,947 100,000 Proceeds from conveyances of Section 29 credit properties.............. 69,644 - Deferred financing costs............................................... - (6,406) Other.................................................................. (413) (219) ----------------- ------------------ Net Cash Used In Financing Activities................................ (106,535) (314,877) ----------------- ------------------ Increase (decrease) In Cash and Cash Equivalents......................... (38,974) 43,171 Cash and Cash Equivalents at Beginning of Period......................... 64,889 10,706 ----------------- ------------------ Cash and Cash Equivalents at End of Period............................... $ 25,915 $ 53,877 ================= ==================
See accompanying Notes to Consolidated Financial Statements. 3 Ocean Energy, Inc. Consolidated Statements Of Comprehensive Income (Amounts in Thousands) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- --------------------------------- 2000 1999 2000 1999 ----------------- --------------- ---------------- ---------------- Net income (loss).................................... $ 57,869 $ 28,805 $ 146,340 $ (50,110) Other comprehensive income, net of tax: Foreign currency translation adjustment........... - - - 10,720 ----------------- --------------- ---------------- ---------------- Comprehensive income (loss) ......................... $ 57,869 $ 28,805 $ 146,340 $ (39,390) ================= =============== ================ ================
See accompanying Notes to Consolidated Financial Statements. 4 Ocean Energy, Inc. Notes to Consolidated Financial Statements (Unaudited) Note 1. Presentation of Financial Information The consolidated financial statements of Ocean Energy, Inc. ("Ocean", "OEI" or "the Company"), a Texas corporation, included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Although certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted, management believes that the disclosures are adequate to make the information presented not misleading. The financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. On March 30, 1999, Ocean Energy, Inc. ("Old Ocean") was merged with and into Seagull Energy Corporation ("Seagull", the "Merger"). The resulting company was renamed Ocean Energy, Inc. The Merger was treated for accounting purposes as an acquisition of Seagull by Ocean with the assets and liabilities of Old Ocean being recorded based upon their historical costs and the assets and liabilities of Seagull being recorded at their estimated fair market values. As of December 31, 1999 a total purchase price of $642 million had been allocated to assets and liabilities. The Merger, completed through the issuance of common stock, increased property, plant and equipment by $1.3 billion, debt by $563 million, other liabilities by $200 million, and equity by $595 million through a non-cash transaction. The financial results presented here include those of Ocean Energy, Inc. on a stand-alone basis for the first quarter of 1999 and of the combined company thereafter. The accompanying consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 1999. Property, Plant and Equipment - The Company capitalizes interest expense and certain employee-related costs that are directly attributable to oil and gas operations. For the three months ended September 30, 2000 and 1999, the Company capitalized interest expense in the amount of $11 million and $8 million, respectively, and certain employee-related costs in the amount of $11 million and $11 million, respectively. For the nine months ended September 30, 2000 and 1999, the Company capitalized interest expense in the amount of $34 million and $28 million, respectively, and certain employee-related costs in the amount of $33 million and $26 million, respectively. During the first nine months of 1999, the Company recognized impairments in the amount of $28.5 million, pre-tax, related primarily to the sale of the Canadian subsidiary on April 15, 1999. 5 Ocean Energy, Inc. Notes to Consolidated Financial Statements (Unaudited) Earnings Per Share - The following table provides a reconciliation between basic and diluted earnings (loss) per share (stated in thousands except per share data):
Net Income (Loss) Available to Weighted Average Earnings (Loss) Common Common Shares Per Share Shareholders Outstanding Amount --------------------- -------------------- ------------------ Quarter Ended September 30, 2000: Basic................................ $ 57,056 167,125 $ 0.34 Effect of dilutive securities: Stock options................... - 6,468 Convertible preferred stock..... 813 3,442 --------------------- -------------------- Diluted.............................. $ 57,869 177,035 $ 0.33 ===================== ==================== Quarter Ended September 30, 1999: Basic................................ $ 27,986 166,680 $ 0.17 Effect of dilutive securities: Stock options................... - 3,949 --------------------- -------------------- Diluted.............................. $ 27,986 170,629 $ 0.16 ===================== ==================== Nine Months Ended September 30, 2000: Basic................................ $ 143,902 167,061 $ 0.86 Effect of dilutive securities: Stock options................... - 5,945 Convertible preferred stock..... 2,438 3,442 --------------------- -------------------- Diluted.............................. $ 146,340 176,448 $ 0.83 ===================== ==================== Nine Months Ended September 30, 1999: Basic................................ $ (52,566) 145,670 $ (0.36) Effect of dilutive securities........ - - --------------------- -------------------- Diluted.............................. $ (52,566) 145,670 $ (0.36) ===================== ====================
Weighted average options to purchase 7,263,000 shares of common stock at $13.46 to $36.54 per share and 6,667,000 shares of common stock at $14.69 to $36.54 per share were outstanding during the first nine months and during the third quarter of 2000, respectively, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares. These options expire at various dates through 2010. Weighted average options to purchase 19,517,000 shares of common stock for the nine months ended September 30, 1999 at prices ranging from $2.11 to $36.54 per share were outstanding but were not included in the computation of diluted loss per share because such options would have an antidilutive effect on the computation of diluted loss per share. These options expire at various dates from 1999 to 2009. The preferred stock conversion was also excluded from the computation for the nine months ended September 30, 1999 because of its antidilutive effect. Weighted average options to purchase 10,800,000 shares of common stock at $10.19 to $36.54 per share were outstanding during the third quarter of 1999 but were not included in the computation of diluted earnings per share because the options' exercise prices 6 Ocean Energy, Inc. Notes to Consolidated Financial Statements (Unaudited) were greater than the average market price of the common shares. These options expire at various dates through 2009. Subsidiary Guarantee - A wholly-owned subsidiary of the Company has unconditionally guaranteed the full and prompt performance of the Company's obligations under certain of the notes and related indentures, including the payment of principal, premium (if any) and interest. Other than intercompany arrangements and transactions, the consolidated financial statements of the subsidiary are equivalent in all material respects to those of the Company and therefore are not presented separately. Treasury Stock - The Company follows the average cost method of accounting for treasury stock transactions. Discontinued Operations - During the first nine months of 1999 the Company operated in Alaska through a division of the Company and a wholly-owned subsidiary (collectively referred to herein as "ENSTAR"). In July 1999 the Company committed to a plan to dispose of ENSTAR, and on November 1, 1999 the Company completed the sale. Prior to the sale the results of operations and net assets of ENSTAR were reflected as discontinued operations. Accounting Pronouncements - In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities, and in June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133. These statements establish accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at fair value and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results of hedging activities, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company will adopt SFAS 133 effective January 1, 2001. Upon adoption, the Company will record its derivative instruments, which currently consist of the derivative financial instruments discussed in Note 4, at fair market value, as assets or liabilities in the Company's Consolidated Balance Sheet, based on quoted market values and the Company's portfolio of derivative instruments as of January 1, 2001. The Company at this time is unable to predict the market values that will exist for its derivative instruments on January 1, 2001. Any transition adjustment resulting from adoption will be reported either in net income or in other comprehensive income, as appropriate, as the cumulative effect of a change in accounting principle. Subsequent to adoption, the Company will adjust the carrying values of the derivative instruments to fair market value on an ongoing basis. The Company is currently completing its evaluation of the impact of these statements and believes the statements will not have a 7 Ocean Energy, Inc. Notes to Consolidated Financial Statements (Unaudited) significant impact on its results of operations as it expects its current derivative activities will continue to qualify under hedge accounting. However, the adoption of SFAS 133 and the ongoing valuation of the Company's portfolio of derivative instruments could add an element of volatility to the Company's financial position and other comprehensive income measured under generally accepted accounting principles due to the marking to market of the derivative instruments. Note 2. Major Transactions Conveyances of Section 29 Credit Properties - In September 2000, the Company conveyed certain Internal Revenue Code Section 29 Tax Credit-bearing properties to a trust for approximately $70 million, which was recorded in other noncurrent liabilities and deferred revenue. As part of the transaction, the trust is required to hedge 85% of its estimated gas production through approximately December 31, 2005, depending upon actual production. Although the Company is not a party to the financial instrument, under SFAS 133 this transaction is determined to be an embedded derivative financial instrument. Deferred Revenue - In September 2000, the Company entered into a market-sensitive prepaid natural gas sales agreement to deliver approximately 53,500 Mcf of natural gas per day beginning in January 2002 through December 2003. In exchange for the natural gas to be provided, the Company received an advance payment of approximately $75 million. In addition, to the extent that for any month in which natural gas deliveries are made under the agreement, the index price, as defined, exceeds $2.50 MMbtu, the purchaser will make payments to the Company equal to the difference, if any, between the index price and $2.50 times the delivery quantity for that month. The obligation associated with the future delivery of the natural gas has been recorded as deferred revenue and is included in other noncurrent liabilities and deferred revenue. The deferred revenue will be amortized into revenue as scheduled deliveries of natural gas are made. Disposition of East Bay - In March 2000, the Company completed the sale of its East Bay Complex receiving net proceeds of approximately $78 million. The properties were located in the Mississippi Delta Region of the Gulf of Mexico. The East Bay Complex contributed revenues of $23 and $40 million for the first quarter of 2000 and the first nine months of 1999, respectively, and had operating profit of $10 million and $2 million, respectively. Disposition of Canadian Subsidiary - In April 1999, the Company completed a sale of its Canadian oil and gas assets, realizing net proceeds of $68 million. The Canadian assets disposed of contributed revenues of $7 million, and had an operating loss of $21 million (including impairment) for the nine months ended September 30, 1999. Proceeds from these transactions were used primarily to repay amounts outstanding under the Company's existing credit facilities. 8 Ocean Energy, Inc. Notes to Consolidated Financial Statements (Unaudited) Note 3. Supplemental Disclosures of Cash Flow Information
Nine Months Ended September 30, -------------------- ------ ---------------------- 2000 1999 -------------------- ---------------------- (amounts in thousands) Cash paid during the period for: Interest.................................................. $ 76,874 $ 84,429 Income taxes.............................................. $ 25,220 $ 11,607
Note 4. Financial Instruments From time to time, the Company has utilized and expects to continue to utilize derivative financial instruments with respect to a portion of its oil and natural gas production to achieve a more predictable cash flow as well as to reduce its exposure to price fluctuations. These instruments generally are swaps or price collars and are entered into with major financial institutions or commodities trading institutions. Derivative financial instruments are intended to reduce the Company's exposure to declines in the market price of natural gas and crude oil. As a result, gains and losses on derivative financial instruments are generally offset by similar changes in the realized prices of natural gas and crude oil. Gains and losses from these financial instruments are recognized in revenues for the periods to which the derivative financial instruments relate. As of September 30, 2000 and based on NYMEX oil and gas strip prices at that date, the Company's derivative financial instruments were as follows:
Crude Oil Natural Gas ----------------------------------- ------------------------------------ Daily Average Daily Production Hedged Production Average Period (Bbl) Price (Mcf) Hedged Price - --------------------------------------- --------------- --------------- --------------- ---------------- Fourth Quarter, 2000........ 25,000 $ 22.17 115,000 $ 2.95 First Six Months, 2001...... 15,000 $ 21.53 - -
Subsequent to September 30, 2000 the Company acquired put options that placed a $25.00 per Bbl floor price on 20,000 Bbl per day and a $4.00 per Mcf floor price on 100,000 Mcf per day during 2001. 9 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations The following discussion is intended to assist in understanding the Company's financial position, results of operations and cash flows for each of the periods indicated. On March 30, 1999, Ocean Energy, Inc. ("Old Ocean") merged with and into Seagull Energy Corporation ("Seagull", "the Merger"). In conjunction with the Merger, Seagull amended its Articles of Incorporation to change its name to Ocean Energy, Inc. The merger was treated for accounting purposes as an acquisition of Seagull by Ocean. As such, the financial results presented here include those of Ocean Energy, Inc. on a stand-alone basis for the first quarter of 1999 and of the combined company thereafter. The Company's accompanying unaudited consolidated financial statements and the notes thereto and the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 1999 contain detailed information that should be referred to in conjunction with the following discussion. Results Of Operations (Amounts in Thousands)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- ------------------------------- 2000 1999 2000 1999 -------------- -------------- -------------- ------------- Oil and gas operations: Revenues: Natural gas............................ $ 137,416 $ 101,908 $ 337,402 $ 236,914 Oil and NGL............................ 123,673 112,485 406,184 279,379 -------------- -------------- -------------- ------------- 261,089 214,393 743,586 516,293 -------------- -------------- -------------- ------------- Operating expenses....................... 57,330 54,672 172,040 165,278 Depreciation, depletion and amortization. 75,226 83,323 225,093 227,623 Impairment of oil and gas properties..... - - - 28,500 -------------- -------------- -------------- ------------- Operating profit ........................ 128,533 76,398 346,453 94,892 Corporate................................... (7,891) (7,247) (26,128) (24,147) -------------- -------------- -------------- ------------- Total operating profit .................. $ 120,642 $ 69,151 $ 320,325 $ 70,745 ============== ============== ============== =============
With the Merger, the Company gained new operations in Egypt, Russia and Indonesia and expanded its operations in the U.S. and Cote d'Ivoire. In addition, the Company sold more than $700 million of non-core assets during 1999 and $86 million during the first nine months of 2000 as part of its debt reduction program. The Company's expanded operations, offset by property sales, combined with the continued escalation of world crude oil and natural gas prices which began during the second quarter of 1999 and has continued into 2000, resulted in a $227 million increase in revenues during the first nine months of 2000 and a $47 million increase for the current quarter compared to the same periods of 1999. During the first nine months of 1999, the Company recorded impairments of oil and gas properties in the amount of $28.5 million related primarily to the sale of the Canadian subsidiary on April 15, 1999. These factors combined to improve total operating profit by $250 million for the first nine months of 2000 and by $51 million for the third quarter of 2000 compared to the same periods of 1999. For the first quarter 10 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations of 1999, prior to the Merger, Seagull on a stand-alone basis recorded revenues of $57 million from its oil and gas operations and had production of 19,456 barrels of oil per day and 277 MMcf of gas per day. Revenues - Natural gas revenues increased $100 million, or 42%, to $337 million for the nine months ended September 30, 2000, from $237 million for the nine months ended September 30, 1999. Gas revenues increased $35 million, or 34%, to $137 million for the third quarter of 2000 as compared to $102 million for the third quarter of 1999. These increases are primarily due to higher average gas prices realized during the period, offset by the effects of property sales as discussed below. The average realized price for natural gas increased 52% to $3.06 per Mcf for the first nine months of 2000 as compared to $2.01 for the first nine months of 1999 and increased 55% to $3.65 per Mcf for the third quarter of 2000 compared to $2.36 per Mcf for the third quarter of 1999. Daily natural gas production for the first nine months of 2000 was 403 MMcf as compared to 431 MMcf per day for the first nine months of 1999. Daily production decreased 13% from 1999 volumes for the third quarter of 2000 to 409 MMcf due primarily to property sales. Oil revenues reached $406 million for the nine months ended September 30, 2000, an increase of $127 million, or 46%, over revenues of $279 million for the nine months ended September 30, 1999. For the third quarter of 2000, oil revenues increased $12 million, or 11%, to $124 million for 2000 compared to $112 million for the third quarter of 1999. These increases are the result of an increase in the average realized oil price during the period, offset by the effects of property sales as discussed below. The average realized price for oil increased 60% to $22.16 for the first nine months of 2000 compared to $13.84 for the same period in 1999. The average realized oil price increased to $21.24 for the third quarter of 2000 compared to $15.74 for the third quarter of 1999. Daily oil production decreased 10%, to 66,887 Bbl for the first nine months of 2000 as compared to 73,965 Bbl for the same period in 1999. For the third quarter of 2000, daily oil production decreased 19%, to 63,285 Bbl as compared to 77,674 Bbl for the third quarter of 1999 primarily due to property sales. During 1999 and the first quarter of 2000, the Company sold various non-core oil and gas assets as part of its debt reduction program as follows:
Net Daily Production Nine Months Ended September 30, 1999 ------------------------------------------ Oil and NGL Gas Asset Date of Sale (Bbl) (MMcf) - ---------------------------------------------- ---------------- ------------------- ------------------- Canadian subsidiary........................ April 1999 469 14 Arkoma Basin assets (acquired primarily in Merger)................... August 1999 - 56 Gulf of Mexico assets...................... August 1999 2,212 6 East Bay assets............................ March 2000 7,727 20 ------------------- ------------------- Total reduction in daily production associated with property sales.......... 10,408 96 =================== ===================
11 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations Operating Data
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2000 1999 2000 1999 ------------ ------------- ------------- ------------- Net Daily Natural Gas Production (MMcf): Domestic......................................... 386 428 368 382 Cote d'Ivoire.................................... 14 34 25 30 Other International.............................. 9 8 10 19 ------------ ------------- ------------- ------------- Total............................................ 409 470 403 431 ============ ============= ============= ============= Average Natural Gas Prices ($ per Mcf) (1): Domestic......................................... $ 4.09 $ 2.38 $ 3.30 $ 2.03 Cote d'Ivoire.................................... $ 2.02 $ 1.77 $ 2.19 $ 1.73 Other International.............................. $ 3.92 $ 2.44 $ 3.62 $ 1.74 Weighted Average................................. $ 4.01 $ 2.34 $ 3.24 $ 2.00 Average Natural Gas Prices including Hedging Activities ($ per Mcf)..................... $ 3.65 $ 2.36 $ 3.06 $ 2.01 Net Daily Oil and NGL Production (Bbl): Domestic......................................... 25,206 36,522 27,737 38,340 Equatorial Guinea................................ 21,053 20,774 21,277 19,902 Cote d'Ivoire.................................... 3,433 5,046 4,001 4,839 Egypt ........................................... 8,837 10,729 9,099 7,447 Other International.............................. 4,756 4,603 4,773 3,437 ------------ ------------- ------------- ------------- Total............................................ 63,285 77,674 66,887 73,965 ============ ============= ============= ============= Average Oil and NGL Prices ($ per Bbl) (1): Domestic......................................... $ 26.05 $ 18.99 $ 25.42 $ 15.07 Equatorial Guinea................................ $ 25.75 $ 21.69 $ 26.46 $ 16.11 Cote d'Ivoire.................................... $ 28.53 $ 20.24 $ 25.23 $ 16.56 Egypt............................................ $ 27.60 $ 20.06 $ 26.97 $ 17.70 Other International.............................. $ 22.68 $ 12.92 $ 19.19 $ 9.88 Weighted Average................................. $ 26.05 $ 19.58 $ 25.51 $ 15.47 Average Oil and NGL Prices including Hedging Activities ($ per Bbl)..................... $ 21.24 $ 15.74 $ 22.16 $ 13.84 Wells Drilled: Gross............................................ 99 103 234 206 Net.............................................. 64 70 133 125 Success Rate..................................... 79% 74% 79% 78%
(1) All price information excludes the results of hedging activities, unless otherwise stated. Operating Expenses - Total operating expenses increased $7 million, or 4%, to $172 million for the nine months ended September 30, 2000 compared to $165 million for the comparable 1999 period. Operating expenses per BOE were $4.68 per BOE for the first nine months of 2000 compared to $4.15 per BOE for the comparable 1999 period. Approximately $0.39, or 74%, of the increase per BOE is attributable to increases in production taxes, which relate to the higher realized oil and gas prices. For the third quarter of 2000 total operating expenses remained 12 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations relatively flat at $57 million compared to $55 million for the third quarter of 1999, while operating expenses per BOE were $4.74 per BOE for the third quarter of 2000 compared to $3.81 per BOE for the third quarter of 1999. The increase in third quarter operating expenses per BOE is also due primarily to the increase in production taxes. Depreciation, Depletion and Amortization Expense - Total depreciation, depletion and amortization ("DD&A") expense for oil and gas operations decreased $3 million to $225 million for the nine months ended September 30, 2000 from $228 million for the same period in 1999. DD&A expense for oil and gas operations decreased $8 million to $75 million for the third quarter of 2000 compared to $83 million for the third quarter of 1999 primarily due to decreased production during the third quarter of 2000. DD&A expense per BOE related to oil and gas operations rose 7% to $6.13 per BOE for the nine months ended September 30, 2000, from $5.72 per BOE for the comparable period in 1999. DD&A per BOE was $6.22 per BOE for the third quarter of 2000 as compared to $5.81 per BOE for the third quarter of 1999. The higher DD&A expense per BOE for both the first nine months and the third quarter of 2000 is primarily attributable to the effects of property sales and the geographic mix of production. General and Administrative Expenses - General and administrative expenses increased $3 million to $21 million for the nine months ended September 30, 2000 from $18 million for the comparable 1999 period. This increase is due primarily to an increase in expense relating to compensation plans that are tied directly to the market price of the Company's common stock. Other Interest Expense - Interest expense decreased $29 million, or 33%, to $58 million for the nine months ended September 30, 2000 from $87 million in the comparable 1999 period. Interest expense for the third quarter of 2000 decreased $10 million to $20 million from $30 million for 1999, also a 33% decrease. These substantial decreases are the result of the Company's debt reduction program undertaken subsequent to the Merger in 1999 and to the increase in the amount of interest capitalized during the first nine months of 2000 ($34 million in 2000 as opposed to $28 million in 1999) and during the third quarter of 2000 ($11 million in 2000 as opposed to $8 million in 1999) due to the increase in the level of capital expenditures. Merger and Integration Costs - Merger and integration costs of $3 million relating primarily to severance costs were recorded in the first nine months of 2000. Costs of $44 million were recorded in the first nine months of 1999 and consisted primarily of Old Ocean's severance costs ($24 million), the write-off of certain costs relating to Old Ocean's information technology system ($14 million) and compensation expense related to the vesting of Old Ocean's restricted stock ($6 million). Income Tax Expense (Benefit) - Income tax expense of $115 million was recognized for the nine months ended September 30, 2000 compared to an income tax benefit of $9 million for the nine months ended September 30, 1999. This change is primarily the result of three factors: (i) 13 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations significant improvement in operating results; (ii) changes in the nature of deferred tax assets and liabilities due to asset sales and prepaid crude oil and natural gas sales; and (iii) the relative significance of international operating results and taxes to the Company's total results. Liquidity And Capital Resources Liquidity - As a result of the Merger, the Company had nearly $2 billion in long-term debt as of March 31, 1999. One of management's goals has been the reduction of these high debt levels, leading to a debt to total capitalization ratio of 54% by the end of 2000. With a debt to total capitalization ratio of 49% at September 30, 2000, the Company exceeded its target ratio of 54% and expects continued improvement through year-end. The improvement in the debt to total capialization ratio was achieved and long-term debt was reduced to $1.1 billion at September 30, 2000 with cash flows attributable to asset sales, prepaid oil and gas sales, higher commodity prices and disciplined capital spending. Concurrent with the closing of the Merger on March 30, 1999, the Company entered credit facilities (the "Credit Facilities"), which combined the existing credit facilities of both Old Ocean and Seagull. As of September 30, 2000, the Credit Facilities consist of a $500 million five-year revolving facility and a renewable $200 million 364-day facility. The Credit Facilities bear interest, at the Company's option, at LIBOR or prime rates plus applicable margins ranging from zero to 1.7% or at a competitive bid. Due to the substantial repayments made during the third quarter of 2000, borrowings outstanding against the Credit Facilities have been reduced from $225 million at June 30, 2000 to $40 million at September 30, 2000. Letters of Credit totaled $45 million at September 30, 2000, leaving $615 million of available credit. Capital Expenditures (Amounts in Thousands)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- ----------------------------------- 2000 1999 2000 1999 -------------- -------------- --------------- --------------- Oil and Gas Operations: Leasehold acquisitions............... $ 16,420 $ 4,336 $ 45,418 $ 16,907 Exploration costs................... 49,432 34,375 133,407 84,220 Development costs................... 94,028 42,913 226,292 119,126 -------------- -------------- --------------- --------------- 159,880 81,624 405,117 220,253 Corporate............................. 2,121 6,270 8,232 11,723 -------------- -------------- --------------- --------------- Total Continuing Operations........... 162,001 87,894 413,349 231,976 Discontinued Operations............ - 2,869 - 5,040 -------------- -------------- --------------- --------------- Total Capital Expenditures............ $ 162,001 $ 90,763 $ 413,349 $237,016 ============== ============== =============== ===============
During the first nine months of 2000 the Company drilled 234 gross wells, 133 net wells, with a success rate of 79%. During the third quarter of 2000 the Company drilled 99 gross wells, 64 net wells, also with a success rate of 79%. 14 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations During the second quarter, the Company's Board of Directors approved a $50 million increase to the Company's capital expenditure budget for 2000 to approximately $550 million (excluding proved property acquisitions). Actual capital spending may vary from the capital expenditure budget. The Company will evaluate its level of capital spending throughout the year based upon drilling results, commodity prices, cash flows from operations and property acquisitions. The Company makes, and will continue to make, substantial capital expenditures for the acquisition, exploration, development, production and abandonment of its oil and natural gas reserves. The Company has historically funded its expenditures from cash flows from operating activities, bank borrowings, sales of equity and debt securities, sales of non-strategic oil and natural gas properties, sales of partial interests in exploration concessions and project finance borrowings. The Company intends to finance remaining 2000 capital expenditures primarily with funds provided by operations. Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), and in June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133. These statements establish standards of accounting for and disclosures of derivative instruments and hedging activities and are effective for fiscal years beginning after June 15, 2000. The Company will adopt SFAS 133 effective January 1, 2001. See Note 1 to the Company's Consolidated Financial Statements for a discussion of the expected impact of SFAS 133 on the Company's financial position and results of operations. Environmental Compliance with applicable environmental and safety regulations by the Company has not required any significant capital expenditures or materially affected its business or earnings. The Company believes it is in substantial compliance with environmental and safety regulations and foresees no material expenditures in the future; however, the Company is unable to predict the impact that compliance with future regulations may have on capital expenditures, earnings and competitive position. Defined Terms Natural gas is stated herein in thousand cubic feet ("Mcf") or million cubic feet ("MMcf"). Oil, condensate and natural gas liquids ("NGL") are stated in barrels ("Bbl). Oil, condensate and NGL are converted to gas at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy content. BOE represents one barrel of oil equivalent with six Mcf of gas converted to one barrel of liquid. 15 Ocean Energy, Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results Of Operations Forward-Looking Statements May Prove Inaccurate This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this document, including, without limitation, statements regarding the financial position, business strategy, production and reserve growth and other plans and objectives for the future operations of the Company are forward-looking statements. Although the Company believes that such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will in fact occur. Important factors could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements are subject to risks and uncertainties and include information concerning general economic conditions and possible or assumed future results of operations of the Company, estimates of oil and gas production and reserves, drilling plans, future cash flows, anticipated capital expenditures, the Company's realization of its deferred tax assets, the level of future expenditures for environmental costs, and management's strategies, plans and objectives as set forth herein. When used in this document, the words "believes," "expects," "anticipates," "intends" or similar expressions are intended to identify such forward-looking statements. The following important factors, in addition to those discussed elsewhere in this document could affect the future results of the energy industry in general and could cause those results to differ materially from those expressed in such forward-looking statements: - - Risks incident to the drilling and operation of oil and gas wells; - - Future production and development costs; - - The effect of existing and future laws and regulatory actions; - - The political and economic climate in the foreign jurisdictions in which the Company conducts oil and gas operations; - - The effect of changes in commodity prices, hedging activities and conditions in the capital markets; - - Competition from others in the energy industry; and - - Effects of implementation of SFAS 133 on the Company's financial position and results of operations. Item 3. Quantitative and Qualitative Disclosures About Market Risks. To mitigate a portion of its exposure to fluctuations in commodity prices, the Company has entered into various derivative financial instruments for its oil and natural gas production for the remainder of 2000 and for 2001. See Note 4 to the Company's Consolidated Financial 16 Ocean Energy, Inc. Statements for a discussion of hedging activities during the first nine months of 2000. To calculate the potential effect of the derivative financial instruments on revenues, the Company applies the average NYMEX oil and gas strip prices for the remainder of 2000 and for 2001 to the quantity of the Company's oil and gas production hedged as of September 30, 2000. The following table shows the estimated potential effect of the derivative financial instruments on revenues for the periods for which the hedges are in effect (in thousands):
Estimated Increase Estimated Increase Estimated Increase (Decrease) in Revenues (Decrease) in Revenues (Decrease) in Revenues at Current with 10% Decrease in with 10% Increase in Period Prices Prices Prices - --------------------------------- ------------------------ ------------------------- ------------------------ Fourth Quarter, 2000......... $ (45,000) $ (32,000) $ (57,000) Year 2001.................... (23,000) (15,000) (31,000)
Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders None during the third quarter of 2000. Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: *#10.1 First Amendment to Ocean Energy, Inc. Supplemental Benefit Plan dated September 29, 2000. *#10.2 Ocean Energy, Inc. Excess Benefit Plan dated September 29, 2000. *#10.3 First Amendment to Executive Supplemental Retirement Plan Membership Agreement by and between the Company and James T. Hackett effective as of June 26, 2000. *#10.4 Employment Agreement by and between the Company and John D. Schiller dated July 20, 2000. * 27.1 Financial Data Schedule.
* Filed herewith. # Identifies management contracts and compensatory plans or arrangements. 17 Ocean Energy, Inc. (b) Reports on Form 8-K: On October 25, 2000, the Company filed a Current Report on Form 8-K dated October 25, 2000 containing the Company's revised estimates of its operating statistics for the fourth quarter and year ended December 31, 2000. The item reported in such Current Report was Item 9. Regulation FD Disclosure. Signatures Pursuant to the requirements 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. Ocean Energy, Inc. By: /s/ William L. Transier William L. Transier Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: November 2, 2000 By: /s/Gordon L. McConnell Gordon L. McConnell Vice President and Controller (Principal Accounting Officer) Date: November 2, 2000 18 Ocean Energy, Inc. EXHIBIT INDEX
*#10.1 First Amendment to Ocean Energy, Inc. Supplemental Benefit Plan dated September 29, 2000. *#10.2 Ocean Energy, Inc. Excess Benefit Plan dated September 29, 2000. *#10.3 First Amendment to Executive Supplemental Retirement Plan Membership Agreement by and between the Company and James T. Hackett effective as of June 26, 2000. *#10.4 Employment Agreement by and between the Company and John D. Schiller dated July 20, 2000. * 27.1 Financial Data Schedule.
* Filed herewith. # Identifies management contracts and compensatory plans or arrangements. 19 EX-10.1 2 0002.txt FIRST AMENDMENT TO SUPPLEMENTAL BENEFIT PLAN Exhibit 10.1 FIRST AMENDMENT TO OCEAN ENERGY, INC. SUPPLEMENTAL BENEFIT PLAN WHEREAS, OCEAN ENERGY, INC., a Texas corporation (the "Company") and certain designated participating employers have heretofore adopted the OCEAN ENERGY, INC. SUPPLEMENTAL BENEFIT PLAN (the "Plan") for the benefit of certain eligible employees; WHEREAS, the Company amended and restated the Plan on behalf of itself and the participating employers effective as of January 1, 2000; and WHEREAS, the Employer desires to further amend the Plan on behalf of itself and the participating employers; NOW, THEREFORE, the Plan shall be amended as follows, effective as of December 31, 2000: 1. Section 1.1(1) of the Plan shall be deleted and the following shall be substituted therefor: "(1) Account: A memorandum bookkeeping account established on the records of the Employer for a Participant which is credited with amounts determined pursuant to Article III of the Plan. Each Participant shall have four Accounts, a Bonus Deferral Account, a Compensation Deferral Account, an ESOP Account and a Thrift Account. As of any determination date, a Participant's benefit under this Plan shall be equal to the amount credited to his Accounts as of such date." 2. The following new Section 1.1(13A) shall be added to Article I of the Plan: "(14)Employer Discretionary Contributions: Contributions made to the Thrift Plan by the Employer on a Participant's behalf pursuant to Section 3.3 of the Thrift Plan." 3. Section 1.1(19) of the Plan shall be deleted. 4. The following new Section 1.1(22A) shall be added to Article I of the Plan: "(22A) Thrift Account: An account credited with amounts determined pursuant to Sections 3.3, 3.5 (if any) and 3.6 of the Plan." 5. Section 3.3 of the Plan shall be deleted and the following shall be substituted therefor: "3.3 Amount of Supplemental Thrift Benefit. (a) As of the last day of each month of each Plan Year, the Thrift Account of any Participant who makes the maximum allowable contribution under the Thrift Plan but, as a result of the Limitations, such contribution is less than the percentage of Compensation such Participant actually elected under such Plan shall be credited with an amount equal to the excess, if any, of (a) over (b) where: (1) equals the Employer Matching Contributions to which such Participant would have been entitled under the Thrift Plan based upon the percentage of Compensation such Participant actually elected to defer under such Plan for such month assuming none of the Limitations were imposed; and (2) equals the Employer Matching Contributions that were made on behalf of such Participant under the Thrift Plan for such month. (b) As of the last day of each Plan Year, a Participant's Thrift Account shall be credited with an amount equal to the excess, if any, of (a) over (b) where: (1) equals the amount of Employer Discretionary Contributions that would have been allocated to such Participant's Employer Discretionary Contribution Account under the Thrift Plan assuming none of the Limitations were imposed; and (2) equals the amount of Employer Discretionary Contributions that were actually allocated to such Participant's Employer Discretionary Contribution Account under the Thrift Plan." 6. For purposes of Article IV of the Plan, references to a Participant's "Employer Contribution Account" shall be deemed to be references to a Participant's "Employer Contribution Accounts." 7. Section 6.5 of the Plan shall be deleted and the following shall be substituted therefor: "6.5 Rights to Employer's Assets. No Participant shall have any right to, or interest in, any assets of the Employer upon termination of employment or otherwise, except as provided from time to time under this Plan, and then only to the extent of the benefits payable under the Plan to such Participant. This Plan is unfunded, and all payments of benefits as provided for in this Plan shall be made solely out of the general assets of the Employer on a current disbursements basis. The preceding sentence to the contrary notwithstanding, the Employer may fund all or part of its obligations hereunder by transferring assets to a trust if the provisions of the trust agreement creating such trust require the use of such trust's assets to satisfy claims of the Employer's general unsecured creditors in the event of the Employer's insolvency or bankruptcy and provide that no Employee shall at any time have a prior claim to such assets and that such trust shall not cause the Plan to be other than "unfunded" for the purposes of ERISA. The assets of such trust shall not be deemed to be assets of this Plan." 8. As amended hereby, the Plan is specifically ratified and reaffirmed. EXECUTED this ________ day of September, 2000. OCEAN ENERGY, INC. By: ______________________________ Houston:305433 v 5 EX-10.2 3 0003.txt EXCESS BENEFIT PLAN OCEAN ENERGY, INC. EXCESS BENEFIT PLAN Effective Date: December 1, 2000 OCEAN ENERGY, INC. EXCESS BENEFIT PLAN WHEREAS, OCEAN ENERGY, INC. , a Texas corporation (the "Company"), and certain of its subsidiaries (hereinafter referred to as the "Employer," jointly and severally) have heretofore adopted the OCEAN ENERGY, INC. THRIFT PLAN (the "Basic Plan") for the benefit of their employees; and WHEREAS, the Employer desires to provide additional benefits to certain of its employees who are participants in the Basic Plan on and after the effective date hereof whose benefits are limited under the Basic Plan; NOW, THEREFORE, the Employer hereby adopts the OCEAN ENERGY, INC. EXCESS BENEFIT PLAN (the "Excess Plan") as follows, effective as of December 1, 2000: I. Purpose of the Excess Plan The Employer intends and desires by the adoption of this Excess Plan to recognize the value to the Employer of the past and present services of employees covered by the Excess Plan and to encourage and assure their continued service with the Employer by making more adequate provision for their future retirement security. The establishment of this Excess Plan is made necessary by certain benefit limitations which are imposed on the Basic Plan by the Employee Retirement Income Security Act of 1974, as amended, (the "Act"), and by section 415 of the Internal Revenue Code of 1986, as amended (the "Code"). II. Incorporation of the Basic Plan The Basic Plan, with any amendments thereto to the date of adoption of the Excess Plan, shall be attached hereto as Exhibit I and is hereby incorporated by reference into and shall form a part of this Excess Plan as fully as if set forth herein verbatim. Any amendment made to the Basic Plan shall also be incorporated by reference into and form a part of this Excess Plan, effective as of the effective date of such amendment. The Basic Plan, whenever referred to in this Excess Plan, shall mean the Basic Plan, as amended, as it exists as of the date any determination is made of amounts credited or benefits payable under this Excess Plan. All terms used in this Excess Plan shall have the meanings assigned to them under the provisions of the Basic Plan unless otherwise qualified by the context. III. Administration This Excess Plan shall be administered by the administrative committee under the Basic Plan (the "Committee") which shall administer it in a manner consistent with the administration of the Basic Plan, as from time to time amended and in effect, except that this Excess Plan shall be administered as an unfunded plan which is not intended to meet the qualification requirements of section 401 of the Code. The Committee shall have full power and authority to interpret, construe and administer this Excess Plan and the Committee's interpretations and construction hereof, and actions hereunder, including the amount or recipient of any payment to be made hereunder, shall be binding and conclusive on all persons for all purposes. Members of the Committee shall not participate in any action or determination regarding their own benefits hereunder. The Company shall indemnify and hold harmless each member of the Committee and each Employee who is a delegate of the Committee against any and all expenses and liabilities arising out of his administrative functions or fiduciary responsibilities, including any expenses and liabilities that are caused by or result from an act or omission constituting the negligence of such individual in the performance of such functions or responsibilities, but excluding expenses and liabilities that are caused by or result from such individual's own gross negligence or willful misconduct. Expenses against which such individual shall be indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof. IV. Eligibility Employees (a) who are participating in the Basic Plan, (b) whose benefits under the Basic Plan are limited pursuant to section 415 of the Code and (c) who are not participating in the Ocean Energy, Inc. Supplemental Benefit Plan shall be eligible for benefits under this Excess Plan. In no event shall an Employee who is not entitled to benefits under the Basic Plan be eligible for a benefit under this Excess Plan. V. Amount of Benefit The Committee shall establish a memorandum bookkeeping account (the "Excess Plan Account") for each Employee whose allocations of Employer Contributions under the Basic Plan have been limited pursuant to section 415 of the Code. As of the end of each Plan Year, the Committee shall credit such Employee's Excess Plan Account in an amount equal to the sum of (a) and (b), where (a) equals the excess, if any, of: (1) the amount that would have been allocated to the Employer Discretionary Contribution Account of such Employee under the Basic Plan as of the end of such Plan Year if the provisions of the Basic Plan were administered without regard to the maximum amount of retirement income limitations of section 415 of the Code, over (2) the amount that was in fact allocated as of the end of such Plan Year to the Employer Discretionary Contribution Account of such Employee under the Basic Plan; and (b) equals the excess, if any, of: (1) the amount that would have been allocated to the Employer Matching Contribution Account of such Employee under the Basic Plan as of the end of such Plan Year if the provisions of the Basic Plan were administered without regard to the maximum amount of retirement income limitations of section 415 of the Code, over (2) the amount that was in fact allocated as of the end of such Plan Year to the Employer Matching Contribution Account of such Employee under the Basic Plan. An Employee's Vested Interest in his Excess Plan Account shall be the same percentage as his Vested Interest in his Employer Contribution Accounts under the Basic Plan. Therefore, if any portion of an Employee's Employer Contribution Accounts under the Basic Plan is forfeited for any reason, the Committee shall debit such Employee's Excess Plan Account by an amount equal to the percentage of such Excess Plan Account which corresponds to the percentage of his Employer Contribution Accounts under the Basic Plan that were forfeited. Benefits payable under this Excess Plan to any recipient shall be computed in accordance with the foregoing and with the objective that such recipient should receive under this Excess Plan and the Basic Plan that total amount which would have been payable to that recipient solely under the Basic Plan had section 415 of the Code not been applicable thereto. This Excess Plan is intended to constitute an unfunded "excess benefit plan" within the meaning of section 3(36) and section 4(b)(5) of the Act. VI. Deemed Investment of Excess Plan Accounts and Adjustment for Net Income or Loss The amounts credited to each Employee's Excess Plan Account shall be deemed to be invested in the Investment Funds made available under the Basic Plan in the same manner as the Employee designates for amounts allocated to his Accounts under the Basic Plan. If an Employee changes his investment designation with respect to amounts allocated to his Accounts under the Basic Plan, such change shall also apply to the amounts credited to such Employee's Excess Plan Account. The Committee shall ascertain the net income (or net loss) of the Investment Funds at such times and in such manner as it deems appropriate and shall adjust the balance of each Employee's Excess Plan Account as appropriate to reflect such net income (or net loss). An Employee's Excess Plan Account shall continue to be adjusted for the net income (or net loss) of the Investment Funds so long as there is any balance credited to such account. VII. Payment of Benefits The amount credited to an Employee's Excess Plan Account shall be paid in a lump sum cash payment as soon as practicable following the Employee's termination of employment with the Employer for any reason. If an Employee's termination of employment is by reason of his death, the payment shall be made to the Employee's beneficiary under the Basic Plan. The Employer shall have the right to deduct from all payments made under this Excess Plan any federal, state or local taxes required by law to be withheld with respect to such payments. The Employee's Excess Plan Account shall be debited for the amount paid pursuant to this Article VII. VIII. Employee's Rights Except as otherwise specifically provided, an Employee's rights under this Excess Plan shall be the same as his rights under the Basic Plan. Benefits payable under this Excess Plan shall be a general, unsecured obligation of the Employer to be paid by the Employer from its general assets, and such payments shall not (a) impose any obligation upon the Trust Fund under the Basic Plan; (b) be paid from the Trust Fund under the Basic Plan; or (c) have any effect whatsoever upon the Basic Plan or the payment of benefits from the Trust Fund under the Basic Plan. No employee or his beneficiary or beneficiaries shall have any title to or beneficial ownership in any assets which the Employer may set aside to pay benefits hereunder or any other assets of the Employer. Further, Employees shall not be permitted to withdraw or borrow from their Excess Plan Accounts. IX. Amendment and Discontinuance The Employer expects to continue this Excess Plan indefinitely, but reserves the right to amend or discontinue it if, in its sole judgment, such a change is deemed necessary or desirable. Any such amendment or discontinuance shall be by action of the Company's board of directors. However, if the Employer should amend or discontinue this Excess Plan, the Employer shall be liable for any benefits accrued under this Excess Plan (determined on the basis of each Employee's presumed termination of employment as of the date of such amendment or discontinuance) as of the date of such action. X. Restrictions on Assignment The interest of an Employee or his beneficiary or beneficiaries may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt o to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy, except that no amount shall be payable hereunder until and unless any and all amounts representing debts or other obligations owed to the Company or any affiliate of the Company by the Employee with respect to whom such amount would otherwise be payable shall have been fully paid and satisfied. The preceding notwithstanding, the Committee shall comply with the terms and provisions of an order that satisfies the requirements for a "qualified domestic relations order" as defined in section 206(d) of the Act, including an order that requires distributions to an alternate payee prior to an Employee's "earliest retirement age" as such term is defined in section 206(d)(3)(E)(ii) of the Act. XI. Nature of Excess Plan The Excess Plan is not intended to meet the qualification requirements of section 401 of the Code. Although the Employer is obligated to pay all amounts due under the Excess Plan out of its general assets, the Employer, in its sole discretion, may set aside such amounts for the payment of benefits as the Employer may from time to time determine. Neither the establishment of the Excess Plan, the operation thereof, nor the setting aside of any amounts shall be deemed to create a funding arrangement. Any and all amounts set aside shall remain subject to the claims of the general creditors of the Employer, present and future, and no payment shall be made under the Excess Plan unless the Employer is then solvent. This Article shall not require the Employer to set aside any funds, but the Employer may set aside such funds if it chooses to do so. The preceding paragraph to the contrary notwithstanding, the Employer may fund all or part of its obligations hereunder by transferring assets to a trust if the provisions of the trust agreement creating such trust require the use of such trust's assets to satisfy claims of the Employer's general unsecured creditors in the event of the Employer's insolvency or bankruptcy and provide that no Employee shall at any time have a prior claim to such assets and that such trust shall not cause the Plan to be other than "unfunded" for the purposes of the Act. The assets of such trust shall not be deemed to be assets of this Excess Plan. XII. Nonguarantee of Employment Nothing contained in this Excess Plan shall be construed as a contract of employment between the Employer and any Employee, or as a right to have benefits which are provided by the Employer maintained, or as a right of any Employee to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge any of its Employee, with or without cause. XIII. Binding on Employer, Employees and Their Successors This Excess Plan shall be binding upon and inure to the benefit of the Employer, its successors and assigns and the Employee and his heirs, executors, administrators and legal representatives. The provisions of this Excess Plan shall be applicable with respect to each Employer separately, and amounts payable hereunder shall be paid by the Employer which employs the particular Employee. XIV. Employment with More than One Employer If any Employee shall be entitled to benefits under the Basic Plan on account of service with more than one Employer, the obligations under this Excess Plan shall be apportioned among such Employers on the basis of time of service with each. XV. Laws Governing This Excess Plan shall be construed in accordance with and governed by the laws of the State of Texas except to the extent preempted by federal law. EXECUTED this day of September, 2000. ------------- OCEAN ENERGY, INC. By: ___________________________ Name:___________________________ Title:__________________________ OTHER PARTICIPATING EMPLOYERS Ocean Energy, Inc. (Louisiana) Houston:292981 v 5 EX-10.3 4 0004.txt FIRST AMENDMENT TO MEMBERSHIP AGREEMENT FIRST AMENDMENT TO OCEAN ENERGY, INC. EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN MEMBERSHIP AGREEMENT WHEREAS, OCEAN ENERGY, INC., a Texas corporation, formerly known as Seagull Energy Corporation (the "Company"), and JAMES T. HACKETT (the "Employee") have heretofore executed an instrument entitled "SEAGULL ENERGY CORPORATION EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN MEMBERSHIP AGREEMENT" (the "Agreement"), evidencing the terms and conditions of the Employee's membership in the OCEAN ENERGY, INC. EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN, formerly known as the Seagull Energy Corporation Executive Supplemental Retirement Plan ( the "Plan"); and WHEREAS, the Company and the Employee desire to amend the Agreement; NOW, THEREFORE, the parties hereto agree as follows, effective as of June 26, 2000: 1. Paragraph 3 of the Agreement shall be deleted and the following shall be substituted therefor: "3. For purposes of Section 1.01(8) of the Plan, Employee's Compensation shall include (a) `deemed salary' equal to the base salary that Employee would have received if he had not received an option to purchase common stock of the Company in lieu of such salary pursuant to paragraph 3.1 of the Employment Agreement and (b) all amounts received by Employee as bonuses from the Company." 2. As amended hereby, the Agreement is specifically ratified and reaffirmed. EXECUTED this ____________ day of _____________________________, 2000. OCEAN ENERGY, INC. By:_________________________________ Name:_______________________________ Title:______________________________ EMPLOYEE ------------------------------------ James T. Hackett Houston:321750 v 1 EX-10.4 5 0005.txt EMPLOYMENT AGREEMENT BETWEEN COMPANY AND SCHILLER EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into effective as of July 20, 2000 (the "Effective Date"), by and between Ocean Energy, Inc., a Texas corporation (the "Company"), and John D. Schiller ("Employee"). WHEREAS, the Company employs Employee and desires to continue such employment relationship and Employee desires to continue such employment; and WHEREAS, the Company and Employee entered into a Severance Agreement effective as of June 22, 1999, which is currently in effect (the "Severance Agreement"); and WHEREAS, the Company and Employee desire to enter into an agreement reflecting the terms of the employment relationship, including the termination thereof, that replaces the Severance Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Effect of Agreement. Effective as of the Effective Date, this Agreement supersedes and replaces the Severance Agreement in its entirety and the Severance Agreement shall be null and void and of no further force and effect. 2. Employment. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, on the terms and conditions set forth in this Agreement. 3. Term of Employment. Subject to the provisions for earlier termination provided in this Agreement, this Agreement shall expire on July 20, 2005. 4. Employee's Duties. During the Term of this Agreement, Employee shall serve as Executive Vice President - Operations of the Company, with such duties and responsibilities as may from time to time be assigned to him by the board of directors of the Company (the "Board"), provided that such duties are consistent with the customary duties of such position. Employee agrees to devote his full attention and time during normal business hours to the business and affairs of the Company and to use reasonable best efforts to perform faithfully and efficiently his duties and responsibilities. Employee shall not, either directly or indirectly, enter into any business or employment with or for any person, firm, association or corporation other than the Company during the Term of this Agreement; provided, however, that Employee shall not be prohibited from making financial investments in any other company or business or from serving on the board of directors of any other company. Employee shall at all times observe and comply with all lawful directions and instructions of the Board. 5. Base Compensation. For services rendered by Employee under this Agreement, the Company shall pay to Employee a base salary ("Base Compensation") of $350,000 per annum payable in accordance with the Company's customary pay periods and subject to customary withholdings. The amount of Base Compensation shall be reviewed by the Board on an annual basis as of the close of each fiscal year of the Company and may be increased, as the Board may deem appropriate. In the event the Board deems it appropriate to increase Employee's annual base salary, said increased amount shall thereafter be the "Base Compensation." Employee's Base Compensation, as increased from time to time, may not thereafter be decreased unless agreed to by Employee. Nothing contained herein shall prevent the Board from paying additional compensation to Employee in the form of bonuses or otherwise during the Term of this Agreement. 6. Additional Benefits. In addition to the Base Compensation provided for in Section 5 herein, Employee shall be entitled to the following: (a) Expenses. The Company shall, in accordance with any rules and policies that it may establish from time to time for executive officers, reimburse Employee for business expenses reasonably incurred in the performance of his duties. It is understood that Employee is authorized to incur reasonable business expenses for promoting the business of the Company, including reasonable expenditures for travel, lodging, meals and client or business associate entertainment. Request for reimbursement for such expenses must be accompanied by appropriate documentation. (b) Vacation. Employee shall be entitled to five (5) weeks of vacation per year, without any loss of compensation or benefits. Employee shall not be entitled to compensation for, or to carry forward, any unused vacation time. (c) General Benefits. Employee shall be entitled to participate in the various employee benefit plans or programs provided to the employees of the company in general, including but not limited to, health, dental, disability and life insurance plans, subject to the eligibility requirements with respect to each of such benefit plans or programs, and such other benefits or perquisites as may be approved by the Board during the Term of this Agreement. Nothing in this paragraph shall be deemed to prohibit the Company from making any changes in any of the plans, programs or benefits described in this Section 6, provided the change similarly affects all executive officers of the Company similarly situated. (d) Options. Upon the occurrence of a "Corporate Change" as hereinafter defined, Employee shall be considered as immediately and totally vested in any and all stock options or other similar awards previously made to Employee by the Company or its subsidiaries under a "Long Term Incentive Plan" duly adopted by the Board (such options or similar awards are hereinafter collectively referred to as "Options"). For purposes of this Agreement, a "Corporate Change" shall occur if (i) the Company (A) shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly-owned subsidiary of the Company) or (B) is to be dissolved and liquidated, and as a result of or in connection with such transaction, the persons who were directors of the Company before such transaction shall cease to constitute a majority of the Board, (ii) any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote) of 20% or more of the outstanding shares of the Company's voting stock (based upon voting power), and as a result of or in connection with such transaction, the persons who were directors of the Company before such transaction shall cease to constitute a majority of the Board, or (iii) the Company sells all or substantially all of the assets of the Company to any other person or entity (other than a wholly-owned subsidiary of the Company) in a transaction that requires shareholder approval pursuant to the Texas Business Corporation Act. 7. Confidential Information. Employee, during the Term, may have access to and become familiar with confidential information, secrets and proprietary information concerning the business and affairs of the Company. As to such confidential information, Employee agrees as follows: (a) During the employment of Employee with the Company and thereafter Employee will not, either directly or indirectly, disclose to any third party without the written permission of the Company, nor use in any way (except as required in the course of his employment with the Company) any confidential information, secret or proprietary information of the Company. In the event of a breach or threatened breach of the provisions of this Section 7(a), the Company shall be entitled, in addition to any other remedies available to the Company, to an injunction restraining Employee from disclosing such confidential information. (b) Upon termination of employment of Employee, for whatever reason, Employee shall surrender to the Company any and all documents, manuals, correspondence, reports, records and similar items then or thereafter coming into the possession of Employee which contain any confidential, secret or proprietary information of the Company. 8. Termination. This Agreement may be terminated prior to the end of its Term as set forth below: (a) Resignation (other than for Good Reason). Employee may resign, including by reason of retirement, his position at any time by providing written notice of resignation to the Company in accordance with Section 11 hereof. In the event of such resignation, except in the case of resignation for Good Reason (as defined below), this Agreement shall terminate and Employee shall not be entitled to further compensation pursuant to this Agreement other than the payment of any unpaid Base Compensation accrued hereunder as of the date of Employee's resignation. (b) Death. If Employee's employment is terminated due to his death, this Agreement shall terminate and the Company shall have no obligations to Employee or his legal representatives with respect to this Agreement other than the payment of any unpaid Base Compensation previously accrued hereunder. (c) Discharge.(i) The Company may terminate Employee's employment for any reason at any time upon written notice thereof delivered to Employee in accordance with Section 11 hereof. In the event that Employee's employment is terminated during the Term by the Company for any reason other than his Misconduct or Disability (both as defined below), then (A) the Company shall pay in lump sum in cash to Employee, within fifteen (15) days following the date of termination, an amount equal to the product of (i) Employee's Base Compensation as in effect immediately prior to Employee's termination, multiplied by (ii) three, (B) for three years following the date of termination, the Company, at its cost, shall provide or arrange to provide Employee (and, as applicable, Employee's dependents) with accident and group health insurance benefits substantially similar to those which Employee (and Employee's dependents) were receiving immediately prior to Employee's termination; however, the welfare benefits otherwise receivable by Employee pursuant to this clause (B) shall be reduced to the extent comparable welfare benefits are actually received by Employee (and/or Employee's dependents) during such period under any other employer's welfare plan(s) or program(s), with Employee being obligated to promptly disclose to the Company any such comparable welfare benefits, (C) in addition to the aforementioned compensation and benefits, the Company shall pay in lump sum in cash to Employee within fifteen (15) days following the date of termination an amount equal to the product of (i) Employee's average bonus paid by the Company during the most recent two (2) years immediately prior to the date of termination, provided, however, that for purposes of computing such average bonus, Employee shall be deemed to have received a bonus payment equal to 45% of Employee's annual salary at the time he commenced employment with the Company for the 1998 fiscal year of the Company and any bonus payments actually received by Employee for such fiscal year shall be disregarded, multiplied by (ii) three and (D) Employee shall be considered as immediately and totally vested in any and all Options previously made to Employee by Company or its subsidiaries. (ii) Notwithstanding the foregoing provisions of this Section 8, in the event Employee is terminated because of Misconduct, the Company shall have no obligations pursuant to this Agreement after the Date of Termination other than the payment of any unpaid Base Compensation accrued through the Date of Termination. As used herein, "Misconduct" means (A) the continued failure by Employee to substantially perform his duties with the Company (other than any such failure resulting from Employee's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by Employee for Good Reason), after a written demand for substantial performance is delivered to Employee by the Board, which demand specifically identifies the manner in which the Board believes that Employee has not substantially performed his duties, (B) the engaging by Employee in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise (other than such conduct resulting from Employee's incapacity due to physical or mental illness or any such actual or anticipated conduct after the issuance of a Notice of Termination by Employee for Good Reason), or (C) Employee's conviction for the commission of a felony. Anything contained in this Agreement to the contrary notwithstanding, the Chief Executive Officer of the Company shall have the sole power and authority to terminate the employment of Employee on behalf of the Company. (d) Disability. If Employee shall have been absent from the full-time performance of Employee's duties with the Company for ninety (90) consecutive calendar days as a result of Employee's incapacity due to physical or mental illness, Employee's employment may be terminated by the Company for "Disability" and Employee shall not be entitled to further compensation pursuant to this Agreement, except that Employee shall be considered as immediately and totally vested in any and all Options previously granted to Employee by Company or its subsidiaries. (e) Resignation for Good Reason. Employee shall be entitled to terminate his employment for Good Reason as defined herein. If Employee terminates his employment for Good Reason he shall be entitled to the compensation and benefits provided in Paragraph 8(c)(i) hereof. "Good Reason" shall mean the occurrence of any of the following circumstances without Employee's express written consent unless such breach or circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination given in respect hereof: (i) the material breach of any of the Company's obligations under this Agreement without Employee's express written consent; (ii) the continued assignment to Employee of any duties inconsistent with the office of Executive Vice President - Operations; (iii) the failure by the Company to pay to Employee any portion of Employee's compensation on the date such compensation is due; (iv) the failure by the Company to continue to provide Employee with benefits substantially similar to those enjoyed by other executive officers who have entered into similar employment agreements with Employer under any of the Company's medical, health, accident, and/or disability plans in which Employee was participating immediately prior to such time; (v) a change in the location of Employee's principal place of employment by the Company by more than 50 miles from the location where he was principally employed immediately prior to the date of such change; or (vi) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 13 hereof. In addition, the occurrence of a Corporate Change other than as described in Section 6(d)(i)(A), shall constitute "Good Reason" hereunder, but only if Employee terminates his employment within ninety (90) days following the effective date of such Corporate Change. (f) Notice of Termination. Any purported termination of Employee's employment by the Company under Sections 8(c)(ii) or 8(d), or by Employee under Section 8(e), shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which, if by the Company and is for Misconduct or Disability, shall set forth in reasonable detail the reason for such termination of Employee's employment, or in the case of resignation by Employee for Good Reason, said notice must specify in reasonable detail the basis for such resignation. A Notice of Termination given by Employee pursuant to Section 8(e) shall be effective even if given after the receipt by Employee of notice that the Board has set a meeting to consider terminating Employee for Misconduct. Any purported termination for which a Notice of Termination is required which is not effected pursuant to this Section 8(f) shall not be effective. (g) Date of Termination. "Date of Termination" shall mean the date specified in the Notice of Termination, provided that the Date of Termination shall be at least 15 days following the date the Notice of Termination is given. Notwithstanding the foregoing, in the event Employee is terminated for Misconduct, the Company may refuse to allow Employee access to the Company's offices (other than to allow Employee to collect his personal belongings under the Company's supervision) prior to the Date of Termination. (h) Mitigation. Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by Employee as a result of employment by another employer, except that any severance amounts payable to Employee pursuant to the Company's severance plan or policy for employees in general shall reduce the amount otherwise payable pursuant to Sections 8(c)(i) or 8(e). (i) Excess Parachute Payments. Notwithstanding anything in this Agreement to the contrary, to the extent that any payment or benefit received or to be received by Employee hereunder in connection with the termination of Employee's employment would, as determined by tax counsel selected by the Company, constitute an "Excess Parachute Payment" (as defined in Section 280G of the Internal Revenue Code), the Company shall fully "gross-up" such payment so that Employee is in the same "net" after-tax position he would have been if such payment and gross-up payments had not constituted Excess Parachute Payments. (j) Resignation from Board. In the event Employee is a member of the board of directors of the Company or any of its subsidiaries, and Employee's employment by the Company is terminated for any reason (other than Employee's death), Employee shall immediately resign as a member of such board of directors upon the written request of the Chairman of the Board. Nothing herein shall be deemed to limit the power of the shareholders of the Company to at any time remove any director, including, without limitation, Employee, in accordance with applicable law. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Employee's continuing or future participation in any benefit, bonus, incentive, or other plan or program provided by the Company or any of its affiliated companies and for which Employee may qualify, nor shall anything herein limit or otherwise adversely affect such rights as Employee may have under any Options with the Company or any of its affiliated companies. 10. Assignability. The obligations of Employee hereunder are personal and may not be assigned or delegated by him or transferred in any manner whatsoever, nor are such obligations subject to involuntary alienation, assignment or transfer. The Company shall have the right to assign this Agreement and to delegate all rights, duties and obligations hereunder, either in whole or in part, to any parent, affiliate, successor or subsidiary organization or company of the Company, so long as the obligations of the Company under this Agreement remain the obligations of the Company. 11. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Company at its principal office address, directed to the attention of the Board with a copy to the Secretary of the Company, and to Employee at Employee's residence address on the records of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith except that notice of change of address shall be effective only upon receipt. 12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to compensation from the Company in the same amount and on the same terms as he would be entitled to hereunder if he terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used herein, the term "Company" shall include any successor to its business and/or assets as aforesaid which executes and delivers the Agreement provided for in this Section 13 or which otherwise becomes bound by all terms and provisions of this Agreement by operation of law. (b) This Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amounts would be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devisee, legatee, or other designee or, if there be no such designee, to Employee's estate. 14. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and such officer as may be specifically authorized by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement is an integration of the parties agreement; no agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party, except those which are set forth expressly in this Agreement. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 16. Arbitration. Either party may elect that any dispute or controversy arising under or in connection with this Agreement be settled by arbitration in Houston, Texas in accordance with the rules of the American Arbitration Association then in effect. If the parties cannot mutually agree on an arbitrator, then the arbitration shall be conducted by a three arbitrator panel, with each party selecting one arbitrator and the two arbitrators so selected selecting a third arbitrator. The findings of the arbitrator(s) shall be final and binding, and judgment may be entered thereon in any court having jurisdiction. The findings of the arbitrator(s) shall not be subject to appeal to any court, except as otherwise provided by applicable law. The arbitrator(s) may, in his or her (or their) own discretion, award legal fees and costs to the prevailing party. IN WITNESS WHEREOF, the parties have executed this Agreement on July 20, 2000, effective for all purposes as provided above. OCEAN ENERGY, INC. By: ____________________________ Name: Peggy T. d'Hemecourt Title: Vice President - Human Resources EMPLOYEE: --------------------------------------- 43206.1 EX-27 6 0006.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS Dec-31-2000 Sep-30-2000 25,915 0 205,158 0 26,244 289,425 4,713,301 2,414,119 2,812,729 335,072 1,073,104 0 50 16,961 1,077,981 2,812,729 743,586 743,586 0 401,958 1,526 0 57,850 260,949 114,609 146,340 0 0 0 146,340 0.86 0.83
-----END PRIVACY-ENHANCED MESSAGE-----