-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UfSkAKfJ6mJLUwFHk4SV4Cmdf8/v3BKdDAaXoS76TMTAJcR/tCHkreuJeG1KKp8M rJlcgMe5FhCLXIuYba6GNg== 0000890566-00-000262.txt : 20000310 0000890566-00-000262.hdr.sgml : 20000310 ACCESSION NUMBER: 0000890566-00-000262 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANTA FE SNYDER CORP CENTRAL INDEX KEY: 0000086772 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 362722169 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07667 FILM NUMBER: 564730 BUSINESS ADDRESS: STREET 1: 840 GESSNER STREET 2: SUITE 1400 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: 7135075000 MAIL ADDRESS: STREET 1: 840 GESSNER CITY: HOUSTON STATE: TX ZIP: 77024 FORMER COMPANY: FORMER CONFORMED NAME: SANTA FE ENERGY RESOURCES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SANTA FE NATURAL RESOURCES INC DATE OF NAME CHANGE: 19900111 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-7667 SANTA FE SNYDER CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2722169 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 840 GESSNER, SUITE 1400 HOUSTON, TEXAS 77024 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 507-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - -------------------------------------------------------------------------- COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 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. ____ Aggregate market value of the voting stock held by non-affiliates of the registrant as of March 1, 2000, was $1,355,700,000. Shares of common stock outstanding at March 1, 2000: 182,009,498 DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement Dated March 22, 2000 (Part III) TABLE OF CONTENTS PART I PAGE ---- Items 1. and 2. Business and Properties 1 General 1 Reserves 2 Exploration and Production Activities 2 Drilling Activities 8 Producing Wells 8 Domestic Acreage 9 Foreign Acreage 9 Santa Fe Energy Trust 10 Current Markets for Oil and Gas 10 Risk Factors 11 Other Business Matters 13 Item 3. Legal Proceedings 16 Item 4. Submission of Matters to a Vote of Security Holders 16 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 18 Item 6. Selected Financial Data 19 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Qualitative and Quantitative Disclosures About Market Risks 26 Item 8. Consolidated Financial Statements and Supplementary Data 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 28 PART III Item 10. Directors and Executive Officers of the Registrant 29 Item 11. Executive Compensation 29 Item 12. Security Ownership of Certain Beneficial Owners and Management 29 Item 13. Certain Relationships and Related Transactions 29 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 30 PART I CERTAIN DEFINITIONS As used herein, the following terms have specific meanings as set forth below: Bbl barrel MBbl thousand barrels MMBbl million barrels B/d barrels per day Mcf thousand cubic feet MMcf million cubic feet Bcf billion cubic feet Tcf trillion cubic feet MMBtu million British thermal units BOE barrel of oil equivalent, with gas volumes converted to oil barrels at a ratio of 6.0 Mcf of gas to 1.0 barrel of oil MBOE thousand barrels of oil equivalent MMBOE million barrels of oil equivalent MMcfe million cubic feet of gas equivalent, with oil volumes converted to Mcf at a ratio of 1.0 barrel of oil to 6.0 Mcf of gas CoFD cost per BOE of reserves added during a year calculated by using a fraction, of which the numerator is equal to the costs incurred by the Company for property acquisition, exploration and development and of which the denominator is equal to proved reserve additions from extensions, discoveries, improved recovery, acquisitions and revisions of previous estimates E&D Programs capital expenditures and exploration costs, excluding proved oil and gas property acquisitions and capitalized interest Gas natural gas Oil crude oil, condensate and natural gas liquids U.S. United States References herein to "Santa Fe Snyder", the "Company", "we", "us" and "our" mean Santa Fe Snyder Corporation. ITEMS 1 AND 2. BUSINESS AND PROPERTIES GENERAL Santa Fe Snyder is engaged in the exploration, development, acquisition and production of crude oil and natural gas in the U.S. and certain international areas. Our U.S. core areas are in the Gulf of Mexico, the Permian Basin and the Rocky Mountains and our international core areas are Southeast Asia and South America. We also have oil production and conduct some exploration operations, in West Africa. Effective May 5, 1999, Snyder Oil Corporation ("Snyder Oil") was merged with and into Santa Fe Energy Resources, Inc. ("Santa Fe Energy"), a Delaware corporation, pursuant to an Agreement and Plan of Merger dated January 13, 1999 (the "Merger"). In connection with the Merger, Santa Fe Energy changed its name to Santa Fe Snyder. The Merger was accounted for as a purchase, as described in Note 2 to the Consolidated Financial Statements. See Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations for a further discussion of the effects of the Merger on the operations of the Company. As discussed in Note 3 to the Consolidated Financial Statements, in July 1997 Santa Fe Energy completed the spin-off of Monterey Resources, Inc. ("Monterey"). At December 31, 1999 our worldwide proved oil and gas reserves totaled 386.3 MMBOE, of which approximately 67% was domestic and 33% was foreign. Year-end reserves were comprised of 210.8 MMBbls of oil (52% domestic) and 1,053.1 Bcf of gas (85% domestic). In 1999, excluding the Merger, we replaced 337% of our production at a CoFD of $4.93 per BOE (including the Merger, 589% at a 1 CoFD of $6.56 per BOE). In 1999, we participated in 118 development wells (74 domestic and 44 international) and 24 exploratory wells (19 domestic and 5 international), of which 113 development wells (71 domestic and 42 international) and 14 exploratory wells (13 domestic and 1 international) were successful. In 1999 E&D Program expenditures totaled $314 million and an additional $264 million was spent on acquisitions of proved oil and gas properties (excluding those acquired in the Merger). Expenditures on E&D Programs in 2000 are expected to be approximately $340 million and expenditures to acquire proved oil and gas properties are expected to be approximately $230 million. The actual amounts expended in 2000 and the results therefrom will be influenced by numerous factors, many of which are beyond our control, and may vary significantly from our plan. RESERVES The following tables set forth information regarding changes in the Company's estimates of net proved reserves from January 1, 1997 to December 31, 1999 and estimated net proved developed reserves at December 31 for each of the years 1996 through 1999.
Increases (Decreases) - ------------------------------------------------------------------------------------------------------------------------------------ NET PURCHASES REVISIONS (SALES) BALANCE AT OF OF SNYDER SPIN BALANCE BEGINNING PREVIOUS MINERALS OIL OFF OF AT END OF PERIOD ESTIMATES ADDITIONS IN PLACE MERGER MONTEREY PRODUCTION OF PERIOD - ------------------------------------------------------------------------------------------------------------------------------------ 1999 Oil (MMBbls) 168.6 9.1 13.8 19.0 17.7 -- (17.4) 210.8 Gas (Bcf) 278.1 15.8 269.2 171.7 424.0 -- (105.7) 1,053.1 Oil equivalents (MMBOE) 214.9 11.7 58.7 47.7 88.4 -- (35.1) 386.3 1998 Oil (MMBbls) 129.0 (1.0) 33.8 21.6 -- -- (14.8) 168.6 Gas (Bcf) 252.6 15.7 58.3 16.5 -- -- (65.0) 278.1 Oil equivalents (MMBOE) 171.1 1.6 43.6 24.3 -- -- (25.7) 214.9 1997 Oil (MMBbls) 299.5 11.2 35.5 10.3 -- (205.8) (21.7) 129.0 Gas (Bcf) 259.4 39.1 36.1 (6.0) -- (11.6) (64.4) 252.6 Oil equivalents (MMBOE) 342.7 17.7 41.5 9.3 -- (207.7) (32.4) 171.1
December 31, - --------------------------------------------------------------------------------- 1999 1998 1997 1996 - --------------------------------------------------------------------------------- PROVED DEVELOPED RESERVES (MMBOE) 259.4 148.4 141.8 275.7
Ryder Scott Company ("Ryder Scott"), a firm of independent petroleum engineers, prepared the above estimates of total proved reserves at December 31, 1996, 1997 and 1999. Ryder Scott also prepared the above estimates of proved reserves at December 31, 1998 with the exception of the reserves on the Jabung Block in Southeast Asia, which were prepared by the Company. EXPLORATION AND PRODUCTION ACTIVITIES UNITED STATES OPERATIONS The Company's U.S. operations are concentrated in the Gulf of Mexico, the Permian Basin and the Rocky Mountains. U.S. production averaged 24.9 MBbls of oil and 263.5 MMcf of gas per day in 1999. U.S. properties accounted for 72% of total production in 1999 and 67% of proved reserves at December 31, 1999. In 1999 we participated in 74 gross (47.4 net) domestic development wells, of which 71 gross (45.1 net) wells were successful, and 19 gross (9.2 net) domestic exploratory wells in 1999, of which 13 gross 2 (5.4 net) wells were successful. In 1999 expenditures on domestic E&D Programs totaled $205 million and we expended an additional $263 million to acquire proved oil and gas properties (excluding those acquired in the Merger). We expect expenditures on domestic E&D Programs in 2000 to be approximately $200 million and, we expect to spend $180 million to acquire proved oil and gas properties. GULF OF MEXICO. Our Gulf Coast area properties produced an average of 4.9 MBbls of oil and 138.3 MMcf of gas per day in 1999. These properties accounted for 41% of our domestic production in 1999 and 22% of our domestic proved reserves at December 31, 1999. The majority of our Gulf Coast production comes from the shallow water (less than 400 feet of water) areas of the Gulf of Mexico. At the beginning of 1999 we had no production from deepwater areas; however, by year-end those areas accounted for more than 10% of our Gulf Coast production. This increase reflects the implementation of our strategy to reinvest in the deepwater areas. In July 1999 we increased our deepwater asset base by acquiring a portion of Shell's working interest in the Angus (Green Canyon Blocks 111, 112, 113, 156 and 157 -- 15% working interest), El Toro (Green Canyon Blocks 68 and 69 -- 49% working interest), Manatee (Green Canyon Block 15 -- 15% working interest) and Macaroni (Garden Banks Blocks 602 and 646 -- 15% working interest) fields. The Angus field is fully developed and on production and we expect the Macaroni field to commence production in the first quarter of 2000. Development of the El Toro and Manatee fields is expected to commence in 2000 and 2002, respectively. In January 2000 we increased our working interest in the Angus and Manatee fields to 48% with our purchase of Marathon's working interest in the fields. In 1999 we participated in eight exploratory wells in the offshore Gulf of Mexico, four in the shallower water Shelf and four in deepwater areas. Six of the eight wells were discoveries, one well was dry, and the eighth well was abandoned due to mechanical reasons prior to reaching the targeted objective. In the Shelf program, three wells were successes and one well was dry. The successful wells included the South Timbalier 186 #C-2 well that was completed for a gross rate of 9.5 MMcf of gas and 472 barrels of oil per day and the West Cameron 536 #A-10 well that is currently producing at a rate of 15 MMcf of gas per day. We have a 100% working interest in both wells. In the deepwater program, three wells were discoveries and one well was abandoned due to mechanical problems. In February 1999, we drilled the Firebird prospect in Mississippi Canyon Block 661 (25% working interest) and found 85 feet of net gas pay in two zones at approximately 10,200 feet. In December 1999 a second Firebird test found 47 net feet of gas pay at approximately 11,600 feet. Production casing has been set and both wells will be completed as a subsea development. In December 1999, we drilled the Gretchen Prospect (100% working interest) in Green Canyon Block 114. The Gretchen well, drilled in 2,700 feet of water, found approximately 40 feet of net gas pay at approximately 15,200 feet subsea elevation. Subsea tieback options are being evaluated for producing this well. At this time we do not anticipate production to commence prior to 2002. We are evaluating additional exploratory opportunities on the Block. An exploration well on the El Toro Deep Prospect, in Green Canyon Block 69, was abandoned due to mechanical problems. The re-entry was abandoned at 11,450 feet measured depth due to poor hole conditions. A new well to test this prospect from a different location is planned for 2000. We have a 49% working interest in El Toro Deep Prospect. PERMIAN BASIN. Properties in the Permian Basin of west Texas and southeastern New Mexico produced an average of 17.8 MBbls of oil and 71.7 MMcf of gas per day in 1999. These properties accounted for 43% of our domestic production in 1999 and 37% of our domestic proved reserves at December 31, 1999. Long-lived properties in mature fields where we are engaged in development activities through the use of secondary waterfloods and tertiary CO2 floods accounted for approximately 65% of our Permian Basin oil production in 1999. Waterfloods involve the injection of water into reservoirs to drive hydrocarbons into producing wellbores. Following the waterflood phase, certain fields may continue to produce in 3 response to tertiary projects such as the injection of CO2, which improves the efficiency of the waterflood. Development activities continued in Lea and Eddy Counties of southeastern New Mexico with the drilling and completing of a total of 26 gross (12.9 net) development wells in 1999. Net production from this area averaged 4.5 MBbls of oil and 56.4 MMcf of gas per day in 1999. The most significant producing area in southeast New Mexico is the Cisco-Canyon project at Indian Basin. Production from this project, located in Eddy County, averaged 2.9 MBbls of oil and 33.8 MMcf of gas per day in 1999. We operate a major portion of the Cisco-Canyon project area with an average working interest of 97% in the operated properties. Development drilling will continue on the project in 2000. The Lost Peak field, discovered in 1995 in Howard County, Texas, was actively developed during 1999. We are the operator and hold an average 75% working interest in this field which covers approximately 12,000 surface acres. Gas production is from the Cisco formation at a depth of approximately 7,700 feet. In 1999, we drilled 44 development wells and we have scheduled a similar number to be drilled in 2000. ROCKY MOUNTAINS. The Rocky Mountain area properties, which consist almost entirely of properties acquired in the Merger and 1999 proved property acquisitions, produced an average of 2.2 MBbls of oil and 53.5 MMcf of gas per day in 1999. These properties accounted for 16% of domestic production in 1999 and 41% of domestic proved reserves at December 31, 1999. The Rocky Mountain producing properties are primarily low-permeability, long-lived gas properties that offer significant infill drilling opportunities. At year-end 1999 our properties in the Washakie Basin in southwest Wyoming produced at a net rate of 63 MMcf of gas and 730 Bbls of oil per day. We currently operate 229 wells in the Washakie Basin, holding a 77% average working interest and 64% average net revenue interest. In the Mesaverde and Lewis formations, we have identified a long-term inventory of drillable locations at depths ranging from 8,000 to 11,500 feet. During 1999, 20 development wells were drilled in the Washakie Basin (including wells drilled prior to the Merger), 19 of which were productive, and 32 development wells are planned for 2000. At year-end 1999 our properties in the Wind River Basin in south-central Wyoming produced at a net rate of 26 MMcf of gas and 600 Bbls of oil per day. We currently operate 110 wells in the Wind River Basin, holding a 91% average working interest and a 79% average net revenue interest. During 1999, we substantially increased our ownership in the Beaver Creek Unit through acquisitions and we are currently focusing our development efforts in the Wind River Basin. During 1999, we completed 11 new wells and recompletions in the Wind River Basin (including wells drilled prior to the Merger) and plan a similar number in 2000. In the Deep Green River Basin we purchased an undeveloped lease in the Jonah field from the federal government and drilled two wells in late 1999. Drilled to the Lance formation at approximately 10,000 (feet), the two wells were producing at a net rate of 12 MMcf of gas per day at year-end 1999. We plan to drill two more development wells to the Lance formation during 2000. In addition, we hold the deep rights below the currently producing horizons at the Jonah field on 24,000 gross (10,000 net) acres. INTERNATIONAL OPERATIONS In 1999 our production from Indonesia, Argentina and Gabon averaged 22.8 MBbls of oil and 26.2 MMcf of gas per day, a 14% increase from 1998 production levels. International properties accounted for 28% of our total production in 1999 and 33% of our proved reserves at December 31, 1999. In 1999 we participated in 44 gross (10.6 net) international development wells of which 42 gross (10.0 net) wells were successful. In 1999 our expenditures on international E&D Programs totaled $109 million. We expect to spend approximately $140 million on international E&D Programs in 2000 and approximately $50 million on the acquisition of proved oil and gas properties. Our principal development projects in 2000 include the Jabung Block in Indonesia, the Carauna project in Brazil, the El Mangrullo field in Argentina and the continuing appraisal and development of Block 15/34 in China. 4 Our international exploration program is concentrated in Southeast Asia, South America and, to a lesser extent, in West Africa. At year-end, we held interests in 30 blocks in ten countries. During 1999, we participated in 5 gross (2.1 net) international exploratory wells, of which 1 gross (.5 net) was successful. Our international exploration expenditures totaled $32 million in 1999. We expect these expenditures to increase to approximately $40 million in 2000. SOUTHEAST ASIA INDONESIA. In 1999 our Indonesian production averaged 14.6 MBbls of oil per day from four producing concessions. We sell our Indonesian oil production for U.S. dollars to markets outside Indonesia, except for Jabung, which averaged 3.1 MBbls of oil per day in 1999 and is currently sold to the Indonesian state oil agency ("Pertamina") for U.S. dollars. We hold a 30% interest and operate the Jabung Block on the island of Sumatra under the terms of a Production Sharing Contract ("PSC") with Pertamina. Fields discovered on the block include the North Geragai field, the Makmur field and the three-field Betara complex consisting of the Northeast Betara, North Betara and Gemah fields. We have discovered both oil and gas in all these fields. Oil production commenced from the North Geragai and Makmur fields in August 1997 and January 1998, respectively, and net production from the two fields at year-end 1999 was approximately 3.1 MBbls per day. Additional development wells are planned in the North Geragai field in 2000. A second plan of development that includes both the Betara complex as well as expansion of the Geragai field was approved by Pertamina in January 2000. The plan initially focuses on the development of liquids through the processing of gas, with initial production scheduled to commence in late 2000. Development of the gas reserves on the Jabung Block is dependent upon entering into sales contracts for the gas. We have entered into letter agreements for gas sales and transportation and are in final negotiations concerning a long-term gas sales contract. Assuming successful conclusion of the negotiations in early 2000, gas sales should commence in late 2002 from the Jabung Block. In 1999 we initiated a 185 square mile 3-D seismic program across the Betara and Gemah fields that will be instrumental in identifying locations for development wells. The Tuban Block is on the island of Java where a total of 12 successful wells have been drilled through year-end 1999. Production from the block commenced in December 1998 and our net production averaged 8.6 MBbls of oil per day in 1999. Production rates from the field were reduced at year-end due to water influx on some wells. Updated modeling indicates the need for additional wells to insure maximum recovery from the field. Pending governmental approval of a revised plan of development, five additional development wells are planned for 2000-2001. We hold a 25% equity interest in the Block, which is jointly operated with Pertamina (with a 50% interest) under the terms of a Joint Operating Body contract ("JOB"). We operate two concessions in Irian Jaya, Indonesia's easternmost province, which together produced a net average of 2.9 MBbls of oil per day in 1999. The Salawati Basin concession, in which we hold a 33% participation interest, is operated under a PSC with Pertamina. The other concession covers the Salawati Island Block in which we hold a 17% participation interest and operate the block jointly with Pertamina (which holds a 50% interest) under the terms of a JOB. Under the contract terms at Salawati Basin and Tuban, the participants recover all expenditures related to the operation (the "cost recovery amount") by allocating to the participants a portion of the crude oil production ("cost oil") priced at the Indonesian government official crude oil price ("ICP") and/or proceeds from the sale of gas, sufficient to offset the cost recovery amount. ICP is determined by the Indonesian government based on the average market prices of a basket of world crude oil prices. All unrecovered costs in any calendar year are carried forward to future years. The balance of production after deducting the cost recovery amount (the "equity production") is allocated to Pertamina and the participants. Oil equity production is allocated 66% to Pertamina at Salawati Basin and 71% to Pertamina at Tuban. After the first five years of production, 25% of the oil equity production allocated to the participants must be sold into the Indonesian domestic market for $0.20 per barrel. 5 Under the contract terms at Salawati Island and Jabung, the joint venture participants are allowed to recover the cost recovery amount, after an initial 20% (12% to Pertamina at Salawati Island and 14% to Pertamina at Jabung) has been deducted, by allocating to the joint venture participants cost oil priced at the ICP and/or proceeds from the sale of gas, sufficient to cover the cost recovery amount. All unrecovered costs in any calendar year are carried forward to future years. The equity production is allocated to Pertamina and the joint venture participants. Oil equity production is allocated 61% to Pertamina at Salawati Island and 71% to Pertamina at Jabung. Gas equity production is allocated 33% to Pertamina at Jabung. After the first five years of production, 25% of the oil equity production allocated to the joint venture participants must be sold into the Indonesian domestic market for 10% to 15% of ICP. CHINA. Our first operated well in offshore China, the Ursa Prospect Panyu 4-2-1 on Block 15/34 in the Pearl River Mouth Basin of the South China Sea, was completed as a discovery in April 1998. Based on a 1,600 square mile 3-D survey that was acquired across Block 15/34 in 1998, the Panyu 4-2-2 appraisal well confirmed the discovery well in August 1999. In November 1999 a second discovery well, the Bootes Prospect Panyu 5-1-1, was completed approximately 11 miles east of the Panyu 4-2-1 well. Two intervals were tested at a combined rate of approximately 3,800 barrels of oil per day. We expect to drill an appraisal well to this discovery well in 2000. In 1999 we also participated in the drilling of three exploratory wells on Block 15/34 that were not commercial. We hold a 50% working interest in Block 15/34 and are the operator. We are preparing a plan of development ("ODP") for the Ursa field and will submit it to the Chinese National Offshore Oil Company ("CNOOC") in 2000. Following the drilling of the appraisal well to the Bootes discovery, an ODP for the Bootes field will be prepared and submitted to CNOOC. We currently expect to develop the fields utilizing wellhead platforms with drilling capabilities and producing to a floating production, storage and offloading vessel. Upon approval of an ODP, CNOOC may elect to take a participatory interest in the exploitation area of up to 51%. We acquired four new blocks in the Pearl River Mouth Basin in 1999. Two blocks, 16/02 and 16/05, are new PSC exploration concessions with CNOOC. We obtained our interests in Blocks 15/35 and 15/26 from another company. We hold a 100% working interest in each of these contract areas and plan to commence exploration drilling on these Blocks in 2000. MALAYSIA. Under a PSC covering offshore Block PM-308, we have work program commitments, with respect to which we are required to pay 100% of the costs, that include seismic acquisition and reprocessing and the drilling of three wells. We fulfilled the seismic work commitment by acquiring new 2-D seismic and reprocessing existing seismic data. The data has helped us to identify multiple exploration prospects and better define the structure at the undeveloped Rhu Field. A drilling program consisting of an exploratory well and a Rhu Field delineation well is planned in 2000. We hold an 80% working interest in the Block and are the operator. THAILAND. We have signed a concession agreement on Block B7/38 that covers nearly 2.3 million acres off the East Coast of Thailand. We are planning to acquire seismic data and to drill at least one exploratory well during the three-year primary term of the agreement. We hold a 100% working interest in the block and are the operator. SOUTH AMERICA ARGENTINA. In 1999 our net production in Argentina averaged 5.2 MBbls of oil and 26.0 MMcf of gas per day. Oil production primarily comes from our 22% working interest in the El Tordillo field in the San Jorge Basin. Gas production comes from our 19.9% working interest in the Sierra Chata field in the Neuquen Basin. Development activities in the El Tordillo field during 1999 included the drilling of 36 gross (7.9 net) development wells in addition to performing well workovers and waterflood expansion projects. In 2000 well workovers and some waterflood and facility work will continue at El Tordillo. 6 With the use of a 3-D seismic survey, four wells were drilled in the Sierra Chata field in 1999. All four were successful, testing at a combined gross rate of 18 MMcf of gas per day. We have acquired an additional 116 square miles of 3-D seismic and expect to drill six additional wells in 2000 to further extend the field and maintain deliverability. Production from the Sierra Chata field is sold under a gas contract with certain "take-or-pay" and "delivery-or-pay" obligations with a Buenos Aires gas distribution company and to the Chilean market via the GasAndes Pipeline. We sell gas produced in excess of contract requirements on the spot market. In January 2000 we were the successful bidder to develop and operate the El Mangrullo gas field, located 25 miles south of the Sierra Chata field. Our development plans for the year 2000 include the drilling of two appraisal wells. BRAZIL. In December 1998 we entered into a contract with the Brazilian oil company Petroleo Brasileiro S.A. ("Petrobras") to develop the Carauna Block in the Potiguar Basin offshore Brazil. We operate the Block and hold a 51.4% working interest. Petrobras has drilled ten productive wells that have discovered six separate field areas on this Block. In 2000 we plan to re-enter three of these wells, drill four new wells and install a system which will produce to a floating storage and offloading vessel. We plan to commence first production from the Block during the second quarter of 2000, and by the end of that year net production is expected to be about 2 MBbls of oil per day. If the field performs as expected, we expect to set permanent production facilities and drill additional development wells in 2001. In 1999 we participated in acquiring a 3-D seismic program on Block BES-3 in the offshore Espirito Santo Basin, where we have a 19% non-operating interest. On Block BPOT-2 in the offshore Potiguar Basin, where we are the operator and hold a 51% working interest, a 143 mile 2-D seismic program was initiated to aid in the selection of exploration drilling locations for both blocks. WEST AFRICA We have oil production on the Kowe Block, offshore Gabon, and hold exploratory concessions in Gabon, the Congo, Cote d'Ivoire and Ghana. We are in the process of evaluating our West African exploratory blocks and expect to reduce our interests in these blocks. GABON. On the Kowe Block, offshore Gabon, oil production commenced from the Tchatamba Marine field in January 1998 and from the Tchatamba South field in August 1999. Kowe Block gross oil production averaged 27.5 MBbls per day (4.4 MBbls net per day) in December 1999. Production from the Tchatamba West field is expected to commence in 2000. Under the terms of the Kowe Block PSC the Gabonese government may elect to take a 25% participatory interest in any exploitation area. If the Gabonese government elects to participate, it may designate the company that will hold such interest and we and our partners receive reimbursement for certain capital expenditures. We hold an 18.75% participatory interest in the exploitation license area covering the Tchatamba Marine and Tchatamba South fields (after taking into account the Gabonese government's election to participate). The Gabonese government is expected to elect to take a participatory interest in the exploitation license area covering the Tchatamba West field when the field is placed on production. We have a 25% participatory interest in the Block's exploration area. We have signed an exploration contract on the M-97 Agali Block located offshore Gabon. The Block covers nearly 1.1 million acres in water depths that range from 600 to 9,000 feet. We plan to acquire new data and to drill at least one exploratory well during the three-year primary term of the agreement. We hold 100% of the working interest in the block and are the operator. CONGO. The Company farmed-in Marine Block IX, which contains an untested prospect covering in excess of 6,500 acres. We plan to drill the prospect in 2001. We hold an 85% interest in this block and are the operator. COTE D'IVOIRE. The Company holds 100% working interests and operates two blocks, CI-24 and CI-202, offshore Cote d'Ivoire, which cover approximately 320,000 acres. In 2000 we plan to drill a well on Block CI-202. 7 GHANA. The Keta Block encompasses an offshore area of approximately 2.2 million acres in water depths that range from near-shore to 9,000 feet. In 2000 we plan to drill a well in approximately 1,300 feet of water. We hold 100% of the working interest in the block and are the operator. DRILLING ACTIVITIES The table below sets forth, for the periods indicated, the number of wells drilled in which we had an economic interest. As of December 31, 1999, wells in the process of drilling or completing included 6 gross (3.7 net) domestic exploratory wells, 33 gross (24.0 net) domestic development wells, 1 gross (0.3 net) foreign exploratory well and 7 gross (1.9 net) foreign development wells.
Year Ended December 31, - ------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------ GROSS NET GROSS NET GROSS NET - ------------------------------------------------------------------------------------------ Development Wells Domestic Gas 40 24.4 25 9.0 22 9.8 Oil 31 20.7 21 16.0 218 184.2 Dry 3 2.3 1 .1 8 4.2 Foreign Gas 6 1.4 15 3.8 2 .4 Oil 36 8.6 44 15.1 41 9.6 Dry 2 .6 2 .6 2 .6 ----- ----- ----- ----- ----- ----- 118 58.0 108 44.6 293 208.8 ----- ----- ----- ----- ----- ----- Exploratory Wells Domestic Gas 9 4.1 8 3.4 9 2.9 Oil 4 1.3 2 .6 7 3.4 Dry 6 3.8 17 6.1 21 7.5 Foreign Gas -- -- 2 .7 -- -- Oil 1 .5 7 2.2 1 .3 Dry 4 1.6 18 8.2 5 1.8 ----- ----- ----- ----- ----- ----- 24 11.3 54 21.2 43 15.9 ----- ----- ----- ----- ----- ----- 142 69.3 162 65.8 336 224.7 ===== ===== ===== ===== ===== =====
PRODUCING WELLS The following table sets forth our ownership in producing wells at December 31, 1999.
Southeast U.S. (a) Asia (b) South America West Africa Total - ---------------------------------------------------------------------------------------------------------------------- GROSS NET GROSS NET GROSS NET GROSS NET GROSS NET - ---------------------------------------------------------------------------------------------------------------------- Oil 9,398 1,253.2 412 129.4 453 132.0 8 1.8 10,271 1,516.4 Gas 1,486 743.7 16 5.3 28 5.6 -- -- 1,530 754.6 ------ ------ ----- ----- ----- ----- ----- --- ------ ------- 10,884 1,996.9 428 134.7 481 137.6 8 1.8 11,801 2,271.0 ====== ====== ===== ===== ===== ===== ===== === ====== =======
- ------------ (a) Includes 74 gross wells with multiple completions. (b) Includes 4 gross wells with multiple completions. 8 DOMESTIC ACREAGE The following table summarizes our developed and undeveloped fee and leasehold acreage holdings in the U.S. at December 31, 1999. Acreage in which ownership interest is limited to royalty, overriding royalty and other similar interests is excluded.
Undeveloped Developed - ----------------------------------------------------------------------------------- GROSS NET GROSS NET - ----------------------------------------------------------------------------------- (in acres) Alabama-offshore 23,040 7,440 8,210 6,921 Alabama-onshore -- -- 823 112 Arkansas 136,931 82,804 822 186 California -- -- 40 40 Colorado 1,233 1,089 5,932 5,248 Kansas 34 34 3,293 737 Louisiana-offshore 355,913 199,010 221,694 87,055 Louisiana-onshore 442,473 308,845 32,824 18,467 Michigan 35,980 18,364 -- -- Mississippi 279 83 2,639 440 Montana 12,400 3,023 635 32 New Mexico 149,291 94,647 69,587 36,403 North Dakota 7,391 6,278 3,964 1,149 Oklahoma 5,170 5,052 20,198 7,771 South Dakota 223 223 -- -- Texas-offshore 128,532 82,145 33,732 12,326 Texas-onshore 125,672 101,277 209,244 147,612 Utah 324 324 2,608 1,373 Wyoming 444,040 306,604 183,441 134,783 ---------- ---------- --------- --------- 1,868,926 1,217,242 799,686 460,655 ========== ========== ========= ========= Total offshore 507,485 288,595 263,636 106,302 ========== ========== ========= =========
FOREIGN ACREAGE The following table summarizes our foreign acreage holdings at December 31, 1999.
Undeveloped Developed - --------------------------------------------------------------------------------- GROSS NET GROSS NET - --------------------------------------------------------------------------------- (thousands of acres) Southeast Asia China 3,861 3,202 -- -- Indonesia 5,989 2,192 18 4 Malaysia 3,494 2,795 -- -- Thailand 2,294 2,294 -- -- South America Argentina 1,186 330 201 46 Brazil 570 176 47 24 West Africa Congo 207 155 -- -- Cote d'Ivoire 315 312 -- -- Gabon 1,052 1,025 13 3 Ghana 2,222 2,222 -- -- --------- --------- --------- --------- 21,190 14,703 279 77 ========= ========= ========= =========
9 SANTA FE ENERGY TRUST The Santa Fe Energy Trust (the "Trust") was formed in 1992 to hold 6,300,000 Depository Units ("Depository Units"), each consisting of beneficial ownership of one unit of undivided interest in the Trust and a $20 face amount beneficial ownership interest in a $1,000 face amount zero coupon United States Treasury obligation maturing on or about February 15, 2008. The Trust will be liquidated on February 15, 2008. The assets of the Trust consist of certain oil and gas properties conveyed by the Company. The properties conveyed to the Trust consisted of two term royalty interests in two production units in the Wasson field in West Texas and a net profits royalty interest in certain royalty and working interests in a diversified portfolio of properties located in twelve states. At December 31, 1999, 3.6 MMBOE of our estimated proved reserves were subject to such net profits interest. The reserve estimates included herein reflect the conveyance of the Wasson term royalties to the Trust. For any calendar quarter ending on or prior to December 31, 2002, the Trust will receive support payments to the extent that such payments are required to provide distributions of $0.39 per Depository Unit per quarter or $2.46 million in the aggregate. Such support payments come from our remaining royalty interest in one of the production units in the Wasson field described above, and are non-recourse to the Company. The aggregate amount of the support payments (net of any amounts recouped) is limited to $19.4 million on a revolving basis. If such additional payments are made, certain proceeds otherwise payable to the Trust in subsequent quarters may be reduced to recoup the amount of such payments. Through the end of 1999, the Trust had received support payments totalling $4.2 million and we had recouped $3.9 million of such payments. In the first quarter of 2000 we recouped the remaining $0.3 million of support payments. Depending on various factors, such as sales volumes and prices and the level of operating costs and capital expenditures incurred, proceeds payable to the Trust with respect to operations in subsequent quarters may not be sufficient to make the required quarterly distributions. In such instances we would be required to make support payments. CURRENT MARKETS FOR OIL AND GAS Substantially all of the Company's oil and gas production is sold for U.S. dollars at market responsive prices. The revenues generated from our operations are highly dependent upon the prices of, and demand for, oil and gas. The price we receive depends upon numerous factors, the majority of which are beyond our control, including economic conditions in the U.S. and elsewhere, the world political situation as it affects OPEC and other producing countries, the actions of OPEC and governmental regulation. The fluctuation in world oil prices continues to reflect market uncertainty regarding the balance of world demand for and supply of oil and gas. The fluctuation of natural gas prices reflects the seasonal swings of storage inventory, weather conditions, and increasing utilization of natural gas for electric generation as they affect overall demand. Decreases in the prices of oil and gas have had, and could have in the future, a material adverse effect on our development and exploration programs, proved reserves, revenues, profitability and cash flow. See Item 7A -- Qualitative and Quantative Disclosures About Market Risks. In Argentina, we market oil for U.S. dollars under market responsive terms. Production from the El Tordillo field is generally exported from Argentina. Production from the Tupungato field is sold under a long-term contract to a local refinery under market responsive terms. Gas from the Sierra Chata field is sold under a gas contract with certain "take-or-pay" and "delivery-or-pay" obligations with a Buenos Aires gas distribution company and to the Chilean Market via the GasAndes Pipeline for prices ranging between $1.15 and $1.35 per MMBtu. Gas production in excess of the contract requirements is sold on the local spot market. We sell our Indonesian oil production for U.S. dollars to markets outside of Indonesia except for Jabung which we currently sell to the Indonesian state oil agency for U.S. dollars. Gabonese oil production is sold for U.S. dollars into the international markets. 10 We do not believe that the loss of any of our customers would have a material adverse effect on our operations. Periodically we hedge a portion of our oil and gas production to manage our exposure to volatility in prices of oil and natural gas. See Item 7A -- Qualitative and Quantitive Disclosures About Market Risk and Note 14 to the Consolidated Financial Statements. RISK FACTORS AND CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report contains or incorporates by reference certain statements (other than statements of historical fact) that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used herein, the words "budget," "budgeted," "anticipates," "expects," "believes," "seeks," "estimates," "intends" or "projects" and similar expressions are intended to identify forward-looking statements. Where any forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that while we believe these assumptions or bases to be reasonable and to be made in good faith, assumed facts or bases almost always vary from actual results and the difference between assumed facts or bases and actual results could be material, depending on the circumstances. It is important to note that our actual results could differ materially from those projected by such forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable and such forward-looking statements are based upon the best data available at the time this report is filed with the Securities and Exchange Commission, we cannot assure you that such expectations will prove correct. Factors that could cause our results to differ materially from the results discussed in such forward-looking statements include, but are not limited to, the following: production variances from expectations, volatility of oil and gas prices, hedging results, the need to develop and replace reserves, the substantial capital expenditures required to fund operations, exploration risks, environmental risks, uncertainties about estimates of reserves, competition, litigation, government regulation, political risks, and our ability to implement our business strategy. All such forward-looking statements in this document are expressly qualified in their entirety by the cautionary statements in this paragraph. With the foregoing in mind, you should consider the following important factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by us or on our behalf. OIL AND GAS PRICES ARE VOLATILE, WHICH CAN ADVERSELY AFFECT CASH FLOW AVAILABLE FOR REINVESTMENT AND OUR HEDGING ACTIVITIES EXPOSE US TO CERTAIN RISKS Prices for oil and gas have historically been volatile and during the latter part of 1998 and the early part of 1999 prices were significantly lower than those we are currently receiving. As a result, in those periods we reported substantial losses. Decreases in oil and gas prices from current levels will adversely affect our revenues, results of operations, cash flows and proved reserves. If the industry experiences significant prolonged future price decreases they could be materially adverse to our operations and could result in our inability to fund planned capital expenditures. Periodically, we enter into hedging arrangements relating to a portion of our oil and gas production to achieve a more predictable cash flow, as well as to reduce our exposure to adverse price fluctuations of oil and gas. Hedging instruments used are fixed price swaps, collars and options. While the use of these types of hedging instruments limits our downside risk to adverse price movements, they are subject to a number of risks, including instances in which the benefit to revenues is limited when commodity prices increase. For a further discussion concerning our risks related to oil and gas prices and our hedging programs, see Item 7A -- Qualitative and Quantitative Disclosures About Market Risks. 11 ESTIMATES OF OUR OIL AND GAS RESERVES MAY CHANGE, WE MAY NOT BE ABLE TO REPLACE OUR RESERVES The calculations of our proved oil and gas reserves included in this document are only estimates. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment and the assumptions used regarding quantities of recoverable oil and gas reserves and prices for oil and gas. Actual prices, production, development expenditures, operating expenses and quantities of recoverable oil and gas reserves will vary from those assumed in our estimates, and such variances may be significant. Any significant variance from the assumptions used could result in the actual quantity of our reserves and future net cash flow being materially different from the estimates in our reserve reports. In addition, results of drilling, testing and production and changes in oil and gas prices after the date of the estimate may result in substantial upward or downward revisions. Without successful exploration, development or acquisition activities, our reserves and revenues will decline over time. Exploration, the continuing development of our reserves and acquisition activities will require significant expenditures. If our cash flow from operations is not sufficient for this purpose, we may not be able to obtain the funds from other sources necessary to continue such exploration, development and acquisition activities. OUR FOREIGN ACTIVITIES ARE SUBJECT TO CERTAIN POLITICAL AND ECONOMIC UNCERTAINTIES We conduct a significant part of our operations in foreign countries and these operations expose us to political, economic and other risks including: o the risk of war, revolution, civil unrest, border disputes, expropriation, forced renegotiation or modification of existing contracts, import, export and transportation regulations and tariffs; o taxation policies, including royalty and tax increases and retroactive tax claims; o exchange controls, currency fluctuations and other uncertainties arising out of foreign government sovereignty over our international operations; o laws and policies of the United States affecting foreign trade, taxation and investment; and o the possibility of having to be subject to the exclusive jurisdiction of foreign courts in connection with legal disputes and the possible inability to subject foreign persons to the jurisdiction of courts in the U.S. WE MAY HAVE WRITEDOWNS OF OIL AND GAS PROPERTIES' CARRYING VALUE Accounting rules require that we review periodically the carrying value of our oil and gas properties for possible impairment. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write down the carrying value of our oil and gas properties. A writedown constitutes a charge to earnings, which does not impact our cash flow from operating activities. Based primarily on our long-term outlook for future commodities prices, we recorded impairment charges of $196.4 million in the second quarter of 1999 and $87.8 million in the fourth quarter of 1998. For a further discussion of our accounting policies with respect to oil and gas properties, see Note 1 to the Consolidated Financial Statements. WE COULD INCUR SUBSTANTIAL ENVIRONMENTAL LIABILITIES We may incur significant costs and liabilities in order to comply with existing and future environmental laws and regulations. It is also possible that other developments, such as increasingly strict environmental laws, regulations and enforcement policies thereunder, and claims for damages to property, employees, other persons and the environment resulting from current or discontinued operations, could result in substantial costs and liabilities in the future. For additional information concerning our environmental matters, see Other Business Matters -- Environmental Regulation. 12 OUR ACTIVITIES INVOLVE OPERATING HAZARDS AND UNINSURED RISKS While we maintain insurance against certain of the risks normally associated with our operations, including, but not limited to explosions, pollution and fires, the occurrence of a significant event against which we are not fully insured could have a significant negative effect on our business. WE ARE SUBJECT TO FINANCING AND INTEREST RATE EXPOSURE RISKS Our business and operating results can be harmed by factors such as the availability or cost of capital, changes in interest rates, changes in the tax rates due to new tax laws, market perceptions of the oil and gas industry or the Company, or any reduction in our credit ratings. OTHER BUSINESS MATTERS WE FACE STIFF COMPETITION We face competition in all aspects of our business, including, but not limited to, acquiring reserves, leases, licenses and concessions; obtaining goods, services and labor needed to conduct operations and manage the Company; and marketing oil and gas. Our competitors include multinational energy companies, government-owned oil and gas companies, other independent producers and individual producers and operators. Many of our competitors have greater financial and other resources than the Company. CRUDE OIL AND NATURAL GAS ARE SUBJECT TO EXTENSIVE REGULATION The petroleum industry is subject to various types of regulation throughout the world, including regulation in the United States by state and federal agencies. Domestic legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both state and federal, are authorized by statute to issue and have issued rules and regulations binding on the oil and gas industry and its individual members, compliance with which is often difficult and costly and which may carry substantial penalties for non- compliance. Although the regulatory burden on the oil and gas industry increases the cost of doing business and, consequently, affects profitability, generally these burdens do not appear to affect the Company any differently or to any greater or lesser extent than other companies in the industry with similar types, quantities and locations of production. While we are a party to several regulatory proceedings before governmental agencies arising in the ordinary course of business, we do not believe that the outcome of such proceedings will have a material adverse affect on our operations or financial condition. Set forth below is a general description of certain state and federal regulations that affect our operations. STATE REGULATION. State statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. Most states in which we operate also have statutes and regulations governing the conservation of oil and gas and the prevention of waste, including the unitization or pooling of oil and gas properties and rates of production from oil and gas wells. Rates of production may be regulated through the establishment of maximum daily production allowables on a market demand or conservation basis or both. In addition to regulatory oil and gas production, numerous states have implemented statutory and regulatory initiatives requiring local distribution companies ("LDCs") to develop (to various degrees) unbundled transportation and related service options and rates. Typically, these programs are designed to allow the LDCs' commercial, industrial, and, with increasing frequency, residential customers to have access to transportation service on the LDC, coupled with an ability to select third-party city-gate gas suppliers. Similarly, several states are also addressing the unbundling of the retail electric markets, ranging from the consideration of initial unbundling proposals to permitting, in varying degrees, the implementation of programs allowing direct retail access. These developments have already led a number of industry participants to redirect significant marketing resources to these emerging energy markets. 13 FEDERAL REGULATION. A portion of our oil and gas leases are granted by the federal government and administered by the Bureau of Land Management ("BLM") and the Minerals Management Service ("MMS"), both of which are federal agencies. Such leases are issued through competitive bidding, contain relatively standardized terms and require compliance with detailed BLM and MMS regulations and orders (which are subject to change by the BLM and the MMS). For offshore operations, lessees must obtain MMS approval for exploration plans and development and production plans prior to the commencement of such operations. In addition to permits required from other agencies (such as the Coast Guard, Army Corps of Engineers and Environmental Protection Agency), lessees must obtain a permit from the BLM or the MMS prior to the commencement of drilling. The interstate transportation and sale for resale of gas are regulated by the Federal Energy Regulatory Commission ("FERC"). Commencing in 1985 and continuing with the issuance of Order No. 636 in 1992, the FERC promulgated a series of orders and regulations that significantly fostered competition in the business of transporting and marketing gas. These orders and regulations induced, and ultimately required, interstate pipeline companies to provide nondiscriminatory transportation services to producers, marketers, and other shippers, regardless of whether shippers were affiliated with an interstate pipeline company. The FERC's initiatives have led to the development of a competitive, unregulated, open access market for gas purchases and sales that permits all purchasers of gas to buy gas directly from third-party sellers other than the pipelines. On February 9, 2000, the FERC issued Order No. 637, which permits, and in some cases, requires, interstate gas pipelines to make certain changes to the nature of interstate transportation services. We do not expect to experience any adverse material effect as a result of these changes, although the full impact of Order No. 637 on our performance cannot be determined at this time. The changes permitted or required by Order No. 637 attempt to continue the development of competitive gas markets under the open access regime created by Order No. 636. These changes include, INTER ALIA: (1) elimination, for a two-year period, of the rate cap that applies to sales of released firm transportation capacity by pipelines' firm shippers; (2) the adoption by pipelines of seasonal or term-differentiated rates; (3) revisions to pipeline scheduling procedures that are designed to put capacity released by firm shippers on a more equal footing with capacity sales by pipelines; and (4) additional reporting requirements that seek to increase the ability of the FERC and interested parties to monitor the actions of pipelines and firm capacity holders and detect attempts market power or to engage in unduly discriminatory conduct. FERC's regulation of electric transmission facilities may also have a significant impact on the natural gas industry. In 1996, FERC's issuance of Order Nos. 888 and 889 resulted in the unbundling of the wholesale electric industry and the initiation of open-access electric transmission. Moreover, in its recently issued Order No. 2000, FERC again expressed its continued commitment to the development of the wholesale transmission market, this time through the creation of Regional Transmission Organizations. These developments represent an evolution in Open-Access transmission and are intended to facilitate a more robust wholesale electric market. Today, as utilities search for new sources of competitively-priced generation, numerous new generation facilities are either planned or already being constructed. Many of these new facilities are gas-fired, leading to a recent trend in the construction of new pipelines and the expansion of existing ones. ENVIRONMENTAL REGULATION Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect our operations and costs. In particular, our oil and gas exploration, development, production and secondary and tertiary recovery operations, activities in connection with storage and transportation of liquid hydrocarbons and use of facilities for treating, processing, recovering or otherwise handling hydrocarbons and wastes therefrom are subject to stringent environmental regulation by governmental authorities. Such regulation has increased the cost of planning, designing, drilling, installing, operating and abandoning oil and gas wells and other facilities. We have expended significant resources, both financial and managerial, to comply with environmental regulations and permitting requirements and anticipate that we will continue 14 to do so in the future in order to comply with increasingly stricter industry and regulatory safety standards such as those described below. Although we believe our operations and facilities are in general compliance with applicable environmental regulations, risks of substantial costs and liabilities are inherent in oil and gas operations and we cannot assure you that we will not incur significant costs and liabilities in the future. It is also possible that other developments, such as increasingly strict environmental laws, regulations and enforcement policies thereunder, and claims for damages to property, employees, other persons and the environment resulting from our operations, could result in substantial costs and liabilities in the future. Although the resulting costs cannot be accurately estimated at this time, these requirements and risks typically apply to companies with types, quantities and locations of production similar to ours and to the oil and gas industry in general. OFFSHORE PRODUCTION. Our offshore oil and gas operations are subject to regulations of the United States Department of the Interior, the Department of Transportation, the United States Environmental Protection Agency ("EPA") and certain state agencies. In particular, the Federal Water Pollution Control Act of 1972, as amended ("FWPCA"), imposes strict controls on the discharge of oil and its derivatives into navigable waters. The FWPCA provides for civil and criminal penalties for any discharges of petroleum in reportable quantities and, along with the Oil Pollution Act of 1990 and similar state laws, imposes substantial liability for the costs of oil removal, remediation and damages. SUPERFUND. The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a "hazardous substance" into the environment. These persons include the owner or operator of a site and companies that disposed or arranged for the disposal of the hazardous substance found at a site. CERCLA also authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. In the course of our operations, we have generated and will generate wastes that may fall within CERCLA's definition of "hazardous substances". We may be responsible under CERCLA for all or part of the costs to clean up sites at which such wastes have been disposed. Certain properties owned or used by us or our predecessors have been investigated under state and Federal Superfund statutes, and we have been and could be named a potentially responsible party ("PRP") for the cleanup of some of these sites. Monterey agreed to indemnify and hold harmless the Company from and against any costs incurred in the future relating to environmental liabilities in respect to any property or interest located in California and formerly owned or operated by the former Western Division or its predecessors. AIR EMISSIONS. Our operations are subject to local, state and federal regulations for the control of emissions from sources of air pollution. Legal and regulatory requirements in this area are increasing, and there can be no assurance that significant costs and liabilities will not be incurred in the future as a result of new regulatory developments. In particular, the 1990 Clean Air Act Amendments impose additional requirements that may affect operations, including permitting of existing sources and control of hazardous air pollutants. We have been and may in the future be subject to administrative enforcement actions for failure to comply strictly with air regulations or permits. These administrative actions are generally resolved by payment of a monetary penalty and correction of any identified deficiencies. Alternatively, regulatory agencies may require us to forego construction or operation of certain air emission sources. OTHER. We are subject to the requirements of the federal Occupational Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and similar state statutes require us to organize information about hazardous materials used or produced in our operations. Certain of this information must be provided to employees, state and local governmental authorities and local citizens. 15 Although generally less stringent, our foreign operations are subject to similar foreign laws respecting environmental and worker safety matters. INSURANCE COVERAGE MAINTAINED WITH RESPECT TO OPERATIONS We maintain insurance policies covering our operations in amounts and areas of coverage normal for a company of our size in the oil and gas exploration and production industry. These include, but are not limited to, workers' compensation, employers' liability, automotive liability and general liability. In addition, umbrella liability and operator's extra expense policies are maintained. All such insurance is subject to normal deductible levels. We do not insure against all risks associated with our business either because insurance is not available or because we have elected not to insure due to prohibitive premium costs. EMPLOYEES At December 31, 1999, we had 1,408 total employees, including 865 foreign nationals working in Indonesia and Argentina. We believe that our relations with our employees are satisfactory. ITEM 3. LEGAL PROCEEDINGS The Company, its subsidiaries and other related companies are named defendants in several lawsuits and named parties in certain governmental proceedings arising in the ordinary course of business. While the outcome of such lawsuits or other proceedings cannot be predicted with certainty, in the opinion of management, the amounts, if any, which may be awarded in connection with any of these claims and actions could be significant to the results of operations and cash flows of any period, but would not be material to our consolidated financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of shareholders in the fourth quarter of 1999. EXECUTIVE OFFICERS OF SANTA FE SNYDER Listed below are the names, ages (as of February 1, 2000) and positions of all executive officers of Santa Fe Snyder (excluding executive officers who are also directors of Santa Fe Snyder, who are described in our proxy statement) and their business experience during the past five years. Each executive officer holds office until his or her successor is elected or appointed or until his or her earlier death, resignation or removal. HUGH L. BOYT, 54 President -- International since May 5, 1999. From April 1998 until May 1999, Mr. Boyt served as President and Chief Operating Officer. From March 1990 until April 1998, Mr. Boyt served as Senior Vice President -- Production. WILLIAM G. HARGETT, 50 President -- North America since May 5, 1999. From April 1997 until May 1999, Mr. Hargett served as President and Chief Operating Officer of Snyder Oil. From September 1994 until April 1997, Mr. Hargett served as President of Greenhill Petroleum Corporation. JANET F. CLARK, 45 Executive Vice President -- Corporate Development/Administration since May 5, 1999. From March 1998 until May 1999, Ms. Clark served as Senior Vice President, Chief Financial Officer and Treasurer. From January 1997 until March 1998, Ms. Clark served as Vice President and Chief Financial Officer. Ms. Clark was with Southcoast Capital Corporation from January 1994 until she joined Santa Fe. While with Southcoast Capital, Ms. Clark served as Vice President from January 1994 to June 1996 and as Director, Corporate Finance, from June 1996 to December 1996. MARK A. JACKSON, 45 Executive Vice President and Chief Financial Officer since May 5, 1999. From August 1997 until May 1999 Mr. Jackson served as Senior Vice President and Chief Financial Officer of Snyder Oil. Prior to joining Snyder Oil Mr. Jackson was with Apache Corporation from 1988 until August 1997 and held various positions including Vice President, 16 Finance from May 1994 until March 1996 and Vice President and Chief Financial Officer from March 1996 until August 1997. TIMOTHY S. PARKER, 47 Executive Vice President -- Exploration since May 5, 1999. From January 1999 until May 1999, Mr. Parker served as Senior Vice President -- Exploration and Land. From April 1998 until January 1999, Mr. Parker served as Vice President -- Exploration and from September 1995 until April 1998 he served as Division Exploration Manager, International. Mr. Parker served as Corporate Exploration Manager from May 1994 until September 1995 and from 1988 until May 1994 he served as Division Manager, Exploration. DUANE C. RADTKE, 51 Executive Vice President -- Production since May 5, 1999. From April 1998 until May 1999, Mr. Radke served as Senior Vice President -- Production. From July 1993 to April 1998, Mr. Radtke served as President -- Santa Fe Energy Resources, Inc. Southeast Asia Companies. DAVID L. HICKS, 50 Vice President -- Law and General Counsel since March 1991. 17 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Santa Fe Snyder common stock is listed for trading on the New York Stock Exchange and trades under the symbol SFS. The following table sets forth information as to the closing sales price per share of our common stock as quoted on the Consolidated Tape System of the New York Stock Exchange for each calendar quarter in 1999 and 1998.
Price Range - ----------------------------------------------------------- HIGH LOW - ----------------------------------------------------------- (in dollars) 1999 First Quarter 7.6250 4.8750 Second Quarter 9.3125 6.5625 Third Quarter 10.5625 8.1250 Fourth Quarter 9.3125 6.8125 1998 First Quarter 11.687 8.812 Second Quarter 11.562 9.375 Third Quarter 11.000 6.844 Fourth Quarter 9.187 5.375
Except for the distribution of shares of Monterey common stock in July 1997, we have not paid dividends on common stock since the third quarter of 1993. The determination of the amount of future cash dividends, if any, to be declared and paid is in the sole discretion of our Board of Directors and will depend on our financial condition, earnings and funds from operations, the level of capital and exploration expenditures, dividend restrictions in financing agreements, future business prospects and other matters as our Board of Directors deems relevant. For a discussion of certain restrictions on our ability to pay dividends, see Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources and Note 9 to the Consolidated Financial Statements. At December 31, 1999 we had approximately 28,600 shareholders of record. 18 ITEM 6. SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA (IN MILLIONS OF DOLLARS, EXCEPT AS NOTED)
Year Ended December 31, - -------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Revenues(a) 510.3 290.7 514.1 582.3 447.8 Impairment of oil and gas properties 196.4 87.8 -- 57.4 30.2 Merger related costs 16.8 -- -- -- -- Income (loss) from operations (128.8) (154.3) 110.2 88.5 52.3 Income (loss) before extraordinary items (120.7) (98.7) 54.7 42.4 26.6 Extraordinary items -- debt extinguishment costs (4.2) -- -- (6.0) -- Net income (loss) (124.9) (98.7) 54.7 36.4 26.6 Earnings (loss) attributable to common shares (124.9) (98.7) 42.7 (10.8) 11.8 Basic and diluted per share data (in dollars) Before extraordinary item (.79) (.96) .43 (.05) .13 Extraordinary item -- debt extinguishment costs (.03) -- -- (.07) -- Per common share (.82) (.96) .43 (.12) .13 Weighted average shares outstanding (in millions) 152.9 102.6 98.6 90.6 90.2 BALANCE SHEET DATA (AT PERIOD END) Properties and equipment, net(a) 1,657.1 718.3 649.7 909.8 889.5 Total assets(a) 1,862.8 859.0 788.9 1,129.1 1,073.8 Long-term debt 629.4 330.6 121.7 278.5 344.4 Convertible preferred stock -- -- -- 19.7 80.0 Shareholders' equity 741.2 348.4 454.7 526.8 437.7
- ------------ (a) The increase in 1999 in revenues, properties and equipment, net and total assets primarily reflect the effect of the Merger (see Note 2 to the Consolidated Financial Statements). The decrease in such amounts in 1997 primarily reflect the spin off of Monterey (see Note 3 to the Consolidated Financial Statements). 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our U.S. core areas are the Gulf of Mexico, the Permian Basin and the Rocky Mountains. Our international core areas are Southeast Asia and South America. We also have oil production, and conduct some exploration operations, in West Africa. On May 5, 1999 Snyder Oil was merged with and into Santa Fe Energy and the Company's name was changed to Santa Fe Snyder Corporation. The producing properties that we acquired in the Merger are entirely located in the U.S., primarily in the Gulf of Mexico and the Rocky Mountains. The Merger is described in Note 2 to the Consolidated Financial Statements. The consolidated financial statements for the year ended December 31, 1999 include eight months of results attributable to the properties acquired in the Merger. As described in Note 3 to the Consolidated Financial Statements, we completed the spin off of Monterey on July 25, 1997. The consolidated financial statements for the year ended December 31, 1997 include seven months of Monterey's results. RESULTS OF OPERATIONS The following table reflects the components of our oil and gas revenues:
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- OIL SALES VOLUMES (MBBLS/DAY) Domestic 24.9 21.2 50.3 Argentina 5.2 5.4 4.9 Indonesia 14.6 12.3 4.3 Gabon 3.0 1.8 -- --------- --------- --------- 47.7 40.7 59.5 ========= ========= ========= SALES PRICES ($/BBL) Unhedged Domestic 16.49 11.60 16.32 Argentina 16.89 10.73 16.93 Indonesia 17.42 11.91 17.58 Gabon 19.13 11.59 -- Total 16.99 11.58 16.46 Hedged 16.84 11.74 16.56 REVENUES ($ MILLIONS) Sales Domestic 150.2 89.4 299.9 Argentina 31.8 21.3 30.5 Indonesia 92.9 53.4 27.4 Gabon 21.2 7.7 -- --------- --------- --------- 296.1 171.8 357.8 Hedging (2.5) 2.5 2.2 Net Profits Payments (1.4) (3.0) (4.3) --------- --------- --------- 292.2 171.3 355.7 ========= ========= =========
(TABLE CONTINUED ON FOLLOWING PAGE) 20
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- GAS SALES VOLUMES (MMCF/DAY) Domestic 263.5 152.1 154.8 Argentina 26.0 25.7 21.4 Indonesia .2 .2 .3 --------- --------- --------- 289.7 178.0 176.5 ========= ========= ========= SALES PRICES ($/MCF) Unhedged Domestic 2.23 2.01 2.37 Argentina 1.24 1.30 1.30 Indonesia 1.16 1.01 1.04 Total 2.14 1.91 2.23 Hedged 2.11 1.91 2.23 REVENUES($ MILLIONS) Sales Domestic 214.0 111.7 133.7 Argentina 11.8 12.2 10.1 Indonesia .1 .1 .1 --------- --------- --------- 225.9 124.0 143.9 Hedging (3.0) -- -- Net Profits Payments (5.6) (4.9) (5.8) --------- --------- --------- 217.3 119.1 138.1 ========= ========= =========
The following table sets forth our revenues and costs and expenses (excluding impairment of oil and gas properties and merger related costs) on a BOE basis:
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- (In Dollars Per BOE, except as noted) Production -- MMBOE 35.1 25.7 32.4 ========= ========= ========= Revenues 14.56 11.33 15.83 --------- --------- --------- Production costs 3.77 4.38 4.89 Production and other taxes .76 .63 .67 Cost of crude oil purchased -- -- .68 General and administrative .75 .77 .87 Financing costs, net(a) 1.04 .34(b) .45 --------- --------- --------- 6.32 6.12 7.56 --------- --------- --------- Operating margin 8.24 5.21 8.27 Exploration 1.55 2.77 1.51 Depletion, depreciation and amortization 5.30 5.30 3.93 Loss (gain) on disposition of assets .02 .06 (.11) --------- --------- --------- Pre-tax margin 1.37 (2.92) 2.94 ========= ========= =========
- ------------ a) Reflects interest expense less amounts capitalized and interest income. b) Includes $0.18 per BOE ($4.7 million) of interest income related to federal income tax audit refunds. 21 YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998 Total revenues for 1999 of $510.3 million were 76% higher than in 1998, primarily reflecting higher realized prices for oil and gas and increased production. Our increased production was primarily due to the contribution of the properties acquired in the Merger and other producing property acquisitions (collectively the "Acquired Properties"). Our average sales price for oil increased 43%, from $11.74 per barrel in 1998 to $16.84 per barrel in 1999, and the average sales price for gas increased 10%, from $1.91 per Mcf in 1998 to $2.11 per Mcf in 1999. Oil production increased 17%, from 40.7 MBbls per day in 1998 to 47.7 MBbls per day in 1999, primarily reflecting production from the Acquired Properties of 4.3 MBbls per day as well as increases of 2.3 MBbls per day in Indonesia and 1.2 MBbls per day in Gabon. Gas production increased 63%, from 178.0 MMcf per day in 1998 to 289.7 MMcf per day in 1999, primarily reflecting production from the Acquired Properties of 101.4 MMcf per day. Realized oil prices for 1999 were reduced $0.15 per barrel by hedging losses compared to a $0.16 increase in 1998 realized prices due to hedging gains. Realized gas sales prices in 1999 were reduced by a $0.03 per Mcf hedging loss. The Company did not hedge gas sales in 1998. Costs and expenses increased from $445.0 million in 1998 to $639.1 million in 1999. Production costs, depletion, depreciation and amortization ("DD&A"), general and administrative and production and other taxes increased primarily reflecting costs attributable to the Merger and the Acquired Properties. Production costs decreased from $4.38 per BOE in 1998 to $3.77 per BOE in 1999, principally reflecting the effect of costs per BOE attributable to the Acquired Properties. Exploration costs decreased $16.9 million in 1999, primarily reflecting a $17.5 million decrease in dry hole costs. Merger related expenses in 1999 include $1.9 million of severance and relocation costs and $9.6 million of costs related to the acceleration of certain compensation plans and other benefits. In 1999 we evaluated the recovery of our long-lived assets and determined that the estimated future undiscounted cash flows were below the carrying value of certain oil and gas properties in the U.S., resulting in an impairment of $196.4 million. The estimated fair value was based on anticipated future cash flows discounted at a rate commensurate with the risk involved with the properties and our long-term outlook for future commodity prices. The impairments recognized in 1998 related to certain producing properties and unproven leaseholds in the Gulf of Mexico. For an explanation of such impairment, see the following discussion that compares the results of operations for the years 1998 and 1997. Interest income decreased $5.1 million, due to the inclusion in 1998 of interest income from federal income tax audits. Current year interest expense increased $21.6 million reflecting the assumption of $219.0 million in debt in the Merger and increased borrowings under our credit facility. Income taxes for 1998 included a $6.0 million benefit related to the favorable settlement of an audit and a $2.4 million benefit related to an income tax refund. The extraordinary item recognized in 1999 relates to the write-off of certain debt issue costs and prepayment penalties incurred in connection with the retirement of certain debt, net of $2.3 million in related income tax benefit. See -- Liquidity and Capital Resources. YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997 Total revenues for 1998 of $290.7 million were 43% lower than 1997, due to lower prices for oil and gas which were down 30% and 14%, respectively and the contribution of Monterey for seven months of 1997. Monterey contributed $180.8 million in oil and gas revenues in 1997. Our oil production for 1998 decreased 31% to 40.7 MBbls per day from 59.5 MBbls per day in 1997. The production decrease was due to Monterey's contribution of 29.2 MBbls per day in 1997, partially offset by an increase of 10.4 MBbls per day which was attributable to new production from the Mudi, N. Geragai and Makmur fields in Indonesia and the Tchatamba field in Gabon, the acquisition of an additional working interest in the Mudi field and a full year of production from the Tupungato field in Argentina. Gas production increased to 178.0 MMcf per day in 1998 compared with 176.5 MMcf per day for the same period in 1997. Gas production from new wells in Southeast New Mexico, the Gulf of Mexico and Argentina more than offset the loss of production from natural production declines, property sales and weather-related disruptions in the Gulf of Mexico. Oil prices in 1998 averaged $11.74 per barrel, including a $0.16 per barrel hedging 22 benefit, compared with $16.56 per barrel, including a $0.10 per barrel hedging benefit in 1997. Gas prices in 1998 averaged $1.91 per Mcf, compared with an average of $2.23 per Mcf in 1997. Production costs for the year ended December 31, 1998 decreased to $112.5 million from $158.9 million in 1997 principally due to Monterey's contribution of $71.3 million for the first seven months of 1997 partially offset by increased oil and gas production, as noted above. Production costs decreased to $4.38 per BOE from $4.89 per BOE in 1997 primarily due to Monterey's production for the first seven months of 1997. Exploration expense in 1998 increased to $71.1 million from $49.1 million in 1997, primarily due to dry hole costs in Cote d'Ivoire, China and Ecuador and seismic programs in China and Gabon. DD&A for 1998 increased to $136.1 million from $127.8 million for the same period of 1997 primarily due to increased production, but was partially offset by Monterey's contribution of $22.3 million for the first seven months of 1997. DD&A per BOE increased to $5.30 from $3.93 in 1997 due to new production from higher cost properties in the Gulf of Mexico and Monterey's contribution in 1997 at $2.07 per BOE. Impairments of $87.8 million were recorded in 1998 primarily on producing oil and gas properties and unproven leasehold in the Gulf of Mexico. The impairments of oil and gas properties were primarily the result of lower oil and gas prices. The oil and gas impairment tests were based on estimates of future cash flows using an initial WTI spot oil price and an initial New York Mercantile Exchange ("NYMEX") gas price based on quoted forward market prices which were moderately escalated and included no forward sales. Future cash flows at December 31, 1998 were based on our estimate of proved reserves and, in the case of two fields where waterflood projects will be implemented, risk-adjusted probable reserves. Probable reserves were reduced by risk factors for the inherently higher risk associated with the ultimate recovery of these reserves. If the cash flows from probable reserves had not been included in the impairment test, the amount of the impairment would have increased by $17.0 million for 1998. The probable reserves associated with the two waterflood projects require approval from state authorities and interest owners and will involve the expenditure of approximately $8 million in the year 2000 and $7 million in the following two years. We intend to expend this capital and have the financial resources to do so. We charge accumulated amortization with the remaining basis of individually insignificant unproved leasehold deemed to have no future value. The impairments of unproved leasehold in the amount of $18.4 million recorded during 1998 were associated with substantially all leases on the Gulf of Mexico shelf and certain individually significant leases in the flex trend of the Gulf of Mexico. Based primarily on unsuccessful drilling results to date, a thorough technical review of flex trend leases and the current commodity price environment, we decided not to commit additional capital to further explore on these leases. Interest income for 1998 included $4.7 million related to refunds on federal income tax audits. Interest expense decreased by $1.8 million in 1998 primarily due to Monterey's contribution of $11.7 million for the first seven months of 1997 and was partially offset by an increase in borrowings in 1998. Income taxes for 1998 included a $6.0 million benefit related to the favorable settlement of an audit and a $2.4 million benefit related to an anticipated income tax refund. The preferred dividend requirement decreased $3.6 million in 1998 due to the purchase and conversion of all of our outstanding preferred stock, which included the Convertible Preferred Stock, 7% Series (the "7% Preferred") and the $.732 Series A Convertible Preferred (the "DECS"). In November 1996 we purchased 3.8 million of the outstanding shares of our 7% Preferred for $24.50 per share. In the second quarter of 1997, we converted the remaining 1.2 million outstanding shares of 7% Preferred for 2.3 million shares of common stock. The conversion of the 7% Preferred resulted in a noncash reduction in earnings to common shares (which is reflected as a convertible preferred premium in the Statement of Operations) of $8.4 million in 1997. Also, in the second quarter of 1997, we converted all 10.7 million outstanding shares of our DECS into 9.1 million shares of common stock which had no effect on earnings to common shares. LIQUIDITY AND CAPITAL RESOURCES CAPITAL EXPENDITURES. In 1999, our primary needs for cash were for exploration, development and acquisition of oil and gas properties. We spent $521.1 million for capital expenditures in 1999, including 23 $263.7 million related to the acquisition of producing oil and gas properties. In 2000 we expect to spend approximately $340 million on E&D Programs and approximately $230 million on the acquisition of producing oil and gas properties. Because the actual amounts expended in the future and the results therefrom will be influenced by numerous factors, including many beyond our control, no assurances can be given as to the amounts that will be expended. The Board of Directors has authorized the purchase of up to $50 million of our common stock to meet the requirements of outstanding stock options and to satisfy the stock requirements of employee benefit plans. From December 1997 through year-end 1998, we purchased 1.3 million common shares for $12.0 million and in 1999 1.6 million shares were purchased for $11.6 million. In early 2000 we purchased an additional 1.2 million common shares for $8.8 million. CAPITAL RESOURCES. Our principal capital resources in 1999 consisted of cash flow from operating activities of $296.4 million, including $99.3 million relating to a crude oil forward sale contract, $55.8 million in borrowings under the Credit Facility, $108.0 (net of underwriting discounts) from an equity offering of common stock, and $23.4 million of proceeds from the issuance of the Senior Notes in excess of the amount used to retire our 11% Senior Subordinated Debentures. See Note 9 to the Consolidated Financial Statements. At December 31, 1999, there were $629.4 million in borrowings outstanding, all of which were classified as long-term debt on the balance sheet since we have the ability and intend to refinance on a long-term basis. At December 31, 1999 one letter of credit for $20.2 million was outstanding under the Credit Facility. Concurrent with the closing of the Merger we entered into a $500.0 million credit facility (the "Credit Facility") which was amended in November 1999 to increase the amount available to $600.0 million. The Credit Facility consists of a $450.0 million five-year tranche and a renewable $150.0 million 364-day tranche. The Credit Facility bears interest, at our option, at LIBOR or prime rates plus applicable margins dependent upon our credit rating and certain financial ratios. Borrowings under the Credit Facility are unsecured. At December 31, 1999, $320.0 million in borrowings were outstanding under the Credit Facility. The weighted average interest rate with respect to borrowings under the Credit Facility during 1999 was 6.3%. In connection with the Merger, Santa Fe Snyder assumed Snyder Oil's $175.0 million of 8.75% Senior Subordinated Notes (the "Subordinated Notes") due June 15, 2007. The Subordinated Notes are redeemable on or after June 15, 2002, initially at 104.375% of principal and at prices declining to 100% of principal on or after June 15, 2005. The Subordinated Notes are general unsecured obligations. Also in connection with the Merger, we assumed $44.0 million of long-term debt outstanding under the terms of Snyder Oil's revolving credit facility, which was repaid with funds borrowed under the Credit Facility. In June 1999 the Company filed a shelf registration statement with the Securities and Exchange Commission under which, for a period of two years, we may sell different types of securities in one or more offerings up to a total amount of $500 million. Utilizing the shelf registration statement, we may offer and sell; (i) unsecured debt securities consisting of senior notes and debentures and subordinated notes and debentures and/or other unsecured evidences of indebtedness in one or more series; (ii) shares of preferred stock, in one or more series, which may be convertible or exchangeable for common stock or debt securities; and (iii) shares of common stock. During 1999 we issued $125 million of senior notes and sold 12.6 million shares of common stock in a public offering for $114.6 million under the shelf registration. In June 1999 we issued $125 million of 8.05% Senior Notes due 2004 (the "Senior Notes") to replace our $100.0 million of 11% Senior Subordinated Debentures. The Senior Notes were issued for 98.758% of face value and we received total proceeds of $121.6 million after deducting related costs and expenses of $1.9 million. In connection with the Senior Notes offering, we executed two forward treasury lock agreements (the "Treasury Locks") to mitigate interest rate risk during the issuance of the Senior Notes. Upon the issuance of the Senior Notes, the Treasury Locks were terminated, resulting in proceeds totaling $3.1 million, which will be recognized as a component of interest expense over the life of the Senior Notes. 24 The Credit Facility and the indentures for the Subordinated Notes and the Senior Notes include covenants that restrict our ability to take certain actions, including the ability to incur additional indebtedness and to pay dividends or repurchase capital stock. Under the most restrictive of these covenants, at December 31, 1999 we could incur $616 million of additional indebtedness, of which $280 million could be borrowed under the Credit Facility, and could pay dividends and/or repurchase common stock of up to $83 million. In addition to the Credit Facility, we have short-term uncommitted lines of credit which are used to meet short-term cash needs. At December 31, 1999 we had two lines of credit and in February 2000 a third line of credit was added. Under two of the lines of credit we may borrow up to $20.0 million and $10.0 million, respectively, and under the other line of credit the amount available (up to $25.0 million) varies with the amount outstanding under the Credit Facility. Interest rates on borrowings under these lines of credit are typically lower than rates paid under the Credit Facility when compared to the prime rate, which would be required for short-term (less than 30 days) borrowings. As of December 31, 1999, there was $10.8 million in borrowings outstanding under short-term facilities. In connection with the retirement of certain debt in 1999 we recorded a $4.2 million extraordinary loss, net of $2.3 million of taxes. The extraordinary loss represents the write-off of certain debt issue costs and prepayment penalties pertaining to the retirement of the Debentures, net of related tax benefits. In August 1999, we entered into an oil forward sales contract, under the terms of which we will deliver a total of 6.2 million barrels of oil to the purchaser, at specified monthly volumes, during the period from October 1999 through August 2002. In consideration we received a prepayment of $99.3 million, after deducting arrangement and other related costs. The prepayment is recognized in earnings when the oil is delivered. The balance of the prepayment related to undelivered oil is reflected on the consolidated balance sheet under the caption Deferred Revenues. Also in August 1999, we completed a $114.6 million equity offering of 12.65 million shares of Santa Fe Snyder common stock receiving $108.0 million after deducting the underwriting discount. The proceeds from these transactions were used to fund the previously discussed acquisition of Gulf of Mexico deepwater properties. As a result of the Merger, we acquired interests in two foreign energy companies which are listed on the London Stock Exchange. In November 1999 we sold our interest in Cairn Energy plc for $24.7 million. Our investment in SOCO International plc ("SOCO") is classified as an available-for-sale security and is included in Other Assets in the consolidated balance sheet at December 31, 1999 (see Note 7 to the Consolidated Financial Statements). In January 2000 we increased our working interest in two recently acquired offshore Gulf of Mexico fields by purchasing Marathon Oil Company's working interest for $160.0 million. To finance a portion of this acquisition, we entered into an oil forward sales contract. Under the terms of the contract, we will deliver a total of 4.2 million barrels of oil to the purchaser, at specified monthly volumes, during the period from February 2000 through August 2002. In consideration, we received a prepaid amount of $74.6 million, after deducting arrangement and other related costs. The balance of the prepayment related to undelivered oil will be shown on the consolidated balance sheet under the caption Deferred Revenues. The remainder of the purchase price was paid utilizing the Credit Facility. At February 29, 2000 we had $455.0 million outstanding under the Credit Facility and $21.5 million outstanding under our short-term lines of credit. At that date letters of credit outstanding totaled $27.3 million. The increase in outstanding debt from year-end 1999 primarily reflects the purchase of working interests from Marathon. Historically we have funded our operations and exploration and development capital spending programs with cash flow from operations and borrowings under bank credit facilities and funded acquisitions with cash flow from operations, bank debt, public debt, equity offerings and forward sales of production. We believe we will be able to fund our anticipated capital requirements for 2000 from the same or similar sources. 25 ENVIRONMENTAL MATTERS. Almost all phases of our oil and gas operations are subject to stringent environmental regulation by governmental authorities. Such regulation has increased the costs of planning, designing, drilling, installing, operating and abandoning oil and gas wells and other facilities. We have expended significant financial and managerial resources to comply with such regulations and believe our operations and facilities are in general compliance with applicable environmental regulations, however, risks of substantial costs and liabilities are inherent in oil and gas operations. It is possible that other developments, such as increasingly strict environmental laws, regulations and enforcement policies or claims for damages to property, employees, other persons and the environment resulting from our operations, could result in significant costs and liabilities in the future. As we have done in the past, we intend to fund the cost of environmental compliance from operating cash flows. See Part I, Items 1. and 2. Business and Properties, Other Business Matters -- Environmental Regulation and Note 14 to the Consolidated Financial Statements. DIVIDENDS. The determination of the amount of future cash dividends, if any, to be declared and paid on our common stock is at the sole discretion of our Board of Directors and is dependent on financial condition, earnings and available funds from operations, level of capital and exploration expenditures, dividend restrictions as set forth in financing agreements, future business prospects and other matters that our Board deems relevant. YEAR 2000. Many computer systems were built using software that processes transactions using two digits to represent the year. This type of software generally required modifications to function properly with dates after December 31, 1999 (or, to become "Y2K compliant"). To date, we have not encountered any significant problems, have not incurred any unexpected costs and do not expect any Y2K problems to arise in the future. We estimate the total cost related to our Y2K compliance effort to be approximately $1.7 million, of which $0.5 million was capitalized, which was funded by cash from operations or borrowings under the Credit Facility. ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS We are exposed to market risk, which includes adverse changes in commodity prices and interest rates as discussed below. COMMODITY PRICE RISK We produce and sell oil and gas. As a result, our financial results can be materially affected as these commodity prices fluctuate widely in response to changing market factors. Oil prices are subject to significant changes in response to fluctuations in the domestic and world supply and demand and other market conditions as well as the world political situation as it affects OPEC and other producing countries. In 1999 our actual average oil sales price (unhedged) received ranged from a low of $10.85 per barrel in the first quarter to a high of $21.70 per barrel in the fourth quarter. Our average oil sales price (unhedged) received in January 2000 was $23.34 per barrel. The price of gas fluctuates due to weather conditions, the level of gas in storage, the relative balance between supply and demand and other economic factors. Our actual average sales price received in 1999 for gas (unhedged) ranged from a low of $1.59 per Mcf in the first quarter to a high of $2.36 per Mcf in the third quarter. Our average gas price received in January 2000 was $2.04 per Mcf. Based on operating results for the last six months of 1999, we estimate that on an annualized basis a $1.00 per barrel increase or decrease in our average oil sales price would result in a corresponding $12.3 million change in net income and a $15.7 million change in cash flow from operating activities, and a $0.10 per Mcf increase or decrease in our average gas sales price would result in a corresponding $7.8 million change in net income and an $11.7 million change in cash flow from operating activities. These estimates do not give effect to changes in any other factors, such as the effect of our hedging program, debt levels and related interest expense, reserve levels or the level of capital expenditures, that might result from a change in oil and gas prices. From time to time we hedge a portion of our oil and gas sales to provide a certain minimum level of cash flow. While the hedges are generally intended to reduce our exposure to declines in market price, our 26 gain from increases in market price may be limited. We use various financial instruments whereby monthly settlements are based on differences between the prices specified in the instruments and the settlement prices of certain futures contracts quoted on the New York Mercantile Exchange ("NYMEX") or certain other indices. The instruments we utilize differ from futures contracts in that there is no contractual obligation which requires or allows for the future delivery of the product. Gains or losses on hedging activities are recognized in oil and gas revenues in the period in which the hedged production is sold. Oil sales hedges resulted in a $2.5 million decrease in revenues in 1999 and increases of $2.5 million and $2.2 million in 1998 and 1997, respectively. At December 31, 1999 we had open oil sales hedges on an average of 11,000 barrels per day through December 31, 2000. The instruments used have an average floor of $20.20 per barrel and an average ceiling of $25.06 per barrel. If the aggregate average of the applicable daily settlement prices is below the floor, we will receive a settlement based on difference, and if the aggregate average of the applicable daily settlement prices is above the ceiling, we will be required to pay an amount based on the difference. Based on the December 31, 1999 settlement price of the applicable NYMEX futures contracts, our unrealized loss with respect to such hedges at December 31, 1999 was $1.8 million. The actual gains or losses realized from these hedges may vary significantly due to the volatility of the futures markets and other indices. At January 31, 2000 we had open oil sales hedges on an average of 17,300 barrels per day through December 31, 2000. The instruments used have an average floor of $20.19 per barrel and an average ceiling of $25.12 per barrel. In addition to oil sales hedges, we have entered into two forward sales contracts which cover approximately 9.6 million barrels of our oil production during the period from February 2000 until August 2002. These contracts are discussed in Liquidity and Capital Resources. Gas sales hedges resulted in a $3.0 million reduction in gas revenues in 1999. We had no gas sales hedges in 1998 or 1997 and currently have no open gas sales hedges. We have a long-term gas swap agreement that was entered into by Snyder Oil in 1994 to lock in the price difference between the Rocky Mountain and Henry Hub prices on 20,000 MMBtu per day of Rocky Mountain gas production through 2004. The gas swap agreement had no effect on gas revenues for the full year 1999. The unrealized gain with respect to the gas swap agreement at December 31, 1999 was $2.2 million. INTEREST RATE RISK Our exposure to changes in interest rates primarily results from our short-term and long-term debt with both fixed and floating interest rates. To date, we have not deemed it necessary to enter into any financial instruments, such as interest rate swaps, because interest rates have remained at historically low levels. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by Statement of Financial Accounting Standards No. 137, is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. We intend to implement the provisions of SFAS 133 beginning January 1, 2001. SFAS 133 requires all derivatives to be recognized in the balance sheet as either assets or liabilities and measured at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. We have not yet determined the impact that the adoption of SFAS 133 will have on earnings, financial position or cash flows. 27 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Consolidated Financial Statements listed under Item 14 (a)(1) on page 30 and the Supplemental Information to Consolidated Financial Statements (Unaudited) on page 59. Information required by schedules required under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 28 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Except for the portion of Item 10 relating to the Executive Officers of the Registrant, which is included in Part 1 of this Report, the information called for by Items 10 through 14 is incorporated by reference from the Company's definitive Proxy Statement, which involves the election of directors, in accordance with General Instruction G to the Annual Report on Form 10-K. Such definitive Proxy Statement shall be filed with the Securities and Exchange Commission not later than April 29, 2000. 29 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: PAGE ---- (1) Consolidated Financial Statements Report of Management 31 Report of Independent Accountants 32 Consolidated Statement of Operations -- Years Ended December 31, 1999, 1998 and 1997 33 Consolidated Balance Sheet -- December 31, 1999 and 1998 34 Consolidated Statement of Cash Flows -- Years Ended December 31, 1999, 1998 and 1997 35 Consolidated Statement of Comprehensive Income -- Years Ended December 31, 1999, 1998 and 1997 36 Consolidated Statement of Shareholders' Equity -- Years Ended December 31, 1999, 1998 and 1997 37 Notes to Consolidated Financial Statements 38 (2) Financial Statement Schedules All schedules have been omitted because they are not applicable or the required information is presented in the financial statements or the notes thereto. (3) Exhibits See Index of Exhibits on page 68 for a description of the exhibits filed as a part of this report. (b) Reports on Form 8-K Not applicable. 30 REPORT OF MANAGEMENT To the Stockholders of Santa Fe Snyder Corporation: Management of Santa Fe Snyder is responsible for preparing the accompanying consolidated financial statements and for assuring their integrity and objectivity. These statements were prepared in accordance with generally accepted accounting principles and fairly present the transactions and financial position of the Company. The financial statements include amounts that are based on management's best estimates and judgments. The Company's financial statements have been audited by PricewaterhouseCoopers LLP, independent accountants selected by the Audit Committee and approved by the stockholders. Management has made available to PricewaterhouseCoopers LLP all of the Company's financial records and related data, as well as the minutes of stockholders' and directors' meetings. Management of the Company has established and maintains a system of internal accounting controls that is designed to provide reasonable assurance that assets are safeguarded, transactions are properly recorded and executed in accordance with management's authorization, and the books and records accurately reflect the disposition of assets. The system of internal controls includes appropriate division of responsibility. The Company maintains an internal audit department that conducts a comprehensive program of internal audits and independently assesses the effectiveness of the internal controls. The Board of Directors exercises its oversight role with respect to the Company's system of internal controls primarily through its Audit Committee, which is composed of directors who are not officers or employees of the Company. It meets regularly with members of management, the internal auditors and the independent accountants to discuss the adequacy of the Company's internal controls, financial statements and the nature, extent and results of the audit effort. Both the internal auditors and the independent accountants have free and direct access to the Audit Committee without the presence of management. James L. Payne Mark A. Jackson Chief Executive Officer and Director Executive Vice President and (Principal Executive Officer) Chief Financial Officer (Principal Financial Officer)
31 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Santa Fe Snyder Corporation: In our opinion, the consolidated financial statements listed in the accompanying index appearing under Item 14(a)(1) on page 30 present fairly, in all material respects, the financial position of Santa Fe Snyder Corporation and its subsidiaries (the "Company") at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP Houston, Texas January 28, 2000 32 SANTA FE SNYDER CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (In Millions of Dollars, except as noted)
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- Revenues Crude oil and liquids $ 292.2 $ 171.3 $ 355.7 Natural gas 217.3 119.1 138.1 Crude oil purchased -- -- 20.5 Other .8 .3 (.2) --------- --------- --------- 510.3 290.7 514.1 --------- --------- --------- Costs and Expenses Production costs 132.1 112.5 158.9 Production and other taxes 26.6 16.3 21.6 Cost of crude oil purchased -- -- 22.0 Exploration 54.2 71.1 49.1 Depletion, depreciation and amortization 185.8 136.1 127.8 Impairment of oil and gas properties 196.4 87.8 -- General and administrative 26.2 19.7 28.1 Merger related costs 16.8 -- -- Loss (gain) on disposition of assets 1.0 1.5 (3.6) --------- --------- --------- 639.1 445.0 403.9 --------- --------- --------- Income (Loss) from Operations (128.8) (154.3) 110.2 Interest income 1.1 6.2 2.5 Interest expense (43.6) (22.0) (23.8) Interest capitalized 6.0 7.2 6.7 --------- --------- --------- Income (Loss) Before Income Taxes, Minority Interest and Extraordinary Item (165.3) (162.9) 95.6 Current income tax (expense) benefit 1.6 11.4 (8.9) Deferred income tax (expense) benefit 43.0 52.8 (27.3) --------- --------- --------- Income (Loss) Before Minority Interest and Extraordinary Item (120.7) (98.7) 59.4 Minority interest in Monterey Resources, Inc. -- -- (4.7) --------- --------- --------- Income (Loss) Before Extraordinary Item (120.7) (98.7) 54.7 Extraordinary item -- debt extinguishment costs (4.2) -- -- --------- --------- --------- Net Income (Loss) (124.9) (98.7) 54.7 Preferred dividend requirement -- -- (3.6) Convertible preferred repurchase premium -- -- (8.4) --------- --------- --------- Earnings (Loss) Attributable to Common Shares $ (124.9) $ (98.7) $ 42.7 ========= ========= ========= Earnings (Loss) per Common Share, basic and diluted (in dollars) Before extraordinary item $ (.79) $ (.96) $ .43 Extraordinary item -- debt extinguishment costs (.03) -- -- --------- --------- --------- Per common share $ (.82) $ (.96) $ .43 ========= ========= ========= Weighted Average Shares Outstanding (in millions) 152.9 102.6 98.6 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 33 SANTA FE SNYDER CORPORATION CONSOLIDATED BALANCE SHEET (In Millions of Dollars)
December 31, - ----------------------------------------------------------- 1999 1998 - ----------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 6.0 $ 12.1 Accounts receivable 106.6 53.2 Inventories 25.5 19.0 Other current assets 35.0 31.7 --------- --------- 173.1 116.0 --------- --------- Properties and equipment, at cost Oil and gas (successful efforts method of accounting) 3,134.9 1,940.0 Other 53.2 37.0 --------- --------- 3,188.1 1,977.0 Accumulated depletion, depreciation, amortization and impairment (1,531.0) (1,258.7) --------- --------- 1,657.1 718.3 --------- --------- Other Assets Deferred income taxes -- 13.5 Other assets 32.6 11.2 --------- --------- 32.6 24.7 --------- --------- $ 1,862.8 $ 859.0 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 200.4 $ 123.3 Income taxes payable 1.3 1.2 Interest payable 2.1 1.9 Other current liabilities 36.1 12.8 --------- --------- 239.9 139.2 --------- --------- Long-Term Debt 629.4 330.6 --------- --------- Deferred Revenues 104.8 3.6 --------- --------- Other Long-Term Obligations 70.1 37.2 --------- --------- Deferred Income Taxes 77.4 -- --------- --------- Commitments and Contingencies (Note 14) Shareholders' Equity Preferred stock, $0.01 par value, 50.0 million shares authorized in 1999, 38.1 million shares authorized in 1998, none issued -- -- Common stock, $0.01 par value, 500.0 million shares authorized in 1999, 200.0 million shares authorized in 1998 1.8 1.0 Paid-in capital 1,247.4 728.2 Accumulated deficit (498.5) (372.5) Accumulated other comprehensive income 1.3 -- Treasury stock, at cost (10.8) (6.8) Unamortized restricted stock awards -- (1.5) --------- --------- 741.2 348.4 --------- --------- $ 1,862.8 $ 859.0 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 34 SANTA FE SNYDER CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (In Millions of Dollars)
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- Operating Activities Net income (loss) $ (124.9) $ (98.7) $ 54.7 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depletion, depreciation and amortization 185.8 136.1 127.8 Impairment of oil and gas properties 196.4 87.8 -- Deferred income taxes (43.0) (52.8) 27.3 Loss (gain) on disposition of oil and gas properties 1.0 1.5 (3.6) Exploratory dry hole costs 20.9 38.4 23.7 Minority interest in Monterey Resources, Inc. -- -- 4.7 Other 7.6 3.9 5.7 Changes in operating assets and liabilities (net of acquisitions): Decrease (increase) in accounts receivable (38.0) 20.6 11.3 Decrease (increase) in inventories (5.5) (2.6) (2.3) Increase (decrease) in accounts payable 16.7 (16.0) 15.3 Increase (decrease) in income taxes payable .1 (5.3) (15.0) Increase (decrease) in interest payable (5.7) .5 1.7 Increase (decrease) in deferred revenues 98.4 (.1) (.3) Change in other assets and liabilities (13.4) 1.8 3.6 --------- --------- --------- Net cash provided by operating activities 296.4 115.1 254.6 --------- --------- --------- Investing activities Capital expenditures (255.9) (191.9) (218.6) Acquisition of Snyder Oil Corporation, net of cash acquired (1.5) -- -- Acquisition of producing properties (263.7) (117.6) (197.8) Proceeds from disposition of assets 36.8 2.0 40.8 --------- --------- --------- Net cash used in investing activities (484.3) (307.5) (375.6) --------- --------- --------- Financing Activities Issuance of common stock 108.0 1.6 2.8 Net change in long-term lines of credit 55.8 208.9 118.2 Issuance of 8.05% senior notes 123.4 -- -- Retirement of 11% senior subordinated debentures (100.0) -- -- Cash dividends paid -- -- (8.5) Treasury stock purchased (11.6) (11.6) (0.5) Treasury stock reissued 6.2 -- -- --------- --------- --------- Net cash provided by financing activities 181.8 198.9 112.0 --------- --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents (6.1) 6.5 (9.0) Cash and Cash Equivalents at Beginning of Period 12.1 5.6 14.6 --------- --------- --------- Cash and Cash Equivalents at End of Period $ 6.0 $ 12.1 $ 5.6 ========= ========= ========= Supplemental Disclosure of Cash Flow Information Interest paid $ 52.3 $ 21.1 $ 11.5 Income taxes paid $ 5.0 $ 5.2 $ 17.8
The accompanying notes an are integral part of these consolidated financial statements. 35 SANTA FE SNYDER CORPORATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In Millions of Dollars)
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- Earnings (Loss) Attributable to Common Shares $ (124.9) $ (98.7) $ 42.7 --------- --------- --------- Other Comprehensive Income Unrealized holding gain on securities 2.1 -- -- Deferred income taxes (.8) -- -- --------- --------- --------- 1.3 -- -- --------- --------- --------- Comprehensive Income (Loss) $ (123.6) $ (98.7) $ 42.7 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 36 SANTA FE SNYDER CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Shares and Dollars In Millions)
1999 1998 1997 - ------------------------------------------------------------------------------------------------ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------ $.732 SERIES A CONVERTIBLE PREFERRED STOCK Balance, beginning of year -- $-- -- $-- 10.7 $91.4 Conversion to common stock (10.7) (91.4) ------ ------ ------ ------ ------ ------ Balance, end of year -- -- -- -- -- -- ====== ------ ====== ------ ====== ------ COMMON STOCK Balance, beginning of year 103.0 1.0 103.0 1.0 91.0 0.9 Issuances of common stock Acquisition of Snyder Oil Company 68.8 0.7 -- -- -- -- Public offering 12.6 0.1 -- -- -- -- Employee stock compensation and savings plans -- -- -- -- 0.7 -- Conversion of $.732 Series A preferred stock -- -- -- -- 9.1 0.1 Conversion of convertible preferred stock, 7% series -- -- -- -- 2.2 -- ------ ------ ------ ------ ------ ------ Balance, end of year 184.4 1.8 103.0 1.0 103.0 1.0 ====== ------ ====== ------ ====== ------ PAID-IN CAPITAL Balance, beginning of year 728.2 728.2 601.3 Issuances of common stock Acquisition of Snyder Oil Company 411.4 -- -- Public offering 107.8 -- -- Employee stock compensation and savings plans -- -- 7.6 Conversion of $.732 Series A preferred stock -- -- 91.3 Conversion of convertible preferred stock, 7% series -- -- 28.0 ------ ------ ------ Balance, end of year 1,247.4 728.2 728.2 ------ ------ ------ ACCUMULATED DEFICIT Balance, beginning of year (372.5) (273.2) (166.5) Net income (loss) (124.9) (98.7) 54.7 Common stock issuances related to employee stock compensation and savings plans (1.1) (0.6) -- Conversion of convertible preferred stock, 7% series -- -- (8.4) Dividends declared -- -- (3.6) Spin off of Monterey Resources, Inc. -- -- (149.4) ------ ------ ------ Balance, end of year (498.5) (372.5) (273.2) ------ ------ ------ ACCUMULATED OTHER COMPREHENSIVE INCOME Balance, beginning of year -- -- -- Other comprehensive income 1.3 -- -- ------ ------ ------ Balance, end of year 1.3 -- -- ------ ------ ------ TREASURY STOCK Balance, beginning of year (0.8) (6.8) (0.1) (0.6) -- (0.3) Issuances related to employee stock compensation and savings plans 0.9 7.6 0.6 5.4 -- 0.2 Purchase of treasury stock (1.6) (11.6) (1.3) (11.6) (0.1) (0.5) ------ ------ ------ ------ ------ ------ Balance, end of year (1.5) (10.8) (0.8) (6.8) (0.1) (0.6) ====== ------ ====== ------ ====== ------ UNAMORTIZED RESTRICTED STOCK AWARDS Balance, beginning of year (1.5) (0.7) -- Issuances related to employee stock compensation and savings plans (0.1) (2.6) (2.4) Amortization of restricted stock awards 1.6 1.8 1.7 ------ ------ ------ Balance, end of year -- (1.5) (0.7) ------ ------ ------ TOTAL SHAREHOLDERS' EQUITY $741.2 $348.4 $454.7 ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. 37 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of Santa Fe Snyder Corporation ("Santa Fe Snyder" or the "Company") and its subsidiaries include the accounts of all wholly owned subsidiaries and Monterey Resources, Inc. ("Monterey") until its Spin Off in July 1997. Prior to Monterey's initial public offering in November 1996, the Company owned 100% of the outstanding common stock of Monterey. At December 31, 1996, the Company owned 82.8% of the outstanding common stock of Monterey. On July 25, 1997 the Company distributed pro rata to its common shareholders all of the shares of Monterey's common stock that it owned (the "Spin Off" -- see Note 3 -- Spin Off of Monterey Resources, Inc.). Effective May 5, 1999, Snyder Oil Corporation ("Snyder Oil") was merged with and into Santa Fe Energy Resources, Inc. ("Santa Fe Energy"), a Delaware corporation, pursuant to an Agreement and Plan of Merger dated January 13, 1999 (the "Merger"). In connection with the Merger, Santa Fe amended its Articles of Incorporation to change its name to Santa Fe Snyder Corporation and increased its authorized common stock and preferred stock to 500.0 million shares and 50.0 million shares, respectively. The Merger was accounted for as a purchase. See Note 2 -- Merger with Snyder Oil Corporation. All significant intercompany accounts and transactions have been eliminated. Certain amounts in prior periods have been reclassified to conform to the current year's presentation. OIL AND GAS OPERATIONS. The Company follows the successful efforts method of accounting for its oil and gas exploration and production activities. Costs (both tangible and intangible) of productive wells and development dry holes, as well as the cost of prospective acreage, are capitalized. For exploratory drilling costs where management is assessing the appropriateness of significant capital expenditures, amounts are capitalized pending finalization of spending plans. Other costs of drilling exploratory wells are capitalized pending determination within one year of whether they have discovered commercial reserves. The costs of drilling and equipping exploratory wells which do not find proved reserves are expensed upon determination that a well does not justify commercial development. Other exploratory costs, including geological and geophysical costs and delay rentals, are charged to expense as incurred. Depletion and depreciation of proved properties are computed on a field basis using the unit-of-production method based upon proved oil and gas reserves attributable to the field. Periodically, proved properties are reviewed to determine if the carrying value of the property exceeds the expected undiscounted future net cash flows from the operation of the property. Based on this review and the continuing evaluation of development plans, production data, economics and other factors, as appropriate, the Company records impairment (additional depletion and depreciation) to the extent that the carrying value of the property exceeds the fair value of the property on a discounted basis. In 1999 and 1998 the Company recorded impairment charges of $196.4 million and $87.8 million, respectively. In 1999 the Company determined that the estimated future undiscounted cash flows were below the carrying value of certain oil and gas properties in the United States. The estimated fair value was based on anticipated future cash flows discounted at a rate commensurate with the risk involved with the properties and the Company's long-term outlook for future commodity prices. The impairments recorded in 1998 were primarily on producing oil and gas properties and unproven leasehold in the Gulf of Mexico and were primarily the result of lower oil and gas prices. The oil and gas impairment tests were based on estimates of future cash flows using an initial WTI spot oil price and an initial New York Mercantile Exchange ("NYMEX") gas price based on quoted forward market prices which were moderately escalated and included no forward sales. Future cash flows were based on the Company's estimate of proved reserves and, in 1998, risk-adjusted probable reserves. Probable reserves were reduced by risk factors for the inherently higher risk associated with the ultimate recovery of such 38 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) reserves. If cash flows from probable reserves had not been included in the impairment tests, the amount of the impairment would have increased by $17.0 million for 1998. The value of undeveloped acreage is aggregated and the portion of such costs estimated to be nonproductive, based on historical experience, is amortized to expense over the average holding period. The cost of properties determined to be productive is transferred to proved properties; the cost of properties determined to be nonproductive is charged to accumulated amortization. Additional amortization may be recognized based upon periodic assessment of prospect evaluation results. The previously discussed impairment amount for 1998 includes $18.4 million associated with substantially all leases on the Gulf of Mexico shelf and certain individually significant leases in the flex trend of the Gulf of Mexico. Based primarily on unsuccessful drilling results, a thorough technical review of flex trend leases and the current commodity price environment, the Company decided not to commit additional capital to further explore on such leases. The Company provides for future abandonment and site restoration costs with respect to certain of its oil and gas properties. The Company estimates that with respect to these properties such future costs total approximately $28.9 million and such amount is being accrued over the expected life of the properties on a unit-of-production basis. At December 31, 1999 and 1998, accumulated depletion, depreciation, amortization and impairment included $17.0 million and $12.3 million, respectively, of such costs. Maintenance and repairs are expensed as incurred; major renewals and improvements are capitalized. Gains and losses arising from sales of assets are included in income when incurred. REVENUE RECOGNITION. Revenues from the sale of crude oil and liquids produced are generally recognized upon the passage of title, net of royalties and net profits interests. Revenues from natural gas production are generally recorded using the entitlement method, net of royalties and net profits interests. Sales proceeds in excess of the Company's entitlement are included in Deferred Revenues and the Company's share of sales taken by others is included in Other Assets. At December 31, 1999 and 1998, the Company's deferred revenues for sales proceeds received in excess of the Company's entitlement were $10.3 million with respect to 5.1 MMcf and $3.2 million with respect to 2.5 MMcf, respectively, and the asset related to the Company's share of sales taken by others was $8.1 million with respect to 4.4 MMcf and $1.2 million with respect to 0.9 MMcf, respectively. In August 1999 and January 2000 the Company entered into crude oil forward sales contracts under the terms of which the Company is obligated to deliver crude oil to the purchaser, based on specified monthly volumes, during the period October 1999 through August 2002. See Note 14 -- Commitments and Contingencies -- Crude Oil Sales Contracts. Revenues from sales of crude oil purchased relate to the sales of low viscosity crude oil purchased and blended with certain of Monterey's high viscosity, low gravity crude oil production, either to facilitate pipeline transportation or to realize higher margins. The cost to purchase such crude oil is reflected as an expense. PRICE RISK MANAGEMENT. The Company engages in price risk management activities for non-trading purposes. Derivative financial instruments (primarily fixed price swaps, collars and options) are utilized to hedge the impact of market fluctuations on natural gas and crude oil market prices. Gains and losses on derivative financial instruments are recognized in oil and gas revenues in the period in which the hedged production is sold. Gains and losses on hedging instruments that are closed prior to maturity are deferred and recognized in earnings over the period the hedged production is sold. The cash flow impact of hedging activities are reflected in Cash Provided by Operating Activities in the Consolidated Statement of Cash Flows. See Note 14 -- Commitments and Contingencies -- Oil and Gas Hedging. 39 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) EARNINGS PER SHARE. The computation of earnings per share is discussed in Note 4 -- Earnings Per Share. ACCOUNTS RECEIVABLE. Accounts Receivable relates primarily to sales of oil and gas and amounts due from joint interest partners for expenditures made by the Company on behalf of such partners. The Company reviews the financial condition of potential purchasers and partners prior to signing sales or joint interest agreements. At December 31, 1999 and 1998 the Company's allowance for doubtful accounts receivable, which is reflected in the consolidated balance sheet as a reduction in accounts receivable, totaled $2.1 million and $1.6 million, respectively. Accounts receivable totalling $1.1 million and $0.3 million were written off as uncollectible in 1998 and 1997, respectively. The allowance was increased by $0.5 million in 1999 as a result of the Merger and by $0.5 million in 1997 by a charge to expense. INVENTORIES. Inventories are generally valued at the lower of cost (average price or first-in, first-out) or market. Crude oil inventories at December 31, 1999 and 1998 were $9.8 million and $5.7 million, respectively, and materials and supplies inventories at such dates were $15.7 million and $13.3 million, respectively. ENVIRONMENTAL EXPENDITURES. Environmental liabilities are recognized when the expenditures are considered probable and can be reasonably estimated. Measurement of liabilities is based on currently enacted laws and regulations, existing technology and undiscounted site-specific costs. Generally, such recognition coincides with the Company's commitment to a formal plan of action. INCOME TAXES. The Company follows the asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are determined using the tax rate for the period in which those amounts are expected to be received or paid, based on a scheduling of temporary differences between the tax bases of assets and liabilities and their reported amounts. Under this method of accounting for income taxes, any future changes in income tax rates will affect deferred income tax balances and financial results. FUNCTIONAL CURRENCY. The functional currency of the Company and its subsidiaries is the U.S. dollar. USE OF ESTIMATES. The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires the Company to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities and the periods in which certain items of revenue and expense are included. The Company's most significant financial estimates are related to the Company's proved oil and gas reserves (see Supplemental Information to Consolidated Financial Statements). Actual results may differ from such estimates. COMPREHENSIVE INCOME. Comprehensive income is net income, plus certain other items that are recorded directly to shareholders' equity. In 1998 and 1997, the Company had no comprehensive income other than net income. NEW ACCOUNTING STANDARDS. Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by Statement of Financial Accounting Standards No. 137, is effective for fiscal years beginning after June 15, 2000. The Company intends to implement the provisions of SFAS 133 beginning January 1, 2001. SFAS 133 requires all derivatives to be recognized in the balance sheet as either assets or liabilities and measured at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in 40 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company has not yet determined the impact that the adoption of SFAS 133 will have on its earnings, statement of financial position or cash flows. NOTE 2. MERGER WITH SNYDER OIL CORPORATION. Effective May 5, 1999, Snyder Oil was merged with and into Santa Fe Energy pursuant to an Agreement and Plan of Merger dated January 13, 1999. In connection with the Merger, Santa Fe Energy amended its Articles of Incorporation to change its name to Santa Fe Snyder Corporation. In the Merger each issued and outstanding share of common stock of Snyder Oil was converted into 2.05 shares of common stock of Santa Fe Snyder. The exchange ratio was determined through arm's length negotiations between the parties. The Merger has been accounted for as a purchase and the results of operations of the acquired company are included in Santa Fe Snyder's results of operations effective May 1, 1999. To consummate the Merger, Santa Fe Snyder issued 68.8 million shares of common stock, assumed the long-term debt and other liabilities of Snyder Oil and incurred other Merger-related costs. In addition, the Company recorded a deferred income tax liability with respect to the difference between the book and tax basis in the assets acquired. Such amounts are set forth in the following table, in millions of dollars: Cash costs 1.5 Common stock 412.1 Long-term debt assumed 219.0 Liabilities assumed or accrued 96.7 Deferred income tax liability 135.4 --------- 864.7 =========
Such amount was allocated to specific assets or charged to the Company's results of operations as follows, in millions of dollars: Charged to assets acquired Property, plant and equipment 793.9 Current assets 16.8 Other assets 37.2 Charged to results of operations 16.8 --------- 864.7 =========
The allocation of the purchase price to specific assets was based on certain estimates of fair values. At the time of the Merger the Company assumed or accrued the following $19.4 million of costs which were capitalized: (i) severance costs related to Snyder employees of $9.6 million; (ii) professional fees of $5.7 million; (iii) provisions for certain lease obligations for duplicate or unused facilities of $2.5 million; and (iv) other transition costs of $1.6 million. Subsequently the Company increased the accruals for professional fees and other transition costs by $0.3 million and $1.0 million, respectively. At December 31, 1999, after deducting payments made, the Company's accrued liabilities included $2.9 million with respect to severance costs and $0.3 million of costs with respect to lease obligations for duplicate or unused facilities. 41 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The following unaudited pro forma condensed income statement information has been prepared to give effect to the Merger as if such transaction had occurred at the beginning of the period presented. The historical results of operations have been adjusted to reflect the difference between Snyder Oil's historical depletion, depreciation and amortization and such expense calculated based on the value allocated to the assets acquired in the Merger. The information presented is not necessarily indicative of the results of future operations of the merged companies.
Year Ended December 31, - ---------------------------------------------------------------- 1999 1998 - ---------------------------------------------------------------- (In millions of dollars, except per share data) (Unaudited) Revenues 550.1 429.0 Net loss before extraordinary items (144.2) (140.2) Net loss (148.4) (140.2) Basic and diluted loss per share (.84) (.82)
NOTE 3. SPIN OFF OF MONTEREY RESOURCES, INC. In 1996 the Company formed Monterey to assume the operations of the Company's Western Division (the "Western Division"), which conducted the Company's oil and gas operations in the State of California. In November 1996 Monterey sold 9.3 million shares of its common stock (17.2%) in an initial public offering. On July 25, 1997 the Company distributed pro rata to its common shareholders all of the shares of Monterey's common stock that it owned (82.8% of the outstanding Monterey common stock) by means of a tax-free distribution. Pursuant to the terms of a letter agreement dated June 13, 1996, upon consummation of the Spin Off, fees aggregating $3.3 million were paid by Monterey to Chase Securities Inc. and Petrie Parkman & Co., Inc. In addition, a fee of $0.4 million was paid to GKH Partners, L.P., of which $0.2 million was paid by the Company and $0.2 million was paid by Monterey. One of the Company's former directors was associated with Chase Securities and another current director is associated with GKH Partners. Monterey agreed to indemnify the Company if at any time during the one-year period subsequent to consummation of the Spin Off (or if certain tax legislation is enacted and is applicable, such longer period as is required for the Spin Off to be tax free to the Company) Monterey takes certain actions, the effects of which result in the Spin Off being taxable to the Company. The Company does not believe that any such actions occurred during the one-year period that would have had such effect on the Spin Off. Prior to the Spin Off, Monterey purchased all the common stock of McFarland Energy, Inc. ("McFarland Energy") for $106.2 million in cash and $2.3 million of assumed debt. Pursuant to the Contribution Agreement, Monterey agreed to indemnify and hold harmless the Company from and against any costs incurred in the future relating to environmental liabilities of the Western Division assets (other than those retained by the Company), and any costs or liabilities that may arise in the future that are attributable to laws, rules or regulations in respect to any property or interest therein located in California and formerly owned or operated by the Western Division or its predecessors. 42 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The following table sets forth certain financial information for the Company, on an unaudited pro forma basis assuming that the Spin Off occurred January 1, 1997 (in millions of dollars, except per share amounts):
YEAR ENDED DECEMBER 31, 1997 (1) - --------------------------------------------------------------- (Unaudited) Revenues 333.5 Income from operations 60.3 Net income 35.0 Earnings to common shares 23.0 Earnings per common share, basic and diluted 0.23
- ------------ (1) Costs and expenses related to the Spin Off of Monterey have been excluded from the year ended December 31, 1997 pro forma presentations as follows: (i) $2.0 million in pension curtailments and (ii) $0.6 million in compensation expenses; and (iii) $1.1 million in Spin Off related costs and expenses. The Company recorded the following reductions on the balance sheet in 1997 as a result of the Spin Off of Monterey (in millions of dollars): Current assets 45.7 Property and equipment, net 537.5 Other assets 1.6 Current liabilities 49.0 Long-term debt 277.3 Other long-term obligations 3.8 Deferred income taxes 74.2 Minority interest in Monterey Resources, Inc. 31.1 Shareholders' equity 149.4
NOTE 4. EARNINGS PER SHARE. The following table sets forth the components of the Company's basic and diluted earnings per share calculations:
WEIGHTED EARNINGS (LOSS) AVERAGE ATTRIBUTABLE TO COMMON SHARES PER SHARE COMMON SHARES OUTSTANDING AMOUNT - ---------------------------------------------------------------------------------------- ($/millions) (millions) (in dollars) Year Ended December 31, 1999 Basic and diluted before extraordinary item (120.7) 152.9 (.79) Basic and diluted -- extraordinary item (4.2) 152.9 (.03) --------------- ------------ Basic and diluted after extraordinary item (124.9) 152.9 (.82) =============== ============ Year Ended December 31, 1998 Basic and diluted (98.7) 102.6 (.96) =============== ============= ============ Year Ended December 31, 1997 Basic 42.7 98.6 Effect of dilutive stock options -- 1.8 Effect of dilutive performance awards -- .2 --------------- ------------- Basic and diluted 42.7 100.6 .43 =============== ============= ============
43 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The Company had 5.1 million, 5.2 million and 1.4 million stock options outstanding in 1999, 1998 and 1997, respectively, which were not included in the computation of diluted earnings per share because the exercise price of these options was greater than the average market price of the common shares. The Company also had convertible preferred stock in 1997 and 1996 which was antidilutive. The Company reported a loss in 1999 and 1998 and, accordingly, the potential effects of dilutive stock options and performance awards were not included in the computation of diluted earnings per share as they are antidilutive. NOTE 5. SANTA FE ENERGY TRUST. The Santa Fe Energy Trust (the "Trust") was formed in 1992 to hold 6.3 million Depository Units ("Depository Units"), each consisting of beneficial ownership of one unit of undivided interest in the Trust and a $20 face amount beneficial ownership interest in a $1,000 face amount zero coupon United States Treasury obligation maturing on or about February 15, 2008, when the Trust will be liquidated. The assets of the Trust consist of certain oil and gas properties conveyed by the Company. For any calendar quarter ending on or prior to December 31, 2002, the Trust will receive additional support payments to the extent that it needs such payments to distribute $0.39 per Depository Unit per quarter. The source of such support payments is limited to the Company's remaining royalty interest in certain of the properties conveyed to the Trust. The aggregate amount of the additional royalty payments (net of any amounts recouped) is limited to $19.4 million on a revolving basis. If such support payments are made, certain proceeds otherwise payable to the Trust in subsequent quarters may be reduced to recoup the amount of such support payments. Through the end of 1999, the Trust had received support payments totalling $4.2 million and the Company had recouped $3.9 million of such payments. In the first quarter of 1999 the Company recouped the remaining $0.3 million of support payments. Depending on various factors, such as sales volumes and prices and the level of operating costs and capital expenditures incurred, proceeds payable to the Trust with respect to operations in subsequent quarters may not be sufficient to make the required quarterly distributions. In such instances the Company would be required to make support payments. At December 31, 1999 and 1998, accounts payable included $3.4 million and $2.6 million, respectively, due to the Trust. NOTE 6. CASH FLOWS. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company's accrued accounts payable with respect to capital expenditures increased by $45.2 million in 1999, $29.9 million in 1998 and $7.2 million in 1997. The following balances represent noncash adjustments to the Company's Consolidated Balance Sheet at December 31, 1999 related to the Merger (in millions of dollars): Accounts receivable 15.4 Inventories 1.0 Accounts payable 15.2 Interest payable 5.9 Deferred revenues 2.8 Long-term debt 219.0 Other assets and liabilities 11.5 Common stock and paid-in capital 412.1
44 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The following balances represent noncash adjustments to the Company's Consolidated Balance Sheet as of December 31, 1998, related to the acquisition of an additional interest in the Tuban Production Sharing Contract on the island of Java in Indonesia from Total S.A. (in millions of dollars):
TOTAL S.A. ACQUISITION - --------------------------------------------------- Accounts receivable 2.9 Inventories 1.9 Other assets 3.4 Accounts payable 3.4 Other long-term obligations .1 Deferred income taxes .9
The following balances represent noncash adjustments to the Company's Consolidated Balance Sheet as of December 31, 1997, related to Monterey's acquisition of McFarland Energy, the Company's Spin Off of Monterey and the Company's acquisition of interests in the Tupungato field in Argentina (in millions of dollars):
MCFARLAND MONTEREY TUPUNGATO ACQUISITION SPIN OFF ACQUISITION TOTAL - ------------------------------------------------------------------------------------------ Accounts receivable 7.0 (38.4) 1.3 (30.1) Inventories .3 (2.4) .7 (1.4) Accounts payable .5 (27.6) .6 (26.5) Income taxes payable -- .1 -- .1 Interest payable -- (6.3) -- (6.3) Other assets and liabilities ( .3) 10.1 1.2 11.0 Long-term debt 2.3 (277.3) -- (275.0)
NOTE 7. INVESTMENTS. As a result of the Merger, the Company acquired interests in two foreign energy companies which are listed on the London Stock Exchange. The Company's investment in Cairn Energy plc was sold in November 1999 for $24.7 million. The Company's investment in SOCO International plc ("SOCO") is classified as an available-for-sale security and such investment is reported at fair value, with unrealized gains and losses excluded from earnings and reported in Comprehensive Income. The Company's cost basis in its investment in SOCO is $7.0 million and at December 31, 1999 the fair value of such securities was $9.1 million. Accordingly, 1999 Comprehensive Income includes an unrealized gain of $2.1 million ($1.3 after deducting $0.8 million in deferred income taxes). The Company's investment in SOCO is included in Other Assets in the Consolidated Balance Sheet at December 31, 1999. NOTE 8. INCOME TAXES. Tax years 1997 and 1998 are currently under audit. Certain state franchise tax returns for years 1984 through 1990 are currently under audit. In November 1996, the Company and Monterey executed a tax sharing agreement, which transferred to Monterey all obligations attributable to these franchise tax liabilities for such years. Total pretax income (loss) for the years ended December 31, 1999, 1998 and 1997 was taxed under the following jurisdictions (in millions of dollars):
1999 1998 1997 - ---------------------------------------------------------------------- Domestic (193.4) (126.1) 88.0 Foreign 28.1 (36.8) 7.6 --------- --------- --------- (165.3) (162.9) 95.6 ========= ========= =========
45 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The Company's total income tax benefit (expense) for the years ended December 31, 1999, 1998 and 1997 consisted of the following items (in millions of dollars):
1999 1998 1997 - ---------------------------------------------------------------------- Current U.S. federal 6.3 11.2 (2.3) State .1 2.1 (1.4) Foreign (4.8) (1.9) (5.2) --------- --------- --------- 1.6 11.4 (8.9) --------- --------- --------- Deferred U.S. federal 55.9 41.6 (26.7) State -- -- (.7) Foreign (12.9) 11.2 .1 --------- --------- --------- 43.0 52.8 (27.3) --------- --------- --------- 44.6 64.2 (36.2) ========= ========= =========
The Company's deferred income tax (assets) liabilities at December 31, 1999 and 1998 are composed of the following differences between financial and tax reporting (in millions of dollars):
1999 1998 - ----------------------------------------------------------- Capitalized costs and write-offs 151.6 47.2 Foreign deferred liability .9 -- --------- --------- Gross deferred tax liability 152.5 47.2 --------- --------- Accruals not currently deductible for tax purposes (5.0) (3.0) Alternative minimum tax carryforwards (18.8) (16.9) Net operating loss carryforwards (50.7) (26.6) Foreign deferred asset -- (14.1) Other (.6) (.1) --------- --------- Gross deferred tax assets (75.1) (60.7) --------- --------- Deferred tax (asset) liability 77.4 (13.5) ========= =========
46 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) A reconciliation of the Company's total income tax benefit (expense) computed by applying the statutory U.S. federal income tax rate to the Company's total income (loss) before income taxes minority interest and extraordinary item for the years ended December 31, 1999, 1998 and 1997 is presented in the following table (in millions of dollars):
1999 1998 1997 - ---------------------------------------------------------------------- U.S. federal income tax benefit (expense) at statutory rate 57.8 57.0 (33.4) Increase (reduction) resulting from: State income taxes, net of federal effect .1 1.4 (1.4) Foreign income taxes in excess of (less than) U.S. rate (5.8) (2.8) (2.4) U.S. tax on foreign reinvested earnings (.8) (.6) (.5) Prior period tax adjustments (6.7) 9.3 -- Other -- (.1) 1.5 --------- --------- --------- 44.6 64.2 (36.2) ========= ========= =========
As a result of the Merger, the Company succeeded to net operating loss carryforwards of $97.6 million. Such loss carryforwards are subject to Internal Revenue Code Section 382 limitations, which annually limit the amount of taxable income that can be offset by such carryforwards. Certain changes in the Company's shareholders may impose additional limitations. The majority of these carryforwards expire between 2006 and 2010. NOTE 9. FINANCING AND DEBT. Long-term debt at December 31, 1999 and 1998 consisted of the following balances (in millions of dollars):
1999 1998 - ---------------------------------------------------------------------------------------- CURRENT LONG-TERM CURRENT LONG-TERM - ---------------------------------------------------------------------------------------- 11% Senior Subordinated Debentures -- -- -- 99.6 8.05% Senior Notes -- 123.6 -- -- 8.75% Senior Subordinated Notes -- 175.0 -- -- Lines of credit borrowings -- 330.8 -- 231.0 -------- ---------- -------- ---------- -- 629.4 -- 330.6 ======== ========== ======== ==========
Aggregate total maturities of long-term debt during the next five years are as follows: 2000 -- none; 2001 -- none; 2002 -- none; 2003 -- none; and 2004 -- $454.4 million. In connection with the Merger, the Company assumed Snyder Oil's $175.0 million of 8.75% Senior Subordinated Notes (the "Subordinated Notes") due June 15, 2007. The Subordinated Notes are redeemable by the Company on or after June 15, 2002, initially at 104.375% of principal and at prices declining to 100% of principal on or after June 15, 2005. The Subordinated Notes are general unsecured obligations of the Company. Also, in connection with the Merger, the Company assumed $44.0 million of long-term debt outstanding under the terms of Snyder Oil's revolving credit facility, which was repaid with funds borrowed under the Credit Facility. Concurrent with the closing of the Merger the Company entered into a $500.0 million credit facility (the "Credit Facility") which was amended in November 1999 to increase the amount available to $600.0 million. The Credit Facility consists of a $450.0 million five-year tranche which expires May 2004 and a renewable $150.0 million 364 day tranche. The Credit Facility bears interest, at the Company's option, at LIBOR or prime rates plus applicable margins dependent upon the Company's credit rating and certain financial ratios. Borrowings under the Credit Facility are unsecured. At December 31, 1999, the Company had $320.0 million in borrowings outstanding under the Credit Facility which were 47 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) classified as long-term debt on the balance sheet since the Company had the ability and intended to refinance such amounts on a long-term basis. The weighted average interest rate with respect to borrowings under the Credit Facility during 1999 was 6.3%. At the time the Company entered into the Credit Facility, the Company had a revolving credit agreement (the "Credit Agreement") which matured May 15, 2003 and permitted the Company to obtain revolving credit loans and issue letters of credit having a maximum aggregate amount of $335.0 million. Amounts outstanding under the Credit Agreement was refinanced under the terms of the Credit Facility. In June 1999 the Company issued $125.0 million of 8.05% Senior Notes due 2004 (the "Senior Notes"). The Senior Notes were issued for 98.758% of face value and the Company received total proceeds of $121.6 million after deducting related costs and expenses of $1.9 million. The Senior Notes, which mature June 15, 2004, are redeemable, upon not less than thirty nor more than sixty days notice, as a whole or in part, at the option of the Company at a redemption price equal to the sum of (i) 100% of the principal amount thereof, (ii) the applicable make-whole premium as determined by an independent investment banker and (iii) accrued and unpaid interest. The Senior Notes are general unsecured obligations of the Company. At the time of the issuance of the Senior Notes, the Company had outstanding $100.0 million of 11% Senior Subordinated Debentures (the "Debentures") which matured May 15, 2004 and were redeemable at the option of the Company at prices set forth in the indenture for the Debentures. A portion of the net proceeds from the Senior Notes was used to retire the Debentures and to pay $5.5 million in accrued interest and prepayment penalties due upon retirement of such debt. The Credit Facility and the indentures for the Senior Subordinated Notes and the Senior Notes include covenants that restrict the Company's ability to take certain actions, including the ability to incur additional indebtedness and to pay dividends or repurchase capital stock. Under the most restrictive of these covenants, at December 31, 1999 the Company could incur $615.8 million of additional indebtedness, of which $280.0 million could be borrowed under the Credit Facility, and could pay dividends and/or repurchase common stock of up to $83.1 million. In addition to the Credit Facility, at December 31, 1999 the Company also had two short-term uncommitted lines of credit which are used to meet short-term cash needs. Under one line of credit the Company may borrow up to $20.0 million and under the other line of credit the amount available (up to $25.0 million) varies with the amount outstanding under the Credit Facility. Interest rates on borrowings under these lines of credit are typically lower than rates paid under the Credit Facility when compared to the prime rate, which would be required for short-term (less than 30 days) borrowings. As of December 31, 1999, the Company had $10.8 million in borrowings outstanding under these facilities, which were classified as long-term debt on the balance sheet since the Company has the ability and intends to refinance such amounts on a long-term basis. In connection with the Senior Notes offering, the Company executed two forward treasury lock agreements (the "Treasury Locks") to mitigate interest rate risk during the issuance of the Senior Notes. Upon the issuance of the Senior Notes, the Treasury Locks were terminated resulting in proceeds to the Company totaling $3.1 million which amount has been deferred and will be recognized as a component of interest expense over the life of the Senior Notes. In connection with the retirement of certain debt in 1999, the Company recorded a $4.2 million extraordinary loss, net of $2.3 million of taxes. The extraordinary loss represents the write-off of certain debt issue costs and prepayment penalties pertaining to the retirement of the Debentures, net of related tax benefits. 48 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) At December 31, 1998, the Company had $225.0 million in borrowings outstanding under the Credit Agreement and $6.0 million in borrowings outstanding under short term lines of credit. Such borrowings were classified as long-term debt on the balance sheet since the Company had the ability and intended to refinance such amounts on a long-term basis. The fair value of the Company's long-term debt at December 31, 1999 and 1998 was $627.4 million and $336.4 million, respectively. The fair value of the Company's 8.05% Senior Notes, 8.75% Senior Subordinated Notes and 11% Senior Subordinated Debentures is based on market prices. With respect to the Company's floating-rate debt, the carrying amount approximates fair value. The fair value set forth herein is not representative of the amount that could be realized or settled, nor does the fair value amount consider tax consequences, if any, of realization or settlement. NOTE 10. SEGMENT INFORMATION. The principal business of the Company consists of the exploration, development and acquisition of oil and gas properties and the production and sale of crude oil and liquids and natural gas. The Company has determined that its reportable segments are those that are based on the Company's method of internal reporting, which disaggregates its business by geographic area. The Company's reportable segments are the United States, Southeast Asia, South America, and West Africa. The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies." The Company evaluates the performance of its segments and allocates resources based principally on operating income or loss. 49 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The table below presents information about the reported segments for the years ending December 31, 1999, 1998 and 1997. Other reconciling items include other corporate income and expenses, hedging activities and overhead costs not allocated to specific geographic areas. Asset information by reportable segment is not presented because such information is not a factor used by management to evaluate the performance of the segments.
INCOME (LOSS) BEFORE INCOME DEPLETION TAXES, MINORITY DEPRECIATION OPERATING INTEREST AND AMORTIZATION GAIN (LOSS) TOTAL INCOME EXTRAORDINARY AND ON DISPOSITION OF REVENUES (LOSS) ITEM IMPAIRMENT ASSETS - --------------------------------------------------------------------------------------------------------------------- (millions of dollars) 1999 United States 365.4 (77.9) (77.9) 325.5 1.8 Southeast Asia 93.0 25.1 25.1 19.2 -- South America 43.6 (8.0) (8.0) 26.2 (2.5) West Africa 21.2 3.5 3.5 4.9 -- Other reconciling items (12.9) (71.5) (108.0) 6.4 (.3) -------- --------- --------------- ------------ ---------------- 510.3 (128.8) (165.3) 382.2 (1.0) ======== ========= =============== ============ ================ 1998 United States 194.3 (78.8) (78.8) 179.4 (1.5) Southeast Asia 53.5 (14.5) (14.5) 20.4 -- South America 33.8 (6.2) (6.2) 13.1 -- West Africa 7.7 (25.5) (25.5) 2.4 -- Other reconciling items 1.4 (29.3) (37.9) 8.6 -- -------- --------- --------------- ------------ ---------------- 290.7 (154.3) (162.9) 223.9 (1.5) ======== ========= =============== ============ ================ 1997 United States 443.7 127.5 127.5 106.0 3.6 Southeast Asia 27.8 (2.9) (2.9) 7.3 -- South America 40.7 13.4 13.4 9.2 -- West Africa -- (1.7) (1.7) 0.2 -- Other reconciling items 1.9 (26.1) (40.7) 5.1 -- -------- --------- --------------- ------------ ---------------- 514.1 110.2 95.6 127.8 3.6 ======== ========= =============== ============ ================
For the year ended December 31, 1999 no individual purchaser accounted for 10% of the Company's consolidated revenues. For the year ended December 31, 1998 revenues from two purchasers accounted for 13% and 12%, respectively, of the Company's consolidated revenues and for the year ended December 31, 1997 one purchaser accounted for 11% of consolidated revenues. All of these amounts represent sales in the United States segment. The following table represents enterprise-wide information for long-lived assets. These assets include net property and equipment and other long-term assets (in millions of dollars):
December 31, - ----------------------------------------------------------- 1999 1998 - ----------------------------------------------------------- United States 1,352.0 419.4 Southeast Asia 166.2 151.9 South America 130.2 141.8 West Africa 41.3 29.9 --------- --------- 1,689.7 743.0 ========= =========
50 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE 11. SHAREHOLDERS' EQUITY. CONVERTIBLE PREFERRED STOCK, 7% SERIES. In 1997, the Company converted the 1.2 million outstanding shares of Convertible Preferred Stock, 7% Series (the "7% Preferred") for 2.3 million shares of common stock. The conversion of the 7% Preferred resulted in a non-cash reduction in earnings to common shares which is reflected as an $8.4 million convertible preferred repurchase premium in the Statement of Operations. $.732 SERIES A CONVERTIBLE PREFERRED STOCK. In the second quarter of 1997 the Company converted all 10.7 million outstanding shares of its $.732 Series A Convertible Preferred Stock (the "DECS") into 9.1 million shares of common stock. There was no charge to earnings as a result of the conversion of the DECS. PREFERRED STOCK. The Board of Directors of the Company is empowered, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more series, and to determine the number of shares in each series and the rights, preferences and limitations of each series. Among the specific matters which may be determined by the Board of Directors are the annual rate of dividends; the redemption price, if any; the terms of a sinking or purchase fund, if any; the amount payable in the event of any voluntary liquidation, dissolution or winding up of the affairs of the Company; conversion rights, if any; and voting powers, if any. COMMON STOCK. At December 31, 1999 the Company had 500.0 million shares authorized, 184.4 million shares issued, 182.9 million shares outstanding and 1.5 million shares in treasury. At December 31, 1998 the Company had 200.0 million shares authorized, 103.0 million shares issued, 102.2 million shares outstanding and 0.8 million shares in treasury. TREASURY STOCK. The Company's Board of Directors has authorized the Company to buy back up to $50.0 million of its common stock to meet the requirements of outstanding stock options and to satisfy the stock requirements of employee benefit plans. In 1999, 1998 and 1997, the Company purchased 1.6 million shares, 1.3 million shares and 0.1 million shares, for $11.6 million, $11.6 million and $0.5 million, respectively. In 1999 and 1998 the Company issued 0.9 million shares and 0.6 million shares, respectively, of treasury stock in connection with outstanding stock options and to meet certain requirements with respect to employee benefit plans. NOTE 12. STOCK OPTION PLANS. The Company has granted options and awards in the form of Restricted Stock, Bonus Stock, and Phantom Units, as such terms may be defined in the applicable plans, to its employees, officers and directors. Under the terms of the Santa Fe Snyder 1990 Incentive Stock Compensation Plan (the "1990 Plan") options and awards have been granted to officers, directors and key employees. Under the terms of the Santa Fe Snyder 1995 Incentive Stock Compensation Plan (the "1995 Plan"), the Company may grant options and awards with respect to not more than 1,000,000 shares of common stock per year to employees, other than executive officers, and directors. Under the terms of the Santa Fe Snyder 1999 Stock Compensation Retention Plan (the "Retention Plan"), awards in the form of Phantom Units may be made to certain executive officers. In addition, in connection with the Merger one-time grants were made to certain former employees and directors of Snyder Oil to replace options held under Snyder Oil's stock option plans. Collectively, these plans are referred to as the "Plans". Options granted under the terms of the 1990 Plan and the 1995 Plan have been granted at the average market price on the date of grant and have a ten-year term with vesting periods ranging from six months to three years. Awards under the Retention Plan convert into common shares two years from the date of grant. The options granted to the former Snyder Oil employees and directors are vested and expire under the same terms as under the Snyder Oil stock option plans. As of December 31, 1999 no additional options or awards can be granted under the 1990 Plan, no shares were available for options 51 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) or awards under the 1995 Plan and 0.1 million Phantom Units were available for awards under the Retention Plan. The following table summarizes the activity with respect to options and awards outstanding under the Plans during the years ended December 31, 1999, 1998 and 1997 (per share amounts in dollars):
1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE (THOUSANDS) PRICE (THOUSANDS) PRICE (THOUSANDS) PRICE - -------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 9,386.2 8.01 8,068.5 7.69 5,392.0 12.07 Grants 1,891.4 7.54 1,783.6 9.68 873.1 9.73 Merger grants 4,451.0 7.74 -- -- -- -- Revaluation due to Spin Off -- -- -- -- 3,119.0 7.27 Cancellations (322.6) 9.81 (222.0) 11.29 (919.7) 11.31 Exercises (976.2) 7.33 (243.9) 6.84 (395.9) 7.23 -------- -------- -------- Outstanding at end of year 14,429.8 7.90 9,386.2 8.01 8,068.5 7.69 ======== ======== ======== Exercisable at end of year 13,083.8 6,560.9 6,037.3 ======== ======== ======== Weighted average fair value of options granted during the year 4.85 4.88 5.73
The following table summarizes certain information with respect to options outstanding under the Plans at December 31, 1999 (per share amounts in dollars):
Options Outstanding Options Exercisable - --------------------------------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE REMAINING EXERCISE EXERCISE SHARES CONTRACTUAL PRICE SHARES PRICE RANGE OF EXERCISE PRICES (THOUSANDS) LIFE PER SHARE (THOUSANDS) PER SHARE - --------------------------------------------------------------------------------------------------- 2.75 to 5.99 3,480.9 3.6 years 5.27 3,480.9 5.27 6.00 to 10.99 9,600.9 5.5 years 8.22 8,254.9 8.29 11.00 to 14.25 1,348.0 4.7 years 12.41 1,348.0 12.32 ----------- ----------- 14,429.8 13,083.8 =========== ===========
During 1998 and 1997 the Company granted 0.1 million and 0.2 million, respectively, shares of restricted stock to certain employees and directors. In each of 1998 and 1997 the Company issued 0.2 million shares of restricted stock under its incentive compensation plan. Such restricted shares vested one-third per year over a three year period and the value of such shares at the grant date was being amortized over the vesting period. The unamortized portion of the awards at December 31, 1998 was $1.5 million. As a result of the Merger, all such shares vested and the unamortized portion of the awards was charged to expense. As a result of the Spin Off of Monterey in July 1997, all stock options outstanding at that time were adjusted to reflect the effect of the transaction on the value of the Company's common stock. The anti- 52 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) dilution formula utilized follows the Internal Revenue Service approved guidelines for adjusting Qualified Incentive Stock Options and took into account the average sales prices for the Company's common stock for a period of time before and after the Spin Off. As a result of the adjustment the number of options outstanding increased by a factor of 1.7045 and the strike price was reduced accordingly in order to preserve the value of either in the money or out of the money spread in existence at the time. The Company will receive the same overall consideration for the underlying securities upon exercise of the option. All outstanding Phantom Units were also adjusted utilizing the same formula. All other terms and conditions of the options and the Phantom Units remained unchanged. The Company has elected to continue to account for stock-based compensation costs in accordance with APB Opinion No. 25. If the Company had elected to adopt the fair value method of accounting for options under SFAS No. 123, earnings (loss) attributable to common shares and the related per share amounts would have been reduced as is reflected by the pro forma amounts in the following table (in millions of dollars, except per share data):
Year Ended December 31, - ---------------------------------------------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------- AS REPORTED Earnings (loss) attributable to common shares (124.9) (98.7) 42.7 Earnings (loss) per common share, basic and diluted (.82) (.96) .43 PROFORMA Earnings (loss) attributable to common shares (133.3) (102.4) 41.4 Earnings (loss) per common share, basic and diluted (.87) (1.00) .42
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: (i) expected dividend yield - 0.0%; (ii) expected stock price volatility - 35% to 42%; (iii) risk-free interest rate - 5% to 7%; and (iv) expected life of options - 10 years. NOTE 13. PENSION AND OTHER POSTRETIREMENT BENEFITS. The following disclosures regarding pension benefits represent the combination of three plans the Company offers its employees. These plans include (i) a defined benefit retirement plan (the "SFER Plan") covering substantially all salaried employees, (ii) a nonqualified supplemental plan (the "Supplemental Plan") which pays benefits to participants in the SFER Plan in those instances where the SFER Plan formula produces a benefit in excess of limits established by ERISA and The Tax Reform Act of 1986 and (iii) a pension plan for certain persons employed in foreign locations (the "Foreign Plan"). Disclosures regarding other benefits represent health care and life insurance benefits for substantially all employees who retire under the provisions of a Company-sponsored retirement plan and their dependents. 53 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The following table sets forth the status of those plans and benefits described above at December 31, 1999 and 1998 (in millions of dollars, except as noted):
Pension Benefits Other Benefits - --------------------------------------------------------------------------------- 1999 1998 1999 1998 - --------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year 48.7 42.2 8.1 6.6 Service cost 2.4 1.7 .7 .4 Interest cost 3.3 3.1 .6 .5 Contribution by plan participants -- -- -- .1 Merger 3.1 -- .8 -- Actuarial (gain) loss (2.0) 3.8 .6 1.0 Benefits paid (2.2) (2.1) (.7) (.5) --------- --------- --------- --------- Benefit obligation at end of year 53.3 48.7 10.1 8.1 --------- --------- --------- --------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 35.2 37.1 -- -- Actual return on plan assets 6.0 .2 -- -- Company contribution .1 -- .6 .4 Contribution by plan participants -- -- .1 .1 Benefits paid (2.2) (2.1) (.7) (.5) --------- --------- --------- --------- Fair value of plan assets at end of year 39.1 35.2 -- -- --------- --------- --------- --------- Funded status (14.2) (13.5) (10.1) (8.1) Contributions .1 -- .1 .1 Unrecognized net (gain) loss (.5) 4.4 .8 .2 Unrecognized prior service cost .4 .5 -- -- Unrecognized net transition (asset) obligation (.4) (.5) 2.1 2.3 --------- --------- --------- --------- Prepaid (accrued) benefit cost (14.6) (9.1) (7.1) (5.5) ========= ========= ========= ========= WEIGHTED AVERAGE ASSUMPTIONS AT YEAR - END Discount rate 7.50% 6.75% 7.50% 6.75% Expected return on plan assets 9.50% 9.50% Rate of compensation increase 4.75% 4.75% 4.75% 4.75% Health care trend rate 5.50% 6.00% EFFECTS OF CHANGES IN ASSUMED HEALTH CARE COST TREND RATE Effect of a one percentage point increase Effect on postretirement benefit obligation 1.0 .7 Effect on total of service and interest cost components .2 .1 Effect of a one percentage point decrease Effect on postretirement benefit obligation (.8) (.6) Effect on total of service and interest cost components (.2) (.1)
54 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Pension Plan Other Benefits - ---------------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------- COMPONENTS OF NET PERIODIC BENEFIT COST Service cost 2.4 1.7 1.9 .7 .4 .5 Interest cost 3.3 3.1 3.2 .6 .5 .5 Expected return on plan assets (3.2) (3.4) (3.3) -- -- -- Amortization of transition obligation -- -- (.1) .2 .2 .2 Amortization of loss (gain) -- (.1) -- -- -- -- Curtailment charges (credits) -- -- (2.4) -- -- .3 ---- ---- ---- ---- ---- ---- Net periodic (benefit) cost 2.5 1.3 (.7) 1.5 1.1 1.5 ==== ==== ==== ==== ==== ====
The aggregate projected benefit obligation, the aggregate accumulated benefit obligation and the aggregate fair value of plan assets for plans with benefit obligations in excess of plan assets were $53.3 million, $44.5 million and $39.1 million, respectively, as of December 31, 1999 and $48.7 million, $40.0 million and $35.2 million, respectively, as of December 31, 1998. SAVINGS PLAN The Company has a savings plan available to substantially all salaried employees and intended to qualify as a deferred compensation plan under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). The Company matches employee contributions for amounts up to 4% of each employee's base salary. In addition, if at the end of each fiscal year the Company's performance for such year has exceeded certain predetermined criteria, each participant will receive an additional matching contribution equal to 50% of the regular matching contribution. The Company's contributions to the 401(k) Plan, which are made in the form of the Company's common stock and charged to expense, totaled $1.6 million in 1999, $1.3 million in 1998 and $1.6 million in 1997. The Company also has a savings plan with respect to certain personnel employed in foreign locations. The plan is an unsecured creditor of the Company and at December 31, 1999, and 1998 and 1997, the Company's liability with respect to the plan totaled $0.4 million, $0.3 million and $0.2 million, respectively. NOTE 14. COMMITMENTS AND CONTINGENCIES. OIL AND GAS HEDGING. From time to time the Company hedges a portion of its oil and gas sales to provide a certain minimum level of cash flow from its sales of oil and gas. While the hedges are generally intended to reduce the Company's exposure to declines in market price, the Company's gain from increases in market price may be limited. The Company uses various financial instruments whereby monthly settlements are based on differences between the prices specified in the instruments and the settlement prices of certain futures contracts quoted on the New York Mercantile Exchange ("NYMEX") or certain other indices. Generally, in instances where the applicable settlement price is less than the price specified in the contract, the Company receives a settlement based on the difference; in instances where the applicable settlement price is higher than the specified price, the Company pays an amount based on the difference. The instruments utilized by the Company differ from futures contracts in that there is no contractual obligation which requires or allows for the future delivery of the product. Gains or losses on hedging activities are recognized in oil and gas revenues in the period in which the hedged production is sold. Crude oil sales hedges resulted in a $2.5 million decrease in revenues in 1999 and increases of $2.5 million and $2.2 million in 1998 and 1997, respectively. At December 31, 1999, the Company had open crude oil sales hedges on an average of 11,000 barrels per day through December 31, 2000. The instruments used have an average floor of $20.20 per barrel and an average ceiling of $25.06 per barrel. 55 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Under the terms of the instruments, if the aggregate average of the applicable daily settlement prices is below the floor, the Company will receive a settlement based on the difference, and if the aggregate average of the applicable daily settlement prices is above the ceiling, the Company will be required to pay an amount based on the difference. Based on the December 31, 1999 settlement price of the applicable NYMEX futures contracts, the Company's unrealized loss with respect to such hedges at December 31, 1999 was $1.8 million. The actual gains or losses realized by the Company from these hedges may vary significantly due to the volatility of the futures markets and other indices. At January 31, 2000 the Company had open oil sales hedges on an average of 17,300 barrels per day through December 31, 2000. The instruments used have an average floor of $20.19 per barrel and an average ceiling of $25.12 per barrel. Natural gas sales hedges resulted in a $3.0 million reduction in revenues in 1999. The Company had no natural gas sales hedges in 1998 or 1997 and had no open natural gas sales hedges at December 31, 1999. The Company has a long-term gas swap agreement that was entered into by Snyder Oil in 1994 to lock in the price difference between the Rocky Mountain and Henry Hub prices on a portion of its Rocky Mountain gas production. The contract covers 20,000 MMBtus per day through 2004. The long-term gas swap agreement had no effect on revenues in 1999. The unrealized gain with respect to the swap agreement at December 31, 1999 was $2.2 million. CRUDE OIL SALES CONTRACTS. In August 1999, the Company entered into a crude oil forward sales contract under the terms of which the Company is to deliver a total of 6.2 million barrels of crude oil to the purchaser, at specified monthly volumes, during the period from October 1999 through August 2002. In consideration the Company received a prepayment of $99.3 million, after deducting arrangement and other related costs. The prepayment is recognized in earnings when the crude oil is delivered. The balance of the prepayment related to undelivered crude oil is reflected on the balance sheet under the caption Deferred Revenues. In January 2000, the Company entered into a crude oil forward sales contract under the terms of which the Company is to deliver a total of 4.2 million barrels of crude oil to the purchaser, at specified monthly volumes, during the period from February 2000 through August 2002. In consideration the Company received a prepayment of $74.6 million, after deducting arrangement and other related costs. The prepayment will be recognized in earnings when the crude oil is delivered. The balance of the prepayment related to undelivered crude oil will be reflected on the consolidated balance sheet under the caption Deferred Revenues. The proceeds from the prepayment were used to pay a portion of the $160.0 million purchase price of certain proved oil and gas properties acquired in January 2000. ENVIRONMENTAL REGULATION. The Company's oil and gas operations are subject to stringent environmental regulation by government authorities. Such regulation has increased the costs of planning, designing, drilling, installing, operating and abandoning oil and gas wells and associated facilities. The Company has expended significant financial and managerial resources to comply with such regulations. Although the Company believes its operations and facilities are in general compliance with applicable environmental regulations, the risk of substantial costs and liabilities are inherent to oil and gas operations. It is possible that other developments, such as increasingly strict environmental laws, regulations and enforcement policies or claims for damages to property, employees, other persons and the environment resulting from the Company's operations, could result in significant costs and liabilities in the future. As it has in the past, the Company intends to fund the future costs of environmental compliance from operating cash flows. OPERATING LEASES. The Company has noncancellable agreements with terms ranging from one to ten years to lease office space, office equipment and certain production equipment in foreign locations. Minimum rental payments due under the terms of these agreements are: 2000 - $22.3 million, 56 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) 2001 - $16.0 million, 2002 - $9.4 million, 2003 - $5.0 million, 2004 - $4.8 million and $21.6 million thereafter. Rental expense under the terms of noncancellable agreements totaled $17.3 million in 1999, $15.2 million in 1998 and $10.8 million in 1997. OTHER MATTERS. In connection with the development of the Sierra Chata gas field in Argentina in which the Company has a 19.9% working interest, a gas contract with "take-or-pay" and "delivery-to-pay" obligations was executed in 1994 with a gas distribution company. There are other claims and actions, including certain other environmental matters, pending against the Company. In the opinion of management, the amounts, if any, which may be awarded in connection with any of these claims and actions could be significant to the results of operations or cash flows of any period but are not believed to be material to the Company's consolidated financial position. 57 SANTA FE SNYDER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) NOTE 16. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED).
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER YEAR - ------------------------------------------------------------------------------------------ (millions of dollars, except as noted) 1999(a) Revenues 68.2 112.3 157.0 172.8 510.3 Impairment of oil and gas properties -- 196.4 -- -- 196.4 Merger related costs -- 16.8 -- -- 16.8 Gross profit (loss)(b) (6.8) (191.5) 46.5 49.2 (102.6) Loss (gain) on disposition of assets .1 .1 .6 .2 1.0 Income (loss) from operations (12.2) (199.1) 40.0 42.5 (128.8) Income (loss) before extraordinary items (12.1) (143.8) 16.4 18.8 (120.7) Extraordinary item -- debt extinguishment costs -- (4.2) -- -- (4.2) Net income (loss) (12.1) (148.0) 16.4 18.8 (124.9) Earnings (loss) attributable to common shares (12.1) (148.0) 16.4 18.8 (124.9) Earnings (loss) attributable to common shares per share, basic and diluted (in dollars)(c) Earnings (loss) before extraordinary items (.12) (.99) .09 .10 (.79) Extraordinary item -- (.03) -- -- (.03) Earnings (loss) to common share (.12) (1.02) .09 .10 (.82) Weighted average shares outstanding (millions) 102.2 145.3 178.8 184.2 152.9 1998 Revenues 68.8 77.7 75.8 68.4 290.7 Impairment of oil and gas properties -- -- -- 87.8 87.8 Gross profit (loss)(b) (.9) 5.3 (18.9) (120.1) (134.6) Loss (gain) on disposition of assets -- 1.2 .2 .1 1.5 Income (loss) from operations (5.3) .7 (24.0) (125.7) (154.3) Net Income (loss) (.3) .4 (17.8) (81.0) (98.7) Earnings (loss) attributable to common shares (.3) .4 (17.8) (81.0) (98.7) Earnings (loss) attributable to common shares per share, basic and diluted (in dollars) -- -- (.17) (.79) (.96) Weighted average shares outstanding (millions) 102.7 102.9 102.6 102.2 102.6
- ------------ (a) Includes the results of operations of the properties acquired in the Merger effective May 1, 1999. (b) Revenues less operating expenses other than general and administrative. (c) The sum of the per share amounts per quarter does not equal the year due to the changes in the average number of common shares outstanding. 58 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) OIL AND GAS RESERVES AND RELATED FINANCIAL DATA Information with respect to the Company's oil and gas producing activities is presented in the following tables. Reserve quantities as well as certain information regarding future production and discounted cash flows were determined by independent petroleum consultants, Ryder Scott Company, for all years presented, with the exception of the Company's reserves on the Jabung Block in Southeast Asia at December 31, 1998, which were prepared by the Company. The following estimates of proved and proved developed reserve quantities and related standardized measure of discounted net cash flow are estimates only, and do no purport to reflect realizable values or fair market values of the Company's reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. OIL AND GAS RESERVES The following table sets forth the Company's net proved oil and gas reserves at December 31, 1996, 1997, 1998 and 1999 and the changes in net proved oil and gas reserves for the years ended December 31, 1997, 1998 and 1999.
Crude Oil and Liquids (MMBbls) Natural Gas (Bcf) - --------------------------------------------------------------------------------------------------------------------------------- SOUTHEAST SOUTH WEST SOUTHEAST SOUTH U.S. ASIA AMERICA AFRICA TOTAL U.S. ASIA AMERICA TOTAL - --------------------------------------------------------------------------------------------------------------------------------- Proved Reserves at December 31, 1996 275.3 8.9 15.3 -- 299.5 232.8 .2 26.4 259.4 Revisions of previous estimates 6.9 2.2 2.1 -- 11.2 22.7 -- 16.4 39.1 Improved recovery techniques 10.6 -- -- -- 10.6 -- -- -- -- Extensions, discoveries and other additions 1.0 15.6 3.9 4.4 24.9 34.9 -- 1.2 36.1 Purchases of minerals-in-place 3.9 -- 6.4 -- 10.3 7.0 -- -- 7.0 Sales of minerals-in-place -- -- -- -- -- (13.0) -- -- (13.0) Spin Off of Monterey Resources (205.8) -- -- -- (205.8) (11.6) -- -- (11.6) Production (18.3) (1.6) (1.8) -- (21.7) (56.5) (.1) (7.8) (64.4) ------ ------ ------- ------- ------- ------ ------- ------ ------- Proved Reserves at December 31, 1997 73.6 25.1 25.9 4.4 129.0 216.3 0.1 36.2 252.6 Revisions of previous estimates (7.5) 11.7 (5.2) -- (1.0) 9.4 -- 6.3 15.7 Extensions, discoveries and other additions 1.8 22.0 0.9 9.1 33.8 54.6 -- 3.7 58.3 Purchases of minerals-in-place 1.3 6.4 13.9 -- 21.6 18.8 -- -- 18.8 Sales of minerals-in-place -- -- -- -- -- (2.3) -- -- (2.3) Production (7.7) (4.5) (2.0) (0.6) (14.8) (55.5) (.1) (9.4) (65.0) ------ ------ ------- ------- ------- ------ ------- ------ ------- Proved Reserves at December 31, 1998 61.5 60.7 33.5 12.9 168.6 241.3 -- 36.8 278.1 Revisions of previous estimates 17.8 (9.5) 2.5 (1.7) 9.1 3.7 (.4) 12.5 15.8 Improved recovery techniques -- -- .7 -- .7 -- -- .4 .4 Extensions, discoveries and other additions 2.0 9.2 1.6 0.3 13.1 145.8 99.1 23.9 268.8 Merger with Snyder Oil 17.7 -- -- -- 17.7 424.0 -- -- 424.0 Purchases of minerals-in-place 19.2 -- -- -- 19.2 172.2 -- -- 172.2 Sales of minerals-in-place (.2) -- -- -- (.2) (.5) -- -- (.5) Production (9.1) (5.3) (1.9) (1.1) (17.4) (96.2) -- (9.5) (105.7) ------ ------ ------- ------- ------- ------ ------- ------ ------- Proved Reserves at December 31, 1999 108.9 55.1 36.4 10.4 210.8 890.3 98.7 64.1 1,053.1 ====== ====== ======= ======= ======= ====== ======= ====== =======
59 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Crude Oil and Liquids (MMBbls) Natural Gas (Bcf) - -------------------------------------------------------------------------------------------------------------------------------- SOUTHEAST SOUTH WEST SOUTHEAST SOUTH U.S. ASIA AMERICA AFRICA TOTAL U.S. ASIA AMERICA - -------------------------------------------------------------------------------------------------------------------------------- Proved Developed Reserves at December 31, 1996 224.1 6.5 8.5 -- 239.1 193.6 .2 25.9 1997 68.0 21.8 15.2 -- 105.0 184.8 .1 35.6 1998 56.5 39.5 12.3 1.8 110.1 194.8 -- 35.0 1999 90.7 24.1 12.6 7.1 134.5 713.4 -- 36.2 TOTAL - ----------------------------------------------- Proved Developed Reserves at December 31, 1996 219.7 1997 220.5 1998 229.8 1999 749.6
Proved reserves are estimated quantities of crude oil and natural gas which geological and engineering data indicate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Southeast Asia reserves include Indonesian reserves which represent an entitlement to gross reserves in accordance with a production sharing contract. These reserves include estimated quantities allocable to the Company for recovery of operating costs as well as quantities related to the Company's net equity share after recovery of costs. Accordingly, these quantities are subject to fluctuations with an inverse relationship to the price of oil. If oil prices increase, the reserve quantities attributable to the recovery of operating costs decline. Although this reduction would be offset partially by an increase in the net equity share, the overall effect would be a reduction of reserves attributable to the Company. The Company has certain commitments with respect to the delivery of natural gas which the Company believes it can fulfill from its proved reserves and supply contracts with other companies. At December 31, 1999, 1.7 million barrels of crude oil reserves and 11.5 billion cubic feet of natural gas reserves were subject to a 90% net profits interest held by Santa Fe Energy Trust. STANDARDIZED MEASURE OF FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVE QUANTITIES The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas (with consideration of price changes only to the extent provided by contractual arrangements) to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10 percent a year to reflect the estimated timing of the future cash flows. Estimated future cash flows represent an estimate of future net cash flows from the production of proved reserves using estimated sales prices and estimates of the production costs, ad valorem and production taxes, and future development costs necessary to produce such reserves. No deduction has been made for depletion, depreciation or any indirect costs such as general corporate overhead or interest expense. The sales prices used in the calculation of estimated future net cash flows are based on the prices in effect at year end with consideration of price changes only to the extent provided by contractual arrangements in existence at year-end. Each period presented reflects the effects of gas sold from the Sierra Chata field sold under long-term contracts in Argentina and Chile for prices ranging between $1.15 and $1.35 per MMBtu. Gas production in excess of the contract requirements is sold on the local spot market. Such prices have been held constant except for known and determinable escalation. 60 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) Operating costs and ad valorem and production taxes are estimated based on current costs with respect to producing oil and gas properties. Future development costs are based on the best estimate of such costs assuming current economic and operating conditions. Income tax expense is computed based on applying the appropriate statutory tax rate to the excess of future cash inflows less future production and development costs over the current tax basis of the properties involved. While applicable investment tax credits and other permanent differences are considered in computing taxes, no recognition is given to tax benefits applicable to future exploration costs or the activities of the Company that are unrelated to oil and gas producing activities. The information presented with respect to estimated future net revenues and cash flows and the present value thereof is not intended to represent the fair value of oil and gas reserves. Actual future sales prices and production and development costs may vary significantly from those in effect at year end and actual future production may not occur in the periods or amounts projected. This information is presented to allow a reasonable comparison of reserve values prepared using standardized measurement criteria and should be used only for that purpose. The standardized measure of future net cash flows relating to the Company's proved oil and gas reserve quantities at December 31, 1999, 1998 and 1997 is presented in the following tables (in millions of dollars, except as noted):
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - ------------------------------------------------------------------------------------------------ 1999 Future cash inflows 4,391.4 1,632.4 908.1 254.7 7,186.6 Future development and production costs (1,767.8) (988.1) (340.9) (85.2) (3,182.0) Future income tax expenses (576.1) (233.6) (143.7) (58.8) (1,012.2) --------- ---------- -------- ------- --------- Net future cash flows 2,047.5 410.7 423.5 110.7 2,992.4 Discount at 10% for timing of cash flows (936.7) (202.0) (199.1) (25.1) (1,362.9) --------- ---------- -------- ------- --------- Present value of future net cash flows from proved reserves 1,110.8 208.7 224.4 85.6 1,629.5 ========= ========== ======== ======= ========= Present value of pretax future net cash flows from proved reserves 1,423.1 325.1 298.3 131.2 2,177.7 ========= ========== ======== ======= ========= Average sales prices Oil ($/Barrel) 23.24 23.97 22.78 24.47 23.38 Natural gas ($/Mcf) 2.13 3.66 1.23 -- 2.22 (TABLES CONTINUED ON FOLLOWING PAGE)
61 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - ------------------------------------------------------------------------------------------------ 1998 Future cash inflows 1,067.1 582.8 344.5 135.5 2,129.9 Future development and production costs (535.7) (378.9) (250.6) (94.9) (1,260.1) Future income tax expenses (31.5) (18.7) (16.1) (4.2) (70.5) --------- ---------- -------- ------- --------- Net future cash flows 499.9 185.2 77.8 36.4 799.3 Discount at 10% for timing of cash flows (183.8) (71.9) (44.7) (16.9) (317.3) --------- ---------- -------- ------- --------- Present value of future net cash flows from proved reserves 316.1 113.3 33.1 19.5 482.0 ========= ========== ======== ======= ========= Present value of pretax future net cash flows from proved reserves 336.0 126.0 34.7 21.8 518.5 ========= ========== ======== ======= ========= Average sales prices Oil ($/Barrel) 9.94 10.14 8.84 10.55 9.81 Natural gas ($/Mcf) 1.94 -- 1.29 -- 1.85 1997 Future cash inflows 1,653.8 412.9 431.0 69.9 2,567.6 Future development and production costs (775.5) (225.3) (266.4) (49.6) (1,316.8) Future income tax expenses (208.2) (54.7) (24.4) (5.6) (292.9) --------- ---------- -------- ------- --------- Net future cash flows 670.1 132.9 140.2 14.7 957.9 Discount at 10% for timing of cash flows (259.2) (55.0) (61.0) (3.0) (378.2) --------- ---------- -------- ------- --------- Present value of future net cash flows from proved reserves 410.9 77.9 79.2 11.7 579.7 ========= ========== ======== ======= ========= Present value of pretax future net cash flows from proved reserves 538.6 111.9 93.1 16.1 759.7 ========= ========== ======== ======= ========= Average sales prices Oil ($/Barrel) 16.30 16.59 14.96 16.00 16.06 Natural gas ($/Mcf) 2.26 1.05 1.21 -- 2.11
62 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) The following tables set forth the changes in the present value of estimated future net cash flows from proved reserves during 1999, 1998 and 1997 (in millions of dollars):
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - ------------------------------------------------------------------------------------------------ 1999 Balance at beginning of year 316.1 113.3 33.1 19.5 482.0 --------- ---------- -------- ------- --------- Increase (decrease) due to Sales of oil and gas, net of production costs of $153.6 million (256.6) (57.8) (27.8) (13.7) (355.9) Net changes in prices and production costs 406.9 291.2 265.9 115.0 1,079.0 Extensions, discoveries and improved recovery 114.1 72.0 14.1 .6 200.8 Purchase of mineral-in-place 734.1 -- -- -- 734.1 Sales of minerals-in-place (3.5) -- -- -- (3.5) Development costs incurred 133.3 33.0 13.2 17.3 196.8 Changes in estimated volumes 46.3 (146.2) 8.3 (13.7) (105.3) Changes in estimated development costs (116.7) (3.5) (14.0) 1.3 (132.9) Interest factor -- accretion of discount 29.2 10.3 4.0 2.5 46.0 Income taxes (292.3) (103.7) (72.4) (43.2) (511.6) --------- ---------- -------- ------- --------- 794.8 95.3 191.3 66.1 1,147.5 --------- ---------- -------- ------- --------- Balance at end of year 1,110.9 208.6 224.4 85.6 1,629.5 ========= ========== ======== ======= ========= 1998 Balance at beginning of year 410.9 77.9 79.2 11.7 579.7 --------- ---------- -------- ------- --------- Increase (decrease) due to Sales of oil and gas, net of production costs of $115.0 million (129.6) (25.9) (17.6) -- (173.1) Net changes in prices and production costs (228.7) (102.9) (86.2) (20.8) (438.6) Extensions, discoveries and improved recovery 52.8 134.9 10.9 17.2 215.8 Purchase of mineral-in-place 43.3 61.2 4.9 -- 109.4 Sales of minerals-in-place (8.2) -- -- -- (8.2) Development costs incurred 130.1 68.5 28.3 12.4 239.3 Changes in estimated volumes (0.9) (113.8) (9.6) 1.3 (123.0) Changes in estimated development costs (105.6) (22.8) 5.0 (6.1) (129.5) Interest factor -- accretion of discount 44.3 15.3 6.0 1.8 67.4 Income taxes 107.7 20.9 12.2 2.0 142.8 --------- ---------- -------- ------- --------- (94.8) 35.4 (46.1) 7.8 (97.7) --------- ---------- -------- ------- --------- Balance at end of year 316.1 113.3 33.1 19.5 482.0 ========= ========== ======== ======= ========= (TABLES CONTINUED ON FOLLOWING PAGE)
63 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - --------------------------------------------------------------------------------------------- 1997 Balance at beginning of year 1,363.8 15.1 98.2 -- 1,477.1 --------- --------- ------- ------ --------- Increase (decrease) due to Sales of oil and gas, net of production costs of $177.1 million (271.4) (10.8) (26.9) -- (309.1) Net changes in prices and production costs (444.7) 16.0 (73.8) -- (502.5) Extensions, discoveries and improved recovery 107.0 64.0 7.3 16.1 194.4 Purchase of mineral-in-place 24.0 -- 32.2 -- 56.2 Spin off of Monterey Resources (932.2) -- -- -- (932.2) Sales of minerals-in-place (36.3) -- -- -- (36.3) Development costs incurred 325.7 30.7 54.6 5.2 416.2 Changes in estimated volumes 28.4 11.7 14.7 -- 54.8 Changes in estimated development costs (294.9) (25.4) (44.9) (5.2) (370.4) Interest factor -- accretion of discount 80.6 2.2 10.2 -- 93.0 Income taxes 460.9 (25.6) 7.6 (4.4) 438.5 --------- --------- ------- ------ --------- (952.9) 62.8 (19.0) 11.7 (897.4) --------- --------- ------- ------ --------- Balance at end of year 410.9 77.9 79.2 11.7 579.7 ========= ========= ======= ====== =========
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES The following tables includes all costs incurred, whether capitalized or charged to expense at the time incurred (in millions of dollars):
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - --------------------------------------------------------------------------------------------- 1999 Property acquisition costs Unproved 14.5 1.3 -- 2.4 18.2 Proved 262.7 -- -- 1.0 263.7 Snyder Oil Acquisition 771.9 -- -- -- 771.9 Exploration costs 58.4 18.6 6.2 4.0 87.2 Development costs 135.9 34.6 25.1 19.0 214.6 --------- --------- ------- ------ --------- 1,243.4 54.5 31.3 26.4 1,355.6 ========= ========= ======= ====== ========= 1998 Property acquisition costs Unproved 13.6 3.3 1.9 -- 18.8 Proved 60.2 42.2 7.1 .8 110.3 Exploration costs 36.3 21.8 8.4 24.4 90.9 Development costs 73.6 30.7 27.0 15.0 146.3 --------- --------- ------- ------ --------- 183.7 98.0 44.4 40.2 366.3 ========= ========= ======= ====== ========= 1997 Property acquisition costs Unproved 14.9 .8 .3 1.2 17.2 Proved 185.2 -- 37.6 -- 222.8 Exploration costs 48.5 8.6 4.1 4.4 65.6 Development costs 115.6 30.7 17.2 5.2 168.7 --------- --------- ------- ------ --------- 364.2 40.1 59.2 10.8 474.3 ========= ========= ======= ====== =========
64 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES The following table sets forth information concerning capitalized costs at December 31, 1999 and 1998 related to the Company's oil and gas operations (in millions of dollars):
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - ------------------------------------------------------------------------------------------------ 1999 Oil and gas properties Unproved 91.3 17.8 5.2 3.6 117.9 Proved 2,527.6 258.4 182.4 48.6 3,017.0 Accumulated amortization of unproved properties (50.8) (8.7) (2.8) (1.2) (63.5) Accumulated depletion, depreciation and impairment of proved properties (1,262.0) (105.1) (68.8) (9.7) (1,445.6) --------- ---------- -------- ------- --------- 1,306.1 162.4 116.0 41.3 1,625.8 ========= ========== ======== ======= ========= 1998 Oil and gas properties Unproved 74.7 16.5 11.9 1.9 105.0 Proved 1,427.1 219.7 157.9 30.3 1,835.0 Accumulated amortization of unproved properties (41.7) (6.4) (3.2) (1.6) (52.9) Accumulated depletion, depreciation and impairment of proved properties (1,050.6) (89.4) (45.7) (5.2) (1,190.9) --------- ---------- -------- ------- --------- 409.5 140.4 120.9 25.4 696.2 ========= ========== ======== ======= =========
65 SANTA FE SNYDER CORPORATION SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES The following table sets forth the Company's results of operations from oil and gas producing activities for the years ended December 31, 1999, 1998 and 1997 (in millions of dollars):
SOUTHEAST SOUTH WEST U.S. ASIA AMERICA AFRICA TOTAL - ---------------------------------------------------------------------------------------------- 1999 Revenues 351.8 93.0 43.5 21.2 509.5 Production costs (72.1) (35.4) (17.0) (7.6) (132.1) Production taxes (23.2) -- (.4) -- (23.6) Exploration (31.1) (12.5) (6.1) (4.5) (54.2) Depletion, depreciation, amortization and impairments (325.5) (19.2) (26.2) (4.9) (375.8) Gain (loss) on disposition of assets 1.8 -- (2.5) -- (0.7) --------- ---------- -------- ------- ------ (98.3) 25.9 (8.7) 4.2 (76.9) Income tax (expense) benefit 34.4 (14.5) 2.9 (1.7) 21.1 --------- ---------- -------- ------- ------ (63.9) 11.4 (5.8) 2.5 (55.8) ========= ========== ======== ======= ====== 1998 Revenues 195.8 53.5 33.4 7.7 290.4 Production costs (60.5) (27.9) (15.9) (8.2) (112.5) Production taxes (12.4) -- (.3) -- (12.7) Exploration (21.7) (18.3) (9.4) (21.7) (71.1) Depletion, depreciation, amortization and impairments (179.5) (20.4) (13.1) (2.4) (215.4) Gain (loss) on disposition of assets (1.5) -- -- -- (1.5) --------- ---------- -------- ------- ------ (79.8) (13.1) (5.3) (24.6) (122.8) Income tax (expense) benefit 27.9 3.3 1.8 9.8 42.8 --------- ---------- -------- ------- ------ (51.9) (9.8) (3.5) (14.8) (80.0) ========= ========== ======== ======= ====== 1997 Revenues 446.2 27.5 40.6 -- 514.3 Production costs (128.9) (16.7) (13.3) -- (158.9) Production taxes (17.8) -- (.4) -- (18.2) Cost of crude oil purchased (22.0) -- -- -- (22.0) Exploration (37.9) (6.3) (3.7) (1.2) (49.1) Depletion, depreciation, amortization and impairments (106.1) (7.3) (9.2) (.2) (122.8) Gain (loss) on disposition of assets 3.6 -- -- -- 3.6 --------- ---------- -------- ------- ------ 137.1 (2.8) 14.0 (1.4) 146.9 Income tax (expense) benefit (48.0) .8 (4.9) .6 (51.5) --------- ---------- -------- ------- ------ 89.1 (2.0) 9.1 (.8) 95.4 ========= ========== ======== ======= ======
Income taxes are computed by applying the appropriate statutory rate to the results of operations before income taxes. Applicable tax credits and allowances related to oil and gas producing activities have been taken into account in computing income tax expenses. No deduction has been made for indirect cost such as corporate overhead or interest expense. 66 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 ON THE 9TH DAY OF MARCH 2000. SANTA FE SNYDER CORPORATION (Registrant) * By:________________________________ MARK A. JACKSON EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE - ------------------------------------------------------ -------------------------------------------- * __________________________________ Chairman of the Board and Director JOHN C. SNYDER * __________________________________ Chief Executive Officer and Director JAMES L. PAYNE (Principal Executive Officer) * __________________________________ Executive Vice President and Chief Financial MARK A. JACKSON Officer (Principal Financial Officer) * __________________________________ Director WILLIAM E. GREEHEY * __________________________________ Director JOHN A. HILL * __________________________________ Director MELVYN N. KLEIN * __________________________________ Director HAROLD R. LOGAN, JR. * __________________________________ Director ALLAN V. MARTINI * __________________________________ Director JAMES E. MCCORMICK * __________________________________ Director REUBEN F. RICHARDS * __________________________________ Director E.T. STORY * __________________________________ Director KATHRYN D. WRISTON * __________________________________ Vice President and Controller (Principal MICHAEL S. WILKES Accounting Officer) Dated March 9, 2000 *By:/s/DAVID L. HICKS DAVID L. HICKS, ATTORNEY-IN-FACT
67 INDEX OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------------------------ ---------------------------------------------------------------------------- 3(a) -- Restated Certificate of Incorporation of Santa Fe Snyder Corporation ("SFS Corp.") (incorporated by reference to Exhibit 3.1 of the Form 8-A/A Registration Statement of SFS Corp. filed on May 11, 1999, Commission File No. 001-07667). 3(b) -- Bylaws of SFS Corp., as amended June 30, 1999 (incorporated by reference to Exhibit 3(b) to SFS Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 4(a) -- Senior Indenture dated as of June 1, 1999 between SFS Corp. and The Bank of New York, as Trustee, relating to SFS Corp.'s senior debt securities, including form of senior debt security (incorporated by reference to Exhibit 4.1 to SFS Corp.'s Form 8-K filed on June 15, 1999). 4(b) -- First Supplemental Indenture dated as of June 14, 1999 to Senior Indenture dated June 1, 1999 between SFS Corp. and The Bank of New York, as Trustee, relating to SFS Corp.'s 8.05% Senior Notes due 2004, including form of 8.05% Senior Notes due 2004 (incorporated by reference to Exhibit 4.2 to SFS Corp.'s Form 8-K filed on June 15, 1999). 4(c) -- Certificate of Trust of SFS Capital Trust I (incorporated by reference to Exhibit 4.3 to Form S-3 Registration Statement of SFS Corp., Commission File No. 333-78265). 4(d) -- Declaration of Trust of SFS Capital Trust I dated as of May 11, 1999 (incorporated by reference to Exhibit 4.4 to Form S-3 Registration Statement of SFS Corp., Commission File No. 333-78265). 4(e) -- Certificate of Trust of SFS Capital Trust II (incorporated by reference to Exhibit 4.5 to Form S-3 Registration Statement of SFS Corp., Commission File No. 333-78265). 4(f) -- Declaration of Trust of SFS Capital Trust II dated as of May 11, 1999 (incorporated by reference to Exhibit 4.6 to Form S-3 Registration Statement of SFS Corp., Commission File No. 333-78265). 4(g) -- Indenture dated as of June 10, 1997 between Snyder Oil Corporation ("Snyder Oil") and Texas Commerce Bank National Association relating to Snyder Oil's 8 3/4% Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 4.1 to Snyder Oil's Form 8-K dated June 10, 1997 [Commission File No. 1-10509]). 4(h) -- First Supplemental Indenture dated as of June 10, 1997 to Indenture dated as of June 10, 1997 between Snyder Oil and Texas Commerce Bank National Association relating to Snyder Oil's 8 3/4% Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 4.2 to Snyder Oil's Form 8-K dated June 10, 1997 [Commission File No. 1-10509]). 4(i) -- Second Supplemental Indenture dated as of June 10, 1997 to Indenture dated as of June 10, 1997 between Snyder Oil and Texas Commerce Bank National Association relating to Snyder Oil's 8 3/4% Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 4.3 to Snyder Oil's Form 8-K dated June 10, 1997). 10(a) -- SFER, Inc. Incentive Compensation Plan, as amended. (incorporated by reference to Exhibit 10(a) to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998). 10(b) -- SFER, Inc. 1990 Incentive Stock Compensation Plan, Third Amendment and Restatement (incorporated by reference to Exhibit 10(a) to SFER, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31,1996). 10(c) -- Examples of Employment Agreements entered into with executive officers of SFER, Inc. (incorporated by reference to Exhibit 10(d) to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996). 10(d) -- Example of Indemnification Agreements with SFER Inc.'s directors and officers (incorporated by reference to Exhibit 10(b) to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995). 10(e) -- SFER, Inc. Supplemental Retirement Plan effective as of December 4, 1990 (incorporated by reference to Exhibit 10(h) to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996).
68 10(f) -- SFER, Inc. Deferred Compensation Plan, effective as of January 1, 1991 as amended and restated, effective February 1, 1994 (incorporated by reference to Exhibit 10(p) to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993). 10(g) -- Agreement for the Allocation of Consolidated Federal Income Tax Liability and State and Local Taxes among the members of the SFER, Inc. Affiliated Group dated November 19, 1996 (incorporated by reference to Exhibit 10.2 to Monterey Resources, Inc.'s (Commission File No. 1-12311) Annual Report on Form 10-K for the year ended December 31, 1996). 10(h) -- Agreement Concerning Taxes and Tax Indemnifications upon Spin Off, dated November 19, 1996, between Monterey Resources, Inc. and SFER, Inc. (incorporated by reference to Exhibit 10.3 to Monterey Resources, Inc.'s (Commission File No. 1-12311) Annual Report on Form 10-K for the year ended December 31, 1996). 10(i) -- Agreement Regarding Shelf Registration Statement dated March 24, 1995, between SFER, Inc. and HC Associates, GKH Partners, L.P., GKH Investments, L.P., Ernest H. Cockrell Texas Testamentary Trust and Carol Cockrell Jennings Texas Testamentary Trust (incorporated by reference to Exhibit 10(o) to SFER, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995). 10(j) -- Conveyance and Contribution Agreement dated as of November 1, 1996, between Monterey Resources, Inc. and SFER, Inc. (incorporated by reference to Monterey Resources, Inc.'s (Commission File No. 1-12311) Annual Report on Form 10-K for the year ended December 31, 1996). 10(k) -- Credit Agreement dated as of May 5, 1999 among SFS Corp., the banks signatory thereto, and Chase Bank of Texas, N.A. as Administrative Agent; Bank of America National Trust and Savings Association as Syndication Agent; Wells Fargo Bank (Texas), N.A. as Documentation Agent; Bank One, Texas, N.A. as Managing Agent; ABN AMRO Bank N.V., Credit Lyonnais New York Branch and Salomon Brothers Holding Company Inc. as Co-Agents (incorporated by reference to Exhibit 10(a) to SFS, Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 10(l) -- 364-Day Credit Agreement dated as of May 5, 1999 among SFS Corp., the banks signatory thereto, and Chase Bank of Texas, N.A. as Administrative Agent; Bank of America National Trust and Savings Association as Syndication Agent; Wells Fargo Bank (Texas), N.A. as Documentation Agent; Bank One, Texas, N.A. as Managing Agent; ABN AMRO Bank N.V., Credit Lyonnais New York Branch and Salomon Brothers Holding Company Inc. as Co-Agents (incorporated by reference to Exhibit 10(b) to SFS, Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 10(m) -- SFS Corp., 1999 Stock Compensation Retention Plan (incorporated by refer- ence to Exhibit 10(a) to SFS Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999). *10(n) -- Amendment dated November 17, 1999 to Credit Agreement dated as of May 5, 1999 among SFS Corp., the banks signatory thereto, and Chase Bank of Texas, N.A. as Administrative Agent; Bank of America National Trust and Savings Association as Syndication Agent; Wells Fargo Bank (Texas), N.A. as Documentation Agent; Bank One, Texas, N.A. as Managing Agent; ABN AMRO Bank N.V., Credit Lyonnais New York Branch and Salomon Brothers Holding Company Inc. as Co-Agents. *10(o) -- Snyder Oil Supplemental Executive Retirement Plan, effective January 12, 1999. *10(p) -- Restricted Stock Grant Agreement with Chief Executive Officer dated December 14, 1999. *21 -- Subsidiaries of the registrant. *23(a) -- Consent of PricewaterhouseCoopers LLP *23(b) -- Consent of Ryder Scott Company *24 -- Powers of Attorney *27 -- Financial Data Schedule
- ------------ * Filed herewith 69 EX-10.N 2 EXHIBIT 10.N AGREEMENT AND FIRST AMENDMENT TO CREDIT AGREEMENT (November 17, 1999) THIS AGREEMENT AND FIRST AMENDMENT TO CREDIT AGREEMENT (this "AGREEMENT"), dated as of November 17, 1999, is made and entered into by and among SANTA FE SNYDER CORPORATION (the "COMPANY"), a Delaware corporation; the financial institutions listed on the signature pages hereto; and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("CHASE TEXAS"), acting in its capacity as agent (in such capacity, the "AGENT"). The Company, the financial institutions parties hereto, and the Agent are herein sometimes called the "PARTIES". RECITALS: 1. The Company, the Agent, certain of the Parties, and other financial institutions entered into a Credit Agreement dated as of May 5, 1999 (the "CREDIT AGREEMENT"). 2. SECTION 2.9 of the Credit Agreement permits the Company to effectuate an increase in the Aggregate Commitment by adding to the Credit Agreement one or more commercial banks or other financial institutions, or by allowing one or more Banks to increase its Commitment under the Credit Agreement, PROVIDED certain criteria are met. Pursuant to SECTION 2.9, this increase can be effected without the consent of the Banks whose Commitments do not change. The Company has notified the Agent of its desire to exercise its rights under said SECTION 2.9. 3. The Parties desire to reflect the Company's exercise of its rights under SECTION 2.9 of the Credit Agreement, to adopt the Credit Agreement as their own agreement and to amend the Credit Agreement in certain respects to reflect the increase in the Aggregate Commitment, to provide for additional financial institutions to become Banks, to change the Commitments of certain Banks, and to make certain other changes thereto, all as more fully described below; and to ratify, confirm and continue the Credit Agreement as so adopted and amended. Banks which are not parties to this Agreement shall retain their existing Commitments under the Credit Agreement. AGREEMENTS: NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Parties, the Parties agree as follows: 1. AMENDMENT AND ADOPTION OF THE CREDIT AGREEMENT. The Parties hereby adopt and continue the Credit Agreement as their own agreement. By executing this Agreement, each of the Parties agrees to be bound by the terms of the Credit Agreement as hereby adopted and amended. Each of the financial institutions executing this Agreement shall have the rights of and be obligated to perform the obligations of a Bank under the Credit Documents and, together with the other Banks, shall be considered a "Bank" for all purposes of the Credit Documents. 2. AMENDMENT OF DEFINITIONS. SECTION 1.1 of the Credit Agreement is amended to amend the following definitions: "COMMITMENT" shall mean, as to any Bank, the obligation, if any, of such Bank to extend credit to the Company in the form of Loans and Letters of Credit in an aggregate principal amount at any one time outstanding up to but not exceeding the amount set forth opposite such Bank's name (i) in the case of Banks which are not parties to the First Amendment, on the signature pages of this Agreement under the caption "Commitment" or in such Bank's Assignment Agreement and (ii) in the case of Banks which are parties to the First Amendment, on the signature pages of the First Amendment under the caption "Commitment" or in its Assignment Agreement (in each case of (i) or (ii) above, as the same may be reduced from time to time or terminated pursuant to SECTION 2.3, or modified pursuant to SECTION 12.6). 3. ADDITIONAL DEFINITION. There is hereby added to SECTION 1.1 of the Credit Agreement the following definition: ""FIRST AMENDMENT" shall mean the Agreement and First Amendment to Credit Agreement dated as of November 17, 1999." 4. AMENDMENT OF SECTION 2.7 OF THE CREDIT AGREEMENT. SECTION 2.7 of the Credit Agreement is hereby amended by deleting from the first sentence thereof the words "as originally in effect". 5. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and warrants to the Agent and each Bank as follows: (a) no Default has occurred and is continuing; (b) there has been no Material Adverse Change since the date of the Credit Agreement; (c) all representations and warranties made in each Credit Document are true and correct in all material respects on and as of the date of this Agreement, with the same force and effect as if made on and as of such date (except as the same are expressly stated in the Credit Documents to be made only as of a specific earlier date, in which case the same shall have been true and correct in all material respects as of such earlier date); and (d) no Eurodollar Loan is outstanding on the date of this Agreement. 6. CONDITIONS PRECEDENT. This Agreement shall become effective on the date (the "EFFECTIVE DATE") that each of the following conditions shall have been satisfied or waived in the discretion of the Agent: 2 (a) CORPORATE ACTION AND STATUS. The Agent shall have received copies of the resolutions of the Board of Directors of the Company, certified by the Secretary of the Company, for all corporate action taken by the Company authorizing the execution, delivery and performance of this Agreement and the Notes. (b) INCUMBENCY. The Company shall have delivered to the Agent a certificate in respect of the name and signature of each officer who (i) is authorized to sign on its behalf this Agreement and the Notes and (ii) will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the other Credit Documents. The Agent and each Bank may conclusively rely on such certificates until they receive notice in writing from the Company to the contrary. (c) NOTES. The Agent shall have received the appropriate Note of the Company for each Bank, in the amount of each Bank's Commitment, duly completed and executed. (d) CREDIT DOCUMENTS; EXPENSES. The Company shall have duly executed and delivered this Agreement and the other Credit Documents provided for herein to which it is a party, and each such Credit Document shall be in Proper Form. Each such Credit Document shall be in substantially the form furnished to the Banks prior to their execution of this Agreement, together with such non-material changes therein as the Agent may approve in its discretion. The Company shall have paid to the Agent all fees and expenses, including those for the benefit of the Banks, in the amounts previously agreed upon in writing among the Company and the Agent and all amounts due under SECTION 12. (e) COUNTERPARTS. The Agent shall have received counterparts of this Agreement duly executed and delivered by or on behalf of each of the parties thereto (or, in the case of any Bank as to which the Agent shall not have received such a counterpart, the Agent shall have received evidence satisfactory to it of the execution and delivery by such Bank of a counterpart hereof). (f) CONSENTS. The Agent shall have received evidence satisfactory to it in its discretion that all consents of each Governmental Authority and of each other Person, if any, required in connection with the execution, delivery and performance of this Agreement and the Notes have been received and remain in full force and effect. (g) OTHER DOCUMENTS. The Agent shall have received such other documents consistent with the terms of this Agreement and relating to the transactions contemplated hereby as the Agent may reasonably request. (h) NO DEFAULT. No Default shall have occurred and be continuing. 3 (i) NO LEGAL BAR. Such effectiveness shall not violate any Legal Requirement applicable to the Agent or any Bank. PROVIDED, HOWEVER, that this Agreement shall not become effective or be binding on any Party unless all of the foregoing conditions are satisfied not later than November 30, 1999. The Agent shall promptly notify the Company and the Banks of the Effective Date, and such notice shall be conclusive and binding on all Parties. All provisions and payments required by this SECTION 6 are subject to the provisions of SECTION 12.8 of the Credit Agreement. 7. ACKNOWLEDGMENTS; APPOINTMENT AND AUTHORIZATION. Each of The Sanwa Bank Ltd., The Bank of Tokyo-Mitsubishi, Ltd. and Credit Suisse First Boston (collectively, the "NEW BANKS") hereby (a) acknowledges receipt of copies of the Credit Agreement and the most recent financial statements of the Company, and (b) acknowledges and agrees that (1) it has, independently and without reliance upon the Agent or any other Bank and based on the financial statements of the Company delivered to such New Bank by the Company and such other documents and information as such New Bank has deemed appropriate, made its own credit analysis and decision to become a Bank and (2) it is a Bank for all purposes of the Credit Agreement, with all of the rights, liabilities and obligations of a Bank to the extent of its Commitment. Each New Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the Notes as are delegated to the Agent by the terms of the Credit Agreement or the Notes, together with all such powers as are reasonably incidental thereto, and agrees with the Agent to all matters set forth in SECTION 11 of the Credit Agreement. 8. COLLATERAL. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in the Credit Agreement. 9. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE CREDIT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY. 10. RATIFICATION. Except as expressly amended hereby, the Credit Agreement, as hereby adopted and amended, is in all respects ratified, confirmed and continued as the agreement of the Parties and is, and shall continue to be, in full force and effect and binding upon the Parties. The Company hereby agrees and acknowledges that all of its liabilities and obligations under the Credit Agreement, as hereby adopted and amended, remain in full force and effect and binding upon it as of the date of this Agreement. 11. DEFINITIONS AND REFERENCES. Unless otherwise defined herein, terms used herein which are defined in the Credit Agreement shall have the meanings therein ascribed to them. The term "Agreement" as used in the Credit Agreement and the term "Credit Agreement" as used in this Agreement or in any other instrument, document or writing furnished to the Agent or any Bank by or on behalf of the Company shall mean the Credit Agreement as hereby amended. 4 12. EXPENSES; ADDITIONAL INFORMATION. The Company shall pay to the Agent on demand (i) all out-of-pocket expenses (including fees and disbursements of special counsel to the Agent and expenses of syndication) in connection with the preparation and administration of this Agreement, any waiver or consent hereunder and any amendment hereof, and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. 13. SEVERABILITY. If any term or provision of this Agreement or the application thereof to any Person or circumstances shall, to any extent, be deemed invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to Persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and this Agreement shall be valid and enforced to the fullest extent permitted by applicable law. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions thereof or affecting the validity or enforceability of such provision in any other jurisdiction and, to this end, the provisions of this Agreement are severable. 14. MISCELLANEOUS. This Agreement (a) shall be binding upon and inure to the benefit of the Company, the Agent and the Banks and their respective successors and assigns (however, the Company may not assign its rights hereunder without the express prior written consent of all Banks); (b) may be modified or amended only in the manner prescribed for amendments to the Credit Agreement in SECTION 12.5 of the Credit Agreement; (c) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (TO THE EXTENT PERMITTED BY LAW, OTHER THAN ITS CONFLICT OF LAW RULES) AND OF THE UNITED STATES OF AMERICA; (d) may be executed in several counterparts, and by the Parties on separate counterparts, and each counterpart, when so executed and delivered, shall constitute an original agreement, and all such separate counterparts shall constitute but one and the same agreement, and (e) together with the Credit Agreement and the Notes, embodies the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior agreements, consents and understandings relating to such subject matter. The headings herein shall be accorded no significance in interpreting this Agreement. 15. ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE CREDIT AGREEMENT AND THE NOTES, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AS TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 5 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers effective as of the date provided herein. SANTA FE SNYDER CORPORATION, a Delaware corporation By:_______________________________________ Mark A. Jackson, Executive Vice President and Chief Financial Officer Address for Notices: Santa Fe Snyder Corporation 840 Gessner, Suite 1400 Houston, Texas 77024 Telephone: (713) 507-5000 Telecopy: (713) 507-5341 Attention: Treasurer COMMITMENT: CHASE BANK OF TEXAS, NATIONAL $43,000,000 ASSOCIATION, Individually and as Administrative Agent By:_______________________________________ Russell A. Johnson Vice President Address for Notices: Domestic and Eurodollar Lending Offices: Chase Bank of Texas, National Association Chase Bank of Texas, 1 Chase Manhattan Plaza National Association New York, NY 10081 600 Travis Street, 20th Floor Telephone: (212) 552-7446 Houston, Texas 77002-8086 Telecopy: (212) 552-5777 Attention: Peter Licalzi E-Mail Address: debbie.rockower@chase.com Telephone: (713) 216-8869 Attn.: Debbie Rockower Telecopy: (713) 216-4117 E-Mail Address: peter.licalzi@chase.com WITH A COPY TO: - -------------- Chase Bank of Texas, National Association 600 Travis, 20th Floor Houston, Texas 77002-8086 Attn.: Peter Licalzi Telephone: (713) 216-8869 Telecopy: (713) 216-4117 E-Mail Address: ____________________ Attn.: Peter Licalzi COMMITMENT: ABN AMRO BANK N.V., INDIVIDUALLY AND AS A $35,375,000 CO-AGENT By:_______________________________________ Robert J. Cunningham Group Vice President By:_______________________________________ Jamie A. Conn Vice President ADDRESS FOR ALL REQUIRED FINANCIAL INFORMATION: ABN AMRO Bank N.V. 208 South LaSalle Street, Suite 1500 Chicago, Illinois 60604 Attention: Credit Administration Telephone: (312) 992-5123 Fax: (312) 992-5111 E-Mail Address: _____________________ WITH A COPY TO: ABN AMRO Bank N.V. Three Riverway, Suite 1700 Houston, Texas 77056 Attention: Robert J. Cunningham Telephone: (713) 964-3351 Fax: (713) 961-1699 E-Mail Address: robert.cunningham@abnamro.com LOAN ADMINISTRATION CONTACTS: ABN AMRO Bank N.V. 208 South LaSalle Street, Suite 1500 Chicago, Illinois 60604 Attention: Loan Administration Telephone: (312) 992-5152 Fax: (312) 992-5157 E-Mail Address: _____________________ LETTER OF CREDIT CONTACTS: ABN AMRO Bank N.V. 200 West Monroe Street, Suite 1100 Chicago, Illinois 60606-5002 Attention: Trade Services Department Telephone: (888) 226-5113 Fax: (888) 226-5119 E-Mail Address:____________________________ COMMITMENT: BANK ONE, TEXAS, N.A., Individually and as $43,000,000 Co-Documentation Agent By:_______________________________________ Charles Kingswell-Smith Senior Vice President CREDIT CONTACT: Domestic and Eurodollar 910 Travis Street Lending Offices: Houston, Texas 77002-4330 Attn.: Mr. Charles Kingswell-Smith Bank One, Texas, N.A. Telephone: (713) 751-7803 910 Travis Street Telecopy: (713) 751-3544 Houston, Texas 77002 E-Mail Address: _____________________ ADMINISTRATIVE CONTACTS - BORROWINGS, PAYMENTS, INTEREST, ETC.: Tax Withholding Information: 910 Travis Street Houston, Texas 77002-4225 Tax ID No.: Attn.: Ms. Karen Smith Telephone: (713) 751-3872 Telecopy: (713) 751-3590 REMITTANCE INSTRUCTIONS: Bank One, Texas, N.A. ABA Transmit No.: 111000614 Name of Account: Loan Services Account No.: 1065151010 Attn.: ___________________ Re: Santa Fe Snyder Corporation COMMITMENT: BANK OF AMERICA, NATIONAL $43,000,000 ASSOCIATION, formerly known as Bank of America, National Trust and Savings Association, Individually and as Syndication Agent By:_______________________________________ Ronald E. McKaig Managing Director Domestic and Eurodollar CREDIT CONTACT: Lending Offices: Bank of America, National Association 333 Clay Street, Suite 4550 Bank of America, National Association Houston, Texas 77002 901 Main St. Attn.: Ronald E. McKaig Dallas, TX 75202-3714 Telephone: (713) 651-4881 Telecopy: (713) 651-4888 E-Mail: Ronald.McKaig@Bankamerica.com ADMINISTRATIVE CONTACTS - BORROWINGS, PAYMENTS, INTEREST, ETC.: 901 Main St. Dallas, TX 75202-3714 Attn.: Linda Adjei-Kontoh Telephone: (214) 209-3621 Telecopy: (214) 290-9433 COMPETITIVE BID CONTACT: 1455 Market Street San Francisco, CA 94103 Attn.: Carolyn Alberts Telephone: (415) 622-2020 Telecopy: (415) 622-2237 PAYMENT INSTRUCTIONS: Bank of America, National Association ABA Routing No.: 111000012 Acct. No.: 1292000883 COMMITMENT: WELLS FARGO BANK (TEXAS), N.A., $35,375,000 Individually and as Co-Documentation Agent By:_______________________________________ Brian K. Otis Assistant Vice President ADDRESS FOR BUSINESS MATTERS: Domestic and Eurodollar 1000 Louisiana, 3rd Floor Lending Offices: Houston, Texas 77002 Attention: Brian K. Otis Wells Fargo Bank Telephone: (713) 319-1316 1000 Louisiana, 3rd Floor Telecopy: (713) 739-1087 Houston, Texas 77002 E-Mail Address: otisbrik@wellsfargo.com ADDRESS FOR ADMINISTRATIVE MATTERS: 1000 Louisiana, 3rd Floor Houston, Texas 77002 Attention: Maria Valdivia Telephone: (713) 319-1378 Telecopy: (713) 739-1087 E-Mail Address: valdivia@wellsfargo.com 201 Third Street, 8th Floor San Francisco, CA 94103 Attn.: Oscar Enriquez Telephone: (415) 477-5425 Telecopy: (415) 979-0675 REMITTANCE INSTRUCTIONS: Wells Fargo Bank ABA #: 121000248 Name of Account: Santa Fe Snyder Additional Info.: Loan Accounting Dept.- Syndication COMMITMENT: BANK OF MONTREAL $20,000,000 By:_______________________________________ M. A. Bauman Director Address for Notices: Domestic and Eurodollar 700 Louisiana, Suite 4400 Lending Offices: Houston, Texas 77002 Attention: Mr. James Whitmore 115 S. LaSalle Street, 11th Floor Telephone: 713/223-4400 Chicago, Illinois 60603 Telecopy: 713/223-4007 E-Mail Address: _____________________ ADMINISTRATIVE MATTERS: 115 S. LaSalle Street, 11th Floor Chicago, Illinois 60603 Attn.: Mr. C. Reynolds Telephone: (312) 750-3771 Telecopy: (312) 750-6061 PAYMENT INSTRUCTIONS: Harris Trust & Savings Bank ABA #071000288 For Credit To: Bank of Montreal, Chicago Branch Attn.: C. Reynolds Reference: Santa Fe Snyder Corporation COMMITMENT: THE INDUSTRIAL BANK OF JAPAN, $20,000,000 LIMITED, NEW YORK BRANCH By:_______________________________________ Name:_____________________________________ Title:____________________________________ Address for Notices: Domestic and Eurodollar Three Allen Center, Suite 4850 Lending Offices: 333 Clay Street Houston, Texas 77002 The Industrial Bank of Japan, Limited, Attn.: Mr. Dan Davis, Vice President New York Branch Telephone: (713) 651-9444 ext. 103 1251 Avenue of the Americas Telecopy: (713) 651-9209 New York, NY 10020-1104 WITH A COPY TO: The Industrial Bank of Japan, Limited, New York Branch 1251 Avenue of the Americas New York, NY 10020-1104 Attn.: Mr. Robert Cumming, Credit Administration Telephone: (212) 282-4067 Telecopy: (212) 282-4480/(212) 282-4250 PAYMENT INSTRUCTIONS: (VIA FED) The Industrial Bank of Japan, Limited, New York Branch ABA#: 026008345 Reference: SANTA FE SYNDER CORPORATION COMMITMENT: DEUTSCHE BANK AG, NEW YORK BRANCH $32,500,000 A/O CAYMAN ISLANDS BRANCH By:_______________________________________ Name:_____________________________________ Title:____________________________________ By:_______________________________________ Name:_____________________________________ Title:____________________________________ Address for Notices: DOMESTIC LENDING OFFICE: 31 W. 52nd Street Deutsche Bank AG New York, NY 10019 New York Branch Attn.: Scott Weber 31 W. 52nd Street Telephone: (212) 759-6756 New York, NY 10019 Telecopy: (212) 759-6736 Telecopy: (212) 469-4138/4139 WITH A COPY TO: EURODOLLAR LENDING OFFICE: Deutsche Bank AG Deutsche Bank AG New York Branch Cayman Island Branch 31 W. 52nd Street c/o New York Branch New York, NY 10019 31 W. 52nd Street Attn.: Ms. Donna Quilty New York, NY 10019 Telephone: (212) 469-8196 Telecopy: (212) 469-4138/4139 Telecopy: (212) 469-8173 OPERATION CONTACT: Deutsche Bank AG New York Branch 31 W. 52nd Street New York, NY 10019 Attn.: Joe Gyurindak Telephone: (212) 469-4107 Telecopy: (212) 469-4138/4139 PAYMENT INSTRUCTIONS: Deutsche Bank AG New York Branch ABA#: 026003780 Reference: Santa Fe Snyder COMMITMENT: CREDIT LYONNAIS NEW YORK BRANCH, $35,375,000 Individually and as a Co-Agent By:_______________________________________ Philippe Soustra Senior Vice President CREDIT CONTACT: Domestic and Eurodollar 1000 Louisiana, Suite 5360 Lending Offices: Houston, Texas 77002 Attn.: Jeffrey Baker Credit Lyonnais New York Branch Telephone: (713) 753-8711 1301 Avenue of the Americas Telecopy: (713) 751-0307 or (713)751-0421 New York, NY 10019 E-Mail Address: _____________________ BACKUP CONTACT: 1000 Louisiana, Suite 5360 Houston, Texas 77002 Attn.: John Falbo Telephone: (713) 753-8704 Telecopy: (713) 751-0307 or (713) 751-0421 ADMINISTRATIVE CONTACTS - BORROWINGS, PAYMENTS, INTEREST, ETC.: 1000 Louisiana, Suite 5360 Houston, Texas 77002 Attn.: Bernadette Archie Telephone: (713) 753-8723 Telecopy: (713) 759-9766 or (713) 751-0421 PAYMENT INSTRUCTIONS: Credit Lyonnais New York ABA No.: 026008073 Account No.: 01-88179-3701-00-179 Ref.: Santa Fe Snyder COMMITMENT: THE BANK OF NEW YORK $20,000,000 By:_______________________________________ Peter W. Keller Vice President CREDIT CONTACT: Domestic and Eurodollar One Wall Street, 19th Floor Lending Offices: New York, NY 10286 Attn.: Peter W. Keller, Vice President The Bank of New York Telephone: (212) 635-7861 One Wall Street, 19th Floor Telecopy: (713) 635-7552 Energy Division E-Mail Address: p.keller@bankofny.com New York, NY 10286 ADMINISTRATIVE CONTACTS - BORROWINGS, PAYMENTS, INTEREST, ETC.: Tax Withholding Information: One Wall Street, 19th Floor New York, NY 10286 Tax ID No.: 13-5160382 Attn.: Lisa Williams Telephone: (212) 635-7535 Telecopy: (212) 635-7552 REMITTANCE INSTRUCTIONS: ----------------------- The Bank of New York ABA Transmit No.: 021000018 Name of Account: Commercial Loan Dept. GLA No.: 111556 Ref.: Account Name COMMITMENT: SALOMON BROTHERS HOLDING $35,375,000 COMPANY INC., Individually and as a Co-Agent By:_______________________________________ Timothy Freeman Managing Director Domestic and Eurodollar CREDIT CONTACT: Lending Offices: 633 W. 5th Street, 63rd Floor Los Angeles, CA 90071 __________________________ Attn.: Sara Ahmed, Assistant Vice President __________________________ Telephone: (213) 833-2376 __________________________ Telecopy: (213) 833-2381 E-Mail Address: _____________________ BACK-UP CREDIT CONTACT: 633 W. 5th Street, 63rd Floor Los Angeles, CA 90071 Telephone: (213) 833-2376 Telecopy: (213) 833-2381 Attn.: Michael Leyland ADMINISTRATIVE CONTACTS - BORROWINGS, PAYMENTS, INTEREST, ETC.: 2 Pennsway, Suite 200 New Castle, DE 19720 Attn.: Tammy DeCourcelle Telephone: (302) 894-6018 Telecopy: (302) _______________ PAYMENT INSTRUCTIONS: Chase Manhattan Bank New York, NY ABA Transmit No.: 021-000-021 Acct. Name: Salomon Brothers Holding Co., Inc. Account No.: 066 296 722 Attn.: Tammy DeCourcelle Re: Santa Fe Snyder, Bank Loan Dept. COMMITMENT: THE SANWA BANK, LIMITED $20,000,000 By:_________________________________________ C. Lawrence Murphy, Senior Vice President Address for Notices: Domestic and Eurodollar Lending Offices: The Sanwa Bank, Limited 1200 Smith Street, Suite 2670 The Sanwa Bank, Limited Houston, Texas 77002 55 East 52nd Street Telephone: (713) 652-3190 New York, New York 10055 Telecopy: (713) 654-1462 Attention: Mr. C. Lawrence Murphy E-Mail Address: clyderedford@worldnet.att.net Telephone: (212) 339-6380 Attn.: Mr. Clyde Redford Telecopy: (212) 754-2360 WITH A COPY TO: The Sanwa Bank, Limited 1200 Smith Street, Suite 2670 Houston, Texas 77002 Telephone: (713) 652-3190 Telecopy: (713) 654-1462 E-Mail Address: clyderedford@worldnet.att.net Attn.: Mr. Clyde Redford COMMITMENT: THE BANK OF TOKYO-MITSUBISHI, LTD. $15,000,000 By:_______________________________________ Name:____________________________________ Title:_____________________________________ Address for Notices: Domestic and Eurodollar Lending Offices: The Bank of Tokyo-Mitsubishi, Ltd. 1100 Louisiana, Suite 2800 The Bank of Tokyo-Mitsubishi, Ltd. Houston, Texas 77010 1100 Louisiana, Ste. 2800 Telephone: (713) 655-3845/3815 Houston, Texas 77010 Telecopy: (713) 655-3855/658-0116 Attention: J. M. McIntyre E-Mail Address: jmcintyre@btmny.com Telephone: (713) 655-3845 Attn.: John McIntyre/Michael Meiss Telecopy: (713) 655-3855 E-Mail Address: jmcintyre@btmny.com WITH A COPY TO: _________________________________ _________________________________ _________________________________ Attn.: __________________________ Telephone: ______________________ Telecopy: _______________________ E_Mail Address: _________________ Attn.: __________________________ COMMITMENT: CREDIT SUISSE FIRST BOSTON $10,000,000 By:_______________________________________ Name:_____________________________________ Title:____________________________________ By:_______________________________________ Name:_____________________________________ Title:____________________________________ Address for Notices: Domestic and Eurodollar Lending Offices: Credit Suisse First Boston __________________________ _______________________________ __________________________ _______________________________ Telephone:________________ _______________________________ Telecopy:_________________ Attention: ____________________ E-Mail Address: ______________________ Telephone: ___________________ Attn.: ___________________ Telecopy: ____________________ E-Mail Address: _______________ WITH A COPY TO: _______________________________ _______________________________ _______________________________ Attn.:_________________________ Telephone:_____________________ Telecopy:______________________ E-Mail Address:________________ Attn.:_________________________ EX-10.O 3 EXHIBIT 10.O SNYDER OIL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS ARTICLE I -- DEFINITIONS ................................................... 1 ARTICLE II -- BENEFITS ..................................................... 1 ARTICLE III -- ADMINISTRATION .............................................. 2 ARTICLE IV -- CLAIMS PROCEDURES ............................................ 3 ARTICLE V -- AMENDMENT AND TERMINATION OF PLAN ............................. 4 i SNYDER OIL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN This unfunded Supplemental Executive Retirement Plan, effective as of January 12, 1999, is hereby adopted and established by the Snyder Oil Corporation (the "Company") and will be maintained by the Company for the purpose of providing benefits for certain individuals as provided herein. ARTICLE I DEFINITIONS I.1 "Board" shall mean the Board of Directors of the Company. I.2 "Code" shall mean the Internal Revenue code of 1986, as amended from time to time. I.3 "Company" shall mean Snyder Oil Corporation and any of its subsidiaries or affiliated business entities designated by the Board as participating entities. I.4 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as from time to time amended. I.5 "Normal Retirement Age" shall mean age 55. I.6 "Participant" shall mean John Snyder, the current chief executive officer of the Company and all management or highly-compensated employees of the Company who have been identified as influential within the Company and selected to participate in the Plan by the Board of Directors of the Company. I.7 "Plan" shall mean the Snyder Oil Corporation Supplemental Executive Retirement Plan, as from time to time amended or restated. ARTICLE II BENEFITS II.l Upon the retirement or termination of employment, for any reason, of a Participant on or after his Normal Retirement Age, he shall be entitled to a normal retirement benefit paid each month in an amount equal to $21,750. The normal retirement benefit shall be payable each month beginning with the month the first day of which coincides with or immediately follows the month of the Participant's retirement or termination of employment. The normal retirement benefit shall be paid each month until and including the month of the Participant's death. If the Participant is survived by a spouse, the spouse shall be entitled to a monthly benefit calculated in accordance with Section 2.2. 2 II.2 If a Participant dies, his spouse at the time he originally became a Participant shall be entitled to a monthly benefit equal to $14,507. The spousal pension benefit shall be payable each month beginning with the month the first day of which immediately follows the month of the Participant's death. The spousal pension benefit shall be paid each month until and including the month of the spouse's death. The spousal pension benefit shall be paid regardless of whether the Participant's death occurs while he is still employed by the Company as long as the Participant would be entitled to a monthly benefit pursuant to 2.1 if his termination occurs before his death. ll.3 Notwithstanding the foregoing, the Participant or the Participant's spouse if receiving a spousal retirement benefit, may request at any time on or after the Participant's termination of employment, if the Company so agrees in its sole and absolute discretion, that the actuarial present value of any benefits expected to be paid including spousal retirement benefits under this Plan, as determined in accordance with the appropriate actuarial factors and interest rates in effect at the beginning of the calendar year for an immediate annuity upon a plan termination under Pension Benefit Guaranty Corporation requirements, be immediately paid to the Participant or the surviving spouse if such spouse is currently collecting a spousal retirement benefit, in a lump sum in cash. ARTICLE III ADMINISTRATION III.l The right of a Participant or the Participant's spouse to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company. The Plan at all times shall be considered entirely unfunded both for tax purposes and for purposes of Title I of ERISA. Any funds invested hereunder shall continue for all purposes to be part of the general assets of the Company and available to its general creditors in the event of bankruptcy or insolvency. Notwithstanding the foregoing, a rabbi trust or rabbi trusts shall be established, substantially in the form attached hereto, in connection with the Plan in order to hold amounts contributed thereto. Any benefits which may be payable pursuant to this Plan are not subject in any manner to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of a Participant or a Participant's spouse. The Plan constitutes a mere promise by the Company to make benefit payments in the future. No interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. III.2 The Plan shall be administered by the Board, which shall have the authority, duty and power to interpret and construe the provisions of the Plan as the Board deems appropriate including the authority to determine eligibility for benefits under the Plan. The Board shall have the duty and responsibility of maintaining records, making the requisite calculations and disbursing the payments hereunder. The interpretations, determinations, regulations and calculations of the Board shall be final and binding on all persons and parties concerned. 3 III.3 The Board shall be titled to rely on all tables, valuations, certificates, opinions, data and reports furnished by an actual , accountant, controller, counsel or other person employed or retained by the Company with respect to the Plan. III.4 The Board shall furnish individual annual statements of accrued benefits to each Participant, or Participant's spouse, in such form as determined by the Board or as required by law. III.5 The sole rights of a Participant or a Participant's spouse under this Plan shall be to have this Plan administered according to its provisions and to receive whatever benefits he or she may be entitled to hereunder. Further, the adoption and maintenance of this Plan shall not be construed as creating any contract of employment between the Company and any Participant. The Plan shall not affect the right of the Company to deal with any Participants in employment respects, including their hiring, discharge, compensation, and conditions of employment. III.6 The Company may from time to time establish rules and procedures which it determines to be necessary for the proper administration of the Plan. III.7 The Company shall require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Company, expressly to assume an agree to pay the benefits accrued under this Plan as of the date of such succession in the same manner and to the same extent as the Company would have been required if no such succession had taken place. In any event, however, the provisions of this Plan shall be binding upon the corporation or other entity resulting from such purchase, merger, consolidation or other transaction and this Section 3.7 shall apply to the successor in the event of any subsequent purchase, merger, consolidation or other transaction. The Plan may not be amended to eliminate or alter the requirements of this Section 3.7. III.8 Each Participant or Participant's spouse, as the case may be, shall keep the Company informed of his or her current address. III.9 All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the State of Texas to the extent not preempted by federal law. III.10 The Company shall pay all benefits arising under this Plan and all costs, charges and expenses relating thereto. ARTICLE IV CLAIMS PROCEDURES IV.1 For purposes of handling claims with respect to this Plan, the "Claims Reviewer" shall be the Company, unless another person or organizational unit is designated by the Company as Claims Reviewer. 4 IV.2 An initial claim for benefits under the Plan must be made by the Participant or the Participant's spouse, as the case may be. Not later than 7 days after receipt of such a claim, the Claims Reviewer will render a written decision on the claim to the claimant, unless special circumstances require the extension of such 7-day period. If such extension is necessary, the Claims Reviewer shall provide the Participant or the Participant's spouse with written notification of such extension before the expiration of the initial 7-day period. Such notice shall specify the reason or reasons for such extension and the date by which a final decision can be expected. In no event shall such extension exceed a period of 7 days from the end of the initial 7-day period. In the event the Claims Reviewer denies the claim of a Participant or the Participant's spouse in whole or in part, the Claims Reviewer's written notification shall specify, in a manner calculated to be understood by the claimant, the reason for denial; a reference to the Plan or other document or form that is the basis for the denial; a description of any additional material or information necessary for the claimant to perfect the claim; an explanation as to why such information or material is necessary; and an explanation of the applicable claims procedure. Should the claim be denied in whole or in part and should the claimant be dissatisfied with the Claims Reviewer's disposition of the claimant's claim, the claimant may have a full and fair review of the claim by the Company upon written request therefor submitted by the claimant or the claimant's duly authorized representative and received by the Company within 60 days after the claimant receives written notification that the claimant's claim has been denied. In connection with such review, the claimant or the claimant's duly authorized representative shall be entitled to review pertinent documents and submit the claimant's views as to the issues, in writing. The Company shall act to deny or accept the claim within 7 days after receipt of the claimant's written request for review unless special circumstances require the extension of such 7-day period. If such extension is necessary, the Company shall provide the claimant with written notification of such extension before the expiration of such initial 7-day period. In all events, the Company shall act to deny or accept the claim within 14 days of the receipt of the claimant's written request for review. The action of the Company shall be in the form of a written notice to the claimant and its contents shall include all of the requirements for action on the original claim. In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Article IV. ARTICLE V AMENDMENT AND TERMINATION OF PLAN The Company reserves the right to amend or terminate the Plan subject to the requirements of Section 3.7 and notification of each Participant and each Participant's spouse receiving benefits pursuant to the Plan. Notification will be by first class mail, addressed to each Participant or Participant's spouse at his or her last known address, or by other notice acknowledged in writing by the participant. Any amounts the Participant or the Participant's spouse would be entitled to if the Participant's employment terminated as of the effective date of such amendment or termination shall remain subject to the provisions of the Plan and distribution will not be accelerated because of the termination of the Plan. No amendment or termination shall directly or indirectly reduce or eliminate a Participant's and/or Participant's spouse's right to a benefit the Participant and/or the Participant's 5 spouse would be entitled to if the Participant's employment terminated as of the effective date of such amendment or termination. IN WITNESS WHEREOF, the Company, acting by and through its officers hereunto duly authorized has executed this instrument, this 30th day of April, 1999, but to be effective as set forth above. SNYDER OIL CORPORATION By: JOHN H. KARNES Name: John H. Karnes Title: Vice President 6 EX-10.P 4 EXHIBIT 10.P SANTA FE SNYDER CORPORATION December 14, 1999 James L. Payne Chief Executive Officer RE: RESTRICTED STOCK GRANT Dear Mr. Payne: I am pleased to inform you that you have been granted the right to receive shares of Restricted Stock under the Santa Fe Snyder Corporation Incentive Stock Compensation Plan 2000 (the "Plan") as provided below upon the approval of the Plan by the stockholders of the Company: 1. Restricted Stock Grant # 1999-1 Effective Grant Date December 9, 1999 Number of Shares Granted 345,324 2. Subject to the further provisions of this Agreement, the shares of Restricted Stock shall become vested (no longer subject to forfeiture or restrictions on transfer) as follows: one-third upon the first anniversary of the Effective Grant Date; an additional one-third on the second anniversary of the Effective Grant Date; and the final one-third on your 65th birthday. In addition, the shares of Restricted Stock shall become 100% vested upon the first to occur of the following (a) the Company ceases to be an independent, publicly traded company, (b) the termination of your employment due to your death or Disability, and (c) the Board removing you as the Chief Executive Officer of the Company other than for Cause. As used herein, "Disability" means you are entitled to receive disability benefits under a Company long-term disability plan or Social Security, and "Cause" means your conviction for a felony involving moral turpitude. Except as provided in (a) above, you shall not become vested upon a Change of Control. 3. Except to the extent vesting has occurred pursuant to paragraph 2 above, the shares of Restricted Stock shall be forfeited upon your termination of employment for any reason other than as provided in paragraph 2 above. 4. During the period the shares of Restricted Stock remain subject to forfeiture, (i) they may not be pledged, assigned or otherwise transferred by you (other than by will or laws of descent and distribution), (ii) you will be entitled to receive any dividends paid with respect to the shares, and (iii) you will be entitled to vote the shares. 5. Pursuant to your direction, the Company shall satisfy its tax withholding obligations with respect to the vesting of the shares of Restricted Stock by withholding that number of whole shares of Common Stock having an aggregate Fair Market Value equal to, or exceeding by less than one whole share, the amount of such tax withholding obligation, with the amount of any fractional share in excess of the required withholding amount paid to you in cash by the Company. Alternatively, you may elect to satisfy their tax withholding obligations by a cash payment to the Company and receive the full number of vested shares or you may elect to use any combination of share withholdings and cash. 6. Notwithstanding anything in this Agreement or the Plan to the contrary, if it shall be determined that the vesting or payment of the grant under this Agreement would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then the Company shall pay you such additional amount of cash as necessary to put you in the same economic position you would have been in had the vesting or payment of this grant not been subject to such excise tax. This paragraph shall be interpreted and applied in the manner that is most favorable to you. 7. The certificate to be issued in respect of the shares of Restricted Stock granted you under this Agreement shall be registered in your name and held in escrow by the Company. This grant of shares of Restricted Stock is conditioned upon your endorsing in blank a stock power for the Restricted Stock. 8. Nothing in the Agreement shall confer any right on you to continue employment with the Company or an Affiliate nor restrict the Company or an Affiliate from terminating your employment for any reason. 9. The shares of Restricted Stock are subject to the terms of the Plan, as approved by the stockholders, which terms are hereby incorporated by reference. In the event of a conflict between the terms of this Agreement and the Plan, the Plan shall be the controlling document, without exception. Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to them in the Plan. 10. Notwithstanding anything in this Agreement to the contrary, prior to approval of the Plan by the stockholders of the Company, this Agreement shall also evidence a tandem grant (not under the Plan) to you of 345,324 phantom shares of Company stock on the same vesting terms as set forth above, except that upon vesting such phantom shares shall be payable in shares of Company stock acquired on the open market, treasury stock, cash of equivalent value or any combination thereof, as determined by the Committee in its discretion. In the event of your death, your designated beneficiary or, if none, your estate will be entitled to receive this payment. If the stockholders approve the Plan, upon such approval this tandem grant of phantom 2 shares of Company stock is hereby automatically canceled. To the extent the phantom shares become vested prior to the stockholders' approval of the Plan, such vesting shall automatically cancel an equal number of the tandem grant of shares of Restricted Stock under the Plan. 11. As consideration for this grant, you agree that (i) certain Employment Agreement between you and the Company, dated as of December 31, 1996, is hereby terminated in full effective for all purposes as of the Effective Grant Date and (ii) you will not be entitled to any cash severance payments under any Company severance program, but you shall continue to be eligible to receive all other benefits, if any, provided under such severance program(s). 12. This grant shall be void and of no effect unless you execute and return this Agreement to the undersigned. The attached copy of this Agreement is for your records. SANTA FE SNYDER CORPORATION By:_________________________________ Name: William E. Greehey Title: Chairman, Compensation and Benefits Committee of the Board of Directors Agreed to: By: _____________________ JAMES L. PAYNE 3 EX-21 5 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Santa Fe Snyder Corporation has 59 wholly-owned active subsidiaries, which are involved in the exploration for and development and production of crude oil and natural gas. Thirteen subsidiaries conduct operations in the United States and 46 subsidiaries conduct operations in foreign areas. EX-23.A 6 EXHIBIT 23(A) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-37175, 33-44541, 33-44542, 33-58613, 33-59253, 33-59255, 333-07949, 333-34135, 333-34161, 333-34165, 333-47847, 333-63711 and 333-71595) and Form S-3 (File No. 333-78265) of Santa Fe Snyder Corporation (formerly Santa Fe Energy Resources, Inc.) of our report dated January 28, 2000 relating to the consolidated financial statements, which appears in this Form 10-K. PRICEWATERHOUSECOOPERS LLP Houston, Texas March 9, 2000 EX-23.B 7 EXHIBIT 23(B) CONSENT OF EXPERTS As petroleum engineers, we hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-37175, 33-44541, 33-44542, 33-58613, 33-59253, 33-59255, 333-07949, 333-34135, 333-34161, 333-34165, 333-47847, 333-63711 and 333-71595) and Form S-3 (File No. 333-78265) of our oil and gas reserve reports as of December 31, 1995, December 31, 1996, December 31, 1997, December 31, 1998 and December 31, 1999 included in the Santa Fe Snyder Corporation Form 10-K for the year ended December 31, 1999. Ryder Scott Company, L.P. Petroleum Engineers March 9, 2000 EX-24 8 EXHIBIT 24 POWER OF ATTORNEY Know all men by these presents that W. E. GREEHEY constitutes and appoints J. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 W. E. Greehey POWER OF ATTORNEY Know all men by these presents that M. N. KLEIN constitutes and appoints J. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 M. N. Klein POWER OF ATTORNEY Know all men by these presents that A. V. MARTINI constitutes and appoints J. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 A. V. Martini POWER OF ATTORNEY Know all men by these presents that R. F. RICHARDS constitutes and appoints J. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 R. F. Richards POWER OF ATTORNEY Know all men by these presents that J. A. HILL constitutes and appoints J. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 J. A. Hill POWER OF ATTORNEY Know all men by these presents that K. D. WRISTON constitutes and appoints J. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 K. D. Wriston POWER OF ATTORNEY Know all men by these presents that J. L. PAYNE constitutes and appoints MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 J. L. Payne POWER OF ATTORNEY Know all men by these presents that H. R. LOGAN, JR. constitutes and appoints JAMES L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 H.R. Logan, Jr. POWER OF ATTORNEY Know all men by these presents that J. E. MCCORMICK constitutes and appoints JAMES L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 J. E. McCormick POWER OF ATTORNEY Know all men by these presents that E.T. STORY constitutes and appoints JAMES L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 E. T. Story POWER OF ATTORNEY Know all men by these presents that J. C. SNYDER constitutes and appoints JAMES. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 J. C. Snyder POWER OF ATTORNEY Know all men by these presents that M. S. WILKES constitutes and appoints JAMES. L. PAYNE, MARK A. JACKSON and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 M. S. Wilkes POWER OF ATTORNEY Know all men by these presents that M. A. JACKSON constitutes and appoints JAMES. L. PAYNE and DAVID L. HICKS and each or any of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities to sign in his name to the Annual Report on Form 10-K of SANTA FE SNYDER CORPORATION for the fiscal year ended December 31, 1999 and to file the same, and with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof. Dated March 9, 2000 M. A. Jackson EX-27 9
5 1,000 12-MOS DEC-31-1999 DEC-31-1999 6,000 9,100 108,700 2,100 25,500 173,100 3,188,100 1,531,000 1,862,800 239,900 0 0 0 1,800 739,400 1,862,800 509,500 510,300 639,100 639,100 0 0 37,600 (165,300) (44,600) (120,700) 0 (4,200) 0 (124,900) (0.82) (0.82)
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