-----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, JuDj0KRqUsM+ARs5wI7rvhxM/S180V5edDRTJOyZqlyaP6b5W4+wR9Nrc1Vd+U7V Q2sJUe9DWDOXqHcfSfK5LA== 0000060512-96-000002.txt : 19960322 0000060512-96-000002.hdr.sgml : 19960322 ACCESSION NUMBER: 0000060512-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960321 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISIANA LAND & EXPLORATION CO CENTRAL INDEX KEY: 0000060512 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 720244700 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00959 FILM NUMBER: 96536792 BUSINESS ADDRESS: STREET 1: 909 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045666500 MAIL ADDRESS: STREET 1: P O BOX 60350 CITY: NEW ORLEANS STATE: LA ZIP: 70160 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1995 Commission file number 1-959 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 THE LOUISIANA LAND AND EXPLORATION COMPANY Exact name of registrant as specified in its charter MARYLAND 72-0244700 State or other jurisdiction of I.R.S. Employer incorporation or organization Identification No. 909 POYDRAS STREET, NEW ORLEANS, LA. 70112 Address of principal executive offices Zip Code Registrant's telephone number, including area code: 504-566-6500 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON WHICH TITLE OF EACH CLASS REGISTERED Capital Stock, $.15 par New York Stock Exchange value (including Capital London Stock Exchange Stock Purchase Rights) The Stock Exchanges of Geneva, Zurich and Basle 8-1/4% Notes due 2002 New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE (continued) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 and (2) has been subject to such filing requirements for the past 90 days. YES X . NO . State the aggregate market value of the voting stock held by non-affiliates of the registrant. Aggregate Market Value Class of Voting Stock at February 26, 1996 Capital Stock, $.15 par value $1,413,689,000 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Outstanding at Class February 26, 1996 Capital Stock, $.15 par value 33,559,383 shares DOCUMENTS INCORPORATED BY REFERENCE Part III: The Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held on May 9, 1996 INDEX Page Number _________________________________________________________________ PART I 4 Items 1 and 2. Business and Properties. 4 The Company 4 Contributions of Principal Products 5 Petroleum Operations 6 General 7 Sales 8 Oil and Gas Properties 9 Oil and Gas Reserves 9 Exploration Activities 14 Development Activities 18 Drilling Activities at December 31, 1995 18 Oil and Gas Wells 20 Crude and Condensate, Plant Products and Natural Gas Production and Prices Realized 21 Refining Operations 22 Regulation 22 Federal Energy Regulatory Commission 22 Environmental Matters 24 Item 3. Legal Proceedings. 24 Item 4. Submission of Matters to a Vote of Security Holders. 25 Executive Officers of the Registrant PART II 27 Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. 27 Item 6. Selected Financial Data. 27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 28 Item 8. Financial Statements and Supplementary Data. 91 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. PART III 91 Item 10. Directors and Executive Officers of the Registrant. 91 Item 11. Executive Compensation. 91 Item 12. Security Ownership of Certain Beneficial Owners and Management. 91 Item 13. Certain Relationships and Related Transactions. PART IV 92 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 92 (a)(1) Financial Statements and Supplementary Data 92 (a)(2) Financial Statement Schedules 92 (a)(3) Index to Exhibits 92 (b) Reports on Form 8-K 96 Signatures ITEMS 1 AND 2. BUSINESS AND PROPERTIES. The Company The Louisiana Land and Exploration Company and subsidiaries (LL&E or the Company) is engaged principally in the exploration for and the development and production of petroleum natural resources. The major portion of LL&E's petroleum operations are conducted in the continental United States, the federal offshore area in the Gulf of Mexico, the North Sea, Colombia and Indonesia. In 1995, the Company sold its remaining oil and gas assets in Canada, which were not material to the Company's operations. LL&E also owns a refinery in Alabama, and also processes natural gas. At December 31, 1995, LL&E had 745 employees. Contributions of Principal Products The table below sets forth the principal products and their contribution to the operating revenues of LL&E's petroleum operations for the periods indicated. Reference is made to Note 16 of "Notes to Consolidated Financial Statements" for additional information on LL&E's operations.
Years ended December 31, (Millions of dollars) 1995 1994 19931 _______________________________________________________________________________________ Crude and condensate $ 272.8 235.8 210.0 Natural gas 172.5 169.9 146.0 Refined products2 355.2 361.4 400.2 Other petroleum products 19.4 15.4 14.1 _______________________________________________________________________________________ Total $ 819.9 782.5 770.3 _______________________________________________________________________________________ 1 Includes NERCO Oil & Gas, Inc. since October 1, 1993. 2 After elimination of intercompany transfers to the Company's refinery. In 1995, 1994 and 1993, such transfers were valued at $28.0, $24.8 and $22.4, respectively.
Petroleum Operations LL&E employs a staff of petrotechnical professionals to initiate, evaluate, plan and execute LL&E's petroleum activities. Typically, the actual tasks of exploration and development, such as seismic surveys and drilling, are performed by independent specialized contractors under the direction of LL&E's professional staff. LL&E's principal domestic exploration activities at December 31, 1995 were in the Gulf of Mexico and in Louisiana and Wyoming. Outside the United States, LL&E's principal exploration activities were in the North Sea, Algeria, Australia, Indonesia and Tunisia. In the United States, LL&E has working interests in development and producing operations principally in Alabama, Florida, Louisiana, Wyoming and the federal offshore area in the Gulf of Mexico. Outside the United States, LL&E has working interests in development and producing operations in the North Sea, Colombia and Indonesia. The majority of LL&E's working interest activities occur on property leased from others, which leaseholds are acquired by paying a signature bonus, delay rental and production royalty to the owner of the mineral rights. In 1995, working interest revenues accounted for 90% of LL&E's total oil and gas revenues. LL&E receives income from royalties from production by others of oil and gas from portions of the properties LL&E owns and leases in south Louisiana. In addition, LL&E receives income from geophysical options and the leasing of mineral rights to explore undeveloped portions of these properties. CLAM Petroleum Company (CLAM), a 50%-owned, unconsolidated affiliate, is engaged in oil and gas exploration, development and production activities in the Netherlands sector of the North Sea. The tables on the following pages set forth LL&E's 50% equity interest in the operations of CLAM. LL&E Petroleum Marketing, Inc., a wholly owned subsidiary, owns and operates a refinery in Mobile, Alabama. The refinery utilizes various sources of feedstocks including Company-owned and - -controlled crude oil which is acquired on a competitive basis with other domestic and foreign crudes from third parties (see "REFINING OPERATIONS"). GENERAL LL&E's petroleum operations are subject to all of the risks and uncertainties normally incident to exploration for and development of oil and gas. Significant capital expenditures are required in connection with such operations, with capital expenditures for offshore operations typically being substantially greater than for similar operations onshore. LL&E's earnings and the scope of its future exploration and development programs will be affected by the extent to which state and federal legislation and regulations applicable to the petroleum industry impact incentives for exploration and production, and permit the recovery of revenues sufficient to meet increasing costs and to expand operations. The marketability of offshore production is limited by the availability of marine transportation facilities, which are barge or pipeline for oil, but only pipeline for gas. In instances where there are no gas pipelines in an area of production, LL&E must await the permitting, certification and construction of pipeline facilities before deliveries of gas can commence. A portion of LL&E's petroleum operations is conducted in foreign countries where LL&E is also subject to regulation, risks of a political nature and other risks. LL&E's oil and gas production is from properties in jurisdictions in which well drilling and production are regulated or subject to limitations by governmental production and conservation authorities. The oil and gas industry is highly competitive in all phases, including the search for and development of new sources of supply and the refining and marketing of crude oil and petroleum products. The oil and gas industry also competes with other industries that supply energy and fuel, and LL&E competes with a number of major integrated oil companies and other companies having greater resources. LL&E participates in bidding for federal leases on the U.S. Outer Continental Shelf, as well as for leases (concessions) in other countries; participation in the bidding for these leases is extremely competitive. The principal raw materials and supplies required directly by LL&E for its petroleum operations, other than refining and natural gas processing, are generally available through multiple sources and acquired through specialized independent contractors. The refinery and gas processing operations' principal raw materials are crude oil and natural gas, a portion of which is Company-owned and - -controlled. Internally generated fuels and electricity are the principal energy requirements for the petroleum operations and the refinery, and electricity is the principal energy requirement at the gas processing plants. No serious problems currently exist with respect to the availability of any of these items. SALES The availability of a ready market for oil and gas depends upon numerous factors beyond the Company's control, including the production of crude oil and gas by others, crude oil imports, the marketing of competitive fuels, the proximity and capacity of oil and gas pipelines, the availability of treatment facilities, the regulation of allowable production by governmental authorities and the regulation by the Federal Energy Regulatory Commission (FERC) and various state agencies of the transportation and marketing of natural gas transported or sold in interstate commerce (see "Regulation"). Liquids During 1995, LL&E's crude oil, condensate and plant products production were sold into various domestic and international markets at prices competitive for the area and for quality of production. In some instances, crude oil, condensate and plant products were traded from area to area and were then sold to third parties or transferred to the Company's refinery. LL&E charged transfers of proprietary production to its refinery at appropriate market prices. The 1995 sales period experienced dramatic price fluctuations with crude oil prices ranging between $16.50 per barrel and $21 per barrel. Overall, crude oil prices averaged $18.40 per barrel at Cushing, Oklahoma for West Texas Intermediate. This price was approximately $1.20 per barrel above the price averaged in 1994. Natural Gas Prior to FERC Orders 436/500 and 636, most of LL&E's sales of natural gas were made to various interstate and intrastate gas pipeline companies under long-term take-or-pay contracts subject to the regulations of the FERC. With the implementation of the above- referenced orders, the structure of the industry has changed drastically. LL&E now has the ability, as other producers do, to ship gas on the nationwide transportation grid and contract directly with downstream customers. Development of this downstream marketing activity has allowed LL&E to gain entry into markets not previously available, virtually eliminated the Company's reliance on pipelines to purchase natural gas and given the Company greater flexibility and control of its natural gas reserves. Less than 5% of LL&E's domestic natural gas production is being sold to interstate pipeline companies. The remainder of the Company's domestic natural gas production is sold primarily to local distribution companies, industrials, electric utilities and aggregators under short- or medium-term contracts at market- responsive prices. The vast majority of the Company's North Sea gas production is sold to distributors, electric generators and aggregators under long-term contracts at prices based on various combinations of commodity and inflation-based indices. Refined Products LL&E's refinery products, which include propane, butane, three grades of gasoline, naphtha, two grades of No. 2 fuel oil, turbine fuel, vacuum gas-oil and vacuum residuum, are generally sold in the spot market, wholesale markets, or under short-term contracts. Products are either sold in local or Gulf Coast markets or exchanged in return for products in pipeline markets. OIL AND GAS PROPERTIES Information regarding LL&E's productive and undeveloped acreage is presented under the heading "Oil and Gas Properties" in Part II, Item 8. - "Financial Statements and Supplementary Data." Working Interest Properties At December 31, 1995, LL&E had working interests in approximately 594 thousand gross (270 thousand net) productive acres and approximately 6.2 million gross (2.6 million net) undeveloped acres. The total unamortized cost to LL&E of such undeveloped acreage at December 31, 1995 was $36 million. Through its affiliate, CLAM Petroleum Company, LL&E had working interests in approximately 41 thousand gross (6 thousand net) productive acres and approximately 623 thousand gross (114 thousand net) undeveloped acres, all located in the Netherlands sector of the North Sea. Leaseholds held by LL&E in the United States on privately owned lands generally reserve to the lessor a 12-1/2% to 25% royalty interest in the production from such lands. Federal leases offshore in the Outer Continental Shelf are acquired by sealed bids, and generally provide for a royalty of 16-2/3% of the value of production. Federal leases onshore generally are acquired by payment of a filing fee and provide for a royalty of 16-2/3% of the value of production. The primary terms of LL&E's leases vary generally from 3 to 10 years (five years in the case of federal offshore leases), but such leases are automatically extended by production for as long thereafter as production continues. Royalty Properties At December 31, 1995, LL&E owned approximately 594 thousand acres in fee lands in south Louisiana of which approximately 104 thousand acres were leased to various other companies for oil and gas exploration, development and production and an additional 72 thousand acres were subject to geophysical option agreements. Of those leased to others, approximately 88 thousand acres are productive and yielded a weighted average royalty to LL&E of 25%. In addition, LL&E holds State of Louisiana leases covering approxi- mately 55 thousand productive acres which have been assigned to Texaco Inc. under a contract (1928 Texaco Contract). Under the 1928 Texaco Contract, which also covers certain fee lands owned by LL&E, LL&E is entitled to receive a 25% royalty interest in the production from the acreage subject to the lease. LL&E is obligated to pay to the lessor of the leasehold interests subject to the 1928 Texaco Contract a royalty which is, in most cases, 12- 1/2% of the proceeds from production for such property. Of the approximately 418 thousand fee acres not leased to others and not subject to geophysical options, LL&E conducts operations on approximately 1.1 thousand productive acres; the balance of the fee acreage is classified as undeveloped. From time to time, LL&E conducts exploratory activities on this undeveloped fee acreage. OIL AND GAS RESERVES Information regarding LL&E's proved oil and gas reserves is presented under the heading "Data on Oil and Gas Activities" in Part II, Item 8. - "Financial Statements and Supplementary Data." LL&E and its oil and gas subsidiaries are required to report, at varying times, estimates of oil and gas reserve data with various governmental authorities and agencies, including the Federal Energy Regulatory Commission. The basis for reporting estimates of reserves to these authorities and agencies may not be comparable to that presented because of the nature of the various reports required. The major sources of noncomparability include differences in the times as of which such estimates are made and differences in the definition of the reporting unit, such as, gross, net, total operator, lease by lease, reservoir by reservoir. EXPLORATION ACTIVITIES Working Interest The Company's exploration expenditures totaled $78 million in 1995: $12 million was spent on seismic data, over $4 million was expended for unproved leases in the United States, and $62 million was expended for participation in 28 wells. Of this total, 19 wells were successful completions: 5 oil and 14 gas. South Louisiana Drilling success at the Bastian Bay Field in Plaquemines Parish over the last two years validates the use of three dimensional (3-D) seismic data in the exploitation of mature fields. Bastian Bay was initially developed in the 1940's and has not had drilling activity for 13 years. Two successful 3-D wells were drilled in 1994 and an additional four wells were drilled in 1995. The Company's net revenue interest in those wells ranges from 20% to 95% due to its combined working interest and royalty interest. These wells were drilled to depths between 5,000 and 12,000 feet and are currently producing a total of 10 million cubic feet of gas per day and 140 barrels of oil per day, net. Production from the field has more than tripled since the program began. At least two additional exploitation wells are planned for the field in 1996. One of the largest 3-D seismic surveys in which the Company is a partner covers a number of existing producing fields, including the second largest in the state, the Caillou Island Field. The first phase of the survey was completed in 1995 and the first four wells were successfully drilled. These were shallow, low cost wells and in total are currently producing 6.5 million cubic feet of gas per day and 2,039 barrels of oil per day. At least six additional wells are planned over this same area in 1996. The Company's 3-D seismic program in south Louisiana has also produced a number of high potential, high risk drilling opportunities in the area. Large untested structures are being identified due to the fact that there was poor or incomplete 2-D seismic coverage over much of the area because of the previous difficulty in acquiring seismic information over a marshland/open water environment. One such high potential prospect that was successfully drilled in 1995 was the Widgeon Prospect in the Timbalier Field in Lafourche Parish. The well was drilled below 20,000 feet and encountered at least 130 feet of net pay from three zones. No water levels were present in any zone and the reservoirs were of good quality. On a limited production test, the well flowed at 6 million cubic feet of gas per day and 216 barrels of condensate per day. The Company is the operator of the field and owns a 75% working interest. Construction of pipeline and production facilities is in progress and initial production is expected by mid-year. Drilling activity will increase dramatically in 1996 in south Louisiana. At least 31 3-D generated wells are planned to be drilled, of which 24 are low risk exploitation and seven are high potential wells. Gulf of Mexico During 1995, the Company acquired nine new offshore leases adding a total of 23,000 new net acres to inventory. The Company intends to participate in lease sales again this year. A substantial effort continues to be directed to the acquisition, processing and interpretation of 3-D seismic information on the Company's large Gulf lease inventory. The Company currently has licenses over 780 blocks of 3-D data of which 224 blocks were added in 1995. The Company has been actively analyzing data over its significant Gulf inventory of 68 blocks with salt-related features of which 30 are exploratory and 38 are held by production. In addition, particular emphasis is being placed on analyzing data on areas immediately adjacent to the Company's existing producing areas to generate more exploitation drilling opportunities for 1996. The Company plans to drill at least six high potential offshore wells in 1996. At least two subsalt wells will be spud. North Sea The Brae Complex, in which the Company owns an average 6% working interest, continues to offer opportunities for future development. In May 1995, the 16/3b-8z well at Braemar, located on Block 16/3c in the northeastern sector of the complex, was successfully reentered and deepened. This well flowed at a combined rate of 57 million cubic feet of gas per day and 4,400 barrels of condensate per day from two different zones. The well was suspended for possible future use as a development well. Further technical evaluation is necessary to fully assess the reserve potential of this discovery. A 3-D survey was conducted over the area in 1995 and is currently under evaluation. The nearby existing Brae infrastructure offers economically advantageous development options for Braemar as well as other areas of the complex that are being studied for possible development. At least one new exploratory well will be drilled in 1996 from a number of leads and prospects remaining in the complex. A 3-D seismic survey conducted over the T-Block Complex in 1995 has yielded exploratory prospects, at least one of which is planned for drilling in 1996. Indonesia A 3-D survey over the KAKAP area has yielded a number of attractive leads and prospects. Three successful exploratory wells were drilled during 1995. The three wells will be completed in 1996 through subsea tiebacks to the existing platforms. The existing infrastructure in the area should minimize the cost of developing additional reserves. Additional exploratory drilling is planned in 1996. Algeria In 1995, the first exploratory well on the block, the MLE No. 1, was drilled to a total depth of 14,458 feet and encountered gas and gas condensate pays in several sand reservoirs. Three intervals were tested, two yielding a combined flow rate of 1,724 barrels of condensate per day and 36 million cubic feet of gas per day and a third yielding a gas rate of 7 million cubic feet of gas per day. While the results of this initial well are encouraging, further exploratory drilling must be undertaken on the block before commercial production can be established. Preparations are underway to drill a second well, the MLN No. 1, in the first half of 1996. This well will be in the northeast sector of the block, on trend with recent industry discoveries on adjacent blocks. Additional seismic information is being acquired over this same area and a third exploratory well may be drilled before yearend. In addition to its 65% interest in the 713,000 acre Block 405, the Company also owns a 65% interest the 840,000 acre Block 215 where seismic data is currently being acquired. Tunisia The first exploratory well on the Company's million acre Ramla Block, located 80 miles offshore Tunisia in the Gulf of Gabes was drilled in 1995. The M'Sela No. 1 encountered a 492 foot oil column but poor reservoir quality at this location made the accumulation noncommercial. The well tested 1,100 barrels of oil per day from a limited 98 foot interval. Additional seismic data has since been acquired to evaluate other prospects identified on the block. Encouraged that the initial well confirmed the existence of an active hydrocarbon system in the area, a second exploratory well is planned for 1996. The Company owns a 50% working interest in the block. Australia In Australia, the Company plans to drill an exploratory well in 1996 on its WA258P concession located in the Carnarvon Basin. The Company has brought in a partner to share the costs of drilling the well. The Company will pay 8-1/3% of the cost of the well but will retain a 21% interest in the area. During the years 1993 through 1995, LL&E and CLAM participated in the drilling of exploratory wells with the results set forth in the table below.
Net wells Oil Gas Dry 1995 1994 1993 1995 1994 1993 1995 1994 1993 _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic: Offshore Gulf of Mexico - - .5 2.2 3.3 1.8 2.8 1.8 1.4 Louisiana .9 1.2 .7 3.3 1.7 1.1 .7 2.9 1.8 North Sea: United Kingdom - .1 .1 - - - - - .1 Other foreign: Australia - - - - - - - .3 .6 Canada .3 .5 13.9 1.3 5.3 1.0 - 2.9 7.4 Colombia - - - - - - - 1.0 - Indonesia .3 - - - - - - - - Tunisia - - - - - - .5 - - Yemen - - - - - - - .3 - _______________________________________________________________________________________ Total 1.5 1.8 15.2 6.8 10.3 3.9 4.0 9.2 11.3 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea - - - - - - .2 .2 .1 _______________________________________________________________________________________
Royalty Interest During 1995, the following exploratory wells were drilled by others on LL&E's fee and leasehold acreage.
Gross wells Oil Gas Dry _______________________________________________________________________________________ Domestic: Gulf of Mexico 1 3 3 Louisiana 7 4 3 Mississippi - 1 - Other foreign - Canada 1 - - _______________________________________________________________________________________ Total 9 8 6 _______________________________________________________________________________________
DEVELOPMENT ACTIVITIES Working Interest Development of the Company's oil and gas properties in 1995 resulted in the expenditure of $88 million for participation in 27 wells and the installation of platforms and facilities in the United States and overseas. Successful development drilling resulted in 21 oil and 6 gas wells. In addition, over $9 million was spent in the acquisition of additional working interests in proved properties, primarily in the United States. South Louisiana In 1995, 3-D data was instrumental in the development of a new producing property at the Fresh Water Bayou Field in Vermilion Parish. The field was discovered in early 1994 and is one of the Company's largest domestic gas discoveries in recent years. While the discovery well and two delineation wells were drilled prior to 1995 on the basis of 2-D seismic data, a 3-D seismic study conducted over the field in late 1994 was utilized to drill two development wells in 1995. The Louisiana Furs C-18 and C-20 wells were both successful in extending the known limits of the gas reservoir and encountered 241 and 282 feet of net gas pay, respectively. The C-18 well tested at 30.9 million cubic feet of gas per day and 374 barrels of condensate per day while the C-20 well tested at 30.5 million cubic feet of gas per day and 403 barrels of condensate per day. The Company owns a 35% working interest in the field. Gross field production volumes grew from 55 million cubic feet of gas per day in early 1995 to 205 million cubic feet of gas per day in the fourth quarter of 1995 after completion of a second salesline out of the field and expansion of production facilities. An exploratory well will evaluate an untested adjacent fault block in the southern part of the 3,200 acre Fresh Water Bayou lease in mid-1996. Jay Field A successful enhanced recovery program at the Jay Field in Florida has resulted in recovery rates from this oil field discovered in the early 1970's well beyond industry averages. An expanded nitrogen injection program in 1995 has led to increases in production and recoverable reserves. Over the last several years, the Company has purchased additional interests in the field and currently owns a 46% working interest. Gulf of Mexico Three new production platforms were installed in the Gulf in 1995. The Company-operated Vermilion 395 was set in 420 feet of water utilizing a tripod design, the second deepest platform of this type in the Gulf. Two wells drilled from the platform are currently producing 30 million cubic feet of gas per day. The Company owns a 50% working interest in the field. At Vermilion 143, a platform was set that is currently producing 20 million cubic feet of gas per day from two wells. The Company's working interest in this field is 25%. The third structure was a four-pile platform with production capacity of 40 million cubic feet of gas per day that was set in late 1995 at South Pass 34/47. Development drilling is underway and production is anticipated in the first quarter of 1996. The Company owns a 50% working interest in this field. A new platform is scheduled to be installed in mid-1996 at South Timbalier 229/Grand Isle 108 to produce three wells that were successfully drilled in late 1994. The Company owns 100% of these wells and production is expected to reach 30 million cubic feet of gas per day later this year. The Company has also begun the initial study and facility design for a shallow discovery well that was drilled in 1995 at Ship Shoal 358. Wyoming In 1995, natural gas sales from the 70,000 acre Madden Field in Wyoming attained the highest level in its 26 year history. Field deliverability now exceeds 100 million cubic feet of gas per day. The rise in natural gas sales and deliverability was achieved after the Lost Cabin Gas Plant, constructed to process sour gas production from the deep Madison Formation, was brought on line in March 1995. The facility cost $83 million and has a design inlet capacity of 50 million cubic feet of gas per day. At this rate, the plant produces approximately 33 million cubic feet per day of sales gas and over 200 long tons of sulfur per day. The plant is being studied for de-bottlenecking possibilities which could increase inlet capacity. The Company is the operator and has a 37% interest in the facility. A third Madison Formation well, in which the Company has a 38% working interest, the Bighorn 4-36, began drilling in late 1995. This well's location was based on the 3-D seismic survey completed over the field in 1994. A substantial portion of the cost of this well, which will take nearly 12 months to drill, will be covered by insurance proceeds. The Bighorn 4-36 is a significant step-out from the two existing wells and has the potential to materially increase the Company's gas reserves. The Lost Cabin Gas Plant can be expanded to process additional gas volumes from future successful Madison Formation wells. North Sea In the U.K. sector of the North Sea, successful development drilling in the Brae Complex contributed to an increase in liquids volumes. Additionally, 1995 was the first full year of natural gas sales from the Brae Complex. In late 1994, the Brae group initiated natural gas sales through the SAGE Pipeline System in which it owns a 50% equity interest. During 1995, the SAGE owners entered into an arrangement with the operator of another large North Sea producing field to process their gas production through the SAGE onshore plant which will be expanded to handle the additional volumes. At the T-Block Complex, immediately south of the Brae Complex, facilities modifications completed during 1995 enabled production volumes to reach an all-time high last summer. The Company owns a 11.26% interest in the two currently-producing fields, Tiffany and Toni, as well as the Thelma fields. The plan of development for the Thelma and Southeast Thelma fields was approved by the U.K. government last year. Development plans include a subsea production structure that will be tied back to the existing Tiffany platform. The first two of five planned production wells have been successfully predrilled and encountered pay sections thicker than those in the exploration wells. The production structure is scheduled to be set in mid-1996. Initial production of 12,000 barrels of oil per day is expected in late 1996 or early 1997, rising to 25,000 barrels of oil per day a year later. In the Dutch sector of the North Sea, the Company participates in natural gas exploration and development through its 50%-owned affiliate, CLAM Petroleum Company. In 1995, the Company's share of production rose to 43.5 million cubic feet of gas per day. New production from successful development drilling at the K8 and K11 blocks contributed to the volume increment. Additionally, the L13- FH subsea tieback development project was completed during 1995 and tested at an initial rate of 50 million cubic feet of gas per day. Development drilling will continue at CLAM during 1996. Indonesia At the KAKAP concession offshore Indonesia, the Company's share of production more than doubled following the installation of production facilities at the KG and KGA fields. Four successful development wells have been drilled at each field. Additional development drilling is planned in both areas in 1996. During the years 1993 through 1995, LL&E and CLAM participated in the drilling of development wells with the results set forth in the table below.
Net wells Oil Gas Dry 1995 1994 1993 1995 1994 1993 1995 1994 1993 _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic: Offshore Gulf of Mexico .6 .8 1.5 1.5 2.3 1.9 - - .3 Louisiana - - .5 .9 - - - - - Wyoming .2 - - - .7 1.3 - - - North Sea: Netherlands .6 - - - .1 - - - - United Kingdom .6 .2 .1 - - - - .1 - Other foreign: Colombia .1 - - - .1 - - - - Indonesia 1.1 - - - - - - - - _______________________________________________________________________________________ Total 3.2 1.0 2.1 2.4 3.2 3.2 - .1 .3 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea - - - .2 .1 .2 - - - _______________________________________________________________________________________
Royalty Interest During 1995, the following development wells were drilled by others on LL&E's fee and leasehold acreage.
Gross wells Oil Gas Dry _______________________________________________________________________________________ Other foreign - Canada 1 - - _______________________________________________________________________________________
DRILLING ACTIVITIES AT DECEMBER 31, 1995 Working Interest The table below sets forth the working interest wells in the process of drilling at December 31, 1995 by LL&E and by CLAM.
Wells drilling Gross Net _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic 9 3.7 North Sea 4 .3 Other foreign 2 .3 _______________________________________________________________________________________ Total 15 4.3 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea - - _______________________________________________________________________________________
Royalty Interest Two domestic wells were being drilled by others at December 31, 1995 in which LL&E has a royalty interest. OIL AND GAS WELLS Working Interest The table below shows the number of productive oil and gas wells in which working interests are held by LL&E and by CLAM as of December 31, 1995.
Oil wells Gas wells Gross Net Gross Net _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic 1,407 139.5 296 107.1 North Sea 66 7.8 - - Other foreign 57 8.5 - - _______________________________________________________________________________________ Total 1,530 155.8 296 107.1 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea - - 58 3.8 _______________________________________________________________________________________
Oil wells include 41 dual completions and gas wells include 26 dual completions. Royalty Interest The table below shows the number of productive oil and gas wells drilled by others in whose production LL&E had a royalty interest as of December 31, 1995.
Gross wells Oil Gas _______________________________________________________________________________________ Domestic 646 246 _______________________________________________________________________________________
Oil wells include 29 dual completions and gas wells include 15 dual completions. CRUDE AND CONDENSATE, PLANT PRODUCTS AND NATURAL GAS PRODUCTION AND PRICES REALIZED The production and average price information for the years 1993 through 1995 are presented under the heading "Oil and Gas Operating Data" in Part II, Item 8. - "Financial Statements and Supplementary Data." Lifting Cost per Equivalent Barrel of Production The table below presents the average annual production (lifting) cost per equivalent barrel of production (excluding royalty interest production) for LL&E and for CLAM for the periods indicated. For the purpose of this calculation, natural gas and plant products are converted to equivalent barrels of oil, based on an estimate of their relative BTU content, at the ratios of 6:1 and 1.56:1, respectively.
1995 1994 1993 _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic $3.95 3.97 4.69 North Sea 4.65 5.89 9.20 Other foreign 3.51 5.59 5.64 _______________________________________________________________________________________ CLAM Netherlands-North Sea $4.39 2.36 3.07 _______________________________________________________________________________________
Production (lifting) cost, as defined by the Securities and Exchange Commission, consists of costs incurred to operate and maintain wells and related equipment and facilities, as well as property and production taxes. It does not include depletion, depreciation, and amortization of capitalized acquisition, exploration and development costs, general and administrative expenses, interest expense or income taxes. Accordingly, production (lifting) cost reflected in the above table does not represent the total cost involved in producing a barrel of oil. REFINING OPERATIONS General The Company operates a crude oil refinery and terminal in Mobile, Alabama. Refinery capability consists of the following units: Atmospheric and Vacuum Distillation, Distillate Hydrodesulfurization, Sulfur Recovery, Catalytic Reforming and Light Naphtha Isomerization. This equipment is designed to handle both high- and low-sulfur feedstocks. The Company's crude oil terminal is located in Mobile Harbor and can accept vessels up to 35 feet draft. The terminal is connected to the refinery by parallel crude and product lines (approximately seven miles each in length) and can accept and load both crude oil and refined products. Refinery capital expenditures during 1995 totaled $1.5 million which was used for miscellaneous capital improvements, safety and environmental items. In 1996, $2 million has been budgeted for capital projects including over $1 million for catalyst replacement and the balance for maintenance, safety and environmental items. In 1995, the refinery processed an average of 47,000 barrels per day of crude oil and remained under the Independent Producers status during the year. The low industry refinery margins (excluding retail), which began in 1992, continued through 1995. In 1995, the Company announced plans to review the strategic alternatives for the refinery. The Company will continue to pursue the sale or other alternatives for the refinery in 1996. In the years 1995, 1994 and 1993, the refinery generated revenues, after elimination of intercompany transfers, totaling $355.2 million, $361.4 million and $400.2 million, respectively, and operating profits (losses) of $2.6 million, $2.1 million (before a $39 million write-down of refinery assets) and $(3.3) million (before a $6.7 million write-down of refinery inventories). Sales and Prices Realized The sales and average price information for the years 1993 through 1995 are presented under the heading "Refining Operating Data" in Part II, Item 8. - "Financial Statements and Supplementary Data." Regulation FEDERAL ENERGY REGULATORY COMMISSION Natural gas prices were formerly subject to regulation by the Federal Energy Regulatory Commission (FERC) pursuant to the Natural Gas Act of 1938, as amended, and the Natural Gas Policy Act of 1978 (NGPA). Effective December 1, 1978, the NGPA defined certain categories of natural gas and established price ceilings on all first sales of gas, whether interstate or intrastate, for most categories. Price controls on certain categories of gas were removed on various dates through July 1, 1987. On July 26, 1989, the Natural Gas Wellhead Decontrol Act of 1989 was enacted. This legislation amended the Natural Gas Policy Act of 1978, effectively removing wellhead price controls on new wells or wells not covered by a gas contract immediately and all maximum lawful price controls by January 1, 1993. As a result of these legislative acts, none of the Company's natural gas production is currently subject to wellhead price regulation and virtually all of it is priced at competitive market levels. In the winter of 1993-94, FERC implemented its Order 636 on the comparability of pipeline services. The order was designed to eliminate certain competitive advantages interstate pipelines may have had in selling gas and further move the industry toward a more efficient, competitive market environment. Among other things, Order 636 required pipelines to unbundle the various services that they had provided in the past, such as gas supply, gathering, transmission and storage, and offer these services individually to their customers. For producers, the net result is expected to be increased gas sales opportunities. ENVIRONMENTAL MATTERS The protection of our environment has always been a consideration of LL&E and has involved additional operating and facility costs. As federal, state and local environmental statutes evolve, LL&E implements design changes and incorporates pollution control devices at its facilities in response to environmental considerations. This has impacted the cost of new facilities and equipment and has been considered a normal, recurring cost of LL&E's ongoing operations and not an extraordinary cost of compliance with governmental regulations. LL&E believes that the amount of presently known expenditures that will be incurred primarily for environmental controls over the next two to three years will not have a material adverse effect on its results of operations, cash flow or financial position. However, as additional laws or regulations regarding the protection of the environment are adopted, become effective, or are hereafter interpreted, there is no assurance that they will not have such an effect. As a result of anticipated new regulations promulgated under the Clean Air Act Amendments of 1990 (CAAA), additional costs may be incurred at the Company's refining operations and larger production facilities. Since the Company's operations are located in areas currently classified as attainment areas for criteria air pollutants, and most of the Company's operations are below the expected threshold levels of hazardous air emissions to be regulated, at this time the Company does not believe that the cost of compliance with the new CAAA regulations will have a material adverse effect on its results of operations, cash flow or financial position. LL&E has received notice from the Environmental Protection Agency (EPA) that the Company is one of many Potentially Responsible Parties (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, with respect to National Priorities List sites located in certain areas where the Company has historically operated. With the exception of the PAB Oil and Chemical Superfund site, the Company is considered a de minimis party to each of the listed sites. At the PAB Oil and Chemical site, the Company's participation allocation exceeds the de minimis threshold. However, based on the Company's evaluation of the potential total cleanup cost, its estimate of its potential exposure, and the viability of the other PRP's, the Company believes that any costs ultimately required to be borne by it will not have a material adverse effect on its results of operations, cash flow or financial position. ITEM 3. LEGAL PROCEEDINGS. Information regarding the Company's legal proceedings is presented in Note 15 under the heading "Notes to Consolidated Financial Statements" in Part II, Item 8. - "Financial Statements and Supplementary Data." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT NAME AGE POSITIONS _________________________________________________________________ H. Leighton Steward (61) Chairman of the Board and Chief Executive Officer since September 1995. Chairman of the Board, President and Chief Executive Officer from 1989 to 1995. Richard A. Bachmann (51) President and Chief Operating Officer since September 1995. Director since 1989. Executive Vice President, Finance and Administration and Chief Financial Officer from 1985 to 1995. Louis A. Raspino, Jr. (43) Senior Vice President-Chief Financial Officer since September 1995. Treasurer from 1992 to 1995. Assistant Treasurer from 1984 to 1992. John A. Williams (51) Senior Vice President-Exploration and Production since September 1995. Vice President from 1988 to 1995. Suzanne V. Baer (48) Vice President and Treasurer since September 1995. Director- Investor and Shareholder Relations from 1988 to 1995. Jerry D. Carlisle (50) Vice President and Controller since 1984. Robert J. Chebul (48) Vice President since 1991. Held various managerial positions, including District Manager from 1988 to 1991. William N. Hahne (44) Vice President since December 1994. General Manager-Production from September 1993 to December 1994. Vice President of NERCO Oil & Gas, Inc. from 1991 to September 1993. C. Scott Kirk (46) Vice President-Production Marketing since September 1995. General Manager-Natural Gas Marketing from 1989 to 1995. John O. Lyles (50) Vice President since 1992. Vice President and Treasurer from 1984 to 1992. James E. Orth (43) Vice President-Production since September 1995. District Manager from 1991 to 1995. Frederick J. Plaeger, II (42) Vice President, General Counsel and Corporate Secretary since September 1995. General Counsel and Corporate Secretary from 1992 to 1995. Corporate Secretary and Senior Counsel from 1989 to 1992. Joel M. Wilkinson (60) Vice President since 1988. C. A. Zackary (51) Vice President-Human Resources since September 1995. Director- Human Resources from 1987 to 1995. Each officer holds office until the first meeting of the Board of Directors following the annual meeting of shareholders and until his successor shall have been elected and qualified, or until he shall have resigned or been removed as provided in the LL&E By- Laws. No family relationship exists between any of the above listed executive officers or between any such executive officer and any Director of LL&E. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Information regarding the Company's Capital Stock is presented under the heading "Capital Stock, Dividends and Other Market Data" in Item 7. - "Management's Discussion and Analysis of Financial Condition and Results of Operations." and under the heading "Market Price and Dividend Data" in Item 8. - "Financial Statements and Supplementary Data." ITEM 6. SELECTED FINANCIAL DATA. The information required hereunder is presented under the heading "Selected Financial Data" in Item 8. - "Financial Statements and Supplementary Data." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required hereunder is presented under the heading "Management's Discussion and Analysis" in Item 8. - "Financial Statements and Supplementary Data." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following consolidated financial statements and supplementary data of the Company are included herein: Page herein Financial Statements: Report of Management 29 Independent Auditors' Report 30 Consolidated Balance Sheets 31 Consolidated Statements of Earnings (Loss) 32 Consolidated Statements of Stockholders' Equity 33 Consolidated Statements of Cash Flows 34 Notes to Consolidated Financial Statements 35 Unaudited Supplemental Data: Management's Discussion and Analysis 54 Data on Oil and Gas Activities 59 Oil and Gas Operating Data 67 Refining Operating Data 68 Oil and Gas Properties 69 Wells Drilled 70 Selected Financial Data 71 Market Price and Dividend Data 72 Quarterly Data 73 The following financial statements of 50% or less owned persons required by Regulation S-X, Rule 3-09, are included herein: Page herein MaraLou Netherlands Partnership and its wholly owned consolidated subsidiary, CLAM Petroleum Company: Independent Auditors' Report 74 Consolidated Balance Sheets 75 Consolidated Statements of Income 76 Consolidated Statements of Partners' Capital 77 Consolidated Statements of Cash Flows 79 Notes to Consolidated Financial Statements 81 _________________________________________________________________ REPORT OF MANAGEMENT _________________________________________________________________ The consolidated financial statements of The Louisiana Land and Exploration Company and subsidiaries and the related information included in this Annual Report have been prepared by Management in accordance with generally accepted accounting principles and include certain estimates and judgments which Management considers appropriate. To meet its responsibilities for the fair presentation of consolidated financial statements, Management maintains a system of internal controls, including internal accounting controls, considered appropriate in view of the costs associated with the benefits to be derived. In addition, the Audit Committee meets periodically with the Company's Management, the internal auditors and KPMG Peat Marwick LLP, independent auditors, to review and discuss audit activities and results, internal control procedures and other matters relative to accounting and financial reporting. Based on the results of these procedures, Management is of the opinion that the system of internal controls in effect during the year ended December 31, 1995 provided reasonable assurance that all transactions were executed in accordance with Management's authorizations, that assets were safeguarded from loss and unauthorized use and that the accounting records and financial statements properly reflect the transactions of the Company. H. Leighton Steward Louis A. Raspino, Jr. Chairman and Senior Vice President - Chief Executive Officer Chief Financial Officer _________________________________________________________________ INDEPENDENT AUDITORS' REPORT _________________________________________________________________ The Board of Directors and Stockholders The Louisiana Land and Exploration Company: We have audited the accompanying consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in Notes 12 and 13 to the consolidated financial statements, in 1993 the Company adopted the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statements of Financial Accounting Standards Nos. 109 and 106, respectively. In addition, as discussed in Note 2 to the consolidated financial statements, in 1994 the Company changed its methods of assessing the impairment of the capitalized costs of proved oil and gas properties and other long-lived assets. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP New Orleans, Louisiana February 2, 1996 _________________________________________________________________________________________ CONSOLIDATED BALANCE SHEETS The Louisiana Land and Exploration Company and Subsidiaries December 31, 1995 and 1994 (Millions of dollars) ASSETS 1995 1994 _________________________________________________________________________________________ CURRENT ASSETS: Cash, including cash equivalents (1995-$1.0; 1994-$8.6) $ 10.3 12.5 Accounts and notes receivable 143.6 126.4 Income taxes receivable .2 1.9 Inventories 38.7 31.8 Prepaid expenses 12.9 8.9 Deferred income taxes .9 2.6 _________________________________________________________________________________________ Total current assets 206.6 184.1 _________________________________________________________________________________________ Investments in affiliates 19.9 23.4 Net property, plant and equipment, at cost, under the successful efforts method of accounting for oil and gas properties 1,207.6 1,240.4 Other assets 33.6 30.2 _________________________________________________________________________________________ $ 1,467.7 1,478.1 _________________________________________________________________________________________ LIABILITIES AND STOCKHOLDERS' EQUITY _________________________________________________________________________________________ CURRENT LIABILITIES: Accounts payable and accrued expenses 199.8 187.7 Income taxes payable .8 2.8 _________________________________________________________________________________________ Total current liabilities 200.6 190.5 _________________________________________________________________________________________ Deferred income taxes 49.6 40.0 Long-term debt 691.6 739.5 Other liabilities 155.2 155.7 STOCKHOLDERS' EQUITY: Capital stock of $.15 par value. Authorized-100,000,000 shares; issued-38,004,537 shares 5.7 5.7 Additional paid-in capital 88.3 87.3 Retained earnings 435.0 424.2 _________________________________________________________________________________________ 529.0 517.2 Loans to ESOP (1.9) (5.2) Cost of capital stock in treasury-4,514,357 shares in 1995 and 4,624,729 shares in 1994 (156.4) (159.6) _________________________________________________________________________________________ TOTAL STOCKHOLDERS' EQUITY 370.7 352.4 _________________________________________________________________________________________ $ 1,467.7 1,478.1 _________________________________________________________________________________________ See accompanying notes to consolidated financial statements.
_________________________________________________________________________________________ CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) The Louisiana Land and Exploration Company and Subsidiaries Years ended December 31, 1995, 1994 and 1993 (Millions, except per share data)
1995 1994 1993 _________________________________________________________________________________________ REVENUES: Oil and gas $ 464.7 421.2 370.1 Refined products 355.2 361.3 400.2 Gain on sales of oil and gas properties 2.3 6.8 23.5 Other (interest, 1995-$1.0; 1994-$1.6; 1993-$3.4) 8.3 12.2 21.6 _________________________________________________________________________________________ 830.5 801.5 815.4 _________________________________________________________________________________________ COSTS AND EXPENSES: Lease operating and facility expenses 116.5 116.1 106.8 Refinery cost of sales and operating expenses 347.9 354.5 403.4 Dry holes and exploratory charges 68.3 69.7 48.8 Depletion, depreciation and amortization 161.8 202.2 129.8 Taxes, other than on earnings 23.6 25.4 24.7 General, administrative and other expenses 45.0 44.6 49.0 Interest and debt expenses 38.6 25.6 28.3 Reversal of litigation accrual - (10.0) - Write-down of petroleum assets - 319.0 - _________________________________________________________________________________________ 801.7 1,147.1 790.8 _________________________________________________________________________________________ Earnings (loss) before income taxes 28.8 (345.6) 24.6 Income tax expense (benefit) 10.0 (118.7) 11.9 _________________________________________________________________________________________ Earnings (loss) before extraordinary item and cumulative effect of changes in accounting principles 18.8 (226.9) 12.7 Extraordinary item: loss on early retirement of debt - - (3.3) Cumulative effect on years prior to 1993 of change in accounting principle for income taxes - - 13.7 Cumulative effect on years prior to 1993 of change in accounting principle for postretirement benefits other than pensions - - (13.5) _________________________________________________________________________________________ NET EARNINGS (LOSS) $ 18.8 (226.9) 9.6 _________________________________________________________________________________________ Earnings (loss) per share before extraordinary item and cumulative effect of changes in accounting principles 0.56 (6.80) 0.43 Extraordinary item: loss on early retirement of debt - - (0.11) Change in accounting principle for income taxes - - 0.47 Change in accounting principle for post- retirement benefits - - (0.46) _________________________________________________________________________________________ EARNINGS (LOSS) PER SHARE $ 0.56 (6.80) 0.33 _________________________________________________________________________________________ AVERAGE SHARES 33.5 33.4 29.5 _________________________________________________________________________________________ See accompanying notes to consolidated financial statements. /TABLE ________________________________________________________________________________________ CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY The Louisiana Land and Exploration Company and Subsidiaries Years ended December 31, 1995, 1994 and 1993 (Millions of dollars, except per share data)
Additional Treasury stock paid-in Retained Loans to Number of capital earnings ESOP shares Cost _________________________________________________________________________________________ Balance at December 31, 1992 $41.5 $704.5 $(11.8) 9,656,167 $(323.3) Net earnings - 9.6 - - - Sale of treasury stock 40.7 - - (4,400,000) 148.1 Cash dividends ($1.00 per share) - (29.8) - - - Repayment of loans to ESOP - - 3.0 - - Purchase of treasury stock - - - 40,247 (1.5) Other .7 .1 - (464,840) 12.3 _________________________________________________________________________________________ Balance at December 31, 1993 82.9 684.4 (8.8) 4,831,574 (164.4) Net loss - (226.9) - - - Cash dividends ($1.00 per share) - (33.3) - - - Repayment of loans to ESOP - - 3.6 - - Other 4.4 - - (206,845) 4.8 _________________________________________________________________________________________ Balance at December 31, 1994 87.3 424.2 (5.2) 4,624,729 (159.6) Net earnings - 18.8 - - - Cash dividends ($0.24 per share) - (8.0) - - - Repayment of loans to ESOP - - 3.3 - - Other 1.0 - - (110,372) 3.2 _________________________________________________________________________________________ Balance at December 31, 1995 $88.3 $435.0 $ (1.9) 4,514,357 $(156.4) _________________________________________________________________________________________ Capital stock of $.15 par value was unchanged during the three-year period ended December 31, 1995. See accompanying notes to consolidated financial statements.
_________________________________________________________________________________________ CONSOLIDATED STATEMENTS OF CASH FLOWS The Louisiana Land and Exploration Company and Subsidiaries Years ended December 31, 1995, 1994 and 1993 (Millions of dollars)
1995 1994 1993 _________________________________________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 18.8 (226.9) 9.6 Adjustments to reconcile to cash flows from operations: Write-down of petroleum assets - 319.0 - Changes in accounting principles, net - - (.2) Gain on sales of oil and gas properties (2.3) (6.8) (23.5) Extraordinary item: loss on early retirement of debt - - 3.3 Depletion, depreciation and amortization 161.8 202.2 129.8 Deferred income taxes 11.3 (111.2) 9.2 Dry holes and impairment charges 41.2 36.4 21.8 Other 6.3 2.2 22.2 _________________________________________________________________________________________ 237.1 214.9 172.2 Changes in operating assets and liabilities, net of acquisitions: Net (increase) decrease in receivables (19.7) (9.0) 4.3 Net increase in inventories (6.9) (5.0) (4.9) Net (increase) decrease in prepaid items (4.0) 3.8 (5.0) Net increase in payables 11.8 .7 2.7 Other 2.2 6.7 9.6 _________________________________________________________________________________________ Net cash flows from operating activities 220.5 212.1 178.9 _________________________________________________________________________________________ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions - - (547.9) Capital expenditures (191.0) (236.8) (171.7) Proceeds from asset sales 21.3 15.6 43.7 Other (4.3) (16.3) (46.4) _________________________________________________________________________________________ Net cash flows from investing activities (174.0) (237.5) (722.3) _________________________________________________________________________________________ CASH FLOWS FROM FINANCING ACTIVITIES: Sale of treasury stock - - 188.8 Additions to long-term debt 28.0 239.7 492.0 Repayments of long-term debt (75.9) (234.7) (104.6) Dividends (8.0) (33.3) (29.8) Advances against cash surrender value 9.0 34.4 - Repayment of loans to ESOP 3.3 3.6 3.0 Purchase of treasury stock - - (1.5) Other (5.1) (5.1) (11.7) _________________________________________________________________________________________ Net cash flows from financing activities (48.7) 4.6 536.2 _________________________________________________________________________________________ Decrease in cash and cash equivalents $ (2.2) (20.8) (7.2) _________________________________________________________________________________________ See accompanying notes to consolidated financial statements. /TABLE _________________________________________________________________ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Louisiana Land and Exploration Company and Subsidiaries December 31, 1995, 1994 and 1993 _________________________________________________________________ 1. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Investments in affiliates are accounted for under the equity method. Certain amounts have been reclassified to conform to the current period's presentation. Petroleum Operations The Company uses the successful efforts method of accounting for its oil and gas operations. The costs of unproved leaseholds are capitalized pending the results of exploration efforts. Significant unproved leasehold costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, that the cost of the property has been impaired. The costs of individually insignificant unproved leaseholds estimated to be nonproductive are amortized over estimated holding periods based on historical experience. Effective in the fourth quarter of 1995, the Company began assessing the impairment of capitalized costs of proved oil and gas properties and other long- lived assets in accordance with Statement of Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under this method, the Company generally assesses its oil and gas properties on a field-by-field basis utilizing its current estimate of future revenues and operating expenses. In the event net undiscounted cash flow is less than the carrying value, an impairment loss is recorded based on estimated fair value, which would consider discounted future net cash flows. The Company's methods of assessing impairment in prior years is described in Note 2. Exploratory dry holes and geological and geophysical charges are expensed. Depletion of proved leaseholds and amortization and depreciation of the costs of all development and successful exploratory drilling are provided by the unit-of-production method based upon estimates of proved and proved-developed oil and gas reserves, respectively, for each property. The estimated costs of dismantling and abandoning offshore and significant onshore facilities are provided currently using the unit-of-production method; such costs for other onshore facilities are insignificant and are expensed as incurred. The costs of refining and processing equipment and facilities are depreciated on a straight-line basis over their estimated useful lives. Significant changes in the various estimates discussed above could affect the financial position and results of operations of the Company. The Company uses the entitlement method for recording natural gas sales revenues. Under the entitlement method of accounting, revenue is recorded based on the Company's net working interest in field production. Deliveries of natural gas in excess of the Company's working interest are recorded as liabilities while under- deliveries are recorded as receivables. Such amounts are immaterial. Financial Instruments and Hedging Activities The Company's anticipated hydrocarbon transactions and its committed British pound currency expenditures are periodically hedged against market risks through the use of various derivative financial instruments. The gains and losses on these instruments are included in the valuation of the transactions being hedged upon completion of the transactions. The Company also manages the interest rate components of its debt portfolio through the use of swap agreements. Gains and losses on swap agreements are accrued to interest expense on a monthly basis over the terms of the agreements. Gains and losses on closed swap agreements are deferred and amortized over the original terms of the agreements. Functional Currency The foreign exploration and production operations of the Company's subsidiaries and its foreign affiliate, CLAM Petroleum Company, are considered an extension of the parent company's operations. The assets, liabilities and operations of these companies are therefore measured using the United States dollar as the functional currency. As a result, foreign currency translation/transaction adjustments (which were not material) are included in net earnings. Income Taxes The Company and its domestic subsidiaries file a consolidated federal income tax return. In 1993, Statement of Financial Accounting Standards No. 109 (SFAS No. 109) - "Accounting for Income Taxes" was adopted effective as of January 1, 1993. As prescribed by SFAS No. 109, deferred tax assets and liabilities are initially recognized (i) for differences between the financial statement carrying amounts and tax bases of assets and liabilities that will result in future deductible and taxable amounts and (ii) for operating loss and tax credit carryforwards. A valuation allowance would then be established to reduce that deferred tax asset if it is more likely than not that the related tax benefits will not be realized. Earnings (Loss) Per Share Earnings (loss) per share are calculated on the weighted average number of shares outstanding during each period for capital stock and, when dilutive, capital stock equivalents, which assumes exercise of stock options. 2. Write-down of Petroleum Assets In the fourth quarter of 1994, the Company changed its method of periodically assessing the impairment of capitalized costs of proved oil and gas properties. Historically, this assessment had been determined by comparing the total capitalized costs of oil and gas properties less accumulated depletion, depreciation and amortization and related deferred income taxes (net capitalized costs) to undiscounted future net cash flows of proved oil and gas reserves after estimated income taxes. Under the revised method, the Company assessed impairment by comparing net capitalized costs to undiscounted future net cash flows after estimated income taxes on a field-by-field basis using period-end prices. For measurement purposes, future net cash flows were determined using period-end prices adjusted for changes in prices as of the date of the auditors' report on the Company's consolidated financial statements. Prices utilized for measurement purposes and expected costs were held constant. As a result of the change in method, the Company reduced the capitalized costs of its oil and gas properties by a fourth quarter charge against earnings of approximately $280 million (before income tax benefits of $95 million). In addition, the Company changed its method of measuring the impairment of other long-lived assets, specifically facilities, from a measurement based upon undiscounted future net cash flows to a measurement based upon fair value for assets where it was determined that net capitalized costs exceed undiscounted future net cash flows. As a result of this change, the Company reduced the capitalized costs of its refinery assets by a fourth quarter charge against earnings of $39 million (before income tax benefits of $13.7 million). The changed methods referred to above were not identical to those later prescribed by SFAS No. 121 as described in Note 1. The Company adopted the provisions of SFAS No. 121 in the fourth quarter of 1995 and no further impairment was indicated. 3. Property Acquisitions and Dispositions Acquisitions In September 1993, the Company completed the acquisition of all of the issued and outstanding common stock of NERCO Oil & Gas, Inc. (NERCO) for a cash purchase price of approximately $354 million plus associated expenses. The acquisition was financed initially through the credit facility discussed in Note 10. The cost of the acquisition was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed. The results of NERCO's operations were consolidated with the Company's effective October 1, 1993. Pro forma combined results of operations of the Company and NERCO, including appropriate purchase accounting adjustments for the year ending December 31, 1993, as though the acquisition had taken place on January 1, are as follows:
(Millions of dollars, except per share data) 1993 ________________________________________________________________________________________ Revenues $907.1 ________________________________________________________________________________________ Earnings (loss) before extraordinary items and cumulative effect of changes in accounting principles (.3) ________________________________________________________________________________________ Net earnings (loss) (3.4) ________________________________________________________________________________________ Earnings (loss) per share $(0.09) ________________________________________________________________________________________
In December 1993, the Company acquired an 11.26% working interest in Block 16/17 in the U.K. North Sea (T-Block) from British Gas Exploration and Production Limited for approximately $187 million in cash. The purchase was financed initially through the credit facility discussed in Note 10. Initial production from T-Block came onstream in late 1993 and had an insignificant impact on the 1993 results of operations. Dispositions In 1995, the Company sold various oil and gas properties for approximately $16.1 million resulting in a gain of $2.3 million (before income taxes of $.8 million). In 1994, the Company sold various domestic oil and gas producing properties for approximately $15 million resulting in a gain of $6.8 million (before income taxes of $2.3 million). In December 1993, the Company completed the sale of certain oil and gas producing properties, undeveloped acreage and seismic data located in southern Alberta, Canada for approximately $42.8 million resulting in a gain, net of associated expenses, of approximately $23.5 million (before income taxes of $10.3 million). The properties sold generated revenues of $12.1 million and pretax earnings of $1.2 million in 1993. 4. Cash Flows All of the Company's cash investments are liquid short-term debt instruments and are considered to be cash equivalents. These cash investments are carried in the accompanying consolidated balance sheets at cost plus accrued interest, which approximates fair value. Cash flows related to hedging activities are classified in the same categories as that from the items being hedged. 5. Nonrecurring Credits As reported in prior years, the State of Louisiana had asserted claims against the Company in its capacity as sublessor to Texaco of certain State leases, based upon Texaco's alleged royalty miscalculations. In February 1994, a settlement was agreed to by all parties. The amounts previously provided in the financial statements for this litigation exceeded the cash payment required by $10 million, which was reversed during the first quarter of 1994. This adjustment to the litigation accrual is included in "Net increase in payables" in the accompanying Consolidated Statements of Cash Flows. 6. Inventories
(Millions of dollars) 1995 1994 _________________________________________________________________________________________ Refinery inventories at lower of cost (last-in, first-out) or market $37.8 30.8 Repair parts, supplies and other, at lower of average cost or market .9 1.0 _________________________________________________________________________________________ $38.7 31.8 _________________________________________________________________________________________
At December 31, 1993, the LIFO cost of refinery inventories exceeded their current market values which resulted in a non-cash charge to earnings of $6.5 million (before income tax benefits of $2.3 million) which is included in "Refinery cost of sales and operating expenses" in the accompanying Consolidated Statements of Earnings (Loss). 7. Investments in Affiliates
Investment % (Millions of dollars) Investee Industry Location Owned 1995 1994 _________________________________________________________________________________________ MaraLou (CLAM Petroleum Oil & Company) Gas North Sea 50% $15.5 18.9 Other Various U.S. Various 4.4 4.5 _________________________________________________________________________________________ $19.9 23.4 _________________________________________________________________________________________
The Company's equity in earnings of affiliates, which is included in "Other revenues" in the accompanying Consolidated Statements of Earnings (Loss), amounted to $5.8 million, $4.2 million and $2.4 million in 1995, 1994 and 1993, respectively. Cash dividends received from MaraLou/CLAM in 1995, 1994 and 1993 totaled $10 million, $6 million and $10 million, respectively. The consolidated financial position of MaraLou and its wholly owned subsidiary, CLAM, as of December 31, 1995 and 1994 and the results of their operations for each of the years in the three-year period ended December 31, 1995 are summarized below.
(Millions of dollars) 1995 1994 _________________________________________________________________________________________ Current assets $ 28.6 24.0 _________________________________________________________________________________________ Noncurrent assets 167.5 175.3 _________________________________________________________________________________________ Current liabilities 18.4 15.8 _________________________________________________________________________________________ Noncurrent liabilities 148.3 145.7 _________________________________________________________________________________________
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Gross revenues $ 85.8 68.7 61.1 _________________________________________________________________________________________ Operating profit 31.1 36.2 30.1 _________________________________________________________________________________________ Earnings before cumulative effect of change in accounting principle 11.6 8.2 10.9 _________________________________________________________________________________________ Net earnings 11.6 8.2 4.9 _________________________________________________________________________________________
MaraLou applied the provisions of SFAS No. 109 as of January 1, 1993 without restating prior years' financial statements. Upon adoption, MaraLou recorded a non-cash charge to earnings of $6 million ($3 million net to the Company's interest). The common stock of CLAM is pledged as collateral under a revolving credit agreement between MaraLou and a group of banks. The credit agreement is nonrecourse to the partners of MaraLou. 8. Property, Plant and Equipment
(Millions of dollars) 1995 1994 _________________________________________________________________________________________ Petroleum properties: Proved $2,693.3 2,530.3 Unproved 82.7 170.6 Refining and marketing 278.2 276.6 _________________________________________________________________________________________ 3,054.2 2,977.5 Other properties 66.7 72.4 _________________________________________________________________________________________ 3,120.9 3,049.9 Less accumulated depletion, depreciation and amortization 1,913.3 1,809.5 _________________________________________________________________________________________ $1,207.6 1,240.4 _________________________________________________________________________________________
In 1995, the Company announced plans to review the strategic alternatives for its refinery. The Company will continue to pursue the sale or other alternatives for the refinery in 1996. In the years 1995, 1994 and 1993, the refinery generated revenues, after elimination of intercompany transfers, totaling $355.2 million, $361.4 million and $400.2 million, respectively, and operating profits (losses) of $2.6 million, $2.1 million (before a $39 million write-down of refinery assets) and $(3.3) million (before a $6.7 million write-down of refinery inventories). The net book value of refining assets was approximately $34 million as of December 31, 1995. 9. Financial Instruments and Hedging Activities The Company uses derivative financial instruments to manage well- defined interest rate, foreign currency and commodity price risks and does not use them for speculative purposes. At December 31, 1995, the Company had $100 million of notional value interest rate swap agreements terminating in 1996 and 1997. These agreements allow the Company to manage fixed- and variable- rate interest exposure by converting a portion of the Company's variable-rate exposure to fixed-rate. At December 31, 1994, the Company had $100 million of notional value interest rate swap agreements terminating in 1997, which converted a portion of the Company's fixed-rate exposure to variable-rate. The fair value of the interest rate swap agreements at December 31, 1995 and 1994 amounted to $2.1 and $4.7 million, respectively, which represents the Company's cost to terminate the agreements. The Company also had $5.7 million of British pound currency forward contracts maturing in 1996 and 1997. Such contracts totaled $11.7 million at December 31, 1994. These contracts lock-in the exchange rate for a portion of the British pounds needed to fund the Company's future expenditures in the North Sea. British pounds currency forward contracts are valued at the net benefit or cost to the Company to unwind its forward position, which was estimated to be a benefit of $.4 million and $.7 million, respectively, at December 31, 1995 and 1994. The carrying amounts of cash and cash equivalents and long-term, variable-rate debt approximate fair value. The Company estimates the fair value of its long-term, fixed-rate debt as $423 million and $353 million at December 31, 1995 and 1994, respectively, based upon quoted market prices for the same or similar issues. Such debt was recorded at carrying amounts of $400 million at December 31, 1995 and 1994, resulting in an unrealized loss of $23 million and an unrealized gain of $47 million for the respective periods. The Company also used futures, forwards, options and swap contracts to reduce price volatility of refinery feedstock and the sale of refined products produced therefrom. Although generally settled in cash, these contracts permit settlement by delivery of commodities. At December 31, 1995, the Company had contracts maturing monthly through June 1996 covering the net purchase of 9.6 million barrels of feedstock totaling $181 million and the net sale of 9.6 million barrels of refined products totaling $209.8 million. Gains or losses resulting from market changes will be offset by losses or gains on the Company's hedged inventory or production. The Company processed over 17 million barrels of crude oil and sold more than 18 million barrels of refined products in 1995 and had approxi- mately 2.2 million barrels of crude oil and petroleum products in its refinery inventories at December 31, 1995. At December 31, 1994, the Company had similar contracts covering the net purchase of 1.4 millon barrels of feedstock totaling $25.5 million and the net sale of 1.4 million barrels of refined products totaling $30.1 million. In 1995, the Company initiated a hedging program designed to minimize the price risks associated with future natural gas and crude oil production. This program utilizes futures, forwards, options and swap contracts in series of transactions designed to set a floor price for future production and at the same time allow the Company to participate in market price increases above a set level over the floor price. At December 31, 1995, approximately 27 billion British Thermal Units (BTU) of 1996 natural gas production for the period January through April were covered by a series of transactions designed to set an average floor price of $1.78 per million BTU and at the same time allow the Company to participate in natural gas price increases more than $0.20 per million BTU above the floor price. While these transactions have no carrying value, their fair value, represented by the estimated amount that would be required to terminate the contracts, was a net cost of $2.4 million at December 31, 1995. (The Company estimates that its domestic natural gas production averages approximately 1.07 million BTU for each thousand cubic feet.) In addition, approximately 2.3 million barrels of 1996 crude oil production for the period January through February were covered by a series of transactions designed to set an average floor price of $18.81 per barrel and at the same time allow the Company to participate in crude oil price increases more than $1.34 per barrel above the floor price. While these transactions have no carrying value, their fair value, represented by the estimated amount that would be required to terminate the contracts, was a net cost of $.9 million at December 31, 1995. These financial instruments are generally executed on the New York Mercantile Exchange or with major financial or commodities trading institutions which, along with cash and cash equivalents and accounts receivable, expose the Company to acceptable levels of market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The credit worthiness of counterparties is subject to continuing review and full performance is anticipated. 10. Long-term Debt
(Millions of dollars) 1995 1994 _________________________________________________________________________________________ Revolving Credit Facility $ 92.0 64.0 7-5/8% Debentures due 2013 100.0 100.0 7.65% Debentures due 2023 200.0 200.0 8-1/4% Notes due 2002 100.0 100.0 Commercial paper notes 198.6 271.7 Notes payable to bank for financing of leveraged ESOP - 3.5 Other issues 1.0 .3 _________________________________________________________________________________________ Total long-term debt $691.6 739.5 _________________________________________________________________________________________
Debt maturities for the years 1996 through 1999 are less than $.1 million each year with maturities of $290.7 million in the year 2000. To finance the aforementioned NERCO and T-Block acquisitions (see Note 3), refinance certain existing indebtedness and fund general corporate activities, the Company entered into a $790 million credit facility with a syndicate of banks in September 1993. The revolving credit facility, which was subsequently reduced to $450 million, was renegotiated in 1994 and converted to a reducing revolving loan. In June 1995, the reducing revolving loan was replaced by a $450 million revolving credit facility due June 30, 2000. Amounts outstanding under the revolving credit facility bear interest at fluctuating rates subject to certain options chosen in advance by the Company. Borrowings under the facilities in 1995 and 1994 were at average interest rates of 6.5% and 4.8%, respectively. Fees ranging from .10% to .25%, based upon debt ratings and subject to certain options chosen by the Company, are charged on the facility. In June 1992, the Company registered under the Securities and Exchange Commission's shelf registration rules $300 million of senior unsecured debt securities to be issued from time to time on terms to be then determined. In June 1992, the Company sold $100 million of 8-1/4% Notes due 2002. In April 1993, the Company completed its second $100 million public offering of debt securities under the existing shelf registration filed in 1992 with the issuance of 7-5/8% Debentures due 2013. In November 1993, the Company registered up to $500 million of senior unsecured debt securities under the Securities and Exchange Commission's shelf registration rules, which included the $100 million available under the shelf registration filed in 1992. In December 1993, the Company completed a $200 million public offering with the issuance of 7.65% Debentures due 2023. In 1987 and 1988, the Company borrowed $10.2 million and $14 million, respectively, from a bank (unsecured) and loaned the proceeds to the leveraged employee stock ownership plan (ESOP) to fund its purchases of 836,368 shares of Company capital stock. The loans to the ESOP are secured by the Company's capital stock owned by the ESOP. The interest rates varied with time and market conditions and were determined by the bank subject to certain options chosen in advance by the Company. The average interest rates for both loans in 1995 and 1994 were 5.8% and 4%, respectively. During 1995, the average monthly balance of commercial paper notes outstanding was $291 million; the maximum amount outstanding during that period was $324 million. Commercial paper borrowings during 1995 and 1994 were at average interest rates of 6.1% and 4.6%, respectively. The commercial paper program is supported by the unused portion of the aforementioned revolving credit facility. In connection with an early retirement of debt, the Company recorded an extraordinary loss of $3.3 million (after income tax benefits of $1.7 million) in 1993. 11. Interest and Debt Expenses For the years ended December 31, 1995, 1994 and 1993, interest costs incurred, which were essentially the same as interest payments, were $54.3 million, $47.9 million and $47 million, respectively, of which $15.7 million, $22.3 million and $18.7 million, respectively, were capitalized as part of the cost of property, plant and equipment. In connection with the 1993 credit facility discussed in Note 10, bank fees and other costs totaled $8.1 million of which $6.7 million was charged to interest and debt expenses in the fourth quarter of 1993. 12. Income Taxes As explained in Note 1, the Company adopted SFAS No. 109 effective January 1, 1993. Upon adoption, the Company recorded a non-cash credit to earnings in the first quarter of 1993 of $13.7 million which represented the recognition of deferred tax assets existing at December 31, 1992. With the enactment of the Budget Reconciliation Act of 1993, the Federal statutory corporate income tax rate was increased from 34% to 35% retroactive to January 1, 1993. As a result, the Company increased its deferred income tax liabilities as of January 1, 1993 with a non-cash charge to income tax expense of $3 million in the third quarter of 1993. The components of earnings (loss) before income taxes were taxed under the following jurisdictions:
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Domestic $ (16.7) (322.0) 9.7 Foreign 45.5 (23.6) 14.9 _________________________________________________________________________________________ $ 28.8 (345.6) 24.6 _________________________________________________________________________________________
Components of income tax expense (benefit) are as follows:
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Current tax expense (benefit): Federal $ 1.1 (3.5) (3.5) State .2 (.7) (.3) Foreign (2.6) (3.3) 6.5 _________________________________________________________________________________________ (1.3) (7.5) 2.7 _________________________________________________________________________________________ Deferred tax expense (benefit): Federal 10.2 (109.2) 9.2 Foreign 1.1 (2.0) - _________________________________________________________________________________________ 11.3 (111.2) 9.2 _________________________________________________________________________________________ $ 10.0 (118.7) 11.9 _________________________________________________________________________________________
Tax expense (benefit) differs from the amounts computed by applying the U.S. Federal tax rate of 35% to earnings (loss) before income tax. The reasons for the differences are as follows:
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Computed "expected" tax expense (benefit) $ 10.1 (121.0) 8.6 Increases (reductions) in taxes resulting from: Increase in Federal income tax rate - - 3.0 Equity in earnings of foreign affiliates (4.3) 4.5 (7.4) Foreign income taxes, net of Federal income tax benefit 4.5 (2.0) 8.4 Employee benefit plans (1.8) (1.1) (.9) Percentage depletion (.2) (.2) (.1) Other 1.7 1.1 .3 _________________________________________________________________________________________ $ 10.0 (118.7) 11.9 _________________________________________________________________________________________
Total income tax expense (benefit) was allocated as follows:
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Income (loss) before extraordinary item and changes in accounting principles $ 10.0 (118.7) 11.9 Loss on early retirement of debt - - (1.7) Change in accounting principle for income taxes - - (13.7) Change in accounting principle for postretirement benefits - - (7.0) Stockholders' equity for compensation expense for tax purposes in excess of amount recognized for financial reporting purposes (.2) (1.0) (1.8) _________________________________________________________________________________________ $ 9.8 (119.7) (12.3) _________________________________________________________________________________________
The significant components of income tax expense (benefit) attri- butable to income from continuing operations are as follows:
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Current tax expense (benefit) $ (1.3) (7.5) 2.7 Deferred tax expense (benefit) (exclusive of the effects of other components listed below) 11.3 (2.5) 6.2 Deferred tax benefits related to write-down of petroleum assets - (108.7) - Adjustments to deferred tax assets and liabilities for increase in Federal income tax rate - - 3.0 _________________________________________________________________________________________ $ 10.0 (118.7) 11.9 _________________________________________________________________________________________
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Deferred tax assets: Deferred foreign tax credits $ 42.5 32.3 22.8 Foreign tax credit carryforwards 6.5 11.7 10.2 Federal net operating loss carryforwards 44.0 36.4 - Alternative minimum tax credit carryforwards 2.1 1.9 5.2 Employee benefits 16.0 19.0 18.7 Other 10.9 10.3 12.8 _________________________________________________________________________________________ Total gross deferred tax assets 122.0 111.6 69.7 Less valuation allowance (31.9) (28.3) (17.8) _________________________________________________________________________________________ Net deferred tax assets 90.1 83.3 51.9 _________________________________________________________________________________________ (continued)
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Deferred tax liabilities: Property, plant and equipment, principally due to differences in depreciation and capitalized interest (114.4) (90.7) (178.7) Other (24.4) (30.0) (21.8) _________________________________________________________________________________________ Total gross deferred tax liabilities (138.8) (120.7) (200.5) _________________________________________________________________________________________ $ (48.7) (37.4) (148.6) _________________________________________________________________________________________
The net changes in the valuation allowance for the years ended December 31, 1995, 1994 and 1993 were increases of $3.6 million, $10.5 million and $3 million, respectively. These changes were made to provide for uncertainties surrounding the realization of certain foreign tax credit carryforwards. The remaining balance of the deferred tax assets should be realized through future operating results and the reversal of taxable temporary differences. For the years ended December 31, 1995, 1994 and 1993, the Company's net cash payments (refunds) of income taxes totaled $.7 million, $(1.1) million and $7.1 million, respectively. At December 31, 1995, the Company has foreign tax credit carryforwards for Federal income tax purposes of $6.5 million which are available through 1997 to offset future Federal income taxes, if any. The Company has Federal net operating loss carryforwards totaling $125.9 million which are available to offset future Federal taxable income through 2009. The Company also has alternative minimum tax credit carryforwards of $2.1 million which are available to reduce Federal regular income taxes, if any, over an indefinite period. 13. Retirement Benefits The Company has a noncontributory defined benefit pension plan covering all eligible employees, with benefits based on years of service and the employee's highest three-year average monthly earnings. The Company's funding policy is intended to provide for both benefits attributed to service to-date and for those expected to be earned in the future. Plan assets consist primarily of stocks, bonds and short-term cash investments, including 51,971 shares of Company capital stock as of December 31, 1995 and 1994 with market values of $2.2 million and $1.9 million, respectively. Funding requirements for the years ended December 31, 1995 and 1994 amounted to $5.6 million and $5.5 million, respectively. The following tables set forth the plan's funded status and amounts recognized in the statements of financial position and results of operations at December 31:
(Millions of dollars) 1995 1994 _________________________________________________________________________________________ Accumulated benefit obligation, including vested benefits of $24.3 and $16.1 $ 24.9 16.8 _________________________________________________________________________________________ Projected benefit obligation (37.2) (25.5) Plan assets at fair market value 23.8 17.5 _________________________________________________________________________________________ Plan assets under projected benefit obligation (13.4) (8.0) Additional minimum liability (1.1) - Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 13.4 9.3 Unrecognized net asset being recognized over 15 years (.8) (1.0) _________________________________________________________________________________________ Prepaid (accrued) pension cost $ (1.9) .3 _________________________________________________________________________________________
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Service cost $ 2.5 3.4 1.8 Interest cost 2.0 2.0 1.4 Actual (gain) loss on plan assets (5.0) .4 (1.3) Net amortization and deferral 3.7 (1.1) .1 _________________________________________________________________________________________ Net pension expense $ 3.2 4.7 2.0 _________________________________________________________________________________________ Discount rate 7-1/4% 8% 7-1/4% _________________________________________________________________________________________ Compensation increase 5% 5% 5% _________________________________________________________________________________________ _________________________________________________________________________________________ Return on assets 9% 9% 9% _________________________________________________________________________________________
The Company has postretirement medical and dental care plans for all eligible retirees and their dependents with eligibility based on age and years of service upon retirement. The Company also maintains a Medicare Part B reimbursement plan and life insurance coverage for a closed group of retirees of a former subsidiary for which estimated benefits of approximately $4.7 million were accrued at December 31, 1992. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106) - "Employers' Accounting for Postretirement Benefits Other than Pensions," which changed the Company's practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. Upon adoption, the Company recorded a transition liability of approximately $20.5 million ($13.5 million after income taxes) as a one-time, non-cash charge against earnings in the first quarter of 1993. The postretirement benefit plans are unfunded and the Company continues to fund claims on a cash basis. The following tables set forth the amounts recognized in the statements of financial position and results of operations at December 31: (Millions of dollars) 1995 1994 _________________________________________________________________________________________ Accumulated postretirement benefit obligation: Retirees $ (21.8) (21.3) Employees eligible to retire (3.4) (2.4) Other employees (5.6) (4.3) _________________________________________________________________________________________ (30.8) (28.0) Unrecognized net loss 3.1 1.1 _________________________________________________________________________________________ Accrued postretirement benefit cost $ (27.7) (26.9) _________________________________________________________________________________________
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Service cost $1.1 1.3 .8 Interest cost 2.2 2.1 2.1 _________________________________________________________________________________________ Net postretirement benefit cost $3.3 3.4 2.9 _________________________________________________________________________________________
Assumptions utilized to measure the accumulated postretirement obligation at December 31, 1995 and 1994 were: discount rates of 7-1/4% and 8%, respectively; health care cost trend rates of 9% and 12%, respectively, both declining to 5% in the year 2003 and held constant thereafter. A 1% increase in the assumed trend rates would have resulted in increases in the accumulated postretirement benefit obligation at December 31, 1995 and 1994 of $2.7 million and $1.7 million, respectively; the aggregate of service cost and interest cost for the years ended December 31, 1995 and 1994 would have increased by $.5 million and $.5 million, respectively. 14. Capital Stock, Options and Rights In November 1993, the Company completed a public offering of 4.4 million shares of capital stock at a price of $44.625 per share. The capital stock was taken from the Company's treasury at an average cost of $33.125 per share. The excess of net proceeds over the cost of treasury stock issued was credited to additional paid- in capital. The net proceeds of the offering, after underwriting commissions and expenses, were approximately $188.8 million. Under the 1988 Long-term Stock Incentive Plan, the Company may grant to officers and key employees stock options, stock appreciation rights, performance shares, performance units, restricted stock or restricted stock units for up to 2.8 million shares of the Company's capital stock. Stock options are exercisable at the market price on the date of the grant, generally over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant; all options expire ten years from the date of grant. In 1995, 1994 and 1993, options for 447,700 shares, 250,100 shares and 257,700 shares were granted, respectively. The restricted stock and performance shares awarded under the plan entitle the grantee to the rights of a shareholder, including the right to receive dividends and to vote such shares, but the shares are restricted as to sale, transfer or encumbrance. Restricted stock is released to the grantee over varying periods after a one-year waiting period has expired. In 1995, 1994 and 1993, awards were granted for 11,000 shares, 9,000 shares and 34,250 shares of restricted stock, respectively. In 1995 and 1994, 16,088 shares and 12,081 shares were released to grantees; none were released in 1993. The performance cycle consists of a three- year period, beginning with the year of grant, at the end of which certain performance goals must be attained by the Company for the unrestricted performance shares to be issued to the grantee. Awards granted in 1995, 1994 and 1993 for performance shares amounted to 29,700 shares, 19,500 shares and 18,900 shares, respectively. Performance shares issued in 1995, 1994 and 1993 amounted to 16,228 shares, 10,496 shares and 15,257 shares, respectively. Restricted stock and performance share awards are "compensatory" awards and the Company accrued compensation expense of $1.2 million, $1 million and $.7 million in 1995, 1994 and 1993, respectively. Under the 1990 Stock Option Plan for Non-Employee Directors, which expired in May 1994, the Company could grant stock options to non- employee directors for up to 150,000 shares of the Company's capital stock. In May 1995, the shareholders approved the 1995 Stock Option Plan for Non-Employee Directors under which the Company may grant stock options to non-employee directors for up to an additional 150,000 shares. As prescribed by the plans, the options are exercisable at the market price at the date of grant over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant; all options expire ten years from the date of grant. Awards for 20,000 shares, 22,500 shares and 20,000 shares were granted in 1995, 1994 and 1993, respectively. At December 31, 1995, 587,686 shares of capital stock were reserved for future grants under all plans. Total grants outstanding under the plans and the changes therein for the periods indicated follows:
Number Option of shares price range __________________________________________________________________________________________ Outstanding at December 31, 1992 1,719,353 $27 1/8 - 45 1/2 Granted 330,850 44 3/8 - 45 7/16 Cancelled (6,354) 29 3/4 - 45 7/16 Exercised (453,085) 27 1/8 - 39 11/16 __________________________________________________________________________________________ Outstanding at December 31, 1993 1,590,764 27 1/8 - 45 7/16 Granted 301,100 36 - 41 1/4 Cancelled (25,627) 29 3/4 - 45 1/2 Exercised (226,952) 29 3/4 - 39 11/16 __________________________________________________________________________________________ Outstanding at December 31, 1994 1,639,285 27 1/8 - 45 1/2 Granted 508,400 35 9/16 - 37 11/16 Cancelled (26,714) 35 9/16 - 44 7/8 Exercised (112,066) 27 1/8 - 39 11/16 __________________________________________________________________________________________ Outstanding at December 31, 1995 2,008,905 27 1/8 - 45 1/2 __________________________________________________________________________________________ Exercisable at December 31, 1995 1,380,383 27 1/8 - 45 1/2 __________________________________________________________________________________________ Weighted average prices: Outstanding at December 31, 1995 $ 36 3/16 Exercisable at December 31, 1995 36 3/8 __________________________________________________________________________________________
In October 1995, Statement of Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation," was issued. SFAS No. 123 encourages a fair value based method of accounting for the compensation costs associated with employee stock option and similar plans. However, it also permits the continued use of the intrinsic value based method prescribed by the Accounting Principles Board's Opinion No. 25 (Opinion No. 25), "Accounting for Stock Issued to Employees." If the accounting prescribed by Opinion No. 25 is continued, then pro forma disclosure of net income and earnings per share must be presented as if the method of accounting defined in SFAS No. 123 had been applied in both 1995 and 1996. SFAS No. 123 is effective for the Company's 1996 fiscal year, though it may be adopted earlier. The Company has elected to continue to apply the provisions of Opinion No. 25 and will calculate compensation cost prescribed by SFAS No. 123 and present pro forma disclosures in 1996. Until such calculations are completed, the Company cannot estimate the impact such will have on the pro forma disclosures. In 1986, the Company's Board of Directors declared a dividend to shareholders consisting of one Capital Stock Purchase Right on each outstanding share of capital stock. A Right will also be issued with each share of capital stock that becomes outstanding prior to the time the Rights become exercisable or expire. If a person or group acquires beneficial ownership of 20% or more, or announces a tender offer that would result in beneficial ownership of 20% or more, of the shares of outstanding capital stock, the Rights become exercisable ten days thereafter and each Right will entitle its holder to purchase one share of capital stock for $90. If the Company is acquired in a business combination transaction, each Right not owned by the 20% holder will entitle its holder to purchase, for $90, common shares of the acquiring company having a market value of $180. Alternatively, if a 20% holder were to acquire the Company by means of a reverse merger in which the Company and its capital stock survive or were to engage in certain "self-dealing" transactions, or if a person or group were to acquire 30% or more of the outstanding capital stock (other than pursuant to a cash offer for all shares), each Right not owned by the acquiring person would entitle its holder to purchase, for $90, capital stock of the Company having a market value of $180. Each Right can be redeemed by the Company for $.05, subject to the occurrence of certain events and other restrictions, and expires in June 1996. These Rights may cause substantial ownership dilution to a person or group who attempts to acquire the Company without approval of the Company's Board of Directors. The Rights should not interfere with a business combination transaction that has been approved by the Board of Directors. 15. Contingencies The Company has been notified by the U.S. Environmental Protection Agency that it is one of many Potentially Responsible Parties (PRP) with respect to certain National Priorities List sites. Based on its evaluation of the potential total cleanup costs, its estimate of its potential exposure, and the viability of the other PRP's, the Company believes that any costs ultimately required to be borne by it at these sites will not have a material adverse effect on its results of operations, cash flow or financial position. The Company is subject to other legal proceedings, claims and liabilities which arise in the ordinary course of its business. In the opinion of Management, the amount of ultimate liability with respect to these actions will not have a material adverse effect on results of operations, cash flow or financial position of the Company. 16. Petroleum Segment Information*
(Millions of dollars) 1995 1994 1993 _________________________________________________________________________________________ Sales to unaffiliated customers: Domestic $ 662.0 678.1 692.9 North Sea 133.9 92.9 40.3 Other foreign 26.3 18.3 60.6 _________________________________________________________________________________________ 822.2 789.3 793.8 Interest and other income 8.3 12.2 21.6 _________________________________________________________________________________________ Total revenues $ 830.5 801.5 815.4 _________________________________________________________________________________________ Earnings (loss) before income taxes: Operating profit (loss): Domestic 92.3 (265.7) 79.2 North Sea 33.8 5.5 (7.7) Other foreign (15.9) (30.7) 16.5 _________________________________________________________________________________________ 110.2 (290.9) 88.0 Other income (expense), net (81.4) (54.7) (63.4) _________________________________________________________________________________________ Earnings (loss) before income taxes $ 28.8 (345.6) 24.6 _________________________________________________________________________________________ Identifiable industry assets: Domestic 824.0 793.9 1,089.6 North Sea 495.6 518.8 523.2 Other foreign 78.5 92.6 99.5 _________________________________________________________________________________________ 1,398.1 1,405.3 1,712.3 Other assets 69.6 72.8 126.4 _________________________________________________________________________________________ Total assets $1,467.7 1,478.1 1,838.7 _________________________________________________________________________________________ Depletion, depreciation and amortization: Petroleum 156.1 196.7 123.4 Other 5.7 5.5 6.4 _________________________________________________________________________________________ $ 161.8 202.2 129.8 _________________________________________________________________________________________ Capital expenditures: Exploration: Domestic 51.8 55.3 31.2 North Sea .4 1.6 1.8 Other foreign 14.1 16.5 10.0 _________________________________________________________________________________________ 66.3 73.4 43.0 _________________________________________________________________________________________ Development: Domestic 69.5 75.4 58.0 North Sea 16.9 18.2 37.6 Other foreign 11.2 16.0 3.1 _________________________________________________________________________________________ 97.6 109.6 98.7 _________________________________________________________________________________________ Refining and marketing 3.5 31.1 18.4 _________________________________________________________________________________________ 167.4 214.1 160.1 Capitalized interest 15.7 22.3 18.7 Other 4.2 3.8 3.5 _________________________________________________________________________________________ $ 187.3 240.2 182.3 _________________________________________________________________________________________ * Includes nonrecurring charges/credits as follows: 1995 - see Note 3. 1994 - see Notes 2, 3 and 5. 1993 - see Notes 3, 6, 7, 11 and 12. /TABLE _________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS _________________________________________________________________ REVIEW OF OPERATIONS (1995 vs 1994) The Company reported net income of $18.8 million in 1995. This was a significant improvement over the 1994 net loss of $27.6 million (before inclusion of the 1994 write-down of the Company's oil and gas properties and refining assets and certain nonrecurring gains discussed below). The improvement was primarily a result of higher oil and gas revenues and lower depletion, depreciation and amortization expenses. Oil and Gas Operations Revenues from oil and gas operations were up $44 million from 1994. Liquids revenues were up almost $43 million due to higher crude oil prices ($27 million) and volumes ($11 million). Natural gas revenues were up almost $3 million due to higher domestic and North Sea deliveries ($24 million). The effect of lower natural gas prices ($21 million) partially offset the higher revenues. Crude oil volumes were higher in 1995 due to a 2,500 barrel per day (BPD) increase in North Sea operations and a 1,400 BPD increase in other foreign operations. North Sea volumes were up primarily due to higher volumes from new wells onstream at the Brae and T-Block Complexes. Volumes from other foreign operations were up in 1995 primarily due to the initiation of oil production from the KG Field and entitlement adjustments in the KAKAP concession, offshore Indonesia. These production increases at North Sea and other foreign properties were partially offset by natural declines at mature producing properties. Domestic volumes were down 1,800 BPD primarily due to natural declines at mature producing properties and production interruptions resulting from weather, maintenance, and drilling activities. The reduction in domestic volumes was partially offset by production from new south Louisiana wells onstream. Natural gas deliveries were up 35 million cubic feet per day (MMCFD) in 1995. Volumes from the North Sea rose 22 MMCFD in 1995 primarily due to the late-1994 initiation of North Sea gas sales through the SAGE Pipeline System and a full year's gas sales from the Brae and T-Block Complexes. An improvement in domestic deliveries, which accounted for 11 MMCFD of the increase, was due to new wells onstream. These domestic and North Sea increases were partially offset by the effects of natural declines at mature producing properties, the voluntary curtailment of some domestic sales volumes in response to low prices, domestic wells shut-in for weather, maintenance and drilling activities, and the sale of certain oil and gas properties. Also, contributing to the increase, were higher volumes from the Company's 50%-owned affiliate, CLAM Petroleum Company, due in part to successful development drilling. Lease operating and facility expenses were unchanged during the current year as higher operating and facilities expenses associated with new producing wells were almost offset by lower repair and maintenance costs. Depletion, depreciation and amortization (DD&A) was $40 million lower in 1995 primarily due to the impact of the 1994 write-down of petroleum assets ($49 million) and natural production declines on mature producing properties ($32 million). These reductions were partially offset by DD&A associated with new wells onstream in 1995 ($18 million) and higher production at the Brae and T-Block Complexes ($20 million). Dry holes and exploratory charges were down $1 million in 1995 due to lower costs incurred for seismic and the write-off of unsuccessful wells. Higher lease impairment partially offset the reduction in dry holes and exploratory charges. Interest and debt expenses were up $13 million due to a reduction in the amount of interest capitalized and higher average interest rates. Refining Operations Refining operations resulted in a pretax operating profit of $2.6 million, compared to the $2.1 million operating profit (before the $39 million write-down of refinery assets) reported in 1994. The favorable impact of lower crude oil feedstock costs ($2 million) and operating expenses ($3 million) more than offset the effect of revenue declines ($3 million). Revenues were down as a result of lower sales volumes ($20 million), despite an increase in product prices ($17 million). REVIEW OF OPERATIONS (1994 vs 1993) The Company reported a $226.9 million net loss in 1994 primarily as a result of fourth quarter nonrecurring charges totaling $319 million ($210.3 million after tax). The non-recurring charges were related to a change in the procedure for assessing impairment of the capitalized costs of the Company's assets which resulted in a $280 million ($185 million after tax) write-down of oil and gas properties and the write-down of the Company's refinery assets by $39 million ($25.3 million after tax). In 1993, the Company reported net earnings of $9.6 million, which included nonrecurring and extraordinary items as discussed below. Before inclusion of the write-down of these assets and certain nonrecurring gains, the Company's net loss totaled $27.6 million in 1994 reflecting lower gross revenues and higher costs and expenses. Gross revenues, which fell $14 million from the 1993 level, was significantly impacted by declining worldwide crude oil prices and domestic natural gas and refined product prices. Costs and expenses increased due to higher lease operating, depletion, depreciation and amortization and exploration expenses. Partially offsetting the adverse effect of these items were a $10 million pretax gain ($6.5 million after tax) on the reversal of a previously established provision for the settlement of the Texaco litigation and a $6.8 million pretax gain ($4.4 million after tax) on the sale of oil and gas properties. Oil and Gas Operations Revenues from oil and gas operations were up $51 million from 1993. Liquids revenues were up almost $26 million due to increased crude oil volumes ($38 million), and natural gas revenues were up $23 million primarily due to higher domestic deliveries ($41 million). The higher revenues from increased crude oil and natural gas production exceeded the effect of declining worldwide crude oil prices ($12 million) and lower domestic natural gas prices ($20 million). Crude oil volumes were higher in 1994 due to an 8,200 BPD increase in North Sea operations and an 800 BPD increase in domestic operations. North Sea volumes were up primarily due to the late- 1993 T-Block acquisition and new wells onstream at Brae Field. Domestic volumes were up primarily due to the late-1993 acquisition of NERCO and new domestic wells onstream. These production increases at domestic and North Sea properties were partially offset by natural declines at mature producing properties. Volumes from other foreign operations were down 3,000 BPD primarily due to the sale of certain Canadian properties in late 1993. Natural gas deliveries were up 57 MMCFD in 1994. An improvement in domestic deliveries, which accounted for 49 MMCFD of the increase, was due to the acquisition of NERCO, new wells onstream and the return to production of wells which were shut-in for repairs and maintenance during the prior year. North Sea natural gas sales volumes, which were 5 MMCFD higher due to the completion of the SAGE Pipeline System during 1994, also contributed to the increase. These increases were partially offset by the effects of natural declines at mature producing properties, the sales of a limited number of domestic properties in 1994 and certain Canadian properties in late 1993, and the voluntary curtailment of some domestic sales volumes in the second half of 1994 in response to low prices. Lease operating and facility expenses increased $9 million during the current year primarily due to additional operating expenses for properties acquired in late 1993 and higher repair and maintenance costs on older properties. These costs were partially offset by lower operating expenses and workover costs on existing properties. Depletion, depreciation and amortization was $72 million higher in 1994 than in the prior year due primarily to DD&A on properties and working interests acquired in late 1993 and new producing wells onstream in 1994. The increase was partially offset by the reduc- tion in DD&A for the Canadian properties sold in 1993. Dry holes and exploratory charges were up $21 million in 1994 due to the write-off of unsuccessful wells and higher domestic seismic costs incurred and lease impairment. Interest and debt expenses were down $3 million primarily due to increased interest capitalized on qualifying projects and the inclusion in the prior year of the aforementioned $6.7 million write-off of debt-issue costs. Refining Operations Refining operations resulted in a pretax operating profit of $2 million in 1994 (before the $39 million write-down of refinery assets), compared to a $10 million pretax operating loss in the prior year. The favorable impact of lower crude oil feedstock costs ($50 million) due to lower prices ($32 million) and volumes ($12 million) and the inclusion in the prior year's costs of the $6 million inventory write-down more than offset the effect of higher operating expenses ($4 million) and revenue declines ($36 million). Revenues were down as a result of lower sales volumes ($12 million) and product prices ($24 million). LIQUIDITY AND CAPITAL RESOURCES In 1995, the Company generated approximately $220 million in cash from operations which, along with advances against cash surrender values of life insurance policies ($9 million), proceeds from asset sales ($21 million) and available cash, was utilized for capital projects ($191 million), repayment of long-term debt ($48 million) and dividends ($8 million). The Company expects that its 1996 capital and exploration program, presently estimated at approximately $228 million, will be financed substantially by internally generated funds and the proceeds from sales of nonstrategic assets. The Company continues to pursue the sale or other alternatives for its Mobile Refinery. The Company does not expect to realize any significant losses from these sales. The Company's expenditures are continually reviewed, and revised as necessary, based on perceived current and long-term economic conditions. As explained in Note 15, the Company has been notified by the U.S. Environmental Protection Agency that it is one of many Potentially Responsible Parties with respect to certain National Priorities List sites. In the opinion of Management, the ultimate liability with respect to these matters will not have a material adverse effect on the results of operations, cash flow or financial position of the Company. As explained in Note 9, the Company uses derivative financial instruments to manage well-defined interest rate, foreign currency and commodity price risks and does not use them for speculative purposes. CAPITAL STOCK, DIVIDENDS AND OTHER MARKET DATA The Company's capital stock is listed and traded on the New York Stock Exchange, the London Stock Exchange and the Swiss Stock Exchanges (Basle, Geneva and Zurich). As of February 26, 1996, there were 6,786 holders of record. The quarterly market prices for the past two years and the cash dividends paid in each period are presented in the table on page 72. In January 1995, the Company announced that its quarterly dividend of $0.25 per share was being reduced to $0.06 per share with the savings being redirected to the capital and exploration program. In November 1993, 4.4 million of the Company's treasury shares were issued in a public offering. (See Note 14 of "Notes to Consolidated Financial Statements.") The remaining 4.5 million shares being held as treasury shares continue to afford the Company financial flexibility to respond to financing and other opportunities that might arise. In 1986, the Company's Board of Directors declared a dividend to shareholders consisting of one Capital Stock Purchase Right on each outstanding share of capital stock. These rights may cause substantial ownership dilution to a person or group who attempts to acquire the Company without approval of the Company's Board of Directors. The rights should not interfere with a business combination transaction that has been approved by the Board of Directors. (See Note 14 of "Notes to Consolidated Financial Statements.") The Company has reserved 2,596,591 shares of its capital stock for future grants and exercises of stock options. (See Note 14 of "Notes to Consolidated Financial Statements.") NOTE: The accompanying consolidated financial statements and notes thereto and the unaudited supplemental data are an integral part of this discussion and analysis and should be read in conjunction herewith. _________________________________________________________________ DATA ON OIL AND GAS ACTIVITIES (Unaudited) _________________________________________________________________ Proved Reserves and Changes Therein The tables below set forth estimates of the proved reserves attributable to the working and royalty interests of the Company (net of royalties payable to other parties) along with a summary of the changes in the quantities of proved reserves during the periods indicated. Also set forth is the Company's 50% equity interest in the proved reserves of CLAM Petroleum Company. The Company emphasizes that the volumes of reserves shown below are estimates which, by their nature, are subject to revision. The estimates are made using all available geological and reservoir data as well as production performance data. These estimates are reviewed annually and revised, either upward or downward, as warranted by additional performance data. There have been no significant changes in the estimates of proved reserves since December 31, 1995.
Liquids (Millions of barrels) North Other Domestic Sea CLAM Foreign Total _________________________________________________________________________________________ Proved reserves at December 31, 1992 49.4 25.2 .4 15.7 90.7 Revisions of previous estimates (2.8) (.2) - 2.5 (.5) Purchase of reserves in place 11.9 17.5 - - 29.4 Extensions, discoveries and other additions 1.7 - - .8 2.5 Production (8.8) (2.5) - (2.4) (13.7) Sales of reserves in place (.2) - - (5.1) (5.3) _________________________________________________________________________________________ Proved reserves at December 31, 1993 51.2 40.0 .4 11.5 103.1 Revisions of previous estimates 2.8 (2.6) (.1) (.1) - Extensions, discoveries and other additions 8.6 2.3 - - 10.9 Production (9.1) (5.6) - (1.2) (15.9) Sales of reserves in place (1.0) - - - (1.0) _________________________________________________________________________________________ Proved reserves at December 31, 1994 52.5 34.1 .3 10.2 97.1 Revisions of previous estimates 4.8 (4.3) - .5 1.0 Purchase of reserves in place .2 - - - .2 Extensions, discoveries and other additions 12.8 4.8 - .5 18.1 Production (8.7) (6.6) - (1.8) (17.1) Sales of reserves in place (.9) - - (1.6) (2.5) _________________________________________________________________________________________ Proved reserves at December 31, 1995 60.7 28.0 .3 7.8 96.8 _________________________________________________________________________________________ Proved-developed reserves at December 31, 1993 47.0 36.9 .3 5.7 89.9 _________________________________________________________________________________________ 1994 48.1 32.7 .2 4.4 85.4 _________________________________________________________________________________________ 1995 56.7 23.7 .2 6.4 87.0 _________________________________________________________________________________________ /TABLE
Gas (Billions of cubic feet) North Other Domestic Sea CLAM Foreign Total _________________________________________________________________________________________ Proved reserves at December 31, 1992 444.1 134.5 167.1 9.2 754.9 Revisions of previous estimates 20.5 (3.2) (.6) 1.0 17.7 Purchase of reserves in place 221.6 11.5 - - 233.1 Extensions, discoveries and other additions 12.2 - - 2.6 14.8 Production (65.6) (.1) (12.6) (1.9) (80.2) Sales of reserves in place (1.2) - - (3.2) (4.4) _________________________________________________________________________________________ Proved reserves at December 31, 1993 631.6 142.7 153.9 7.7 935.9 Revisions of previous estimates 16.6 (4.5) (2.8) (1.7) 7.6 Purchase of reserves in place 3.4 - - - 3.4 Extensions, discoveries and other additions 116.4 26.0 1.0 5.2 148.6 Production (83.6) (1.8) (14.6) (1.1) (101.1) Sales of reserves in place (10.7) - - - (10.7) _________________________________________________________________________________________ Proved reserves at December 31, 1994 673.7 162.4 137.5 10.1 983.7 Revisions of previous estimates 43.8 3.0 2.8 1.9 51.5 Purchase of reserves in place 16.3 - - - 16.3 Extensions, discoveries and other additions 48.6 9.0 - 6.5 64.1 Production (87.6) (9.8) (15.9) (.5) (113.8) Sales of reserves in place (5.2) - - (17.5) (22.7) _________________________________________________________________________________________ Proved reserves at December 31, 1995 689.6 164.6 124.4 .5 979.1 _________________________________________________________________________________________ Proved-developed reserves at December 31, 1993 405.9 132.9 118.9 7.7 665.4 _________________________________________________________________________________________ 1994 493.5 146.4 116.1 10.1 766.1 _________________________________________________________________________________________ 1995 520.7 159.7 111.1 .5 792.0 _________________________________________________________________________________________
The table below sets forth estimates of the domestic sulfur reserves attributable to the Company's interests as of December 31:
Proved- (Thousands of long tons) Proved developed _________________________________________________________________________________________ 1993 583.6 226.1 _________________________________________________________________________________________ 1994 670.3 670.3 _________________________________________________________________________________________ 1995 974.7 974.7 _________________________________________________________________________________________
_________________________________________________________________ Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves The following supplemental data on the Company's oil and gas activities were prepared in accordance with the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards No. 69 - "Disclosures About Oil and Gas Producing Activities." Estimated future net cash flows are determined by: (1) applying the respective yearend oil and gas prices to the Company's estimates of future production of proved reserves; (2) deducting estimates of the future costs of development and production of proved reserves based on the assumed continuation of the cost levels and economic conditions existing at the respective yearend; and (3) deducting estimates of future income taxes based on the respective yearend and future statutory tax rates. Present value is determined using the FASB-prescribed discount rate of 10% per annum. Although the information presented is based on the Company's best estimates of the required data, the methods and assumptions used in preparing the data were those prescribed by the FASB. Although unrealistic, they were specified in order to achieve uniformity in assumptions and to provide for the use of reasonably objective data. It is important to note here that this information is neither fair market value nor the present value of future cash flows and it does not reflect changes in oil and gas prices experienced since the respective yearend. It is primarily a tool designed by the FASB to allow for a reasonable comparison of oil and gas reserves and changes therein through the use of a standardized method. Accordingly, the Company cautions that this data should not be used for other than its intended purpose. _________________________________________________________________________________________ STANDARDIZED MEASURE AT DECEMBER 31, 1995:
North Other (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Future cash inflows $2,680.4 903.7 140.8 3,724.9 Future production and development costs (1,047.2) (266.1) (75.4) (1,388.7) Future income tax expenses (367.2) (192.5) (21.3) (581.0) _________________________________________________________________________________________ Future net cash flows 1,266.0 445.1 44.1 1,755.2 10% annual discount for estimated timing of cash flows (416.3) (149.1) (10.1) (575.5) _________________________________________________________________________________________ Standardized measure of discounted future net cash flows $ 849.7 296.0 34.0 1,179.7 _________________________________________________________________________________________ CLAM $ - 28.8 - 28.8 _________________________________________________________________________________________
PRINCIPAL SOURCES OF CHANGE DURING 1995:
(Millions of dollars) _________________________________________________________________________________________ Sales and transfers, net of production costs $(330.5) Net change in prices and production costs 316.5 Extensions, discoveries and improved recovery, less related costs 211.3 Net change in future development costs (13.9) Previously estimated development costs incurred during the year 80.2 Revisions of previous reserve estimates 37.9 Purchase of reserves in place 20.5 Sales of reserves in place (38.1) Accretion of discount 113.3 Net change in income taxes (139.3) Other (6.1) _________________________________________________________________________________________ Net change $ 251.8 _________________________________________________________________________________________
_________________________________________________________________________________________ STANDARDIZED MEASURE AT DECEMBER 31, 1994:
North Other (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Future cash inflows $1,898.9 1,011.5 181.4 3,091.8 Future production and development costs (889.8) (254.9) (102.5) (1,247.2) Future income tax expenses (165.2) (234.2) (18.9) (418.3) _________________________________________________________________________________________ Future net cash flows 843.9 522.4 60.0 1,426.3 10% annual discount for estimated timing of cash flows (292.6) (179.1) (26.7) (498.4) _________________________________________________________________________________________ Standardized measure of discounted future net cash flows $ 551.3 343.3 33.3 927.9 _________________________________________________________________________________________ CLAM $ - 40.7 - 40.7 _________________________________________________________________________________________ Note: If the post yearend prices utilized by the Company in the write-down of its oil and gas properties (see Note 2 of "Notes to Consolidated Financial Statements") were applied, the undiscounted and discounted Standardized Measure would have been reduced to $1,287 million and $846 million, respectively.
PRINCIPAL SOURCES OF CHANGE DURING 1994:
(Millions of dollars) _________________________________________________________________________________________ Sales and transfers, net of production costs $(274.2) Net change in prices and production costs (81.2) Extensions, discoveries and improved recovery, less related costs 164.6 Net change in future development costs (27.4) Previously estimated development costs incurred during the year 107.6 Revisions of previous reserve estimates 5.9 Purchase of reserves in place 2.0 Sales of reserves in place (12.6) Accretion of discount 113.8 Net change in income taxes 27.2 Other (21.2) _________________________________________________________________________________________ Net change $ 4.5 _________________________________________________________________________________________
_________________________________________________________________________________________ STANDARDIZED MEASURE AT DECEMBER 31, 1993:
North Other (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Future cash inflows $2,153.6 933.2 160.1 3,246.9 Future production and development costs (996.1) (287.3) (110.2) (1,393.6) Future income tax expenses (228.1) (149.8) (9.6) (387.5) _________________________________________________________________________________________ Future net cash flows 929.4 496.1 40.3 1,465.8 10% annual discount for estimated timing of cash flows (347.6) (180.9) (13.9) (542.4) _________________________________________________________________________________________ Standardized measure of discounted future net cash flows $ 581.8 315.2 26.4 923.4 _________________________________________________________________________________________ CLAM $ - 51.8 - 51.8 _________________________________________________________________________________________
PRINCIPAL SOURCES OF CHANGE DURING 1993: (Millions of dollars) _________________________________________________________________________________________ Sales and transfers, net of production costs $(225.9) Net change in prices and production costs (209.6) Extensions, discoveries and improved recovery, less related costs 25.6 Net change in future development costs (14.6) Previously estimated development costs incurred during the year 56.6 Revisions of previous reserve estimates 10.1 Purchase of reserves in place 414.7 Sales of reserves in place (24.1) Accretion of discount 101.3 Net change in income taxes 100.6 Other (12.7) _________________________________________________________________________________________ Net change $ 222.0 _________________________________________________________________________________________
_________________________________________________________________________________________ RESULTS OF OPERATIONS FOR OIL AND GAS ACTIVITIES
Years ended December 31: North Other 19951 (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Revenues $306.82 133.9 26.3 467.0 Production costs (87.8) (39.9) (8.8) (136.5) Exploration expenses (45.9) (2.6) (19.8) (68.3) DD&A (83.1) (57.6) (13.6) (154.3) _________________________________________________________________________________________ 90.0 33.8 (15.9) 107.9 Income tax (expense) benefit (33.1) (15.9) 7.2 (41.8) _________________________________________________________________________________________ Earnings (loss)3 $ 56.9 17.9 (8.7) 66.1 _________________________________________________________________________________________ CLAM4 $ - 5.4 - 5.4 _________________________________________________________________________________________ 19941(Millions of dollars) _________________________________________________________________________________________ Revenues 316.82 92.9 18.3 428.0 Production costs (90.5) (36.9) (9.4) (136.8) Exploration expenses (44.8) (2.6) (22.3) (69.7) DD&A (142.6) (41.9) (8.9) (193.4) Write-down of oil and gas properties (265.6) (6.0) (8.4) (280.0) _________________________________________________________________________________________ (226.7) 5.5 (30.7) (251.9) Income tax (expense) benefit 79.0 (9.0) 13.6 83.6 _________________________________________________________________________________________ Earnings (loss)3 $(147.7) (3.5) (17.1) (168.3) _________________________________________________________________________________________ CLAM4 $ - 3.9 - 3.9 _________________________________________________________________________________________ 19931 (Millions of dollars) _________________________________________________________________________________________ Revenues 292.72 40.3 60.6 393.6 Production costs (83.8) (24.9) (17.8) (126.5) Exploration expenses (31.4) (3.8) (13.6) (48.8) DD&A (86.2) (19.3) (12.7) (118.2) _________________________________________________________________________________________ 91.3 (7.7) 16.5 100.1 Income tax (expense) benefit (32.0) 1.5 (6.8) (37.3) _________________________________________________________________________________________ Earnings (loss)3 $ 59.3 (6.2) 9.7 62.8 _________________________________________________________________________________________ CLAM4 $ - 2.3 - 2.3 _________________________________________________________________________________________ 1 Includes nonrecurring charges/credits as explained in "Notes to Consolidated Financial Statements" as follows: 1995 - see Note 3. 1994 - see Notes 2 and 3. 1993 - see Note 3. 2 Includes intercompany transfers to the Company's refinery of $28.0, $24.8 and $22.4 in 1995, 1994 and 1993, respectively. 3 Excludes other income, general and administrative expenses, and interest and debt expenses. 4 Represents the Company's equity in CLAM's net earnings after U.S. income taxes. See Note 7 of "Notes to Consolidated Financial Statements."
_________________________________________________________________________________________ COSTS INCURRED IN OIL AND GAS ACTIVITIES
Years ended December 31: North Other 1995 (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Property acquisition: Proved $ 9.2 .3 - 9.5 Unproved 4.3 - - 4.3 Exploration 55.7 .8 18.8 75.3 Development 60.3 16.6 11.2 88.1 _________________________________________________________________________________________ 129.5 17.7 30.0 177.2 Capitalized interest 4.4 10.3 1.0 15.7 _________________________________________________________________________________________ $ 133.9 28.0 31.0 192.9 _________________________________________________________________________________________ CLAM $ - 9.3 - 9.3 _________________________________________________________________________________________ 1994 (Millions of dollars) _________________________________________________________________________________________ Property acquisition: Proved 2.0 - - 2.0 Unproved 2.3 - 1.1 3.4 Exploration 69.5 2.5 20.0 92.0 Development 73.4 18.3 15.9 107.6 _________________________________________________________________________________________ 147.2 20.8 37.0 205.0 Capitalized interest 7.3 14.7 .3 22.3 _________________________________________________________________________________________ $ 154.5 35.5 37.3 227.3 _________________________________________________________________________________________ CLAM $ - 10.5 - 10.5 _________________________________________________________________________________________ 1993 (Millions of dollars) _________________________________________________________________________________________ Property acquisition: Proved 364.2 159.4 - 523.6 Unproved 4.5 40.8 1.2 46.5 Exploration 39.1 2.1 17.7 58.9 Development 52.2 24.2 3.1 79.5 _________________________________________________________________________________________ 460.0 226.5 22.0 708.5 Capitalized interest 3.9 14.8 - 18.7 _________________________________________________________________________________________ $ 463.9 241.3 22.0 727.2 _________________________________________________________________________________________ CLAM $ - 5.2 - 5.2 _________________________________________________________________________________________
_________________________________________________________________________________________ OIL AND GAS OPERATING DATA1
Years ended December 31: 1995 1994 19932 1992 1991 _________________________________________________________________________________________ CRUDE AND CONDENSATE3 Production (barrels per day): Domestic: Working interest 16,808 18,833 17,586 15,308 16,439 Royalty interest 3,945 3,678 4,161 4,070 4,070 _________________________________________________________________________________________ 20,753 22,511 21,747 19,378 20,509 North Sea (working interest) 17,250 14,769 6,529 6,258 8,352 Other foreign (working interest) 4,936 3,496 6,509 5,674 5,896 _________________________________________________________________________________________ 42,939 40,776 34,785 31,310 34,757 _________________________________________________________________________________________ Average price received (per barrel): Domestic $ 18.11 16.26 17.33 19.85 22.13 North Sea 17.29 16.01 16.20 19.11 19.96 Other foreign 15.12 12.63 14.40 14.98 14.53 Consolidated 17.44 15.86 16.57 18.82 20.32 _________________________________________________________________________________________ NATURAL GAS Production (thousands of cubic feet per day): Domestic: Working interest 209,876 203,700 155,917 119,050 124,592 Royalty interest 30,052 24,957 23,861 21,146 25,666 _________________________________________________________________________________________ 239,928 228,657 179,778 140,196 150,258 North Sea (working interest) 26,864 5,302 156 236 283 Other foreign (working interest) 1,379 3,018 5,316 4,871 4,388 CLAM Petroleum Company 43,550 40,003 34,608 40,485 48,772 _________________________________________________________________________________________ 311,721 276,980 219,858 185,788 203,701 _________________________________________________________________________________________ Average price received (per MCF): Domestic $ 1.73 1.95 2.19 1.75 1.53 North Sea 2.09 2.20 1.51 1.92 1.91 Other foreign 0.68 1.63 1.27 0.84 1.03 CLAM Petroleum Company 2.59 2.27 2.35 2.73 3.08 Consolidated 1.88 2.00 2.19 1.94 1.89 _________________________________________________________________________________________ PLANT PRODUCTS Production (barrels per day): Domestic (working interest) 2,936 2,475 2,377 2,294 2,145 North Sea (working interest) 1,015 552 352 461 510 Other foreign (working interest) 19 6 29 39 33 _________________________________________________________________________________________ 3,970 3,033 2,758 2,794 2,688 _________________________________________________________________________________________ Average price received (per barrel): Domestic $ 11.20 10.06 11.26 13.07 14.89 North Sea 13.49 11.28 12.62 14.47 16.93 Other foreign 10.67 7.84 11.97 12.68 13.12 Consolidated 11.78 10.28 11.44 13.29 15.26 _________________________________________________________________________________________ 1 Includes the Company's 50% equity interest in its unconsolidated affiliate, CLAM Petroleum Company. 2 Includes NERCO Oil & Gas, Inc. since October 1, 1993. 3 Before the elimination of intercompany transfers. /TABLE _________________________________________________________________________________________ REFINING OPERATING DATA
Years ended December 31: (Millions of dollars) 1995 1994 1993 1992 1991 _________________________________________________________________________________________ Refining operating profit (loss): Revenues: Refined products* $ 383.2 386.1 422.6 462.6 451.5 Other .3 2.1 1.9 .3 .2 _________________________________________________________________________________________ 383.5 388.2 424.5 462.9 451.7 _________________________________________________________________________________________ Costs and expenses: Cost of sales* 337.8 340.1 390.6 413.6 401.4 Operating expenses 38.1 39.2 35.2 31.4 32.4 Depreciation 1.8 3.3 5.2 5.0 4.7 Taxes, other than income 3.2 3.5 3.5 3.3 2.7 Write-down of refinery assets - 39.0 - - - _________________________________________________________________________________________ 380.9 425.1 434.5 453.3 441.2 _________________________________________________________________________________________ $ 2.6 (36.9) (10.0) 9.6 10.5 _________________________________________________________________________________________ *Before the elimination of intercompany transfers to the Company's refinery $ 28.0 24.8 22.4 20.7 18.7 _________________________________________________________________________________________ Sales (barrels per day): No. 2 fuel oil 9,586 11,572 11,471 12,471 11,079 Unleaded gasoline 21,777 22,571 22,747 23,640 21,675 Jet fuel 6,106 7,166 6,488 5,415 5,102 Naphtha 3,252 4,090 5,477 4,922 4,045 Other 9,514 7,505 8,347 6,880 6,987 _________________________________________________________________________________________ 50,235 52,904 54,530 53,328 48,888 _________________________________________________________________________________________ Average price received (per barrel) $ 20.90 20.00 21.24 23.70 25.30 _________________________________________________________________________________________
_________________________________________________________________________________________ OIL AND GAS PROPERTIES
December 31, 1995 Productive acreage Undeveloped acreage (Thousands of acres) Gross Net Gross Net _________________________________________________________________________________________ LEASEHOLDS AND OPTIONS Domestic: Offshore Gulf of Mexico 326.7 161.9 258.7 161.4 Louisiana 126.2 77.6 42.0 20.1 Alabama/Florida 9.8 8.1 .9 .6 Colorado/Utah .8 .1 105.2 51.8 Wyoming 42.9 12.4 203.2 86.0 Other 45.4 4.5 69.4 9.4 _________________________________________________________________________________________ 551.8 264.6 679.4 329.3 _________________________________________________________________________________________ North Sea: Netherlands 2.7 1.0 103.3 36.0 United Kingdom 19.1 1.2 133.4 11.1 _________________________________________________________________________________________ 21.8 2.2 236.7 47.1 _________________________________________________________________________________________ Other foreign: Algeria - - 1,552.9 1,009.4 Australia - - 139.1 46.3 Colombia 11.7 1.6 216.1 119.4 Indonesia 8.3 1.2 487.4 65.9 Papua New Guinea - - 730.4 320.1 Tunisia - - 1,021.0 510.5 Yemen - - 1,167.9 198.5 _________________________________________________________________________________________ 20.0 2.8 5,314.8 2,270.1 _________________________________________________________________________________________ FEE LANDS 89.0 89.0 505.0 505.0 _________________________________________________________________________________________ CLAM PETROLEUM COMPANY (50%) Netherlands-North Sea 41.0 6.3 622.9 114.0 _________________________________________________________________________________________ 723.6 364.9 7,358.8 3,265.5 _________________________________________________________________________________________
_______________________________________________________________________________________ WELLS DRILLED
Years ended December 31: 1995 1994 1993 1992 1991 _______________________________________________________________________________________ GROSS WELLS DRILLED (by location) Working interest Domestic: Offshore Gulf of Mexico 15 20 23 5 18 Louisiana 13 14 10 17 30 Oklahoma - - - - 25 Texas - - - - 3 Wyoming 1 4 6 2 9 Other - - - 1 - _______________________________________________________________________________________ 29 38 39 25 85 _______________________________________________________________________________________ North Sea: Netherlands 7 3 4 5 10 United Kingdom 8 6 5 8 4 _______________________________________________________________________________________ 15 9 9 13 14 _______________________________________________________________________________________ Other foreign: Canada 5 14 38 33 44 Colombia 1 2 - 3 2 Indonesia 9 - - - - Other 1 3 2 1 2 _______________________________________________________________________________________ 16 19 40 37 48 _______________________________________________________________________________________ Total working interest 60 66 88 75 147 Royalty interest 24 19 35 26 28 _______________________________________________________________________________________ Total wells 84 85 123 101 175 _______________________________________________________________________________________
GROSS (NET) WELLS DRILLED (by type)
Exploratory: Oil 14 (1.5) 15 (1.8) 34 (15.2) 26 (13.1) 33 (15.1) Gas 22 (6.8) 26 (10.3) 18 (3.9) 10 (2.5) 34 (12.4) Dry 17 (4.2) 22 (9.4) 31 (11.4) 28 (12.4) 74 (29.5) _______________________________________________________________________________________ 53 (12.5) 63 (21.5) 83 (30.5) 64 (28.0) 141 (57.0) _______________________________________________________________________________________ Development: Oil 22 (3.2) 7 (1.0) 17 (2.1) 22 (2.6) 23 (2.4) Gas 9 (2.6) 14 (3.3) 21 (3.4) 6 (1.4) 9 (1.5) Dry - - 1 (.1) 2 (.3) 9 (.7) 2 (.6) _______________________________________________________________________________________ 31 (5.8) 22 (4.4) 40 (5.8) 37 (4.7) 34 (4.5) _______________________________________________________________________________________ Total wells 84 (18.3) 85 (25.9) 123 (36.3) 101 (32.7) 175 (61.5) _______________________________________________________________________________________
_________________________________________________________________________________________ SELECTED FINANCIAL DATA
Years ended December 31: (Millions of dollars, except per share data) 1995* 1994* 1993* 1992* 1991 _________________________________________________________________________________________ Revenues $ 830.5 801.5 815.4 787.4 825.3 Operating profit (loss) $ 110.2 (290.9) 88.0 49.9 75.2 Net earnings (loss) $ 18.8 (226.9) 9.6 (6.8) 20.9 Earnings (loss) per share $ 0.56 (6.80) 0.33 (0.24) 0.74 Average shares (millions) 33.5 33.4 29.5 28.4 28.3 _________________________________________________________________________________________ Net cash flows from: Operating activities $ 220.5 212.1 178.9 178.7 209.2 Investing activities $ (174.0) (237.5) (722.3) (116.3) (180.7) Financing activities $ (48.7) 4.6 536.2 (48.6) (31.7) Working capital (deficit): End of year $ 6.0 (6.4) 15.6 (20.2) 24.2 Current ratio 1.03 .97 1.09 .88 1.15 _________________________________________________________________________________________ Total assets $ 1,467.7 1,478.1 1,838.7 1,209.1 1,252.8 Long-term debt $ 691.6 739.5 734.5 343.0 347.3 Stockholders' equity $ 370.7 352.4 599.8 416.6 446.5 Cash dividends per share $ 0.24 1.00 1.00 1.00 1.00 _________________________________________________________________________________________ * Includes nonrecurring charges/credits as explained in "Notes to Consolidated Financial Statements" as follows: 1995 - see Note 3. 1994 - see Notes 2, 3 and 5. 1993 - see Notes 3, 6, 7, 11 and 12. 1992 - In the first quarter of 1992, the Company recorded a charge of $54.2 million (before income tax benefits of approximately $17.8 million) against earnings to provide for the restructuring of its oil and gas operations. This charge included provisions for estimated losses on the disposition of selected domestic properties of $47.6 million (both developed and undeveloped) and costs associated with staff retirements, reductions and related transition expenses of $4.8 million. These charges were reduced by a $25 million (before income taxes of $8.5 million) reduction in the Company's litigation accrual for a State of Louisiana gas royalty claim. The Company completed the sale of substantially all of the selected properties for a purchase price of $48.1 million in the third quarter of 1992 resulting in a gain of approximately $8 million which was also applied against the restructuring charges.
_________________________________________________________________________________________ MARKET PRICE AND DIVIDEND DATA
Quarter Ended March 31 June 30 Sept. 30 Dec. 31 _________________________________________________________________________________________ 1995: Capital stock price: High $38 1/2 41 1/8 40 1/8 43 Low 31 1/4 35 3/8 35 35 1/8 Cash dividends per share 0.06 0.06 0.06 0.06 _________________________________________________________________________________________ 1994: Capital stock price: High $43 3/8 45 45 3/8 47 1/8 Low 35 1/8 35 7/8 40 7/8 36 3/8 Cash dividends per share 0.25 0.25 0.25 0.25 _________________________________________________________________________________________
_________________________________________________________________________________________ QUARTERLY DATA*
Quarter Ended (Millions of dollars, except per share data) March 31 June 30 Sept. 30 Dec. 31 _________________________________________________________________________________________ 1995: Revenues $193.1 213.1 212.0 212.3 Costs and expenses 187.7 203.3 209.2 201.5 _________________________________________________________________________________________ Earnings before income taxes 5.4 9.8 2.8 10.8 Income tax expense 1.9 3.4 1.0 3.7 _________________________________________________________________________________________ Net earnings $ 3.5 6.4 1.8 7.1 _________________________________________________________________________________________ Earnings per share $ 0.11 0.19 0.05 0.21 _________________________________________________________________________________________ Average shares 33.5 33.5 33.6 33.6 _________________________________________________________________________________________ 1994: Revenues 206.7 190.7 197.9 206.2 Costs and expenses 197.8 188.5 216.5 544.3 _________________________________________________________________________________________ Earnings (loss) before income taxes 8.9 2.2 (18.6) (338.1) Income tax expense (benefit) 2.7 1.6 (7.3) (115.7) _________________________________________________________________________________________ Net earnings (loss) $ 6.2 .6 (11.3) (222.4) _________________________________________________________________________________________ Earnings (loss) per share $ 0.19 0.02 (0.34) (6.64) _________________________________________________________________________________________ Average shares 33.3 33.4 33.4 33.5 _________________________________________________________________________________________ * Includes nonrecurring charges/credits as explained in "Notes to Consolidated Financial Statements" as follows: 1995 - see Note 3. 1994 - see Notes 2, 3 and 5.
Independent Auditors' Report The Partners MaraLou Netherlands Partnership: We have audited the accompanying consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MaraLou Netherlands Partnership and subsidiary as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in note 4 to the consolidated financial statements, the Partnership adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" in 1993. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Houston, Texas January 25, 1996 MARALOU NETHERLANDS PARTNERSHIP Consolidated Balance Sheets December 31, 1995 and 1994 (Expressed in U.S. Dollars)
ASSETS 1995 1994 Current assets: Cash and cash equivalents $ 8,362,890 4,120,901 Accounts receivable 18,195,607 15,596,130 Accounts receivable - net profits interest - 385,371 Income taxes receivable 1,897,581 3,708,460 Materials and supplies 132,839 197,812 Other current assets 30,514 6,606 Total current assets 28,619,431 24,015,280 Long-term receivable 6,250,390 5,774,218 Property, plant and equipment, at cost, based on the successful efforts method of accounting for oil and gas properties 381,561,020 370,624,832 Less accumulated depletion, amortization and depreciation 220,545,368 201,248,670 Net property, plant and equipment 161,015,652 169,376,162 Deferred charges 158,462 182,991 $ 196,043,935 199,348,651 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable - affiliated companies 209,655 63,109 Accounts payable - net profits interest 89,443 - Accrued liabilities 12,199,361 11,188,175 Amounts due to operators of joint ventures 3,429,466 1,315,712 Government royalties payable 1,658,735 1,387,035 Income taxes payable 772,540 1,893,523 Total current liabilities 18,359,200 15,847,554 Long-term debt 96,000,000 96,000,000 Deferred income taxes 30,265,085 28,725,590 Deferred liability - platform abandonment 22,027,271 21,011,173 Minority interest 1,980,114 2,263,549 Partners' capital: Marathon Petroleum Netherlands, Ltd. 6,704,238 10,748,498 LL&E (Netherlands), Inc. 6,704,238 10,748,498 Foreign currency translation adjustment 14,003,789 14,003,789 Total partners' capital 27,412,265 35,500,785 $ 196,043,935 199,348,651 See accompanying notes to consolidated financial statements. /TABLE MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Income Years Ended December 31, 1995, 1994 and 1993 (Expressed in U.S. Dollars)
1995 1994 1993 Revenues: Sales $ 85,789,643 68,663,916 61,152,082 Interest income 1,167,368 1,259,380 4,465,502 Total revenues 86,957,011 69,923,296 65,617,584 Costs and expenses: Costs and operating expenses 22,258,728 11,079,073 12,349,387 Exploration expenses, including dry hole costs 7,506,437 4,344,427 3,336,263 Depletion, amortization and depreciation 20,060,105 16,571,265 14,100,833 General and administrative expenses 6,611,751 5,691,285 4,950,135 Royalty expense 1,751,800 996,651 960,585 Net profits interest 585,859 96,232 336,356 Interest expense 6,765,432 5,467,221 7,222,385 Foreign exchange loss/(gain) (232,567) 543,705 (763,957) Total costs and expenses 65,307,545 44,789,859 42,491,987 Income before income taxes 21,649,466 25,133,437 23,125,597 Provision for income taxes 10,001,420 16,940,713 12,192,472 Income after income taxes 11,648,046 8,192,724 10,933,125 Minority interest 1,536,566 1,126,536 797,688 Income before cumulative effect of change in accounting principle 10,111,480 7,066,188 10,135,437 Cumulative effect of change in accounting principle for income taxes - - 6,003,589 Net income $ 10,111,480 7,066,188 4,131,848 See accompanying notes to consolidated financial statements.
MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Partners' Capital Years Ended December 31, 1995, 1994 and 1993 (Expressed in U.S. Dollars)
Marathon Petroleum L.L.&E. Netherlands, Inc. (Netherlands), Inc. Total Capital, January 1, 1995 $10,748,498 10,748,498 21,496,996 Net income 5,055,740 5,055,740 10,111,480 Distribution to Partners (9,100,000) (9,100,000) (18,200,000) Capital before adjustments $ 6,704,238 6,704,238 13,408,476 Foreign currency translation adjustment 14,003,789 Capital, December 31, 1995 27,412,265
Marathon Petroleum L.L.&E. Netherlands, Inc. (Netherlands), Inc. Total Capital, January 1, 1994 $12,675,404 12,675,404 25,350,808 Net income 3,533,094 3,533,094 7,066,188 Distribution to Partners (5,460,000) (5,460,000) (10,920,000) Capital before adjustments $10,748,498 10,748,498 21,496,996 Foreign currency translation adjustment 14,003,789 Capital, December 31, 1994 35,500,785
(Continued) MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Partners' Capital (Continued) Years Ended December 31, 1995, 1994 and 1993 (Expressed in U.S. Dollars)
Marathon Petroleum L.L.&E. Netherlands, Inc. (Netherlands), Inc. Total Capital, January 1, 1993 $19,709,480 19,709,480 39,418,960 Net income 2,065,924 2,065,924 4,131,848 Distribution to Partners (9,100,000) (9,100,000) (18,200,000) Capital before adjustments $12,675,404 12,675,404 25,350,808 Foreign currency translation adjustment 14,003,789 Capital, December 31, 1993 39,354,597 See accompanying notes to consolidated financial statements. /TABLE MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 (Expressed in U.S. Dollars)
1995 1994 1993 Cash flows from operating activities: Net income accruing to MaraLou partners $ 10,111,480 7,066,188 4,131,848 Net (loss)/income accruing to minority shareholders, net of cash distributions (283,434) 34,536 (1,022,312) Adjustments to reconcile net income to net cash provided by operating activities: Depletion, amortization, depreciation and abandonment 20,060,105 16,571,265 14,100,833 Dry hole costs 7,704,402 3,860,175 1,892,456 Deferred income taxes 431,900 9,021,323 (7,951,542) Exchange loss (gain) (193,026) 374,213 (175,868) Interest on EBN repayment 118,451 281,812 665,428 Cumulative effect of change in accounting principle - - 6,003,589 Decrease (increase) in accounts receivable (1,116,282) (2,041,325) 2,175,071 Decrease (increase) in accounts receivable - net profits interest 385,371 (19,222) (326,001) Decrease (increase) in materials and supplies 64,973 (190,902) (65) Decrease (increase) in other current assets (19,958) 206,155 (161,390) Decrease in deferred charges 25,291 64,096 18,201 (Decrease) increase in accounts payable-affiliates 148,198 (3,255) (6,535) (Decrease) increase in accounts payable-net profits interest 203,856 - (228,091) Increase in accrued liabilities 169,047 1,483,332 677,612 Increase (decrease) in amounts due to operators of joint ventures 1,885,328 (2,558,160) 4,676,131 (Decrease) increase in government royalties payable 49,040 (131,600) (865,267) (Decrease) increase in income taxes payable/receivable 445,126 (15,179,834) 8,415,273 Net cash provided by operating activities 40,189,868 18,838,797 32,019,371 Cash flows from investing activities: Capital expenditures (18,387,901) (24,241,343) (9,973,617) Net cash used in investing activities (18,387,901) (24,241,343) (9,973,617)
(Continued) MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Cash Flows (Continued) Years Ended December 31, 1995, 1994 and 1993 (Expressed in U.S. Dollars)
1995 1994 1993 Cash flows from financing activities: Borrowing under revolving credit agreement $ - 8,200,000 - Repayments under revolving credit agreement - - (10,000,000) Cash distribution to partners (18,200,000) (10,920,000) (18,200,000) Net cash used in financing activities (18,200,000) (2,720,000) (28,200,000) Effect of exchange rate on cash 640,022 766,758 (854,829) Net increase (decrease) in cash and cash equivalents 4,241,989 (7,355,788) (7,009,075) Cash and cash equivalents at beginning of year 4,120,901 11,476,689 18,485,764 Cash and cash equivalents at end of year $ 8,362,890 4,120,901 11,476,689 Supplemental disclosure of cash flow information: Cash paid (received) during the year for: Interest $ 7,166,142 4,487,259 5,543,844 Foreign taxes 11,682,068 23,621,088 13,746,175 Federal taxes (1,591,489) (518,116) (1,155,157) Supplemental schedule of noncash investing and financing activities: Long-term receivable for EBN reimbursement $ 476,172 154,362 (321,870) Accrued liability established for repayment to EBN 844,590 732,141 191,527 See accompanying notes to consolidated financial statements.
MARALOU NETHERLANDS PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 1. Organization and summary of significant accounting policies Organization and ownership: MaraLou Netherlands Partnership (MaraLou), a Texas general partnership, was formed on March 27, 1985 by LL&E (Netherlands), Inc. (LL&E Netherlands) and Marathon Petroleum Netherlands, Ltd. (Marathon Netherlands) for the purpose of owning their interests in CLAM Petroleum Company (CLAM) and for the purpose of purchasing the outstanding shares of CLAM held by Netherlands-Cities Service, Inc. On March 27, 1985 both partners agreed to contribute their respective ten thousand shares of CLAM to MaraLou. These shares were transferred to MaraLou on June 21, 1985. The remaining shares held by Netherlands-Cities Service, Inc. were acquired by MaraLou for $85,381,881 on March 29, 1985. The acquisition has been accounted for using the purchase method of accounting effective January 1, 1985. On December 6, 1991 an agreement was concluded whereby LL&E Netherlands Petroleum Company, an affiliated company to LL&E Netherlands (both of which are wholly owned subsidiaries of The Louisiana Land and Exploration Company) contributed Netherlands North Sea license interests and other assets valued at $11,629,000 for five hundred newly issued shares of CLAM stock. For financial reporting purposes, the contribution made by LL&E Netherlands Petroleum Company in excess of its calculated minority interest is reflected in Partners' capital as an addition to the LL&E Netherlands capital balance. MaraLou made a cash contribution of $11,629,000 for an additional five hundred newly issued shares of CLAM stock. The contributed cash is to be used to develop the North Sea license interest contributed by LL&E Netherlands Petroleum Company. MaraLou subsequently sold all of its newly issued shares of CLAM stock to Marathon Netherlands, a partner in MaraLou, which purchased the shares with a note valued at $11,629,000, on which $6,000,000 was paid in 1991 and $6,000,000, inclusive of interest, was paid in 1992. These newly issued shares of CLAM stock have been pledged as security for MaraLou and CLAM's revolving credit agreement (see Note 6). CLAM Petroleum Company, a Delaware Corporation, was formed in October 1975 by LL&E Netherlands, Marathon Netherlands and Netherlands-Cities Service, Inc. (stockholders) for the purpose of owning their interest in certain licenses and agreements covering hydrocarbon operations in The Netherlands and for the purpose of entering into agreements with lending institutions to finance such interest. Effective May 24, 1976 the stockholders assigned their interests and obligations under the licenses and related agreements to CLAM. CLAM has no operations outside the oil and gas industry or in areas other than The Netherlands North Sea. The financial statements reflect the consolidation of CLAM Petroleum Company (the Company) with MaraLou for the period from January 1, 1985. The financial statements also reflect the interests and earnings of the minority shareholders, LL&E Netherlands Petroleum Company and Marathon Netherlands. Currently, MaraLou has no interests other than in the operation of CLAM. Joint venture agreements: CLAM, together with unrelated parties, has interests in certain prospecting and production licenses and related operating agreements which provide for the joint conduct of seismic, geological, exploration and development activities on the continental shelf of The Netherlands. The accompanying financial statements include CLAM's share of operations as reported to it by the operator of the joint venture. The amounts reported by the operator of the joint venture are subject to annual audits by the non-operators. A deter- mination is made annually as to the requirement for an audit based on the materiality of each operator's expenditures. The audit for the year 1994 has been conducted for the most significant joint venture with no material items discovered. The remaining operators' 1994 expenditures were not material to require an audit. Petroleum exploration and development costs: CLAM follows the successful efforts method of accounting for oil and gas properties. Exploration expenses, including geological and geophysical costs, prospecting costs, carrying costs and exploratory dry hole costs are charged against income as incurred. The acquisition costs of unproved properties are capitalized with appropriate provision for impairment based upon periodic assessments of such properties. All development costs, including development dry hole costs, are capitalized. Capitalized costs are adjusted annually for cash adjustments relating to changes in CLAM's share in gas reserve estimates (see Note 7). The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in March 1995. Effective December 31, 1995, CLAM adopted SFAS No. 121 and impairment of its long-lived assets was not required. Under SFAS No. 121, the Company performed its impairment review of proved gas and condensate properties on a depletable unit basis. For each depletable unit determined to be impaired, an impairment loss equal to the difference between the carrying value and the fair value of the depletable unit would be recognized. Fair value, on a depletable unit basis, was estimated to be the present value of expected future cash flows computed by applying estimated future gas and condensate prices, as determined by Management, to estimated future production of gas and condensate reserves over the economic lives of the reserves. Geographic concentration: All concessions in which CLAM has interests are located in the Netherlands. Use of estimates: Management of CLAM and MaraLou have made a number of estimates and assumptions relating to the reporting of assets and lia- bilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Depletion, amortization and depreciation: Depletion is provided under the unit-of-production method based upon estimates of proved-developed reserves. Depreci- ation is based on estimated useful life. Reserve determinations are management's best estimates and generally are related to economic and operating conditions. Depletion and depreciation rates are adjusted for future estimated salvage values. CLAM property, plant and equipment retirements: Upon sale or retirement of property, plant and equipment, the cost and related accumulated depletion, amortization and de- preciation are eliminated from the accounts and the gain or loss is reflected in income. CLAM platform abandonment amortization: Platform abandonment amortization is provided under the unit- of-production method based upon estimates of proved-developed reserves. Amortization rates are adjusted for future esti- mated abandonment costs. Platform abandonment amortization is charged to operating expense. 2. Related party transactions CLAM transactions with related parties consisted of charges for geological, geophysical and administrative services rendered by an affiliate under two service contracts and administrative services rendered by another affilate. Such charges were approximately $2,803,322, $2,183,002 and $2,512,536 for 1995, 1994 and 1993, respectively. Salaries and related social charges included therein amounted to $2,007,984, $1,449,062 and $1,685,046 for 1995, 1994 and 1993, respectively. MaraLou transactions with related parties consisted of charges for administrative services rendered by an affiliate amounting to $60,900, $59,880 and $55,800 in 1995, 1994 and 1993, respectively. 3. Property, plant and equipment Changes in property, plant and equipment for the years ended December 31, 1995, 1994 and 1993 are as follows (in thousands of U.S. dollars): Balance Additions Dry Hole Balance 12/31/94 (Reductions) Costs 12/31/95 Concession $ 8,275 (2,287) - 5,988 Wells and platforms 280,828 30,231 - 311,059 Incomplete construction 5,726 (5,726) - - Uncompleted wells 16,280 (5,667) (5,003) 5,610 Pipelines 51,870 27 - 51,897 Gas processing facilities 6,519 126 - 6,645 Furniture and fixtures 1,127 (765) - 362 370,625 15,939 (5,003) 381,561 Depletion and amortization 200,144 20,045 - 220,189 Depreciation-furniture and fixtures 1,105 (749) - 356 201,249 19,296 - 220,545 Net property, plant and equipment $ 169,376 161,016
Balance Additions Dry Hole Balance 12/31/93 (Reductions) Costs 12/31/94 Concession $ 11,678 (3,403) - 8,275 Wells and platforms 262,139 18,689 - 280,828 Incomplete construction 3,278 2,448 - 5,726 Uncompleted wells 17,640 (1,482) 122 16,280 Pipelines 48,439 3,431 - 51,870 Gas processing facilities 5,374 1,145 - 6,519 Furniture and fixtures 1,116 11 - 1,127 349,664 20,839 122 370,625 Depletion and amortization 183,645 16,499 - 200,144 Depreciation-furniture and fixtures 1,032 73 - 1,105 184,677 16,572 - 201,249 Net property, plant and equipment $ 164,987 169,376
Balance Additions Dry Hole Balance 12/31/92 (Reductions) Costs 12/31/93 Concession $ 12,231 (553) - 11,678 Well and platforms 246,086 16,053 - 262,139 Incomplete construction 11,985 (8,707) - 3,278 Uncompleted wells 17,245 1,720 (1,325) 17,640 Pipelines 48,403 36 - 48,439 Gas processing facilities 3,952 1,422 - 5,374 Furniture and fixtures 1,113 3 - 1,116 341,015 9,974 (1,325) 349,664 Depletion and amortization 169,631 14,014 - 183,645 Depreciation-furniture and fixtures 945 87 - 1,032 170,576 14,101 - 184,677 Net property, plant and equipment $ 170,439 164,987
4. Federal and foreign income taxes MaraLou is a partnership and, therefore, does not pay income taxes. Since CLAM (wholly owned by MaraLou) is a corporation, income taxes included in the accompanying consolidated financial statements have been determined utilizing applicable domestic and foreign tax rates. The FASB has issued Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes" which superseded SFAS No. 96, "Accounting for Income Taxes." SFAS No. 109 was adopted on January 1, 1993 and requires a change from the deferred method of accounting for income taxes to the asset and liability method. Under the new method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable to those years in which the temporary differences between financial statement carrying amounts and tax bases are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted. Details of federal and foreign income taxes (benefits) - (in thousands of U.S. dollars) are as follows:
1995 1994 1993 Current tax expense (benefit): Federal $ 25 (860) (2,471) Foreign 9,543 8,779 22,615 Deferred tax expense (benefit): Federal 1,463 2,673 (2,544) Foreign (1,030) 6,349 (5,408) Total provision for income taxes $10,001 16,941 12,192
Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35% to income before income taxes of CLAM as a result of the following (in thousands of U.S. dollars):
1995 1994 1993 Computed "expected" tax expense $ 9,416 10,267 9,440 Increase (reduction) in income taxes resulting from: Foreign tax greater than federal income tax - 4,178 (10,024) Increase in deferred tax valuation allowance 1,225 2,852 12,152 Other (640) (356) 624 Provision for income taxes $ 10,001 16,941 12,192
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1995, 1994 and 1993 relate to the following (in thousands of U.S. dollars):
U.S. - Deferred 1995 1994 1993 Deferred Tax Assets: Foreign tax credit carryover $ 701 - 3,805 Benefit for foreign deferred taxes 13,492 13,415 6,199 Abandonment accrual 7,708 7,354 7,151 Valuation allowance (15,506) (14,281) (8,860) Total deferred tax assets $ 6,395 6,488 8,295 Deferred Tax Liabilities: Property, plant and equipment differences in depreciation and amortization $23,168 21,798 20,932 Total deferred tax liabilities $23,168 21,798 20,932 Total U.S. - deferred $16,773 15,310 12,637 /TABLE
Foreign State Profit Share - Deferred 1995 1994 1993 Deferred Tax Assets: Abandonment accrual $ 2,915 2,809 4,769 Morgan loan currency revaluation - 270 5,287 Valuation allowance (261) (723) (3,292) Total deferred tax assets $ 2,654 2,356 6,764 Deferred Tax Liabilities: Property, plant and equipment differences in depreciation and amortization $ 16,146 15,771 12,899 Total deferred tax liabilities $ 16,146 15,771 12,899 Total Foreign State Profit Share - deferred $ 13,492 13,415 6,135
The Company provides a valuation allowance against deferred tax assets to reflect the amount of deferred tax asset, net of valuation allowance, that more likely than not will be utilized to offset future taxes. The valuation allowance increased from December 31, 1994 to December 31, 1995 due to changes in the Company's estimate of the amount and timing of the reversal of its abandonment accrual. The Company's current tax liability was determined on a regular tax basis. 5. CLAM foreign currency translation adjustment As of January 1, 1983 CLAM adopted Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" (SFAS No. 52), under which the functional currency is deemed to be the Dutch guilder. Effective January 1, 1987, CLAM changed its functional currency from the Dutch guilder to the U.S. dollar. The change was precipitated by the significant effect on CLAM's operation of a new dollar-driven gas sales contract which was effective January 1, 1987 and the Tax Reform Act of 1986. In accordance with SFAS No. 52, there is no restatement of prior years' financial statements and the translated amounts for nonmonetary assets as of December 31, 1986 have become the accounting basis for those assets in the year of the change. 6. Debt On July 25, 1985 MaraLou and CLAM entered into a revolving credit agreement, which was amended and restated as of June 19, 1992, with a syndicate of major international banks to fund the purchase by MaraLou of CLAM shares previously owned by Netherlands-Cities Service, Inc. and to provide working capital for CLAM. The banks' total commitment as of December 31, 1995 and December 31, 1994 was $110,000,000. Interest is paid, at the borrower's option, based on the prime rate, the London Interbank Offered Rate (LIBOR), or an adjusted CD rate. A contractual margin is added to LIBOR and CD based borrowings. The all-in interest rates for CLAM for December 31, 1995 and December 31, 1994 were 6.1875% and 6.9375%, respectively. During the revolving credit period, the borrowers are obligated to pay a commitment fee of 1/4% on the unused committed portion of the facility. All of the CLAM common stock held by MaraLou has been pledged as security for the facility. In addition, under certain circumstances MaraLou can exercise an option to purchase the shares held by LL&E Netherlands Petroleum Company and Marathon Petroleum Netherlands, Ltd. for a nominal amount. The option agreement has been assigned to the banks as security for the facility. The credit agreement permits CLAM and MaraLou to incur total debt up to an agreed borrowing base which at December 31, 1995 and December 31, 1994 was $132,000,000. The agreement pro- vides that the borrowing base is reduced periodically over the term of the facilty which is currently scheduled to expire on December 31, 2000. The borrowing base and the scheduled reduc- tions may be adjusted based on a redetermination of the net present value of the projections of certain cash flows included in an Engineering Report prepared by petroleum engineers. The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $96,000,000, at December 31, 1995 of which $-0- was due within one year. The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $96,000,000 at December 31, 1994. At December 31, 1995, the required reductions to the borrowing base in each of the next five years are $-0- in 1996, $8,000,000 in 1997, $29,000,000 in 1998, $30,000,000 in 1999 and $29,000,000 in 2000. CLAM has an unsecured combined short-term loan and overdraft facility of Dfl. 80,000,000 ($49,903,312 at yearend exchange rates). On December 31, 1995 and December 31, 1994 the out- standing balances relating to this facility were $-0-. Interest rates are determined at the time borrowings are made. 7. Annual evaluation of gas reserves Under the provisions of the Joint Development Operating Agreement to which CLAM is a party, an annual estimate of gas reserves is to be made and agreed upon by the Area Management Committee. Based upon such estimate, each participant's investment in the area properties, as defined, is to be adjusted so that a participant's investment is in proportion to its interest in the remaining reserves. Adjustments to the investments are made in cash in the year following the date the reserve revision is agreed upon. In 1992, the Area Management Committee agreed to freeze each participant's interest through 1994, at the level agreed upon in 1992. However, in 1994 new entitlements were agreed upon effective January 1, 1994. CLAM made a cash payment of $15,382,204 to equalize past investment. Effective January 1, 1995, new entitlements were agreed upon and CLAM made a cash payment of $3,439,966 to equalize past investment. 8. Reserves of oil and gas (unaudited) CLAM's share of proven gas reserves at January 1, 1996 and 1995 are 245,107 MMCF and 261,990 MMCF, respectively. 9. Major customer CLAM has one major customer from which it derives 96% of its sales revenue. CLAM is required under its production license to offer its production first to this customer, which is partially owned by The Netherlands government. Production is sold to this customer under five contracts representing various partnership interests and gas qualities. 10. Net profits interest agreement CLAM entered into an agreement dated November 1, 1981 which requires CLAM to pay a portion of its net profits ("net profits interest") to an unrelated party in exchange for a 7-1/2% participation interest in certain blocks. The "net profits interest" is equal to one twenty-fourth (1/24) of CLAM's revenues from the contract area, after various deductions, as defined in the agreement. 11. Issuance of production licenses In March 1990, a production license was granted by the Minister of Economics Affairs of the Netherlands covering the L12a and L12b/L15b blocks. As a result, the Dutch Government, through Energie Beheer Nederland (EBN) (a Dutch company wholly owned by the Dutch Government) exercised its option to participate 40% in the L12a block and 50% in the L12b/L15b block. CLAM was subsequently reimbursed $10,628,572 during 1990, all of which was included in income because there were costs associated with these blocks which had been written-off in prior years. Components of the reimbursement were: Exploration well cost (previously written off as dry wells) $ 5,595,076 Exploration administrative expense 1,818,220 Interest 3,215,276 Total reimbursement $10,628,572 In 1991, it was determined that the portion of the above noted reimbursement allocable to trapping unit L12-FC, within blocks L12b/L15b, would be refunded to EBN as production on this trapping unit is not expected to commence within the 48-month requirement stipulated by the contractual agreement with EBN (the Agreement). The refundable amount, which CLAM expected to repay in 1994, was recorded as a long-term receivable of $3.6 million, interest expense of $1.5 million and an accrued liability of $5.1 million. The Agreement calls for EBN to reimburse the funds to CLAM net of interest upon first production from trapping unit L12-FC, which is expected to occur in 1997. In 1992, it was determined that the portion of the above noted reimbursement allocable to trapping units L12-FA and L12-FB, within blocks L12a and L12b/L15b, would be refunded to EBN as production on these trapping units are not expected to commence within the 48-month requirement stipulated by the Agreement. The refundable amount for L12-FA and L12-FB, which CLAM expected to repay in 1994, was recorded as a long-term receivable of $0.5 and $1.6 million, respectively, interest expense of $0.2 million and $0.6 million, respectively, and an accrued liability of $0.7 million and $2.2 million, respectively. The Agreement calls for EBN to reimburse the respective funds to CLAM net of interest upon first production from trapping units L12-FA and L12-FB, which is expected to occur in 2000 and 1998, respectively. In 1994, the contractual agreement with EBN (the Agreement) was renegotiated with the result being that the refundable amounts for the L12-FB and L12-FC trapping units will have to be repaid by December 31, 1999 unless production has commenced prior to this date. Additionally, it was agreed there is no repayment obligation for the L12-FA trapping unit, and resulting in a reversal of the associated long-term receivable, interest expense and accrued liability. 12. Disclosures about fair value of financial instruments Cash and Cash Equivalents, Receivables, Due from Operator of Joint Venture, Due to Affiliated Company, Accounts Payable, and Due to Operator of Joint Venture - The carrying amount approximates fair value because of the short maturity of these instruments. Long-Term Receivable - The estimated fair value of the Company's long-term receivable is as follows (in thousands of U.S. dollars): At December 31, 1995 Carrying Estimated Amount Fair Value Long-term receivable $6,250 $4,630 The fair value of the long-term receivable was based on discounted cash flows. Long-Term Debt Due to Banks - The carrying amount approximates fair value because of the variable rate of interest associated with this debt. Derivatives - MaraLou has no derivative financial instruments. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information relating to directors of the Registrant will be contained in the definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 9, 1996, which the Registrant will file pursuant to Regulation 14A not later than 120 days after December 31, 1995, and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. Information relating to executive officers of the Registrant appears at page 25 of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. Information relating to the compensation of the Registrant's executive officers and directors will be contained in the definitive Proxy Statement referred to above in Item 10. - "Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information relating to beneficial ownership of securities will be contained in the definitive Proxy Statement referred to above in Item 10. - "Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information relating to transactions with management and others and certain business relationships regarding directors will be contained in the definitive Proxy Statement referred to above in Item 10. - "Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) Financial Statements - the information required hereunder is included in Item 8. - "Financial Statements and Supplementary Data." (a)(2) Financial Statement Schedules - all financial statement schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. (a)(3) Index to Exhibits - the information required hereunder is included herein. (b) Reports on Form 8-K - no reports on Form 8-K were filed during the quarter ended December 31, 1995. THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits The following Exhibits have been filed with the Securities and Exchange Commission: Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Regis- trant's Registration Statement No. 2-45541 on Form S-1.); Articles Supplementary pursuant to Section 3-603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commis- sion File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.). Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1-959.). Exhibit 4(a) Rights Agreement dated as of May 25, 1986 among the Registrant and The Bank of New York (as Rights Agent) - (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated May 25, 1986 - Commission File No. 1-959.). Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) - (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.). Exhibit 10(a)(i) Form of Termination Agreement with Certain Senior Management Personnel (as amended). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits Exhibit 10(a)(ii) Form of Termination Agreement with Certain Senior Management Personnel. Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incor- porated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982.) and the amendment thereto dated December 8, 1982 (Incorporated by re- ference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1- 959.). Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993.). Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(e) Pension Agreement dated December 27, 1994 (Incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 - Commission File No. 1-959.). Exhibit 10(f) The Louisiana Land and Exploration Company 1995 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 28, 1995.). Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by re- ference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). Exhibit 10(i) Form of The LL&E Change in Control Severance Plan for Key Executives. Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorpo- rated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(l) Credit Agreement dated as of June 8, 1995 among the Registrant, the Banks listed there- in, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 - Commission File No. 1-959.). Exhibit 21 Subsidiaries of the Registrant. Exhibit 23 Consent of Experts. Exhibit 24 Powers of Attorney. Exhibit 27 Financial Data Schedule. Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE LOUISIANA LAND AND EXPLORATION COMPANY (Registrant) Date: March 5, 1996 By /s/ Frederick J. Plaeger, II __________________________________ Frederick J. Plaeger, II Vice President, General Counsel and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 5, 1996 *H. Leighton Steward _____________________________________ H. Leighton Steward Director, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) Date: March 5, 1996 *Richard A. Bachmann _____________________________________ Richard A. Bachmann Director Date: March 5, 1996 *Robert E. Howson _____________________________________ Robert E. Howson Director Date: March 5, 1996 *Eamon M. Kelly _____________________________________ Eamon M. Kelly Director Date: March 5, 1996 *Kenneth W. Orce _____________________________________ Kenneth W. Orce Director Date: March 5, 1996 *Victor A. Rice _____________________________________ Victor A. Rice Director Date: March 5, 1996 *Orin R. Smith _____________________________________ Orin R. Smith Director Date: March 5, 1996 *Arthur R. Taylor _____________________________________ Arthur R. Taylor Director Date: March 5, 1996 *W. R. Timken, Jr. _____________________________________ W. R. Timken, Jr. Director Date: March 5, 1996 *Carlisle A. H. Trost _____________________________________ Carlisle A. H. Trost Director Date: March 5, 1996 *Louis A. Raspino, Jr. _____________________________________ Louis A. Raspino, Jr. Senior Vice President-Chief Financial Officer (Principal Financial Officer) Date: March 5, 1996 *Jerry D. Carlisle _____________________________________ Jerry D. Carlisle Vice President and Controller (Principal Accounting Officer) */s/ Frederick J. Plaeger, II _________________________________________ Frederick J. Plaeger, II Vice President, General Counsel and Corporate Secretary (As attorney-in-fact for each of the persons indicated) ________________________________________________________________ ________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 __________________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 __________________________ THE LOUISIANA LAND AND EXPLORATION COMPANY (Exact name of registrant as specified in its charter) EXHIBITS ________________________________________________________________ ________________________________________________________________ THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits The following Exhibits have been filed with the Securities and Exchange Commission: Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Regis- trant's Registration Statement No. 2-45541 on Form S-1.); Articles Supplementary pursuant to Section 3-603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commis- sion File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.). Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1-959.). Exhibit 4(a) Rights Agreement dated as of May 25, 1986 among the Registrant and The Bank of New York (as Rights Agent) - (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated May 25, 1986 - Commission File No. 1-959.). Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) - (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.). Exhibit 10(a)(i) Form of Termination Agreement with Certain Senior Management Personnel (as amended). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits Exhibit 10(a)(ii) Form of Termination Agreement with Certain Senior Management Personnel. Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incor- porated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982.) and the amendment thereto dated December 8, 1982 (Incorporated by re- ference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1- 959.). Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993.). Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(e) Pension Agreement dated December 27, 1994 (Incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 - Commission File No. 1-959.). Exhibit 10(f) The Louisiana Land and Exploration Company 1995 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 28, 1995.). Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by re- ference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). Exhibit 10(i) Form of The LL&E Change in Control Severance Plan for Key Executives. Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorpo- rated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(l) Credit Agreement dated as of June 8, 1995 among the Registrant, the Banks listed there- in, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 - Commission File No. 1-959.). Exhibit 21 Subsidiaries of the Registrant. Exhibit 23 Consent of Experts. Exhibit 24 Powers of Attorney. Exhibit 27 Financial Data Schedule. Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request. EX-10 2 EXHIBIT 10(a)(i) FORM OF TERMINATION AGREEMENT WITH CERTAIN SENIOR MANAGEMENT PERSONNEL (AS AMENDED) Exhibit 10(a)(i) TERMINATION AGREEMENT This Agreement, made and entered into as of this ___ day of ________, 1996, by and between THE LOUISIANA LAND AND EXPLORATION COMPANY, a Maryland corporation with its principal executive offices at 909 Poydras Street, New Orleans, Louisiana 70130 ("Company"), and __________________________ residing at ___________________ ("Executive"). W I T N E S S E T H : WHEREAS, Company and Executive entered into a Termination Agreement as of ____________, as amended and restated as of __________ (the "Prior Termination Agreement"), and wish to amend and restate said Prior Termination Agreement as hereinafter set forth in this Agreement; and WHEREAS, the Board of Directors of Company considers the maintenance of a sound management to be essential to protecting and enhancing the best interests of Company and its stockholders and recognizes that the possibility of a change in control raises uncertainty and questions among key employees and may result in the departure or distraction of such key employees to the detriment of Company and its stockholders; and WHEREAS, the Board of Directors of Company believes it is important, should Company receive proposals from third parties with respect to its future, to enable Executive, without being influenced by the uncertainties of his own situation, to assess and advise Company whether such proposals would be in the best interests of Company and its stockholders and to take such other action regarding such proposals as Company might determine to be appropriate; and WHEREAS, the Board of Directors of Company wishes to assure that it will have the continued dedication of Executive and the availability of Executive's advice and counsel notwithstanding the possibility, threat, or occurrence of an event affecting control of Company, and to induce Executive to remain in the employ of Company; NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED: ARTICLE I Definitions For the purposes of this Agreement, the following terms shall have the meanings set forth herein: (a) "Change in Control" shall be deemed to have occurred if any of the following shall occur: (i) Any person (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) ("Person") (but excluding Company, a Subsidiary, or a trustee or other fiduciary holding securities under any employee benefit plan or employee stock plan of Company or a Subsidiary) becomes, directly or indirectly, the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of 25% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors ("Voting Securities") of Company. (ii) Individuals constituting the Board of Directors of Company on the date of this Agreement and the successors of such individuals ("Continuing Directors") cease to constitute a majority of the Board of Directors of Company. For this purpose, a director shall be a successor if and only if he or she was nominated by a Board of Directors of Company (or a Nominating Committee thereof) on which individuals constituting the Board of Directors of Company on the date of this Agreement and their successors (determined by prior application of this sentence) constituted a majority. (iii) The stockholders of Company approve a merger, consolidation, or reorganization of Company ("Combination") with any other corporation or legal person, other than a Combination which both (a) is approved by a majority of the directors of Company who are Continuing Directors, and (b) would result in stockholders of Company immediately prior to the Combination owning, immediately thereafter, more than fifty percent (50%) of the combined voting power of either the surviving entity or the Person owning directly or indirectly all the common stock, or its equivalent, of the surviving entity. (iv) The stockholders of Company approve a plan of complete liquidation of Company or an agreement for the sale or disposition by Company of all or substantially all of Company's assets. (v) The Board of Directors of Company adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control of Company has occurred. (b) "Involuntary Termination" shall mean termination of Executive's employment with Company within the Protection Period (as hereinafter defined) if such termination results from: (i) termination by Company on any grounds whatsoever except for "cause" as defined below; or (ii) termination by Executive in connection with or based upon any of the following: a significant change in the nature or scope of Executive's duties and/or responsibilities; notification of a reduction in Executive's compensation or in his participation in any employee benefit plan or program; ordered relocation to a place of employment which is more than 50 miles away from Executive's principal place of employment immediately before the Change in Control; failure to provide facilities or services which are suitable to Executive's position and adequate for the performance of his duties; or a good faith determination by Executive that due to any other material change in circumstances affecting the terms and conditions of employment he is not able properly to carry on his duties and responsibilities. The Protection Period shall be: (i) if Executive has not attained age 55 at the time of the Change in Control, the period of two years beginning on the date of the Change in Control, and (ii) if Executive is age 55 or older at the time of the Change in Control, the period of five years beginning on the date of the Change in Control. For purposes of subsection b(i), termination for "cause" shall mean: (A) an act or acts of dishonesty on the part of Executive resulting or intending to result directly or indirectly in substantial gain or personal enrichment to which Executive was not legally entitled at the expense of Company; or (B) a material breach of Executive's duties or responsibilities resulting in demonstrably material injury to Company, provided, however, that such breach shall not include (i) bad judgment or negligence on the part of Executive; (ii) neglect of duties; (iii) any act or omission believed by Executive in good faith to have been in or not opposed to the interests of Company; or (iv) any act or omission in respect of which a determination could properly be made that Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-Laws of Company, the laws of the State of Maryland or the directors' and officers' liability insurance of Company, in each case as in effect at the time of such act or omission. (c) "Subsidiary" shall mean any corporation in which Company possesses directly or indirectly fifty percent (50%) or more of the total combined voting power of all classes of stock. ARTICLE II Termination Benefits In the event Executive's employment with Company terminates as a result of an Involuntary Termination, Company shall provide to Executive the following benefits: (a) Company shall pay to Executive in a lump sum within 30 days of such Involuntary Termination an amount of cash equal to three times the sum of (i) Executive's highest annual salary rate from Company, whether current or deferred, in effect for any of the thirty-six months immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater), and (ii) the greater of (A) the highest annual bonus paid, granted or awarded Executive by Company, whether current or deferred and whether or not vested, during or in respect of any of the three calendar years immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater) or (B) the product of the percentage of salary payable as a bonus at 100% of target with respect to Executive under Company's target bonus program for the calendar year in which the Involuntary Termination occurs multiplied by Executive's highest annual salary rate determined pursuant to (i) above. For purposes of clause (ii) of the preceding sentence, awards of Company Common Stock shall be valued at the average of the high and low sales prices as reported on the New York Stock Exchange - Composite Transactions on the date of the award (or, if the stock did not trade on that date, on the first date prior thereto on which the stock traded). (b) Company shall supplement the benefits payable in respect of Executive under The LL&E Pension Plan, the pension plan component of The LL&E Compensatory Benefits Agreement, and the pension plan component of The LL&E Supplemental Excess Plan (collectively, the "Pension Plans") by making a lump-sum cash payment within 30 days of such Involuntary Termination in an amount equal to the present value of the difference between (i) the benefits that Executive would have been entitled to receive under the Pension Plans if he had been credited with three additional years of service (but no additional years of age) for purposes of the benefit accrual formula under the Pension Plans as of the date of his Involuntary Termination, and (ii) the benefits that Executive is entitled to receive under the Pension Plans determined without regard to this subsection b. Such present value shall be determined by an actuary selected by Company based on the actuarial equivalence factors, methods, and assumptions used in determining lump-sum distributions under The LL&E Pension Plan. The additional years of service added for purposes of the benefit accrual formula under the Pension Plans pursuant to this subsection b shall not be counted for purposes of determining whether Executive qualifies as a retiree eligible for retiree benefits or for any other enhanced benefits under the Pension Plans or under any other benefit plan or program of Company. (c) During the period of three years beginning on the date of Executive's Involuntary Termination, Executive shall be deemed to remain an employee of Company for purposes of the applicable medical, life insurance, and long-term disability plans and programs of Company and shall be entitled to receive the benefits available to employees thereunder, provided that continued participation is possible under applicable law and the terms of such plan or program, and provided, further, that if Executive qualified for retiree benefits under the applicable medical plan or program on the date of his termination of employment, Executive shall instead be entitled to receive the benefits available to retirees in accordance with the terms of such plan or program. In the event that Executive's participation in any such benefit plan or program is barred, Company shall arrange to provide Executive with substantially similar benefits. The additional three years of coverage pursuant to this subsection c shall not be counted for purposes of determining whether Executive qualifies as a retiree eligible for retiree benefits under the applicable medical plan or program or under any other benefit plan or program of Company. (d) Company shall pay to Executive in a lump sum within 30 days of such Involuntary Termination an amount of cash equal to 30% of Executive's highest annual salary rate from Company paid by Company during any of the thirty-six months immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater). The payment pursuant to this subsection d is intended to compensate Executive for the Company-provided benefits that he would have received under The LL&E Savings Plan, the savings plan component of The LL&E Compensatory Benefits Agreement, and the savings plan component of The LL&E Supplemental Excess Plan if he had remained an employee of Company for the three-year period following the Involuntary Termination. (e) Company shall promptly reimburse Executive for any fees that he may pay to an outplacement assistance firm in order to obtain outplacement assistance services, provided that (i) such expenses must be incurred within twelve (12) months after the Involuntary Termination and (ii) Company's obligation pursuant to this subsection e shall be limited to fifteen percent (15%) of Executive's highest annual base salary rate from Company, whether current or deferred, in effect during any of the thirty-six months immediately prior to the Involuntary Termination or Change in Control (whichever is greater). (f) Each stock option granted by Company to Executive and outstanding immediately prior to the Involuntary Termination shall be fully exercisable and may be exercised by Executive (or his beneficiary or personal representative) at any time prior to the expiration date of the applicable option (determined without regard to any earlier termination that would otherwise occur by reason of termination of employment). With respect to any shares of restricted stock granted by Company to Executive and still subject to restrictions immediately prior to the Involuntary Termination, all restrictions shall immediately lapse upon such Involuntary Termination. With respect to any performance shares granted by Company to Executive and for which the Performance Cycle has not expired on the date of Involuntary Termination, Executive shall receive an immediate payment of a percentage of such performance shares, which percentage shall be the greater of: (i) 100%, or (ii) the percentage of performance shares earned under the applicable program for the last Performance Cycle that ended before the date of Involuntary Termination. Any outstanding award agreements with Executive are deemed amended to the extent necessary to conform with this subsection f. (g) Company shall pay and provide to Executive any and all other payments and benefits to which Executive would at that time be entitled as a terminating employee under any then existing Company plan or program. (h) Any payments and benefits provided for under this Agreement shall be paid net of any applicable withholding required under Federal, state or local law. ARTICLE III Parachute Payments If any payment or benefit received by or in respect of Executive under this Agreement or any other plan, arrangement or agreement with Company or any of its subsidiaries (determined without regard to any additional payments required under this Article III and Appendix A) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive with respect to such Payment at the time specified in Appendix A an additional amount (the "Gross-up Payment") such that the net amount retained by Executive from the Payment and the Gross-up Payment, after reduction for any Excise Tax upon the payment and any Federal, state and local income and employment tax and Excise Tax upon the Gross-up Payment, shall be equal to the Payment. The calculation and payment of the Gross-up Payment shall be subject to the provisions of Appendix A. ARTICLE IV Restrictions on Executive During the term of this Agreement, Executive will regard and preserve as confidential all knowledge and information pertaining uniquely to the business of Company obtained by him from any source whatever as a result of his employment with Company and which is not a matter of public knowledge. ARTICLE V Miscellaneous SECTION 1. Not an Employment Agreement. This Agreement does not constitute an agreement or contract of employment and shall not be construed to limit in any manner the right of Company to terminate Executive's employment. SECTION 2. No Duty to Seek Employment. Executive shall not be under any duty or obligation to seek or accept other employment following termination and no amount, payment or benefit due Executive hereunder or otherwise shall be reduced or suspended if Executive accepts subsequent employment. SECTION 3. Failure to Enforce and Waiver. The failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such terms, covenants or conditions, and the waiver or relinquishment of any right or power under this Agreement at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times. SECTION 4. Amendment and Restatement of Prior Termination Agreement. This Agreement constitutes an amendment and restatement of the Prior Termination Agreement between Executive and Company and supersedes the Prior Termination Agreement. SECTION 5. No Set-Offs or Counterclaims. The Company's obligation to provide the benefits set forth in this Agreement shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, or other right which Company or any Subsidiary may have against Executive or anyone else. SECTION 6. Company's Successors. Any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Company, by agreement in form and substance satisfactory to Executive, shall expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform if no such succession had taken place. As used in this Agreement, "Company" shall mean Company as defined in the preamble to this Agreement and any successor to its business or assets which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. SECTION 7. Inurement. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Company and Executive and their respective personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, legatees and assigns. SECTION 8. Executive's Representative. In the event Executive dies while entitled to any payments and benefits hereunder, Executive's legal representatives shall be entitled to receive all payments and benefits due Executive. SECTION 9. Legal Expenses; Dispute Resolution; Arbitration. (a) Company shall promptly pay all legal fees and related expenses incurred by Executive in seeking to obtain or enforce any right or benefit under this Agreement or to defend against any claim or assertion in connection with this Agreement (in each case including all fees and expenses, if any, incurred in seeking advice in connection therewith) or to enforce or defend against any arbitration award pursuant to subsection c below. (b) If any dispute or controversy arises under or in connection with this Agreement, including without limitation any claim under any Federal, state or local law, rule, decision or order relating to employment or the fact or manner of its termination, Company and Executive shall attempt to resolve such dispute or controversy through good faith negotiations. (c) If such parties fail to resolve such dispute or controversy within ninety days, such dispute or controversy shall be settled by arbitration, conducted before a panel of three arbitrators in Louisiana in accordance with the applicable rules and procedures of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. Such arbitration shall be final and binding on the parties. Costs of any arbitration, including, without limitation, reasonable attorneys' fees of both parties, shall be borne by Company. (d) Pending the resolution of any dispute, Company shall continue payment of all amounts due Executive under this Agreement and all benefits to which Executive is entitled other than those specifically at issue. SECTION 10. Notices. All notices required or permitted to be given under this Agreement shall be given in writing and shall be deemed sufficiently given if delivered by hand or mailed by registered mail, return receipt requested, to his residence in the case of Executive and to its principal executive offices in the case of Company. Either party may by giving notice to the other party in accordance with this Section 10 change the address at which it is to receive notices hereunder. SECTION 11. Unsecured Creditor. The rights of Executive to benefits under this Agreement shall be solely those of an unsecured creditor of Company. Any asset acquired or held by Company or funds allocated by Company in connection with the liabilities assumed by Company pursuant to this Agreement shall not be deemed to be security for the performance of Company's obligations pursuant hereto, but shall be and remain general assets of Company. SECTION 12. Nonalienation. To the extent permitted by law, the right or interest of Executive hereunder shall not be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner (but excluding devolution on account of mental incompetency and passage under will or intestacy laws in the case of death), and any such right or interest hereunder shall not be liable for or subject to any obligation or liability of Executive. SECTION 13. Governing Law. This Agreement is made pursuant to, and shall be governed by, the laws of the State of New York, in all respects (without giving effect to principles of conflict of laws), including, without limitation, matters of construction, validity and performance. SECTION 14. Severability. It is the desire and intent of the parties that the terms, provisions, covenants and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant or remedy of this Agreement or the application thereof to any person or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. SECTION 15. Changes to Agreement. This Agreement may not be changed orally but only by agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year set forth above. THE LOUISIANA LAND AND EXPLORATION COMPANY ATTEST: _________________________ By WITNESS: _________________________ Appendix A Gross-up Payments The following provisions shall be applicable with respect to the Gross-up Payments described in Article III: (a) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Payments received or to be received shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of tax counsel selected by Executive and reasonably acceptable to Company, the Payments (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or excess parachute payments (as determined after application of Section 280G(b)(4)(B) of the Code), and (ii) the value of any non- cash benefits or any deferred payment or benefit shall be determined by independent auditors selected by Executive and reasonably acceptable to Company in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation to which such payment could be subject based upon the state and locality of Executive's residence or employment, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In addition, for purposes of determining the amount of the Gross-up Payment, Company shall make a determination of the amount of employment taxes required to be paid on the Gross-up Payment. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, Executive shall repay to Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and Federal and state and local income and employment tax imposed on the portion of the Gross-up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax and/or a Federal and state and local income or employment tax deduction), plus interest on the amount of such repayment at the Federal short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payments the existence or amount of which cannot be determined at the time of the Gross-up Payment), Company shall make an additional gross-up payment in respect of such excess (plus any interest, penalties or additions payable with respect to such excess) at the time that the amount of such excess is finally determined. Notwithstanding the foregoing, Company shall withhold from any payment due to Executive the amount required by law to be so withheld under Federal, state or local wage or employment tax withholding requirements or otherwise (including without limitation Section 4999 of the Code), and shall pay over to the appropriate government authorities the amount so withheld. (b) The Gross-up Payment with respect to a Payment shall be paid not later than the thirtieth day following the date of the Payment; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, Company shall pay to Executive on such date an estimate, as determined in good faith by the Company, of the amount of such payments and shall pay the remainder of such payments (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by Company to Executive, payable on the fifth day after demand by Company (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code). At the time that payments are made under Article III and this Appendix A, Company shall provide Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including, without limitation, any opinions or other advice Company has received from outside counsel, auditors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). (c) Company shall promptly pay the fees and related expenses of any tax counsel and auditors selected by Executive to provide services in connection with this Appendix A. EX-10 3 EXHIBIT 10(a)(ii) FORM OF TERMINATION AGREEMENT WITH CERTAIN SENIOR MANAGEMENT PERSONNEL Exhibit 10(a)(ii) TERMINATION AGREEMENT This Agreement, made and entered into as of this ___ day of ________, 1996, by and between THE LOUISIANA LAND AND EXPLORATION COMPANY, a Maryland corporation with its principal executive offices at 909 Poydras Street, New Orleans, Louisiana 70130 ("Company"), and __________________________ residing at ___________________ ("Executive"). W I T N E S S E T H : WHEREAS, the Board of Directors of Company considers the maintenance of a sound management to be essential to protecting and enhancing the best interests of Company and its stockholders and recognizes that the possibility of a change in control raises uncertainty and questions among key employees and may result in the departure or distraction of such key employees to the detriment of Company and its stockholders; and WHEREAS, the Board of Directors of Company believes it is important, should Company receive proposals from third parties with respect to its future, to enable Executive, without being influenced by the uncertainties of his own situation, to assess and advise Company whether such proposals would be in the best interests of Company and its stockholders and to take such other action regarding such proposals as Company might determine to be appropriate; and WHEREAS, the Board of Directors of Company wishes to assure that it will have the continued dedication of Executive and the availability of Executive's advice and counsel notwithstanding the possibility, threat, or occurrence of an event affecting control of Company, and to induce Executive to remain in the employ of Company; NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED: ARTICLE I Definitions For the purposes of this Agreement, the following terms shall have the meanings set forth herein: (a) "Change in Control" shall be deemed to have occurred if any of the following shall occur: (i) Any person (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) ("Person") (but excluding Company, a Subsidiary, or a trustee or other fiduciary holding securities under any employee benefit plan or employee stock plan of Company or a Subsidiary) becomes, directly or indirectly, the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of 25% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors ("Voting Securities") of Company. (ii) Individuals constituting the Board of Directors of Company on the date of this Agreement and the successors of such individuals ("Continuing Directors") cease to constitute a majority of the Board of Directors of Company. For this purpose, a director shall be a successor if and only if he or she was nominated by a Board of Directors of Company (or a Nominating Committee thereof) on which individuals constituting the Board of Directors of Company on the date of this Agreement and their successors (determined by prior application of this sentence) constituted a majority. (iii) The stockholders of Company approve a merger, consolidation, or reorganization of Company ("Combination") with any other corporation or legal person, other than a Combination which both (a) is approved by a majority of the directors of Company who are Continuing Directors, and (b) would result in stockholders of Company immediately prior to the Combination owning, immediately thereafter, more than fifty percent (50%) of the combined voting power of either the surviving entity or the Person owning directly or indirectly all the common stock, or its equivalent, of the surviving entity. (iv) The stockholders of Company approve a plan of complete liquidation of Company or an agreement for the sale or disposition by Company of all or substantially all of Company's assets. (v) The Board of Directors of Company adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control of Company has occurred. (b) "Involuntary Termination" shall mean termination of Executive's employment with Company within the Protection Period (as hereinafter defined) if such termination results from: (i) termination by Company on any grounds whatsoever except for "cause" as defined below; or (ii) termination by Executive in connection with or based upon any of the following: a significant change in the nature or scope of Executive's duties and/or responsibilities; notification of a reduction in Executive's compensation or in his participation in any employee benefit plan or program; ordered relocation to a place of employment which is more than 50 miles away from Executive's principal place of employment immediately before the Change in Control; failure to provide facilities or services which are suitable to Executive's position and adequate for the performance of his duties; or a good faith determination by Executive that due to any other material change in circumstances affecting the terms and conditions of employment he is not able properly to carry on his duties and responsibilities. The Protection Period shall be: (i) if Executive has not attained age 55 at the time of the Change in Control, the period of two years beginning on the date of the Change in Control, and (ii) if Executive is age 55 or older at the time of the Change in Control, the period of five years beginning on the date of the Change in Control. For purposes of subsection b(i), termination for "cause" shall mean: (A) an act or acts of dishonesty on the part of Executive resulting or intending to result directly or indirectly in substantial gain or personal enrichment to which Executive was not legally entitled at the expense of Company; or (B) a material breach of Executive's duties or responsibilities resulting in demonstrably material injury to Company, provided, however, that such breach shall not include (i) bad judgment or negligence on the part of Executive; (ii) neglect of duties; (iii) any act or omission believed by Executive in good faith to have been in or not opposed to the interests of Company; or (iv) any act or omission in respect of which a determination could properly be made that Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-Laws of Company, the laws of the State of Maryland or the directors' and officers' liability insurance of Company, in each case as in effect at the time of such act or omission. (c) "Subsidiary" shall mean any corporation in which Company possesses directly or indirectly fifty percent (50%) or more of the total combined voting power of all classes of stock. ARTICLE II Termination Benefits In the event Executive's employment with Company terminates as a result of an Involuntary Termination, Company shall provide to Executive the following benefits: (a) Company shall pay to Executive in a lump sum within 30 days of such Involuntary Termination an amount of cash equal to three times the sum of (i) Executive's highest annual salary rate from Company, whether current or deferred, in effect for any of the thirty-six months immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater), and (ii) the greater of (A) the highest annual bonus paid, granted or awarded Executive by Company, whether current or deferred and whether or not vested, during or in respect of any of the three calendar years immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater) or (B) the product of the percentage of salary payable as a bonus at 100% of target with respect to Executive under Company's target bonus program for the calendar year in which the Involuntary Termination occurs multiplied by Executive's highest annual salary rate determined pursuant to (i) above. For purposes of clause (ii) of the preceding sentence, awards of Company Common Stock shall be valued at the average of the high and low sales prices as reported on the New York Stock Exchange - Composite Transactions on the date of the award (or, if the stock did not trade on that date, on the first date prior thereto on which the stock traded). (b) Company shall supplement the benefits payable in respect of Executive under The LL&E Pension Plan, the pension plan component of The LL&E Compensatory Benefits Agreement, and the pension plan component of The LL&E Supplemental Excess Plan (collectively, the "Pension Plans") by making a lump-sum cash payment within 30 days of such Involuntary Termination in an amount equal to the present value of the difference between (i) the benefits that Executive would have been entitled to receive under the Pension Plans if he had been credited with three additional years of service (but no additional years of age) for purposes of the benefit accrual formula under the Pension Plans as of the date of his Involuntary Termination, and (ii) the benefits that Executive is entitled to receive under the Pension Plans determined without regard to this subsection b. Such present value shall be determined by an actuary selected by Company based on the actuarial equivalence factors, methods, and assumptions used in determining lump-sum distributions under The LL&E Pension Plan. The additional years of service added for purposes of the benefit accrual formula under the Pension Plans pursuant to this subsection b shall not be counted for purposes of determining whether Executive qualifies as a retiree eligible for retiree benefits or for any other enhanced benefits under the Pension Plans or under any other benefit plan or program of Company. (c) During the period of three years beginning on the date of Executive's Involuntary Termination, Executive shall be deemed to remain an employee of Company for purposes of the applicable medical, life insurance, and long-term disability plans and programs of Company and shall be entitled to receive the benefits available to employees thereunder, provided that continued participation is possible under applicable law and the terms of such plan or program, and provided, further, that if Executive qualified for retiree benefits under the applicable medical plan or program on the date of his termination of employment, Executive shall instead be entitled to receive the benefits available to retirees in accordance with the terms of such plan or program. In the event that Executive's participation in any such benefit plan or program is barred, Company shall arrange to provide Executive with substantially similar benefits. The additional three years of coverage pursuant to this subsection c shall not be counted for purposes of determining whether Executive qualifies as a retiree eligible for retiree benefits under the applicable medical plan or program or under any other benefit plan or program of Company. (d) Company shall pay to Executive in a lump sum within 30 days of such Involuntary Termination an amount of cash equal to 30% of Executive's highest annual salary rate from Company paid by Company during any of the thirty-six months immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater). The payment pursuant to this subsection d is intended to compensate Executive for the Company-provided benefits that he would have received under The LL&E Savings Plan, the savings plan component of The LL&E Compensatory Benefits Agreement, and the savings plan component of The LL&E Supplemental Excess Plan if he had remained an employee of Company for the three-year period following the Involuntary Termination. (e) Company shall promptly reimburse Executive for any fees that he may pay to an outplacement assistance firm in order to obtain outplacement assistance services, provided that (i) such expenses must be incurred within twelve (12) months after the Involuntary Termination and (ii) Company's obligation pursuant to this subsection e shall be limited to fifteen percent (15%) of Executive's highest annual base salary rate from Company, whether current or deferred, in effect during any of the thirty-six months immediately prior to the Involuntary Termination or Change in Control (whichever is greater). (f) Each stock option granted by Company to Executive and outstanding immediately prior to the Involuntary Termination shall be fully exercisable and may be exercised by Executive (or his beneficiary or personal representative) at any time prior to the expiration date of the applicable option (determined without regard to any earlier termination that would otherwise occur by reason of termination of employment). With respect to any shares of restricted stock granted by Company to Executive and still subject to restrictions immediately prior to the Involuntary Termination, all restrictions shall immediately lapse upon such Involuntary Termination. With respect to any performance shares granted by Company to Executive and for which the Performance Cycle has not expired on the date of Involuntary Termination, Executive shall receive an immediate payment of a percentage of such performance shares, which percentage shall be the greater of: (i) 100%, or (ii) the percentage of performance shares earned under the applicable program for the last Performance Cycle that ended before the date of Involuntary Termination. Any outstanding award agreements with Executive are deemed amended to the extent necessary to conform with this subsection f. (g) Company shall pay and provide to Executive any and all other payments and benefits to which Executive would at that time be entitled as a terminating employee under any then existing Company plan or program. (h) Any payments and benefits provided for under this Agreement shall be paid net of any applicable withholding required under Federal, state or local law. ARTICLE III Parachute Payments If any payment or benefit received by or in respect of Executive under this Agreement or any other plan, arrangement or agreement with Company or any of its subsidiaries (determined without regard to any additional payments required under this Article III and Appendix A) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive with respect to such Payment at the time specified in Appendix A an additional amount (the "Gross-up Payment") such that the net amount retained by Executive from the Payment and the Gross-up Payment, after reduction for any Excise Tax upon the payment and any Federal, state and local income and employment tax and Excise Tax upon the Gross-up Payment, shall be equal to the Payment. The calculation and payment of the Gross-up Payment shall be subject to the provisions of Appendix A. ARTICLE IV Restrictions on Executive During the term of this Agreement, Executive will regard and preserve as confidential all knowledge and information pertaining uniquely to the business of Company obtained by him from any source whatever as a result of his employment with Company and which is not a matter of public knowledge. ARTCILE V Miscellaneous SECTION I. Not an Employment Agreement. This Agreement does not constitute an agreement or contract of employment and shall not be construed to limit in any manner the right of Company to terminate Executive's employment. SECTION 2. No Duty to Seek Employment. Executive shall not be under any duty or obligation to seek or accept other employment following termination and no amount, payment or benefit due Executive hereunder or otherwise shall be reduced or suspended if Executive accepts subsequent employment. SECTION 3. Failure to Enforce and Waiver. The failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such terms, covenants or conditions, and the waiver or relinquishment of any right or power under this Agreement at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times. SECTION 4. No Set-Offs or Counterclaims. The Company's obligation to provide the benefits set forth in this Agreement shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, or other right which Company or any Subsidiary may have against Executive or anyone else. SECTION 5. Company's Successors. Any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Company, by agreement in form and substance satisfactory to Executive, shall expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform if no such succession had taken place. As used in this Agreement, "Company" shall mean Company as defined in the preamble to this Agreement and any successor to its business or assets which executes and delivers the agreement provided for in this Section 5 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. SECTION 6. Inurement. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Company and Executive and their respective personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, legatees and assigns. SECTION 7. Executive's Representative. In the event Executive dies while entitled to any payments and benefits hereunder, Executive's legal representatives shall be entitled to receive all payments and benefits due Executive. SECTION 8. Legal Expenses; Dispute Resolution; Arbitration. (a) Company shall promptly pay all legal fees and related expenses incurred by Executive in seeking to obtain or enforce any right or benefit under this Agreement or to defend against any claim or assertion in connection with this Agreement (in each case including all fees and expenses, if any, incurred in seeking advice in connection therewith) or to enforce or defend against any arbitration award pursuant to subsection c below. (b) If any dispute or controversy arises under or in connection with this Agreement, including without limitation any claim under any Federal, state or local law, rule, decision or order relating to employment or the fact or manner of its termination, Company and Executive shall attempt to resolve such dispute or controversy through good faith negotiations. (c) If such parties fail to resolve such dispute or controversy within ninety days, such dispute or controversy shall be settled by arbitration, conducted before a panel of three arbitrators in Louisiana in accordance with the applicable rules and procedures of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. Such arbitration shall be final and binding on the parties. Costs of any arbitration, including, without limitation, reasonable attorneys' fees of both parties, shall be borne by Company. (d) Pending the resolution of any dispute, Company shall continue payment of all amounts due Executive under this Agreement and all benefits to which Executive is entitled other than those specifically at issue. SECTION 9. Notices. All notices required or permitted to be given under this Agreement shall be given in writing and shall be deemed sufficiently given if delivered by hand or mailed by registered mail, return receipt requested, to his residence in the case of Executive and to its principal executive offices in the case of Company. Either party may by giving notice to the other party in accordance with this Section 9 change the address at which it is to receive notices hereunder. SECTION 10. Unsecured Creditor. The rights of Executive to benefits under this Agreement shall be solely those of an unsecured creditor of Company. Any asset acquired or held by Company or funds allocated by Company in connection with the liabilities assumed by Company pursuant to this Agreement shall not be deemed to be security for the performance of Company's obligations pursuant hereto, but shall be and remain general assets of Company. SECTION 11. Nonalienation. To the extent permitted by law, the right or interest of Executive hereunder shall not be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner (but excluding devolution on account of mental incompetency and passage under will or intestacy laws in the case of death), and any such right or interest hereunder shall not be liable for or subject to any obligation or liability of Executive. SECTION 12. Governing Law. This Agreement is made pursuant to, and shall be governed by, the laws of the State of New York, in all respects (without giving effect to principles of conflict of laws), including, without limitation, matters of construction, validity and performance. SECTION 13. Severability. It is the desire and intent of the parties that the terms, provisions, covenants and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant or remedy of this Agreement or the application thereof to any person or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect. SECTION 14. Changes to Agreement. This Agreement may not be changed orally but only by agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year set forth above. THE LOUISIANA LAND AND EXPLORATION COMPANY ATTEST: _________________________ By WITNESS: _________________________ Appendix A Gross-up Payments The following provisions shall be applicable with respect to the Gross-up Payments described in Article III: (a) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Payments received or to be received shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of tax counsel selected by Executive and reasonably acceptable to Company, the Payments (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or excess parachute payments (as determined after application of Section 280G(b)(4)(B) of the Code), and (ii) the value of any non- cash benefits or any deferred payment or benefit shall be determined by independent auditors selected by Executive and reasonably acceptable to Company in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment Executive shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation to which such payment could be subject based upon the state and locality of Executive's residence or employment, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In addition, for purposes of determining the amount of the Gross-up Payment, Company shall make a determination of the amount of employment taxes required to be paid on the Gross-up Payment. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, Executive shall repay to Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and Federal and state and local income and employment tax imposed on the portion of the Gross-up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax and/or a Federal and state and local income or employment tax deduction), plus interest on the amount of such repayment at the Federal short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payments the existence or amount of which cannot be determined at the time of the Gross-up Payment), Company shall make an additional gross-up payment in respect of such excess (plus any interest, penalties or additions payable with respect to such excess) at the time that the amount of such excess is finally determined. Notwithstanding the foregoing, Company shall withhold from any payment due to Executive the amount required by law to be so withheld under Federal, state or local wage or employment tax withholding requirements or otherwise (including without limitation Section 4999 of the Code), and shall pay over to the appropriate government authorities the amount so withheld. (b) The Gross-up Payment with respect to a Payment shall be paid not later than the thirtieth day following the date of the Payment; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, Company shall pay to Executive on such date an estimate, as determined in good faith by the Company, of the amount of such payments and shall pay the remainder of such payments (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by Company to Executive, payable on the fifth day after demand by Company (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code). At the time that payments are made under Article III and this Appendix A, Company shall provide Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including, without limitation, any opinions or other advice Company has received from outside counsel, auditors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). (c) Company shall promptly pay the fees and related expenses of any tax counsel and auditors selected by Executive to provide services in connection with this Appendix A. EX-10 4 EXHIBIT 10(i) FORM OF THE LL&E CHANGE IN CONTROL SEVERANCE PLAN FOR KEY EXECUTIVES Exhibit 10(i) THE LL&E CHANGE IN CONTROL SEVERANCE PLAN PREAMBLE The Board of Directors of The Louisiana Land and Exploration Company (the "Company") considers the maintenance of a sound management to be essential to protecting and enhancing the best interests of the Company and its stockholders and recognizes that the possibility of a change in control raises uncertainty and questions among key employees and may result in the departure or distraction of such key employees to the detriment of the Company and its stockholders. In addition, the Board of Directors of the Company believes it is important, should the Company receive proposals from third parties with respect to its future to enable key employees, without being influenced by the uncertainties of their own situations, to assess and advise the Company whether such proposals would be in the best interests of the Company and its stockholders and to take such other action regarding such proposals as the Company might determine to be appropriate. Accordingly, the Board of Directors has decided to establish this Plan to assure that it will have the continued dedication of the designated eligible employees and the availability of their advice and counsel notwithstanding the possibility, threat, or occurrence of an event affecting control of the Company, and to induce the designated eligible employees to remain in the employ of the Company. ARTICLE I -- DEFINITIONS The following words and phrases as set forth in this Plan shall have the respective meanings set forth below: 1.1. Change in Control. The term "Change in Control" means a change in control of the Company as defined in Article III. 1.2. Committee. The Compensation Committee of the Board of Directors of The Louisiana Land and Exploration Company. 1.3. Company. The Louisiana Land and Exploration Company, a Maryland corporation. 1.4. Eligible Employee. An employee of the Company who has been designated by the Board of Directors of the Company for participation in the Plan and whose designation is still in effect on the date of a Change in Control. 1.5. Involuntary Termination. Any termination of the employment of an Eligible Employee within the Protection Period (as hereinafter defined) if such termination constitutes: (i) a termination by the Company for any reason other than a termination for "cause"; or (ii) a termination by the Eligible Employee in connection with or based upon any of the following: (A) a significant change in the nature or scope of the Eligible Employee's duties and/or responsibilities; (B) a notification of a reduction of the Eligible Employee's compensation or his or her participation in any employee benefit plan or program; (C) any ordered relocation of the Eligible Employee to a place of employment which is more than 50 miles away from the Eligible Employee's principal place of employment immediately before the Change in Control; (D) any failure to provide facilities or services which are suitable to the Eligible Employee's position and adequate for the performance of his or her duties; or (E) a good faith determination by the Eligible Employee that due to any other material change in circumstances affecting the terms and conditions of employment, he or she is not able properly to carry on his or her duties and responsibilities. The Protection Period shall be: (i) in the case of an Eligible Employee who has not attained age 55 at the time of the Change in Control, the period of two years beginning on the date of the Change in Control, and (ii) in the case of an Eligible Employee who is age 55 or older at the time of the Change in Control, the period of five years beginning on the date of the Change in Control. For purposes of this Section 1.5, termination for "cause" shall mean: (A) an act or acts of dishonesty on the part of the Eligible Employee resulting or intending to result directly or indirectly in substantial gain or personal enrichment to which the Eligible Employee was not legally entitled at the expense of the Company; or (B) a material breach of the Eligible Employee's duties or responsibilities resulting in demonstrably material injury to the Company, provided, however, that such breach shall not include (i) bad judgment or negligence on the part of the Eligible Employee; (ii) neglect of duties; (iii) any act or omission believed by the Eligible Employee in good faith to have been in or not opposed to the interests of the Company; or (iv) any act or omission in respect of which a determination could properly be made that the Eligible Employee met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-Laws of the Company, the laws of the State of Maryland or the directors' and officers' liability insurance of the Company, in each case as in effect at the time of such act or omission. 1.6. Plan. The term "Plan" shall mean The LL&E Change in Control Severance Plan for Key Executives as set forth herein and as it may be hereafter amended. 1.7. Subsidiary. The term "Subsidiary" shall mean any corporation in which the Company possesses directly or indirectly fifty percent (50%) or more of the combined voting power of all classes of stock. ARTCILE II -- BENEFITS 2.1. Severance Benefits. In the event of the Involuntary Termination of an Eligible Employee, the Company shall provide to the Eligible Employee the following benefits: (a) The Company shall pay to the Eligible Employee in a lump sum within 30 days of such Involuntary Termination an amount of cash equal to two times the sum of (i) the Eligible Employee's highest annual salary rate from the Company, whether current or deferred, in effect for any of the thirty-six months immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater), and (ii) the greater of (A) the highest annual bonus paid, granted or awarded to the Eligible Employee by the Company, whether current or deferred and whether or not vested, during or in respect of any of the three calendar years immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater) or (B) the product of the percentage of salary payable as a bonus at 100% of target with respect to the Eligible Employee under the Company's target bonus program for the calendar year in which the Involuntary Termination occurs multiplied by the Eligible Employee's highest annual salary rate determined pursuant to (i) above. For purposes of clause (ii) of the preceding sentence, awards of Company Common Stock shall be valued at the average of the high and low sales prices as reported on the New York Stock Exchange - Composite Transactions on the date of the award (or, if the stock did not trade on that date, on the first date prior thereto on which the stock traded). (b) The Company shall supplement the benefits payable in respect of the Eligible Employee under The LL&E Pension Plan, the pension plan component of The LL&E Compensatory Benefits Agreement, and the pension plan component of The LL&E Supplemental Excess Plan (collectively, the "Pension Plans") by making a lump sum cash payment within 30 days of such Involuntary Termination in an amount equal to the present value of the difference between (i) the benefits that the Eligible Employee would have been entitled to receive under the Pension Plans if he or she had been credited with two additional years of service (but no additional years of age) for purposes of the benefit accrual formula under the Pension Plans as of the date of his or her Involuntary Termination, and (ii) the benefits that the Eligible Employee is entitled to receive under the Pension Plans determined without regard to this subsection (b). Such present value shall be determined by an actuary selected by the Company based on the actuarial equivalence factors, methods, and assumptions used in determining lump sum distributions under The LL&E Pension Plan. The additional years of service added for purposes of the benefit accrual formula under the Pension Plans pursuant to this subsection (b) shall not be counted for purposes of determining whether the Eligible Employee qualifies as a retiree eligible for retiree benefits or for any other enhanced benefits under the Pension Plans or under any other benefit plan or program of the Company. (c) During the period of two years beginning on the date of the Eligible Employee's Involuntary Termination, the Eligible Employee shall be deemed to remain an employee of the Company for purposes of the applicable medical, life insurance, and long-term disability plans and programs of the Company and shall be entitled to receive the benefits available to employees thereunder, provided that continued participation is possible under applicable law and the terms of such plan or program, and provided, further, that if the Eligible Employee qualified for retiree benefits under the applicable medical plan or program on the date of his termination of employment, the Eligible Employee shall instead be entitled to receive the benefits available to retirees in accordance with the terms of such plan or program. In the event that the Eligible Employee's participation in any such benefit plan or program is barred, the Company shall arrange to provide the Eligible Employee with substantially similar benefits. The additional two years of coverage pursuant to this subsection (c) shall not be counted for purposes of determining whether the Eligible Employee qualifies as a retiree eligible for retiree benefits under the applicable medical plan or program or under any other benefit plan or program of the Company. (d) The Company shall pay to the Eligible Employee in a lump sum within 30 days of such Involuntary Termination an amount of cash equal to 20% of the Eligible Employee's highest annual salary rate from the Company paid by the Company during any of the thirty-six months immediately prior to the date of Involuntary Termination or Change in Control (whichever is greater). The payment pursuant to this subsection (d) is intended to compensate the Eligible Employee for the Company-provided benefits that he or she would have received under The LL&E Savings Plan, the savings plan component of The LL&E Compensatory Benefits Agreement, and the savings plan component of The LL&E Supplemental Excess Plan if he or she had remained an employee of the Company for the two-year period following the Involuntary Termination. (e) The Company shall promptly reimburse the Eligible Employee for any fees that he or she may pay to an outplacement assistance firm in order to obtain outplacement assistance services, provided that (i) such expenses must be incurred within twelve (12) months after the Involuntary Termination, and (ii) the Company's obligation pursuant to this subsection (e) shall be limited to fifteen percent (15%) of the Eligible Employee's highest annual base salary rate from the Company, whether current or deferred, in effect during any of the thirty-six months immediately prior to the Involuntary Termination or Change in Control (whichever is greater). (f) Each stock option granted by the Company to the Eligible Employee and outstanding immediately prior to the Involuntary Termination shall be fully exercisable and may be exercised by the Eligible Employee (or his or her beneficiary or personal representative) at any time prior to the expiration date of the applicable option (determined without regard to any earlier termination that would otherwise occur by reason of termination of employment). With respect to any shares of restricted stock granted by the Company to the Eligible Employee and still subject to restrictions immediately prior to the Involuntary Termination, all restrictions shall immediately lapse upon such Involutary Termination. With respect to any performance shares granted by the Company to the Eligible Employee and for which the Performance Cycle has not expired on the date of Involuntary Termination, the Eligible Employee shall receive an immediate payout of a percentage of such performance shares, which percentage shall be the greater of (i) 100%, or (ii) the percentage of performance shares earned under the applicable program for the last Performance Cycle that ended before the date of Involuntary Termination. Any outstanding award agreements with the Eligible Employee are deemed amended to the extent necessary to conform with this subsection (f). (g) The Company shall pay and provide to each Eligible Employee any and all other payments and benefits to which the Eligible Employee would at that time be entitled as a terminating employee under any then existing Company plan or program. (h) Any payments and benefits provided for under this Plan shall be paid net of any applicable withholding required under Federal, state or local law. 2.2. Parachute Payments. If any payment or benefit received by or in respect of an Eligible Employee under this Plan or any other plan, arrangement or agreement with the Company or any of its subsidiaries (determined without regard to any additional payments required under this Section 2.2 and Appendix A) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) or any interest or penalties are incurred by the Eligible Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), the Company shall pay to the Eligible Employee with respect to such Payment at the time specified in Appendix A an additional amount (the "Gross-up Payment") such that the net amount retained by the Eligible Employee from the Payment and the Gross-up Payment, after reduction for any Excise Tax upon the Payment and any Federal, state and local income and employment tax and Excise Tax upon the Gross-up Payment, shall be equal to the Payment. The calculation and payment of the Gross-up Payment shall be subject to the provisions of Appendix A. ARTICLE III -- CHANGE IN CONTROL 3.1. A "Change in Control" shall be deemed to have occurred for purposes of this Plan if any of the following shall occur: (a) Any person (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) ("Person") (but excluding the Company, a Subsidiary, or a trustee or other fiduciary holding securities under any employee benefit plan or employee stock plan of the Company or a Subsidiary) becomes, directly or indirectly, the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of 25% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors ("Voting Securities") of the Company. (b) Individuals constituting the Board of Directors of the Company on the effective date of this Plan and the successors of such individuals ("Continuing Directors") cease to constitute a majority of the Board of Directors of the Company. For this purpose, a director shall be a successor if and only if he or she was nominated by a Board of Directors of the Company (or a Nominating Committee thereof) on which individuals constituting the Board of Directors of the Company on the effective date of this Plan and their successors (determined by prior application of this sentence) constituted a majority. (c) The stockholders of the Company approve a merger, consolidation, or reorganization of the Company ("Combination") with any other corporation or legal person, other than a Combination which both (a) is approved by a majority of the directors of the Company who are Continuing Directors, and (b) would result in stockholders of the Company immediately prior to the Combination owning, immediately thereafter, more than fifty percent (50%) of the combined voting power of either the surviving entity or the Person owning directly or indirectly all the common stock, or its equivalent, of the surviving entity. (d) The stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (e) The Board of Directors of the Company adopts a resolution to the effect that, for purposes of the Plan, a Change in Control has occurred. ARTICLE IV -- PLAN ADMINISTRATION 4.1. Committee. The Plan shall be administered by the Committee. The Committee shall interpret the provisions of the Plan and shall determine all questions arising in the administration thereof, including without limitation, the reconciliation of any inconsistent provisions, the resolution of any ambiguities, the correction of defects, and the supplying of omissions. Any such determination by the Committee shall be consistently and uniformly applied to all persons similarly situated. 4.2. Claims Procedure. In the event that a claim for a benefit under the Plan has been denied, the decision shall be subject to review by the Committee upon written request of the claimant received by the Committee within sixty (60) days after mailing or delivery to the claimant of written notice of such denial. The decision of the Committee upon such review shall be in writing and shall state the reasons for the decision and the provisions of the Plan on which the decision is based. Such decision shall be made within sixty (60) days after the Committee's receipt of written request for such review unless a hearing is necessitated to determine the facts and circumstances, in which event a decision shall be rendered as soon as possible, but not later than one hundred and twenty (120) days after the claimant's written request for review. ARTICLE V -- ELIGIBLE EMPLOYEE'S RIGHTS 5.1. Unsecured Creditor. The rights of an Eligible Employee to benefits under the Plan shall be solely those of an unsecured creditor of the Company. Any asset acquired or held by the Company or funds allocated by the Company in connection with the liabilities assumed by the Company pursuant to the Plan shall not be deemed to be security for the performance of the Company's obligations pursuant hereto, but shall be and remain general assets of the Company. 5.2. Nonalienation. To the extent permitted by law, the right or interest of each Eligible Employee hereunder shall not be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner (but excluding devolution on account of mental incompetency and passage under will or intestacy laws in the case of death), and any such right or interest hereunder shall not be liable for or subject to any obligation or liability of the Eligible Employee. 5.3. Plan Not an Employment Agreement. The Plan does not constitute an agreement or contract of employment and shall not be construed to limit in any manner the right of the Company to terminate the Eligible Employee's employment. 5.4. No Set-Offs or Counterclaims. The Company's obligation to provide the benefits set forth in this Plan shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, or other right which the Company or any Subsidiary may have against the Eligible Employee or anyone else. ARTICLE VI -- MISCELLANEOUS 6.1. Amendment and Termination of the Plan. The Board of Directors of the Company reserves the right prior to a Change in Control, if any, to amend, modify or terminate the Plan at any time and for any reason without the consent of any person. Following a Change in Control, the Plan may not be terminated or amended. 6.2. Legal Expenses; Dispute Resolution; Arbitration. (a) The Company shall promptly pay all legal fees and related expenses incurred by an Eligible Employee in seeking to obtain or enforce any right or benefit under this Plan or to defend against any claim or assertion in connection with this Plan or to defend against any claim or assertion in connection with this Plan (in each case including all fees and expenses, if any, incurred in seeking advice in connection therewith) or to enforce or defend against any arbitration award pursuant to subsection (c) below. (b) If any dispute or controversy arises under or in connection with this Plan, including without limitation, any claim under any Federal, state or local law, rule, decision or order relating to employment or the fact or manner of its termination, the Company and the Executive shall attempt to resolve such dispute or controversy through good faith negotiations. If the dispute or controversy involves a claim for benefits, the Eligible Employee may, but shall not be required to, exhaust the claims procedure described in Section 4.2 before seeking to resolve the dispute through negotiations with the Company (or instituting arbitration pursuant to subsection (c) below). (c) If such parties fail to resolve such dispute or controversy within ninety days, such dispute or controversy shall be settled by arbitration, conducted before a panel of three arbitrators in Louisiana in accordance with the applicable rules and procedures of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. Such arbitration shall be final and binding on the parties. Costs of any arbitration, including, without limitation, reasonable attorneys' fees of both parties, shall be borne by the Company. (d) Pending the resolution of any dispute, the Company shall continue payment of all amounts due the Eligible Employee under this Plan and all benefits to which the Eligible Employee is entitled other than those specifically at issue. 6.3. Inurement. The Plan shall be binding upon, shall inure to the benefit of, and shall be enforceable by the Company and each Eligible Employee and their respective personal or legal representatives, heirs, executors, administrators, distributees, devisees, legatees, successors and assigns. 6.4. No Duty to Seek Employment. An Eligible Employee shall not be under any duty or obligation to seek or accept other employment following termination and no amount, payment or benefit due the Eligible Employee hereunder or otherwise shall be reduced or suspended if the Eligible Employee accepts subsequent employment. 6.5. Failure to Enforce and Waiver. The failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such terms, covenants or conditions, and the waiver or relinquishment of any right or power under the Plan at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times. 6.6. Company's Successors. Any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, shall expressly assume and agree to perform all the obligations of the Company under the Plan in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in the Plan, the "Company" shall mean the Company as defined in the Preamble and Section 1.3 of the Plan and any successor to its business or assets which executes and delivers the agreement provided for in this Section 6.6 or which otherwise becomes bound by all the terms and provisions of the Plan by operation of law. 6.7. Eligible Employee's Representative. In the event an Eligible Employee dies while entitled to any payments and benefits hereunder, the Eligible Employee's legal representatives shall be entitled to receive all payments and benefits due the Eligible Employee. 6.8. Severability. It is the intent that the terms, provisions, covenants and remedies contained in the Plan shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant or remedy of the Plan or the application thereof to any person or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of the Plan or the application thererof to any person or circumstances other than those to which they have been held invalid or unenforceable, shal remain in full force and effect. 6.9. Governing Law. The Plan is made pursuant to, and shall be governed by, the laws of the State of New York, in all respects (without giving effect to principles of conflict of laws), including, without limitation, matters of construction, validity and performance. Appendix A Gross-up Payments The following provisions shall be applicable with respect to the Gross-up Payments described in Section 2.2: (a) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) all of the Payments received or to be received shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of tax counsel selected by the Eligible Employee and reasonably acceptable to the Company, the Payments (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or excess parachute payments (as determined after application of Section 280G(b)(4)(B) of the Code), and (b) the value of any non-cash benefits or any deferred payment or benefit shall be determined by independent auditors selected by the Eligible Employee and reasonably acceptable to the Company in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment the Eligible Employee shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation to which such payment could be subject based upon the state and locality of the Eligible Employee's residence or employment, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In addition, for purposes of determining the amount of the Gross-up Payment, the Company shall make a determination of the amount of employment taxes required to be paid on the Gross-up Payment. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Eligible Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and Federal and state and local income and employment tax imposed on the portion of the Gross-up Payment being repaid by the Eligible Employee if such repayment results in a reduction in Excise Tax and/or a Federal and state and local income or employment tax deduction), plus interest on the amount of such repayment at the Federal short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payments the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional gross- up payment in respect of such excess (plus any interest, penalties or additions payable with respect to such excess) at the time that the amount of such excess is finally determined. Notwithstanding the foregoing, the Company shall withhold from any payment due to the Eligible Employee the amount required by law to be so withheld under Federal, state or local wage and employment tax withholding requirements or otherwise (including without limitation Section 4999 of the Code), and shall pay over to the appropriate government authorities the amount so withheld. (b) The Gross-up Payment with respect to a Payment shall be paid not later than the thirtieth day following the date of the Payment; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Eligible Employee on such date an estimate, as determined in good faith by the Company, of the amount of such payments and shall pay the remainder of such payments (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Eligible Employee, payable on the fifth day after demand by the Company (together with interest at the Federal short- term rate provided in Section 1274(d)(1)(C)(i) of the Code). At the time that payments are made under Section 2.2 and this Appendix A, the Company shall provide the Eligible Employee with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including, without limitation, any opinions or other advice the Company has received from outside counsel, auditors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). (c) The Company shall promptly pay the fees and related expenses of any tax counsel and auditors selected by the Eligible Employee to provide services in connection with this Appendix A. EX-21 5 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Subsidiaries of the Registrant December 31, 1995
% Ownership Jurisdiction by Immediate of Parent Incorporation _______________________________________________________________________________________ The Louisiana Land and Exploration Company - Maryland LL&E Algeria, Ltd. 100 Bermuda LL&E Australia (Offshore) Pty., Ltd. 100 Australia LL&E (Australia) Pty., Ltd. 100 Australia LL&E Canada Holdings, Inc. 100 Delaware LL&E Colombia, Inc. 100 Delaware LL&E Egypt, Inc. 100 Delaware LL&E Erave Pty., Ltd. 100 Papua New Guinea LL&E Espana, Inc. 100 Delaware LL&E (Europe-Africa-Middle East) Inc. 100 Delaware LL&E France, S.A. 100 France LL&E Gas Marketing, Inc. 100 Delaware LL&E Gippsland Pty., Ltd. 100 Australia LL&E, Inc. 100 Delaware LL&E Indonesia, Ltd. 100 British Virgin Islands LL&E International, Inc. 100 Delaware LL&E Mining, Inc. 100 Delaware LL&E (Netherlands) Inc. 100 Delaware MaraLou Netherlands Partnership* 50 Texas CLAM Petroleum Company 100 Delaware LL&E Netherlands North Sea, Ltd. 100 Canada LL&E Netherlands Petroleum Company 100 Delaware LL&E Overseas Petroleum, Ltd. 100 Delaware LL&E Peru (Maranon), Ltd. 100 Bermuda LL&E Petroleum Marketing, Inc. 100 Delaware LL&E Petroleum Terminals, Inc. 100 Delaware LL&E Petroleum Resources International, Inc. 100 Delaware LL&E Pipeline Corporation 100 Delaware LL&E PNG Pty., Ltd. 100 Papua New Guinea LL&E Properties, Inc. 100 Texas Westport Utilities Systems Co., Inc. 100 Louisiana LL&E Sepik Pty., Ltd. 100 Papua New Guinea LL&E Suez, Inc. 100 Delaware LL&E Timor Sea Pty., Ltd. 100 Australia LL&E Tunisia, Inc. 100 Delaware LL&E Tunisia, Ltd. 100 Bermuda LL&E (U.K.) Inc. 100 Delaware LL&E Yemen, Ltd. 100 Bermuda
Exhibit 21 (Continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Subsidiaries of the Registrant December 31, 1995
% Ownership Jurisdiction by Immediate of Parent Incorporation _______________________________________________________________________________________ LLOXY Holdings, Inc. 100 Maryland LLOXY Production Financing Company, Inc. 100 Delaware White Pine Leasing, Inc. 100 Delaware Inexco Oil Company 100 Delaware Wilson Brothers Drilling Company 100 Delaware LL&E Petroleum Resources Marketing, L.P. 100 Louisiana Evangeline Gas Corp. 45 Delaware * Unconsolidated affiliate accounted for under the equity method.
EX-23 6 EXHIBIT 23 CONSENT OF EXPERTS Exhibit 23 The Board of Directors The Louisiana Land and Exploration Company: We consent to incorporation by reference in Registration Statements No. 2-79097, No. 2-98948, No. 33-22108, No. 33-22338, No. 33-37814, No. 33- 56209, No. 33-62923 and No. 33-56211 on Form S-8, No. 33-48339 and No. 33-50991 on Form S-3 and No. 33-6593 on Form S-4 of The Louisiana Land and Exploration Company of our reports dated February 2, 1996, relating to the consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995 which reports appear in the December 31, 1995 annual report on Form 10-K of The Louisiana Land and Exploration Company. Our reports refer to the adoption in 1993 of the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statement of Financial Accounting Standards Nos. 109 and 106, respectively, and to the change in 1994 of the methods of assessing the impairment of the capitalized costs of proved oil and gas properties and other long-lived assets. We also consent to incorporation by reference in the previously referred to Registration Statements of our report dated January 25, 1996, relating to the consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1995 and 1994 and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1995 which report appears in the December 31, 1995 annual report on Form 10-K of The Louisiana Land and Exploration Company. Our report refers to the adoption in 1993 of the method of accounting for income taxes prescribed by Statement of Financial Accounting Standard No. 109. /s/ KPMG Peat Marwick LLP KPMG PEAT MARWICK LLP New Orleans, Louisiana March 18, 1996 EX-24 7 EXHIBIT 24 POWERS OF ATTORNEY THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director and the principal executive officer of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director and the principal executive officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ H. Leighton Steward _____________________________ H. Leighton Steward THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, III and Jerry D. Carlisle his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Richard A. Bachmann _____________________________ Richard A. Bachmann THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Robert E. Howson _____________________________ Robert E. Howson THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Eamon M. Kelly _____________________________ Eamon M. Kelly THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Kenneth W. Orce _____________________________ Kenneth W. Orce THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Victor A. Rice _____________________________ Victor A. Rice THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Orin R. Smith _____________________________ Orin R. Smith THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Arthur R. Taylor _____________________________ Arthur R. Taylor THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ W. R. Timken, Jr. _____________________________ W. R. Timken, Jr. THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr., Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Carlisle A. H. Trost _____________________________ Carlisle A.H. Trost THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as the principal financial officer of The Louisiana Land and Exploration Company hereby appoints Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as the principal financial officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Louis A. Raspino, Jr. _____________________________ Louis A. Raspino, Jr. THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as the principal accounting officer of The Louisiana Land and Exploration Company hereby appoints Louis A. Raspino, Jr. and Frederick J. Plaeger, II and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as the principal accounting officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 5th day of March, 1996. /s/ Jerry D. Carlisle _____________________________ Jerry D. Carlisle EX-27 8
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS (LOSS) OF THE LOUISIANA LAND AND EXPLORATION COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 DEC-31-1995 10,300 0 143,800 0 38,700 206,600 3,120,900 1,913,300 1,467,700 200,600 691,600 5,700 0 0 365,000 1,467,700 822,200 830,500 0 718,100 45,000 0 38,600 28,800 10,000 18,800 0 0 0 18,800 0.56 0.56 -----END PRIVACY-ENHANCED MESSAGE-----