-----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, BNu7g6bK75WILEVKGeONNrsr7GAaK8dm8+WXT9tCgv4U2X6mS3QGucHvkUIqN7I9 +M4vFRzVCru7SwaBfLjrzg== 0000950134-99-002195.txt : 19990331 0000950134-99-002195.hdr.sgml : 19990331 ACCESSION NUMBER: 0000950134-99-002195 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMINGTON OIL & GAS CORP CENTRAL INDEX KEY: 0000874992 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752369148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11516 FILM NUMBER: 99577260 BUSINESS ADDRESS: STREET 1: 8201 PRESTON RD STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2148908000 MAIL ADDRESS: STREET 1: 8201 PRESTON RD STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75225-6211 FORMER COMPANY: FORMER CONFORMED NAME: BOX ENERGY CORP DATE OF NAME CHANGE: 19930328 10-K 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1998 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-11516 REMINGTON OIL AND GAS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2369148 (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
8201 PRESTON ROAD, SUITE 600, DALLAS, TEXAS 75225-6211 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 210-2650 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- COMMON STOCK, $0.01 PAR VALUE PACIFIC EXCHANGE, INC. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $0.01 PAR VALUE (TITLE OF CLASS) 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. [ ] THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT ON MARCH 24, 1999, WAS $71,160,343. ON THAT DATE, THE NUMBER OF OUTSTANDING SHARES, $0.01 PAR VALUE, WAS 21,453,453. REGISTRANT'S REGISTRATION STATEMENT FILED ON FORM S-2 EFFECTIVE DECEMBER 1, 1992 FOR ITS 8 1/4% CONVERTIBLE SUBORDINATED NOTES IS INCORPORATED BY REFERENCE IN PART IV OF THIS FORM 10-K. REGISTRANT'S REGISTRATION STATEMENT FILED ON FORM S-4 EFFECTIVE NOVEMBER 27, 1998, IS INCORPORATED BY REFERENCE IN PART IV OF THIS FORM 10-K. 2 FORM 10-K REMINGTON OIL AND GAS CORPORATION Table of Contents PART I........................................................................3 ITEM 1. BUSINESS..........................................................3 ITEM 2. PROPERTIES........................................................5 ITEM 3. LEGAL PROCEEDINGS.................................................8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............8 PART II.......................................................................9 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........................................................9 ITEM 6. SELECTED FINANCIAL DATA..........................................10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................11 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................17 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.........................................37 PART III.....................................................................37 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............37 ITEM 11. EXECUTIVE COMPENSATION...........................................40 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...49 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................50 PART IV......................................................................52 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..52
2 3 PART I ITEM 1. BUSINESS. General Remington Oil and Gas Corporation began in 1981 as OKC Limited Partnership. In 1992, we converted the limited partnership to a corporation named Box Energy Corporation. The company changed its name in December 1997, to Remington Oil and Gas Corporation. We are incorporated in Delaware, and our executive offices are located at 8201 Preston Road, Suite 600, Dallas, Texas 75225-6211 (telephone number 214/210-2650). The company employed 20 people on December 31, 1998. Long-term Strategy Our long-term strategy to increase shareholder value involves increasing our oil and gas reserve base by finding, developing or acquiring more oil and gas reserves than we produce each year. In addition to adding reserves, our long-term strategy also includes increasing production each year through our development drilling operations. It is essential to the success of the long-term strategy that our finding and development costs be competitive with our industry peers. It is also important, especially during a period of low oil and gas prices, that our balance sheet remains strong so that we can complete our exploration, development and acquisition activity. In 1997, we replaced 129% of our production and increased our oil and gas reserves by 6% to 10.5 million barrels of oil equivalents. In 1998, we replaced 264% of our production and increased our reserve base by 3.8 million barrels of oil equivalents, or 36%. In determining barrels of oil equivalents, we convert gas reserves or production at a ratio of six Mcf to one barrel. Operations and Risks Involved in Exploration, Development and Production Our primary business operation is the exploration, development and production of oil and gas reserves in the offshore Gulf of Mexico and onshore Gulf Coast areas. Our geophysical and geological staff identifies prospects in the core areas primarily by using 3-D technology. We then attempt, along with various industry partners, to acquire a leasehold interest in properties that merit further exploration. After acquiring a leasehold interest, the company drills an exploratory well. Positive results from the exploratory well may lead to additional exploration or development of the property. In addition, the company purchases properties with existing oil and gas reserves and production for further exploration, development or exploitation. Remington sells the oil and gas production from the properties and reinvests the net cash flow from operations in its exploration, development and acquisition activities. Exploration, development and production operations involve a high degree of risk. Unprofitable efforts may result from drilling dry holes or from drilling marginally productive wells that do not produce enough oil or gas to return a profit on the amount invested in a well or property. Although we use 3-D seismic data or other technology to identify and define the parameters of drilling prospects, there is no guarantee that such technology will lead to successful results. Much of our success depends upon the abilities and experience of our management and technical personnel. Additional operating risks include mechanical failure, title risks, blowouts, environmental pollution, and personal injury. We maintain general liability insurance and insurance against blowouts, redrilling, and certain other operating hazards, including certain pollution risks. An uninsured loss or liability, or a loss that exceeds the limits of our insurance, could adversely affect our financial condition. Operating Agreements We typically own interests in oil and gas properties subject to joint operating agreements. Although we have typically been a non-operator, we anticipate operating many of our properties in the future to maintain control over timing and amount of capital expenditures. Many of the agreements grant the operator a lien on our interest to secure payment of our share of expenses. Competition in the Oil and Gas Industry Remington faces competition from large integrated oil and gas companies, independent exploration and production 3 4 companies, private individuals and sponsored drilling programs. We compete for operational, technical and support staff, options and/or leases on prospective oil and gas properties, and sales of products from developed properties. Many of the competitors have significantly more financial, personnel, technological, and other resources available. In addition, some of the larger integrated companies may be better able to respond to industry changes including price fluctuations, oil and gas demands, and governmental regulations. Markets for Oil and Gas Production We sell our oil and gas production at posted market prices, spot market indices, or prices derived from the posted price or index. Purchasers modify the price for quality, refined product yield, geographical proximity to refineries, and availability of transportation facilities. Oil and gas prices fluctuate significantly over time because of changes in supply and demand, changes in refinery utilization, levels of economic activity throughout the country, seasonal or extraordinary weather patterns, and political developments throughout the world. We use an independent third party to sell a significant portion of our gas production from the Gulf of Mexico. The revenue from the sale of gas by this marketing company accounted for approximately 53% of our total gas revenue in 1998. In addition, we sold approximately 72% of our total oil production to one company during the year, which accounted for approximately 75% of our total oil revenues in 1998. Before July 1998, we sold our gas production from South Pass block 89 under a long-term contract. Effective July 1, 1998, we terminated this contract and received $49.8 million for the termination. Because of this termination the average price received for gas produced from this block decreased by $6.55 per Mcf, which reduced our total gas revenues $3.7 million for the remainder of 1998. Governmental Regulation of Oil and Gas Operations and Environmental Regulations The federal government and the various state governments have issued numerous regulations that affect our oil and gas operations. Current regulations are constantly reviewed at the same time that new regulations are being considered and implemented. This regulatory burden upon the oil and gas industry increases the cost of doing business and consequently affects profitability. In addition, because we hold federal leases, the federal government requires us to comply with numerous additional regulations that focus on government contractors. These regulations also increase the company's general and administrative costs. State regulations relate to virtually all aspects of the oil and gas business including drilling permits, bonds and operation reports. In addition, many states have regulations relating to pooling of oil and gas properties, maximum rates of production, and spacing and plugging and abandonment of wells. Our oil and gas operations are subject to stringent federal, state and local laws and regulations related to improving or maintaining the quality of the environment. The most significant environmental regulations include compliance with federal legislation for the Oil Pollution Act of 1990 and the Clean Water Act together with their amendments. The cost of compliance with this federal and state legislation could have a significant impact on our financial ability to carry out our oil and gas operations. The legislation and accompanying regulations could impose financial responsibility requirements, liability features, and operational requirements, which could be onerously burdensome to satisfy. The laws that require or address environmental remediation apply retroactively to previous waste disposal practices. In many cases, these laws apply regardless of fault, legality of the original activities, or ownership or control of sites. A company could be subject to severe fines and cleanup costs if found liable under these laws. We have never been a liable party under these laws nor have we been named a potentially responsible party for waste disposal at any site. Recapitalization of Common Stock and Other Business Information In December 1998, the holders of both classes of common stock approved the merger agreement which merged S-Sixteen Holding Company into Remington. As part of that transaction, Remington's two classes of common stock were recapitalized into a single class of voting common stock. The primary asset we acquired in the merger was an undivided interest in the oil pipeline that transports our oil production from the South Pass area to onshore Louisiana. 4 5 Except for our oil and gas leases with third parties and licenses to acquire or use seismic data, we have no material patents, licenses, franchises or concessions that we consider significant to our oil and gas operations. The nature of our business is such that we do not have any "backlog" of products, customer orders, or inventory. We have not been a party to any bankruptcy, reorganization, adjustment or similar proceeding except in the capacity as a creditor. ITEM 2. PROPERTIES. We concentrate our principal operations in two areas, the federal waters of the Gulf of Mexico and the onshore regions of the Gulf Coast. Net proved oil and gas reserves at December 31, 1998, as evaluated by Netherland, Sewell, and Associates, Inc. and Miller and Lents, Ltd., are summarized below on the following table. The Netherland, Sewell, and Associates report covers approximately 90% of the total proved reserves. In addition to the information below, we recommend that you read "Management's Discussion and Analysis of Financial Condition and Results of Operations" found on pages 11 through 16 and "Financial Statements and Notes to Consolidated Financial Statements" found on pages 17 through 36. Note 5 -- Oil and Gas Properties in our Notes to Consolidated Financial Statements provides detailed information concerning costs incurred, proved oil and gas reserves and discounted future net revenue for proved reserves. The quantities of proved oil and gas reserves discussed in this section include only the amounts which we reasonably expect to recover in the future from known oil and gas reservoirs under the current economic and operating conditions. Proved reserves include only quantities that we can commercially recover using current prices, costs, existing regulatory practices and technology. Therefore, any changes in future prices, costs, regulations, technology or other unforeseen factors could significantly increase or decrease proved reserve estimates.
Net Oil Net Gas Pre-tax Reserves Reserves Present Value Barrels Mcf Discounted @10% -------- -------- --------------- (In thousands) Offshore Gulf of Mexico 2,853 47,710 $60,319 Onshore Gulf Coast 2,666 4,999 9,799 ----- ------ ------- Total 5,519 52,709 $70,118 ===== ====== =======
The table below summarizes our ownership in producing wells at December 31, 1998.
1998 1997 1996 ------------------- --------------------- ------------------------- GROSS NET GROSS NET GROSS NET ------- ------- ------- ----- ---------- ----------- Oil Wells Offshore Gulf of Mexico 22 5.87 17 4.37 18 4.61 Onshore Gulf Coast 52 17.49 12 5.47 10 4.55 ------ ----- ----- ----- ----- ---- Total 74 23.36 29 9.84 28 9.16 ====== ===== ===== ===== ===== ==== Gas Wells Gulf of Mexico 41 5.92 10 2.46 9 2.57 Onshore Gulf Coast 80 14.09 78 18.24 3 0.53 ------ ----- ----- ----- ----- ---- Total 121 20.01 88 20.70 12 3.10 ====== ===== ===== ===== ===== ====
The table below summarizes our lease holding acreage at December 31, 1998.
UNDEVELOPED DEVELOPED ---------------------------------- ----------------------------------- GROSS NET GROSS NET -------------- --------------- --------------- ---------------- Offshore 92,166 49,088 67,834 15,220 Onshore 80,804 23,650 21,314 4,950 --------- --------- --------- --------- Total 172,970 72,738 89,148 20,170 ========= ========= ========= =========
5 6 Producing Properties At December 31, 1998, our net pre-tax proved oil and gas reserves, as valued according to the Securities and Exchange Commission's rules and regulations were valued at $70.1 million. Our Gulf of Mexico producing properties accounted for 86% of the discounted present value and 75% of the total proved reserves. The onshore Gulf Coast producing properties accounted for 14% of the discounted present value and 25% of the total proved reserves. In 1998, the company's oil and gas production from the Gulf of Mexico accounted for 81% of the total volumes, while the onshore Gulf Coast accounted for 19%. We owned varying working interests in 38 offshore Gulf of Mexico blocks at December 31, 1998. We currently produce from 11 of these blocks with new production expected in the second quarter of 1999 from a 1998 gas discovery at High Island block 86. We plan additional exploratory drilling for some of our undeveloped offshore acreage in 1999. At December 31, 1998, we owned 28,550 net acres in the Gulf Coast areas of which 4,950 net acres were considered producing. Our Gulf Coast area properties are principally located in Mississippi and Texas. We have a substantial investment in acreage and seismic data in Nueces County, Texas, where a 110 square mile, proprietary three-dimensional seismic survey has just been completed. We plan to drill several exploratory wells in Nueces County during 1999. Oil and gas production from 5 offshore Gulf of Mexico blocks and two onshore Gulf Coast fields accounted for over 90% of our total production. Production from South Pass blocks 86, 87, 89, and 1 well in West Delta block 128 accounted for 72% of the total oil production and 61% of the total gas production in 1998. We own a 25% working interest in South Pass blocks 86 and 89, a 33% working interest in South Pass block 87, and a 20% working interest in the West Delta block 128 well. In 1999, we have additional development and exploratory drilling planned on South Pass block 87. Marathon Oil Company operates all four blocks. As a result of our merger with S-Sixteen Holding Company in December 1998, we acquired CKB Petroleum, Inc. CKB Petroleum owns an undivided interest in the pipeline that transports our oil production from the South Pass blocks to Venice Louisiana. Production from Eugene Island block 135 accounted for 22% of our total gas production and 4% of our total oil production in 1998. We discovered the Eugene Island field in 1996. Production from this field commenced in the third quarter of 1997 from two wells. In 1998, we drilled a third well into a untested fault block, which discovered hydrocarbons in three additional sands. We are currently participating in an exploratory well that will test deeper targets below the producing reservoirs. Enron Oil and Gas Company operates Eugene Island block 135. We own a 15% working interest in this block. Significant onshore Gulf Coast fields include our composite 66% owned Parker Creek Field located in Jones County, Mississippi. In 1998, we drilled and completed one deep exploratory and one shallow development well in the field. The Butler #5-5 well, drilled to 13,724 feet confirmed the presence of the deep Hosston field sands south of the original discovery well. A recently acquired 3-D seismic survey has identified several offset-drilling locations for both the deep and shallow producing horizons. We plan to drill additional wells in this field during 1999. Production from our onshore Texas fields contributed 8% of our total oil and 14% of our total gas production in 1998. Our primary producing interests in Texas are located in Hardin, Jaspar and Lavaca Counties. We plan additional drilling and workover operations on our Texas properties in 1999. In early December 1998, we acquired varying working interests in 10 offshore Gulf of Mexico blocks from Union Pacific Resources. Eight of these blocks are producing and 2 are undeveloped. We have identified additional development and exploratory opportunities on several of these blocks. 6 7 Drilling Activities The following is a summary of our exploration and development drilling activities for the past three years by core area:
1998 1997 1996 ----------------------------- ----------------------------- --------------------------------- GROSS NET GROSS NET GROSS NET ------------- --------------- ------------- --------------- ---------------- ---------------- PROD. DRY PROD. DRY PROD. DRY PROD. DRY PROD. DRY PROD. DRY ------ ----- ------ ------- ------- ----- -------- ------ ------- -------- -------- ------- Exploratory Gulf of Mexico 3 - .90 - 2 2 .30 .42 4 4 1.15 1.15 Onshore Gulf Coast 9 7 2.72 2.13 1 5 .80 2.56 8 17 2.75 9.40 ----- ---- ------ ------ ---- ---- ------ ------ ----- ----- ------ ------ Total 12 7 3.62 2.13 3 7 1.10 2.98 12 21 3.90 10.55 ===== ==== ====== ====== ===== ==== ====== ====== ===== ===== ====== ====== Development Gulf of Mexico - - - - 1 - .25 - - - - - Onshore Gulf Coast 2 1 .82 .30 4 4 1.58 2.77 1 2 .94 1.87 ----- ---- ------ ------ ---- ---- ------ ------ ----- ----- ------ ------ Total 2 1 .82 .30 5 4 1.83 2.77 1 2 .94 1.87 ===== ==== ====== ====== ==== ==== ====== ====== ===== ===== ====== ======
We had an interest in 5 wells (1.18 net) in progress at December 31, 1998, 6 wells (2.47 net) in progress at December 31, 1997, and 4 wells (1.49 net) in progress at December 31, 1996. Other Property and Office Lease We own several non-contiguous tracts of land covering approximately 7,800 surface acres in Southern Louisiana and Southern Mississippi. Outside parties lease several of the tracts for farming, grazing, timber, sand and gravel, camping, hunting and other purposes. Gross revenues from these real estate properties in 1998 totaled $233,000. We lease approximately 17,000 square feet of office space in Dallas, Texas. An amendment to our lease extended the term of the lease an additional 10 years from April 1998. 7 8 ITEM 3. LEGAL PROCEEDINGS. The information required by this Item is incorporated herein by reference to Item 8. "Financial Statements and Supplementary Data." - Note 10. Notes to Financial Statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On December 23, 1998, we held our annual stockholders' meeting to elect members to the company's board of directors and ratify the independent auditors for 1998. Immediately after the annual meeting we held a special meeting to approve the merger agreement between S-Sixteen Holding Company and us. The stockholders voted as follows:
ANNUAL MEETING --------------------------------------------------------------------------------------------------------------- CLASS A COMMON STOCK -------------------------------- Election of Directors FOR WITHHELD ---------- ---------- Don D. Box 2,160,513 12,300 John E. Goble, Jr. 2,167,013 5,800 William E. Greenwood 2,167,013 5,800 David H. Hawk 2,167,013 5,800 James Arthur Lyle 2,167,013 5,800 David E. Preng 2,167,013 5,800 Thomas W. Rollins 2,167,013 5,800 Alan C. Shapiro 2,167,013 5,800 James A. Watt 2,167,013 5,800 Ratification of Arthur Andersen LLP as independent auditors for 1998 2,160,013 9,200
The members of the board of directors do not serve staggered terms of office. All directors elected at the meeting were already members of the board at the time of election. No director serving at the time of the election failed to retain his seat on the board.
SPECIAL MEETING - --------------------------------------------------------------------------------------------------------------------------- CLASS A COMMON STOCK CLASS B COMMON STOCK ---------------------------------------- ------------------------------------------- FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN ------------ ---------- ---------- ------------ ----------- ------------ Approval of merger agreement 2,262,728 6,201 2,880 9,307,011 49,256 67,558
8 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. In December 1998, we issued a new single class of voting common stock in exchange for the surrender of all of the previously outstanding voting and non-voting common stock. The new common stock trades on the NASDAQ National Market System under the symbol ROIL and on the Pacific Exchange under the symbol REM.P. Prior to this exchange of common stock, our two classes of shares traded on the NASDAQ National Market System, under the trading symbols ROILA and ROILB. During the same period, the two classes traded on the Pacific Exchange under the symbols REMA.P and REMB.P. Before we changed our name to Remington Oil and Gas Corporation in December 1997, the shares traded on the NASDAQ National Market System under the symbols BOXXA and BOXXB and on the Pacific Exchange under the symbols BXCA.P and BXCB.P. The following table sets forth the high and low last sales price per share as reported by NASDAQ for the periods indicated.
COMMON STOCK CLASS A COMMON STOCK CLASS B COMMON STOCK ------------------------ ----------------------- ------------------------- HIGH LOW HIGH LOW HIGH LOW ---------- ---------- ---------- --------- ---------- ----------- 1999 First Quarter through March 24 4.000 2.375 - - - - 1998 Fourth Quarter 3.188 2.938 5.000 3.000 4.688 2.875 Third Quarter - - 6.750 3.750 5.875 3.375 Second Quarter - - 7.250 5.500 6.750 5.375 First Quarter - - 6.250 5.125 6.375 5.000 1997 Fourth Quarter - - 8.875 5.125 8.125 5.063 Third Quarter - - 9.250 6.500 8.750 6.250 Second Quarter - - 8.750 6.375 7.500 5.813 First Quarter - - 10.500 7.000 9.313 6.625
On March 24, 1999, the last reported sales price was $3.375 per share. On that date, there were 592 stockholders of record. Our transfer agent informed us that as of this date there were also 228 stockholders of record of class A common stock and 500 stockholders of record of class B common stock who had not yet surrendered their old stock for the new common stock to which they are entitled. We have not declared or paid any cash dividends during the past seven years. Dividends are not currently restricted. However, if we pay dividends in excess of 2% of the market price per share during a calendar quarter, the conversion price of the 8 1/4% Convertible Subordinated Notes will be adjusted proportionately. The determination of future cash dividends, if any, will depend upon, among other things, our financial condition, cash flow from operating activities, the level of our capital and exploration expenditure needs, and future business prospects. 9 10 ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated financial data should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements. In addition, you should also read our "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7. below.
1998 (1) 1997 (2) 1996 1995 1994 ----------- ----------- ---------- ---------- ---------- (In thousands, except prices and per share data) Financial Total revenue $ 87,689 $ 61,053 $ 70,210 $ 59,493 $ 59,244 Net income (loss) $ 13,617 $ (26,790) $ (7,662) $ 5,392 $ 9,157 Basic income (loss) per share $ 0.67 $ (1.31) $ (0.37) $ 0.26 $ 0.44 Diluted income (loss) per share $ 0.66 $ (1.31) $ (0.37) $ 0.26 $ 0.44 Total assets $ 130,229 $ 98,515 $ 136,599 $ 145,491 $ 135,041 81/4% convertible subordinated notes $ 38,371 $ 38,371 $ 55,077 $ 55,077 $ 55,077 Other indebtedness $ 3,500 $ 6,000 $ -- $ -- $ -- Stockholders' equity $ 59,699 $ 44,287 $ 74,356 $ 82,047 $ 75,513 Shares outstanding Common stock 21,247 -- -- -- -- Class A common stock -- 3,219 3,250 3,250 3,250 Class B common stock -- 17,087 17,553 17,553 17,553 --------- --------- --------- --------- --------- Total shares outstanding 21,247 20,306 20,803 20,803 20,803 ========= ========= ========= ========= ========= Net cash flow from operations $ 54,040 $ 27,546 $ 28,955 $ 24,047 $ 27,644 Net cash flow from investing $ (38,149) $ (11,820) $ (47,602) $ (19,899) $ (13,769) Net cash flow from financing $ (1,425) $ (14,171) $ -- $ -- $ (1,970) Operational Average sales prices Oil (per Bbl) $ 10.99 $ 17.79 $ 20.21 $ 16.64 $ 15.51 Natural Gas (per Mcf) $ 3.22 $ 5.06 $ 5.69 $ 6.89 $ 7.46 Future net revenue - proved reserves (before tax) Undiscounted $ 94,824 $ 141,672 $ 227,817 $ 223,896 $ 206,701 Discounted $ 70,118 $ 108,698 $ 189,155 $ 173,388 $ 157,721 Future net revenue - proved reserves (after tax) Undiscounted $ 86,936 $ 124,828 $ 177,178 $ 173,869 $ 163,633 Discounted $ 63,467 $ 93,838 $ 146,013 $ 133,982 $ 124,490 Proved reserves Oil (MBbls) 5,519 4,451 3,299 2,938 3,298 Natural gas (Bcf) 52.7 36.5 39.3 51.4 50.3 Average production (net sales volume) Oil (BOPD) 3,411 3,280 2,555 2,300 1,796 Natural gas (MMcfgd) 17.5 19.5 22.5 16.1 17.2
(1) Financial results for 1998 include $49.8 million in other income from the termination of our gas sales contract and a $18.0 million charge recorded for the Phillips Petroleum judgment. (2) The net loss in 1997 includes a $14.6 million deferred income tax expense that we recorded when we increased the valuation allowance against the deferred income tax asset originally recorded in 1992. 10 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion will assist you in understanding our financial position, liquidity, and results of operations. The information below should be read in conjunction with the financial statements, and the related notes to financial statements. Our discussion contains both historical and forward-looking information. We assess the risks and uncertainties about our business, long-term strategy, and financial condition before we make any forward-looking statements, but we can not guarantee that our assessment is accurate or that our goals and projections can or will be met. Statements concerning results of future exploration, exploitation, development and acquisition expenditures as well as expense and reserve levels are forward-looking statements. We make assumptions about commodity prices, drilling results, production costs, administrative expenses and interest costs that we believe are reasonable based on currently available information of known facts and trends. LONG-TERM STRATEGY AND BUSINESS DEVELOPMENTS Our long-term strategy is to increase shareholder value by economically increasing reserves, production, and cash flow on an annual basis. At the same time, we believe it is important to maintain a strong balance sheet by keeping our total debt at a manageable level. We will balance our capital expenditures, financed primarily by operating cash flow and bank debt, among exploration, development, and acquisitions. Proved oil and gas reserves at December 31, 1998, were 5.5 million barrels of oil and 52.7 Bcf of gas compared to 4.5 million barrels of oil and 36.5 Bcf of gas at December 31, 1997. These results amount to a 45% increase in gas reserves and a 36% growth in total barrels of oil equivalents. We replaced 264% of our total 1998 production, based on barrels of oil equivalent. During the last two years, we have concentrated on reducing our costs and expenses so as to be in line with our industry peers. In addition, we have made an effort to end the litigation that has characterized this company for much of our history. Since 1982, we have had a long-term contract covering gas sales from South Pass block 89. The contract was to expire in July 2002. We entered into the contract with Texas Eastern Transmission Corporation during a time when natural gas supplies were scarce. Over time as natural gas supplies became more abundant, we continued to receive the contract price for our gas production from this block, although such price was by then substantially higher than the market price. In 1989, Texas Eastern Transmission Corporation sued us alleging termination of the contract. In 1990 we settled this litigation and received $69.6 million as part of the settlement. The contract continued to be in effect, although the settlement reduced the new contract price to approximately one-half of the original contract price. These prices, however, escalated 10% each year. For the first six months of 1998, under the contract, we received $12.38 per Mcf for gas produced from the southern portion of the block and $6.83 per Mcf for gas produced from the northern portion of the block. On July 31, 1998, we executed an agreement with Texas Eastern Transmission Corporation to terminate this gas sales contract. The termination was effective June 30, 1998, and as of July 1, 1998, we began selling all gas produced from this block at spot market prices. We received $49.8 million in cash and agreed to release Texas Eastern from the contract, including the gas substitution and indemnification rights, as well as related indemnification and other obligations that had been in effect under the 1990 settlement agreement between Texas Eastern and us. During the first six months of 1998, we received approximately $5.8 million more for the gas sold at the long-term contract price compared to the same gas if sold at spot market prices. During the last six months of 1998, we calculate that gas revenues were approximately $3.7 million lower than if we had continued to receive the contract price. Phillips Petroleum Company owns a net profits interest created in 1977 by a farm-out agreement covering South Pass block 89. Since 1981, Phillips has brought numerous pieces of litigation against us over the net profits interest. Since the inception of the farm-out, we have paid Phillips Petroleum Company $100.8 million related to the net profits interest and overriding royalty. We have tried numerous times to settle the latest litigation equitably, but so far, have been unsuccessful in our settlement attempts. Our goal is to settle or dispose of this litigation in a manner that would discourage any future litigation. However, we will vigorously defend ourselves against all litigation that Phillips Petroleum Company brings against us. We believe, and the Louisiana court has ruled, that under the farm-out agreement Phillips can look only to actual production for determination of its net profits interest. In this latest litigation, Phillips contends that pursuant to its 33% net profits interest in South Pass block 89, it was entitled to receive an overriding royalty for months in which "net profits" were not achieved; that an excessive oil transportation fee was being charged to the net profits account; and that the entire $69.6 million cash payment that had been 11 12 received by OKC Limited Partnership (our predecessor) from the 1990 settlement of previous litigation between Texas Eastern and us, should have been credited to the net profits account instead of the $5.8 million that was credited. On the latter claim, Phillips seeks to receive in excess of $21.5 million, while on the first two claims Phillips alleges aggregate damages of several million dollars. In addition, Phillips, under the Louisiana Mineral Code, is seeking double damages and cancellation of the farm-out agreement that created the net profits interest. We denied Phillips' claims and defended ourselves during a non-jury trial in April 1997. At trial we asserted a counterclaim that Phillips had breached a settlement agreement regarding previous litigation, and we sought to recover damages in excess of $10.0 million. In August 1998, the trial court ruled in the litigation. In its ruling, the court awarded Phillips $1.6 million plus interest for its overriding royalty claim and $9.3 million plus interest for its claim on the 1990 settlement. The trial court dismissed Phillips' claim of excessive transportation charges and its claims for double damages and lease cancellation. The trial court also dismissed our counterclaim. In October 1998, the trial court finalized its judgment. The judgment, including interest, was $18.0 million. We have filed notice of our intent to appeal certain adverse portions of the judgment. The trial court has required that we post a bond in order to prevent Phillips from executing on the judgment pending appeal. The amount of the bond is $18.0 million, $9.0 million of which is collateralized by cash and a letter of credit. During the pendency of the appeal, simple interest will continue to accrue on the $10.9 million judgment. Phillips has also filed notice to appeal. In connection with the judgment, and in accordance with Statement of Financial Accounting Standards No. 5 entitled "Accounting for Contingencies," we recorded $18.0 million as an expense in the third quarter of 1998. In connection with the proceeds from the termination of the Texas Eastern gas sales contract, we filed a declaratory judgment action against Phillips in federal district court in Dallas, Texas. In the action we asked the court to declare that none of the $49.8 million we received from the contract termination is owed to Phillips under the farm-out agreement. In existing litigation in Collin County, Texas, addressing the same issues that have been adjudicated by the Louisiana court, Phillips has filed a counterclaim asserting that the proceeds of the termination agreement should be credited to the net profits account. In response to Phillips counterclaim, we have filed an amended petition seeking a declaratory judgment that the termination proceeds need not be credited to the net profits account. We agreed to dismiss our federal action, and the Collin County action is stayed pending resolution of the Louisiana appeal. Certain possible outcomes of our current litigation with Phillips Petroleum Company could have a material adverse effect on Remington. In June 1998, we entered into a merger agreement with S-Sixteen Holding Company, which was approved by the stockholders on December 23, 1998. One of the subsidiaries we acquired in the merger, CKB Petroleum, Inc., owns an undivided interest in the pipeline that transports our oil production from four of our offshore properties to Venice, Louisiana. We anticipate that the acquisition of CKB Petroleum, Inc. will have a positive effect on our future net income and cash flow from operations. In addition, we issued a new single class of voting common stock in exchange for the surrender of all of the previously outstanding voting and non-voting common stock. Holders of the class A (voting) common stock received 1.15 shares of the new common stock for each share of class A common stock owned. Holders of class B (non-voting) common stock received 1 share of the new common stock for each share of class B common stock owned. NEW ACCOUNTING STANDARDS New accounting standards include Statements of Financial Accounting Standards No. 133 entitled "Accounting for Derivative Instruments and Hedging Activities." The provisions of Statement No. 133, which require companies to recognize all derivatives as either assets or liabilities and measure those instruments at their fair value, will not have a material effect on our financial statements or related disclosures. LIQUIDITY AND CAPITAL RESOURCES Our balance sheet liquidity increased significantly during the third quarter of 1998 after we received $49.8 million from the termination of our gas contract with Texas Eastern. During the fourth quarter of 1998 we reinvested $7.5 million in an acquisition of 10 offshore Gulf of Mexico blocks and paid down our bank line of credit by $6.2 million. In addition, because of the merger agreement and the exchange of our common stock, we were required to offer to purchase any tendered 8 1/4% Convertible Subordinated Notes. Of the $38.4 million outstanding at December 31, 1998, we were required to purchase $32.4 million on February 25, 1999. We refinanced $24.0 million of the purchase with a long-term bank line of credit and used cash to purchase the remaining $8.4 million of the tendered notes. At December 31, 1998, we reclassified the portion of the convertible notes that we purchased with cash as a current liability. Primarily because of the acquisition, 12 13 payment on the bank line of credit, and the reclassification of the 8 1/4% Convertible Subordinated Notes, our current liabilities exceeded our current assets by $1.2 million and the current ratio was .96 to 1. At December 31, 1997, current assets exceeded current liabilities by $3.0 million and the current ratio was approximately 1.2 to 1. Cash flow from operations for 1998 increased $26.5 million, or 96%, compared to 1997. The increase relates to the cash received from the termination of the gas contract. Without the proceeds from the termination of the gas contract, cash flow from operations would have decreased by $20.8 million, or 76%. This decrease resulted from lower total oil prices and lower gas revenue from South Pass block 89 and the increase in restricted cash used as collateral for the appeal bond in the Phillips litigation. The average oil prices for 1998 were $10.99 per barrel compared to $17.79 per barrel during 1997. The lower oil prices caused oil revenues to be $8.1 million lower in 1998. This reduction was somewhat offset by an increase of 48,000 barrels sold. In addition, gas sales revenue from South Pass block 89 decreased $15.1 million during 1998. The decrease in gas revenue from South Pass block 89 resulted primarily from lower gas production for the first six months of 1998 and both lower production and lower gas prices during the last six months of 1998. If the gas production during the third and fourth quarters of 1998 from South Pass block 89 had been sold at the former contract price, gas revenues would have been approximately $3.7 million higher than was actually received. The decline in oil prices has a negative impact on total revenues, net income, and cash flow from operations. In addition, the termination of the long-term gas contract also has a negative impact on our gas sales, net income, and cash flow from operations. However, because of recent acquisitions and completed and planned development drilling in 1998 and 1999, we project a 30% increase in total production for 1999 as compared to 1998. Based on this increase, our current projections indicate that we can finance the majority of our planned capital expenditures through our cash flow from operations. Our projections consider the current depressed oil and gas prices. We also have $5.4 million available on our bank line of credit. We expect to continue to make significant capital expenditures over the next several years as part of our long-term growth strategy. The primary source of funding the capital expenditures will be net cash flow from operations and additional bank debt. We have budgeted $25.5 million for capital expenditures in 1999. While we have projected this amount for capital expenditures, we can delay or cancel the drilling of wells included in the current capital expenditure budget. Our capital expenditure budget for 1999, includes drilling 21 exploratory wells and 3 development wells. In the Gulf of Mexico, we are currently drilling a development well in South Pass block 87, an exploratory well in Eugene Island block 135, and connecting the High Island block 86 well to a production platform. We also have plans for additional drilling on High Island block 86 and Galveston block 333. During the first quarter of 1999, we completed a sidetrack of well A-3 on Main Pass block 262. This well did not encounter commercial oil or gas reserves. We completed the Berryman Unit well in Nueces, County, Texas during the first quarter of 1999, which tested at 10,000 Mcf per day and 318 barrels of oil per day. This well is now waiting for a pipeline connection. We are currently participating in an additional exploratory well located 10 miles south of this discovery well. In addition we have planned additional exploratory wells from 3-D defined prospects in South Texas. At December 31, 1998, we had a revolving line of credit established with a bank. The line of credit had a borrowing base of $15.0 million and an expiration date of March 1, 2000. Our oil and gas properties were the collateral for this line of credit. At December 31, 1998, we had an outstanding balance of $3.5 million and had issued letters of credit totaling $250,000 against this line of credit. In February 1999, we replaced the existing line of credit with a new line of credit from a different bank. The new line of credit with a borrowing base of $32.0 million expires in 2003. We pledged our oil and gas properties as collateral for the new line of credit. On February 24, 1999, we borrowed $24.5 million on this line of credit and used the majority of the proceeds to buy a portion of the convertible notes. The bank will review the borrowing base semi-annually and may increase or decrease the borrowing base relative to the redetermined estimate of proved oil and gas reserves. YEAR 2000 ISSUE The year 2000 issue relates to computer programs written with two digits defining a year rather than four. Computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 instead of 2000 or not at all. This inability to recognize or properly treat the year 2000 may cause a breakdown of both information technology and non-information technology systems and cause these systems to process critical financial and operational information incorrectly. We have assessed and continue to assess the year 2000 issue and its impact on us, our partners, suppliers, vendors and customers. The year 2000 issue has a potential impact on us in several areas including, among others, the ability to be paid for our oil and gas production, the operations of the producing properties in which we hold an interest, the ability to pay our 13 14 vendors and suppliers, and the management of our financial assets including cash and securities held with financial institutions. We currently receive payment for the majority of our oil and gas production from two sources. While these two sources are currently studying the year 2000 issue in order to develop systems to prevent problems in payment processing, they have informed us that manual backup systems exist so that even in the event that the computer software fails, such failure would not result in a material delay in our receiving payment for oil and gas production. During the first quarter of 1999, we operated one of our oil and gas properties. The property was not commercial therefore we have not developed contingency plans relating to the year 2000 issue concerning the operation of this property. We do not believe that any problem relating to the year 2000 issue on this property will have a material impact on our operations. The operators of our other properties are, however, studying the year 2000 issue in connection with both the information technology and non-information technology aspects of operating the oil and gas properties. These operators have informed us that they will develop systems sufficient to address any problems that may arise. In addition the operators have informed us that manual back-up systems exist in the event the computer software fails to adequately address any problems. If, in the future, we act as operator on any other oil or gas property, we anticipate that we will provide for adequate systems to address any year 2000 issue. We continue to assess our current oil and gas accounting system and network operating software to determine if they are year 2000 compliant. The company that provides our oil and gas accounting software has informed us that that the system is year 2000 compliant. In June 1999, we will assess our network system and individual computers and make any repairs or upgrades as required at that time. In the event that the network operating system fails due to a year 2000 problem, we believe that our accounting system can operate on a stand-alone basis. We do not believe that the year 2000 issue will materially affect our ability to pay our vendors and suppliers or track our assets in the custody of financial institutions. We do not believe that the cost of our preparations or upgrades for any year 2000 issues or problems will be material. RESULTS OF OPERATIONS Net income for 1998 was $13.6 million or $0.67 per share ($0.66 diluted income per share) compared to a net loss for 1997 of $26.8 million or $1.31 per share. The increase in net income resulted primarily from the termination of the gas contract with Texas Eastern in July 1998. Lower oil and gas prices, reductions of gas production at South Pass block 89, and the Phillips Petroleum judgment partially offset the income from the termination of the gas contract. The following table discloses the net oil and gas sales volumes, average sales prices and average lifting costs for each of the three years ended December 31, 1998, 1997, and 1996. The table is an integral part of the following discussion of results of operations for the periods 1998 compared to 1997 and 1997 compared to 1996.
% INCREASE % INCREASE 1998 (DECREASE) 1997 (DECREASE) 1996 ------------ --------------- ------------- -------------- ------------ Net sales volumes: Oil (MBbls) 1,245 4 % 1,197 28 % 933 Natural gas (MMcf) 6,383 (10)% 7,116 (13)% 8,219 Average sales price: Oil (per Bbl) $ 10.99 (38)% $ 17.79 (12)% $ 20.21 Natural gas (per Mcf) $ 3.22 (36)% $ 5.06 (11)% $ 5.69 Average lifting costs (per BOE) $ 2.54 51 % $ 1.68 1 % $ 1.66
1998 compared to 1997 Oil revenue for 1998, decreased $7.6 million because of a $6.80, or 38%, decrease in prices, partially offset by a 48,000-barrel, or 4%, increase in oil production. The lower prices alone caused oil revenue to be $8.1 million lower. Oil production increased primarily because of additional oil production from the Parker Creek property in Mississippi and the West Buna Property in South Texas. Gas revenue for 1998 was $15.4 million, or 43%, lower than 1997, primarily due to the lower production from South Pass block 89 in 1998 compared to the prior year. In 1998, production from this block was 1.4 Bcf lower than in 1997 14 15 causing a decrease in gas revenue of approximately $11.6 million. The average gas price decrease, from $5.06 to $3.22 resulted primarily from the termination of the gas sales contract on South Pass block 89. We sold gas from South Pass block 89 at an average price of $8.54 per Mcf in 1997 compared to $6.20 in 1998. Gas production from properties other than South Pass block 89 increased 630,000 Mcf, or 15%, primarily from Eugene Island block 135 in the Gulf of Mexico. Other income increased primarily because of the $49.8 million received from the termination of the gas sales contract. Operating costs increased during 1998 compared to 1997 because the number of our producing properties has increased significantly. Net profits expense decreased in 1998 because of the decreased revenues credited to the net profits account on South Pass block89. Exploration expense increased $943,000, or 11%, primarily due to increased expenditures for 3-D seismic data. Dry hole expense, which is included in exploration expense, included $3.3 million for costs accumulated on the Main Pass block 262 well A-3 at December 31, 1998. This well was determined to be non-commercial during the first quarter of 1999. Depreciation, depletion and amortization decreased by $4.3 million, or 18%, because of an increase in proved oil and gas reserves on producing properties. The impairment expense recorded in 1998 includes $2.5 million for impairment on South Pass block89 platform B that was recorded in the third quarter of 1998 due to the termination of the gas sales contract. In connection with the August 1998 judgment issued in our litigation with Phillips Petroleum Company, and in accordance with Statement of Financial Accounting Standards No. 5 entitled "Accounting for Contingencies," we recorded an $18.0 million expense in August 1998. This amount includes the damage award by the trial court and the estimated interest on the award. We reduced general and administrative expense by 25% in 1998 compared to 1997. The decrease in general and administrative expense was primarily from reduced salaries and payroll expense, rent expense, and professional services fees. Legal expenses decreased because of the reduction in expense associated with defending the Phillips Petroleum Company litigation and the settlement of other litigation. Reorganization expense for 1997 includes payments to employees under employee severance agreements and legal fees or other charges that relate to or were paid because of the purchase of S-Sixteen Holding Company (formerly Box Brothers Holding Company) by Mr. J. R. Simplot in August 1997. We recorded the following as reorganization costs: employee severance payments $3.6 million, Thomas D. Box severance and legal claims and fees $1.2 million, Mr. Simplot and Mr. James Arthur Lyle $2.0 million for legal claims and fees, and other associated expenses $300,000. Interest expense is 19% lower for 1998 because of our purchase of $16.7 million of the outstanding 8 1/4% Convertible Subordinated Notes in October 1997. In 1997, we recorded a valuation allowance against the entire deferred tax benefit, and reflected the amount in the income statement as deferred income tax expense. In 1998, we were able to use those tax benefits to the extent that our effective federal income tax rate for 1998 is only about 5%. The income tax expense for 1998 includes alternative minimum tax expense of $433,000 as a current income tax expense. 1997 Compared to 1996 We incurred a net loss for 1997 of $26.8 million or $1.31 per share compared to the prior year loss of $7.6 million or $0.37 per share. The net loss for 1997 included non-cash charges totaling $18.9 million or $0.94 per share. The charges included deferred income tax expense of $14.6 million or $0.73 per share, impairment charges from marginal oil and gas properties of $3.9 million or $0.19 per share, and accelerated amortization of debt-issue costs of $416,000 or $0.02 per share, caused by the early retirement of a portion of our 8 1/4% Convertible Subordinated Notes in October 1997. In addition, during 1997, we incurred reorganization costs totaling $7.1 million, or $0.34 per share, and legal costs and expenses totaling $2.5 million, or $0.12 per share. Total revenues were $ 61.1 million for the year ended December 31, 1997, compared to $70.2 million for the year ended December 31, 1996. Gas sales revenue decreased $10.7 million, or 23%, for 1997 compared to 1996. Lower gas production caused the decrease but was partially offset by higher average prices of 6% for spot gas sales and 10% for gas sales under the South Pass gas sales contract. The increase in average prices added $1.3 million to gas sales revenue. Gas production from South Pass block 89 platform B decreased 1.4 Bcf during 1997 as production from Well B-20 experienced anticipated declines. The decrease in gas production from platform B caused gas revenues to decrease by $14.2 million. Natural gas production from our South Texas properties increased 379,000 Mcf during 1997 but was more than offset by 15 16 lower net natural gas production from other offshore properties. An increase in oil production partially offset by lower oil prices resulted in a net increase in oil sales revenue of $2.4 million, or 13%, for the year ended December 31, 1997 as compared to the prior year. Oil production increased by 264,000 barrels which increased oil sales revenue by $4.8 million. However, a decrease of $2.44 in average oil prices caused oil sales revenue to be $2.4 million lower. A net increase in oil production came from all areas of operation but the most significant increases came from the Parker Creek field in Mississippi and South Pass blocks 86 and 87 in the Gulf of Mexico. Our 1997 interest income decreased because we sold our marketable securities in October 1997 and used most of the proceeds to purchase $16.7 million of our outstanding 8 1/4% Convertible Subordinated Notes. Other income was lower because of lower oil trading income and losses on the sale of assets, primarily artwork. Operating and transportation expenses increased as a result of new operating properties and an increase in oil production from the South Pass area. Net profits expense decreased as a result of the lower natural gas sales revenues from South Pass block 89. In addition, exploration expenses decreased significantly because of lower dry hole costs. In 1996, we drilled three high cost dry exploration wells totaling $10.6 million in the Gulf of Mexico. Depreciation, depletion and amortization expenses increased because of new properties becoming productive. Marginal production as well as lower oil prices caused us to record impairment charges against some of the oil and natural gas properties. A large decrease in production during the last quarter of 1997 from Main Pass block 262, located in the Gulf of Mexico, caused us to record a $1.9 million impairment charge to write down 100% of the remaining well costs. General and administrative expenses decreased by 18% during 1997 when compared to 1996. Salaries and other employment related expenses during 1997 decreased $706,000 as the number of employees decreased from 41 at December 31, 1996 to 15 at December 31, 1997. Other areas of significant savings were professional fees and investor relations' expenses. Legal fees decreased by $1.1 million as we settled outstanding litigation and concluded the trial proceedings in the Phillips litigation. Reorganization expense for the year includes payments to employees under the employee severance agreements and legal fees or other charges. Reorganization costs accrued or paid are as follows: employee severance payments $3.6 million, Thomas D. Box severance, legal claims and fees $1.2 million, Mr. Simplot and Mr. Lyle $2.0 million, and other associated expenses $300,000. Interest and financing expenses increased 8% during 1997 when compared to 1996. The increase results from an increase on our line of credit and a non-cash charge for deferred offering costs on the 8 1/4% Convertible Subordinated Notes in October 1997. We used the line of credit to provide a portion of the funds to purchase some onshore Gulf Coast properties. In 1997 we increased the valuation allowance against the entire deferred tax asset and recorded a deferred income tax expense. Our actual 1997 results and future projections were significantly different than anticipated in our 1996 and prior projections. The difference resulted from a significant drop in commodity prices, the unusual and unforeseen reorganization expenses incurred in the last half of 1997, and a downward revision in our proved gas reserves as of January 1, 1998, on South Pass block 89. We believe that future drilling results, planned capital expenditures and other future transactions could allow us to realize substantial benefits from the net operating loss carryforwards and the other book-tax attributes underlying the deferred income tax asset. However, the requirement of a greater than 50% probability (more likely than not) of occurrence does not allow us to use much of this information in projecting future taxable income. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our market risk sensitive instrument at December 31, 1998, is a revolving line of credit from a bank. At December 31, 1998, the unpaid principal balance under the line was $3.5 million. The interest rate on this debt is sensitive to market fluctuations, however we do not believe that significant fluctuations in the market interest have a material effect on our consolidated financial position, results of operations, or cash flow from operations. 16 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements Report of Independent Accountants 18 Consolidated Balance Sheets as of December 31, 1998 and 1997 19 Consolidated Statements of Income and Comprehensive Income for 1998, 1997 and 1996 20 Consolidated Statements of Stockholders' Equity for 1998, 1997 and 1996 21 Consolidated Statements of Cash Flow for 1998, 1997 and 1996 22 Notes to Consolidated Financial Statements 23
17 18 REPORT OF INDEPENDENT ACCOUNTANTS To The Stockholders and Board of Directors of Remington Oil and Gas Corporation We have audited the accompanying consolidated balance sheets of Remington Oil and Gas Corporation ("the Company"), a Delaware corporation, as of December 31, 1998 and 1997 and the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These consolidated 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Remington Oil and Gas Corporation as of December 31, 1998 and 1997 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Dallas, Texas March 23, 1999 ARTHUR ANDERSEN LLP 18 19 REMINGTON OIL AND GAS CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
FOR YEARS ENDED DECEMBER 31, -------------------------- ASSETS 1998 1997 -------- ------- CURRENT ASSETS Cash and cash equivalents $ 19,018 $ 4,552 Restricted cash and cash equivalents 8,750 -- Accounts receivable - oil and natural gas 2,400 5,725 Accounts receivable - other 812 268 Note receivable - S-Sixteen Holding Company -- 6,192 Prepaid expenses and other current assets 1,871 2,118 --------- --------- TOTAL CURRENT ASSETS 32,851 18,855 --------- --------- PROPERTIES Oil and natural gas properties (successful-efforts method) 260,649 220,481 Other properties 2,706 2,800 Accumulated depreciation, depletion and amortization (167,053) (144,548) --------- --------- TOTAL PROPERTIES 96,302 78,733 --------- --------- OTHER ASSETS Long-term accounts receivable - related party 299 -- Deferred charges (net of accumulated amortization) 777 927 --------- --------- TOTAL OTHER ASSETS 1,076 927 --------- --------- TOTAL ASSETS $ 130,229 $ 98,515 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 6,923 $ 8,694 Accrued interest payable 264 264 Accrued transportation payable - related party -- 305 Phillips judgment payable 18,165 -- Net Profits expense payable 77 594 Short-term notes payable and current portion of long-term notes payable 8,651 6,000 --------- --------- TOTAL CURRENT LIABILITIES 34,080 15,857 --------- --------- OTHER LIABILITIES Minority interest in subsidiaries 87 -- Long-term accounts payable 2,913 -- Notes payable 3,500 -- Convertible subordinated notes payable 29,950 38,371 --------- --------- TOTAL OTHER LIABILITIES 36,450 38,371 --------- --------- TOTAL LIABILITIES 70,530 54,228 --------- --------- COMMITMENTS AND CONTINGENCIES (NOTE 10) STOCKHOLDERS' EQUITY Common stock, $1.00 par value Class A (Voting) - 15,000,000 shares authorized; 3,250,110 shares issued -- 3,250 Class B (Non-Voting) - 30,000,000 shares authorized; 17,553,010 shares issued -- 17,553 Common stock $0.01 par value; 100,000,000 shares authorized; 21,453,453 issued and 21,247,478 outstanding 213 -- Additional paid-in capital 44,117 25,197 Treasury stock, at cost, 31,100 shares class A, and 465,600 class B in 1997 -- (3,465) Retained earnings 15,369 1,752 --------- --------- TOTAL STOCKHOLDERS' EQUITY 59,699 44,287 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 130,229 $ 98,515 ========= =========
See accompanying Notes to Consolidated Financial Statements. 19 20 REMINGTON OIL AND GAS CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ----------------------------------------- 1998 1997 1996 -------- -------- --------- REVENUES Oil sales $ 13,677 $ 21,292 $ 18,849 Gas sales 20,579 36,012 46,757 Interest income 1,582 1,998 2,273 Gain (loss) on sale of investment -- (125) (73) Other income 51,851 1,876 2,404 -------- -------- --------- TOTAL REVENUES 87,689 61,053 70,210 -------- -------- --------- COSTS AND EXPENSES Operating costs and expenses 5,861 4,015 3,825 Transportation expense 2,654 2,851 2,491 Net profits interest expense 3,600 8,341 11,479 Exploration expenses 9,497 8,554 20,805 Depreciation, depletion and amortization 19,964 24,298 22,349 Impairment of oil and natural gas properties 4,154 3,953 451 General and administrative 4,782 6,344 7,731 Legal expense 552 2,509 3,657 Phillips judgment 17,950 -- -- Reorganization expense -- 7,072 1,959 Interest and financing expense 4,302 5,283 4,895 -------- -------- --------- TOTAL COSTS AND EXPENSE 73,316 73,220 79,642 -------- -------- --------- Income (loss) before taxes 14,373 (12,167) (9,432) Income tax expense (benefit) 756 14,623 (1,770) -------- -------- --------- NET INCOME (LOSS) 13,617 (26,790) (7,662) -------- -------- --------- OTHER COMPREHENSIVE INCOME (LOSS) (NET OF TAXES) Unrealized gain (loss) on marketable securities - available for sale -- 186 (29) -------- -------- --------- TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (NET OF TAXES) -- 186 (29) -------- -------- --------- COMPREHENSIVE INCOME (LOSS) $ 13,617 $(26,604) $ (7,691) ======== ======== ========= BASIC INCOME (LOSS) PER SHARE $ 0.67 $ (1.31) $ (0.37) ======== ======== ========= DILUTED INCOME (LOSS) PER SHARE $ 0.66 $ (1.31) $ (0.37) ======== ======== ========= BASIC COMPREHENSIVE INCOME (LOSS) PER SHARE $ 0.67 $ (1.30) $ (0.37) ======== ======== ========= DILUTED COMPREHENSIVE INCOME (LOSS) PER SHARE $ 0.66 $ (1.30) $ (0.37) ======== ======== =========
See accompanying Notes to Consolidated Financial Statements. 20 21 REMINGTON OIL AND GAS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK ------------------------------------ VALUATION CLASS A CLASS B COMMON ADDITIONAL ALLOWANCE $1.00 PAR $1.00 PAR $0.01 PAR PAID IN RETAINED TREASURY MARKETABLE VALUE VALUE VALUE CAPITAL EARNINGS STOCK SECURITIES ---------- --------- --------- ---------- -------- -------- ---------- Balance December 31, 1995 $ 3,250 $ 17,553 $ -- $ 25,197 $ 36,204 $ -- $ (157) Net income (7,662) Unrealized (loss) (net of income taxes) (29) -------- -------- -------- -------- -------- -------- -------- Balance December 31, 1996 3,250 17,553 -- 25,197 28,542 -- (186) -------- -------- -------- -------- -------- -------- -------- Net income (loss) (26,790) Purchase of Treasury stock (3,465) Unrealized gain (net of income taxes) 186 -------- -------- -------- -------- -------- -------- -------- Balance December 31, 1997 3,250 17,553 -- 25,197 1,752 (3,465) -- -------- -------- -------- -------- -------- -------- -------- Net income (loss) -- 13,617 Common stock issued 27 156 Treasury stock issued 305 Merger and exchange of common stock (3,250) (17,580) 213 18,764 3,160 -------- -------- -------- -------- -------- -------- -------- Balance December 31, 1998 $ -- $ -- $ 213 $ 44,117 $ 15,369 $ -- $ -- ======== ======== ======== ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements. 21 22 REMINGTON OIL AND GAS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ----------------------------------- 1998 1997 1996 -------- -------- --------- CASH FLOW PROVIDED BY OPERATIONS NET INCOME (LOSS) $ 13,617 $(26,790) $ (7,662) Adjustments to reconcile net income Depreciation, depletion and amortization 19,964 24,298 22,349 Impairment of oil and natural gas properties 4,154 3,953 451 Amortization of deferred charges 254 658 262 Amortization of premium on marketable securities -- 27 27 Deferred income tax (benefit) expense 323 14,623 (1,696) Dry hole costs 5,222 5,319 17,638 Stock issued to directors and employees for compensation 488 -- -- Loss (gain) on sale of properties (111) 367 (20) Changes in working capital (Increase) in deferred charges (104) -- -- Decrease in accounts receivable 3,133 2,556 105 Decrease (increase) in prepaid expenses and other current assets 296 (157) (1,298) Increase (decrease) in accounts payable and accrued expenses 15,554 2,692 (1,201) (Increase) in restricted cash (8,750) -- -- -------- -------- -------- NET CASH FLOW PROVIDED BY OPERATIONS 54,040 27,546 28,955 -------- -------- -------- CASH FROM INVESTING ACTIVITIES Payments for capital expenditures (40,155) (39,144) (39,798) Cash acquired in merger with S-Sixteen Holding Company and Subsidiaries 79 -- -- Sales and maturities of marketable securities -- 33,411 19,127 Investment in marketable securities -- (597) (27,191) Notes receivable - S-Sixteen Holding Company -- (7,250) -- Principal repayments - S-Sixteen Holding Company 1,432 1,058 -- Proceeds from property sales 495 702 260 -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (38,149) (11,820) (47,602) -------- -------- -------- CASH FROM FINANCING ACTIVITIES Proceeds from notes payable and long-term accounts receivable 7,813 7,000 -- Payments on notes payable (7,400) (1,000) -- Repurchase common stock -- (3,465) -- Issuance costs for exchange of common stock (1,838) -- -- Principal payments on Convertible Subordinated Notes -- (16,706) -- -------- -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,425) (14,171) -- -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,466 1,555 (18,647) Cash and cash equivalents at beginning of period 4,552 2,997 21,644 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,018 $ 4,552 $ 2,997 ======== ======== ======== Cash paid for interest $ 3,879 $ 5,398 $ 4,907 ======== ======== ======== Cash paid for taxes $ 433 $ -- $ -- ======== ======== ========
See accompanying Notes to Consolidated Financial Statements. 22 23 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements NOTE 1 -- DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION Remington Oil and Gas Corporation, formerly Box Energy Corporation, is an independent oil and gas exploration and production company incorporated in Delaware. We have working interest ownership rights in properties in the offshore Gulf of Mexico and onshore Gulf Coast. Management prepares the financial statements in conformity with generally accepted accounting principles. This requires estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Some of the more significant estimates include oil and gas reserves, useful lives of assets, impairment of oil and gas properties, and future dismantlement and restoration liabilities. Actual results could differ from those estimates. We make certain reclassifications to prior year financial statements in order to conform to the current year presentation. NOTE 2 -- CONSOLIDATION OF SUBSIDIARIES On December 28, 1998, we acquired all of the assets of S-Sixteen Holding Company including its five subsidiaries. The subsidiaries acquired include CKB Petroleum, Inc., CKB & Associates, Inc., Box Brothers Realty Investments Company, CB Farms, Inc., and Box Resources, Inc. Remington issued 579,757 shares of common stock, a warrant to purchase up to 300,000 additional shares of common stock and canceled the note receivable from S-Sixteen Holding Company for the acquisition. Remington's total investment in the transaction was $8.5 million. The effect of the acquisition was not material to the combined consolidated financial statements. We eliminated all inter-company transactions and account balances for the period of consolidation. Before the merger, S-Sixteen Holding Company owned approximately 57% of Remington's voting common stock. The primary operating subsidiary, CKB Petroleum, Inc., owns an undivided interest in a pipeline that transports oil from our South Pass blocks, offshore Gulf of Mexico, to Venice Louisiana. We paid transportation costs to CKB Petroleum, Inc. totaling $3.0 million in 1998, $3.2 million in 1997 and $2.8 million in 1996. NOTE 3 -- CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash equivalents consist of liquid investments that mature within three months or less when purchased. Our cash equivalents include investment grade commercial paper and money market funds invested in United States government securities. We record cash equivalents at cost, which approximates their market value at the balance sheet date. As part of the appeal of the Phillips litigation, more fully discussed in the note about net profits expense, we transferred $8.8 million to a surety company as collateral for the suspensive appeal bond. That amount is presented as restricted cash and cash equivalents on the balance sheet. NOTE 4 -- NOTE RECEIVABLE FROM S-SIXTEEN HOLDING COMPANY In April 1997, Remington lent S-Sixteen Holding Company $7.3 million. S-Sixteen Holding Company repaid $1.4 million of the principal balance of the note receivable in 1998 and $1.1 million in 1997. The remaining $4.8 million balance of the note receivable was effectively canceled in December 1998 when the two companies merged. Remington received $527,000 in interest income in 1998 and $437,000 in interest income in 1997 from S-Sixteen Holding Company on the note receivable. The interest rate was equal to the prime rate of Texas Commerce Bank National Association plus 1% until the sixth month when the rate escalated monthly by 0.1% over the previous month's rate. NOTE 5 -- OIL AND GAS PROPERTIES, ACCOUNTING METHODS, COSTS, PROVED RESERVES AND VALUE BASED INFORMATION Remington uses the successful-efforts method to account for oil and gas exploration and development expenditures. Under this method, we record the expenditures for leasehold acquisitions, tangible equipment, and 23 24 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements intangible drilling costs for an individual oil and gas property as an asset. In addition, if the construction cost of an offshore platform is significant, we record an allocated portion of the interest expense incurred during the construction period as part of the oil and gas property cost. The following table summarizes the oil and gas properties, all of which are located in the United States.
AT DECEMBER 31, ------------------------------------------------------------------------------- 1998 1997 ----------------------------------- -------------------------------------- PROVED UNPROVED TOTAL PROVED UNPROVED TOTAL ---------- ---------- -------- ---------- ---------- ---------- (IN THOUSANDS) Onshore $ 31,704 $ 5,861 $ 37,565 $ 26,401 $ 5,194 $ 31,595 Offshore 210,631 12,453 223,084 185,325 3,561 188,886 --------- --------- --------- --------- --------- --------- Total 242,335 18,314 260,649 211,726 8,755 220,481 Accumulated depreciation, depletion and amortization (165,414) -- (165,414) (139,781) -- (139,781) --------- --------- --------- --------- --------- --------- Net oil and gas properties $ 76,921 $ 18,314 $ 95,235 $ 71,945 $ 8,755 $ 80,700 ========= ========= ========= ========= ========= =========
We accumulate the expenditures incurred in drilling exploratory wells as work in process until we determine whether the well has encountered commercial oil and gas reserves. If the well has encountered commercial reserves, we transfer the accumulated cost to oil and gas properties; otherwise, we charge the accumulated cost to dry hole expense. We record expenditures for geological, geophysical or other prospecting costs as exploration expenses on the income statement when incurred. The following table presents a summary of our oil and gas expenditures during the last three years.
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 -------- -------- -------- (UNAUDITED, IN THOUSANDS) Unproved acquisition costs $ 11,160 $ 5,793 - Proved acquisition costs $ 5,353 $ 12,545 $ 5,548 Exploration costs $ 23,279 $ 13,767 $ 27,811 Development costs $ 4,318 $ 9,975 $ 9,359 Capitalized interest expense - - -
We amortize the capitalized cost of each oil and gas property using the units-of-production method. To calculate the cost per unit we divide the leasehold costs by total proved reserves and the costs for wells, platforms and other equipment by proved developed reserves. Oil and gas reserves that do not require significant additional cost to access the reserves, such as a new well or major sidetrack, are classified as proved developed. We then multiply the cost per unit by the actual production and record the result to depreciation, depletion and amortization expense. Gas reserves are converted at a ratio of 6 Mcf to 1 barrel. We depreciate our costs in the pipeline owned by CKB Petroleum, Inc. over its estimated useful life of 10 years. Future dismantlement, restoration and abandonment costs include the estimated costs to dismantle, restore and abandon our offshore platforms, wells and related facilities. As of December 31, 1998, the total estimated future liability is $4.2 million. We record the liability over the life of the property using the units-of-production method and record the expense as a component of depreciation, depletion and amortization expense. The accrued liability at December 31, 1997 and 1996 was $3.1 million and $2.5 million, respectively. We review a property for impairment if there is a large decrease in oil and gas reserves or production on the property, or if a dry hole is drilled on or near the property. In addition, significant decreases in oil and gas prices may also indicate that a property has become impaired. If the net book value of a property is greater than the estimated undiscounted future net cash flow before income taxes from the same property, the property is impaired. The undiscounted future net cash flow may include risk adjusted probable and possible oil and natural gas reserves in addition to the estimated proved reserves. In addition, we may use escalated prices in projecting future oil and gas revenue. For our 1998 projection of future oil and gas revenue, we estimated oil prices to be $13.00 per barrel and gas prices to be $2.10 per MMBtu in 1999. We escalated oil prices by $2.00 per barrel through 2001 and then by 3% to a 24 25 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements maximum of $25.00 per barrel. We escalated gas prices by 3% to a maximum of $3.50 per MMBtu. We adjusted the above oil and gas prices for location differentials. These prices, consistent with forecasts by others in the industry, were applied to the reserve estimates prepared by our independent reserve engineers. The impairment expense is equal to the difference between the net book value and the fair value of the asset. We estimate fair value by discounting, at an appropriate rate, the future net cash flows from the property. In 1998 we recognized impairment expense totaling $4.2 million. This expense in 1998 included $2.5 million from South Pass block 89 because of the reduction in estimated undiscounted future net cash flow caused by the termination of the long-term gas sales contract for that property. In 1997 we recorded $4.0 million for impairment expense, and in 1996 we recorded $451,000. The remaining impairment expense for 1998 and the impairment expense for 1997 and 1996 primarily resulted from inadequate oil and gas reserves or a significant decrease in oil and gas production from the specific property. The estimates of oil and gas reserves were prepared by the independent engineering and consulting firms of Netherland, Sewell & Associates, Inc. and Miller and Lents, Ltd. for 1998 and 1997, and by Netherland, Sewell & Associates, Inc. for 1996. The Netherland, Sewell, and Associates, Inc. report covers approximately 90% of the total proved oil and gas reserves in 1998. The determination of these reserves is a complex and interpretative process that is subject to continued revision as additional information becomes available. In many cases, a relatively accurate determination of reserves may not be possible for several years due to the time necessary for development drilling, testing and studies of the reservoirs. The quantities of proved oil and gas reserves presented below include only the amounts which we reasonably expect to recover in the future from known oil and gas reservoirs under the current economic and operating conditions. Proved reserves include only quantities that we can commercially recover using current prices, costs, existing regulatory practices and technology. Therefore, any changes in future prices, costs, regulations, technology or other unforeseen factors could significantly increase or decrease proved reserve estimates. The following table presents our net ownership interest in proved oil and gas reserves.
AT DECEMBER 31, ------------------------------------------------------------------------------ 1998 1997 1996 ------------------------------------------------------------------------------ OIL GAS OIL GAS OIL GAS MBbls (1) MMcf MBbls (1) MMcf MBbls MMcf --------------------------------------- -------------------------------------- (UNAUDITED, IN THOUSANDS) Beginning of period 4,451 36,543 3,299 39,332 2,938 51,373 Revisions of previous estimates 850 6,533 330 (6,004) 709 (8,162) Extensions, discoveries and other 1,311 10,958 1,046 4,115 585 4,340 Purchased reserves 152 5,058 973 6,216 - - Production (1,245) (6,383) (1,197) (7,116) (933) (8,219) ---------- --------- --------- --------- --------- --------- End of period 5,519 52,709 4,451 36,543 3,299 39,332 ========== ========= ========= ========= ========= ========= Proved developed reserves Beginning of period 3,208 27,259 2,541 28,323 2,282 33,521 End of period 3,605 33,680 3,208 27,259 2,541 28,323
- ----------------------------------------- (1) Includes natural gas liquids The proved developed and undeveloped reserves and standardized measure of discounted future net cash flows associated with South Pass block 89 are burdened by a 33% net profits interest. The reserves included in the above table include our full net ownership interest without any reduction for the net profit interest. We treat the net profit interest as an operating expense rather than a reduction in proved reserves. Please see Note 14 - Net Profits Expense for a more detailed discussion about the net profit interest. The following tables represent value-based information about our proved oil and gas reserves. The standardized measure of discounted future net cash flows result from the application of specific criteria applicable to the value-based disclosures of all oil and gas reserves in the industry. Due to the imprecise nature of estimating oil and gas reserve 25 26 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements quantities and the uncertainty of future economic conditions, we can not make any representation about interpretations that may be made or what degree of reliance that may be placed on this method of evaluating proved oil and gas reserves. We compute future cash revenue by multiplying the year-end commodity prices or contractual pricing if applicable, by the proved oil and gas reserves. Future production and development costs include the estimated costs to produce or develop the proved reserves based primarily on historical costs. We calculated the future net profits expense by multiplying the net profit percentage to the future revenue less production and development costs on South Pass block 89. Future income tax expense was determined by applying the current tax rate to the future net cash flow from all properties. Finally, we discounted the future net cash flow, after tax, by 10% per year to arrive at the standardized measure of discounted future net cash flows presented below.
AT DECEMBER 31, -------------------------------------- 1998 1997 1996 -------- -------- -------- (UNAUDITED, IN THOUSANDS) Oil and natural gas revenues $ 160,416 $ 226,262 $ 326,498 Production costs (31,474) (31,702) (26,971) Development costs (30,665) (23,954) (17,756) Net Profits expense (3,453) (28,933) (53,955) Income tax expense (7,888) (16,845) (50,638) --------- --------- --------- Net cash flow 86,936 124,828 177,178 10% annual discount (23,469) (30,990) (31,165) --------- --------- --------- Standardized measure of discounted future net cash flow $ 63,467 $ 93,838 $ 146,013 ========= ========= =========
The following table summarizes the principal sources of change in the standardized measure of discounted future net cash flows from year to year. In July of this year, we terminated our gas sales contract that covered gas production on South Pass block 89. The standardized measure of discounted future net cash flows in the prior years included future revenue based on the long-term contract price.
AT DECEMBER 31 -------------------------------------- 1998 1997 1996 -------- -------- -------- (UNAUDITED, IN THOUSANDS) Standardized measure of discounted cash flows at beginning of year $ 93,838 $ 146,013 $ 133,982 Sales and transfers of oil and natural gas produced, net of production costs and net profits expense (24,796) (42,097) (47,810) Net changes in prices and production costs (77,769) (61,134) 37,764 Net changes in estimated development costs 1,274 (5,130) (1,332) Net changes in estimated net profits expense 17,624 14,029 1,750 Net changes in income tax expense 8,208 28,283 (3,736) Extensions, discoveries and improved recovery less related costs 11,625 9,171 16,060 Purchases of proved oil and natural gas reserves 5,050 13,865 -- Development costs incurred during the year 4,318 9,975 9,359 Revisions of previous quantity estimates 18,673 (21,306) (10,747) Other changes (3,962) (12,432) (2,675) Accretion of discount 9,384 14,601 13,398 --------- --------- --------- Standardized measure of discounted future net cash flows end of year $ 63,467 $ 93,838 $ 146,013 ========= ========= =========
NOTE 6 -- OTHER PROPERTIES Other properties include improvements on the leased office space and office computers and equipment. The company depreciates these assets using the straight-line method over their estimated useful lives that range from 3 to 12 years. 26 27 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements NOTE 7 - OTHER ASSETS Long-term accounts receivable - related party reflects CKB Petroleum's claims under Collateral Assignment Split Dollar Insurance Agreements among CKB Petroleum and Don D. Box (an officer and director) and two of his brothers. Deferred charges include the costs, net of amortization, incurred when we issued the 8 1/4% Convertible Subordinated Notes in 1992. We amortize the debt issuance costs on a straight-line basis over the 10-year term of the notes and charge the amortized amount to interest and financing costs. In October 1997, we purchased $16.7 million of the outstanding notes and accelerated the amortization of the allocated portion of the issuance costs. This resulted in an additional $416,000 charge in October 1997. We will accelerate the amortization of the debt issuance costs a second time because of our purchase of an additional $32.4 million of the notes in February 1999. NOTE 8 -- MINORITY INTEREST IN SUBSIDIARIES Two individuals own a combined 5.8824% in two of our subsidiaries, CKB Petroleum, Inc. and CKB & Associates, Inc. The two subsidiaries were acquired when we merged with S-Sixteen Holding Company in December 1998. The minority interest liability reflects their percentage of the total combined equity in the two subsidiaries. Before the merger, the two shareholders, which were former officers of the companies, filed suit against S-Sixteen Holding Company and the two subsidiaries. In this suit the plaintiffs allege that from 1981 to the present the defendants wasted and/or misappropriated CKB Petroleum's corporate assets by paying excessive and unreasonable salaries, bonuses and expenses, and making bogus loans and cash advances. The plaintiffs believe that the court should reclassify these "improper" expenditures as "constructive" dividends and that they should receive a pro-rata share of such dividends. In addition, the plaintiffs also seek an equitable order from the court compelling us to buy out their interest. We will vigorously defend against all of these claims. NOTE 9 -- LONG-TERM ACCOUNTS PAYABLE AND NOTES PAYABLE Long-term accounts payable include the long-term portion of future payments due to a vendor that become due over the next three years. In December 1992, we issued $55.1 million of 8 1/4% Convertible Subordinated Notes. The notes mature December 1, 2002, and convert into shares of common stock at the election of the note-holder any time before maturity, unless previously redeemed. Interest is payable semiannually on June 1 and December 1. We may redeem all or a portion of the notes any time after December 1, 1995, at 105.775% of the face amount. The redemption price decreases .825% each subsequent December 1. The notes are unsecured and subordinate to existing and future senior indebtedness. The indenture for the notes requires us to make an offer to purchase the notes if a "change in control" occurs. The purchase price is the total of the par value plus accrued interest through the date of purchase. In August 1997, Mr. J.R. Simplot purchased S-Sixteen Holding Company, then known as Box Brothers Holding Company. The purchase resulted in a "change of control" as defined in the indenture. In October 1997, we repurchased $16.7 million of the notes outstanding. In December 1998, we reclassified our two classes of common stock into one class of common stock. The indenture also defined this transaction as a "change in control" and we made another offer to purchase the notes. In February 1999, we repurchased $32.4 million of the notes outstanding pursuant to this offer. Of the total amount of notes purchased by us in February 1999, we classified $8.4 million as a short-term liability and the remainder as a long-term liability because we refinanced this portion with long-term debt. At December 31, 1998, we had a revolving line of credit established with a bank. The line of credit with a borrowing base of $15.0 million was scheduled to expire in March 2000. The company's oil and gas properties were the collateral for this line of credit. The interest rate for the line of credit was the lender's floating base rate plus 0.5% until December 31, 1998, and was reduced to the lender's floating base rate effective January 1, 1999. At December 31, 1998, we had an outstanding balance of $3.5 million and had issued letters of credit totaling $250,000 against this line of credit. 27 28 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements In February 1999, we replaced the existing line of credit with a new line of credit from a different bank. The new line of credit with a borrowing base of $32.0 million expires in 2003. We pledged our oil and gas properties as collateral for the new line of credit. We will accrue and pay interest at varying rates based on premiums of from 1.625 to 2.375 percentage points over the London Interbank Offered Rates. On February 24, 1999, we borrowed $24.5 million on this line of credit and used the proceeds to buy a portion of the convertible notes. The most significant financial covenants in the new line of credit include, among others, maintaining a minimum current ratio of 1.0 to 1.0, excluding any current liabilities associated with the Phillips Petroleum Company litigation, a minimum tangible net worth of $55.0 million plus 50% of future net income and 100% of any non-redeemable preferred or common stock offerings, maximum debt to EBITDA of 3.0 to 1.0, and interest coverage of 3.0 to 1.0. We estimate that the fair value of our long-term indebtedness, including the current maturities of such obligations, is approximately $43.6 million at December 31, 1998 and $43.0 million at December 31, 1997. We based the fair value on the quoted market bid price for our convertible notes and on current rates available for our other indebtedness. NOTE 10 -- LEASE COMMITMENTS AND CONTINGENT LIABILITIES We lease approximately 17,000 square feet of office space in Dallas Texas. The non-cancelable operating lease expires in April 2008. The following table reflects our rent payments for the past three years and the commitment for the future minimum rental payments.
Year Rent ---------------------------- -------------------- 1996 $ 717,000 1997 $ 716,000 1998 $ 474,000 1999 $ 407,000 2000 $ 407,000 2001 $ 433,000 2002 $ 441,000 2003 $ 441,000 Remaining commitment $ 2,027000
We are defendants in litigation with Phillips Petroleum Company concerning their net profits interest ownership in South Pass block 89. We discuss this litigation in more detail in Note 14 -- Net Profits Expense. Because of our acquisition of S-Sixteen Holding Company in December 1998, we are involved in litigation with the minority stockholders of CKB Petroleum, Inc. and CKB & Associates, Inc. A more detailed discussion of this litigation is located in Note 8 -- Minority Interest Liability. During the first quarter of 1999, the Minerals Management Service informed us of certain audit issues. The issues involve alleged underpaid royalties on the November 1990 gas contract settlement, the use of FERC tariffs for oil transportation allowances from our South Pass blocks, and alleged underpaid crude oil royalties on our South Pass blocks. We have responded to their audit issue letters. In our responses to the MMS's audit issue letters, we expressed our disagreement with the positions set forth in their letters. We have no other material pending legal proceedings other than the litigation mentioned above. Other than certain possible outcomes of the Phillips litigation, it is our opinion that any adverse judgments or results would not have a material adverse effect on our financial position. NOTE 11 -- COMMON STOCK, PREFERRED STOCK AND DIVIDENDS In December 1998, the holders of class A common stock and class B common stock approved the merger agreement with S-Sixteen Holding Company. Part of the transaction involved the exchange of one class of new voting common stock for the two classes of common stock that were outstanding. The stockholders who owned class A common stock received 1.15 shares of the new common stock for each share of class A common stock. The stockholders who owned class B common stock received 1 share of the new common stock for each share of class B common stock. We issued 579,757 shares of the new common stock plus a warrant to purchase 300,000 additional shares of 28 29 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements the new common stock for the assets of S-Sixteen Holding Company. The exercise prices on the warrant range from $7.00 to $11.00. In addition, our stockholders approved an increase in the number of authorized common stock shares to 100 million and authorized 25.0 million shares of "blank check" preferred stock. The par value of the new common stock is $0.01 per share. The board of directors can issue multiple series of preferred stock and set different terms, voting rights, conversion features and redemption rights for each distinct series of the preferred stock. We have reserved approximately 2.8 million shares of common stock for our two stock option plans, which are discussed in more detail in Note 16 -- Employee and Director Compensation Plans, and 300,000 shares for the warrant. We have not paid dividends since before 1992. Dividends are not currently restricted. However, if we pay dividends in excess of 2% of the market price per share during a calendar quarter, the conversion price of the 8 1/4% Convertible Subordinated Notes will be adjusted proportionately. The determination of future cash dividends, if any, will depend upon, among other things, our financial condition, cash flow from operating activities, the level of our capital and exploration expenditure needs and our future business prospects. NOTE 12 -- OIL AND GAS REVENUES We recognize oil and gas revenue in the month of actual production. Our actual sales have not been materially different from our entitled share of production and we do not have any significant gas imbalances. In 1998, sales by a gas marketing company accounted for approximately 53% of our total gas revenue. In addition, we sold approximately 72% of our total oil production to one company during the year, which accounted for approximately 75% of our total oil revenues in 1998. We do not believe that the risk of losing services or sales from either of these companies would have a material adverse effect on us. NOTE 13 -- MARKETABLE SECURITIES When we sell a marketable security, we record the realized gain or loss on that specific security in the income statement. The following table includes certain information about our marketable security transactions and the change in net unrealized holding gains and losses.
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 -------- -------- -------- (In thousands) Sales Proceeds - $ 33,411 $ 8,127 Gross realized gains - $ 46 $ 7 Gross realized (losses) - $ (169) $ (80) Change in net unrealized holding gains and losses - $ 186 $ (29)
In 1997 and 1996, we classified all of our marketable securities as available-for-sale and recorded them on the balance sheet at their market value as of the balance sheet date. The unrealized holding gains and losses that result from the difference between the market value and the cost of these securities are recorded, net of tax, as a separate component of stockholders' equity. NOTE 14 -- NET PROFITS EXPENSE We pay Phillips Petroleum Company 33% of the "net profit", as defined in the farm-out agreement, from South Pass block 89. The following table summarizes the net profits expense calculation:
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 -------- -------- -------- (In thousands) Oil and natural gas revenue (net of transportation) $ 13,434 $ 30,567 $ 42,063 Operating, overhead, and capital expenditures (2,525) (5,292) (7,279) -------- -------- -------- "Net profit" from South Pass block 89 $ 10,909 $ 25,275 $ 34,784 ======== ======== ======== Net profit expense (at 33%) $ 3,600 $ 8,341 $ 11,479 ======== ======== ========
29 30 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements We are engaged in litigation with Phillips Petroleum Company concerning the Net Profits interest in South Pass block 89. In this dispute, Phillips contends that pursuant to its 33% Net Profits interest in South Pass block 89, it was entitled to receive an overriding royalty for months in which "net profits" were not achieved; that an excessive oil transportation fee was being charged to the Net Profits account; and that the entire $69.6 million cash payment that had been received by OKC Limited Partnership (our predecessor) from the 1990 settlement of previous litigation between Texas Eastern and us, should have been credited to the Net Profits account instead of the $5.8 million that was credited. On the latter claim, Phillips seeks to receive in excess of $21.5 million, while on the first two claims Phillips alleged aggregate damages of several million dollars. In addition, Phillips, under the Louisiana Mineral Code, is seeking double damages and cancellation of the farm-out agreement that created the Net Profits interest. We denied Phillips' claims and defended ourselves during a non-jury trial in April 1997. At trial, we asserted a counterclaim that Phillips had breached a settlement agreement regarding previous litigation, and we sought to recover damages in excess of $10.0 million. In August 1998, the trial court ruled in the litigation. In its ruling, the court awarded Phillips $1.6 million plus interest for its overriding royalty claim and $9.3 million plus interest for its claim on the 1990 settlement. The trial court dismissed Phillips' claim of excessive transportation charges and its claims for double damages and lease cancellation. The trial court also dismissed our counterclaim. In October 1998, the trial court finalized its judgment. We have filed an appeal on certain of the adverse portions of the judgment. The trial court has required that we post a bond in order to prevent Phillips from executing on the judgment pending appeal. The amount of the bond is $18.0 million, 50% of which is collateralized by cash and a letter of credit. During the pendency of the appeal, simple interest will continue to accrue on the $10.9 million judgment. Phillips has also filed notice to appeal. In connection with the proceeds from the termination of the Texas Eastern gas sales contract, we filed a declaratory judgment action against Phillips in federal district court in Dallas, Texas. In the action we asked the court to declare that none of the $49.8 million we received from the contract termination is owed to Phillips under the farm-out agreement. In existing litigation in Collin County, Texas, addressing the same issues that have been adjudicated by the Louisiana court, Phillips has filed a counterclaim asserting that the proceeds of the termination agreement should be credited to the Net Profits account. In response to Phillips counterclaim, we have filed an amended petition seeking a declaratory judgment that the termination proceeds need not be credited to the Net Profits account. We agreed to dismiss our federal court action and the Collin County action is stayed pending resolution of the Louisiana appeal. Certain possible outcomes of our current litigation with Phillips Petroleum Company could have a material adverse effect on Remington. In connection with the judgment, and in accordance with Statement of Financial Accounting Standards No. 5 entitled "Accounting for Contingencies," we recorded $18.0 million as an expense in August 1998. This amount includes both the awards by the trial court and the estimated interest on those awards through September 30, 1998. NOTE 15 -- REORGANIZATION COSTS Reorganization expense recorded in 1997 and 1996 includes employee severance expense, litigation settlement amounts and other costs. During 1997, 31 employees were dismissed, resigned or notified us of their resignation. We paid severance amounts to the employees ranging from 6 to 18 months of their base pay because of severance agreements between the employees and us. The 31 employees included three executive officers (Senior Vice President/Operations, Vice President/Marketing and Supply, and Treasurer), ten employees from the operations technical staff and 18 other professional or clerical personnel. In 1996, under the same severance agreements, 15 employees were dismissed, resigned or notified us of their resignation. The employees included the Chief Executive Officer, Executive Vice President, Chief Financial Officer, General Counsel, and Chief Accounting Officer. During 1995, we adopted a reorganization plan, which eliminated eight positions that included personnel involved with corporate development and the management of our real estate properties in Mississippi and Louisiana. Total reorganization costs included primarily severance pay and benefits to terminated employees, but also included rent expense on closed offices. In the third quarter of 1997, we agreed to pay Thomas D. Box $1.2 million to settle his severance claims and lawsuits against us. He was the Chief Executive Officer and President of the company before his dismissal by the board of directors in August 1996. In addition, the company granted him options to purchase 50,000 shares of common stock 30 31 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements at $9.00 per share, office furniture, computer equipment and a 3-D seismic workstation. When Mr. J.R. Simplot purchased S-Sixteen Holding Company in August 1997, we executed a letter of intent to settle all the litigation brought by Mr. Simplot and other plaintiffs. Under the terms of the subsequently-executed settlement agreement, we paid Mr. Simplot $1.9 million for attorneys' fees and Mr. James Arthur Lyle $100,000 for attorneys' fees. S-Sixteen Holding Company owned approximately 57% of our voting common stock until December 1998. At December 31, 1998, Mr. Simplot controlled approximately 27% of our common stock. Mr. Lyle has been a member of the board of directors since September 2, 1997. NOTE 16 - EMPLOYEE AND DIRECTOR BENEFIT PLANS Stock option plans We have two stock option plans: the 1992 Incentive Stock Option Plan and the 1997 Stock Option Plan. Remington discontinued a third plan, the 1992 Non-Qualified Stock Option Plan in 1997. We no longer use the 1992 Incentive Stock Option Plan, however, 28,500 options remain outstanding thereunder. An employee can exercise up to 50% of the options granted under the 1992 Incentive Stock Option Plan after three years from the date of grant and may exercise the remaining 50% after five years from the date of grant. The options expire ten years from the date of grant. A committee that includes at least two or more outside non-employee directors administers the 1997 Stock Option Plan. The committee has the discretion to determine the participants, the number of shares granted to each person, the purchase price of the common stock covered by each option and most other terms of the option. Options granted under the plan may be either incentive stock options or non-qualified stock options. The committee may issue options for up to 2.8 million shares of common stock, but no more than 275,000 shares to any individual. We continue to apply the accounting provisions of Accounting Principles Board Opinion 25, entitled "Accounting for Stock Issued to Employees," and related interpretations to account for stock-based compensation. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of our stock at the date of the grant over the amount an employee must pay to acquire the stock. A summary of our stock option plans as of December 31, 1997, 1996, and 1995 and changes during the years ending on those dates is presented below:
AT DECEMBER 31, --------------------------------------------------------------------- 1998 1997 1996 ----------------------- --------------------- ----------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- --------- ---------- --------- ---------- --------- Outstanding at beginning of year 455,000 $6.92 312,500 $ 9.52 622,000 $10.08 Granted 751,000 $5.72 426,500 $ 6.73 41,000 $ 8.85 Exercised -- -- -- -- -- -- Forfeited (30,500) $6.80 (284,000) $ 9.51 (350,500) $10.43 --------- ----- -------- ------ -------- ------ Outstanding at end of year 1,175,500 $6.15 455,000 $ 6.92 312,500 $ 9.52 ========= ===== ======== ====== ======== ====== Options exercisable at year-end 257,921 $7.07 8,000 $11.88 38,600 $11.88 Weighted-average fair value of options granted during the year $3.32 $ 4.65 $ 6.15
The options outstanding at December 31, 1998, have a weighted-average remaining contractual life of 9 years and an exercise price ranging from $3.125 to $11.875 per share. 31 32 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements The table below reflects the effect on our net income or loss if we recorded the estimated compensation costs for the stock options using the estimated fair value as determined by applying the Black-Scholes option pricing model.
FOR YEARS ENDED DECEMBER 31, ----------------------------------------------- 1998 1997 1996 -------- -------- --------- (In thousands) Net income (loss) As reported $ 13,617 $ (26,790) $ (7,662) Pro forma $ 12,591 $ (27,062) $ (7,774) Basic income (loss) per share As reported $ 0.67 $ (1.31) $ (0.37) Pro forma $ 0.62 $ (1.32) $ (0.37) Diluted income (loss) per share As reported $ 0.66 $ (1.31) $ (0.37) Pro forma $ 0.61 $ (1.32) $ (0.37)
The fair value of each option grant for the years ended December 31, 1998, 1997, and 1996 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
FOR YEARS ENDED DECEMBER 31, ---------------------------------------------- 1998 1997 1996 -------- -------- -------- Expected life (years) 10 10 10 Interest rate 5.50% 6.19% 6.85% Volatility 51.17% 49.50% 48.21% Dividend yield 0 0 0
Non-Employee Director Stock Purchase Plan The stockholders approved the non-employee director stock purchase plan in December 1997. The plan allows the non-employee directors to receive their directors' fees in shares of common stock. Once each year each non-employee director of the company may elect to receive all or a portion of his fees in restricted shares of common stock instead of cash. The number of shares received will be equal to 150% of the cash fees divided by the closing market price of the common stock on the day that the cash fees would otherwise be paid. The director can not transfer the common stock until one year after issuance or the termination of a director resulting from death, disability, removal, or failure to be nominated for an additional term. The director can vote the shares of restricted stock and receive any dividend paid in cash or other property. Transactions with Directors We paid executive search fees during 1998 totaling $40,000 and during 1997 totaling $141,000 to Preng and Associates, Inc., which is a company controlled by a member of our board of directors. 32 33 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements Pension Plan Remington and CKB Petroleum each have a noncontributory defined benefit pension plan. The retirement benefits available are generally based on years of service and average earnings. We fund the plans with annual contributions at least equal to the minimum funding provisions of the Employee Retirement Income Security Act of 1974, as amended, but no more than the maximum tax deductible contribution allowed. Plan assets consist primarily of equity and fixed income securities. The following table sets forth the reconciliation of the benefit obligation, plan assets, and funded status for Remington's pension plan.
AT DECEMBER 31, ---------------------- ASSETS 1998 1997 -------- ------- RECONCILIATION OF THE CHANGE IN BENEFIT OBLIGATION Beginning benefit obligation $ 2,938 $ 3,032 Service cost 79 116 Interest cost 201 222 Effect of settlement (644) (632) Actuarial loss (gain) 372 820 Benefits paid (142) (620) ------- ------- Ending benefit obligation $ 2,804 $ 2,938 ======= ======= RECONCILIATION OF THE CHANGE IN PLAN ASSETS Beginning market value $ 3,160 $ 3,500 Actual return on plan assets 312 280 Employer contributions 150 -- Benefit payments (786) (620) ------- ------- Ending market value $ 2,836 $ 3,160 ======= ======= FUNDED STATUS AND AMOUNTS RECOGNIZED IN THE BALANCE SHEET Funded status $ 32 $ 222 Unrecognized net actuarial loss (gain) 320 -- Effect of the settlement (60) -- ------- ------- Adjusted prepaid (accrued) benefit cost $ 292 $ 222 ======= =======
The net periodic pension cost recognized in our income statements include the following components:
FOR YEARS ENDED DECEMBER 31, ----------------------------- 1998 1997 1996 -------- -------- --------- (In thousands) COMPONENTS OF NET PERIODIC PENSION COST Service cost $ 79 $ 116 $ 140 Interest cost on projected benefit obligation 201 222 214 Actual return on plan assets (259) (281) (324) Net amortization and deferrals -- 21 114 ----- ----- ----- Net periodic pension cost 21 78 144 Special recognition due to curtailment and lump sum settlements -- (36) -- ----- ----- ----- Net periodic pension cost $ 21 $ 42 $ 144 ===== ===== ===== WEIGHTED AVERAGE ASSUMPTIONS Discount rate 7.00% 7.00% 7.50% Expected return on plan assets 8.00% 8.00% 8.00% Rate of compensation increase 3.00% 3.00% 3.00%
33 34 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements Remington acquired CKB Petroleum in December 1998 as part of the merger with S-Sixteen Holding Company. Because of the merger, we acquired the CKB Petroleum pension plan. The following table presents the benefit obligation, plan assets, and funded status of the CKB Petroleum plan at the time of acquisition. Benefit obligation $ 527,000 Market value of plan assets $ 553,000 Adjusted prepaid benefit cost $ 19,000
Statement of Financial Accounting Standards No. 88 entitled "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" requires immediate recognition of certain previously unrecognized amounts when certain transactions or events occur in a defined benefit pension plan. It prescribes the method for determining the amount to be recognized in earnings when a pension obligation is settled or a plan is curtailed. Settlement is defined as an irrevocable action that relieves the employer (or the plan) of primary responsibility for an obligation and eliminates significant risks related to the obligation and the assets used to effect the settlement. A curtailment is defined as a significant reduction in, or an elimination of, defined benefit accruals for present employees' future services. During 1998, Remington distributed plan assets in settlement of certain obligations to former employees. The following is reconciliation of the settlement on the various components of the plan.
Disclosure Loss Disclosure Prior to Measured at With effect of Settlement Settlement Settlement Settlement ------------- ------------- ------------ -------------- (In thousands) Vested benefit obligation $ (2,925) $ (373) $ 644 $ (2,654) Nonvested benefit obligation (90) - - (90) ---------- ---------- ---------- ---------- Accumulated benefit obligation (3,015) (373) 644 (2,744) Effect of future pay increases (60) - - (60) ---------- ---------- ---------- ---------- Projected benefit obligation (3,075) (373) 644 (2,804) Assets 3,480 - (644) 2,836 ---------- ---------- ---------- ---------- Funded status 405 (373) - 32 Unrecognized (gain) loss (53) 373 (60) 260 ---------- ---------- ---------- ---------- (Accrued) prepaid pension cost $ 352 $ - $ (60) $ 292 ========== ========== ========== ==========
Employee Severance Plan, Post Retirement Benefits and Post Employment Benefits We adopted an employee severance plan in November 1997. The plan provides severance benefits ranging from 2 months to 18 months of the employee's base salary if the employee is terminated involuntarily. The plan incorporates the provisions and terms of any individual contract or agreement that an employee may have with the company. In 1995, certain employees had signed individual severance agreements with the company. In addition, certain of the executive officers have individual employment contracts with the company. We have never paid postretirement benefits other than pensions and have not obligated ourselves to pay such benefits in the future. Future obligations for postemployment benefits are immaterial. Therefore, we have not recognized any liability for either. 34 35 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements NOTE 17 -- INCOME TAXES Income tax expense or benefit includes both the current income taxes and deferred income taxes. Current income tax expense or benefit equals the amount calculated on our income tax return for that year. Deferred income tax expense or benefit equals the change in the net deferred income tax asset or liability from the beginning of the year to the end of the year. The following table provides a reconciliation of our income tax expense or (benefit):
FOR YEARS ENDED DECEMBER 31, ------------------------------------ 1998 1997 1996 -------- -------- --------- (In thousands) "Expected" tax expense (benefit) (35% of income before taxes) $ 5,031 $(4,258) $ (3,301) Net adjustment to valuation allowance (4,708) 19,052 1,036 Other -- (171) 569 -------- -------- -------- Total deferred income tax expense (benefit) 323 14,623 (1,696) Provision (credit) for alternative minimum tax 433 -- (74) -------- -------- -------- Total income tax expense (benefit) $ 756 $ 14,623 $ (1,770) ======== ======== ========
In 1997 we increased the valuation allowance against the entire deferred tax asset and recorded the related deferred income tax expense. Our actual 1997 results and future projections were significantly different than anticipated in our 1996 and prior projections. The difference resulted from a significant drop in commodity prices, the unusual and unforeseen reorganization expenses incurred in the last half of 1997, and a downward revision in our proved gas reserves as of January 1, 1998, on South Pass block 89. We determine the amount of our deferred income tax asset or liability by multiplying the enacted tax rate by the temporary differences, net operating or capital loss carry-forwards plus any tax credit carry-forwards. The tax rate used is the effective rate applicable for the year in which the temporary differences or carry-forwards expect to reverse. A valuation allowance offsets deferred income tax assets, which are not expected to reverse in future years using a "more likely than not" scenario that excludes probable and possible oil and natural gas reserves. The following table reflects the significant components of our deferred tax asset.
AT DECEMBER 31, ---------------------- 1998 1997 --------- --------- (In thousands) Asset (liability) from difference in book and tax basis of oil and gas properties $ (2,257) $ 11,012 Asset from difference in book and tax basis of other assets 879 192 Asset from difference in book and tax basis accrued liabilities 5,339 1,204 Federal income tax operating loss carry-forward 7,977 9,549 Federal capital loss carry-forwards 327 197 Alternative minimum tax credit carry-forward 644 262 -------- -------- Total deferred tax asset 12,909 22,416 Valuation allowance (12,909) (22,416) -------- -------- Net deferred tax asset $ - $ - ======== ========
The unused federal income tax operating loss carry-forward of $22.8 million will expire during the years 2007 through 2012 if not previously utilized, and the capital loss carry-forward of $934,000 will expire in the years 1999 through 2002. 35 36 Remington Oil and Gas Corporation Notes to Consolidated Financial Statements NOTE 18 -- INCOME PER COMMON SHARE We compute basic income per share by dividing net income by the weighted average number of common shares outstanding for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shares in the net income of the company. The following table presents our calculation of basic and diluted income per share.
FOR YEARS ENDED DECEMBER 31, --------------------------------------- 1998 1997 1996 -------- -------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net income (loss) available for basic income per share $ 13,617 $(26,790) $ (7,662) Interest expense on the Notes (net of tax) (2) 2,058 -- -- -------- -------- -------- Net income (loss) available for diluted income per share $ 15,675 $(26,790) $ (7,662) ======== ======== ======== Basic income (loss) per share $ 0.67 $ (1.31) $ (0.37) ======== ======== ======== Diluted income (loss) per share $ 0.66 $ (1.31) $ (0.37) ======== ======== ======== Weighted average common shares for basic income (loss) per share 20,370 20,524 20,803 Dilutive stock options outstanding (treasury stock method) (1) -- -- -- Shares assumed issued by conversion of the Notes (2) 3,488 -- -- -------- -------- -------- Total common share for diluted income (loss) per share 23,858 20,524 20,803 ======== ======== ======== (1) Non dilutive (2) Non dilutive in 1997 and 1996 Potential increase to net income for diluted income per share Interest expense on Notes (net of tax) $ -- $ 2,835 $ 2,954 Potential issues of common stock for diluted income per share Weighted average stock options granted 875 99 302 Weighted average shares from warrant issued in merger 2 -- -- Weighted average shares issued assuming conversion of Notes -- 4,741 5,007
NOTE 19 -- OTHER RELATED PARTY TRANSACTIONS Under the Limited Partnership Agreement of OKC Limited Partnership, the general partners were entitled to advancement of litigation expenses in the event they were named parties to litigation in their capacity as general partners. In order to receive such advancements, each general partner was required to request, in writing, advancement of litigation expenses and undertake to repay any advancements in the event it was determined, in accordance with applicable law, that the general partners were not entitled to indemnification for litigation expenses. Each general partner executed such an undertaking agreement in relation to the Griffin Case. Accordingly, the Partnership, and later the company, advanced litigation expenses to CKB & Associates, Inc. and Cloyce K. Box (and his estate following his death) in connection with such litigation. In addition, we advanced litigation expenses on behalf of certain directors and officers of the company for one lawsuit related to the Griffin litigation and other lawsuits related to the Devere and Nealon Case and Thomas D. Box Cases. In accordance with our By-Laws, the defendants have executed written undertakings to repay us for any related expenses advanced on their behalf if it is later found that such costs were not subject to indemnification. No judicial determination has been made that any of the general partners, directors or officers are not entitled to indemnification for litigation expenses incurred. The total legal costs incurred related to these cases were $351,000 in 1997 and $1.5 million in 1996. Included in Accounts receivable - other is a receivable in the amount of $210,000 from the Estate of Cloyce K. Box. Don D. Box, an officer and director of the company, is co-executor of the Estate. 36 37 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table provides information with respect to persons who served on the company's board of directors or as an executive officer of the company during 1998. Each director holds office until his successor is elected and qualified or until his or her earlier resignation or removal in accordance with our Certificate of Incorporation and By-Laws. Several of the present and former directors and several of the present and former officers have been named as defendants in one or more legal actions. See "Litigation Involving Directors and Officers." Executive officers hold their respective offices at the pleasure of the board of directors.
NAME AGE POSITION - ---- --- -------- Don D. Box 48 Director, Executive Vice President John E. Goble, Jr. (2) 52 Director William E. Greenwood (3) 60 Director David H. Hawk (1) 54 Director, Chairman of the Board James Arthur Lyle (3) 54 Director David E. Preng (3) 52 Director Thomas W. Rollins (1) 67 Director Alan C. Shapiro (2) 53 Director James A. Watt (1) 49 Director, President and Chief Executive Officer Robert P. Murphy 40 Vice President/Exploration Steven J. Craig 47 Senior Vice President/Planning and Administration J. Burke Asher 58 Vice President/Finance and Secretary Edward V. Howard 36 Vice President/Controller and Assistant Secretary
- --------------- (1) Member of the Executive Committee. (2) Member of the Audit Committee. (3) Member of the Compensation Committee. The following is a brief description of the background and principal occupation of each director and executive officer of the company. Don D. Box has served as a director of the company since March 1991 and as Executive Vice President of the company since October 1997. He served as Chairman of the Board of Directors from January 1994 to October 1997, as Chief Executive Officer from August 1996 to October 1997, and as President from August 1996 to March 1997. From March 1994, until January 1995, he served as our Director of Corporate Development. He served as Vice President of S-Sixteen Holding Company from September 1997 until December 1998. He has served as Vice President of CKB & Associates, Inc. and CKB Petroleum, Inc. since September 1997. For more than five years prior to September 1997, he served as a director and executive officer of S-Sixteen Holding Company, CKB & Associates, CKB Petroleum, and certain other affiliates of S-Sixteen Holding Company. Mr. Box is a director of Toucan Mining Company. He is a co-executor of the Cloyce K. Box Estate. He received a Bachelor of Arts degree from the University of Pennsylvania, a Bachelor of Science in Economics degree from the Wharton School of the University of Pennsylvania, and a Master of Business Administration degree from Southern Methodist University. 37 38 John E. Goble, Jr. has served as a director since April 1997. Mr. Goble is a certified public accountant and a certified financial planner and from 1986 through the present has served as an investment and financial advisor to Byrd Investments. Mr. Goble is a director of the Miracle of Pentecost Foundation. Mr. Goble is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. He has a Bachelor of Business Administration degree from Southern Methodist University. William E. Greenwood has served as a director since April 1997. From 1995 through the present, Mr. Greenwood has served as a consultant. He served as director and chief operating officer of Burlington Northern Railroad Corporation from 1990 until 1994. Mr. Greenwood is a director of AmeriTruck Distribution Corporation, Mark VII, Inc., and Transport Dynamics Inc. Mr. Greenwood is also president of the Mendota Museum and Historical Society. He received a Bachelor of Science degree from Marquette University. David H. Hawk has served as a director since September 1997 and as Chairman of the Board since October 1997. Since 1984, he served as Director, Energy Natural Resources for the J.R. Simplot Company in Boise Idaho, which was founded by J.R. Simplot, who together with members of his family, controls approximately 27% of the company's outstanding common stock. Mr. Hawk previously held the positions of Exploration Geologist with Atlantic Richfield Company and Tenneco Inc. He has held executive positions with IGC Production Company, Sundance Oil Company, and Horn Resources Corporation. He received a Bachelor of Science in Geology degree from the University of Idaho and a Master of Science in Geology degree from the University of Oklahoma. James Arthur Lyle, CCIM, has served as a director since September 1997. Since 1976, he has been the owner of James Arthur Lyle & Associates, a commercial, industrial and investment real estate firm in El Paso, Texas. Since 1984, Mr. Lyle has served as a director, Chief Operating Officer, and President of Hueco Mountain Estates, Inc., a 10,500-acre multi-use real estate development located in El Paso County, Texas. He received a Bachelor of Science in Industrial Management degree from the Georgia Institute of Technology. David E. Preng has served as a director since April 1997. From 1980 through the present, Mr. Preng has been Chief Executive Officer and President of Preng and Associates, Inc., an international executive search firm specializing in the energy industry. He is a director of Citizens National Bank of Texas and the British American Business Council in Houston, and is a fellow of the Institute of Directors in London. He has a Bachelor of Science in Business Administration degree from Marquette University and a Master of Business Administration degree from DePaul University. Thomas W. Rollins has served as a director since July 30, 1996. Since 1992, Mr. Rollins has been Chief Executive Officer of Rollins Resources, a natural gas and oil consulting firm. From March 1991 until 1992, Mr. Rollins was President and Chief Executive Officer of Park Avenue Exploration Corporation, an oil and gas exploration company and a subsidiary of USF&G Corporation. He is a director of Enron Cash Company #2, Pheasant Ridge Winery, The Teaching Company, and the Nature Conservancy of Texas. During his career, Mr. Rollins has held executive positions and/or directorships with Shell Oil Company, Pennzoil Company, Florida Gas Transmission Company, Pogo Producing Company, Magma Cooper Company, and Felmont Oil Corporation. He is a graduate and Distinguished Career Medalist of the Colorado School of Mines. Alan C. Shapiro has served as a director since May 5, 1994. Since 1991, Dr. Shapiro has been the Ivadelle and Theodore Johnson Professor of Banking and Finance in the Department of Finance and Business Economics, Marshall School of Business, University of Southern California. From 1993 to 1998, he was chairman of the Department. His business activity also includes frequent engagements as a consultant and/or expert witness with a wide variety of businesses and government agencies. Dr. Shapiro has authored many books and articles including a best-selling textbook, Multinational Financial Management, which is in use in many of the MBA programs around the world. Dr. Shapiro received a Bachelor of Arts in Mathematics degree from Rice University and a Ph.D. in Economics degree from Carnegie Melon University. James A. Watt has served as a director since September 1997, as President and Chief Operating Officer from March 1997 to February 1998, and as President and Chief Executive Officer since February 1998. Since January 1999 he has also served as a director and President of CKB & Associates, Inc. and CKB Petroleum, Inc. Mr. Watt was a Vice President/Exploration of Seagull Energy E&P, Inc. from 1993 to 1997. He was Vice President/Exploration & Exploitation of Nerco Oil & Gas, Inc. from 1991 to 1993. Mr. Watt received a Bachelor of Science in Physics from 38 39 Rensselaer Polytechnic Institute. Robert P. Murphy joined the company as Vice President/Exploration on January 22, 1998. Mr. Murphy served as a director of Cairn Energy USA, Inc. from May 1996 to November 1997. Mr. Murphy joined Cairn in 1990 as an exploration geologist and was Cairn's Vice President-Exploration from March 1993 to January 1998. From 1984 to 1990, Mr. Murphy served as an exploration geologist for Enserch Exploration, an oil and gas company. Mr. Murphy holds a Master of Science in geology from The University of Texas at Dallas. Steven J. Craig has served as Senior Vice President/Planning and Administration of the company since April 1997, and served as Administrative Assistant to the Chairman from August 1996 to April 1997. Since January 1999 he has also served as a director and Vice President of CKB & Associates, Inc. and CKB Petroleum, Inc. He served as Vice President and Assistant Treasurer of S-Sixteen Holding Company, CKB & Associates, and CKB Petroleum from March 1997 to October 1997, and as a director from March 1997 to August 1997. Mr. Craig served as Assistant Treasurer and Controller of CKB & Associates and CKB Petroleum from March 1996 to March 1997, and served as Chief Financial Officer and Assistant Treasurer of S-Sixteen Holding Company from May 1996 to March 1997. He served as Vice President of Remington from February 1994 to March 1995. Mr. Craig was self employed in real estate and consulting from 1992 to 1994 and from March 1995 to March 1996. Mr. Craig received a Bachelor of Arts in Economics degree and a Master of Business Administration in Finance and Quantitative Analysis degree from Southern Methodist University. J. Burke Asher has served as Vice President/Finance of the company since December 1997 and as Secretary since October 1996. He served as the company's Chief Accounting Officer from September 1996 to December 1997. He served as Treasurer and Assistant Secretary of S-Sixteen Holding Company from March 1997 to December 1998. He has served as Treasurer and Assistant Secretary of CKB & Associates, Inc. and CKB Petroleum, Inc. since March 1997. He served as a director of S-Sixteen Holding Company and CKB & Associates from March 1997 to August 1997, and as a director of CKB Petroleum from March 1997 to April 1997. Mr. Asher was an independent, self-employed financial consultant and adviser from 1987 to 1996. He also served as controller of Doty-Moore Tower Services, Inc., a privately held contractor to the communications industry, from 1993 to 1995. Mr. Asher received a Bachelor of Science in Economics degree from the Wharton School of the University of Pennsylvania. Edward V. Howard, a Certified Public Accountant, has served as Vice President/Controller of the company since March 1992 and served as a senior accountant from 1989 to 1992. He was elected Assistant Secretary on October 1, 1997. Mr. Howard received a Bachelor of Business Administration in Accounting degree from West Texas State University. No director has a significant personal interest in the exploration, development or production of oil and gas. LITIGATION INVOLVING DIRECTORS AND EXECUTIVE OFFICERS Shareholder Litigation The company, several former directors and two current directors were named defendants in a consolidated class action suit filed in 1995 in Delaware Chancery Court in Wilmington. Plaintiffs, stockholders of the company at the time, alleged that the company did not properly respond to what the company considered informal overtures and not offers from two outside entities. The Plaintiffs sought to compel the company to put itself up for sale and also sought unspecified damages and attorneys' fees. The case was dismissed on March 10, 1998. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon the company's review of Forms 3 and 4 received by the company, all persons required by Section 16(a) of the Securities Exchange Act of 1934 ("the Act") to file such forms complied with Section 16(a) of the Act with the following exceptions: J. R. Simplot filed one late Form 3. Steven J. Craig filed one late Form 4 reporting two transactions and one late Form 4 reporting one transaction. James Arthur Lyle filed one late Form 4 reporting one transaction. 39 40 ITEM 11. EXECUTIVE COMPENSATION The following table summarizes the compensation paid by the company during 1998, 1997, and 1996 to the company's Chief Executive Officer and its four most highly compensated executive officers, other than the Chief Executive Officer, whose total annual salary and bonus in 1998 exceeded $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE -------------------------------------- ---------------------------------------------- ANNUAL COMPENSATION LONG-TERM COMPENSATION -------------------------------------- ---------------------------------------------- SECURITIES OTHER RESTRICTED UNDERLYING ANNUAL STOCK OPTIONS/ ALL OTHER Name and FISCAL SALARY BONUS COMPENSATION AWARDS SAR'S COMPENSATION Principal Position YEAR ($) ($) ($)(1) ($) (#) ($) - ------------------ ------ ------- ----- ------------ ---------- ----------- ------------ James A. Watt 1998 250,006 70,000 - - 130,000 174 (7) President and Chief 1997 166,250 100,000 - 112,500 (3) 100,000 148,039 (4) Executive Officer(2) 1996 - - - - - - Don D. Box 1998 200,004 - - - 40,000 174 (7) Executive Vice 1997 183,335 - - - 100,000 2,884 (6) President (5) 1996 - - - - - 28,000 (6) Robert P. Murphy 1998 146,260 30,000 - - 60,000 62 (7) Vice President/ 1997 - - - - - - Exploration 1996 - - - - - - Steven J. Craig Senior Vice President/ 1998 110,259 20,000 - - 40,000 174 (7) Planning and 1997 100,008 15,000 - - 20,000 177 (7) Administration 1996 40,202 10,000 - - - 77 (7) J. Burke Asher 1998 105,000 19,000 - - 35,000 450 (7) Vice President/Finance 1997 95,004 15,000 - - 20,000 450 (7) and Secretary 1996 31,668 3,200 - - - 150 (7)
- ------------- (1) No amount is included as it is less than 10% of the total salary and bonus of the individual for the year. (2) James A. Watt served as President and Chief Operating Officer from March 17, 1997, to February 4, 1998, on which date he was appointed Chief Executive Officer. (3) At December 31, 1998, Mr. Watt held 12,000 restricted shares of common stock with a value of $38,250. The total number of restricted shares awarded effective March 17, 1997, was 15,000, which vest 20% per year from the effective date. If any dividends are paid to holders of common stock, Mr. Watt's restricted shares will be entitled to receive dividends. (4) This amount includes a signing bonus of $25,000, reimbursed relocation expenses of $122,892, and $147 for group term life insurance premiums paid by the company. (5) Don D. Box served as Chairman of the Board from January 1994 to October 1997 and as Chief Executive Officer from August 1996 to October 1997. He served as President from August 1996 until March 1997. (6) For 1996, this amount is for director's fees. For 1997, $2,722 is for director's fees and $162 is for group term life insurance premiums paid by the company. (7) These amounts are for group term life insurance premiums paid by the company. 40 41 Severance agreements are discussed below. Three Named Executive Officers have employment contracts with Remington. See "Change in Control Arrangements." EMPLOYEE STOCK OPTIONS 1992 Plan Our board of directors approved the 1992 Incentive Stock Option Plan (the "1992 Plan") on April 24, 1992, for our employees. The 1992 Plan was approved by the holders of a majority of the company's voting stock on July 1, 1992, effective as of April 24, 1992. The 1992 Plan terminates on April 23, 2002. The primary purposes of the 1992 Plan are to provide an additional inducement for those employees granted options to remain with us and to continue to increase their efforts to make the company successful. During 1998, no options were granted under the 1992 Plan. As of December 31, 1998, only 28,500 options remain outstanding under the 1992 Plan, and we do not anticipate granting any more options thereunder. 1997 Plan On December 4, 1997, the holders of a majority of our voting stock approved the 1997 Stock Option Plan (the "1997 Plan"), which is intended to benefit us by providing directors and key employees with additional incentives and giving them a greater interest as shareholders in our success. The 1997 Plan provides for the issuance of options to purchase common stock and is administered by a committee of two or more directors of the company who each qualify as a "Non-Employee Director" under Rule 16b-3 under the Securities Exchange Act of 1934, as amended and as an "outside director" under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Directors and those key employees selected by the committee are eligible to be granted options under the 1997 Plan. The committee has the discretion to determine the participants to be granted options, the number of shares granted to each person, the purchase price of the stock covered by each option and other terms of the option. Options intended to meet the requirements of Section 162(m) of the Code will have an exercise price no less than the fair market value of the common stock on the date of grant. The committee estimates that approximately 22 employees will be eligible participants. Options granted under the 1997 Plan may be either incentive stock options qualifying under Section 422 of the Code or non-qualified stock options. The company may issue up to 2,750,000 shares of common stock upon the exercise of options granted under the 1997 Plan, but no individual may be issued more than 275,000 shares. In the event any option terminates, expires or is surrendered without having been exercised in full, the shares subject to such option will again be available for issuance pursuant to options to be granted under the 1997 Plan. The shares of common stock to be issued upon exercise of options may be authorized but unissued shares or shares previously issued and reacquired by the company. The 1997 Plan will terminate 10 years after its effective date, which is December 4, 1997. The term of an option will be fixed by the committee, but in no event will the term be more than 10 years (five years with respect to incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock then outstanding) from the date of grant. Each option will be exercisable at such times and upon such conditions as the committee may determine, except that the aggregate fair market value of common stock with respect to which incentive stock options are exercisable for the first time by an optionee in any calendar year may not exceed $100,000. The option exercise price will be determined by the committee, but may not be less than the par value of the common stock, and in the case of incentive options may not be less than the fair market value of the common stock on the date of grant or 110% of the fair market value with respect to any incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock then outstanding. Option holders will pay the option exercise price in cash or, unless the committee objects, in shares of common stock owned by the option holder. The committee may provide the option holder with the right to satisfy any withholding tax obligation by delivery of previously owned shares or withholding shares otherwise issuable upon exercise of a non-qualified stock option. The committee 41 42 may provide that unexpired and unvested options will become fully exercisable upon a change in control of the company, as defined in the stock option agreement. Adjustments will be made to the option exercise price and number of shares covered by outstanding options to prevent dilution or enlargement of rights of option holders as a result of certain corporate events, such as reorganizations, mergers, stock splits, stock dividends or other changes in our capital structure. Adjustments will also be made to the number of shares remaining subject to issuance under the 1997 Plan and to the maximum number of shares issuable to any individual. In the event of the retirement of an optionee at the normal retirement age in accordance with our retirement policy, or the resignation of the optionee with the written consent of the company, or after ceasing to be a member of the board of directors in the case of a director who is not an employee of the company, an optionee may exercise vested options for a period of 60 days following the date of such retirement, resignation, or ceasing to be a director. In the event of his death or disability, the optionee may exercise vested options for a period of one year from the date of death or disability. In the event of any other termination of employment, unless otherwise determined by the committee, all outstanding options held by the optionee will terminate on the date of such termination of employment. No option, however, will be exercisable after the expiration of the term of the option. The board of directors may suspend, terminate or amend the 1997 Plan at any time, except that without the approval of the shareholders no such amendment may increase the maximum number of shares subject to the 1997 Plan, increase the maximum number of shares issuable to any person, or change the designation of the class of persons eligible to receive options. Federal Income Tax Consequences A participant will not realize taxable income upon the grant of a non-qualified stock option. Upon exercise, the excess of the fair market value of the shares at the time of exercise over the option exercise price for such shares will generally constitute taxable compensation. We will be entitled to a deduction for such compensation income if we satisfy any federal income tax withholding requirements. Upon disposition of the shares acquired upon exercise, any appreciation (or depreciation) in the stock value after the date of exercise will be treated as capital gain (or loss). A participant will not recognize taxable income upon the grant or exercise of an incentive stock option, assuming there is no disposition of the option shares within two years after the option was granted or within one year after the option was exercised (the "holding period"), and provided that the participant has been employed by us from the date of grant to a date that is not more than three months before the date of exercise. The exercise of an incentive stock option, however, could result in an item of tax preference for purposes of the alternative minimum tax. The sale of incentive stock option shares after the holding period at a price in excess of the participant's adjusted basis (ordinarily the option exercise price) will constitute capital gain to the participant, and we will not be entitled to a federal income tax deduction by reason of the grant or exercise of the option or the sale of the shares. If the participant sells incentive stock option shares prior to the expiration of the holding period, generally the participant will have compensation income taxable in the year of such sale in an amount equal to the excess, if any, of the fair market value of such shares at the time of exercise of the option (or, if less, the amount received upon the sale) over the option exercise price for such shares. We will be entitled to a deduction for such compensation income if we satisfy any federal income tax withholding requirements. 42 43
OPTION GRANTS IN LAST FISCAL YEAR - -------------------------------------------------------------------------------------------------------------------------- INDIVIDUAL GRANTS ------------------------------------------------------------- PERCENT OF NUMBER OF TOTAL SECURITIES OPTIONS UNDERLYING GRANTED TO GRANT DATE OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRESENT VALUE NAME GRANTED FISCAL YEAR PRICE $/SHARE DATE $(1) - ---- --------------- ------------- ------------- ---------- ------------- James A. Watt 50,000 9.88% 5.750 02/04/08 197,555 James A. Watt 80,000 15.81% 3.500 12/11/08 193,680 Don D. Box 20,000 3.95% 5.750 02/04/08 79,022 Don D. Box 20,000 3.95% 3.500 12/11/08 48,420 Robert P. Murphy 20,000 3.95% 5.375 01/22/08 73,818 Robert P. Murphy 20,000 3.95% 5.750 02/04/08 79,022 Robert P. Murphy 40,000 7.91% 3.500 12/11/08 96,840 Steven J. Craig 15,000 2.96% 5.750 02/04/08 59,267 Steven J. Craig 25,000 4.94% 3.500 12/11/08 60,525 J. Burke Asher 15,000 2.96% 5.750 02/04/08 59,267 J. Burke Asher 20,000 3.95% 3.500 12/11/08 48,420
- ------------- (1) We determined these values under the Black-Scholes option pricing model based on the following assumptions: stock price volatility of 49.73% for options expiring on 01/22/08, 50.30% for options expiring on 02/04/08, and 52.98% for options expiring on 12/11/08; interest rate based on the yield to maturity of a 10-year stripped Treasury security; exercise in the tenth year; and a dividend rate of zero. We made no adjustments for nontransferability or risk of forfeiture. Our use of this model does not constitute an endorsement or an acknowledgment that such model can accurately determine the value of options. No assurance can be given that the actual value, if any, realized by an executive upon the exercise of these options will approximate the estimated values calculated by using the Black-Scholes model.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES - --------------------------------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES VALUE OF UNEXERCISED NUMBER OF UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT SHARES AT FISCAL YEAR-END FISCAL YEAR-END ($) (1) ACQUIRED ON VALUE REALIZED ------------------------------ ---------------------------- NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- -------------- ----------- ------------- ----------- -------------- James A. Watt - - 20,000 210,000 - - Don D. Box - - 20,000 120,000 - - Robert P. Murphy - - - 80,000 - - Steven J. Craig - - 6,667 53,333 - - J. Burke Asher - - 6,667 48,333 - -
- ------------- (1) Computed as the number of securities multiplied by the difference between the option exercise prices and the closing price of our common stock on December 31, 1998. PENSION PLANS Our defined benefit pension plans provide retirement and other benefits to eligible employees upon reaching the "normal retirement age," which is age 65 or after five years of service, if later. Directors who are not also employees of the company are not eligible to participate in the plans. Employees are eligible to participate on January 1 following the completion of six months of service or the attainment of age 20 1/2, if later. Additional provisions are made for early or late retirement, disability retirement and benefits to surviving spouses. At normal retirement age, an eligible employee will receive a monthly retirement income equal to 35% of his or her average monthly compensation during the three 43 44 consecutive calendar years in the prior 10 years which provide the highest average compensation, plus 0.65% of such average compensation in excess of the amount shown in the Social Security Covered Compensation Table (as published annually by the Internal Revenue Service) multiplied by his or her years of service, limited to 35 years. If an employee terminates employment (other than by death or disability) before completion of five years of service, no benefits are payable. If an employee terminates employment after five years of service, the employee is entitled to all accrued benefits. The following table illustrates the annual pension for plan participants that retire at "normal retirement age" in 1998:
PENSION PLAN TABLE ------------------------------------------------------------------------------------------------------------- YEARS OF SERVICE (1)(3)(4) ------------------------------------------------------------------------------- AVERAGE COMPENSATION (1)(2) 15 20 25 30 35 ------------------- ------- ------ ------- ------ ------- ($) ($) ($) ($) ($) ($) 125,000 52,896 55,944 58,983 62,041 65,090 150,000 64,083 67,944 71,805 75,666 79,527 160,000 68,558 72,744 76,930 81,116 85,302 175,000 68,558 72,744 76,930 81,116 85,302 200,000 68,558 72,744 76,930 81,116 85,302 225,000 68,558 72,744 76,930 81,116 85,302 250,000 68,558 72,744 76,930 81,116 85,302 300,000 68,558 72,744 76,930 81,116 85,302 400,000 68,558 72,744 76,930 81,116 85,302 450,000 68,558 72,744 76,930 81,116 85,302 500,000 68,558 72,744 76,930 81,116 85,302
- ------------ (1) As of December 31, 1998, the Internal Revenue Code does not allow qualified plan compensation to exceed $160,000 or the benefit payable annually to exceed $130,000. The Internal Revenue Service will adjust these limitations for inflation in future years. When the limitations are raised, the compensation considered and the benefits payable under the pension plans will increase to the level of the new limitations or the amount otherwise payable under the pension plans, whichever amount is lower. (2) Subject to the above limitations, compensation in this table is generally equal to all of a participant's compensation paid in a fiscal year (the total of Salary, Bonus, Other Annual Compensation, and All Other Compensation in the Summary Compensation Table). Average compensation in this table is the average of a plan participant's compensation during the highest three consecutive years out of the prior 10 years. (3) The estimated credited service at December 31, 1998, for the Named Executive Officers is as follows: James A. Watt (2 years), Don D. Box (3 years), Robert P. Murphy (1 year), Steven J. Craig (4 years), and J. Burke Asher (2 years). (4) The normal form of payment is a life annuity for a single participant or a 50% joint and survivor annuity for a married participant. Such benefits are not subject to a deduction for Social Security or other offset amounts. Compensation of Directors The full board of directors held five meetings in 1998. All directors attended at least 75% of the 1998 meetings. With respect to director activities undertaken by a committee of directors, a quorum of committee members were present at each of the respective committee meetings. Each director was paid a fee of $20,000 per annum. In addition, each director receives $1,000 for each board meeting attended and $750 for each committee meeting attended if the committee meeting is on a different day than the board meeting. Directors are entitled to reimbursement for out-of-pocket expenses related to their services as directors. We also provide the directors with directors' and officers' liability insurance. Further, our By-Laws provide that we will indemnify the directors and officers in certain situations. 44 45 In 1998 David H. Hawk and James Arthur Lyle each were granted stock options to purchase shares of our common stock under the 1997 Stock Option Plan. The option grants to each of these directors consist of three grants: one grant to purchase 25,000 shares to be effective December 4, 1997, at an exercise price of $6.94 per share; a second grant to purchase 25,000 shares to be effective May 1, 1998, at an exercise price of $9.00 per share; and a third grant to purchase 25,000 shares to be effective May 1, 1999, at an exercise price of $11.00 per share. The options will have 10-year terms, will not be exercisable until one year after their respective grants or, if earlier, the termination of the director from the board of directors other than by resignation, and will terminate 60 days after the director's ceasing to be a member of the board of directors (one year if due to death or disability). Also in 1998 David H. Hawk and David E. Preng each were awarded stock options under the 1997 Stock Option Plan to purchase 10,000 shares effective December 23, 1998, at an exercise price of $3.13 per share. The options are exercisable one-third each year beginning December 23, 1999. During 1998, we paid Rollins Resources, a proprietorship owned by director Thomas W. Rollins, $9,928 for consulting fees and expense reimbursements. During 1998, we paid $39,601 in fees and expense reimbursements to Preng & Associates, Inc., which is majority-owned by director David E. Preng, for executive search services. Director Stock Purchase Plan On December 4, 1997, the holders of a majority of our voting stock approved the Non-Employee Director Stock Purchase Plan (the "Director Stock Purchase Plan"), which is intended to encourage our directors to acquire a greater equity interest in the company by providing a means for them to receive their director fees in shares of common stock. Each non-employee director of the company may elect once each year to receive all or a portion of the fees he receives as a director in restricted shares of common stock in lieu of cash. The number of shares of stock to be received will be the number of shares that will equal 150% of the cash amount of such director's fees divided by the closing market price of the stock on the day that cash fees would otherwise be paid to the director. The director may not transfer shares of stock for one year after issuance or, if earlier, his termination as a member of the board of directors as a result of his death, disability, removal or failure to be nominated for an additional term. The director will have the right to vote the shares of restricted stock and to receive any dividends paid in cash or other property. During 1998 the directors received shares of stock in lieu of cash fees as follows: John E Goble, Jr. received 4,018 shares in lieu of $12,000 cash. James Arthur Lyle received 6,698 shares in lieu of $20,000 cash. David E. Preng received 11,630 shares in lieu of $35,500 cash. Thomas W. Rollins received 6,698 shares in lieu of $20,000 cash. Alan C. Shapiro received 11,277 shares in lieu of $34,750 cash. The board of directors may terminate the Director Stock Purchase Plan at any time. Change in Control Arrangements 1997 Severance Plan In November 1997, we adopted the Box Energy Corporation Severance Plan (the "1997 Severance Plan") which generally covers all of our full-time regular employees. The 1997 Severance Plan provides for severance pay in applicable instances of "Involuntary Termination" (as defined in the 1997 Severance Plan) of amounts ranging from the equivalent of two months base pay to the equivalent of 18 months base pay. The level of severance pay for which an employee may be eligible depends upon the employee's classification and full years of service. An "Involuntary Termination" of a covered employee is any termination which does not result from a voluntary resignation other than any of (i) a "Termination for Cause," (ii) a termination by reason of death, (iii) a termination by reason of disability if one is eligible for benefits under a company disability benefit plan, or (iv) a termination which is expected to be of short duration and to be followed by reemployment with the company. A "Termination for Cause" is any termination of an individual's employment by reason of such individual's conviction of any felony or of a misdemeanor involving moral 45 46 turpitude, failure to perform his or her duties or responsibilities in a manner satisfactory to the company, engagement in business activities which are in conflict with the business interests of the company, insubordination or engagement in conduct which is in violation of the company's safety rules or standards or which otherwise causes injury to another employee or any other person, or engagement in conduct which is otherwise inappropriate in the office or work environment. Employment Agreements We entered into an employment agreement with James A. Watt, President and Chief Executive Officer of the company, for a period of five years from March 17, 1997, renewable upon mutual agreement of the parties. Under the terms of the agreement, Mr. Watt will receive a salary of $210,000 per year, subject to annual increases at the discretion of the board of directors or its designee, with a target bonus amount equal to 50% of his base salary. Mr. Watt received $123,000 for reimbursement of moving expenses. The company recommended to the compensation committee of the board of directors (and the committee approved) the granting to Mr. Watt 15,000 shares of common stock and employee stock options to purchase 100,000 shares of common stock vesting 20% per year over five years, subject to appropriate stockholder approval. In the event of Mr. Watt's termination of employment by the company other than for cause (as defined in the agreement) or his resignation for good reason (as defined in the agreement), Mr. Watt will be entitled to receive the amount of his then annual base salary plus his target bonus. In the event of his termination of employment by the company other than for cause or by Mr. Watt for good reason, within one year after a change in control of the company (as defined in the agreement), Mr. Watt will be entitled to receive a lump-sum payment equal to a multiple of the sum of his then annual base salary plus his target bonus. Such multiple will decline from three, if the change of control occurs within two years after execution of the agreement, to two, if the change in control occurs between two and four years after execution of the agreement. If payment to Mr. Watt upon termination of employment after a change in control of the company should be subject to federal excise tax, Mr. Watt will be entitled to receive additional payments from the company in an amount necessary to place him in the same after-tax position as would have been the case if no additional tax had been imposed. We entered into employment agreements with Steven J. Craig, Senior Vice President of the company, and J. Burke Asher, Vice President of the company, for a period of two years from August 29, 1997, renewable only by written agreement signed by the company and the officer. Under the terms of the agreements, Mr. Craig will receive a salary of $100,000 per year, and Mr. Asher will receive a salary of $95,000 per year, both subject to annual increases at the discretion of the board of directors. The officer may receive, but is not guaranteed, an annual performance bonus. In the event that the employment of the officer is terminated by the company "Without Cause" (as defined in the agreement), or is terminated by the officer for "Good Reason" (as defined in the agreement), the officer will be entitled to receive a lump-sum cash severance payment equal to two times the amount of the officer's then current annual base salary. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS No executive officer serves on the compensation committee of the board. The company paid $234,000 to Preng & Associates, Inc., which is majority-owned by David E. Preng, chairman of compensation committee, for executive search services provided to the company from July 1996 through the end of 1998, including $40,000 in 1998. The level of fees received by Preng & Associates usually depends, at least in part, on the initial level of compensation we offer to the candidate successfully recruited by us through Preng & Associates. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION We believe that employing and retaining highly qualified and high performing executive officers is vital to our achievement of long-term business goals. To this end, the Compensation Committee of the board of directors (the "Committee") developed an executive compensation program which is designed to attract and retain such officers. The philosophy is to develop a systematic, competitive executive compensation program which recognizes an 46 47 executive officer's position and responsibilities, takes into account competitive compensation levels payable within the industry by similarly sized companies, and reflects both individual and company performance. The executive compensation program developed by the Committee is composed of the following three elements: (i) a base salary, (ii) a performance-based annual cash incentive (short-term), and (iii) a stock-based incentive (long-term). Under this program, short-term and long-term incentives are "at risk" and are based on performance of the company versus defined goals. The Committee compiles data reflecting the compensation practices of a broad range of organizations in the oil and gas industry that are similar to us in size and performance. For both the base salary and annual cash incentives portions of executive compensation discussed below, the Committee adopted a philosophy of paying the executive officers at a level that is competitive and within the ranges reflected by the data compiled. BASE SALARIES Base salary is the portion of an executive officer's total compensation package which is payable for performing the specific duties and assuming the specific responsibilities defining the executive's position with the company. The Committee's objective is to provide each executive officer a base salary that is competitive at the desired level. ANNUAL CASH INCENTIVES The Committee developed a performance-based annual cash incentive plan covering the executive officers and top managers. The objectives in designing the plan are to reward participants for accomplishing objectives which are generally measurable and increase shareholder value. Under the annual cash incentive plan, the Committee has established a "target" cash incentive award for each executive officer (including the Chief Executive Officer) that is payable based mostly upon the company's achieving certain performance targets and, to a lesser extent, for achieving highly challenging individual performance objectives. The performance targets are increasing reserves and production; controlling finding, development, and production costs; and achieving an overall return on capital; all of which are competitive with a peer group of oil and gas companies. The committee also determined that award levels under the plan should be fiscally prudent. LONG-TERM STOCK-BASED INCENTIVES We maintain a stock option plan for officers and other employees. The philosophy is to award stock options to selected plan participants based on their levels within the company and upon individual merit. The plan is to grant stock options which are competitive within the industry for other individuals at the employee's level and which provide the employee a meaningful incentive to remain with the company, to increase performance, and to focus on achieving long-term increases in shareholder value. Other factors the Committee considers in granting stock options include the employee's contributions toward achieving the company's long-term objectives, such as reserve replacements and acquisitions, as well as the employee's contributions in achieving the company's short-term and long-term profitability targets. COMPENSATION COMMITTEE David E. Preng William E. Greenwood James Arthur Lyle 47 48 PERFORMANCE GRAPH The following performance graph compares the performance of all classes of our common stock to the NASDAQ indices of United States companies and to a peer group comprised of NASDAQ companies listed under the Standard Industrial Classification Codes 1310-1319 for the company's last five fiscal years. Such industrial codes include companies engaged in the oil and gas business. The graph assumes that the value of an investment in our common stock and in each index was $100 at December 31, 1993, and that all dividends were reinvested. [GRAPH]
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 -------- -------- -------- -------- -------- -------- ROILA 100.00 53.85 41.83 35.58 20.19 14.10* ROILB 100.00 85.15 68.32 72.28 41.09 25.25* ROIL * NASDAQ U.S. 100.00 97.75 138.27 170.03 208.53 293.83 NASDAQ O&G 100.00 92.48 97.19 140.48 133.88 64.95
* The last day of trading for ROILA and ROILB was December 24, 1998. Effective at the opening of trading on December 28, 1998, both former classes of stock were replaced by the new single class of voting common stock (ROIL). The values shown above as of December 31, 1998, for ROILA give effect to the 1.15:1 exchange ratio that the former holders of ROILA received in the exchange for the new class of common stock, and the 1:1 exchange ratio that the former holders of ROILB received in the exchange for the new class of common stock. 48 49 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Ownership of Certain Beneficial Owners As of March 24, 1999, the following persons held shares of the company's common stock in amounts totaling more than 5% of the total shares of common stock outstanding. This information was furnished to us by such persons or statements filed with the Commission.
NAME AND ADDRESS OF SHARES OF PERCENT OF BENEFICIAL OWNER COMMON STOCK BENEFICIALLY OWNED COMMON STOCK - ------------------------------------- ------------------------------------------ -------------------------------- J.R. Simplot 999 Main Street Boise, Idaho 83702 (1) 5,931,028 (1) 27% S-Sixteen Limited Partnership PO Box 27 Boise, Idaho 83707 (1) 3,085,028 (1) 14% Heartland Advisors, Inc. 790 North Milwaukee Street Milwaukee, Wisconsin 53202 (2) 3,588,220 (2) 17%
- ------------- (1) Mr. J.R. Simplot is the trustee and beneficiary of the J.R. Simplot Self Declaration of Revocable Trust dated December 21, 1989, an inter vivos revocable trust. The Trust is the sole general partner of S-Sixteen Limited Partnership, an Idaho limited partnership. Mr. Simplot may be deemed a beneficial owner of the 2,785,028 shares and 300,000 warrants owned by S-Sixteen Limited Partnership. Mr. Simplot may be deemed a beneficial owner of 2,845,000 shares owned by the Trust and 1,000 shares owned jointly by Mr. Simplot and his spouse. Included in the above table are 300,000 shares of common stock issuable to S-Sixteen Limited Partnership upon the exercise of warrants within 60 days of March 24, 1999. 100,000 warrants are exercisable at $7.00 per share for a period of 12 months from December 28, 1998; 100,000 warrants are exercisable at $9.00 per share for a period of 36 months from December 28, 1998; and 100,000 warrants are exercisable at $11.00 per share for a period of 60 months from December 28, 1998. (2) Heartland Advisors, Inc. informed us that it has sole dispositive power over all 3,588,220 shares and sole voting power over 1,932,520 of the shares. 49 50 OWNERSHIP OF MANAGEMENT The number of shares of the company's common stock beneficially owned as of March 24, 1999, by directors of the company, each Named Executive Officer and as a group comprised of all directors and executive officers, are set forth in the following table. This information was furnished to the company by such persons.
SHARES OF OPTIONS COMMON STOCK EXERCISABLE PERCENT OF BENEFICIALLY WITHIN 60 DAYS OF COMMON NAME OWNED MARCH 24, 1999 TOTAL STOCK - ---- ------------ ----------------- ----- ----------- J. Burke Asher 3,001 11,667 14,668 * Don D. Box 33,707 26,667 60,374 * Steven J. Craig 10,365 11,667 22,032 * John E. Goble, Jr. 5,018 50,000 55,018 * William E. Greenwood 0 50,000 50,000 * David H. Hawk 1,630 50,000 51,630 * James Arthur Lyle 9,680 50,000 59,680 * Robert P. Murphy 2,650 13,334 15,984 * David E. Preng 27,392 50,000 77,392 * Thomas W. Rollins 16,905 50,000 66,905 * Alan C. Shapiro 18,484 50,000 68,484 * James A. Watt 32,700 56,667 89,367 * All Directors and executive officers as a group (13 persons) 162,932 490,002 652,934 3.0%
- --------------------- * Less than one percent of the outstanding shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Until December 28, 1998, S-Sixteen Holding Company owned approximately 57% of outstanding shares of the class A (Voting) stock of Remington and 94% of the outstanding shares of both CKB Petroleum, Inc. and CKB & Associates, Inc. A resolution adopted in 1992 by our board of directors authorizes the us to enter into a transaction with an affiliate of the company so long as the board of directors determines that such a transaction is fair and reasonable to the company and is on terms no less favorable to the company than can be obtained from an unaffiliated party in an arms' length transaction. We pay oil transportation charges to CKB Petroleum, Inc. for transporting crude oil from our South Pass blocks. Since March 1985, CKB Petroleum, Inc. has owned a minority interest in the pipeline transporting oil from the wells in the South Pass blocks to Venice, Louisiana. The tariff for the pipeline at $2.75 per barrel was published and filed with the Federal Energy Regulatory Commission, which regulates such rates. The rate has been uniform since 1982 among all owners of the pipeline from South Pass block 89 Field and is consistent with the rate charged by an unaffiliated party to our predecessor entity prior to the acquisition of the pipeline interest by CKB Petroleum, Inc. CKB Petroleum billed the company $3.0 million, $3.2 million and $2.8 million for oil transportation fees in 1998, 1997, and 1996, respectively. We bill S-Sixteen Holding Company, CKB Petroleum, Inc., and CKB & Associates, Inc. for the estimated fair value of usage of an allocated portion of subleased office space, certain payroll costs and benefits, and other overhead costs. The amounts billed are considered to be the fair value of such usage by, or allocations for the benefit of, the related parties. The amounts that we billed related parties were not material in 1998, 1997, and 1996. Under the Limited Partnership Agreement of our predecessor, OKC Limited Partnership, the general partners were entitled to advancement of litigation expenses in the event they were named parties to litigation in their capacity as general partners. In order to receive such advancements, each general partner was required, in writing, to request advancement of litigation expenses and undertake to repay any advancements in the event it was determined, in 50 51 accordance with applicable law, that the general partners were not entitled to indemnification for litigation expenses. Each general partner executed such an undertaking agreement in relation to the Griffin Case. Accordingly, the OKC Limited Partnership and later the company, advanced litigation expenses to CKB & Associates, Inc. and Cloyce K. Box (and his estate following his death) in connection with such litigation. In addition, the company advanced litigation expenses on behalf of certain of our directors and officers for one lawsuit related to the Griffin litigation and other lawsuits related to the shareholder litigation and Thomas D. Box Cases. In accordance with our By-Laws, the defendants have executed written undertakings to repay the company for any related expenses advanced on their behalf if it is later found that such costs were not subject to indemnification by the company. No judicial determination has been made that any of the general partners, directors, or officers are not entitled to indemnification for litigation expenses incurred. The total legal costs incurred related to these cases were $351,000 and $1.5 million for 1997 and 1996, respectively. In December 1997, we paid $1.9 million to Mr. Simplot and $100,000 to Mr. Lyle for attorneys' fees in connection with the settlement of the Griffin Cases. See Notes to Financial Statements - Note 5 -- Reorganization Costs. On April 29, 1997, the company lent S-Sixteen Holding Company $7.25 million to retire existing secured debt of S-Sixteen Holding Company. The note to the company was payable on May 29, 1997, but was extended to June 3, 1997. After partial repayment by SSHC of the note, the company extended a new note in the amount of $6.95 million at an interest rate of 9.5% that matures May 29, 1998, and requires monthly installment payments of $100,000. In 1998 the maturity date was extended to November 29, 1998. S-Sixteen Holding Company pledged as collateral for the promissory note the 1,840,525 shares of the company's class A (Voting) common stock owned by S-Sixteen Holding Company. The pledge agreement provided that in the event that S-Sixteen Holding Company defaults on the note, the company, upon five days' notice to S-Sixteen Holding Company, has the right to foreclose upon and sell the collateral stock and to bid for and buy the stock (except at a private sale). The pledge agreement also provided that upon the occurrence and during the continuance of an event of default, the company may direct the vote of such stock. S-Sixteen Holding Company made payments in excess of the required amounts, and as of December 28, 1998, the outstanding principal amount of the note had been reduced to $4.76 million. On December 28, 1998, S-Sixteen Holding Company was merged into Remington and the remaining balance of the note is considered forgiven as part of the cost of our acquisition of S-Sixteen Holding Company. We paid $234,000 to Preng & Associates, Inc., which is majority-owned by David E. Preng, a director of the company, for executive search services provided to us from July 1996 through the end of 1998. In the merger with S-Sixteen Holding Company we acquired a receivable in the estimated fair value amount of $210,000 from the Estate of Cloyce K. Box. Don D. Box is co-executor of the Estate. A long-term receivable in the aggregate amount of $299,000 acquired in the merger reflects CKB Petroleum's claims under Collateral Assignment Split Dollar Insurance Agreements among CKB Petroleum and Don D. Box and two of his brothers. 51 52 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents filed as part of this report: 1. Financial Statements included in Item 8: (i) Independent Auditors' Report (ii) Consolidated Balance Sheets as of December 31, 1998 and 1997 (iii) Consolidated Statements of Income and Comprehensive Income for years ended December 31, 1998, 1997 and 1996 (iv) Consolidated Statement of Stockholders' Equity for years ended December 31, 1998, 1997 and 1996 (v) Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 (vi) Notes to Consolidated Financial Statements (vii) Supplemental Oil and Natural Gas Information (Unaudited) 2. Financial Statement Schedules Financial statement schedules are omitted as they are not applicable, or the required information is included in the financial statements or notes thereto. (b) We did not file any reports on Form 8-K during the quarter ended December 31, 1998. (c) Exhibits: 2.0++ Agreement and Plan of Merger dated as of June 22, 1998, by and between Remington Oil and Gas Corporation and S-Sixteen Holding Company. 3.1* Certificate of Incorporation, as amended. 3.2### Certificate of Amendment of Certificate of Incorporation of Box Energy Corporation. 3.2.1++ Certificate of Amendment of Certificate of Incorporation of Remington Oil and Gas Corporation. 3.3 By-Laws as amended. 4.1* Form of Indenture Box Energy Corporation to United States Trust Company of New York, Trustee, dated December 1, 1992, 8 1/4% Convertible Subordinated Notes due December 1, 2002. 10.1* Amended and Restated Certificate and Articles of Limited Partnership of OKC Limited Partnership. 10.2* Restatement and Amendment of Gas Purchase Contract dated July 15, 1982, as amended October 5, 1982 and December 21, 1982 and December 26, 1984. 10.3* Assignment of Lease, dated May 26, 1977. 10.4* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of block 89, South Pass Area and East Addition by the United States of America, as Lessor, dated July 1, 1967, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.5* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of block 86, South Pass Area and East Addition by the United States of America, as Lessor, dated July 1, 1983, said lease having been assigned to Box Energy Corporation as of April 15, 1992.
52 53 10.6* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of block 87, South Pass Area and East Addition by the United States of America, as Lessor, dated September 1, 1985, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.7* Farmout Agreement with Aminoil USA, Inc., effective May 1, 1977, dated May 9, 1977. 10.8* Transportation Agreement with CKB Petroleum, Inc. dated March 1, 1985, as amended on April 19, 1989. 10.9* Agreement of Compromise and Amendment to Farmout Agreement, dated July 3, 1989. 10.10* Settlement Agreement with Texas Eastern Transmission Corporation, dated November 14, 1990. 10.11* Guarantee of Panhandle Eastern Corporation, dated November 21, 1990. 10.12* Bill of Sale and Assumption of Obligations from OKC Limited Partnership, dated April 15, 1992. 10.13* Asset Purchase Agreement, dated April 15, 1992. 10.14* 1992 Incentive Stock Option Plan of Box Energy Corporation. 10.16** Pension Plan of Box Energy Corporation, effective April 16, 1992. 10.17# First Amendment to the Pension Plan of Box Energy Corporation dated December 16, 1993. 10.18## Second Amendment to the Pension Plan of Box Energy Corporation dated December 31, 1994. 10.19+ Form of Executive Severance Agreement dated as of December 12, 1995 by and between Box Energy Corporation and key employees. 10.20+ Form of Letter Agreement regarding severance benefits dated as of December 12, 1995 by and between Box Energy Corporation and employees not covered by Executive Severance Agreements. 10.21*** Amended and Restated Promissory Note between Box Energy Corporation and Box Brothers Holding Company. 10.22*** Amended and Restated Pledge Agreement between Box Energy Corporation and Box Brothers Holding Company. 10.23*** Agreement by and between Box Energy Corporation and James A. Watt. 10.24 ### Box Energy Corporation Severance Plan. 10.25 ### Box Energy Corporation 1997 Stock Option Plan. 10.26 ### Box Energy Corporation Non-Employee Director Stock Purchase Plan. 10.27 ### Form of Executive Employment Agreement effective August 29, 1997, by and between Box Energy Corporation and two executive officers. 21 Subsidiaries of the registrant. 23.1 Consent of Arthur Andersen LLP 27.1 Financial Data Schedule 27.2 Restated Financial Data Schedule
53 54 * Incorporated by reference to the Company's Registration Statement on Form S-2 (file number 33-52156) filed with the Commission and effective on December 1, 1992. ** Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1992 filed with the Commission and effective on or about March 30, 1993. # Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1993 filed with the Commission and effective on or about March 30, 1994. ## Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1994 filed with the Commission and effective on or about March 30, 1995. + Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1995 filed with the Commission and effective on or about April 1, 1996. *** Incorporated by reference to the Company's Form 10-Q (file number 1-11516) for the fiscal quarter ended June 30, 1997 filed with the Commission and effective on or about August 12, 1997. ### Incorporated by reference to the Company's Form 10-K (file number 1-11516) for the fiscal year ended December 31, 1997 filed with the Commission and effective on or about March 30, 1998. ++ Incorporated by reference to the Company's Registration Statement on Form S-4 (file number 333-61513) filed with the Commission and effective on November 27, 1998.
54 55 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. REMINGTON OIL AND GAS CORPORATION Date: March 29, 1999 By: /s/ JAMES A. WATT ------------------------------------------ James A. Watt President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
DIRECTORS: /s/ DON D. BOX /s/ JOHN E. GOBLE, JR. /s/ WILLIAM E. GREENWOOD - -------------------------- -------------------------- -------------------------- Don D. Box John E. Goble, Jr. William E. Greenwood Director Director Director /s/ DAVID H. HAWK /s/ JAMES ARTHUR LYLE /s/ DAVID E. PRENG - -------------------------- -------------------------- -------------------------- David H. Hawk James Arthur Lyle David E. Preng Director Director Director /s/ THOMAS W. ROLLINS /s/ ALAN C. SHAPIRO /s/ JAMES A. WATT - -------------------------- -------------------------- -------------------------- Thomas W. Rollins Alan C. Shapiro James A. Watt Director Director Director OFFICERS: /s/ JAMES A. WATT /s/ J. BURKE ASHER /s/ EDWARD V. HOWARD - -------------------------- -------------------------- -------------------------- James A. Watt J. Burke Asher Edward V. Howard President and Chief Executive Vice President/Finance and Vice President/Controller and Officer Secretary Assistant Secretary Date: March 29, 1999
55 56 INDEX TO EXHIBITS
Exhibit Number Description of Document 2.0++ Agreement and Plan of Merger dated as of June 22, 1998, by and between Remington Oil and Gas Corporation and S-Sixteen Holding Company. 3.1* Certificate of Incorporation, as amended. 3.2### Certificate of Amendment of Certificate of Incorporation of Box Energy Corporation. 3.2.1++ Certificate of Amendment of Certificate of Incorporation of Remington Oil and Gas Corporation. 3.3 By-Laws as amended. 4.1* Form of Indenture Box Energy Corporation to United States Trust Company of New York, Trustee, dated December 1, 1992, 8 1/4% Convertible Subordinated Notes due December 1, 2002. 10.1* Amended and Restated Certificate and Articles of Limited Partnership of OKC Limited Partnership. 10.2* Restatement and Amendment of Gas Purchase Contract dated July 15, 1982, as amended October 5, 1982 and December 21, 1982 and December 26, 1984. 10.3* Assignment of Lease, dated May 26, 1977. 10.4* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of block 89, South Pass Area and East Addition by the United States of America, as Lessor, dated July 1, 1967, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.5* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of block 86, South Pass Area and East Addition by the United States of America, as Lessor, dated July 1, 1983, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.6* Oil and Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act dated July 1, 1967, covering all of block 87, South Pass Area and East Addition by the United States of America, as Lessor, dated September 1, 1985, said lease having been assigned to Box Energy Corporation as of April 15, 1992. 10.7* Farmout Agreement with Aminoil USA, Inc., effective May 1, 1977, dated May 9, 1977. 10.8* Transportation Agreement with CKB Petroleum, Inc. dated March 1, 1985, as amended on April 19, 1989. 10.9* Agreement of Compromise and Amendment to Farmout Agreement, dated July 3, 1989. 10.10* Settlement Agreement with Texas Eastern Transmission Corporation, dated November 14, 1990. 10.11* Guarantee of Panhandle Eastern Corporation, dated November 21, 1990. 10.12* Bill of Sale and Assumption of Obligations from OKC Limited Partnership, dated April 15, 1992. 10.13* Asset Purchase Agreement, dated April 15, 1992. 10.14* 1992 Incentive Stock Option Plan of Box Energy Corporation.
57 10.16** Pension Plan of Box Energy Corporation, effective April 16, 1992. 10.17# First Amendment to the Pension Plan of Box Energy Corporation dated December 16, 1993. 10.18## Second Amendment to the Pension Plan of Box Energy Corporation dated December 31, 1994. 10.19+ Form of Executive Severance Agreement dated as of December 12, 1995 by and between Box Energy Corporation and key employees. 10.20+ Form of Letter Agreement regarding severance benefits dated as of December 12, 1995 by and between Box Energy Corporation and employees not covered by Executive Severance Agreements. 10.21*** Amended and Restated Promissory Note between Box Energy Corporation and Box Brothers Holding Company. 10.22*** Amended and Restated Pledge Agreement between Box Energy Corporation and Box Brothers Holding Company. 10.23*** Agreement by and between Box Energy Corporation and James A. Watt. 10.28 ### Box Energy Corporation Severance Plan. 10.29 ### Box Energy Corporation 1997 Stock Option Plan. 10.30 ### Box Energy Corporation Non-Employee Director Stock Purchase Plan. 10.31 ### Form of Executive Employment Agreement effective August 29, 1997, by and between Box Energy Corporation and two executive officers. 21 Subsidiaries of the registrant. 23.1 Consent of Arthur Andersen LLP 27.1 Financial Data Schedule 27.2 Restated Financial Data Schedule * Incorporated by reference to the Company's Registration Statement on Form S-2 (file number 33-52156) filed with the Commission and effective on December 1, 1992. ** Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1992 filed with the Commission and effective on or about March 30, 1993. # Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1993 filed with the Commission and effective on or about March 30, 1994. ## Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1994 filed with the Commission and effective on or about March 30, 1995. + Incorporated by reference to the Company's Form 10-K (file number 0-19967) for the fiscal year ended December 31, 1995 filed with the Commission and effective on or about April 1, 1996. *** Incorporated by reference to the Company's Form 10-Q (file number 1-11516) for the fiscal quarter ended June 30, 1997 filed with the Commission and effective on or about August 12, 1997. ### Incorporated by reference to the Company's Form 10-K (file number 1-11516) for the fiscal year ended December 31, 1997 filed with the Commission and effective on or about March 30, 1998.
58 ++ Incorporated by reference to the Company's Registration Statement on Form S-4 (file number 333-61513) filed with the Commission and effective on November 27, 1998.
EX-3.3 2 BY-LAWS AS AMENDED 1 EXHIBIT 3.3 BY-LAWS AS AMENDED OF REMINGTON OIL AND GAS CORPORATION ARTICLE I Stockholders Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. Special Meetings. Special meetings of stockholders may be called at any time only by the Chairman of the Board or the President of the Corporation or by resolution adopted by the affirmative vote of a majority of the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of meeting. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5 Quorum. At each meeting of stockholders, except where otherwise provided by law or the Certificate of Incorporation or these By-Laws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required by law for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at 2 the meeting. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these By-Laws until a quorum of such class shall be so present or represented. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock including, but not limited to, its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting; Proxies. Except as otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the Certificate of Incorporation or these By-Laws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the Certificate of Incorporation or these By-Laws. 3 Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during 4 ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation or by law, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified mail or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this By-Law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II Board of Directors Section 2.1. Notice of Stockholder Business and Nominations (A) Annual Meeting of Stockholders (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice of meeting delivered pursuant to Section 1.3 of Article I of these By-Laws, (b) by or at the direction of the Nominations Committee of the Board of Directors pursuant to Section 2.2 of these By-Laws, or (c) by any stockholder who is entitled to vote at the meeting, who has complied with the notice procedures set forth in clauses (2) and (3) of this subsection (A) and this By-Law and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of the foregoing subsection (A)(1) By-Law, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's 5 notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than seventy (70) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than twenty (20) days or delayed by more than seventy (70) days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the seventieth (70th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person who the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholders propose to bring before the meeting, a brief description of the business desired to be brought before the meeting , the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, and (ii) the class and number of shares of the capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of subsection (A)(2) of this By-Law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least eighty (80) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this By-Law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. (4) Only persons who are nominated in accordance with the procedures set forth in this By-Law and Section 2.2 of these By-Laws shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-Law. Except as otherwise provided by law, the Restated Certificate of Incorporation of the Corporation, as amended, or these By-Laws, the chairman of the meeting shall have the power and duty to determine whether a stockholder nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth by this By-Law and, if any proposed nomination or business is not in compliance with this By-Law, to declare that such defective proposal or nomination shall be disregarded. (5) For purposes of this By-Law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated 6 Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14, or 15 (d) of the Exchange Act. (6) Notwithstanding the foregoing provisions of this By-Law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-Law. Nothing in this By-Law shall be deemed to affect any right of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to rule 14a-8 under the Exchange Act. Section 2.2. Nomination; Election; Term of Office; Resignation; Removal; Vacancies. Directors shall be nominated for election by a Nominations Committee consisting of the Chairman of the Board, the President, and such other members as maybe provided by resolution of the Board. Each director shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or to the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Unless otherwise provided in the Restated Certificate of Incorporation or these By-Laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.5. Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this By-Law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the Certificate of Incorporation or these By-Laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the 7 members of the Board present may adjourn the meeting from time to time until a quorum shall be present. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.9. Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board of Directors shall have the authority to fix the compensation of directors. ARTICLE III Committees Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation 8 of a dissolution, removing or indemnifying directors or amending these By-Laws; and, unless the resolution, these By-Laws or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger. Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these By-Laws. ARTICLE IV Officers Section 4.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-Laws otherwise provide. Section 4.2 Term of Office; Resignation; Removal; Vacancies. Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting. Section 4.3. Powers and Duties. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these By-Laws or in a resolution of the Board of Directors which is not inconsistent with these By-Laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. 9 ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock in the Corporation owned by such holder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. So long as the Corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 10 Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given by law or under any provision of the Certificate of Incorporation or these By-Laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these By-Laws. Section 6.4. Indemnification of Directors, Officers, Employees and Agents. Each person who is or was a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has to ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in the second paragraph hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation any expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan)in advance of the final disposition of a Proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this section or otherwise. The Corporation may, by acting of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. The right to 11 indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Restated Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise. Section 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purposes, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7. Amendment of By-Laws. The Board of Directors is expressly empowered to adopt, amend or repeal By-Laws of the Corporation, provided, however, that any adoption, amendment or repeal of By-Laws of the Corporation by the Board of Directors shall require the approval of at least sixty-six and two-thirds percent (66 2/3%) of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend or repeal By-Laws of the Corporation, provided, however, that in addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Restated Certificate of Incorporation the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for such adoption, amendment or repeal by the stockholders of any provisions of the By-Laws of the Corporation. EX-21 3 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 REMINGTON OIL AND GAS CORPORATION LIST OF SUBSIDIARIES OF THE REGISTRANT CKB Petroleum, Inc. (incorporated in Texas). Other subsidiaries are omitted because, if considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary as of December 31, 1998. EX-23.1 4 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Remington Oil and Gas Corporation (formerly Box Energy Corporation), on Form S-4 (File No. 333-61513) of our report dated March 23, 1999 on our audits of the consolidated financial statements of Remington Oil and Gas Corporation as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998. ARTHUR ANDERSEN LLP Dallas, Texas March 29, 1999 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REMINGTON OIL AND GAS CORPORATION'S FORM 10-K FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 19,018 0 3,212 0 0 32,851 263,355 167,053 130,229 34,080 29,950 0 0 213 59,486 130,229 34,256 87,689 45,730 69,014 0 0 4,302 14,373 756 13,617 0 0 0 13,617 0.67 0.66
EX-27.2 6 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REMINGTON OIL AND GAS CORPORATION'S FORM 10-K FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS 12-MOS DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 DEC-31-1997 DEC-31-1996 4,552 2,997 0 32,678 12,185 8,549 0 0 0 0 18,855 46,185 223,281 190,477 144,548 116,371 98,515 136,599 15,857 7,166 38,371 55,077 0 0 0 0 20,803 20,803 23,484 53,553 98,515 136,599 57,304 65,606 61,053 70,210 52,012 61,400 67,937 74,747 0 0 0 0 5,283 4,895 (12,167) (9,432) 14,623 (1,770) (26,790) (7,662) 0 0 0 0 0 0 (26,790) (7,662) (1.31) (0.37) (1.31) (0.37)
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