-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aaYGEB40X+gnRCam3pk+gUrj8LO6kah/dSbpPMlZHKERbkHPxX4oKnoVBuoeVKfh vcsRVo3AcnsMLFbv7BavoQ== 0000060512-94-000011.txt : 19940302 0000060512-94-000011.hdr.sgml : 19940302 ACCESSION NUMBER: 0000060512-94-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISIANA LAND & EXPLORATION CO CENTRAL INDEX KEY: 0000060512 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 720244700 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-00959 FILM NUMBER: 94510916 BUSINESS ADDRESS: STREET 1: 909 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045666500 MAIL ADDRESS: STREET 2: P O BOX 60350 CITY: NEW ORLEANS STATE: LA ZIP: 70160 10-K 1 10K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended DECEMBER 31, 1993 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 Toronto Stock Exchange Stock Purchase Rights) London Stock Exchange 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 4, 1994 Capital Stock, $.15 par value $1,352,009,000 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 4, 1994 Capital Stock, $.15 par value 33,178,132 shares DOCUMENTS INCORPORATED BY REFERENCE Parts I and II: The Registrant's Annual Report to Shareholders for 1993 Part III: The Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held on May 12, 1994 PART I Index Page Number _________________________________________________________________ 3 Items 1 and 2. Business and Properties. 3 The Company 3 1993 Acquisitions 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 13 Development Activities 16 Drilling Activities at December 31, 1993 16 Oil and Gas Wells 18 Crude and Condensate, Plant Products and Natural Gas Production and Prices Realized 19 Refining and Marketing Operations 20 Regulation 20 Federal Energy Regulatory Commission 20 Environmental Matters 22 Miscellaneous 22 Employees 22 Item 3. Legal Proceedings. 22 Item 4. Submission of Matters to a Vote of Security Holders. 23 Executive Officers of the Registrant 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, Canada, Colombia and Indonesia. LL&E also owns a refinery in Alabama, and also processes natural gas. 1993 Acquisitions In September 1993, LL&E acquired 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 added net proved domestic reserves of approximately 219 billion cubic feet of natural gas and approximately 10.7 million barrels of liquids. As of December 31, 1993, NERCO's assets included interests in approximately 196 thousand gross productive acres (123 thousand net) and approximately 237 thousand gross undeveloped acres (186 thousand net); productive wells totaled 96 gross (51.6 net) gas wells and 30 gross (17.3 net) oil wells. NERCO also held royalty interests in 4 gas wells. In December 1993, LL&E completed the acquisition of a 11.26% working interest in Block 16/17 in the U.K. North Sea ("T-Block") for approximately $187 million in cash. T-Block contains two oil fields which are under development: the Tiffany Field and the satellite field, Toni. Production from both fields initially came onstream in late 1993. The development of two additional fields, Thelma and Southeast Thelma (for which proved reserves have not been recorded, is in the advanced stage. The acquisition added net proved reserves of approximately 12 billion cubic feet of natural gas and approximately 15.6 million barrels of liquids. As of December 31, 1993 T-Block consisted of approximately 2 thousand gross productive acres (.2 thousand net) and approximately 52 thousand gross undeveloped acres (6 thousand net); productive oil wells totaled 7 gross (.8 net). 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 14 of "Notes to Consolidated Financial Statements" in the Company's Annual Report to Shareholders for 1993 (page 23 of Exhibit 13 filed herewith) for additional information on LL&E's operations.
(Millions of dollars) 19931 1992 1991 _______________________________________________________________________________________ Crude and condensate ............................. $ 210.0 215.1 257.0 Natural gas ...................................... 146.0 92.0 85.9 Refined products2 ................................ 400.2 441.9 432.8 Other petroleum products ......................... 14.1 16.8 20.8 _______________________________________________________________________________________ Total .......................................... $ 770.3 765.8 796.5 _______________________________________________________________________________________ 1 Includes NERCO Oil & Gas since October 1, 1993. 2 After elimination of intracompany transfers to the Company's refinery. In 1993, 1992 and 1991, such transfers were valued at $22.4, $20.7 and $18.7, respectively (see "SALES").
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, 1993 were in the Gulf of Mexico, Louisiana and Wyoming. Outside the United States, LL&E's principal exploration activities were in the North Sea, Canada, Colombia, Algeria and Yemen. 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 Netherlands and United Kingdom sectors of the North Sea, Canada, 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 1993, working interest revenues accounted for 87% 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. (LPM), 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 high gravity crudes from third parties. LL&E Gas Marketing, Inc. (LGM) a wholly owned subsidiary, markets gas downstream to local distributors and other customers. Gas temporarily or permanently released from long-term pipeline contracts, "new" undedicated gas and, to a very limited extent, purchased third-party gas, is aggregated by LGM and then sold under both short- and long-term agreements. Prices received for this gas are generally not regulated. Development of this downstream marketing activity allows LL&E entry into markets not previously available and reduces LL&E's reliance on pipelines to market gas, thus affording LL&E greater overall control of its natural gas reserves. 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 effected 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 1993, 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 1993 sales period has seen dramatic price fluctuations with crude oil prices falling to below $14/BBL in late 1993 from nearly $21/BBL earlier in the year. Overall, crude oil prices averaged approximately $18.47/BBL at Cushing, Oklahoma for West Texas Intermediate. This price was approximately $2/BBL below the price averaged in 1992. Natural Gas In the past, most of LL&E's sales of natural gas were made to various gas pipeline companies, both interstate and intrastate, and were typically under long-term take-or-pay contracts subject to the regulations of the FERC. With the advent of FERC Order 436/500 and Order 636, the structure of the industry has changed dramatically, allowing producers access to downstream markets previously held by the pipeline companies. Like other producers, the Company may now enter into contracts directly with aggregators, local distribution companies (LDC's), industrial users and other downstream customers and contract with the pipeline companies solely for transportation purposes. As of February 1, 1994, less than 10% of LL&E's natural gas production was being sold to interstate pipeline companies. Development of this downstream marketing activity has allowed the Company to gain entry into markets not previously available and has reduced the Company's reliance on pipelines to market natural gas. All of this has afforded LL&E greater overall control of its natural gas reserves. Refined Products LL&E's refinery products, which include three grades of gasoline, naphtha, two grades of No. 2 fuel oil, turbine fuel and atmospheric 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 presented under the heading "Oil and Gas Properties" in the Company's Annual Report to Shareholders for 1993 (page 46 of Exhibit 13 filed herewith) is incorporated herein by reference. Working Interest Properties At December 31, 1993, LL&E had working interests in approximately 664 thousand gross (303 thousand net) productive acres and approximately 11.4 million gross (6.3 million net) undeveloped acres. The total unamortized cost to LL&E of such undeveloped acreage at December 31, 1993 was $57.6 million. Through its affiliate, CLAM Petroleum Company, LL&E had working interests in approximately 42 thousand gross (5 thousand net) productive acres and approximately 806 thousand gross (184 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 16-2/3% 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. Most of LL&E's leaseholds in Canada are on governmental lands and the royalty rates may vary from time to time by governmental action. Royalty Properties At December 31, 1993, LL&E owned approximately 594 thousand acres in fee lands in south Louisiana of which approximately 109 thousand acres were leased to various other companies for oil and gas exploration, development and production. Of those leased to others, approximately 94 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 approximately 56 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 485 thousand fee acres not leased to others, 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 oil and gas reserves is presented 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 $60 million in 1993: $17 million was spent on gathering and evaluating seismic data, almost $3 million was expended for unproved leases in the United States and overseas, and $40 million was expended for participation in 62 wells. Of this total, 39 wells were successful completions: 30 oil and 9 gas. In the Gulf of Mexico, successful exploratory efforts in 1993 included the drilling of two gas discoveries on contiguous blocks at South Pass Blocks 34 and 47 where LL&E has a 35% working interest. Installation of a production platform to develop these two discoveries is currently under study. At South Marsh Island Block 154, NERCO participated with a 50% working interest in a high volume gas discovery in July. A production facility was installed in October and, by year end, two wells were producing at a combined rate of 85 million cubic feet of gas and 3,000 barrels of condensate per day. In south Louisiana, five successful exploratory wells were drilled and completed during 1993. At Palmetto Bayou, the CL&F #1 well logged pay in five zones and was completed flowing 4.3 million cubic feet of gas and 122 barrels of oil per day. At East Lake Washington, the Cockrell-Moran #C-1 produced at 1.4 million cubic feet of gas per day and the Fina #2 well at Bay Baptiste encountered pay in two zones for a combined rate of 3.5 million cubic feet of gas per day and 72 barrels of oil per day. LL&E's working interests in these wells is 50%, 30% and 25%, respectively. The expanding use of 3-D seismic technology in the onshore south Louisiana environment is accelerating the redevelopment of large, complex fields and the exploration of adjacent acreage. Through year-end 1993, 205 square miles of south Louisiana 3-D data had been acquired with the majority on or adjoining LL&E's fee acreage. Additional surveys covering 92 square miles are scheduled for 1994 and plans for acquisition of another 115 square miles are under discussion with partners. In Canada, LL&E participated in the drilling of 38 working interest wells during 1993, of which 25 were successfully completed. An exploratory success in the Peace River Arch oil field at Earring in central Alberta early in 1993 led to the drilling of 12 additional wells. Late in 1993, LL&E agreed to sell certain oil and gas producing properties, undeveloped acreage and seismic data in southeastern Alberta for approximately $43 million, which resulted in a pretax gain of approximately $24 million. The sale, closed in late December, included daily production totaling about 2,200 barrels of oil and less than two million cubic feet of gas. In Indonesia, the interpretation of the first 3-D seismic survey on the KAKAP license resulted in the identification of several prospective features that will be tested in future years. In Colombia, the Company completed interpretation of seismic and surface geological data gathered on an exploratory lease acquired in 1992 in the Barzalosa area of the Upper Magdalena Valley. An exploratory well in the area is scheduled to begin drilling in the second quarter of 1994. In Yemen, over 450 kilometers of seismic data was acquired and analyzed during 1993 on Block 9 where LL&E holds a 17% working interest. A number of drillable prospects were mapped and two wells were scheduled for drilling in early 1994. The first of these, the Jarshah-1, was spud on December 31, 1993 and completed drilling in less than four weeks. While this well was non- productive, potential remains for the other identified prospects. In Algeria, LL&E's 1993 seismic program successfully acquired over 900 miles of seismic data on Blocks 215 and 405 in the Ghadames Basin. Interpretation of this data has resulted in several prospects. As originally contemplated, the Company farmed- out a 35% interest in its holdings in the two blocks. LL&E will continue as operator and retain a 65% working interest. Several oil discoveries being developed in blocks adjacent to Block 405 have greatly increased the potential of the area. Initial drilling is expected on Block 405 in late 1994. In Tunisia, LL&E entered into an agreement with the government for oil and gas exploration in the one million acre Ramla block, about 80 miles offshore in the Gulf of Gabes. The agreement provides for the acquisition of seismic data and the drilling of one well during the initial four-year term of the contract. Initial seismic acquisition is expected to begin in early 1994. LL&E will carry 50% of the exploration costs. The Tunisian government has the right to participate for up to a 50% interest in the development of a discovery. In Australia, two shallow exploratory wells drilled in Block EP-341 in the offshore Carnarvon Basin were unsuccessful. Seismic studies continue on two other concessions in other regions of the country. In Papua New Guinea, initial geological and remote sensing data is being interpreted on the LL&E-operated, 2.6 million acre PPL-150 concession on the northern coast of the island. During the years 1991 through 1993, 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 1993 1992 1991 1993 1992 1991 1993 1992 1991 _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic: Offshore Gulf of Mexico............. .5 - 1.0 1.8 - 2.2 1.4 1.0 3.0 Colorado............. - - - - - - - .5 - Louisiana............ .7 .4 1.0 1.1 2.2 3.2 1.8 2.5 5.8 Oklahoma............. - - - - 4.9 - - 5.2 Texas................ - - - - - .5 - - .5 Wyoming.............. - - - - - - - .7 2.3 North Sea: United Kingdom....... .1 - - - - - .1 .1 .1 Other Foreign: Australia............ - - - - - - .6 - - Canada............... 13.9 12.4 13.1 1.0 .3 1.6 7.4 7.3 11.3 Colombia............. - .3 - - - - - - - Egypt................ - - - - - - - .2 .5 Papua New Guinea..... - - - - - - - - .5 _______________________________________________________________________________________ Total............. 15.2 13.1 15.1 3.9 2.5 12.4 11.3 12.3 29.2 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea.. - - - - - - .1 .1 .3 _______________________________________________________________________________________
Royalty Interest During 1993, the following exploratory wells were drilled by others on LL&E's fee and leasehold acreage.
Gross wells Oil Gas Dry _______________________________________________________________________________________ Domestic: Louisiana....................................................... 0 6 0 Wyoming......................................................... 1 1 1 Other Foreign - Canada............................................ 3 2 6 _______________________________________________________________________________________ Total ........................................................ 4 9 7 _______________________________________________________________________________________
DEVELOPMENT ACTIVITIES Working Interest Development of the Company's oil and gas properties in 1993 resulted in the expenditures of almost $80 million for participation in 22 wells and the installation of platforms and facilities in the United States and overseas. Successful development drilling resulted in 9 oil and 12 gas wells. In addition, $19 million was spent in the acquisition of additional working interests in proved properties in the United States and overseas. Successful production enhancement programs based on 3-D seismic and field studies were conducted in mature fields in the Gulf of Mexico during 1993. The most prominent of these programs was undertaken at Vermilion Block 331 where a total of eight wells were drilled resulting in a gross production increase of 28.4 million cubic feet of gas and 2,500 barrels of oil per day. LL&E has a 25% working interest in this field, half of which is burdened by a 90% net profits interest. At the LL&E-operated Madden Deep Unit in central Wyoming, construction of the Lost Cabin Gas Plant commenced in August 1993. This facility is being built to process natural gas from the Madison Formation below 24,000 feet. Two wells have been drilled to this horizon, the Bighorn 1-5 in 1985 and the Bighorn 2-3 in 1988 and limited production tests have indicated the potential for significant additional gas reserves and production in the Madison Formation. Both wells will initially be placed on production upon completion of the plant at a combined rate of 50 million cubic feet per day. Recent test of these two wells indicated combined flow potential of 77 million cubic feet per day. The estimated cost of the facility is $62 million with complete project costs expected to total approximately $80 million, with initial treating capacity of over 50 million cubic feet per day. Plant products will include natural gas, sulfur and carbon dioxide. Facility expansion has been contemplated in the plant's design to accommodate production from any additional deep wells drilled. Mechanical completion of the plant is expected in December 1994 with startup in early 1995. LL&E will have a 37% interest in the plant. The 70,000 acre Madden Deep Unit currently produces gas from numerous intervals within four horizons ranging in depth from 5,500 to 18,000 feet. The 1993 development program included the drilling of four infill wells, which tested at daily rates ranging from 2.1 to 5 million cubic feet of gas, and the workover of seven gas wells and two service wells. LL&E's working interest varies by producing horizon but averages 30% fieldwide. Plans for continued development during 1994 include drilling four additional infill wells and the workover of approximately 15 wells. A 3-D seismic survey covering a 37 square mile area of the field is scheduled for completion in 1994. The program is designed to aid in the ongoing development of shallow gas reserves, enhance exploitation of undrilled acreage within the Madden Deep Unit and further delineate the Madison structure. In the U.K. North Sea, the culmination of years of exploratory drilling and field development efforts occurred in December 1993 when production commenced from the East Brae field, the third major platform in the Brae Complex and the largest developed to-date. LL&E owns an average 6% working interest in the Brae complex. East Brae is a gas condensate field and production is expected to build throughout 1994 as additional wells are brought. Utilizing the gas cycling technology developed at North Brae, natural gas produced at East Brae will initially be recycled into the East Brae reservoir to enhance liquids production. Gas sales from the Brae complex is expected to commence in late 1994. Elsewhere in the U.K. North Sea, a plan of development was submitted to the U.K. Department of Energy for the Beinn gas/condensate field in late 1993. Beinn was discovered in 1987 when a successful exploratory well established the production potential of the Middle Jurassic formations at Brae. Upper Jurassic reservoirs had accounted for all Brae production prior to the Beinn discovery. In 1992 and 1993, two successful confirmation wells drilled from the Brae "B" platform have each encountered over 200 feet of Middle Jurassic pay. A third appraisal well was drilling at year end. A new 3-D seismic study will be conducted over the field to assist in determining the optimum locations of additional development wells. The Beinn accumulation partially underlies the North Brae field and development will utilize the North Brae "B" platform. Because of the existing infrastructure, development costs of the reserves is expected to be very low. In the Netherlands sector of the North Sea, LL&E participates in natural gas exploration and development through its 50%-owned affiliate, CLAM. In June, the L12/15 gas field commenced production and is currently producing at a gross daily rate of 72 million cubic feet. LL&E has a 7.5% working interest in the field through CLAM. LL&E increased its ownership at the Kotter and Logger oil fields through reserve acquisitions. LL&E's current working interest in Kotter and Logger is now 31.88% and 37.5%, respectively. In Indonesia, development of the KG and KRA oil fields in the KAKAP Production Sharing Contract offshore in the Republic of Indonesia is underway and on schedule. LL&E's net 15% share of production averaged over 1,300 barrels per day in 1993 and is expected to increase in early 1995 when the two new fields begin production. In Colombia, the first of three planned development wells in the Casanare Contract Area in the Llanos Basin began drilling shortly before year-end 1993. LL&E's net production from its interest in the Casanare Association Contract Area temporarily decreased from 2,300 barrels per day in 1992 to 1,900 barrels per day in 1993 due to pipeline access limitations and more stringent salt water disposal requirements. During the years 1991 through 1993, 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 1993 1992 1991 1993 1992 1991 1993 1992 1991 _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic: Offshore Gulf of Mexico ............ 1.5 .2 .6 1.9 1.0 .5 .3 - - Louisiana ........... .5 1.6 .5 - - .9 - .5 .6 Wyoming ............. - - .4 1.3 .3 - - - - North Sea: Netherlands.......... - .1 .4 - - - - - - United Kingdom ...... .1 .2 .2 - - - - .2 - Other Foreign: Colombia ............ - .3 .3 - - - - - - _______________________________________________________________________________________ Total ............. 2.1 2.4 2.4 3.2 1.3 1.4 .3 .7 .6 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea.. - .2 - .2 .1 .1 - - - _______________________________________________________________________________________
Royalty Interest During 1993, the following development wells were drilled by others on LL&E's fee and leasehold acreage.
Gross wells Oil Gas Dry _______________________________________________________________________________________ Domestic-Louisiana................................................. 8 6 1 _______________________________________________________________________________________
DRILLING ACTIVITIES AT DECEMBER 31, 1993 Working Interest The table below sets forth the working interest wells in the process of drilling at December 31, 1993 by LL&E and by CLAM.
Wells drilling Gross Net _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic .......................................................... 5 2.0 North Sea ......................................................... 2 .2 _______________________________________________________________________________________ Total .......................................................... 7 2.2 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea .................................... - - _______________________________________________________________________________________
Royalty Interest There was one Domestic well being drilled by others at December 31, 1993 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, 1993.
Oil wells Gas wells Gross Net Gross Net _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic ..................................... 1,546 179.6 373 141.8 North Sea .................................... 51 6.8 - - Other Foreign ................................ 71 18.4 10 4.9 _______________________________________________________________________________________ Total ..................................... 1,6681 204.8 3832 146.7 _______________________________________________________________________________________ CLAM (50%) Netherlands-North Sea ............... - - 55 3.4 _______________________________________________________________________________________ 1 Includes 39 dual completion wells. 2 Includes 34 dual completion wells.
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, 1993.
Gross wells Oil Gas _______________________________________________________________________________________ Domestic .......................................................... 620 219 Other Foreign ..................................................... 7 6 _______________________________________________________________________________________ Total .......................................................... 6271 2252 _______________________________________________________________________________________ 1 Includes 30 dual completion wells. 2 Includes 14 dual completion wells.
CRUDE AND CONDENSATE, PLANT PRODUCTS AND NATURAL GAS PRODUCTION AND PRICES REALIZED The production and average price information for the years 1991 through 1993 presented under the heading "Oil and Gas Operating Data" in the Company's Annual Report to Shareholders for 1993 (page 44 of Exhibit 13 filed herewith) is incorporated herein by reference. 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.
1993 1992 1991 _______________________________________________________________________________________ LL&E and Subsidiaries: Domestic .............................................. $4.69 5.51 5.08 North Sea ............................................. 9.20 7.62 6.09 Other Foreign ......................................... 5.64 5.43 5.06 _______________________________________________________________________________________ CLAM Netherlands-North Sea ................................. $3.07 4.05 3.04 _______________________________________________________________________________________
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 AND MARKETING 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. Of the $9.3 million in refinery capital expenditures during 1993, $1.9 million was spent completing construction of a distillate hydrotreating facility, $2.0 million was associated with a vacuum tower upgrade project and the remainder was related to miscellaneous capital improvements and safety and environmental items. In 1994, $8.5 million has been budgeted for capital projects including $5 million toward profit enhancement and the balance to maintenance, safety and environmental items. In 1993, the refinery processed an average of 46,800 barrels per day of crude oil and remained under the Independent Producers status during the year. The decline in industry refinery margins (excluding retail), which began in 1992, continued in 1993. Efforts in 1993 were concentrated on cutting costs and improving quality, which are expected to improve the refinery's 1994 competitive position. Sales and Prices Realized The sales and average price information for the years 1991 through 1993 presented under the heading "Refining and Marketing Operating Data" in the Company's Annual Report to Shareholders for 1993 (page 45 of Exhibit 13 filed herewith) is incorporated herein by reference. Regulation FEDERAL ENERGY REGULATORY COMMISSION Natural gas prices are 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 April of 1992, the FERC issued its Order 636 (followed by revisions 636-A and 636-B) on comparability of pipeline services. The order is intended to eliminate certain competitive advantages interstate pipelines may have in selling gas and further move the industry toward a more efficient, competitive market environment. Among other things, Order 636 requires interstate pipelines to unbundle the various services that they have 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 should be increased gas sales opportunities. Order 636 has withstood several challenges in the courts and the timetable outlined in the order calls for implementation by the winter of 1993-94. 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. Notwithstanding that these normally recurring costs are not separately identified, 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. These regulations are expected to be finalized over the next two to five years with implementation taking effect on a regulatory schedule in future years. 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 three National Priorities List sites in Abbeville, Louisiana known as the "D.L. Mud", "Gulf Coast Vacuum" and "PAB Oil and Chemical" sites. Additionally, in 1993, the Company acquired NERCO Oil & Gas, Inc. (NERCO), which is also named a PRP at the Gulf Coast Vacuum and the D.L. Mud sites. With respect to the Gulf Coast Vacuum site, the Company has entered into a de minimis Consent Agreement with EPA on behalf of itself and NERCO, which agreement is currently lodged for public comment. With respect to D.L. Mud, the Company believes that its liability, if any, is de minimis and has been informed that the parent of the former site owner has assumed all costs of cleanup for the site. With respect to the PAB Oil and Chemical site, based on the Company's 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 this site will not have a material adverse effect on its results of operations, cash flow or financial position. In view of recent prosecutions of other oil companies under the Inventory Update Rule promulgated under the Toxic Substances Control Act, the Company is currently evaluating whether it is also subject to such reporting requirements and has notified, and is meeting with, the appropriate regulatory authorities with respect to its investigation. Based on currently available information, the Company believes that sanctions, if any, will not have a material adverse effect on its results of operations, cash flow or financial position. Miscellaneous EMPLOYEES At December 31, 1993, LL&E had 846 employees. ITEM 3. LEGAL PROCEEDINGS. Information presented in Note 15 under the heading "Notes to Consolidated Financial Statements" in the Company's Annual Report to Shareholders for 1993 (page 24 of Exhibit 13 filed herewith) is incorporated herein by reference. See also "Environmental Matters." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT NAME AGE POSITIONS _________________________________________________________________ H. Leighton Steward (59) Chairman of the Board, President and Chief Executive Officer since 1989. Richard A. Bachmann (49) Director since 1989. Executive Vice President, Finance and Administration and Chief Financial Officer since 1985. John F. Greene (53) Director since 1989. Executive Vice President, Exploration and Production since 1985. Jerry D. Carlisle (48) Vice President and Controller since 1984. Robert J. Chebul (46) Vice President since July, 1991. Held various managerial positions, including District Manager from 1988 to 1991. E. J. Leidner, Jr. (57) Vice President since 1986. John O. Lyles (48) Vice President since 1992. Vice President and Treasurer from 1984 to 1992. Joel M. Wilkinson (58) Vice President since 1988. John A. Williams (49) Vice President since 1988. Frederick J. Plaeger, II (40) General Counsel and Corporate Secretary since 1992. Corporate Secretary and Senior Counsel from 1989 to 1992. Partner in the law firm of Milling, Benson, Woodward, Hillyer, Pierson and Miller from 1985 to 1989. Louis A. Raspino (42) Treasurer since 1992. Assistant Treasurer from 1984 to 1992. Each officer holds office until the first meeting of the Board of Directors following the annual meeting of shareholders and until his successor shall have been elected and qualified, or until he shall have resigned or been removed as provided in the LL&E By- Laws. No family relationship exists between any of the above listed executive officers or between any such executive officer and any Director of LL&E. PART II Index Page Number __________________________________________________________________ 25 Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. 25 Item 6. Selected Financial Data. 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 25 Item 8. Financial Statements and Supplementary Data. 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Information presented under the caption "Capital Stock, Dividends and Other Market Data" in the Company's Annual Report to Shareholders for 1993 (page 35 of Exhibit 13 filed herewith) and information presented under the caption "Market Price and Dividend Data" in the Company's Annual Report to Shareholders for 1993 (page 49 of Exhibit 13 filed herewith) are incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. Information presented under the caption "Selected Financial Data" in the Company's Annual Report to Shareholders for 1993 (page 48 of Exhibit 13 filed herewith) is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Information presented under the heading "Financial Review" in the Company's Annual Report to Shareholders for 1993 (under the heading "Management's Discussion and Analysis" on page 29 of Exhibit 13 filed herewith) is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of The Louisiana Land and Exploration Company and Subsidiaries, together with the report thereon of KPMG Peat Marwick dated February 9, 1994, and the supplementary data referred to in Item 14(a)(1) hereof, which are contained in the Company's Annual Report to Shareholders for 1993 (Exhibit 13 filed herewith), are incorporated herein by reference. The report of KPMG Peat Marwick covering the aforementioned consolidated financial statements refers to the adoption of the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statement of Financial Accounting Standards Nos. 109 and 106, respectively. The consolidated financial statements of MaraLou Netherlands Partnership and Subsidiary (a 50%-owned affiliate accounted for under the equity method), together with the report thereon of KPMG Peat Marwick dated January 28, 1994, as referred to in Item 14(a)(1) hereof, are included herein and filed herewith. The report of KPMG Peat Marwick covering the aforementioned consolidated financial statements refers to the adoption of the method of accounting for income taxes prescribed by Statement of Financial Accounting Standard No. 109. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III Index Page Number __________________________________________________________________ 27 Item 10. Directors and Executive Officers of the Registrant. 27 Item 11. Executive Compensation. 27 Item 12. Security Ownership of Certain Beneficial Owners and Management. 27 Item 13. Certain Relationships and Related Transactions. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information relating to directors of the Registrant will be contained in the definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 12, 1994, which the Registrant will file pursuant to Regulation 14A not later than 120 days after December 31, 1993, and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. Information relating to executive officers of the Registrant appears at page 23 of this Annual Report on Form 10-K. ITEM 11. 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 Index Page Number __________________________________________________________________ Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 29 (a)(1) Financial Statements and Supplementary Data 49 Independent Auditors' Report 50 (a)(2) Financial Statement Schedules: 50 Schedule V - Property, Plant and Equipment 51 Schedule VI - Accumulated Depletion, Depreciation and Amortization 52 Schedule X - Supplementary Earnings Statement Information All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. 53 (a)(3) Index to Exhibits 56 (b) Reports on Form 8-K 57 Signatures THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Financial Statements and Supplementary Data (Item 14 (a)(1)) The following financial statements and supplementary data included in the Company's Annual Report to Shareholders for 1993 are incorporated herein by reference in response to Item 8: Page in Exhibit 13 filed herewith Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Earnings (Loss) 4 Consolidated Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Report of Management 26 Independent Auditors' Report 27 Unaudited Supplemental Data: Data on Oil and Gas Activities 36 Quarterly Data 50 The following financial statements of 50% or Less Owned Persons required by Regulation S-X, Rule 3-09, are included herein and filed herewith in response to Item 8: Page herein MaraLou Netherlands Partnership and its wholly-owned consolidated subsidiary, CLAM Petroleum Company: Independent Auditors' Report 31 Consolidated Balance Sheets 32 Consolidated Statements of Income 33 Consolidated Statements of Partners' Capital 34 Consolidated Statements of Cash Flows 36 Notes to Consolidated Financial Statements 38 MARALOU NETHERLANDS PARTNERSHIP AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (WITH INDEPENDENT AUDITORS' REPORT THEREON) Independent Auditors' Report The Partners MaraLou Netherlands Partnership: We have audited the accompanying consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1993 and 1992, and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MaraLou Netherlands Partnership and subsidiary as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in note 4 to the consolidated financial statements, the Partnership adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" in 1993. /s/ KPMG Peat Marwick KPMG Peat Marwick Houston, Texas January 28, 1994 MARALOU NETHERLANDS PARTNERSHIP Consolidated Balance Sheets December 31, 1993 and 1992 (Expressed in U.S. Dollars)
ASSETS 1993 1992 Current assets: Cash and cash equivalents $ 11,476,689 $ 18,485,764 Accounts receivable 12,538,332 15,600,647 Accounts receivable - net profits (Note 10) 327,160 - Materials and supplies 6,910 6,845 Other current assets 51,913 13,524 Amounts due from operator of joint venture - 997,424 Total current assets 24,401,004 35,104,204 Long-term receivable (Note 11) 5,619,856 5,941,726 Property, plant and equipment, at cost, based on the successful efforts method of accounting for oil and gas properties (Note 3) 349,664,531 341,015,932 Less accumulated depletion, amortization and depreciation 184,677,406 170,576,573 Net property, plant and equipment 164,987,125 170,439,359 Deferred charges 249,523 269,343 $ 195,257,508 $ 211,754,632 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable - affiliated companies $ 63,960 $ 71,857 Accounts payable - net profits interest (Note 10) - 228,091 Accrued liabilities (Note 11) 8,912,609 8,051,676 Amounts due to operator of joint venture 3,667,149 - Government royalties payable 1,408,245 2,352,904 Income taxes payable (Note 4) 12,617,010 5,281,794 Total current liabilities 26,668,973 15,986,322 Long-term debt (Note 6) 87,800,000 97,800,000 Deferred income taxes (Note 4) 18,772,886 21,429,633 Deferred liability - platform abandonment 20,432,039 19,864,602 Minority interest (Note 1) 2,229,013 3,251,326 Partners' capital: Marathon Petroleum Netherlands, Ltd. 12,675,404 19,709,480 LL&E (Netherlands), Inc. 12,675,404 19,709,480 Foreign currency translation adjustment (Note 5) 14,003,789 14,003,789 Total partners' capital 39,354,597 53,422,749 $ 195,257,508 $ 211,754,632 See Accompanying Notes To Consolidated Financial Statements /TABLE MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Income Years Ended December 31, 1993, 1992 and 1991 (Expressed in U.S. Dollars)
1993 1992 1991 Revenues: Sales $ 61,152,082 $ 82,902,883 $ 111,883,626 Interest income 4,465,502 2,722,500 2,873,994 Total revenues 65,617,584 85,625,383 114,757,620 Costs and expenses: Costs and operating expenses 12,349,387 17,514,115 17,435,375 Exploration expenses, including dry hole costs (Note 11) 3,336,263 3,981,650 2,975,337 Depletion, amortization and depreciation 14,100,833 15,424,731 16,702,440 General and administrative expenses (Note 11) 4,950,135 5,522,838 5,332,698 Royalty expense 960,585 2,419,101 2,983,663 Net profits interest (Note 10) 336,356 1,202,888 1,259,829 Interest expense 7,222,385 7,983,685 7,271,586 Foreign exchange loss/(gain) (763,957) (53,951) 392,044 Reimbursement of exploration costs, including interest (Note 11) - 263,056 - Total costs and expenses 42,491,987 54,258,113 54,352,972 Income before income taxes 23,125,597 31,367,270 60,404,648 Provision for income taxes (Note 4) 12,192,472 17,524,381 30,264,968 Income after income taxes 10,933,125 13,842,889 30,139,680 Minority interest (Note 1) 797,688 1,665,693 157,226 Income before cumulative effect of change in accounting principle 10,135,437 12,177,196 29,982,454 Cumulative effect of change in accounting principle for income taxes (Note 4) 6,003,589 - - Net income $ 4,131,848 $ 12,177,196 $ 29,982,454 See Accompanying Notes To Consolidated Financial Statements
MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Partners' Capital Years Ended December 31, 1993, 1992 and 1991 (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
Marathon Petroleum L.L.&E. Netherlands, Inc. (Netherlands), Inc. Total Capital, January 1, 1992 $20,470,882 $20,470,882 $ 40,941,764 Net income 6,088,598 6,088,598 12,177,196 Distribution to Partners (6,850,000) (6,850,000) (13,700,000) Capital before adjustments $19,709,480 $19,709,480 39,418,960 Foreign currency translation adjustment 14,003,789 Capital, December 31, 1992 $ 53,422,749
(Continued) MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Partners' Capital (Continued) Years Ended December 31, 1993, 1992 and 1991 (Expressed in U.S. Dollars)
Marathon Petroleum L.L.&E. Netherlands, Inc. (Netherlands), Inc. Total Capital, January 1, 1991 $13,749,858 $13,749,858 $27,499,716 Net income 14,991,227 14,991,227 29,982,454 Capital Contribution 10,229,797 10,229,797 20,459,594 Distribution to Partners (18,500,000) (18,500,000) (37,000,000) Capital before adjustments $20,470,882 $20,470,882 40,941,764 Foreign currency translation adjustment 14,003,789 Capital, December 31, 1991 $54,945,553 See Accompanying Notes To Consolidated Financial Statements /TABLE MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Cash Flows Years Ended December 31, 1993, 1992 and 1991 (Expressed in U.S. Dollars)
1993 1992 1991 Cash flows from operating activities: Net income accruing to MaraLou partners $ 4,131,848 $ 12,177,196 $ 29,982,454 Net (loss)/income accruing to minority shareholders, net of cash distributions (1,022,312) 295,694 157,226 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, amortization, depreciation and abandonment 14,668,271 16,280,290 20,130,591 Dry hole costs 1,325,018 2,523,479 687,256 Deferred income taxes (7,951,542) 2,511,807 1,300,000 Exchange loss (gain) (175,868) (127,738) 575,469 Interest on EBN repayment 665,428 1,076,991 797,326 Cumulative effect of change in accounting principle 6,003,589 - - Decrease (increase) in accounts receivable 2,175,071 943,544 (5,024,650) Increase in accounts receivable - net profits (326,001) - - Decrease (increase) in materials and supplies (65) 69 (6,914) Decrease (increase) in other current assets (161,390) (380,539) 102,260 Decrease (increase) in deferred charges 18,201 (240,457) 5,127 (Decrease) increase in accounts payable-affiliates (6,535) 5,077 (9,943) (Decrease) increase in accounts payable-net profits (228,091) 20,517 (58,967) Increase (decrease) in accrued liabilities 677,612 (123,115) (42,673) Increase (decrease) in amounts due to operator of joint venture 4,676,131 (2,462,784) (226,976) (Decrease) increase in government royalties payable (865,267) (869,050) 557,026 (Decrease) increase in income taxes payable 8,415,273 (3,489,638) (3,055,851) Net cash provided by operating activities $ 32,019,371 $ 28,141,343 $ 45,868,761 Cash flows from investing activities: Capital expenditures $ (9,973,617)$(20,034,768) $(22,572,339) Net cash used in investing activities (9,973,617) (20,034,768) (22,572,339)
(Continued) MARALOU NETHERLANDS PARTNERSHIP Consolidated Statements of Cash Flows (Continued) Years Ended December 31, 1993, 1992 and 1991 (Expressed in U.S. Dollars)
1993 1992 1991 Cash flows from financing activities: Borrowing under revolving credit agreement $ - $ - $ 6,000,000 Repayments under revolving credit agreement (10,000,000) (6,000,000) (200,000) Borrowings from other bank sources - - 6,000,000 Repayments to other bank sources - - (6,000,000) Reduction of note receivable by minority shareholders in CLAM - 5,629,000 6,000,000 Cash distribution to partners (18,200,000) (13,700,000) (37,000,000) Net cash used in financing activities (28,200,000) (14,071,000) (25,200,000) Effect of exchange rate on cash (854,829) 1,010,031 (204,671) Net decrease in cash and cash equivalents (7,009,075) (4,954,394) (2,108,249) Cash and cash equivalents at beginning of year $ 18,485,764 $ 23,440,158 $ 25,548,407 Cash and cash equivalents at end of year $ 11,476,689 $ 18,485,764 $ 23,440,158 Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 5,543,844 $ 5,224,193 $ 6,980,086 Foreign taxes 13,746,175 17,125,660 29,076,627 Federal taxes (1,155,157) 2,345,247 3,525,000 Supplemental schedule of noncash investing and financing activities: Contribution of North Sea license interests by LL&E Netherlands Petroleum Company $ - $ - $ 11,629,000 Note receivable-Marathon Petroleum Netherlands, Ltd. for purchase of newly issued shares of CLAM stock - - 5,629,000 Long-term receivable for EBN reimbursement (321,870) 1,327,240 4,614,486 Accrued liability established for repayment to EBN (191,527) (2,334,052) (5,468,166) See Accompanying Notes To Consolidated Financial Statements
MARALOU NETHERLANDS PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1993, 1992 and 1991 1. Organization and summary of significant accounting policies Organization and ownership: MaraLou Netherlands Partnership (MaraLou), a Texas general partnership, was formed on March 27, 1985 by LL&E (Netherlands), Inc. (LL&E Netherlands) and Marathon Petroleum Netherlands, Ltd. (Marathon Netherlands) for the purpose of owning their interests in CLAM Petroleum Company (CLAM) and for the purpose of purchasing the outstanding shares of CLAM held by Netherlands-Cities Services, Inc. On March 27, 1985 both partners agreed to contribute their respective ten thousand shares of CLAM to MaraLou. These shares were transferred to MaraLou on June 21, 1985. The remaining shares held by Netherlands-Cities Services, Inc. were acquired by MaraLou for $85,381,881 on March 29, 1985. The acquisition has been accounted for using the purchase method of accounting effective January 1, 1985. On December 6, 1991 an agreement was concluded whereby LL&E Netherlands Petroleum Company, an affiliated company to LL&E Netherlands - both of which are wholly owned subsidiaries of Louisiana Land and Exploration Company, contributed Netherlands North Sea license interests and other assets valued at $11,629,000 for five hundred newly issued shares of CLAM stock. For financial reporting purposes, the contribution made by LL&E Netherlands Petroleum Company in excess of its calculated minority interest is reflected in Partners' capital as an addition to the LL&E Netherlands capital balance. MaraLou made a cash contribution of $11,629,000 for an additional five hundred newly issued shares of CLAM stock. The contributed cash is to be used to develop the North Sea license interest contributed by LL&E Netherlands Petroleum Company. MaraLou subsequently sold all of its newly issued shares of CLAM stock to Marathon Netherlands, a partner in MaraLou, which purchased the shares with a note valued at $11,629,000, on which $6,000,000 was paid in 1991 and $6,000,000, inclusive of interest, was paid in 1992. These newly issued shares of CLAM stock have been pledged as security for MaraLou and CLAM's revolving credit agreement (see Note 6). CLAM Petroleum Company, a Delaware Corporation, was formed in October 1975 by LL&E Netherlands, Marathon Netherlands and Netherlands-Cities Service, Inc. (stockholders) for the purpose of owning their interest in certain licenses and agreements covering hydrocarbon operations in The Netherlands and for the purpose of entering into agreements with lending institutions to finance such interest. Effective May 24, 1976 the stockholders assigned their interests and obligations under the licenses and related agreements to CLAM. CLAM has no operations outside the oil and gas industry or in areas other than The Netherlands North Sea. The financial statements reflect the consolidation of CLAM Petroleum Company (the Company) with MaraLou for the period from January 1, 1985. The financial statements also reflect the interests and earnings of the minority shareholders, LL&E Netherlands Petroleum Company and Marathon Netherlands. Currently, MaraLou has no interests other than in the operation of CLAM. Cash equivalents: Cash equivalents of $11,133,745, $18,721,023 and $23,638,318 at December 31, 1993, 1992 and 1991 respectively, consist of Eurodollar and Euroguilder investments. For purposes of the statements of cash flows, MaraLou considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Joint venture agreements: CLAM, together with unrelated parties, has interests in certain prospecting and production licenses and related operating agreements which provide for the joint conduct of seismic, geological, exploration and development activities on the continental shelf of The Netherlands. The accompanying financial statements include CLAM's share of operations as reported to it by the operator of the joint venture. The amounts reported by the operator of the joint venture are subject to an annual audit by the non-operators. The audit for the year 1992 has been conducted with the non-operators awaiting the operator's initial response to the audit report. Petroleum exploration and development costs: CLAM follows the successful efforts method of accounting for oil and gas properties. Exploration expenses, including geological and geophysical costs, prospecting costs, carrying costs and exploratory dry hole costs are charged against income as incurred. The acquisition costs of unproved properties are capitalized with appropriate provision for impairment based upon periodic assessments of such properties. All development costs, including development dry hole costs, are capitalized. Capitalized costs are adjusted annually for cash adjustments relating to changes in CLAM's share in gas reserve estimates (see Note 7). Depletion, amortization and depreciation: Depletion is provided under the unit-of-production method based upon estimates of proved developed reserves. Depreciation is based on estimated useful life. Reserve determinations are management's best estimates and generally are related to economic and operating conditions. Depletion and depreciation rates are adjusted for future estimated salvage values. CLAM property, plant and equipment retirements: Upon sale or retirement of property, plant and equipment, the cost and related accumulated depletion, amortization and depreciation are eliminated from the accounts and the gain or loss is reflected in income. CLAM platform abandonment amortization: Platform abandonment amortization is provided under the unit- of-production method based upon estimates of proved-developed reserves. Amortization rates are adjusted for future estimated abandonment costs. Platform abandonment amortization is charged to operating expense. 2. Related party transactions CLAM transactions with related parties consisted of charges for geological, geophysical and administrative services rendered by an affiliate under two service contracts and administrative services rendered by another affilate. Such charges were approximately $2,512,536, $2,530,608 and $2,267,479 for 1993, 1992 and 1991, respectively. Salaries and related social charges included therein amounted to $1,685,046, $1,858,876 and $1,512,633 for 1993, 1992 and 1991, respectively. MaraLou transactions with related parties consisted of charges for administrative services rendered by an affiliate amounting to $55,800, $58,200 and $57,600 in 1993, 1992 and 1991, respectively. 3. Property, plant and equipment Changes in property, plant and equipment for the years ended December 31, 1993, 1992 and 1991 are as follows (in thousands of U.S. dollars): 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
Balance Additions Dry Hole Balance 12/31/91 (Reductions) Costs 12/31/92 Concession $ 12,231 $ - $ - $ 12,231 Wells and platforms 233,339 12,747 - 246,086 Incomplete construction 15,039 (3,054) - 11,985 Uncompleted wells 15,228 4,540 (2,523) 17,245 Pipelines 42,847 5,556 - 48,403 Gas processing facilities 3,751 201 - 3,952 Furniture and fixtures 1,070 43 - 1,113 $ 323,505 $ 20,033 $ (2,523) $ 341,015 Depletion and amortization $ 154,292 $ 15,339 $ - $ 169,631 Depreciation-furniture and fixtures 860 85 - 945 $ 155,152 $ 15,424 $ - $ 170,576 Net property, plant and equipment $ 168,353 $ 170,439
Balance Additions Dry Hole Balance 12/31/90 (Reductions) Costs 12/31/91 Concession $ 602 $ 11,629 $ - $ 12,231 Wells and platforms 206,443 26,896 - 233,339 Incomplete construction 8,540 6,499 - 15,039 Uncompleted wells 29,679 (13,764) (687) 15,228 Pipelines 40,216 2,631 - 42,847 Gas processing facilities 3,634 117 - 3,751 Furniture and fixtures 744 326 - 1,070 $ 289,858 $ 34,334 $ (687) $ 323,505 Depletion and amortization $ 137,625 $ 16,667 $ - $ 154,292 Depreciation-furniture and fixtures 692 168 - 860 $ 138,317 $ 16,835 $ - $ 155,152 Net property, plant and equipment $ 151,541 $ 168,353
4. Federal and foreign income taxes MaraLou is a partnership and, therefore, does not pay income taxes. Since CLAM (wholly owned by MaraLou) is a corporation, income taxes included in the accompanying consolidated financial statements have been determined utilizing applicable domestic and foreign tax rates. The FASB has issued Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes" which superseded SFAS No. 96. "Accounting for Income Taxes." The adoption of SFAS 109 caused an additional deferred income tax liability of $6,003,589 as of January 1, 1993, which has been recorded as a cumulative effect of change in accounting principle. Prior year consolidated financial statements have not been adjusted and are based on SFAS No. 96. SFAS 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method. Under the new method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable to those years in which the temporary differences between financial statement carrying amounts and tax bases are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted. Under the deferred method of accounting for income taxes which was applied in 1992 and prior years, deferred income taxes applicable to each year's net temporary differences were provided based on the tax rates in effect during that year and no adjustments were made to the deferred income tax liability amounts for subsequent changes in tax rates. Dutch investment incentive premiums (WIR) are credited to foreign income tax in the year in which they are claimed. CLAM incurred WIR premium expense of $60,331 and $371,771 in 1993 and 1992, respectively. Details of federal and foreign income taxes (in thousands of U.S. dollars) are as follows:
1993 1992 1991 Current tax expense: Federal $(2,471) $ 1,063 $ 2,189 Foreign 22,615 13,950 26,776 Deferred tax expense (benefit): Federal (2,544) (2,800) 1,300 Foreign (5,408) 5,311 - Total provision for income taxes $12,192 $ 17,524 $30,265
Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35 and 34 percent for 1993 and 1992, respectively, to income before income taxes of CLAM as a result of the following (in thousands of U.S. dollars):
1993 1992 1991 Computed "expected" tax expense $ 8,094 $ 12,188 $22,392 Increase (reduction) in income taxes resulting from: Foreign tax greater than federal income tax 5,651 2,668 6,176 Increase in deferred tax valuation allowance 1,452 2,328 1,300 Carryback of foreign tax credits (3,629) - - Other 624 340 397 Provision for income taxes $ 12,192 $ 17,524 $30,265
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1993 and 1992 relate to the following (in thousands of U.S. dollars):
U.S. - Deferred 1993 1992 Deferred Tax Assets: Foreign tax credit carryover $ 3,805 $ - Benefit for foreign deferred taxes 6,199 - Abandonment accrual 7,151 - Valuation allowance (8,860) - Other, net - 427 Total deferred tax assets $ 8,295 $ 427 Deferred Tax Liabilities: Property, plant and equipment differences in depreciation and amortization $ 20,932 $ 16,622 Total deferred tax liabilities $ 20,932 $ 16,622 Total U.S. - deferred $ 12,637 $ 16,195
Foreign State Profit Share - Deferred Deferred Tax Assets: Abandonment accrual $ 4,769 $ - Morgan loan currency revaluation 5,287 - Valuation allowance (3,292) - Total deferred tax assets $ 6,764 $ - Deferred Tax Liabilities: Property, plant and equipment differences in depreciation and amortization $ 12,899 $ 5,234 Total deferred tax liabilities $ 12,899 $ 5,234 Total Foreign State Profit Share - deferred $ 6,135 $ 5,234
The Company's 1993 and 1992 current tax liability was determined on a regular tax basis. The amount of unused foreign tax credit carryforward available on an alternative minimum tax (AMT) basis was $23,354,336 at December 31, 1993. The carryforward expires $5,660,000 in 1994, $5,417,000 in 1995, $5,117,000 in 1996, $3,355,000 in 1997 and $3,805,000 in 1998. The Company did not pay any AMT in 1992 or 1993. 5. CLAM foreign currency translation adjustment As of January 1, 1983 CLAM adopted Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" (SFAS No. 52), under which the functional currency is deemed to be the Dutch guilder. Effective January 1, 1987 CLAM changed its functional currency from the Dutch guilder to the U.S. dollar. The change was precipitated by the significant effect on CLAM's operation of a new dollar-driven gas sales contract which was effective January 1, 1987 and the Tax Reform Act of 1986. In accordance with SFAS No 52 there is no restatement of prior years' financial statements and the translated amounts for nonmonetary assets as of December 31, 1986 have become the accounting basis for those assets in the year of the change. 6. Debt On July 25, 1985 MaraLou and CLAM entered into a revolving credit agreement, which was amended and restated as of June 19, 1992, with a syndicate of major international banks to fund the purchase by MaraLou of CLAM shares previously owned by Netherlands-Cities Service, Inc. and to provide working capital for CLAM. The banks' total commitment as of December 31, 1993 and December 31, 1992 was $110,000,000. Interest is paid, at the borrower's option, based on the prime rate, the London Interbank Offered Rate (LIBOR), or an adjusted CD rate. A contractual margin is added to LIBOR and CD based borrowings. The all-in interest rates for CLAM for December 31, 1993 and December 31, 1992 were 3.9375% and 4.125%, respectively. During the revolving credit period, the borrowers are obligated to pay a commitment fee of 1/4% on the unused committed portion of the facility. All of the CLAM common stock held by MaraLou has been pledged as security for the facility. In addition, under certain circumstances MaraLou can exercise an option to purchase the shares held by LL&E Netherlands Petroleum Company and Marathon Petroleum Netherlands, Ltd. for a nominal amount. The option agreement has been assigned to the banks as security for the facility. The credit agreement permits CLAM and MaraLou to incur total debt up to an agreed borrowing base which at December 31, 1993 and December 31, 1992 was $145,000,000. The agreement provides that the borrowing base is reduced periodically over the term of the facilty which is currently scheduled to expire on January 1, 2000. The borrowing base and the scheduled reductions may be adjusted based on a redetermination of the net present value of the projections of certain cash flows included in an Engineering Report prepared by petroleum engineers. The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $87,800,000, at December 31, 1993 of which $-0- was due within one year. The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $97,800,000 at December 31, 1992. At December 31, 1993, the required reductions to the borrowing base in each of the next five years are $-0- in 1994, $-0- in 1995, $-0- in 1996, $19,800,000 in 1997, $30,000,000 in 1998 and $38,000,000 thereafter. CLAM has an unsecured combined short-term loan and overdraft facility of Dfl. 80,000,000 ($41,152,263 at year-end exchange rate). On December 31, 1993 and December 31, 1992 the outstanding balances relating to this facility were $-0-. Interest rates are determined at the time borrowings are made. 7. Annual evaluation of gas reserves Under the provisions of the Joint Development Operating Agreement to which CLAM is a party, an annual estimate of gas reserves is to be made and agreed upon by the Area Management Committee. Based upon such estimate, each participant's investment in the area properties, as defined, is to be adjusted so that a participant's investment is in proportion to its interest in the remaining reserves. Adjustments to the investments are made in cash in the year following the date the reserve revision is agreed upon. In 1992, the Area Management Committee agreed to freeze each participant's interest through 1994, at the level agreed upon in 1992. A new gas reserve estimate will be agreed upon in 1995. 8. Reserves of oil and gas (unaudited) CLAM's share of proven gas reserves at January 1, 1994 and 1993 are 317,737 MMCF and 343,432 MMCF, respectively. 9. Major customer CLAM has one major customer from which it derives 98% of its sales revenue. CLAM was required under its production license to offer its production first to this customer, which is partially owned by The Netherlands government. Unitization and natural gas sales agreements were executed July 29, 1987 for the K12 - K15 "B" structure. CLAM is a K15 Block participant, however this property is operated by a K12 Block participant. This gas is also sold to the major customer. 10. Net profits interest agreement CLAM entered into an agreement dated November 1, 1981 which requires CLAM to pay a portion of its net profits ("net profits interest") to an unrelated party in exchange for a 7-1/2% participation interest in certain blocks. The "net profits interest" is equal to one twenty-fourth (1/24) of CLAM's revenues from the contract area, after various deductions, as defined in the agreement. 11. Issuance of production licenses In March 1990, a production license was granted by the Minister of Economics Affairs of the Netherlands covering the L12a and L12b/L15b blocks. As a result, the Dutch Government, through Energie Beheer Nederland (EBN) (a Dutch company wholly-owned by the Dutch Government) exercised its option to participate 40% in the L12a block and 50% in the L12b/L15b block. CLAM was subsequently reimbursed $10,628,572 during 1990, all of which was included in income because there were costs associated with these blocks which had been written-off in prior years. Components of the reimbursement were: Exploration well cost (previously written off as dry wells) $ 5,595,076 Exploration administrative expense 1,818,220 Interest 3,215,276 Total reimbursement $10,628,572 In 1991, it was determined that the portion of the above noted reimbursement allocable to trapping unit L12-FC, within blocks L12b/l15b, would be refunded to EBN as production on this trapping unit is not expected to commence within the 48-month requirement stipulated by the contractual agreement with EBN (the Agreement). The refundable amount, which CLAM expects to repay in 1994, was recorded as a long-term receivable of $3.6 million, interest expense of $1.5 million and an accrued liability of $5.1 million. The Agreement calls for EBN to reimburse the funds to CLAM net of interest upon first production from trapping unit L12-FC, which is expected to occur in 1997. In 1992, it was determined that the portion of the above noted reimbursement allocable to trapping units L12-FA and L12-FB, within blocks L12a and L12b/L15b, would be refunded to EBN as production on these trapping units are not expected to commence within the 48-month requirement stipulated by the Agreement. The refundable amount for L12-FA and L12-FB, which CLAM expects to repay in 1994, was recorded as a long-term receivable of $0.5 and $1.6 million, respectively, interest expense $0.2 million and $0.6 million, respectively and an accrued liability of $0.7 million and $2.2 million respectively. The Agreement calls for EBN to reimburse the respective funds to CLAM net of interest upon first production from trapping units L12-FA and L12-FB, which is expected to occur in 2000 and 1998, respectively. 12. Disclosures about fair value of financial instruments Cash and Cash Equivalents, Receivables, Due from Operator of Joint Venture, Due to Affiliated Company, Accounts Payable, and Due to Operator of Joint Venture - The carrying amount approximates fair value because of the short maturity of these instruments. Long-Term Receivable - The estimated fair value of the Company's long-term receivable is as follows (in thousands of U.S. Dollars): At December 31, 1992 Carrying Estimated Amount Fair Value Long-term receivable $5,620 $3,681 The fair value of the long-term receivable was based on discounted cash flows. Long-Term Debt Due to Banks - The carrying amount approximates fair value because of the variable rate of interest associated with this debt. Independent Auditors' Report The Board of Directors and Stockholders The Louisiana Land and Exploration Company: Under date of February 9, 1994, we reported on the consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the Annual Report to Shareholders for 1993. As discussed in Notes 11 and 12 to the consolidated financial statements, the Company adopted the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statements of Financial Accounting Standards Nos. 109 and 106, respectively. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement Schedules V, VI and X. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick KPMG Peat Marwick New Orleans, Louisiana February 9, 1994 Item 14(a)(2) SCHEDULE V THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Property, Plant and Equipment Years Ended December 31, 1993, 1992 and 1991 (Millions of dollars)
Balance at Balance beginning Additions Retire- Other changes* at end Classification of period at cost ments Add Deduct of period _______________________________________________________________________________________ Year ended December 31, 1993: Petroleum properties: Proved $1,988.2 108.1 116.4 551.4 - 2,531.3 Unproved 78.1 52.3 21.3 56.6 38.2 127.5 Refining and marketing 205.0 18.4 - .1 4.8 218.7 _______________________________________________________________________________________ 2,271.3 178.8 137.7 608.1 43.0 2,877.5 Other properties 59.3 3.5 .1 6.7 .4 69.0 _______________________________________________________________________________________ $2,330.6 182.3 137.8 614.8 43.4 2,946.5 _______________________________________________________________________________________ Year ended December 31, 1992: Petroleum properties: Proved 1,957.0 110.6 140.1 60.7 - 1,988.2 Unproved 111.5 47.2 32.0 - 48.6 78.1 Refining and marketing 174.6 27.6 .2 3.0 - 205.0 _______________________________________________________________________________________ 2,243.1 185.4 172.3 63.7 48.6 2,271.3 Other properties 56.3 4.4 .5 - .9 59.3 _______________________________________________________________________________________ $2,299.4 189.8 172.8 63.7 49.5 2,330.6 _______________________________________________________________________________________ Year ended December 31, 1991: Petroleum properties: Proved 1,832.1 94.6 2.7 33.0 - 1,957.0 Unproved 130.0 74.3 59.8 - 33.0 111.5 Refining and marketing 158.6 15.5 (.5) - - 174.6 _______________________________________________________________________________________ 2,120.7 184.4 62.0 33.0 33.0 2,243.1 Other properties 52.0 4.8 .5 - - 56.3 _______________________________________________________________________________________ $2,172.7 189.2 62.5 33.0 33.0 2,299.4 _______________________________________________________________________________________ * Principally transfers between accounts except for: "Other changes - Add" in the year ended December 31, 1993 which includes the acquisitions of oil and gas properties (see Note 2 of "Notes to Consolidated Financial Statements") as follows: Proved - $508.2; Unproved - $56.6. "Other changes - Add" in the year ended December 31, 1992 which includes $14.2 million of deferred Federal income taxes attributed to the cost of certain acquired proved properties as a result of differences between their assigned values and their Federal income tax bases.
Item 14(a)(2) SCHEDULE VI THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Accumulated Depletion, Depreciation and Amortization Years Ended December 31, 1993, 1992 and 1991 (Millions of dollars)
Net Additions retire- Balance at charged ments Balance beginning to (impair- Other changes* at end Classification of period expense ment) Add Deduct of period _______________________________________________________________________________________ Year ended December 31, 1993: Petroleum properties: Proved $1,204.7 113.5 97.5 - - 1,220.7 Unproved 12.0 - 1.0 - - 11.0 Refining and marketing 107.1 6.5 - - - 113.6 _______________________________________________________________________________________ 1,323.8 120.0 98.5 - - 1,345.3 Other properties 32.6 6.4 (1.2) - - 40.2 _______________________________________________________________________________________ $1,356.4 126.4 97.3 - - 1,385.5 _______________________________________________________________________________________ Provisions for dismantle- ment $ 29.3 3.4 - 4.3 1.3 35.7 _______________________________________________________________________________________ Year ended December 31, 1992: Petroleum properties: Proved $1,165.0 94.8 55.0 1.8 1.9 1,204.7 Unproved 16.0 - 2.4 - 1.6 12.0 Refining and marketing 101.0 4.9 - 1.2 - 107.1 _______________________________________________________________________________________ 1,282.0 99.7 57.4 3.0 3.5 1,323.8 Other properties 27.5 4.9 .3 .7 .2 32.6 _______________________________________________________________________________________ $1,309.5 104.6 57.7 3.7 3.7 1,356.4 _______________________________________________________________________________________ Provisions for dismantle- ment $ 27.4 1.9 - - - 29.3 _______________________________________________________________________________________ Year ended December 31, 1991: Petroleum properties: Proved 1,066.9 105.1 8.3 1.3 - 1,165.0 Unproved 21.2 - 3.9 - 1.3 16.0 Refining and marketing 94.7 5.8 (.5) - - 101.0 _______________________________________________________________________________________ 1,182.8 110.9 11.7 1.3 1.3 1,282.0 Other properties 22.6 3.9 (1.0) - - 27.5 _______________________________________________________________________________________ $1,205.4 114.8 10.7 1.3 1.3 1,309.5 _______________________________________________________________________________________ Provisions for dismantle- ment $ 25.9 1.5 - - - 27.4 _______________________________________________________________________________________ * Principally transfers between accounts, except in the year ended December 31, 1993 where "Other changes - Add/Deduct" in Provisions for Dismantlement represent provisions related to property acquisitions and dispositions. /TABLE Item 14(a)(2) SCHEDULE X THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Supplementary Earnings Statement Information Years Ended December 31, 1993, 1992 and 1991 (Millions of dollars)
1993 1992 1991 _______________________________________________________________________________________ Maintenance and repairs $ 19.9 19.3 24.3 _______________________________________________________________________________________ Taxes, other than income taxes: Oil and gas severance and excise 16.9 16.4 16.6 Property 3.2 3.4 3.5 Payroll 3.0 2.8 2.7 Franchise 1.7 1.8 1.7 _______________________________________________________________________________________ $ 24.8 24.4 24.5 _______________________________________________________________________________________
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (Item 14(a)(3)) The following Exhibits have been filed with the Securities and Exchange Commission: Exhibit 2.1 Stock Purchase Agreement, dated as of July 18, 1993, between NERCO, Inc. and The Louisiana Land and Exploration Company (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.). Exhibit 2.2 Sale and Purchase Agreement, dated as of August 19, 1993, between British Gas Exploration and Production Limited and LL&E (U.K.) Inc. (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.). Exhibit 2.3 Amendment, dated October 12, 1993, to Sale and Purchase Agreement in Exhibit 2.2 herein. Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Registrant's Registration Statement No. 2-45541 on Form S-1); Articles Supplementary pursuant to Section 3- 603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.). Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1- 959.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (continued) (Item 14(a)(3)) Exhibit 4(a) Rights Agreement dated as of May 25, 1986 among the Registrant and The Bank of New York (as Rights Agent) - (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated May 25, 1986 - Commission File No. 1-959.). Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.). Exhibit 10(a) Form of Termination Agreement with Senior Management Personnel (Incorporated by reference to Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982) and the amendment thereto dated December 8, 1982 (Incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993). Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(e) Pension Agreement, dated November 10, 1988 (Incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988 - Commission File No. 1-959.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (continued) (Item 14(a)(3)) Exhibit 10(f) The Louisiana Land and Exploration Company 1990 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1990). Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). Exhibit 10(i) The LL&E Special Termination Benefit Plan (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(l) Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1993 among the Registrant, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10 to the Registrant's Registration Statement No. 33-50161 on Form S-3, as amended.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (continued) (Item 14(a)(3)) Exhibit 11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share - Years Ended December 31, 1993, 1992 and 1991. Exhibit 13 Annual Report to Shareholders for 1993. Exhibit 21 Subsidiaries of the Registrant. Exhibit 23 Consent of Experts. Exhibit 24 Powers of Attorney. Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request. Reports on Form 8-K Quarter Ended December 31, 1993 (Item 14(b)) A Current Report on Form 8-K was filed on September 2, 1993, Items 5 and 7 of which were amended on Form 8-K/A filed on October 7, 1993. A Current Report on Form 8-K dated October 29, 1993 was filed containing the press release relating to the unaudited financial results for the Registrant's fiscal quarter ended September 30, 1993. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE LOUISIANA LAND AND EXPLORATION COMPANY (Registrant) Date: February 18, 1994 By /s/ Frederick J. Plaeger, II __________________________________ Frederick J. Plaeger, II General Counsel and Corporate Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 18, 1994 *H. Leighton Steward _____________________________________ H. Leighton Steward Director, Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) Date: February 18, 1994 *Leland C. Adams _____________________________________ Leland C. Adams Director Date: February 18, 1994 *Richard A. Bachmann _____________________________________ Richard A. Bachmann Director, Executive Vice President, Finance and Administration (Principal Financial Officer) Date: February 18, 1994 *John F. Greene _____________________________________ John F. Greene Director, Executive Vice President, Exploration and Production Date: February 18, 1994 *Eamon M. Kelly _____________________________________ Eamon M. Kelly Director Date: February 18, 1994 *Victor A. Rice _____________________________________ Victor A. Rice Director Date: February 18, 1994 *Orin R. Smith _____________________________________ Orin R. Smith Director Date: February 18, 1994 *Arthur R. Taylor _____________________________________ Arthur R. Taylor Director Date: February 18, 1994 *W. R. Timken, Jr. _____________________________________ W. R. Timken, Jr. Director Date: February 18, 1994 *Carlisle A.H. Trost _____________________________________ Carlisle A.H. Trost Director Date: February 18, 1994 *E. L. Williamson _____________________________________ E. L. Williamson Director Date: February 18, 1994 *Jerry D. Carlisle _____________________________________ Jerry D. Carlisle Vice President and Controller (Principal Accounting Officer) */s/ Frederick J. Plaeger, II _________________________________________ Frederick J. Plaeger, II General Counsel and Corporate Secretary (As attorney-in-fact for each of the persons indicated) ________________________________________________________________ ________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 __________________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 __________________________ THE LOUISIANA LAND AND EXPLORATION COMPANY (Exact name of registrant as specified in its charter) EXHIBITS ________________________________________________________________ ________________________________________________________________ THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (Item 14(a)(3)) The following Exhibits have been filed with the Securities and Exchange Commission: Exhibit 2.1 Stock Purchase Agreement, dated as of July 18, 1993, between NERCO, Inc. and The Louisiana Land and Exploration Company (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.). Exhibit 2.2 Sale and Purchase Agreement, dated as of August 19, 1993, between British Gas Exploration and Production Limited and LL&E (U.K.) Inc. (excluding the schedules thereto, which will be made available to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated September 2, 1993, as amended, Commission File No. 1-959.). Exhibit 2.3 Amendment, dated October 12, 1993, to Sale and Purchase Agreement in Exhibit 2.2 herein. Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Registrant's Registration Statement No. 2-45541 on Form S-1); Articles Supplementary pursuant to Section 3- 603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.). Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1- 959.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (continued) (Item 14(a)(3)) Exhibit 4(a) Rights Agreement dated as of May 25, 1986 among the Registrant and The Bank of New York (as Rights Agent) - (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated May 25, 1986 - Commission File No. 1-959.). Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.). Exhibit 10(a) Form of Termination Agreement with Senior Management Personnel (Incorporated by reference to Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982) and the amendment thereto dated December 8, 1982 (Incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993). Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.). Exhibit 10(e) Pension Agreement, dated November 10, 1988 (Incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988 - Commission File No. 1-959.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (continued) (Item 14(a)(3)) Exhibit 10(f) The Louisiana Land and Exploration Company 1990 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1990). Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.). Exhibit 10(i) The LL&E Special Termination Benefit Plan (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.). Exhibit 10(l) Amended and Restated Revolving Credit and Term Loan Agreement dated as of September 22, 1993 among the Registrant, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10 to the Registrant's Registration Statement No. 33-50161 on Form S-3, as amended.). (continued) THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Index to Exhibits (continued) (Item 14(a)(3)) Exhibit 11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share - Years Ended December 31, 1993, 1992 and 1991. Exhibit 13 Annual Report to Shareholders for 1993. Exhibit 21 Subsidiaries of the Registrant. Exhibit 23 Consent of Experts. Exhibit 24 Powers of Attorney. Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request. EXHIBIT 2.3 Exhibit 2.3 AMENDMENT TO SALE AND PURCHASE AGREEMENT THIS AGREEMENT is made on the 12th day of October, 1993 BETWEEN:- (1) BRITISH GAS EXPLORATION AND PRODUCTION LIMITED (registered in England under number 902239) whose registered office is at Rivermill House, 152 Grosvenor Road, London SW1V 3JL (the "Seller"); (2) LL&E (U.K.) INC. whose principal place of business is at LL&E House, 40A Dover Street, London W1X 3RB ("LL&E"); and (3) MURPHY PETROLEUM LIMITED (registered in England under number 811102) whose registered office is at Winston House, Dollis Park, Finchley, London N3 1HZ ("Murphy"). WHEREAS: (A) By a sale and purchase agreement dated 12th August, 1993 between the Seller and LL&E (the "SPA"), the Seller agreed to sell to LL&E, subject to certain conditions contained in the SPA, certain Assets (as defined in the SPA) referable to a fourteen percent interest under the Operating Agreement (as defined in the SPA). (B) LL&E and Murphy have requested the Seller to suspend the SPA for the time being to enable the Seller to sell to Murphy that portion of the Assets referable to a two point seven four percent. (2.74%) interest under the Operating Agreement (the "Murphy interest") and to LL&E that portion of the Assets referable to an eleven point two six percent. (11.26%) interest under the Operating Agreement (the "LL&E interest") and the Seller has agreed, subject to and on the terms and conditions of this Agreement, so to suspend the SPA. (C) It is the intention of the parties that the Seller be in no worse position as a result of entering into this Agreement than if it had proceeded with the SPA in the form entered into by it with LL&E on 12th August, 1993. (D) All relevant pre-emption rights pursuant to the Operating Agreement in respect of the transactions contemplated in this Agreement have been waived. IN CONSIDERATION of the mutual promises and undertakings herein contained on the part of the parties hereto IT IS AGREED as follows: 1. Definitions In this Agreement terms and expressions defined in either the LL&E Agreement or the Murphy Agreement, as appropriate, shall, unless the context otherwise requires, bear the same meanings herein. 2. Undertaking 2.1 LL&E and Murphy acknowledge and are aware that the Seller, in entering into this Agreement, is relying on the following undertaking. LL&E and Murphy hereby undertake for themselves or either of them that as a result of the Seller entering into this Agreement they will put the Seller fully and effectively into a position which is no worse than it would have been in had it proceeded with the SPA with LL&E, such undertaking to include without limitation payment of all costs (including legal costs), charges and expenses whatsoever which are necessarily suffered or incurred by the Seller in relation to the enforcement of this Agreement, the LL&E Agreement or the Murphy Agreement (each as defined below) or any related or subsequent agreement (including those referred to as Further Documentation in the LL&E Agreement and the Murphy Agreement). The Seller shall not be entitled to make a claim under this undertaking unless it has first served on LL&E and Murphy written notice of the matter complained of within 30 days of becoming aware of the same (giving such outline details as shall then be reasonably practicable). 2.2 The undertaking contained in clause 2.1 above shall expire twenty four (24) months after the later of the Completion Dates (as revised pursuant to this Agreement, if appropriate) save in respect of claims made prior to such expiry date, such claims to be pursued with reasonable expedition. 2.3 Murphy shall not be obligated under the undertaking contained in clause 2.1 above for the failure of LL&E to complete the sale and purchase under the LL&E Agreement, save and to the extent that such failure is caused or contributed to by a breach by Murphy of its obligations under clause 6.4 below. 2.4 LL&E shall not be obligated under the undertaking contained in clause 2.1 above for the failure of Murphy to complete the sale and purchase under the Murphy Agreement, save and to the extent that such failure is caused or contributed to by a breach by LL&E of its obligations under clause 6.4 below. 3. SPA 3.1 The SPA shall not be terminated by the execution of this Agreement but shall be suspended and it shall remain suspended until either (a) the Seller is to enforce its rights under the SPA in accordance with clause 6.2.1, 6.2.2 or 6.3.1 below (whereupon it shall come into full force and effect again) or (b) Completion (except a Completion which is deemed not to have occurred pursuant to the provisions of clause 6 below) occurs of either the LL&E Agreement or the Murphy Agreement (whereupon the SPA shall terminate automatically). Neither the Seller nor LL&E shall have any obligations to each other or to any other person under the SPA while it so suspended. 3.2 During such period as the SPA is not in full force and effect (being when it is either suspended or terminated the provisions of Parts 1 and 2 of the Schedule hereto shall apply as agreements in place of the SPA as provided in clauses 4 and 5 below. 4. LL&E Agreement In respect of the sale to LL&E there shall be in effect an agreement on the terms as set out in Part 1 of the Schedule hereto, and the provisions applying to that Schedule shall be called the "LL&E Agreement". 5. Murphy Agreement In respect of the sale to Murphy there shall be in effect an agreement on the terms as set out in Part 2 of the Schedule hereto, and the provisions applying to that Schedule shall be called the "Murphy Agreement". 6. Completion 6.1 Completion of each of the LL&E Agreement and the Murphy Agreement (each and "Agreement" and together the "Agreement") will take place simultaneously and, notwithstanding anything in each of the Agreements, Completion of each Agreement shall, except as provided below, be dependent upon Completion of the other save only for the provisions of this clause. Upon each of the LL&E Agreement and the Murphy Agreement being completed in all respects subject only to the inter-dependence provision in this clause, this clause shall automatically fall away and Completion of each of the Agreements shall be deemed to have occurred. If, but for the provisions of this clause, and except as provided below, one of the Agreements would have been completed but not the other, the first such Agreement shall be deemed not to have been completed, all documents which may have been executed as a part of such Completion shall be null and void and any amounts transferred to the Seller shall be returned immediately without interest. 6.2 The exceptions referred to in clause 6.1 above are: 6.2.1 If LL&E has not for whatsoever reason completed the sale and purchase under the LL&E Agreement (ignoring, for this purpose, the inter-dependence provision in clause 6.1 above) but, save for such provision, Murphy would have completed the Murphy Agreement, any amounts transferred to the Seller shall be returned immediately without interest and the Seller shall have the option exercisable within 7 days following the date when Murphy would have completed the Murphy Agreement (ignoring for this purpose the inter-dependence provision in clause 6.1 above) by notice in writing to the parties hereto either: (a) to declare that the inter- dependence provision in clause 6.1 above is waived and that the sale and purchase under the Murphy Agreement is to be completed, or (b) to declare that the inter-dependence provision in clause 6.1 above is not waived. If the Seller does not give a notice within 7 days exercising either option (a) or (b) above, it shall at the expiry of such 7 day period be deemed to have exercised option (b). If the Seller exercises option (a) above, the Murphy Agreement shall be completed (the "revised Completion Date"), as soon as the relevant Further Documentation is available and shall contain such amendments as are reasonably necessary to reflect that Completion of only one Agreement is taking place, and on the revised Completion Date Murphy shall transfer to the Seller all amounts due under the Murphy Agreement (save that the Completion Date for the purposes of clause 3.2.3 of the Murphy Agreement shall be the actual date of Completion), the Seller shall be entitled to enforce its rights against LL&E under the LL&E Agreement and the SPA shall terminate. If the Seller exercises or is deemed to have exercised option (b) above, this Agreement shall be deemed to have rescinded and the Seller shall be entitled to enforce its rights against LL&E under the SPA. For the avoidance of doubt, LL&E and Murphy shall upon such deemed rescission be released from the undertaking given by them under clause 2.1 above. 6.2.2 If Murphy has not for whatsoever reason completed the sale and purchase under the Murphy Agreement (ignoring, for this purpose, the inter-dependence provision in clause 6.1 above) but, save for such provision, LL&E would have completed the sale and purchase under the LL&E Agreement, any amounts transferred to the Seller shall be returned immediately without interest and the Seller shall have the option exercisable within 7 days following the date when LL&E would have completed the LL&E Agreement (ignoring for this purpose the inter- dependence provision in clause 6.1 above) by notice in writing to the parties hereto either: (a) to declare that the inter-dependence provision in clause 6.1 above is waived and that the sale and purchase under the LL&E Agreement is to be completed, or (b) to declare that the inter- dependence provision in clause 6.1 above is not waived. If the Seller does not give a notice within 7 days exercising either option (a) or (b) above, it shall at the expiry of such 7 day period be deemed to have exercised option (b). If the Seller exercises option (a) above, the LL&E Agreement shall be completed (the "revised Completion Date"), as soon as the relevant Further Documentation is available and shall contain such amendments as are reasonably necessary to reflect that Completion of only one Agreement is taking place, and on the revised Completion Date LL&E shall transfer to the Seller all amounts due under the LL&E Agreement (save that the Completion Date for the purposes of clause 3.2.3 of the LL&E Agreement shall be the actual date of Completion), the Seller shall be entitled to enforce its rights against Murphy under the Murphy Agreement and the SPA shall terminate. If the Seller exercises or is deemed to have exercised option (b) above, this Agreement shall be deemed to have been rescinded and the Seller shall be entitled to enforce its rights against LL&E under the SPA. For the avoidance of doubt, LL&E and Murphy shall upon such deemed rescission be released from the undertaking given by them under clause 2.1 above. 6.3 If Completion has not taken place under either the Murphy Agreement or the LL&E Agreement by 1st December 1993 (or such later date as the parties may agree in writing) the Seller shall have the option exercisable by written notice to the parties hereto or either: 6.3.1 rescinding this Agreement and enforcing the Seller's rights against LL&E under the SPA and for the avoidance of doubt LL&E and Murphy shall thereupon be released from the undertaking given by them under clause 3.1 above; or 6.3.2 enforcing its rights against LL&E under the LL&E Agreement and against Murphy under the Murphy Agreement. 6.4 Each of the parties shall use reasonable endeavors with all due despatch to procure the satisfaction of the conditions necessary for Completion to be achieved including the obtaining of any amended version of the Further Documents. 7. Notices 7.1 Any notice or other document to be served under or in connection with this Agreement may be delivered or sent by first class recorded delivery post or telex or facsimile process to the party to be served at his address, to his telex or facsimile number appearing below or at such other address or to such other number as he may have notified to the other parties in accordance with this clause. British Gas Exploration Address: 100 Thames Valley Park Drive and Production Limited Reading Barks RG6 1PT Fax No: 0434 292100 Telex: 846231 Attention: Dr. Y. O. Barton LL&E (U.K.) Inc. Address: LL&E House 48A Dover Street London W1X 3RB Fax No: 071 499 0677 Telex: 267436 Attention: Dr. J. A. Williams Murphy Petroleum Limited Address: Winston House Dollis Park London N3 1HZ Fax No: 081 349 4443 Telex: 21970 Attention: Managing Director 7.2 Any notice or document shall be deemed to have been served: 7.2.1 if delivered, at the time of delivery; or 7.2.2 if posted, at 10:00 a.m. on the second business day after it was put into the post; or 7.2.3 if sent by telex or facsimile process, at the expiration of two hours after the time of despatch, if despatched before 3:00 p.m. on any business day, and in any other case at 10:00 a.m. on the business day following the date of despatch. 7.3 In proving service of a notice or document it shall be sufficient to prove that delivery was made or that the envelope containing the notice or document was properly addressed and posted as a prepaid first class recorded delivery letter or that the telex or facsimile message was properly addressed and despatched as the case may be. 7.4 For the purposes of this paragraph, a business day is a day other than a Saturday or statutory holiday on which banks are or, as the context may require, were generally open for business in England and New York. 8. Counterpart Execution This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any party may enter into this agreement by executing a counterpart. 9. Supremacy if any conflict or inconsistency arises between provisions in the body of this Agreement and those contained in Parts 1 and 2 of the Schedule hereto or the SPA, then the provisions in the body of this Agreement shall prevail. 10. Proper Law This Agreement shall be governed by and construed in accordance with English law. The parties hereto submit to the exclusive jurisdiction of the English courts. IN WITNESS whereof the parties hereto have executed this Agreement the day and year first above written. Signed by J. G. REID ) for and on behalf of ) BRITISH GAS EXPLORATION ) J. G. REID AND PRODUCTION LIMITED ) Signed by B. WRATHMELL ) for and on behalf of ) LL&E (U.K.) INC. ) B. WRATHMELL Signed by I. IQBAL ) for and on behalf of ) MURPHY PETROLEUM LIMITED) I. IQBAL EXHIBIT 11 Exhibit 11 THE LOUISIANA LAND AND EXPLORATION COMPANY Computation of Primary and Fully Diluted Earnings (Loss) Per Share Years Ended December 31, 1993, 1992 and 1991
(Millions, except per share data) 1993 1992 1991 _______________________________________________________________________________________ PRIMARY EARNINGS (LOSS) PER SHARE: Earnings (loss) before extraordinary item and cumulative effect of changes in accounting principles $ 12.7 (1.2) 20.9 Loss on early retirement of debt (3.3) (5.6) - Changes in accounting principles .2 - - _______________________________________________________________________________________ Net earnings (loss) $ 9.6 (6.8) 20.9 _______________________________________________________________________________________ Weighted average shares outstanding 29.4 28.3 28.2 Incremental shares attributable to outstanding stock options .1 - .1 _______________________________________________________________________________________ Weighted average shares, as adjusted 29.5 28.3 28.3 _______________________________________________________________________________________ Primary earnings (loss) per share before extraordinary item and cumulative effect of changes in accounting principles $ 0.43 (0.04) 0.74 Loss on early retirement of debt (0.11) (0.20) - Changes in accounting principle 0.01 - - _______________________________________________________________________________________ PRIMARY EARNINGS (LOSS) PER SHARE $ 0.33 (0.24) 0.74 _______________________________________________________________________________________ _______________________________________________________________________________________ FULLY DILUTED EARNINGS (LOSS) PER SHARE: Earnings (loss) before extraordinary item N/A $ (1.2) 20.9 Add back interest expense applicable to convertible subordinated debentures, net of income taxes 1.8 1.4 _______________________________________________________________________________________ .6 22.3 Loss on early retirement of debt (5.6) - _______________________________________________________________________________________ Net earnings (loss) , as adjusted N/A $ (5.0) 22.3 _______________________________________________________________________________________ Weighted average shares outstanding 28.3 28.2 Incremental shares attributable to outstanding stock options - .1 Shares attributable to assumed conversion of convertible subordinated debentures .3 .4 _______________________________________________________________________________________ Weighted average shares, as adjusted N/A 28.6 28.7 _______________________________________________________________________________________ Fully diluted earnings (loss) per share before extraordinary item N/A $ 0.02 0.77 Loss on early retirement of debt (0.19) - _______________________________________________________________________________________ FULLY DILUTED EARNINGS (LOSS) PER SHARE N/A $(0.17)* 0.77* _______________________________________________________________________________________ * This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although it is contrary to APB Opinion No. 15 because it produces an anti-dilutive result.
EXHIBIT 13 EXHIBIT 13 1993 ANNUAL REPORT TO SHAREHOLDERS (INCORPORATED BY REFERENCE INTO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993) _________________________________________________________________ FINANCIAL REPORT: Page herein Consolidated Balance Sheets 3 Consolidated Statements of Earnings (Loss) 4 Consolidated Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Report of Management 26 Independent Auditors' Report 27 Unaudited Supplemental Data 28 _________________________________________________________________________________________ CONSOLIDATED BALANCE SHEETS The Louisiana Land and Exploration Company and Subsidiaries December 31, 1993 and 1992 (Millions of dollars) ASSETS 1993 1992 _________________________________________________________________________________________ CURRENT ASSETS: Cash, including cash equivalents (1993-$15.5; 1992-$32.7) $ 33.3 40.5 Accounts and notes receivable, principally trade 109.7 74.6 Income taxes receivable 5.2 5.8 Inventories (note 5) 26.8 25.6 Prepaid expenses 12.7 6.3 Deferred income taxes (note 11) 2.6 - _________________________________________________________________________________________ Total current assets 190.3 152.8 _________________________________________________________________________________________ Investments in affiliates (note 6) 23.5 31.1 Net property, plant and equipment, at cost, under the successful efforts method of accounting for oil and gas properties (note 7) 1,561.0 974.2 Other assets 63.9 51.0 _________________________________________________________________________________________ $ 1,838.7 1,209.1 _________________________________________________________________________________________ LIABILITIES AND STOCKHOLDERS' EQUITY _________________________________________________________________________________________ Current liabilities: Accounts payable and accrued expenses 170.9 158.1 Income taxes payable 3.8 6.9 Deferred income taxes (note 11) - 8.0 _________________________________________________________________________________________ Total current liabilities 174.7 173.0 _________________________________________________________________________________________ Deferred income taxes (note 11) 151.2 148.8 Long-term debt (note 8) 734.5 343.0 Other liabilities 178.5 127.7 _________________________________________________________________________________________ Contingencies and commitments (notes 10, 12, 13 and 15) STOCKHOLDERS' EQUITY (NOTES 8 AND 13): _________________________________________________________________________________________ Capital stock of $.15 par value. Authorized-100,000,000 shares; issued-38,004,537 shares 5.7 5.7 Additional paid-in capital 82.9 41.5 Retained earnings 684.4 704.5 _________________________________________________________________________________________ 773.0 751.7 Loans to ESOP (note 8) (8.8) (11.8) Cost of capital stock in treasury-4,831,574 shares in 1993 and 9,656,167 shares in 1992 (note 13) (164.4) (323.3) _________________________________________________________________________________________ TOTAL STOCKHOLDERS' EQUITY 599.8 416.6 _________________________________________________________________________________________ $ 1,838.7 1,209.1 _________________________________________________________________________________________ See accompanying notes to consolidated financial statements.
_________________________________________________________________________________________ CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) The Louisiana Land and Exploration Company and Subsidiaries Years ended December 31, 1993, 1992 and 1991 (Millions, except per share data)
1993 1992 1991 _________________________________________________________________________________________ REVENUES: Oil and gas $ 370.1 323.9 363.7 Refined products 400.2 441.9 432.8 Gain on sale of Canadian oil and gas properties (note 2) 23.5 - - Other (interest, 1993-$3.4; 1992-$3.6; 1991-$4.6) 21.6 21.6 28.8 _________________________________________________________________________________________ 815.4 787.4 825.3 _________________________________________________________________________________________ COSTS AND EXPENSES: Lease operating and facility expenses 106.8 98.5 96.4 Refinery cost of sales and operating expenses 403.4 424.3 415.1 Dry holes and exploratory charges 48.8 41.5 74.6 Depletion, depreciation and amortization 129.8 106.5 116.3 Taxes, other than on earnings 24.7 24.4 24.5 General, administrative and other expenses 49.0 42.3 48.2 Interest and debt expenses (note 9) 28.3 24.6 16.9 Restructuring and other nonrecurring charges/credits (note 4) - 27.4 - _________________________________________________________________________________________ 790.8 789.5 792.0 _________________________________________________________________________________________ Earnings (loss) before income taxes 24.6 (2.1) 33.3 Income tax expense (benefit) (note 11) 11.9 (0.9) 12.4 _________________________________________________________________________________________ Earnings (loss) before extraordinary item and cumulative effect of changes in accounting principles 12.7 (1.2) 20.9 Extraordinary item: loss on early retirement of debt (note 8) (3.3) (5.6) - Cumulative effect on years prior to 1993 of change in accounting principle for income taxes (note 11) 13.7 - - Cumulative effect on years prior to 1993 of change in accounting principle for postretirement benefits other than pensions (note 12) (13.5) - - _________________________________________________________________________________________ NET EARNINGS (LOSS) $ 9.6 (6.8) 20.9 _________________________________________________________________________________________ Primary and fully diluted earnings (loss) per share before extraordinary item and cumulative effect of changes in accounting principles 0.43 (0.04) 0.74 Extraordinary item: loss on early retirement of debt (0.11) (0.20) - Change in accounting principle for income taxes 0.47 - - Change in accounting principle for post- retirement benefits (0.46) - - _________________________________________________________________________________________ PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE $ 0.33 (0.24) 0.74 _________________________________________________________________________________________ AVERAGE SHARES 29.5 28.4 28.3 _________________________________________________________________________________________ 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, 1993, 1992 and 1991 (Millions of dollars, except per share data)
Additional Loans to Treasury stock paid-in Retained ESOP Number of capital earnings (Note 8) shares Cost _________________________________________________________________________________________ Balance at December 31, 1990 $40.7 $747.0 $(17.4) 9,802,002 $(327.3) Net earnings - 20.9 - - - Cash dividends ($1.00 per share) - (28.3) - - - Repayment of loans to ESOP - - 2.6 - - Other .6 - - (83,977) 2.0 _________________________________________________________________________________________ Balance at December 31, 1991 41.3 739.6 (14.8) 9,718,025 (325.3) Net loss - (6.8) - - - Cash dividends ($1.00 per share) - (28.3) - - - Repayment of loans to ESOP - - 3.0 - - Other .2 - - (61,858) 2.0 _________________________________________________________________________________________ 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) _________________________________________________________________________________________ Capital stock of $.15 par value was unchanged during the three-year period ended December 31, 1993. See accompanying notes to consolidated financial statements.
_________________________________________________________________________________________ CONSOLIDATED STATEMENTS OF CASH FLOWS The Louisiana Land and Exploration Company and Subsidiaries Years ended December 31, 1993, 1992 and 1991 (Millions of dollars)
1993 1992 1991 _________________________________________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 9.6 (6.8) 20.9 Adjustments to reconcile to cash flows from operations: Changes in accounting principles, net (.2) - - Gain on sale of Canadian oil and gas properties (23.5) - - Restructuring and other nonrecurring charges/ credits - 27.4 - Extraordinary item: Loss on early retirement of debt 3.3 8.4 - Depletion, depreciation and amortization 129.8 106.5 116.3 Deferred income taxes 9.2 2.2 4.9 Dry holes and impairment charges 21.8 19.2 50.2 Other 22.2 5.8 7.1 _________________________________________________________________________________________ 172.2 162.7 199.4 Changes in operating assets and liabilities, net of acquisitions: Net (increase) decrease in receivables 4.3 44.8 (3.4) Net increase in inventories (4.9) (1.8) (3.7) Net (increase) decrease in prepaid items (5.0) 3.4 (15.8) Net increase (decrease) in payables 2.7 (27.0) 24.8 Other 9.6 (3.4) 7.9 _________________________________________________________________________________________ Net cash flows from operating activities 178.9 178.7 209.2 _________________________________________________________________________________________ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions (note 2) (547.9) - - Capital expenditures (note 3) (171.7) (153.8) (189.2) Proceeds from asset sales (notes 2 and 4) 43.7 48.5 2.2 Other (46.4) (11.0) 6.3 _________________________________________________________________________________________ Net cash flows from investing activities (722.3) (116.3) (180.7) _________________________________________________________________________________________ CASH FLOWS FROM FINANCING ACTIVITIES: Sale of treasury stock 188.8 - - Additions to long-term debt 492.0 100.0 - Repayments of long-term debt (104.6) (116.8) (6.0) Dividends (29.8) (28.3) (28.3) Repayment of loans to ESOP 3.0 3.0 2.6 Purchase of treasury stock (1.5) - - Other (11.7) (6.5) - _________________________________________________________________________________________ Net cash flows from financing activities 536.2 (48.6) (31.7) _________________________________________________________________________________________ Increase (decrease) in cash and cash equivalents $ (7.2) 13.8 (3.2) _________________________________________________________________________________________ See accompanying notes to consolidated financial statements.
_________________________________________________________________ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Louisiana Land and Exploration Company and Subsidiaries December 31, 1993, 1992 and 1991 _________________________________________________________________ 1. Summary of Significant Accounting Policies a. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Investments in affiliates are accounted for under the equity method. Certain amounts have been reclassified to conform to the current period's presentation. b. Petroleum Operations The Company uses the successful efforts method of accounting for its oil and gas operations. The costs of unproved leaseholds are capitalized pending the results of exploration efforts. Significant unproved leasehold costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, that the cost of the property has been impaired. The costs of individually insignificant unproved leaseholds estimated to be nonproductive are amortized over estimated holding periods based on historical experience. Exploratory dry holes and geological and geophysical charges are expensed. Depletion of proved leaseholds and amortization and depreciation of the costs of all development and successful exploratory drilling are provided by the unit-of- production method based upon estimates of proved and proved-developed oil and gas reserves, respectively, for each property. The estimated costs of dismantling and abandoning offshore and significant onshore facilities are provided currently using the unit-of-production method; such costs for other onshore facilities are insignificant and are expensed as incurred. The costs of refining and processing equipment and facilities are depreciated on a straight-line basis over their estimated useful lives. The Company uses the entitlement method for recording natural gas sales revenues. Under the entitlement method of accounting, revenue is recorded based on the Company's net working interest in field production. Deliveries of natural gas in excess of the Company's working interest are recorded as liabilities while under- deliveries are recorded as receivables. Such amounts are immaterial. The Company's anticipated purchases and sales of crude oil and refined petroleum products and its committed foreign currency expenditures may be hedged against market risks through the use of forward/futures contracts. The gains and losses on these contracts are recognized upon the expiration of the contract and are included in the valuation of the anticipated transactions being hedged. A default by a counterparty to a contract would expose the Company to market risks for the quantity of the contract. There is no material risk to the Company as a result of these contracts and the Company does not anticipate nonperformance by any of the counterparties. c. Functional Currency The foreign exploration and production operations of the Company's subsidiaries and its foreign affiliate, CLAM Petroleum Company, are considered an extension of the parent company's operations. The assets, liabilities and operations of these companies are therefore measured using the United States dollar as the functional currency. As a result, foreign currency translation/transaction adjustments (which were not material) are included in net earnings. d. Income Taxes The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company adopted, effective January 1, 1988, Statement of Financial Accounting Standards No. 96 ("SFAS No. 96") - "Accounting For Income Taxes". Under the liability method specified by SFAS No. 96, the deferred tax liability is determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by existing tax rates which are presumed to be in effect when these differences reverse. Deferred tax expense is the result of changes in the liability for deferred taxes. In February 1992, Statement of Financial Accounting Standards No. 109 ("SFAS No. 109") - "Accounting for Income Taxes" was issued. SFAS No. 109 supersedes SFAS No. 96. SFAS No. 109 was adopted effective as of January 1, 1993. The Company applied the provisions of the SFAS No. 109 without restating prior years' financial statements. For the Company, the most significant change in SFAS No. 109 as compared to SFAS No. 96 is that deferred tax assets will now be recognized and measured based on the likelihood of realization of a tax benefit in future years. Under SFAS No. 109, deferred tax assets are initially recognized for differences between the financial statement carrying amounts and tax bases of assets and liabilities that will result in future deductible amounts and operating loss and tax credit carryforwards. A valuation allowance would then be established to reduce that deferred tax asset if it is more likely than not that the related tax benefits will not be realized. Under SFAS No. 96, the recognition of deferred tax benefits was limited to benefits that would offset deferred tax liabilities and benefits that could be realized through carryback to recover taxes paid for the current year or prior years. e. Earnings (Loss) Per Share Primary earnings (loss) per share are calculated on the weighted average number of shares outstanding during each period for capital stock and, when dilutive, capital stock equivalents, which assumes exercise of stock options. Fully diluted earnings (loss) per share are calculated on the same basis, but also assumes conversion, when dilutive, of the convertible subordinated debentures for the period outstanding prior to the call for redemption on September 25, 1992, and elimination of the related interest expense, net of income taxes. 2. 1993 Acquisitions and Dispositions In September 1993, the Company completed the acquisition of all of the issued and outstanding common stock of NERCO Oil & Gas, Inc. ("NERCO") for a cash purchase price of approximately $354 million plus associated expenses. The acquisition was financed initially through the credit facility discussed in Note 8. The cost of the acquisition was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed. The results of NERCO's operations were consolidated with the Company's effective October 1, 1993. Pro forma combined results of operations of the Company and NERCO, including appropriate purchase accounting adjustments for the years ending December 31, 1993 and 1992, as though the acquisition had taken place on January 1 of the respective years, are as follows:
(Millions, except per share data) 1993 1992 ________________________________________________________________________________________ Revenues $ 907.1 926.1 ________________________________________________________________________________________ Earnings (loss) before extraordinary items and cumulative effect of changes in accounting principles (.3) (11.5) ________________________________________________________________________________________ Net earnings (loss) (3.4) (17.1) ________________________________________________________________________________________ Primary and fully diluted earnings (loss) per share $ (0.09) (0.53) ________________________________________________________________________________________
In December 1993, the Company acquired an 11.26% working interest in Block 16/17 in the U.K. North Sea ("T-Block") from British Gas Exploration and Production Limited for approximately $187 million in cash. The purchase was financed initially through the credit facility discussed in Note 8. Initial production from T-Block came onstream in late 1993 and had an insignificant impact on results of operations. In December 1993, the Company completed the sale of certain oil and gas producing properties, undeveloped acreage and seismic data located in southern Alberta, Canada for approximately $42.8 million resulting in a gain, net of associated expenses, of approximately $23.5 million (before income taxes of $10.3 million). The properties sold generated revenues of $12.1 million and $15.3 million and pretax earnings of $1.2 million and $1.6 million in 1993 and 1992, respectively. 3. Cash Flows All of the Company's cash investments are highly liquid short-term debt instruments and are considered to be cash equivalents. These cash investments are carried in the accompanying balance sheets at cost plus accrued interest, which approximates fair value. Cash flows related to hedging activities through forward/futures contracts are classified in the same categories as that from the items being hedged. In 1992, the Company acquired certain proved properties for approximately $36 million and incurred a short-term liability which was outstanding at year end, the settlement of which is included in 1993 cash flows from investing activities. 4. Restructuring and Other Nonrecurring Charges/Credits In 1992, the Company recorded a charge of $52.4 million (before income tax benefits of approximately $17.8 million) against earnings to provide for the restructuring of its oil and gas operations. This charge included provisions for estimated losses on the disposition of selected domestic properties of $47.6 million (both developed and undeveloped) and costs associated with staff retirements, reductions and related transition expenses of $4.8 million. The Company completed the sale of substantially all of the selected properties for a purchase price of $48.1 million. In addition, during 1992 the Company reduced its litigation accrual for the State of Louisiana gas royalty claim by $25 million (before an income tax charge of $8.5 million). See Note 15. 5. Inventories
(Millions of dollars) 1993 1992 _________________________________________________________________________________________ Refinery inventories at lower of (last-in, first-out) cost or market $24.1 24.6 _________________________________________________________________________________________ Repair parts, supplies and other, at lower of average cost or market 2.7 1.0 _________________________________________________________________________________________ $26.8 25.6 _________________________________________________________________________________________
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). 6. Investments in Affiliates
Investment % (Millions of dollars) Investee Industry Location owned 1993 1992 _________________________________________________________________________________________ MaraLou (CLAM Petroleum Oil & Company) Gas North Sea 50% $20.8 28.3 _________________________________________________________________________________________ Other Various U.S. Various 2.7 2.8 _________________________________________________________________________________________ $23.5 31.1 _________________________________________________________________________________________
The Company's equity in earnings of affiliates, which is included in "Other Revenues" in the accompanying Consolidated Statements of Earnings (Loss), amounted to $2.4 million, $6.9 million and $15 million in 1993, 1992 and 1991, respectively. Cash dividends received from MaraLou/CLAM in 1993, 1992 and 1991 totaled $10 million, $7.5 million and $18.5 million, respectively. The consolidated financial position of MaraLou and its wholly owned subsidiary, CLAM, as of December 31, 1993 and 1992 and the results of their operations for each of the years in the three-year period ended December 31, 1993 are summarized below.
(Millions of dollars) 1993 1992 _________________________________________________________________________________________ Current assets $ 24.4 35.1 _________________________________________________________________________________________ Noncurrent assets 170.9 176.7 _________________________________________________________________________________________ Current liabilities 26.7 16.0 _________________________________________________________________________________________ Noncurrent liabilities 129.2 142.4 _________________________________________________________________________________________
(Millions of dollars) 1993 1992 1991 _________________________________________________________________________________________ Gross revenues $ 61.1 82.9 111.9 _________________________________________________________________________________________ Operating profit 30.1 42.4 70.5 _________________________________________________________________________________________ Earnings before cumulative effect of change in accounting principle 10.9 13.8 30.0 _________________________________________________________________________________________ Net earnings 4.9 13.8 30.0 _________________________________________________________________________________________
MaraLou applied the provisions of SFAS No. 109 as of January 1, 1993 without restating prior years' financial statements. Upon adoption, MaraLou recorded a non-cash charge to earnings of $6 million ($3 million net to the Company's interest). The common stock of CLAM is pledged as collateral under a revolving credit agreement between MaraLou and a group of banks. The credit agreement is nonrecourse to the partners of MaraLou. 7. Property, Plant and Equipment
(Millions of dollars) 1993 1992 _________________________________________________________________________________________ Petroleum properties: Proved $2,531.3 1,988.2 _________________________________________________________________________________________ Unproved 127.5 78.1 _________________________________________________________________________________________ Refining and marketing 218.7 205.0 _________________________________________________________________________________________ 2,877.5 2,271.3 Other properties 69.0 59.3 _________________________________________________________________________________________ 2,946.5 2,330.6 Less accumulated depletion, depreciation and amortization 1,385.5 1,356.4 _________________________________________________________________________________________ $1,561.0 974.2 _________________________________________________________________________________________
8. Long-term Debt
(Millions of dollars) 1993 1992 _________________________________________________________________________________________ Revolving Credit Facility $160.0 - _________________________________________________________________________________________ 7-5/8% Debentures due 2013 100.0 - _________________________________________________________________________________________ 7.65% Debentures due 2023 200.0 - _________________________________________________________________________________________ Term Loan with banks (net of unamortized discount of $4.1 in 1992) 133.5 195.4 _________________________________________________________________________________________ 8-1/4% Notes due 2002 100.0 100.0 _________________________________________________________________________________________ Industrial Development Revenue Refunding Bonds, 1983 Series, due December 1993, interest at 8.6% - 20.5 _________________________________________________________________________________________ Loan Agreement with banks - 15.0 _________________________________________________________________________________________ Notes payable to bank for financing of leveraged ESOP 8.8 11.8 _________________________________________________________________________________________ Commercial paper notes 32.0 - _________________________________________________________________________________________ Other issues .2 .3 _________________________________________________________________________________________ Total long-term debt 734.5 343.0 _________________________________________________________________________________________
The fair value of the Company's long-term debt as of December 31, 1993 is estimated to be approximately $744 million based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of similar maturities. Debt maturities for the next five years follows.
(Millions of dollars) _________________________________________________________________________________________ 1994 $ - _________________________________________________________________________________________ 1995 - _________________________________________________________________________________________ 1996 81.4 _________________________________________________________________________________________ 1997 95.3 _________________________________________________________________________________________ 1998 95.3 _________________________________________________________________________________________
To finance the aforementioned NERCO and T-Block acquisitions (see Note 2), refinance certain existing indebtedness and fund general corporate activities, the Company entered into a $790 million credit facility with a syndicate of banks in September 1993. Commitments under the agreement originally consisted of (i) a $540 million Revolving Credit Facility and (ii) a $250 million Term Loan Facility (which was utilized and repaid and is no longer available to the Company). The Revolving Credit Facility was subsequently reduced to $450 million and will be reduced by approximately $24 million quarterly from June 1994 through September 1999. Amounts outstanding under the Revolving Credit Facility bear interest at fluctuating rates subject to certain options chosen in advance by the Company. Borrowings under the Revolving Credit Facility and the Term Loan Facility during 1993 were at an average interest rates of 5%. A commitment fee of 1/4% is charged on the unused portion of the facility. Bank fees and other costs associated with this facility totaled $8.1 million of which $6.7 million was charged to interest and debt expenses in the fourth quarter of 1993. The balance will be written off during the first quarter of 1994, at which time the Company intends to renegotiate the facility. In June 1992, the Company registered under the Securities and Exchange Commission's shelf registration rules $300 million of senior unsecured debt securities to be issued from time to time on terms to be then determined. In June 1992, the Company sold $100 million of 8-1/4% Notes due 2002. In April 1993, the Company completed its second $100 million public offering of debt securities under the existing shelf registration filed in 1992 with the issuance of 7-5/8% Debentures due 2013. In November 1993, the Company registered up to $500 million of senior unsecured debt securities under the Securities and Exchange Commission's shelf registration rules, which included the $100 million available under the shelf registration filed in 1992. In December 1993, the Company completed a $200 million public offering with the issuance of 7.65% Debentures due 2023. The Company's $20 million Loan Agreement, the $15 million balance of which was repaid in December 1993, was with a group of banks in the form of a revolving credit loan. The interest rate varied with time and market conditions and was determined by the banks subject to certain options chosen in advance by the Company. A commitment fee of 1/4% was charged on the unused portion of the loan during the revolving credit period. Borrowings under this agreement during 1993 and 1992 were at average interest rates of 4% and 4.5%, respectively. In November 1987, the Company created a leveraged employee stock ownership plan (ESOP) within an existing employee savings plan. To fund the ESOP, in 1987 and 1988 the Company borrowed $10.2 million and $14 million, respectively, from a bank (unsecured) and loaned the proceeds to the ESOP. The ESOP then used the proceeds to acquire shares of the Company's capital stock (374,678 in 1987; 461,690 in 1988) at average market prices of $27.125 and $30.25, respectively. The capital stock issued was taken from the Company's treasury at a cost of $30 per share; the differences between treasury stock cost and value were recorded in additional paid-in capital. The loans to the ESOP are on substantially the same terms and conditions as the Company's bank loans and, in addition, are secured by the Company's capital stock owned by the ESOP. The ESOP will repay the loans (plus interest) with the proceeds from the Company's monthly contributions and quarterly dividends paid on the capital stock. The Company's bank loans will be similarly repaid monthly through 1995. The interest rates vary with time and market conditions and are determined by the bank subject to certain options chosen in advance by the Company. The average interest rates for both loans in 1993 and 1992 were 3.1% and 3.7%, respectively. During 1993, the average monthly balance of commercial paper notes outstanding was $38.8 million; the maximum amount outstanding during that period was $94 million. Commercial paper borrowings during 1993 and 1992 were at average interest rates of 3.3% and 4.3%, respectively. The Company's commercial paper program was supported by a $100 million revolving line of credit, which required a commitment fee of 1/4% per annum. No borrowings were made under the line of credit. As of September 1993, the commercial paper program is supported by the unused portion of the aforementioned Revolving Credit Facility. In September 1992, the Company announced the call for early retirement of the 8-1/2% Convertible Subordinated Debentures due September 2000. The redemption completed at a price of 101.66% of principal and the premium, along with unamortized discount, resulted in an extraordinary loss of $5.6 million, after income tax benefits of $2.8 million. The Term Loan with banks, which was retired in January 1994, bore interest at 8.92% (discounted to yield 10.7%), was unsecured and was payable in July 1994. The balance has been excluded from current liabilities as the Company refinanced the balance due on a long-term basis utilizing the Revolving Credit Facility. The early retirement was completed at a price of 102.4% of principal and the premium, along with unamortized discount, resulted in an extraordinary loss of $3.3 million, after income tax benefits of $1.7 million. 9. Interest and Debt Expenses For the years ended December 31, 1993, 1992 and 1991, interest costs incurred, which were essentially the same as interest payments, were $47 million, $37.5 million and $39.5 million, respectively, of which $18.7 million, $12.9 million and $22.6 million, respectively, were capitalized as part of the cost of property, plant and equipment. In 1992 and 1993, the Company participated in interest rate swaps (which were to terminate in 1994 and 1996, respectively) having a notional principal amount totaling $200 million. Under the agreements, the Company received an annual fixed rate and paid a variable rate based on the six-month London Interbank Offering Rate. The rates payable were recalculated in June and December of each year and the amounts received/paid were credited/charged to interest expense. In September 1993, the Company terminated both agreements and deferred a gain of approximately $3.6 million which will be recognized over the remaining terms of the respective agreements as reductions of interest expense. 10. Foreign Currency Contracts The Company hedges its committed British pound expenditures in the U.K. North Sea through the purchase of forward contracts. At December 31, 1993, forward contracts outstanding totaled $24.6 million. The fair value of these contracts, which represents the Company's cost to offset its forward position, is estimated to be approximately $1 million as of December 31, 1993. 11. Income Taxes As explained in Note 1(d), the Company adopted SFAS No. 109 effective January 1, 1993. Upon adoption, the Company recorded a non-cash credit to earnings of $13.7 million which represented the recognition of deferred tax assets existing at December 31, 1992. With the enactment of the Budget Reconciliation Act of 1993, the Federal statutory corporate income tax rate was increased from 34% to 35% retroactive to January 1, 1993. As a result, the Company increased its deferred income tax liabilities as of January 1, 1993 with a non-cash charge to income tax expense of $3 million. The components of earnings (loss) before income taxes were taxed under the following jurisdictions:
(Millions of dollars) 1993 1992 1991 _________________________________________________________________________________________ Domestic $ 9.7 (15.9) 18.5 _________________________________________________________________________________________ Foreign 14.9 13.8 14.8 _________________________________________________________________________________________ $ 24.6 (2.1) 33.3 _________________________________________________________________________________________
Components of income tax expense (benefit) are as follows:
(Millions of dollars) 1993 1992 1991 _________________________________________________________________________________________ Current tax expense (benefit): Federal $ (3.5) (7.3) 4.4 _________________________________________________________________________________________ State (.3) .1 (.8) _________________________________________________________________________________________ Foreign 6.5 1.3 3.9 _________________________________________________________________________________________ 2.7 (5.9) 7.5 _________________________________________________________________________________________ Deferred tax expense (benefit): Federal 9.2 3.8 6.3 _________________________________________________________________________________________ Foreign - 1.2 (1.4) _________________________________________________________________________________________ 9.2 5.0 4.9 _________________________________________________________________________________________ $ 11.9 (0.9) 12.4 _________________________________________________________________________________________
Tax expense (benefit) differs from the amounts computed by applying the U.S. Federal tax rate (1993 - 35%; 1992-91 - 34%) to earnings (loss) before income tax. The reasons for the differences are as follows:
(Millions of dollars) 1993 1992 1991 _________________________________________________________________________________________ Computed "expected" tax expense (benefit) $ 8.6 (.7) 11.3 _________________________________________________________________________________________ Increases (reductions) in taxes resulting from: Increase in Federal income tax rate 3.0 - - _________________________________________________________________________________________ Equity in earnings of foreign affiliates (7.4) (1.3) (1.2) _________________________________________________________________________________________ Foreign income taxes, net of Federal income tax benefit 8.4 3.1 5.0 _________________________________________________________________________________________ Employee benefit plans (.9) (1.2) (2.1) _________________________________________________________________________________________ Percentage depletion (.1) (.3) (.3) _________________________________________________________________________________________ Other .3 (.5) (.3) _________________________________________________________________________________________ $ 11.9 (.9) 12.4 _________________________________________________________________________________________
As a result of the prospective adoption of SFAS No. 109 effective January 1, 1993, the following additional disclosures are presented as of and for the year ended December 31, 1993. Total income tax expense (benefit) was allocated as follows:
(Millions of dollars) 1993 _________________________________________________________________________________________ Income before extraordinary item and changes in accounting principles $ 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 (1.8) _________________________________________________________________________________________ $ (12.3) _________________________________________________________________________________________
The significant components of deferred income tax expense attributable to income from continuing operations are as follows:
(Millions of dollars) 1993 _________________________________________________________________________________________ Deferred tax expense (exclusive of the effects of other components listed below) $ 6.2 _________________________________________________________________________________________ Adjustments to deferred tax assets and liabilities for increase in Federal income tax rate 3.0 _________________________________________________________________________________________ $ 9.2 _________________________________________________________________________________________
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) 1993 _________________________________________________________________________________________ Deferred tax asset: Deferred foreign tax credits $ 22.8 _________________________________________________________________________________________ Foreign tax credit carryforwards 10.2 _________________________________________________________________________________________ Alternative minimum tax credit carryforward 5.2 _________________________________________________________________________________________ Employee benefits 18.7 _________________________________________________________________________________________ Other 12.8 _________________________________________________________________________________________ Total gross deferred tax assets 69.7 Less valuation allowance (17.8) _________________________________________________________________________________________ Net deferred tax assets 51.9 _________________________________________________________________________________________ Deferred tax liabilities: Property, plant and equipment, principally due to differences in depreciation and capitalized interest (178.7) _________________________________________________________________________________________ Other (21.8) _________________________________________________________________________________________ Total gross deferred tax liabilities (200.5) _________________________________________________________________________________________ $(148.6) _________________________________________________________________________________________
The net change in the valuation allowance for the year ended December 31, 1993 was an increase of $3 million. This change was made to provide for uncertainties surrounding the realization of certain foreign tax credit carryforwards. The remaining balance of the deferred tax assets should be realized through future operating results and the reversal of taxable temporary differences. Deferred tax expense (benefit) included the following components, the disclosure of which was prescribed by the now-superseded SFAS No. 96:
(Millions of dollars) 1992 1991 _________________________________________________________________________________________ Restructuring and other special charges/credits $ (1.8) 2.0 _________________________________________________________________________________________ Intangible development and exploration costs 10.1 9.7 _________________________________________________________________________________________ Interest 2.2 6.1 _________________________________________________________________________________________ Depreciation (9.8) (7.8) _________________________________________________________________________________________ Depletion .7 1.0 _________________________________________________________________________________________ Foreign taxes 1.2 (1.4) _________________________________________________________________________________________ Equity in earnings of affiliates (.4) 1.8 _________________________________________________________________________________________ Alternative minimum tax credit carryforward 2.2 (6.7) _________________________________________________________________________________________ Employee benefit plans .1 (2.2) _________________________________________________________________________________________ Partnerships - 1.1 _________________________________________________________________________________________ Other .5 1.3 _________________________________________________________________________________________ $ 5.0 4.9 _________________________________________________________________________________________
For the years ended December 31, 1993, 1992 and 1991, the Company's net cash payments (refunds) of income taxes totaled $7.1 million, $(.6) million and $6.5 million, respectively. At December 31, 1993 the Company has foreign tax credit carryforwards for Federal income tax purposes of $10.2 million which are available through 1998 to offset future Federal income taxes, if any. The Company also has alternative minimum tax credit carryforwards of $5.2 million which are available to reduce Federal regular income taxes, if any, over an indefinite period. 12. Retirement Benefits The Company has a noncontributory defined benefit pension plan covering all eligible employees, with benefits based on years of service and the employee's highest three-year average monthly earnings. The Company's funding policy is intended to provide for both benefits attributed to service to-date and for those expected to be earned in the future. Plan assets consist primarily of stocks, bonds and short-term cash investments. Since the spin-off of the pension plan of a discontinued subsidiary in 1985 and the contribution of excess assets remaining after purchasing annuities for affected employees, the pension plan did not require funding through the year ended December 31,1992. A minimum amount of funding was required in 1993. As a result of an early retirement incentive program and a reduction in force in 1992, benefit obligations of $4.2 million were settled from plan assets, including $1.1 million of early retirement incentive costs included in the restructuring charge described in Note 4. The settlement of the pension obligations related to the restructuring program resulted in a loss of $.3 million, which was also included in the restructuring charge. The following tables set forth the plan's funded status and amounts recognized in the statements of financial position and results of operations at December 31:
(Millions of dollars) 1993 1992 _________________________________________________________________________________________ Accumulated benefit obligation, including vested benefits of $16.8 and $10.0 $ 17.6 10.4 _________________________________________________________________________________________ Projected benefit obligation (27.1) (15.5) Plan assets at fair market value 13.0 12.9 _________________________________________________________________________________________ Plan assets over (under) projected benefit obligation (14.1) (2.6) _________________________________________________________________________________________ Additional minimum liability (2.8) - _________________________________________________________________________________________ Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions 13.5 4.1 _________________________________________________________________________________________ Unrecognized net asset being recognized over 15 years (1.2) (1.4) _________________________________________________________________________________________ Prepaid (accrued) pension cost $ (4.6) .1 _________________________________________________________________________________________
(Millions of dollars) 1993 1992 1991 _________________________________________________________________________________________ Service cost $ 1.8 1.6 1.3 _________________________________________________________________________________________ Interest cost 1.4 1.3 1.0 _________________________________________________________________________________________ Actual gain on plan assets (1.3) (1.1) (1.9) _________________________________________________________________________________________ Net amortization and deferral .1 (.6) .3 _________________________________________________________________________________________ Net pension expense $ 2.0 1.2 .7 _________________________________________________________________________________________ Discount rate 7-1/4% 9% 9% _________________________________________________________________________________________ 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. 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. December 31, January 1, (Millions of dollars) 1993 1993 _________________________________________________________________________________________ Accumulated postretirement benefit obligation: _________________________________________________________________________________________ Retirees $ (20.6) (20.3) _________________________________________________________________________________________ Employees eligible to retire (2.7) (1.1) _________________________________________________________________________________________ Other employees (5.0) (3.8) _________________________________________________________________________________________ (28.3) (25.2) Unrecognized net loss 2.3 - _________________________________________________________________________________________ Accrued postretirement benefit cost $ (26.0) (25.2) _________________________________________________________________________________________
(Millions of dollars) 1993 1992 1991 _________________________________________________________________________________________ Service cost $ .8 - - _________________________________________________________________________________________ Interest cost 2.1 - - _________________________________________________________________________________________ Pay-as-you-go cost - .9 .7 _________________________________________________________________________________________ Net postretirement benefit cost $ 2.9 .9 .7 _________________________________________________________________________________________
Assumptions utilized to measure the accumulated postretirement obligation at December 31, and January 1, 1993 were: discount rates of 7.25% and 8.5%, respectively; health care cost trend rates of 14% declining over 10 years to 5% and 6%, respectively, and held constant thereafter. A 1% increase in the assumed trend rates would have resulted in increases in the accumulated postretirement benefit obligation at December 31, and January 1, 1993 of $2.6 million and $2.1 million, respectively; the aggregate of service cost and interest cost for the year ended December 31, 1993 would have increased by $.4 million. 13. Capital Stock, Options and Rights In November 1993, the Company completed a public offering of 4.4 million shares of capital stock at a price of $44.625 per share. The capital stock was taken from the Company's treasury at an average cost of $33.125 per share. The excess of net proceeds over the cost of treasury stock issued was credited to additional paid- in-capital. The net proceeds of the offering, after underwriting commissions and expenses, were approximately $188.8 million. In May 1988, the 1988 Long-term Stock Incentive Plan (1988 Plan) was approved by the shareholders to replace the 1982 Stock Option Plan (1982 Plan). Under the 1988 Plan, as amended, the Company may grant to officers and key employees stock options, stock appreciation rights, performance shares, performance units, restricted stock or restricted stock units for up to 2.8 million shares (plus the 22,274 shares not awarded under the 1982 Plan) of the Company's capital stock. As prescribed by both Plans, stock options are exercisable at the market price on the date of the grant, generally over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant; all options expire ten years from the date of grant. In 1993 and 1992, options for 277,700 shares and 600,400 shares were granted, respectively. The restricted stock and performance shares awarded under the 1988 Plan entitle the grantee to the rights of a shareholder, including the right to receive dividends and to vote such shares, but the shares are restricted as to sale, transfer or encumbrance. Restricted stock is issued to the grantee over varying periods after a one-year waiting period has expired. In 1993, awards were granted for 34,250 shares of restricted stock. In 1992, no awards were granted. The performance cycle consists of a three-year period, beginning with the year of grant, at the end of which certain performance goals must be attained by the Company for the unrestricted performance shares to be issued to the grantee. Awards granted in 1993 and 1992 for performance shares amounted to 18,900 shares and 26,600 shares, respectively. Performance shares issued in 1993 and 1992 amounted to 15,257 shares and 19,000 shares, respectively. Restricted stock and performance share awards are "compensatory" awards and the Company accrued compensation expense of $.7 million, $1 million and $.8 million in 1993, 1992 and 1991, respectively. In May 1990, the 1990 Stock Option Plan for Non-Employee Directors (1990 Plan) was approved by the shareholders, under which the Company will grant stock options to non-employee directors for up to 150,000 shares of the Company's capital stock. As prescribed by the 1990 Plan, the options are exercisable at the market price at the date of grant over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant; all options expire ten years from the date of grant. Awards for 20,000 shares were granted in both 1993 and 1992. At December 31, 1993, 1,254,638 shares of capital stock were reserved for future grants under all Plans. Total grants outstanding under the Plans and the changes therein for the periods indicated follows.
Number Option of shares price range __________________________________________________________________________________________ Outstanding at December 31, 1991 1,222,718 $21 - 45 1/2 __________________________________________________________________________________________ Granted 647,000 29 3/4 - 38 15/16 __________________________________________________________________________________________ Cancelled (97,475) 29 3/4 - 39 11/16 __________________________________________________________________________________________ Exercised (52,890) 21 - 31 1/2 __________________________________________________________________________________________ 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 __________________________________________________________________________________________ Exercisable at December 31, 1993 973,631 27 1/8 - 45 1/2 __________________________________________________________________________________________ Weighted average prices: Outstanding at December 31, 1993 35 11/16 Exercisable at December 31, 1993 34 5/16 __________________________________________________________________________________________
In 1986, the Company's Board of Directors declared a dividend to shareholders consisting of one Capital Stock Purchase Right on each outstanding share of capital stock. A Right will also be issued with each share of capital stock that becomes outstanding prior to the time the Rights become exercisable or expire. If a person or group acquires beneficial ownership of 20% or more, or announces a tender offer that would result in beneficial ownership of 20% or more, of the shares of outstanding capital stock, the Rights become exercisable ten days thereafter and each Right will entitle its holder to purchase one share of capital stock for $90. If the Company is acquired in a business combination transaction, each Right not owned by the 20% holder will entitle its holder to purchase, for $90, common shares of the acquiring company having a market value of $180. Alternatively, if a 20% holder were to acquire the Company by means of a reverse merger in which the Company and its capital stock survive or were to engage in certain "self- dealing" transactions, or if a person or group were to acquire 30% or more of the outstanding capital stock (other than pursuant to a cash offer for all shares), each Right not owned by the acquiring person would entitle its holder to purchase, for $90, capital stock of the Company having a market value of $180. Each Right can be redeemed by the Company for $.05, subject to the occurrence of certain events and other restrictions, and expires in 1996. These Rights may cause substantial ownership dilution to a person or group who attempts to acquire the Company without approval of the Company's Board of Directors. The Rights should not interfere with a business combination transaction that has been approved by the Board of Directors. 14. Petroleum Segment Information
(Millions of dollars) 19931 1992 1991 _________________________________________________________________________________________ Sales to unaffiliated customers: Domestic $ 692.9 686.2 697.8 North Sea 40.3 46.4 64.2 Other foreign2 60.6 33.2 34.5 _________________________________________________________________________________________ 793.8 765.8 796.5 Interest and other income 21.6 21.6 28.8 _________________________________________________________________________________________ Total revenues $ 815.4 787.4 825.3 _________________________________________________________________________________________ Earnings (loss) before income taxes: Operating profit (loss): Domestic3 79.2 39.7 67.5 North Sea (7.7) 13.1 17.2 Other foreign2 16.5 (2.9) (9.5) _________________________________________________________________________________________ 88.0 49.9 75.2 Other income (expense), net (63.4) (52.0) (41.9) _________________________________________________________________________________________ Earnings (loss) before income taxes $ 24.6 (2.1) 33.3 _________________________________________________________________________________________ Identifiable industry assets: Domestic 1,089.6 705.1 841.3 North Sea 523.2 280.3 245.1 Other foreign 99.5 107.6 64.4 _________________________________________________________________________________________ 1,712.3 1,093.0 1,150.8 Other assets 126.4 116.1 102.0 _________________________________________________________________________________________ Total assets $1,838.7 1,209.1 1,252.8 _________________________________________________________________________________________ Depletion, depreciation and amortization: Petroleum 123.4 101.6 111.5 Other 6.4 4.9 4.8 _________________________________________________________________________________________ $ 129.8 106.5 116.3 _________________________________________________________________________________________ Capital expenditures: Exploration: Domestic 31.2 22.7 51.7 North Sea 1.8 3.2 1.5 Other foreign 10.0 12.7 13.5 _________________________________________________________________________________________ 43.0 38.6 66.7 _________________________________________________________________________________________ Development: Domestic 58.0 47.9 52.9 North Sea 37.6 27.9 24.7 Other foreign 3.1 30.5 2.0 _________________________________________________________________________________________ 98.7 106.3 79.6 _________________________________________________________________________________________ Refining and marketing 18.4 27.6 15.5 _________________________________________________________________________________________ 160.1 172.5 161.8 Capitalized interest 18.7 12.9 22.6 Other 3.5 4.4 4.8 _________________________________________________________________________________________ $ 182.3 189.8 189.2 _________________________________________________________________________________________ 1 Includes NERCO Oil & Gas, Inc. since October 1, 1993. 2 In 1993, Canadian oil and gas properties were sold for $42.8, which resulted in a gain of $23.5. See Note 2. 3 In 1992, restructuring and other nonrecurring charges/credits totaled $27.4. See Note 4. /TABLE 15. Contingencies Texaco Litigation In August 1989, the State of Louisiana, in connection with its claim against Texaco Inc. and certain of its subsidiaries ("Texaco") in the Texaco bankruptcy proceedings, filed an Amended and Restated Objection, Amended and Restated Proof of Claim and Complaint naming, as class action defendants, all persons having overriding royalty, working or other mineral interests in State mineral leases held by Texaco. The State sought cancellation of certain interests in State mineral leases, including the interests of class members. In July 1991, the Company entered into an agreement with Texaco which resolved all claims and issues related to certain Department of Energy matters. Following this settlement, the previously established accrual for the DOE matter, net of certain litigation expenses, was retained with respect to loss contingencies associated with the State of Louisiana gas royalty claim. In January 1992, the Company was added as a defendant as a result of its ownership of royalty interests in State mineral leases subleased to Texaco and its ownership of overriding royalty and working interests in other State leases with Texaco. The State asserted a monetary claim of $210.9 million in principal and $264.8 million in interest, plus penalties, damages equal to double the amount of royalties allegedly due, and attorneys' fees, against Texaco and the Company based on Texaco's alleged improper calculation of royalties on six State leases which Texaco has operated under subleases from the Company. The monetary amount of the State's claims substantially exceeds the amounts provided for in the financial statements. However, the Company believes that the State's claims are significantly overstated. The State further asserted claims for cancellation of the State mineral leases subleased to Texaco based on Texaco's alleged conduct in operating those leases. Lease cancellation is an extraordinary remedy under Louisiana Law. The Company has filed a cross claim against Texaco asserting contractual and legal claims for indemnity, reimbursement and damages from Texaco for any amounts claimed by the State or any other losses sustained as a result of the State's action. On February 9, 1994, the Louisiana State Mineral Board preliminarily approved an agreement among the State of Louisiana, Texaco and the Company settling all claims asserted in the litigation. The settlement is subject to a ten day public comment period, after which it will be considered for final approval by the State Mineral Board and then reviewed for fairness by the U.S. District Court for the Middle District of Louisiana, where the claims are pending. Under the terms of the settlement agreement, the Company will make a $5 million cash payment upon approval of the settlement by the Federal District Court and will agree to a reduction of an immaterial amount of future payments to the Company by Texaco related to the Company's 8-1/3% net profits interest (for which the Company has no cost basis) on a limited number of the Company's Louisiana properties. The Company expects, if the settlement agreement is approved as contemplated in its present form, that the amounts provided in the financial statements for this litigation will exceed the amount of the cash payment to be made under the agreement. In the opinion of Management, the ultimate liability with respect to the Texaco litigation will not have a material adverse effect on the results of operations, cash flow or financial position of the Company. Other The Company has been notified by the U.S. Environmental Protection Agency that it is one of many Potentially Responsible Parties ("PRP") at three 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. _________________________________________________________________ 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, 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, 1993 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 Richard A. Bachmann Chairman, President and Executive Vice President and 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, 1993 and 1992, and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993. 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, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Notes 11 and 12 to the consolidated financial statements, the Company adopted the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statements of Financial Accounting Standards Nos. 109 and 106, respectively. /s/ KPMG Peat Marwick KPMG Peat Marwick New Orleans, Louisiana February 9, 1994 _________________________________________________________________ UNAUDITED SUPPLEMENTAL DATA: Page herein Management's Discussion and Analysis 29 Data on Oil and Gas Activities 36 Oil and Gas Operating Data 44 Refining and Marketing Operating Data 45 Oil and Gas Properties 46 Wells Drilled 47 Selected Financial Data 48 Market Price and Dividend Data 49 Quarterly Data 50 _________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS _________________________________________________________________ REVIEW OF OPERATIONS (1993 VS 1992) Gross revenues in 1993 were up $28 million as an increase in oil and gas revenues of $46 million and a $24 million pretax gain on the sale of certain Canadian oil and gas assets more than offset a $40 million decline in refining revenues, lower crude marketing gains and reduced equity in the earnings of the Company's 50%-owned affiliate, CLAM Petroleum Company (CLAM). CLAM's reduced earnings for 1993 reflect the adverse effect of reduced gas prices, lower gas deliveries and a one-time noncash charge of $6 million to income taxes ($3 million net to the Company) for the adoption SFAS No. 109. Before inclusion of nonrecurring after-tax items netting to a charge of $1.3 million, an extraordinary loss on early retirement of debt of $3.3 million and the favorable effect of two accounting changes amounting to $.2 million, the Company generated earnings of $14 million in 1993. This represents a decline from the comparable 1992 earnings of $18.9 million, which was also exclusive of nonrecurring after-tax items totaling $20.1 million and an extraordinary loss of $5.6 million on the early retirement of debt in 1992. The nonrecurring items in 1993 consisted of the aforementioned $23.5 million ($13.2 million after tax) gain on the sale of certain oil and gas properties, undeveloped acreage and seismic data located in southern Alberta, Canada reduced by a $6.5 million ($4.2 million after tax) charge for the write-down of refinery inventories to market value, a $6.7 million ($4.3 million after tax) charge for the write-off of costs associated with the interim financing provided by banks for the acquisitions of NERCO and T-Block, a $3 million income tax charge to recognize the retroactive rate change enacted in the Budget Reconciliation Act of 1993 and the effect of the aforementioned noncash charge of $6 million ($3 million net to the Company) to the earnings of CLAM. The inclusion of the nonrecurring and extraordinary items resulted in net earnings of $9.6 million in 1993, as compared to the $6.8 million net loss incurred in the prior year. Oil and Gas Operations Revenues from oil and gas operations were up $46 million from 1992. Natural gas revenues, up almost $55 million as a result of higher domestic gas prices ($29 million) and deliveries ($25 million), accounted for much of the increase. Liquids revenues, however, were down $5 million. Although crude oil volumes increased in 1993 ($22 million), this revenue gain was more than offset by declining worldwide crude oil prices ($26 million). Domestic natural gas deliveries were up almost 40 million cubic feet per day from the prior year period. The improvement in domestic natural gas deliveries was due to the acquisition of NERCO, new domestic wells coming onstream and the return to production of wells previously shut-in for repairs and maintenance. These increases were partially offset by the effects of natural declines at mature producing properties. Crude oil volumes in 1993 were higher due to a 2,400 barrel per day (BPD) increase in domestic operations, a 300 BPD increase in North Sea operations and an 800 BPD increase in other foreign operations. The increase in domestic operations resulted primarily from the acquisition of NERCO, the purchase of additional working interests in producing properties, new domestic wells coming onstream, and increased production from domestic wells that were shut-in for repairs and maintenance during the prior year. Volumes were up in the North Sea primarily as a result of the purchase of additional working interests in producing properties and the production from T-Block beginning in mid-December 1993. The year-end 1992 acquisition of a working interest in the KAKAP Field in Indonesia resulted in higher volumes from other foreign areas. These production increases were partially offset by natural declines at domestic and foreign properties. Lease operating and facility expenses increased $8 million during the current year primarily due to operating expenses associated with properties and increased working interests acquired in late 1992 and in 1993 and higher operating and repair and maintenance costs on older properties. These were partially offset by lower workover charges and the inclusion in 1992 of a $3 million nonrecurring charge for the uninsured costs associated with a gas well blowout. Depletion, depreciation and amortization (DD&A) was $23 million higher in 1993 than in the prior year due primarily to DD&A on properties and increased working interests acquired in late 1992 and in 1993. Dry holes and exploratory charges were up over $7 million in the current year due to increases in seismic costs incurred, lease impairment and unsuccessful exploratory wells. General, administrative and other expenses increased over $6 million from the prior year primarily due to the initial accrual of current year costs associated with postretirement benefits other than pensions and increased personnel costs. Interest and debt expenses increased over $3 million due to higher interest expense associated with the increased debt level and the aforementioned write-off of debt issue costs. These additional costs were partially offset by interest capitalized on a greater investment in qualifying projects. Refining and Marketing Operations Refining operations resulted in a loss in 1993. Lower revenues from a decline in product prices ($49 million), a write-down of refinery inventories of over $6 million and higher operating expenses ($4 million) more than offset the favorable impact of higher sales volumes ($9 million) and lower feedstock prices ($30 million) resulting in a $10 million pretax operating loss. The refinery had generated a pretax operating profit of $10 million in the prior year. A $3 million profit from crude oil marketing activities partially offset the operating loss, but was also lower than in the prior year. REVIEW OF OPERATIONS (1992 VS 1991) Gross revenues in 1992 were down $38 million from the comparable prior year as higher refining revenues were more than offset by reduced oil and gas revenues, a decline in crude marketing gains and a lower equity in the earnings of the Company's 50%-owned affiliate, CLAM Petroleum Company (CLAM). The reduction in CLAM's earnings resulted from reduced gas prices and lower gas deliveries due to a major pipeline maintenance program. These revenue declines more than offset the significant reductions in operating costs and expenses (before the restructuring charges) resulting from the Company's cost-cutting efforts. Nevertheless, the Company generated earnings of $18.9 million before the inclusion of nonrecurring after-tax items totaling $20.1 million and an extraordinary loss of $5.6 million on an early retirement of debt. This represents a decline of 10% from the comparable net earnings of 1991. The nonrecurring items consisted of $52.4 million ($34.6 million after tax) for the restructuring of the Company's domestic oil and gas operations and $3 million ($2 million after tax) for the uninsured costs associated with a gas well blowout (after being reduced by $2.5 million in the fourth quarter). The Company also reduced its litigation accrual for the State gas royalty claim $25 million ($16.5 million after tax). The inclusion of the nonrecurring items resulted in a net loss of $6.8 million in 1992. Oil and Gas Operations Revenues from oil and gas operations benefitted from rising gas prices since the 1992 second quarter. Such price gains, however, were offset by average oil prices that were below those in 1991 and lower oil and gas volumes. As a result, revenues from oil and gas operations were $32 million lower than in the prior year. Crude oil revenues were down $32 million due to lower prices in 1992 ($8 million) and lower volumes produced ($24 million). Natural gas revenues were over $5 million higher in 1992 due to price increases ($11 million) but this was offset to an extent by the elimination of revenues generated in 1992 by the properties recently sold and reduced volumes. Crude oil volume declines in 1992 were attributable to an 1,100 barrel per day (BPD) decline in domestic operations, a 2,100 BPD decline in North Sea operations and a 200 BPD decline in other foreign operations. The decline in domestic operations was primarily due to wells shut-in for maintenance and repairs, hurricane related production interruptions and natural declines at mature producing properties. These declines more than offset volumes from new wells coming onstream. In foreign areas, volumes were down primarily as a result of natural declines. Domestic natural gas deliveries were down 7% from the prior year period due to natural declines, hurricane related production interruptions and elimination of volumes related to the properties recently sold. These declines more than offset volumes from new wells coming onstream. Lease operating and facility expenses rose above the prior year level primarily due to increased operating expenses on new and existing properties and the inclusion of the aforementioned charges associated with a gas well blowout. These were offset to an extent by lower workover and repair charges. Depletion, depreciation and amortization (DD&A) was almost $10 million lower in 1992 due to the elimination of DD&A on those properties sold and reduced DD&A on mature properties due to declining production rates. These reductions were partially offset by the increases in DD&A associated with new producing properties. Dry holes and exploratory charges were almost $33 million lower than in the 1991 period due to the reduction in exploration activities in both domestic and foreign areas and a higher exploratory success ratio. General, administrative and other expenses were reduced 12% in 1992 due primarily to the cost-cutting efforts associated with the restructuring program. Although interest incurred in 1992 benefitted from the lower rates charged on the Company's variable rate debt, interest and debt expenses were significantly higher in 1992 due primarily to the reduction in development projects which qualified for interest capitalization. Refining and Marketing Operations Although refined product demand in 1992 improved from the 1991 period, refining operating results declined by 8% from 1991 due to reduced margins. Higher revenues from increased sales volumes ($42 million) were partially offset by lower prices ($31 million) during 1992 as compared to 1991. However, increased feedstock costs offset the revenue gains resulting in lower pretax operating profit. Profits from crude oil marketing activities were also lower than in the prior year primarily due to higher acquisition costs on crude purchased for resale relative to final sales prices and the absence of forward sales in 1992. LIQUIDITY AND CAPITAL RESOURCES In 1993, the Company generated approximately $179 million in cash from operations which, with the proceeds from the equity and debt offerings and the sale of Canadian oil and gas properties, was utilized for the acquisition of NERCO and T-Block, exploration and development projects ($172 million), the repayment of $105 million of long-term debt, payments for prior year accrued capital expenditures included in other investing activities ($36 million) and dividends ($30 million). In April 1993, the Company completed its second $100 million public offering of debt securities under an existing shelf registration filed in 1992 under the Securities and Exchange Commission's rules with the issuance of 7-5/8% Debentures due 2013. Part of the net proceeds of approximately $98 million was applied to the payment of the $66 million installment of the term loan with banks due in July 1993; the balance was used for general corporate purposes. In September 1993, the Company completed the acquisition of NERCO for approximately $354 million in cash. The properties acquired include working interests averaging over 50% in 50 producing oil and gas fields located predominately in the Gulf of Mexico, a substantial portion of which are operated by NERCO. Also, included in the acquisition are NERCO's interests in leases on 53 undeveloped blocks in the Gulf. In December 1993, the Company acquired an 11.26% working interest in T-Block (Block 16/17 in the U.K. North Sea) from British Gas Exploration and Production Limited for approximately $187 million in cash. T-Block contains two oil fields which are under development: the Tiffany Field and the satellite field, Toni. Production from both fields initially came onstream in late 1993. The development of two additional fields, Thelma and Southeast Thelma, is in the advanced planning stage. To finance the NERCO and T-Block acquisitions, 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. Availability under the agreement originally consisted of (i) a $540 million Revolving Credit Facility and (ii) a $250 million Term Loan Facility (which was utilized and repaid and is no longer available to the Company). The Revolving Credit Facility was subsequently reduced to $450 million and will be reduced by approximately $24 million quarterly from June 1994 through September 1999. 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 net proceeds of the offering, after underwriting commissions and expenses, were approximately $189 million and were utilized for the repayment of indebtedness and for general corporate purposes. In November 1993, the Company filed a registration statement on Form S-3 to register up to $500 million of 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, the Company completed an offering of $200 million of 7.65% Debentures due 2023. The net proceeds of the offering, after underwriting commissions and expenses, were approximately $198 million and were utilized for the repayment of indebtedness and for general corporate purposes. 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 $43 million. Part of the proceeds was utilized to retire the $15 million balance of the Loan Agreement with a group of banks. The balance of the proceeds was utilized for general corporate purposes. The Company expects that its 1994 capital and exploration program, presently estimated at approximately $248 million, will be financed substantially by internally generated funds. Such expenditures are continually reviewed, and revised as necessary, based on perceived current and long-term economic conditions. The only significant long-term debt due in 1994, the $133.5 million balance of the Term Loan with banks which was due in July 1994, was refinanced in January 1994 with the proceeds of a Revolving Credit Facility drawdown. As explained in Note 15 of "Notes to Consolidated Financial Statements," 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 preliminary settlement was agreed to by all parties under which the Company will make a $5 million cash payment, which is less than the amounts provided in the financial statements for this litigation. As also 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 at three 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. In November 1992, Statement of Financial Accounting Standards No. 112 ("SFAS No. 112") - "Employers Accounting for Postemployment Benefits" was issued. SFAS No. 112, which will be effective for 1994, prescribes the accrual of benefits provided to former or inactive employees after employment but before retirement. Application of SFAS No. 112 will not have a material adverse effect on the Company's results of operations, cash flow or financial position. CAPITAL STOCK, DIVIDENDS AND OTHER MARKET DATA The Company's capital stock is listed and traded on the New York Stock Exchange, the Toronto Stock Exchange, the London Stock Exchange and the Swiss Stock Exchanges (Basle, Geneva and Zurich). As of February 4, 1994, there were 8,130 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 50. As disclosed elsewhere, 4.4 million of the Company's treasury shares were issued in a public offering completed in November 1993. (See Note 13 of "Notes to Consolidated Financial Statements".) The remaining 4.8 million shares being held as treasury shares continued to afford the Company greater financial flexibility to respond to financing and other opportunities that might arise. The Company has arranged financings totaling approximately $24 million for its ESOP and has sold a total of 836,368 shares of treasury stock to the ESOP. (See Note 8 of "Notes to Consolidated Financial Statements.") 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 13 of "Notes to Consolidated Financial Statements.") The Company has reserved 1,254,638 shares of its capital stock for future grants and exercises of stock options. (See Note 13 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) _________________________________________________________________ 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. There have been no significant changes in the estimates of proved reserves since December 31, 1993.
Liquids (Millions of barrels) North Other Domestic Sea CLAM Foreign Total _________________________________________________________________________________________ Proved reserves at December 31, 1990 45.1 28.6 .4 13.7 87.8 Revisions of previous estimates 6.0 (.1) - (1.6) 4.3 Purchase of reserves in place - - - - - Extensions, discoveries and other additions 4.2 .2 - 1.5 5.9 Production (8.2) (3.2) - (2.2) (13.6) Sales of reserves in place (.1) - - - (.1) _________________________________________________________________________________________ Proved reserves at December 31, 1991 47.0 25.5 .4 11.4 84.3 Revisions of previous estimates 5.3 (.6) - - 4.7 Purchase of reserves in place 2.6 - - 5.8 8.4 Extensions, discoveries and other additions 3.0 2.8 - .6 6.4 Production (7.9) (2.5) - (2.1) (12.5) Sales of reserves in place (.6) - - - (.6) _________________________________________________________________________________________ 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 _________________________________________________________________________________________ Proved-developed reserves at December 31, _________________________________________________________________________________________ 1991 42.4 9.2 .3 9.1 61.0 _________________________________________________________________________________________ 1992 46.8 6.1 .3 10.4 63.6 _________________________________________________________________________________________ 1993 47.0 36.9 .3 5.7 89.9 _________________________________________________________________________________________
Gas (Billions of cubic feet) North Other Domestic Sea CLAM Foreign Total _________________________________________________________________________________________ Proved reserves at December 31, 1990 513.1 126.6 200.9 11.5 852.1 Revisions of previous estimates 32.8 (3.1) 5.4 (.8) 34.3 Purchase of reserves in place .2 - - - .2 Extensions, discoveries and other additions 30.3 - - 1.5 31.8 Production (54.9) (.1) (17.8) (1.6) (74.4) Sales of reserves in place (.6) - - - (.6) _________________________________________________________________________________________ Proved reserves at December 31, 1991 520.9 123.4 188.5 10.6 843.4 Revisions of previous estimates 9.7 (4.6) (6.6) (.2) (1.7) Purchase of reserves in place 3.2 - - - 3.2 Extensions, discoveries and other additions 14.7 15.8 - .6 31.1 Production (51.3) (.1) (14.8) (1.8) (68.0) Sales of reserves in place (53.1) - - - (53.1) _________________________________________________________________________________________ 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 _________________________________________________________________________________________ Proved-developed reserves at December 31, 1991 331.8 38.2 128.9 10.5 509.4 _________________________________________________________________________________________ 1992 270.9 35.3 112.7 9.2 428.1 _________________________________________________________________________________________ 1993 405.9 132.9 118.9 7.7 665.4 _________________________________________________________________________________________
The table below sets forth estimates of the domestic sulphur reserves attributable to the interests of the Company as of December 31:
Proved- (Thousands of long tons) Proved developed _________________________________________________________________________________________ 1991 591.2 225.5 _________________________________________________________________________________________ 1992 608.3 242.6 _________________________________________________________________________________________ 1993 583.6 226.1 _________________________________________________________________________________________
_________________________________________________________________ Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves The following supplemental data on the Company's oil and gas activities were prepared in accordance with the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards No. 69 - "Disclosures About Oil and Gas Producing Activities." Estimated future net cash flows are determined by: (1) applying the respective year-end oil and gas prices to the Company's estimates of future production of proved reserves; (2) deducting estimates of the future costs of development and production of proved reserves based on the assumed continuation of the cost levels and economic conditions existing at the respective year-end; and (3) deducting estimates of future income taxes based on the respective year-end and future statutory tax rates. Present value is determined using the FASB-prescribed discount rate of 10% per annum. Although the information presented is based on the Company's best estimates of the required data, the methods and assumptions used in preparing the data were those prescribed by the FASB. Although unrealistic, they were specified in order to achieve uniformity in assumptions and to provide for the use of reasonably objective data. It is important to note here that this information is neither fair market value nor the present value of future cash flows and it does not reflect changes in oil and gas prices experienced since the respective year-end. It is primarily a tool designed by the FASB to allow for a reasonable comparison of oil and gas reserves and changes therein through the use of a standardized method. Accordingly, the Company cautions that this data should not be used for other than its intended purpose. _________________________________________________________________________________________ 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 (114.3) Previously estimated development costs incurred during the year 56.6 Revisions of previous reserve estimates 10.1 Purchase of reserves in place 514.4 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 _________________________________________________________________________________________
_________________________________________________________________________________________ STANDARDIZED MEASURE AT DECEMBER 31, 1992:
North Other (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Future cash inflows $1,794.9 779.0 276.6 2,850.5 Future production and development costs (715.7) (261.0) (145.0) (1,121.7) Future income tax expenses (292.4) (241.4) (38.2) (572.0) _________________________________________________________________________________________ Future net cash flows 786.8 276.6 93.4 1,156.8 10% annual discount for estimated timing of cash flows (313.9) (113.6) (27.9) (455.4) _________________________________________________________________________________________ Standardized measure of discounted future net cash flows $ 472.9 163.0 65.5 701.4 _________________________________________________________________________________________ CLAM $ - 65.1 - 65.1 _________________________________________________________________________________________
PRINCIPAL SOURCES OF CHANGE DURING 1992:
(Millions of dollars) _________________________________________________________________________________________ Sales and transfers, net of production costs $(203.3) Net change in prices and production costs (9.2) Extensions, discoveries and improved recovery, less related costs 57.9 Net change in future development costs 12.3 Previously estimated development costs incurred during the year 70.5 Revisions of previous reserve estimates 47.6 Purchase of reserves in place 61.7 Sales of reserves in place (52.2) Accretion of discount 69.1 Net change in income taxes 3.3 Other (47.1) _________________________________________________________________________________________ Net change $ 10.6 _________________________________________________________________________________________
_________________________________________________________________________________________ STANDARDIZED MEASURE AT DECEMBER 31, 1991:
North Other (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ Future cash inflows $1,793.3 783.4 179.9 2,756.6 Future production and development costs (691.2) (340.6) (79.1) (1,110.9) Future income tax expenses (294.0) (200.3) (13.2) (507.5) _________________________________________________________________________________________ Future net cash flows 808.1 242.5 87.6 1,138.2 10% annual discount for estimated timing of cash flows (296.1) (126.5) (24.8) (447.4) _________________________________________________________________________________________ Standardized measure of discounted future net cash flows $ 512.0 116.0 62.8 690.8 _________________________________________________________________________________________ CLAM $ - 79.8 - 79.8 _________________________________________________________________________________________
PRINCIPAL SOURCES OF CHANGE DURING 1991:
(Millions of dollars) _________________________________________________________________________________________ Sales and transfers, net of production costs $(234.6) Net change in prices and production costs (641.4) Extensions, discoveries and improved recovery, less related costs 74.1 Net change in future development costs (34.4) Previously estimated development costs incurred during the year 79.3 Revisions of previous reserve estimates 63.0 Accretion of discount 106.0 Net change in income taxes 154.9 Other 63.8 _________________________________________________________________________________________ Net change $(369.3) _________________________________________________________________________________________
_________________________________________________________________________________________ Results of Operations for Oil and Gas Activities
Years ended December 31: North Other 1993 (Millions of dollars) Domestic1 Sea Foreign2 Total _________________________________________________________________________________________ Revenues $ 290.03 40.3 60.6 390.9 Production costs (81.2) (24.9) (17.8) (123.9) Exploration expenses (31.4) (3.8) (13.6) (48.8) DD&A (86.2) (19.3) (12.7) (118.2) _________________________________________________________________________________________ 91.2 (7.7) 16.5 100.0 Income tax (expense) benefit (32.0) 1.5 (6.8) (37.3) _________________________________________________________________________________________ Earnings (loss)4 $ 59.2 (6.2) 9.7 62.7 _________________________________________________________________________________________ CLAM5 $ - 2.3 - 2.3 _________________________________________________________________________________________ 1992 (Millions of dollars) _________________________________________________________________________________________ Revenues 238.73 46.4 33.2 318.3 Production costs (76.8) (20.0) (18.2) (115.0) Exploration expenses (30.5) (4.1) (6.9) (41.5) DD&A and restructuring charge (104.1) (9.2) (11.0) (124.3) _________________________________________________________________________________________ 27.3 13.1 (2.9) 37.5 Income tax (expense) benefit (8.5) (8.4) .9 (16.0) _________________________________________________________________________________________ Earnings (loss)4 $ 18.8 4.7 (2.0) 21.5 _________________________________________________________________________________________ CLAM5 $ - 6.4 - 6.4 _________________________________________________________________________________________ 1991 (Millions of dollars) _________________________________________________________________________________________ Revenues 249.83 64.2 34.5 348.5 Production costs (75.9) (21.7) (16.3) (113.9) Exploration expenses (53.6) (4.6) (16.4) (74.6) DD&A (74.8) (20.7) (11.3) (106.8) _________________________________________________________________________________________ 45.5 17.2 (9.5) 53.2 Income tax expense (14.3) (7.0) (.7) (22.0) _________________________________________________________________________________________ Earnings (loss)4 $ 31.2 10.2 (10.2) 31.2 _________________________________________________________________________________________ CLAM5 $ - 14.0 - 14.0 _________________________________________________________________________________________ 1 Includes NERCO Oil & Gas, Inc. since October 1, 1993. 2 In 1993, Canadian oil and gas properties were sold for $42.8, which resulted in a gain of $23.5 (before income taxes of $10.3). 3 Includes intercompany transfers to the Company's refinery of $22.4, $20.7 and $18.7 in 1993, 1992 and 1991, respectively. 4 Excludes other income, general and administrative expenses and interest and debt expenses. 5 Represents the Company's equity in CLAM's net earnings after U.S. income taxes. See Note 6 of "Notes to Consolidated Financial Statements."
_________________________________________________________________________________________ Costs Incurred in Oil and Gas Activities
Years ended December 31: North Other 1993 (Millions of dollars) Domestic Sea Foreign Total _________________________________________________________________________________________ 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 _________________________________________________________________________________________ 1992 (Millions of dollars) _________________________________________________________________________________________ Property acquisition: Proved 8.3 - 27.5 35.8 Unproved 2.5 - 8.1 10.6 Exploration 29.8 3.5 7.8 41.1 Development 39.5 27.9 3.1 70.5 _________________________________________________________________________________________ 80.1 31.4 46.5 158.0 Capitalized interest 4.0 8.9 - 12.9 _________________________________________________________________________________________ $ 84.1 40.3 46.5 170.9 _________________________________________________________________________________________ CLAM $ - 10.7 - 10.7 _________________________________________________________________________________________ 1991 (Millions of dollars) _________________________________________________________________________________________ Property acquisition: Proved .2 - - .2 Unproved 6.9 - 1.5 8.4 Exploration 53.1 2.0 17.1 72.2 Development 52.7 24.7 2.0 79.4 _________________________________________________________________________________________ 112.9 26.7 20.6 160.2 Capitalized interest 14.7 7.8 .1 22.6 _________________________________________________________________________________________ $ 127.6 34.5 20.7 182.8 _________________________________________________________________________________________ CLAM $ - 18.2 - 18.2 _________________________________________________________________________________________
_________________________________________________________________________________________ OIL AND GAS OPERATING DATA1
Years ended December 31: 19932 1992 1991 1990 1989 _________________________________________________________________________________________ CRUDE AND CONDENSATE3 Production (barrels per day): Domestic: Working interest 17,586 15,308 16,439 17,085 17,909 Royalty interest 4,161 4,070 4,070 4,041 4,406 _________________________________________________________________________________________ 21,747 19,378 20,509 21,126 22,315 North Sea (working interest) 6,529 6,258 8,352 10,283 9,760 Other foreign (working interest) 6,509 5,674 5,896 6,652 5,072 _________________________________________________________________________________________ 34,785 31,310 34,757 38,061 37,147 _________________________________________________________________________________________ Average price received (per barrel): Domestic $ 16.96 19.14 20.13 22.69 17.94 North Sea 16.20 19.11 19.96 23.13 17.42 Other foreign 14.40 14.98 14.53 18.89 15.75 Consolidated 16.34 18.38 19.14 22.15 17.50 _________________________________________________________________________________________ NATURAL GAS Production (thousands of cubic feet per day): Domestic: Working interest 155,917 119,050 124,592 126,610 136,864 Royalty interest 23,861 21,146 25,666 24,771 22,342 _________________________________________________________________________________________ 179,778 140,196 150,258 151,381 159,206 North Sea (working interest) 156 236 283 349 325 Other foreign (working interest) 5,316 4,871 4,388 4,918 5,527 CLAM Petroleum Company 34,608 40,485 48,772 46,330 53,045 _________________________________________________________________________________________ 219,858 185,788 203,701 202,978 218,103 _________________________________________________________________________________________ Average price received (per MCF): Domestic $ 2.19 1.75 1.53 1.74 1.96 North Sea 1.51 1.92 1.91 2.48 1.85 Other foreign 1.27 0.84 1.03 1.13 1.05 CLAM Petroleum Company 2.35 2.73 3.08 2.76 2.19 Consolidated 2.19 1.94 1.89 1.96 1.99 _________________________________________________________________________________________ PLANT PRODUCTS Production (barrels per day): Domestic (working interest) 2,377 2,294 2,145 2,197 2,520 North Sea (working interest) 352 461 510 612 377 Other foreign (working interest) 29 39 33 29 55 _________________________________________________________________________________________ 2,758 2,794 2,688 2,838 2,952 _________________________________________________________________________________________ Average price received (per barrel): Domestic $ 11.26 13.07 14.89 14.31 9.40 North Sea 12.62 14.47 16.93 15.36 10.65 Other foreign 11.97 12.68 13.12 13.70 4.58 Consolidated 11.44 13.29 15.26 14.53 9.47 _________________________________________________________________________________________ 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 AND MARKETING OPERATING DATA
Years ended December 31,: (Millions of dollars) 1993 1992 1991 1990 1989 _________________________________________________________________________________________ Refining operating profit (loss): Revenues: Refined products* $ 422.6 462.6 451.5 453.8 360.5 Other 1.9 .3 .2 .7 .2 _________________________________________________________________________________________ 424.5 462.9 451.7 454.5 360.7 _________________________________________________________________________________________ Costs and expenses: Cost of sales* 390.6 413.6 401.4 396.9 315.9 Operating expenses 35.2 31.4 32.4 33.1 28.9 Depreciation 5.2 5.0 4.7 4.5 4.3 Taxes, other than income 3.5 3.3 2.7 3.4 2.9 _________________________________________________________________________________________ 434.5 453.3 441.2 437.9 352.0 _________________________________________________________________________________________ (10.0) 9.6 10.5 16.6 8.7 Crude marketing gain (loss) 2.9 5.1 15.0 (10.1) 3.6 _________________________________________________________________________________________ $ (7.1) 14.7 25.5 6.5 12.3 _________________________________________________________________________________________ *Before the elimination of intercompany transfers to the Company's refinery $ 22.4 20.7 18.7 22.3 21.3 _________________________________________________________________________________________ Sales (barrels per day): No. 2 fuel oil 11,471 12,471 11,079 13,162 9,911 Leaded gasoline - - - 14 1,423 Unleaded gasoline 22,747 23,640 21,675 21,618 13,472 Jet fuel 6,488 5,415 5,102 5,595 5,789 Naphtha 5,477 4,922 4,045 6,260 5,847 Other 8,347 6,880 6,987 8,258 11,674 _________________________________________________________________________________________ 54,530 53,328 48,888 54,907 48,116 _________________________________________________________________________________________ Average price received (per barrel) $ 21.24 23.70 25.30 22.65 20.52 _________________________________________________________________________________________
_________________________________________________________________________________________ OIL AND GAS PROPERTIES
December 31, 1993 Productive acreage Undeveloped acreage (Thousands of acres) Gross Net Gross Net _________________________________________________________________________________________ LEASEHOLDS AND OPTIONS Domestic: Offshore Gulf of Mexico 343.2 167.6 470.5 315.2 Louisiana 128.7 80.0 34.3 13.7 Mississippi/Alabama/Florida 14.8 11.5 5.5 1.1 Colorado/Utah/New Mexico 1.3 .6 168.8 110.8 Wyoming 44.1 12.6 267.4 110.4 Other 59.5 9.5 77.4 9.0 _________________________________________________________________________________________ 591.6 281.8 1,023.9 560.2 _________________________________________________________________________________________ North Sea: Netherlands 2.7 1.0 103.3 36.0 United Kingdom 19.1 1.2 147.2 12.0 _________________________________________________________________________________________ 21.8 2.2 250.5 48.0 _________________________________________________________________________________________ Other foreign: Algeria - - 1,552.9 1,009.4 Australia - - 2,242.8 557.6 Canada 33.3 16.5 194.1 111.1 Colombia 11.7 1.6 523.7 427.0 France - - 113.4 56.7 Indonesia 5.9 .9 489.7 66.2 Papua New Guinea - - 2,868.4 2,750.5 Tunisia - - 1,021.0 510.5 Yemen - - 1,167.9 198.5 _________________________________________________________________________________________ 50.9 19.0 10,173.9 5,687.5 _________________________________________________________________________________________ FEE LANDS 95.0 95.0 499.0 499.0 _________________________________________________________________________________________ CLAM PETROLEUM COMPANY (50%) Netherlands-North Sea 42.0 5.3 805.9 184.3 _________________________________________________________________________________________ 801.3 403.3 12,753.2 6,979.0 _________________________________________________________________________________________
_______________________________________________________________________________________ WELLS DRILLED
Years ended December 31: 1993 1992 1991 1990 1989 _______________________________________________________________________________________ GROSS WELLS DRILLED (BY LOCATION) Working interest Domestic: Offshore Gulf of Mexico 23 5 18 13 16 Louisiana 10 17 30 28 28 Michigan - - - 1 3 Oklahoma - - 25 25 16 Texas - - 3 - 1 Wyoming 6 2 9 7 6 Other - 1 - - 1 _______________________________________________________________________________________ 39 25 85 74 71 _______________________________________________________________________________________ North Sea: Netherlands 4 5 10 14 6 United Kingdom 5 8 4 8 6 _______________________________________________________________________________________ 9 13 14 22 12 _______________________________________________________________________________________ Other foreign: Canada 38 33 44 44 49 Colombia - 3 2 4 5 Other 2 1 2 2 - _______________________________________________________________________________________ 40 37 48 50 54 _______________________________________________________________________________________ Total working interest 88 75 147 146 137 Royalty interest 35 26 28 31 36 _______________________________________________________________________________________ Total wells 123 101 175 177 173 _______________________________________________________________________________________
Gross (Net) Wells Drilled (by type)
Exploratory: Oil 34 (15.2) 26 (13.1) 33 (15.1) 28 (14.4) 43 (19.2) Gas 18 (3.9) 10 (2.5) 34 (12.4) 40 (15.1) 28 (9.3) Dry 31 (11.4) 28 (12.4) 74 (29.5) 77 (28.1) 56 (23.5) _______________________________________________________________________________________ 83 (30.5) 64 (28.0) 141 (57.0) 145 (57.6) 127 (52.0) _______________________________________________________________________________________ Development: Oil 17 (2.1) 22 (2.6) 23 (2.4) 14 (2.5) 20 (3.6) Gas 21 (3.4) 6 (1.4) 9 (1.5) 17 (1.7) 19 (2.7) Dry 2 (.3) 9 (.7) 2 (.6) 1 (-) 7 (.9) _______________________________________________________________________________________ 40 (5.8) 37 (4.7) 34 (4.5) 32 (4.2) 46 (7.2) _______________________________________________________________________________________ Total wells 123 (36.3) 101 (32.7) 175 (61.5) 177 (61.8) 173 (59.2) _______________________________________________________________________________________
_________________________________________________________________________________________ SELECTED FINANCIAL DATA
Years ended December 31,: (Millions of dollars, except per share data) 19931 19922 1991 19902 1989 _________________________________________________________________________________________ Revenues $ 815.4 787.4 825.3 874.7 760.6 Operating profit $ 88.0 49.9 75.2 142.1 118.5 Net earnings (loss) $ 9.6 (6.8) 20.9 54.9 44.1 Primary and fully diluted earnings (loss) per share $ 0.33 (0.24) 0.74 1.94 1.50 Average shares (millions) 29.5 28.4 28.3 28.3 29.4 _________________________________________________________________________________________ Cash flows from operations $ 178.9 178.7 209.2 251.9 268.6 Working capital (deficit): End of year $ 15.6 (20.2) 24.2 27.2 (11.7) Current ratio 1.09 .88 1.15 1.17 .94 _________________________________________________________________________________________ Total assets $ 1,838.7 1,209.1 1,252.8 1,226.0 1,199.4 Long-term debt $ 734.5 343.0 347.3 346.1 366.9 Stockholders' equity $ 599.8 416.6 446.5 448.7 416.2 Cash dividends per share $ 1.00 1.00 1.00 1.00 1.00 _________________________________________________________________________________________ 1 Includes NERCO Oil & Gas, Inc. since October 1, 1993. In 1993, nonrecurring items resulted in a charge to net earnings of $1.3, which consisted of: Canadian oil and gas properties were sold for $42.8, which resulted in a gain of $23.5 ($13.2 after income taxes); refinery inventories were reduced to market value at year end resulting in a charge of $6.5 ($4.2 after income taxes); debt issue costs associated with a credit facility were written off resulting in a charge of $6.7 ($4.3 after income taxes); a $3 income tax charge to recognize the retroactive rate change enacted in the Budget Reconciliation Act of 1993; and a $3 after-tax charge to the Company's equity in the earnings of its affiliate due to CLAM's adoption of SFAS No. 109. 2 In 1992, restructuring and other nonrecurring charges/credits totaled $27.4. See Note 4 of "Notes to Consolidated Financial Statements." In 1990, nonrecurring charges/credits included a provision for certain litigation which was offset by credits resulting from the conclusion of the 1988 restructuring program at a smaller loss than originally estimated and a favorable settlement of a potential tax claim.
_________________________________________________________________________________________ MARKET PRICE AND DIVIDEND DATA
Quarter ended March 31 June 30 Sept. 30 Dec. 31 _________________________________________________________________________________________ 1993: Capital stock price: High $47 47 7/8 49 47 1/2 Low 31 40 1/2 40 7/8 37 7/8 Cash dividends per share 0.25 0.25 0.25 0.25 _________________________________________________________________________________________ 1992: Capital stock price: High $33 1/2 37 1/4 40 1/2 38 1/4 Low 25 28 1/2 33 3/4 32 1/2 Cash dividends per share 0.25 0.25 0.25 0.25 _________________________________________________________________________________________
_________________________________________________________________________________________ QUARTERLY DATA
Quarter ended (Millions, except per share data) March 31 June 30 Sept. 30 Dec. 31 _________________________________________________________________________________________ 1993*: Revenues $186.9 194.7 193.5 240.3 Costs and Expenses 181.9 184.7 190.9 233.3 _________________________________________________________________________________________ Earnings (loss) before income taxes 5.0 10.0 2.6 7.0 Income tax expense (benefit) 2.3 4.4 4.4 .8 _________________________________________________________________________________________ Earnings (loss) before extraordinary item and accounting changes 2.7 5.6 (1.8) 6.2 Loss on early retirement of debt - - - (3.3) Changes in accounting principles .2 - - - _________________________________________________________________________________________ Net earnings (loss) $ 2.9 5.6 (1.8) 2.9 _________________________________________________________________________________________ Primary and fully diluted earnings (loss) per share before extraordinary item and accounting changes 0.09 0.20 (0.06) 0.19 Loss on early retirement of debt - - - (0.10) Changes in accounting principles 0.01 - - - _________________________________________________________________________________________ Earnings (loss) per share $ 0.10 0.20 (0.06) 0.09 _________________________________________________________________________________________ Average shares 28.5 28.8 28.9 31.7 _________________________________________________________________________________________
Quarter ended (Millions, except per share data) March 31 June 30 Sept. 30 Dec. 31 _________________________________________________________________________________________ 1992**: Revenues $182.9 192.3 208.5 203.7 Costs and Expenses 221.9 186.1 196.1 185.4 _________________________________________________________________________________________ Earnings (loss) before income taxes (39.0) 6.2 12.4 18.3 Income tax expense (benefit) (13.1) 1.4 4.2 6.6 _________________________________________________________________________________________ Earnings (loss) before extraordinary item (25.9) 4.8 8.2 11.7 Loss on early retirement of debt - - (5.6) - _________________________________________________________________________________________ Net earnings (loss) $(25.9) 4.8 2.6 11.7 _________________________________________________________________________________________ Primary and fully diluted earnings (loss) per share before extraordinary item (0.91) 0.17 0.29 0.41 Loss on early retirement of debt - - (0.20) - _________________________________________________________________________________________ Primary and fully diluted earnings (loss) per share $(0.91) 0.17 0.09 0.41 _________________________________________________________________________________________ Average shares 28.3 28.3 28.4 28.4 _________________________________________________________________________________________ (continued) * Includes NERCO Oil & Gas, Inc. since October 1, 1993. In the first quarter of 1993, the Company recorded a $3 after-tax charge to its equity in the earnings of its affiliate due to CLAM's adoption of SFAS No. 109. In the third quarter of 1993, the Company recorded a $3 income tax charge to recognize the retroactive rate change enacted in the Budget Reconciliation Act of 1993. In the fourth quarter of 1993, nonrecurring items resulted in a net credit to earnings of $10.3 ($4.7 after income taxes), which consisted of: Canadian oil and gas properties were sold for $42.8, which resulted in a gain of $23.5 ($13.2 after income taxes); refinery inventories were reduced to market value at year end resulting in a charge of $6.5 ($4.2 after income taxes); and debt issue costs associated with a credit facility were written off resulting in a charge of $6.7 ($4.3 after income taxes). ** In the first quarter of 1992, the Company recorded a $60.4 charge (before income tax benefits of approximately $20.5) against earnings to provide for the restructuring of its oil and gas operations. This charge includes provisions for estimated losses on the disposition of selected domestic properties of $55.6 (both developed and undeveloped) and costs associated with staff retirements, reductions and related transition expenses of $4.8. In addition, the Company reduced its litigation accrual for the State of Louisiana gas royalty claim by $25 (before income taxes of $8.5). Also in the first quarter of 1992, the Company recorded a $5.5 charge (before income tax benefits of $1.9) against earnings to provide for the estimated uninsured losses associated with a gas well blowout. This charge was reduced by $2.5 in the fourth quarter. In the third quarter of 1992, the Company completed the sale of the selected properties for a purchase price of $48.1. The transaction resulted in a gain of approximately $8 (before income taxes of $2.7) which was applied to the previously recorded restructuring charges.
EXHIBIT 21 Exhibit 21 THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES Subsidiaries of the Registrant December 31, 1993
% 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 Canada, Ltd. 100 Canada 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 Holland, Ltd. 100 Canada 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 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, 1993
% Ownership Jurisdiction by Immediate of Parent Incorporation _______________________________________________________________________________________ LLOXY Holdings, Inc. 100 Maryland LLOXY Production Financing Company, Inc. 100 Delaware Molokai California Limited 100 California Kaluakoi Corporation 100 Hawaii White Pine Leasing, Inc. 100 Delaware Inexco Oil Company 100 Delaware Wilson Brothers Drilling Company 100 Delaware Evangeline Northwest Corporation 100 Oregon Evangeline Gas Corp. 45 Delaware * Unconsolidated affiliate accounted for under the equity method.
EXHIBIT 23 Exhibit 23 The Board of Directors The Louisiana Land and Exploration Company: We consent to incorporation by reference in Registration Statements No. 2-79097, No. 2-98948, No. 33-22108, No. 33-22338 and No. 33-37814 on Form S-8, No. 33-48339 and No. 33-50991 on Form S-3 and No. 33-6593 on Form S-4 of The Louisiana Land and Exploration Company of our reports dated February 9, 1994, relating to the consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993 which reports appear or are incorporated by reference in the December 31, 1993 annual report on Form 10-K of The Louisiana Land and Exploration Company. Our reports refer to the adoption of the methods of accounting for income taxes and postretirement benefits other than pensions prescribed by Statement of Financial Accounting Standards Nos. 109 and 106, respectively. We also consent to incorporation by reference in the previously referred to Registration Statements of our report dated January 28, 1994, relating to the consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1993 and 1992 and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1993 which report appears in the December 31, 1993 annual report on Form 10-K of The Louisiana Land and Exploration Company. Our report refers to the adoption of the method of accounting for income taxes prescribed by Statement of Financial Accounting Standard No. 109. /s/ KPMG Peat Marwick KPMG PEAT MARWICK New Orleans, Louisiana February 18, 1994 EXHIBIT 24 THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director and the principal executive officer of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director and the principal executive officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ H. Leighton Steward _____________________________ H. Leighton Steward THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Leland C. Adams _____________________________ Leland C. Adams THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director and the principal financial officer of The Louisiana Land and Exploration Company hereby appoints Frederick J. Plaeger, II and Jerry D. Carlisle his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director and the principal financial officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Richard A. Bachmann _____________________________ Richard A. Bachmann THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ John F. Greene _____________________________ John F. Greene THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Eamon M. Kelly _____________________________ Eamon M. Kelly THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Victor A. Rice _____________________________ Victor A. Rice THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Orin R. Smith _____________________________ Orin R. Smith THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Arthur R. Taylor _____________________________ Arthur R. Taylor THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ W. R. Timken, Jr. _____________________________ W. R. Timken, Jr. THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Carlisle A.H. Trost _____________________________ Carlisle A.H. Trost THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as a director of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann, Frederick J. Plaeger, II and Jerry D. Carlisle and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as a director of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ E. L. Williamson _____________________________ E. L. Williamson THE LOUISIANA LAND AND EXPLORATION COMPANY POWER OF ATTORNEY WHEREAS, The Louisiana Land and Exploration Company intends to file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K; NOW, THEREFORE, the undersigned in his capacity as the principal accounting officer of The Louisiana Land and Exploration Company hereby appoints Richard A. Bachmann and Frederick J. Plaeger, II and each of them severally, his true and lawful attorneys or attorney with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place, and stead, in his capacity as the principal accounting officer of The Louisiana Land and Exploration Company, said Annual Report on Form 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith, and to file or cause to be filed the same with the Securities and Exchange Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument this 18th day of February, 1994. /s/ Jerry D. Carlisle _____________________________ Jerry D. Carlisle [TYPE] COVER THE LOUISIANA LAND AND EXPLORATION COMPANY 909 Poydras Street New Orleans, LA 70112 February 22, 1994 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Annual Report on Form 10-K for the fiscal year ended December 31, 1993. Sincerely, THE LOUISIANA LAND AND EXPLORATION COMPANY s/Frederick J. Plaeger, II Frederick J. Plaeger, II General Counsel and Corporate Secretary -----END PRIVACY-ENHANCED MESSAGE-----