-----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, FSqgRgvPB4a9ywyBvlLw/IV5gFawuJaEg0tsLwn2DnhdCgQVha9FeRY1FmeNEmE7 GFpFxLEA5naUugL+KTvOSA== 0000950152-96-000974.txt : 19960315 0000950152-96-000974.hdr.sgml : 19960315 ACCESSION NUMBER: 0000950152-96-000974 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960314 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELDEN & BLAKE CORP /OH/ CENTRAL INDEX KEY: 0000880114 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 341686642 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20100 FILM NUMBER: 96534773 BUSINESS ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 BUSINESS PHONE: 2164991660 MAIL ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 10-K 1 BELDEN & BLAKE 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-20100 BELDEN & BLAKE CORPORATION (Exact name of registrant as specified in its charter) OHIO 34-1686642 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 5200 STONEHAM ROAD NORTH CANTON, OHIO 44720 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (330) 499-1660 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, WITHOUT 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 the voting stock held by non-affiliates of the registrant as of February 29, 1996 was $178,426,675. The number of shares outstanding of registrant's common stock, without par value, as of February 29, 1996 was 11,162,581. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement to be filed pursuant to Regulation 14A with respect to the Annual Meeting of Shareholders to be held on or about May 23, 1996 are incorporated in Part III of this Form. 2 PART I ------ ITEM 1. BUSINESS -------- GENERAL Belden & Blake Corporation, an Ohio corporation (the "Company"), is primarily engaged in producing oil and natural gas, acquiring and enhancing the economic performance of producing oil and gas properties, exploring for and developing natural gas and oil reserves and gathering and marketing natural gas. Until 1995, the Company conducted business exclusively in the Appalachian Basin where it has operated since 1942 through several predecessor entities. It is now one of the largest exploration and production companies operating in the Appalachian Basin in terms of reserves, production, acreage held and wells operated. In early 1995, the Company commenced operations in the Michigan Basin through the acquisition of Ward Lake Drilling, Inc., an exploration and production company which owns and operates oil and gas properties in Michigan's lower peninsula. See "Significant Events." At December 31, 1995, the Company owned interests in 7,380 gross (6,162 net) productive gas and oil wells in Ohio, West Virginia, Pennsylvania, New York and Michigan with proved reserves totaling 239.4 Bcf (billion cubic feet) of gas and 6.3 MMBbl (million barrels) of oil. The estimated future net revenues from these reserves had a present value before income taxes of approximately $214.3 million at December 31, 1995. At that date, the Company held leases on 1,029,000 gross (941,000 net) acres, including 545,000 gross (496,000 net) undeveloped acres. At December 31, 1995, the Company operated approximately 7,500 wells, including wells operated for third parties. The Company owned and operated approximately 2,600 miles of gas gathering systems with access to the commercial and industrial gas markets of the northeastern United States at December 31, 1995. At December 31, 1995, the Company's net production was approximately 68 MMcf (million cubic feet) of gas and 1,900 Bbls of oil per day. At that date, the Company was marketing approximately 150 MMcf of gas per day, consisting of its own production and gas purchased from third parties. The Company was formed through the combination of a group of companies and assets owned by Henry S. Belden IV (the "Belden Interests") with Belden & Blake Energy Company (the "Partnership"), a master limited partnership listed on the American Stock Exchange, and Belden & Blake International Limited ("BBI"), a Bermuda corporation listed on the Luxembourg Stock Exchange. The transactions combining these entities were effected on March 31, 1992. The Company's succession to the Belden Interests was recorded on the basis of historical cost in a manner similar to a pooling of interests and the consolidation of the Partnership and BBI (the "Consolidation") was accounted for as a purchase. Accordingly, prior to March 31, 1992, the Consolidated Financial Statements of the Company reflect only the historical results of the Belden Interests and do not include the results of operations of the Partnership or BBI prior to that date. The Company has grown principally through the acquisition of producing properties and related gas gathering facilities and exploration and development of its own acreage. From its formation in 1992 through December 31, 1995, the Company has acquired producing properties for $125.3 million with 185.7 Bcfe (billion cubic feet of natural gas equivalent) of proved developed reserves at an average cost of $.67 per Mcfe (thousand cubic feet of natural gas equivalent) and spent $19.3 million to acquire and develop additional gas gathering facilities. During the period from 1992 through 1995, the Company drilled 340 gross (249.2 net) wells at an aggregate cost of approximately $43.4 million for the net wells. 2 3 This drilling added 41.8 Bcfe to the Company's proved reserves. During 1995, the Company drilled 155 gross (117.9 net) wells at a cost of approximately $20.4 million for the net wells. The 1995 drilling activity added 23.7 Bcfe of proved reserves, or approximately 117% of 1995 production at an average cost of $.86 per Mcfe. The Company maintains its corporate offices at 5200 Stoneham Road, North Canton, Ohio 44720. Its telephone number at that location is (330) 499-1660. Unless the context otherwise requires, all references herein to the "Company" are to Belden & Blake Corporation, its subsidiaries and predecessor entities. SIGNIFICANT EVENTS In January 1995, the Company purchased Ward Lake Drilling, Inc. ("Ward Lake"), a privately-held exploration and production company headquartered in Gaylord, Michigan, for $15.1 million and commenced operations in the Michigan Basin. Ward Lake held production payment and working interests averaging 13.6% in approximately 500 Antrim Shale gas wells operated by Ward Lake in Michigan's lower peninsula. The purchase also included approximately 5,500 undeveloped leasehold acres that Ward Lake owned in Michigan. At December 31, 1994, the wells had estimated proved developed natural gas reserves totaling 98 Bcf (14 Bcf net to the Company's interest). Approximately one-half of the purchase price represented payment for proved reserves, with the balance associated with other oil and gas and corporate assets. Through December 31, 1995, the Company purchased additional working interests averaging 24% in the wells operated by Ward Lake for approximately $12 million. The interests acquired had estimated proved developed reserves of 16 Bcf at December 31, 1994. The interests acquired also qualify for nonconventional fuel source tax credits through 2002. In July 1995, the Company purchased from Quaker State Corporation most of its oil and gas properties and related assets in the Appalachian Basin (the "Quaker State Properties") for approximately $50 million. The Quaker State Properties included approximately 1,460 gross (1,100 net) wells with estimated proved reserves of 46.8 Bcf of gas and 2.2 MMBbl of oil at December 31, 1994, approximately 250 miles of gas gathering systems, undeveloped oil and gas leases and fee mineral interests covering approximately 250,000 acres, an extensive geologic and geophysical database and other assets. In August 1995, the Company sold 4,025,000 shares of common stock at $14.75 per share ($13.82 net after underwriting commissions and discounts). Net proceeds, after deducting underwriting discounts and expenses, totaled approximately $55.6 million. Proceeds from the offering were used to fund the purchase of the Quaker State Properties and to reduce the outstanding balance of the Company's revolving credit facility. In September 1995, the Company purchased from Savoy Oil & Gas, Inc., a privately owned independent energy company headquartered in Traverse City, Michigan, oil and gas properties in northwestern Michigan with estimated proved developed reserves, associated with 24 Antrim Shale wells, of 11 Bcf of natural gas net to the Company's interest. These wells extended the Antrim Shale play to northwestern Michigan. The Company's average working interest in these wells is 78% and accounts for approximately one-half of the purchase price of $11.3 million. The remainder of the purchase price is associated with the Company's 94% working interest in undeveloped Antrim Shale locations on approximately 17,000 leasehold acres. 3 4 In addition, during 1995 the Company acquired in three separate transactions for approximately $17.9 million working interests in 1,139 gross (919 net) oil and gas wells in Ohio, Pennsylvania and New York and drilling rights on more than 250,000 acres in Ohio adjacent to properties operated by the Company. Estimated proved developed reserves associated with the wells total 21 Bcf of natural gas and .5 MMBbl of oil net to the Company's interest at December 31, 1994. RECENT DEVELOPMENTS In February 1996, the Company sold or agreed to sell certain interests that qualify for the nonconventional fuel source tax credit. The interests were sold for approximately $750,000 in cash and a volumetric production payment under which 100% of the cash flow from the properties will go to the Company until approximately 11.7 Bcf of gas has been produced and sold. In addition to receiving 100% of the cash flow from the properties, the Company will receive quarterly payments based on production from the interests. The Company has the option to repurchase the interests at a future date. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company operates in two industry segments: (1) oil and gas production and distribution and (2) oilfield sales and services. Oilfield sales are generated by its wholly-owned subsidiary, Target Oilfield Pipe and Supply Company, and oilfield services are provided by its Arrow Oilfield Services division. The financial information with respect to the Company's industry segments is presented in Note 14 to the Consolidated Financial Statements. During September 1995, the Company announced plans to sell Engine Power Systems, Inc. ("EPS"), its wholly-owned subsidiary engaged in engine sales and system packaging for power generation and compression applications, and exit the line of business served by EPS. The Company is actively seeking a buyer for EPS and expects to complete the sale of this business in 1996. The financial information with respect to discontinued operations is presented in Note 16 to the Consolidated Financial Statements. DESCRIPTION OF BUSINESS OVERVIEW The Company, founded in 1942, is actively engaged in the acquisition, exploration, development, production, gathering and marketing of oil and gas in the Appalachian and Michigan Basins, where it is now one of the largest oil and gas companies in terms of reserves, production, acreage held and wells operated. The Appalachian Basin is the oldest and geographically one of the largest oil and gas producing regions in the United States. Although the Appalachian Basin has sedimentary formations indicating the potential for oil and gas reservoirs to depths of 30,000 feet or more, oil and gas is currently produced primarily from shallow blanket formations at depths of 1,000 to 5,500 feet. Drilling success rates of the Company and others drilling in these formations historically have exceeded 90% with production generally lasting longer than 20 years. The combination of long-lived production and high drilling success rates at these shallower depths has resulted in a highly fragmented, extensively drilled, low technology operating environment in 4 5 the Appalachian Basin. As of December 31, 1995, there were over 10,000 independent operators of record and approximately 180,000 producing oil and gas wells in Ohio, West Virginia, Pennsylvania and New York. There has been only limited testing or development of the formations below the existing shallow production in the Appalachian Basin. Fewer than 1,500 wells have been drilled to a depth greater than 7,500 feet, and fewer than 100 wells have been drilled to depth greater than 12,500 feet in the entire Appalachian Basin. As a result, the Company believes that there are significant exploration and development opportunities in these less developed formations for those operators with the capital, technical expertise and ability to assemble the large acreage positions needed to justify the use of advanced exploration and production technologies. The Company's rationale for entering the Michigan Basin was based on its geologic and operational similarities to the Appalachian Basin and its geographic proximity to the Company's operations in the Appalachian Basin. Geologically, the Michigan Basin resembles the Appalachian Basin with shallow blanket formations and deeper formations with greater reserve potential. Operationally, economies of scale and cost containment are essential to operating profitability. The Michigan Basin's operating environment is also highly fragmented with substantial acquisition opportunities. The Company's management has had prior experience operating in the Michigan Basin in that the Company's President and Chief Operating Officer was in charge of Shell Oil Company's drilling and producing operations in Michigan from August 1, 1977 to July 31, 1981. The Company's primary objective in acquiring Ward Lake was to allow the Company to pursue opportunities in the Michigan Basin with an established operating company that provided the necessary critical mass to operate efficiently. Most of the Company's production in the Michigan Basin is derived from the shallow (700 to 1,700 feet) blanket Antrim Shale formation. Success rates for companies drilling to this formation have exceeded 90%, with production often lasting as long as 20 years. The Michigan Basin also contains deeper formations with greater reserve potential (primarily the Niagaran Carbonate). The Company has also established production from certain of these deeper formations. The Michigan Basin has over 250 operators of record, most of which are private companies, and more than 8,100 producing wells. Because the production rate from Antrim Shale wells is relatively low, cost containment is a crucial aspect of operations. In contrast to the shallow blanket formations in the Appalachian Basin, the operating environment in the Antrim Shale is more capital intensive because of the low natural pressures and the high water content of the formation. In addition, there are more major oil and gas companies active in the Michigan Basin than in the Appalachian Basin. The proximity of the Appalachian and Michigan Basins to large commercial and industrial natural gas markets has generally resulted in wellhead gas prices that since 1985 have ranged from $.22 to $1.66 per Mcf above national wellhead prices. In 1995, wellhead prices in the Appalachian and Michigan Basins averaged $.47 per Mcf above national wellhead prices. The Company's average wellhead gas price was $.28 per Mcf above the average Appalachian and Michigan basins wellhead price. BUSINESS STRATEGY The Company's primary operating objective is to utilize its sizeable acreage position, technical capability and financial resources to become a dominant oil and gas producer and natural gas marketer in the Appalachian and Michigan Basins. To accomplish this objective, the Company's specific business strategy is to: 5 6 o make strategic acquisitions of producing oil and gas properties; o expand production and reserves through a balanced portfolio of developmental and exploratory drilling; o improve profitability on production from existing and acquired properties; and o expand its gas gathering and marketing activities. This strategy is intended to enable the Company to take advantage of (i) the availability of producing properties for sale in the Appalachian and Michigan Basins as capital constrained operators seek liquidity or operating capital and (ii) the significant exploration and development opportunities in the deeper and potentially more productive formations in the Appalachian and Michigan Basins. ACQUISITION OF PRODUCING PROPERTIES The Company's acquisition strategy focuses on producing properties that (i) the Company already owns an interest in and operates or that are strategically located in relation to its existing operations, (ii) can be increased in value through operating cost reductions, advanced production technology, mechanical improvements, recompleting or reworking wells and/or the use of enhanced and secondary recovery techniques, (iii) provide development drilling opportunities or enhance the Company's acreage position, (iv) have the potential for increased revenues from gas production through the Company's gas marketing capabilities or (v) are of sufficient size to allow the Company to operate efficiently in new areas. Using these criteria, the Company employs a disciplined approach to acquisition analysis that requires input and approval from all key areas of the Company. These areas include field operations, exploration and production, finance, gas marketing, land management and environmental compliance. Although the Company often reviews in excess of 50 acquisition opportunities per year, this disciplined approach can result in uneven annual spending on acquisitions. The following table sets forth information pertaining to acquisitions completed during the period 1992 through 1995.
Proved Developed Reserves ------------------------------------- Number of Purchase Oil Gas Combined Cost Period Transactions Price (1) (MBbl) (MMcf) (MMcfe) Per Mcfe - ------- ---------------- ---------- --------- ------------ ---------- -------------- (in thousands) 1992 5 $23,733 466 41,477 44,241 $ 0.54 1993 8 3,883 119 4,121 4,835 0.80 1994 11 20,274 223 26,877 28,215 0.72 1995 6 77,388 1,850 97,314 108,416 0.71 _______________ (1) Represents portion of purchase price allocated to proved developed reserves.
6 7 OIL AND GAS OPERATIONS AND PRODUCTION Operations. The Company serves as the operator of substantially all of the wells in which it holds working interests. The Company seeks to maximize the value of its properties through operating efficiencies associated with economies of scale and through operating cost reductions, advanced production technology, mechanical improvements and/or the use of enhanced and secondary recovery techniques. Through its production field offices in Ohio, West Virginia, Pennsylvania, New York and Michigan, the Company continuously reviews its properties, especially recently acquired properties, to determine what action can be taken to reduce operating costs and/or improve production. The Company has reduced field level costs through improved operating practices such as computerized production scheduling and the use of hand-held computers to gather field data. On acquired properties, further efficiencies may be realized through improvements in production scheduling and reductions in oilfield labor. Actions that may be taken to improve production include modifying surface facilities and redesigning down-hole equipment. In 1989 and 1990, the Company participated in the development of an advanced plunger lift system (the "JetStar"), a tool that is designed to improve production on certain low-volume gas wells. As of December 31, 1995, a total of 190 JetStar systems were operating on Company operated wells at a cost of approximately $5,500 per well, resulting in an average net increase in production to the Company of 7 Mcf per well per day during the first year following installation. The Company may also implement enhanced and secondary recovery techniques. Enhanced recovery techniques include the repressurization of a productive field by injecting gases into formations that have significant remaining reserves in place but which are no longer producing at satisfactory levels. The Company initiated a series of pilot repressurization field projects in 1993 which were completed in 1995. Four wells were tested utilizing natural gas "huff and puff" cycles to improve oil recovery from wells drilled more than 15 years ago. Each well was repressured with natural gas and then gas and oil were withdrawn from the same well bore. This process resulted in incremental oil recovery averaging 500 barrels per well. This gas injection process may be used in conjunction with infill drilling to recover the large amount of oil remaining in the geological formation after primary recovery when wells are drilled in accordance with state mandated 40-acre spacing. Reservoir modeling studies of certain of the Company's producing properties performed at the University of Houston and Los Alamos National Laboratory have indicated that less than 10 percent of the oil in place is currently being recovered, leaving over 90 percent yet to be produced. Several infill wells are planned to be drilled in 1996 in combination with the gas injection tests to determine the economic viability of the process for expansion to field-wide development. Secondary recovery methods typically involve all methods of oil extraction in which extrinsic energy sources are applied to extract additional reserves. The principal secondary recovery technique used by the Company is waterflooding, which the Company has used in Ohio and Pennsylvania. Production. The following table sets forth certain information regarding oil and gas production from the Company's properties: 7 8
Year Ended December 31 --------------------------------------------------------------------- 1992 1993 1994 1995 -------- -------- ---------- ------------ Production Oil (thousands of Bbls) 351 453 496 556 Gas (Bcf) 3.7 7.4 9.6 17.0 Average Sales Price Oil (per Bbl) $ 19.27 $ 17.15 $ 15.98 $ 16.78 Gas (per Mcf) $ 2.22 $ 2.55 $ 2.58 $ 2.21 Average production costs per Mcfe (including production taxes) $ 0.92 $ 0.71 $ 0.74 $ 0.69 Total Oil and Gas Revenues (in thousands) $ 15,046 $ 26,631 $ 32,574 $ 46,853 Total Production Expenses (in thousands) $ 5,362 $ 7,190 $ 9,292 $ 13,979
EXPLORATION AND DEVELOPMENT The Company's exploration and development activities include development drilling in shallow blanket formations and development and exploratory drilling in the deeper formations of the Appalachian and Michigan Basins. The Company's strategy is to develop a balanced portfolio of drilling prospects that includes lower risk wells with a high probability of success and higher risk wells with greater economic potential. The Company has an extensive inventory of acreage on which to conduct its exploration and development activities. In 1995, the Company drilled 110 gross (95.7 net) wells to shallow blanket formations in its five state operating area at a cost of approximately $15.1 million for the net wells. The Company also drilled 45 gross (22.2 net) wells to less developed and deeper formations in 1995 at a cost of approximately $5.3 million for the net wells. The results of this drilling activity are shown in the tables on page 12. The Company believes that its diversified portfolio approach to its drilling activities results in more consistent and predictable economic results than might be experienced with a less diversified or higher risk drilling program profile. Shallow Blanket Formations. In general, the shallow blanket formations found in the Appalachian and Michigan Basins are widespread in extent, and hydrocarbon accumulations are not dependent upon local stratigraphic or structural trapping. Drilling success rates exceed 90%. The principal risk of such wells is uneconomic recoverable reserves. The shallow blanket formations in the Appalachian Basin are relatively tight reservoirs that produce 20% to 30% of their recoverable reserves in the first year and 40% to 50% of their total recoverable reserves in the first three years, with steady declines in subsequent years. Average well lives range from 15 years to 25 years or more. 8 9 The Antrim Shale formation, the principal shallow blanket formation in the Michigan Basin, is characterized by high formation water production in the early years of a well's productive life, with water production decreasing over time. Antrim Shale wells typically produce at rates of 100 Mcf to 125 Mcf per day for several years, with modest declines thereafter. Gas production often increases in the early years as the producing formation becomes less water saturated. Average well lives are 20 years or more. Certain typical characteristics of the shallow blanket formations drilled by the Company in 1995 are described below:
Range of or Range of or Average Drilling Average Gross Range of and Completion Reserves Location Well Depths Costs per Well per Well -------- ----------- ---------------- -------------- (In feet) (In thousands) (In MMcfe) Ohio 3,000-5,500 $110-140 130 West Virginia 1,500-6,000 135-155 200 Pennsylvania Clarendon 1,100-1,500 35 30 Medina 5,000-6,200 170 230 New York 3,000-6,000 100-200 75-300 Michigan 700-1,700 250-300 450
Less Developed Formations. The Appalachian Basin has productive and potentially productive sedimentary formations to depths of 30,000 feet or more, but the combination of long-lived production and high drilling success rates in the shallow formations has curbed the development of the deeper formations in the basin. The Company believes it possesses the technological expertise and the acreage position needed to explore the deeper formations in a cost effective manner. The less developed formations in the Appalachian Basin include the Knox sequence of sandstones and dolomites which includes the Rose Run, Beekmantown and Trempeleau productive zones, at depths ranging from 3,000 feet to 8,000 feet. The geographical boundaries of the Knox sequence, which lies approximately 2,000 feet below the blanket Clinton Sandstone, are generally well defined in Ohio with less definition in New York. Nevertheless, the Knox group has been only lightly explored, with fewer than 1,500 wells drilled to this sequence of formations during the past 10 years. The Company began testing the Knox sequence in 1989 by selecting certain wells that were targeted to be completed to the Clinton formation and drilling them an additional 2,000 feet to 2,500 feet to test the Knox formations. In 1991, the Company began using seismic analysis and other geophysical tools to select drilling locations specifically targeting the Knox formations. Since 1991, the Company has added substantially to its technical staff to enhance its ability to develop drilling prospects in the Knox and other less developed formations in the Appalachian Basin and the deeper formations in the Michigan Basin. The following table shows the Company's drilling results in the Knox sequence. 9 10
Drilling Results in the Knox Formations ------------------------------------------------------------------------------ Average Gross Reserves per Well Wells Drilled Wells Completed (1) (MMcfe) (2) ------------------- -------------------- --------------------- Period Gross Net Gross Net - ----------- --------- ----- ------- ------ 1989-1990 18 14.5 5 4.0 465 1991 11 10.3 5 4.7 170 1992 15 12.5 8 6.4 285 1993 30 20.2 16 8.8 360 1994 25 14.2 17 9.8 389 1995 34 16.3 18 8.8 343 - --------------- (1) Completed as producing wells in the Knox formations. Of the 16 gross wells in 1995 that were not commercially productive in the Knox formations, 2 were completed as producing wells in the shallower Clinton Sandstone formation. (2) Average reserves per well reflect production through December 31, 1995 plus estimated proved developed reserves at that date.
The Company's historical experience is that the average Knox well produces 20% to 25% of its recoverable reserves in the first year of production and approximately 50% of its recoverable reserves in the first three years with a steady decline thereafter. Wells in the Knox formations have an expected productive life ranging from 15 to 25 years. As shown in the following table, the Company's production from Knox formation wells has increased steadily as additional wells have been drilled.
Wells and Production in the Knox Formations ------------------------------------------------------------ 1992 1993 1994 1995 ------------ --------- --------- --------- Number of Wells in Production: Gross 16 23 41 66 Net 13.7 20.6 29.7 41.5 Annual Production (net): Oil (MBbl) 4.7 13.9 67.1 74.9 Gas (MMcf) 340 731 1,041 1,624 Combined (MMcfe) 368 814 1,444 2,074
Productive Knox wells represented 0.9% of the Company's total productive wells at December 31, 1995. Production from Knox wells in 1995, however, equaled 10.2% of the Company's total production on an Mcfe basis. 10 11 The Company is well positioned to exploit the undeveloped potential of the Knox formations in the future. At December 31, 1995, it held leases on approximately 422,000 net acres overlying potential Knox drilling locations. The Company plans to drill or participate in joint ventures to drill 34 wells to the Knox formations in 1996. In addition, the Company has also tested the Dundee Carbonate, Niagaran Carbonate, Onondaga Limestone and Oriskany Sandstone formations. Certain typical characteristics of the deeper formations drilled by the Company in 1995 are described below:
Average Drilling Costs Average Range of or ------------------------ Gross Average Dry Completed Reserves Formation Location Well Depth Hole Well Per Well - ------------ ----------- ----------- ----- ------ ----------- (In feet) (In thousands) (In MMcfe) Knox Formations OH, NY 2,500-8,000 $130 $220 350 Dundee Carbonate MI 3,200 320 400 1,200 Niagaran Carbonate MI 4,500 250 525 1,200 Onondaga Limestone PA 4,100-5,500 100 175 400 Oriskany Sandstone PA, NY 5,500-9,000 250 500 1,500
Drilling Results. The following table sets forth drilling results with respect to wells drilled during the past four years. 11 12
Less Developed and Shallow Blanket Formations (1) Deeper Formations (2) ----------------------------------------- ------------------------------------- 1992 1993 1994 1995 1992 1993 1994 1995 --------- ------ ------- ------- ------ ------ ------ ------ Productive Gross 4 42 58 106 8 16(3) 22(4) 23(5) Net 4 31.4 45.6 92.5 6.4 8.8 12.7 11.5 Dry Gross 0 2 2 4 7 14 10 22 Net 0 0.7 0.4 3.2 5.1 11.4 4.8 10.7 Reserves discovered- net (MMcfe) 97 3,019 4,813 18,474 1,821 3,173 5,196 5,194 Approximate cost - net (in $170 $4,847 $5,762 $15,079 $3,343 $3,413 $5,509 $5,284 thousands) - ---------------- (1) Consists of wells drilled to the Berea and Clinton Sandstone formations in Ohio, the Berea Sandstone, Devonian Brown Shale, Ravencliff Sandstone and Big Lime Limestone formations in West Virginia, the Clarendon and Medina Sandstone formations in Pennsylvania and the Medina Sandstone formations in New York. (2) Consists of wells drilled to the Trenton Limestone and Knox formations in Ohio, the Niagaran and Dundee Carbonates in Michigan, the Oriskany Sandstone and Onondaga Limestone formations in Pennsylvania and the Oriskany Sandstone, Onondaga Limestone and Knox formations in New York. (3) Two additional wells which were dry in the Knox formations were subsequently completed in the shallower Clinton formation. (4) One additional well which was dry in the Knox formations was subsequently completed in the shallower Clinton formation. (5) Two additional wells which were dry in the Knox formations were subsequently completed in the shallower Clinton formation. One additional well which was dry in the Oriskany formation was subsequently completed in the shallower Berea/Shale formation.
GAS GATHERING AND MARKETING Gas Gathering. The Company operates approximately 2,600 miles of natural gas gathering lines in Ohio, West Virginia, Pennsylvania, New York and Michigan which are tied directly to various interstate natural gas transmission systems. The interconnections with these interstate pipelines afford the Company potential marketing access to most East Coast gas markets. The Company earned gathering revenues of $4.6 million in 1995. Direct costs associated with gas gathering in 1995 totaled approximately $1.2 million. 12 13 Gas Marketing. The major industrial centers of Akron, Buffalo, Canton, Chicago, Cleveland, Detroit and Pittsburgh are all located in close proximity to the Company's operations and provide a large potential market for direct natural gas sales. At present, the Company markets directly to approximately 200 customers in a five-state area. The Company focuses its gas marketing efforts on small to mid-sized industrial customers that require more service and have the potential to generate higher margins per Mcf than large industrial users. The Company sells the gas it produces to its commercial and industrial customers, local distribution companies and on the spot market. In addition to its own production, the Company buys gas from other producers and third parties and resells it. At December 31, 1995, the Company marketed approximately 150 MMcf of gas per day of which approximately 45% consisted of its own production. Gas sold to end users is usually sold pursuant to contracts which extend for periods of one to three years at fixed prices. Gas sold to local distribution companies is generally sold under one-year or longer contracts either at fixed prices or prices indexed to the cost of gas for local distribution companies. Approximately 50% of the gas marketed by the Company is at fixed prices and 50% at market sensitive prices. The following table shows the type of buyer for gas marketed by the Company at December 31, 1995.
Marketed Gas --------------------------- MMcf Percent Purchaser Per Day of Total - ----------------------------- --------- ---------- End Users 41.7 27.9% Local Distribution Companies 61.8 41.3% Spot Markets 46.1 30.8% ------ ------- Total 149.6 100.0% ===== ======
OILFIELD SUPPLIES AND SERVICES The Company has provided its own oilfield services for more than 30 years in order to assure quality control and operational and administrative support to its exploration and production operations. In 1992, Arrow Oilfield Service Company ("Arrow"), a separate service division, was organized which provides the Company and third party customers with necessary oilfield services such as well workovers, well completions, JetStar conversions, brine hauling and disposal and oil trucking. In 1995, more than 50% of Arrow's revenues were generated by sales to third parties. During the last half of 1994, the Company acquired for $3.1 million substantially all the assets of two Ohio-based oilfield servicing companies and a brine hauling and disposal company operating primarily in Ohio. These acquisitions made Arrow the largest oilfield service company in Ohio. In June 1995, the Company acquired the assets and assumed the operations of Antrim Services, Inc., an oilfield service company headquartered in Gaylord, Michigan, in order to provide adequate oilfield services to its expanding Michigan operations. Target Oilfield Pipe & Supply Company ("TOPS"), a subsidiary of the Company, operates retail sales outlets in the Appalachian and Michigan Basins from which it sells a broad range of equipment, including pipe, tanks, fittings, valves, pumping units and JetStar plunger lift systems. The Company originally entered the oilfield supply business to ensure the quality and availability of supplies for its own operations. In 1995, more than 60% of TOPS' revenues were generated by sales to third parties. In 13 14 August 1995, TOPS acquired the assets and assumed the operations of COFSCO, Inc., a distributor of oilfield supplies, and Precision Processing, Inc., an oilfield pipe threading business, for $4.4 million. The Company plans to expand its oilfield service and supplies business through continued growth in its five state market area. EMPLOYEES As of February 29, 1996, the Company had 576 full-time employees, including 223 oilfield services and sales employees, 268 oil and gas production employees, 20 petroleum engineers, 11 geologists and 2 geophysicists. COMPETITION AND CUSTOMERS The oil and gas industry is highly competitive. Competition is particularly intense with respect to the acquisition of producing properties and the sale of oil and gas production. There is competition among oil and gas producers as well as with other industries in supplying energy and fuel to users. The competitors of the Company in oil and gas exploration, development, production and marketing include major integrated oil and gas companies as well as numerous independent oil and gas companies, individual proprietors, natural gas pipelines and their affiliates and natural gas marketers and brokers. Many of these competitors possess and employ financial and personnel resources substantially in excess of those available to the Company. Such competitors may be able to pay more for desirable prospects or producing properties and to evaluate, bid for and purchase a greater number of properties or prospects than the financial or personnel resources of the Company will permit. The ability of the Company to add to its reserves in the future will be dependent on its ability to exploit its current developed and undeveloped lease holdings and its ability to select and acquire suitable producing properties and prospects for future exploration and development. The only customer which accounted for 10% or more of the Company's consolidated revenues during the year ended December 31, 1995 was The East Ohio Gas Company with purchases of $11,111,822. The only customer which accounted for 10% or more of the Company's consolidated revenues during the years ended December 31, 1993 and 1994 was Ravenswood Aluminum Corporation ("RAC"), sales to which totaled $8,616,069 and $9,600,612, respectively. The Company's contract with RAC, its principal gas purchaser in West Virginia, requires it to deliver 10 billion Btus (approximately 8.9 MMcf) of gas per day through 1998. At present, the Company is supplying this contract requirement by delivering approximately 6.1 billion Btus of its own gas production, 3.2 billion Btus of production from royalty and joint working interest owners in wells in which the Company holds an interest and .7 billion Btus of gas purchased from third parties. The contract price at which gas is delivered to this customer for 1996 is $3.72 per MMBtu. The RAC contract also provides for a discount from the contract price if gas is available under the same terms and conditions from an arms-length third party at a price of less than 70% of the contract price. The discount is equal to one-half of the difference between the lower available price and the contract price and applies to volumes of gas for plant requirements in excess of 6,000 MMBtus per day. RAC unilaterally took discounts totaling $397,000 and $863,000 in 1994 and 1995, respectively. The Company has contested RAC's interpretation of the contract and may initiate legal action to recover part or all of the discounts taken. 14 15 To protect itself against an interruption or reduction in the income stream under the RAC contract, the Company required the seller of the properties subject to the RAC contract to partially secure the delivered gas price the Company would receive under the contract with a declining letter of credit issued by Citibank, N.A. and Chase Manhattan Bank, N.A. in the original amount of $10.7 million, approximately $5.1 million of which is available for drawing in 1996. The Company is entitled to draw against the letter of credit annually if it receives less than a specified minimum average delivered price on gas delivered to RAC under the contract. Under the terms of the letter of credit, the Company was reimbursed approximately $165,000 directly by the seller for the 1994 discounts and expects to be reimbursed for a significant portion of the discount taken in 1995. REGULATION Regulation of Production. In all states in which the Company is engaged in oil and gas exploration and production, its activities are subject to regulation. Such regulations may extend to requiring drilling permits, spacing of wells, the prevention of waste and pollution, the conservation of natural gas and oil, and other matters. Such regulations may impose restrictions on the production of natural gas and oil by reducing the rate of flow from individual wells below their actual capacity to produce which could adversely affect the amount or timing of the Company's revenues from such wells. Moreover, future changes in local, state or federal laws and regulations could adversely affect the operations of the Company. Environmental Regulation. The Company's operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas, and impose substantial liabilities for pollution resulting from the Company's operations. Management believes the Company is in substantial compliance with current applicable environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on the Company. Regulation of Sales and Transportation. The Federal Energy Regulatory Commission (the "FERC") regulates the transportation and sale for resale of natural gas in interstate commerce pursuant to the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). In the past, the federal government has regulated the prices at which oil and gas could be sold. Currently, sales by producers of natural gas and all sales of crude oil and condensate can be made at uncontrolled market prices. 15 16 ITEM 2. PROPERTIES ---------- OIL AND GAS RESERVES The following table sets forth the Company's proved oil and gas reserves as of December 31, 1993, 1994 and 1995 determined in accordance with the rules and regulations of the Securities and Exchange Commission. Proved reserves are the estimated quantities of oil and gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.
December 31 --------------------------------- 1993 1994 1995 ------- ------- ------- Estimated Proved Reserves Gas (billion cubic feet) 94.3 123.0 239.4 Oil (thousands of barrels) 3,533 4,113 6,283
See Note 13 to the Consolidated Financial Statements for more detailed information regarding the Company's oil and gas reserves. The following table sets forth the estimated future net revenues from the proved reserves of the Company and the present value of such future net revenues as of December 31, 1995 determined in accordance with the rules and regulations of the Securities and Exchange Commission. Estimated future net revenues (before income taxes) attributable to estimated production during 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,602,107 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,277,802 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,462,612 1999 and thereafter . . . . . . . . . . . . . . . . . . . . . 270,343,049 ------------- Total $385,685,570 ============= Present value before income taxes (discounted at 10% per annum) . . . . . . . . . . . . . . . . . $214,250,131 ============ Present value after income taxes (discounted at 10% per annum) . . . . . . . . . . . . . . . . . $170,916,733 ============
Estimated future net revenues represent estimated future gross revenues from the production and sale of proved reserves, net of estimated production costs (including production taxes, ad valorem taxes, operating costs) and development costs. Estimated future net revenues were calculated on the basis of prices and costs estimated to be in effect at December 31, 1995 without escalation, except where changes in prices were fixed and readily determinable under existing contracts. 16 17 PRODUCING WELL DATA The following table summarizes by state the Company's productive wells at December 31, 1995:
December 31, 1995 ------------------------------------------------------------------------ Oil Wells Gas Wells Total ------------------ ------------------ --------------------- State Gross Net Gross Net Gross Net - ---------------- ------ ------ ------ ----- ------- -------- Ohio 2,137 1,903 1,656 1,445 3,793 3,348 West Virginia 381 377 859 622 1,240 999 Pennsylvania 290 284 471 287 761 571 New York 7 6 1,031 992 1,038 998 Michigan 1 1 547 245 548 246 ----- ----- ----- ----- ----- ----- 2,816 2,571 4,564 3,591 7,380 6,162 ===== ===== ===== ===== ===== =====
ACREAGE DATA The following table summarizes by state the Company's gross and net developed and undeveloped leasehold acreage at December 31, 1995:
December 31, 1995 --------------------------------------------------------------------------- Developed Acreage Undeveloped Acreage Total Acreage -------------------- --------------------- ----------------------- State Gross Net Gross Net Gross Net --------------- -------- -------- -------- ------ ------- ------- Ohio 272,000 258,000 278,000 245,000 550,000 503,000 West Virginia 62,000 59,000 22,000 19,000 84,000 78,000 Pennsylvania 33,000 24,000 187,000 180,000 220,000 204,000 New York 97,000 95,000 35,000 30,000 132,000 125,000 Michigan 20,000 9,000 23,000 22,000 43,000 31,000 -------- -------- ------- ------- -------- -------- 484,000 445,000 545,000 496,000 1,029,000 941,000 ======== ======== ======= ======= ========= ========
ITEM 3. LEGAL PROCEEDINGS ----------------- The complaint filed by the Estate of Judith C. Bookman against the Company and Harold D. Miller, Inc. seeking the recovery of $5,110,000 in compensatory damages and $2,000,000 in punitive damages for the death of Judith C. Bookman in an automobile accident was dismissed as against the Company by the Court of Common Pleas of Portage County, Ohio, which granted the Company's motion for summary judgment. On January 2, 1996, Karen J. Volgstadt, individually and as administrator of the Estate of George A. Volgstadt, filed a complaint in the Supreme Court of Chautauqua County, New York against the Company seeking the recovery of $6,000,000 in compensatory damages for the death of George A. Volgstadt in an accident which occurred during the course of his employment with the Company. While 17 18 the Company believes that this action is barred by the Workers' Compensation laws of New York and intends to move for its dismissal, any liability of the Company with respect to this action would be covered by insurance. The Company is involved in several other lawsuits arising in the ordinary course of business. The Company believes that the result of such proceedings, individually or in the aggregate, will not have a material adverse effect on the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Company as of February 29, 1996 were as follows: Name Age Position ---- --- -------- Henry S. Belden, IV 56 Chairman of the Board and Chief Executive Officer Max L. Mardick 61 President and Chief Operating Officer and Director Ronald E. Huff 40 Senior Vice President and Chief Financial Officer and Director Joseph M. Vitale 54 Senior Vice President Legal, General Counsel, Secretary and Director Ronald L. Clements 53 Senior Vice President Exploration and Production L. Edward Parker 49 Senior Vice President Energy Marketing Leo A. Schrider 57 Senior Vice President Technical Development Dennis D. Belden 50 Vice President Supply and Service Charles P. Faber 54 Vice President Corporate Development Tommy L. Knowles 45 Vice President Production Donald A. Rutishauser 39 Vice President and Treasurer Dean A. Swift 43 Vice President, Assistant General Counsel and Assistant Secretary
All executive officers of the Company serve at the pleasure of its Board of Directors. None of the executive officers of the Company is related to any other executive officer or director, except that Henry S. Belden, IV and Dennis D. Belden are brothers. The business experience of each executive officer is summarized below. 18 19 HENRY S. BELDEN, IV has been Chairman and Chief Executive Officer of the Company since 1982. Mr. Belden has been involved in oil and gas production since 1955 and associated with Belden & Blake since 1967. Prior to joining Belden & Blake, he was employed by Ashland Oil & Refining Company and Halliburton Services, Incorporated. Mr. Belden attended Florida State University and the University of Akron and is a member of the Society of Petroleum Engineers, the Mid-Continent Oil & Gas Association and the Board of Trustees of the Ohio Oil and Gas Association. He is also a member of the Regional Advisory Board of the Independent Petroleum Association of America and a director and a member of the Executive Committee of the Pennsylvania Grade Crude Oil Association. He is a member of the Interstate Oil Compact Commission. Other professional memberships include the World Business Council and the Association of Ohio Commodores. MAX L. MARDICK has been President and Chief Operating Officer of the Company since 1990, a director since 1992 and a director of predecessor companies from 1988 to 1992. He previously served as Executive Vice President and Chief Operating Officer from 1988 to 1990. Mr. Mardick is a Petroleum Engineer with more than 35 years of experience in domestic and international production, engineering, drilling operations and property evaluation. Prior to joining Belden & Blake, he was employed for more than 30 years by Shell Oil Company in various engineering, supervisory and senior management positions, including: Manager, Property Acquisitions and Business Development (1986-1988); Production Manager for Shell's Onshore and Eastern Divisions (1981-1986); Production Manager of Shell's Rocky Mountain Division (1980-1981); Operations Manager (1977-1980); and Engineering Manager (1975-1977). Mr. Mardick holds a BS degree in Petroleum Engineering from the University of Kansas. He is a member of the Society of Petroleum Engineers and the Ohio Oil and Gas Association. He has served as Vice Chairman of the Alabama - Mississippi section of the Mid-Continent Oil and Gas Association. RONALD E. HUFF has been Senior Vice President and Chief Financial Officer of the Company since 1989, having previously served as its Senior Controller from 1986 to 1989. Mr. Huff has been a director of Belden & Blake since 1991. He is a Certified Public Accountant with nearly 20 years of experience in oil and gas finance and accounting. From 1983 to 1986, Mr. Huff served as Vice President and Chief Accounting Officer of Towner Petroleum Company. From 1980 to 1983 he worked for Sonat Exploration Company as Manager of Financial Accounting; and from 1977 to 1980 he served as Corporate Accounting Supervisor for Transco Companies, Incorporated. Mr. Huff received a BS degree in Accounting from the University of Wyoming. He is a member of the Ohio Petroleum Accountants Society and the Financial Executives Institute-Northeast Ohio Chapter. JOSEPH M. VITALE has been Senior Vice President Legal of the Company since 1989 and has served as its General Counsel since 1974. He has been a director of the Company since 1991. Prior to joining Belden & Blake, Mr. Vitale served for four years in the Army Judge Advocate General's Corps. He holds a BS degree from John Carroll University and a JD degree from Case Western Reserve Law School. He is a member of the Ohio Oil and Gas Association, the Stark County, Ohio State and American Bar Associations, and the Interstate Oil Compact Commission. Mr. Vitale is a past Chairman of the Natural Resources Law Committee of the Ohio State Bar Association. RONALD L. CLEMENTS has been Senior Vice President of Exploration and Production of the Company since 1993 and manages the Company's Exploration and Production Division. He joined Belden & Blake in 1990 and served as Vice President of Producing Operations until appointment to his 19 20 current position in 1993. He has more than 30 years of petroleum engineering and production experience. Prior to joining Belden & Blake he served as Vice President and District Manager of TXO Production Corporation in Corpus Christi, Texas. From 1967 to 1982, Mr. Clements held various operational management positions with Shell Oil Company in Texas and Louisiana. Mr. Clements received a BS degree in Electrical Engineering from the University of North Dakota and a MS degree in Petroleum Engineering from the University of Tulsa. He is a member of the Society of Petroleum Engineers and the Ohio Oil and Gas Association. L. EDWARD PARKER has been Senior Vice President of Energy Marketing of the Company since January of 1996. He has 24 years of experience in the oil and gas industry. Prior to joining Belden & Blake, Mr. Parker served as Executive Vice President of Marketing at Meridian Oil Inc. in Houston, Texas. From 1985 to 1988 he worked for Burlington Northern, Inc. as Vice President-Strategic Planning & Budgeting and from 1971 to 1985 he held various management positions with El Paso Natural Gas Company, including Vice President-Planning & Economics. Mr. Parker received a BA degree in Chemistry and a MBA degree from the University of Dallas. He is a member of the Natural Gas Association of Houston. LEO A. SCHRIDER has been Senior Vice President of Technical Development since 1993. He previously served as Senior Vice President of Exploration, Drilling and Engineering for the Company since 1986. Mr. Schrider is a Petroleum Engineer with 35 years of experience in oil and gas production, principally in the Appalachian Basin. Prior to joining Belden & Blake in 1981, he served as Assistant and Deputy Director of Morgantown Energy Technology Center from 1976 to 1980. From 1973 to 1976, Mr. Schrider served as Project Manager of the Laramie Energy Research Center. He has also held various research positions with the U.S. Department of Energy in Wyoming and West Virginia. Mr. Schrider received his BS degree from the University of Pittsburgh in 1961 and did graduate work at West Virginia University. He has published more than 35 technical papers on oil and gas production. He was an Adjunct Professor at West Virginia University and also served as a member of the International Board of Directors of the Society of Petroleum Engineers. In 1994, Mr. Schrider was elected to the Board of Directors of the Petroleum Technology Transfer Council and is chairman of the product advisory group representing the Appalachian region. DENNIS D. BELDEN has served as Vice President of Supply and Service for the Company since 1989 and has managed the Oilfield Supply and Service Division since 1992. He joined Belden & Blake in 1980 and served as the Company's land manager from 1980 to 1989. From 1976 to 1980 he was employed by Wilmot Mining Company as Special Projects Manager; from 1974 to 1976 he was Treasurer and General Manager of Cabbages & Kings Restaurant of Ohio; and from 1972 to 1974 he was employed by T & M Fuel as General Supervisor. Mr. Belden attended Kent State University. He is a member of the Ohio Oil and Gas Association. CHARLES P. FABER has been Vice President of Corporate Development for the Company since 1993. He previously served as Senior Vice President of Capital Markets from 1988 to 1993. Prior to joining Belden & Blake, Mr. Faber was employed as Senior Vice President of Marketing for Heritage Asset Management from 1986 to 1988. From 1983 to 1986 he served as President and Chief Executive Officer of Samson Properties, Incorporated. Mr. Faber holds a BA degree in Marketing and an MBA in Finance from the University of Wisconsin. 20 21 TOMMY L. KNOWLES has been Vice President of Production of the Company since January of 1996. He has 23 years of petroleum engineering and production experience. Prior to joining Belden & Blake, Mr. Knowles served as President of FWA Drilling Company, a subsidiary of Texas Oil & Gas Corporation. From 1982 to 1988 he worked for TXO Production Corporation in Sacramento, California, serving in various management positions including Vice President; from 1979 to 1982 he held the position of Drilling and Production Manager for Texas Oil & Gas Corporation; and, from 1973 to 1979 he held various engineering, supervisory and management positions with Exxon Corporation. Mr. Knowles holds a BS degree in Mechanical Engineering from the University of Texas at Austin where he graduated with honors. He is a member of the Society of Petroleum Engineers, the American Petroleum Institute and the Independent Association of Drilling Contractors. DONALD A. RUTISHAUSER has been Vice President and Treasurer of the Company since 1989, having previously served as Senior Financial Analyst from 1987 to 1989. Prior to joining Belden & Blake, he was employed by Grace Energy Corporation as Financial Project Manager. Mr. Rutishauser received a BA degree in Economics from Dartmouth College and an MBA in Accounting and Finance from the University of Michigan. DEAN A. SWIFT has served as Vice President, Assistant General Counsel and Assistant Secretary of the Company since 1989. He served as Assistant General Counsel of the Company from 1981 to 1989. From 1978 to 1981 he was associated with the law firm of Hahn, Loeser and Parks in Cleveland, Ohio. Mr. Swift received a BA degree from the University of the South and a JD degree from the University of Virginia. He is a member of the Stark County, Ohio State and American Bar Associations. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER ----------------------------------------------------------------- MATTERS ------- The Company's Common Stock has been traded on The Nasdaq Stock Market under the symbol "BELD" since March 31, 1992. 21 22 The following table sets forth the high and low sales prices for the Common Stock of the Company for the periods indicated as reported by The Nasdaq Stock Market.
Sale Price ------------------------- Average Daily High Low Volume ------- ------- --------------- 1993 ---------------- First Quarter $11.75 $ 9.75 7,801 Second Quarter 15.00 11.00 42,784 Third Quarter 14.75 10.00 42,174 Fourth Quarter 14.75 9.75 30,691 1994 ---------------- First Quarter $13.25 $ 9.75 22,567 Second Quarter 13.00 12.00 14,376 Third Quarter 14.75 11.50 18,909 Fourth Quarter 15.00 13.25 26,388 1995 ---------------- First Quarter $14.25 $11.50 16,892 Second Quarter 17.00 13.75 16,316 Third Quarter 19.25 14.50 46,982 Fourth Quarter 19.25 14.50 74,242 1996 ---------------- First Quarter (through February 29, 1996) $18.75 $15.75 39,884
The approximate number of record holders of the Company's equity securities at February 29, 1996 was as follows:
Number of Title of Class Record Holders -------------------------- -------------- Common Stock 1,925 Class II Serial Preferred Stock $7.50 Series A 1
22 23 DIVIDENDS No dividends have been paid on the Company's Common Stock and none are expected to be paid in the foreseeable future. The Class II Serial Preferred Stock $7.50 Series A is entitled to cumulative quarterly dividends at the annual rate of $7.50 per share. ITEM 6. SELECTED FINANCIAL DATA -----------------------
BELDEN & BLAKE CORPORATION(1) As of or for the Year Ended December 31 --------------------------------------------------------------- 1991 1992 1993 1994 1995 -------- -------- -------- -------- -------- (In thousands) Operations Revenues $49,871 $52,550 $72,874 $79,362 $110,064 Depreciation, depletion and amortization 1,748 4,853 9,693 11,886 19,717 Income (loss) from continuing operations (709) 1,139 3,265 4,180 6,260 Income (loss) from continuing operations per common share -- .48 .55 .57 .69 Preferred dividends paid/cash withdrawals 1,541 -- 180 180 180 Balance sheet data Working capital (4,563) 1,465 28,850 13,611 17,359 (deficit) Oil and gas properties and gathering systems, 8,713 82,751 86,192 106,710 211,142 net Total assets 20,399 102,253 135,174 148,173 297,298 Long-term liabilities, less current portion 8,551 59,311 43,516 47,858 110,523 Preferred stock -- 2,400 2,400 2,400 2,400 Total owners' equity (deficit) (787) 29,023 76,857 81,142 142,291
_______________ [FN] (1) Operating data for periods prior to March 31, 1992 and balance sheet data for years prior to 1992 are for the Belden Interests, the acquisition of which was accounted for in a manner similar to a pooling of interests. Financial results reflect the discontinuance of EPS as disclosed in Note 16 to the Consolidated Financial Statements. 23 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto and the Selected Financial Information included elsewhere in this report. GENERAL On March 31, 1992, the Company succeeded to the Belden Interests. The transaction was accounted for on the basis of historical cost in a manner similar to a pooling of interests. As a result, the consolidated financial statements of the Company reflect the combined historical results of operations of only the Belden Interests prior to March 31, 1992. Also on March 31, 1992, the Company acquired the assets and assumed the liabilities of the Partnership and BBI in exchange for shares of common stock pursuant to the Consolidation. The Consolidation was accounted for as a purchase, and the results of operations of the Partnership and BBI have been included from that date. Prior to March 31, 1992, the Company was engaged principally in managing the assets and business activities of the Partnership, BBI and non-affiliated entities and in gas gathering and marketing. Accordingly, a significant portion of the Company's income was derived from transactions with the Partnership and BBI, including well operating fees, sales of oilfield supplies and services at fixed mark-ups over cost and fees for accounting and related services. Since March 31, 1992, the Company's principal business has been the acquisition, development and production of, and exploration for, oil and gas reserves, principally in Ohio, West Virginia, Pennsylvania, Michigan and New York, and the gathering and marketing of natural gas. Consequently, the historical statements of operations prior to the Consolidation do not reflect the Company's current or planned business activities. The Company utilizes the "successful efforts" method of accounting for its oil and gas properties. Under this method, property acquisition and development costs and productive exploration costs are capitalized while non-productive exploration costs, which include certain geological and geophysical costs, dry holes, expired leases and delay rentals, are expensed as incurred. Capitalized costs related to proved properties are depleted using the unit-of-production method. No gains or losses are recognized upon the disposition of oil and gas properties except in extraordinary transactions. Sales proceeds are credited to the carrying value of the properties. Maintenance and repairs are expensed, and expenditures which enhance the value of properties are capitalized. The Company's gas gathering and marketing operations consist of purchasing gas at the wellhead and from interstate pipelines and selling gas to industrial customers and local gas distribution companies. The cost of gas purchased from the Company is the wellhead price stipulated by the well operating or gas purchase agreements relating to the wells and is included in "Cost of gas and gathering expense." The Company provides oilfield sales and services to its own operations and to third parties. Oilfield sales and service provided to the Company's own operations are provided at cost and all intercompany revenues and expenses are eliminated in consolidation. Prior to the Consolidation, revenues from oilfield sales and service provided to the Partnership and BBI were accounted for as third-party revenues. 24 25 RESULTS OF OPERATIONS 1995 COMPARED TO 1994 OIL AND GAS SALES. Oil and gas sales increased $14.3 million (44%) in 1995 compared to 1994 due primarily to an increase in oil and gas volumes sold and a higher average price paid for the Company's oil. These increases more than offset a lower average price paid for the Company's natural gas. Oil volumes increased 60,000 Bbls (12%) from 496,000 Bbls in 1994 to 556,000 Bbls in 1995 resulting in an increase in oil sales of approximately $1.0 million. Gas volumes increased 7.4 Bcf (77%) from 9.6 Bcf in 1994 to 17.0 Bcf in 1995 resulting in an increase in gas sales of approximately $19.1 million. These volume increases were primarily due to production from the Company's 1995 acquisitions and from wells drilled in 1994 and 1995. Gas volumes produced in 1995 were less than the Company's full production potential as a result of the Company's decision to curtail gas production due to low spot market gas prices. Interstate pipeline repairs and construction in Michigan and West Virginia also reduced potential production volumes. The average price paid for the Company's oil increased from $15.98 per barrel in 1994 to $16.78 per barrel in 1995 which increased oil sales by approximately $450,000. The average price paid for the Company's natural gas decreased $.37 per Mcf to $2.21 per Mcf in 1995 compared to 1994 resulting in decreased gas sales of approximately $6.3 million. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue increased $7.3 million (22%) from $33.1 million in 1994 to $40.4 million in 1995 primarily due to the Company's 1995 acquisitions. Increased volumes of gas purchased from third parties and resold were offset by a lower average selling price . OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $6.9 million (53%) from $13.2 million in 1994 to $20.1 million in 1995. This increase was primarily due to the sales generated by the three oilfield service companies acquired by the Company in September and October of 1994 and three oilfield sales and service companies acquired in 1995. INTEREST AND OTHER REVENUE. Interest and other revenue increased $2.1 million (385%) from $559,000 in 1994 to $2.7 million in 1995 primarily due to the recognition of $1.3 million in anticipated proceeds from contract rejection claims that have been filed in the bankruptcy proceedings of Columbia Gas Transmission Corporation (see Note 11) and the recognition of income in 1995 from an incentive production payment associated with certain properties operated by Ward Lake. PRODUCTION EXPENSE. Production expense increased $4.0 million (50%) from $7.9 million in 1994 to $11.9 million in 1995. This increase was primarily due to the increased production volumes discussed above. The average production cost per equivalent Mcf of natural gas decreased from $.63 per Mcfe in 1994 to $.59 per Mcfe in 1995. PRODUCTION TAXES. Production taxes increased $703,000 (52%) from $1.4 million in 1994 to $2.1 million in 1995. This increase was primarily due to the increased production volumes discussed above. 25 26 COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense increased $5.0 million (17%) from $29.1 million in 1994 to $34.1 million in 1995 primarily due to the Company's 1995 acquisitions. Increased volumes of gas purchased from third parties and resold were offset by a lower average purchase price. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $6.1 million (50%) from $12.3 million in 1994 to $18.4 million in 1995 primarily as a result of the increased cost of goods sold associated with increased sales resulting from the acquisitions described above. EXPLORATION EXPENSE. Exploration expense increased $2.1 million (76%) from $2.8 million in 1994 to $4.9 million in 1995 primarily due to higher levels of geological and geophysical activity and increases in the size of the technical staff. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased $498,000 (13%) from $4.0 million in 1994 to $4.5 million in 1995 primarily due to increases in employee compensation and benefits. Included in general and administrative expense are franchise and property taxes which increased $183,000 from $459,000 in 1994 to $642,000 in 1995. INTEREST EXPENSE. Interest expense increased $2.6 million (73%) from $3.5 million in 1994 to $6.1 million in 1995. This increase was primarily due to higher average debt balances incurred to finance the 1995 acquisitions (Note 3 - "Acquisitions"). DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $7.8 million (66%) from $11.9 million in 1994 to $19.7 million in 1995. Depletion expense increased $6.0 million (66%) from $9.1 million in 1994 to $15.1 million in 1995. This increase was primarily due to additional depletion expense associated with the increased production volumes described above. Depletion per Mcfe increased from $.72 per Mcfe in 1994 to $.74 per Mcfe in 1995. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $1.9 million (29%) from $6.5 million in 1994 to $8.4 million in 1995. The operating income from the oil and gas operations segment increased $3.3 million (37%) from $9.1 million in 1994 to $12.4 million in 1995. The increase was attributable to the items discussed above. The operating income from the oilfield sales and service segment increased $323,000 (92%) from $350,000 in 1994 to $673,000 in 1995. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased $2.1 million (50%) from $4.2 million in 1994 to $6.3 million in 1995. This increase in net income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations decreased $180,000 (8%) from $2.3 million in 1994 to $2.2 million in 1995. This decrease was attributable to a decrease in the effective tax rate partially offset by an increase in income from continuing operations before income taxes. The effective tax rate decreased primarily due to the utilization of nonconventional fuel source tax credits. Net income from continuing operations on a per share basis increased from $.57 per share in 1994 to $.69 per share in 1995. This increase was primarily the result of the factors discussed above. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $1,761,000 ($1,139,000 net of tax benefit or $.13 per share) in 1995 compared to $509,000 ($337,000 net of tax benefit or $.05 per share) in 1994. The loss in 1995 includes the write-down of various assets and 26 27 inventories to estimated realizable value and a provision for estimated costs of asset disposals and future losses related to the Company's decision to sell EPS. 1994 COMPARED TO 1993 OIL AND GAS SALES. Oil and gas sales increased $5.9 million (22%) in 1994 compared to 1993 due primarily to an increase in oil and gas volumes sold and a higher average price paid for the Company's natural gas. These increases more than offset a lower average price paid for the Company's oil. Oil volumes increased 43,000 Bbls (10%) from 453,000 Bbls to 496,000 Bbls in 1994 resulting in an increase in oil sales of approximately $740,000. The increase in oil volumes sold in 1994 was primarily due to the success of the 1994 drilling program and, to a lesser extent, 1994 acquisitions. Gas volumes increased 2.2 Bcf (30%) from 7.4 Bcf in 1993 to 9.6 Bcf in 1994 resulting in an increase in gas sales of approximately $5.6 million. The gas volume increase was primarily due to the Company's 1994 acquisitions. The average price paid for the Company's oil decreased from $17.15 per barrel in 1993 to $15.98 per barrel in 1994 which reduced oil sales by approximately $580,000. The average price paid for the Company's natural gas increased $.03 per Mcf to $2.58 per Mcf in 1994 compared to 1993 resulting in increased gas sales of approximately $190,000. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue decreased 5% in 1994 compared with 1993 due to a decrease in volumes and selling price of gas purchased from third parties and resold. OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $2.3 million (21%) from $10.9 million in 1993 to $13.2 million in 1994. This increase was primarily due to the sales generated by the three oilfield service companies acquired by the Company in September and October of 1994. INTEREST AND OTHER REVENUE. Interest and other revenue decreased $88,000 (14%) from $647,000 in 1993 to $559,000 in 1994 primarily because a gain was recorded in 1993 on the sale of certain oil and gas properties and related equipment in Pennsylvania and New York. PRODUCTION EXPENSE. Production expense increased $2.0 million (33%) from $5.9 million in 1993 to $7.9 million in 1994. The increase was primarily due to the increased production discussed above. The average production cost per equivalent Mcf of natural gas increased from $.59 in 1993 to $.63 in 1994. This increase was primarily due to the recognition of initial workover expense on recently acquired wells designed to maximize future production volume. PRODUCTION TAXES. Production taxes increased $113,000 (9%) from $1.2 million in 1993 to $1.4 million in 1994. This increase was primarily due to the increased production volumes discussed above. COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense decreased 5% in 1994 compared with 1993 due to a decrease in volumes of gas purchased from third parties and resold. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $2.0 million (19%) from $10.3 million in 1993 to $12.3 million in 1994 primarily as a result of the sales generated by the 1994 acquisitions described above. 27 28 EXPLORATION EXPENSE. Exploration expense increased $269,000 (11%) from $2.5 million in 1993 to $2.8 million in 1994 primarily due to a lower level of leasing activity resulting in less cost being capitalized in 1994. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased less than 1% in 1994 compared with 1993, notwithstanding the continued growth of the Company. Included in general and administrative expense are franchise and property taxes which increased $86,000 from $373,000 in 1993 to $459,000 in 1994. INTEREST EXPENSE. Interest expense increased $316,000 (10%) from $3.2 million in 1993 to $3.5 million in 1994 primarily due to higher average debt balances in 1994 incurred to finance acquisitions. DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $2.2 million (23%) in 1994 compared to 1993. Depletion expense increased $1.8 million (25%) from $7.3 million in 1993 to $9.1 million in 1994. This increase was primarily due to additional depletion expense associated with the increased production volumes described above. Depletion per Mcfe remained consistent at $.72 per Mcfe in 1993 and 1994. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $1.2 million (24%) from $5.3 million in 1993 to $6.5 million in 1994. The operating income from the oil and gas operations segment increased $1.5 million (19%) from $7.6 million in 1993 to $9.1 million in 1994. The increase was attributable to the items discussed above. The operating income from the oilfield sales and service segment increased $193,000 (123%) from $157,000 in 1993 to $350,000 in 1994. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased $915,000 (28%) from $3.3 million in 1993 to $4.2 million in 1994. This increase in net income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased $333,000 (17%) from $2.0 million in 1993 to $2.3 million in 1994. This increase was due to the increase in income before income taxes partially offset by a decrease in the effective tax rate. Net income from continuing operations on a per share basis increased from $.55 per share in 1993 to $.57 per share in 1994. This increase was primarily the result of the factors discussed above partially offset by the increase in the average number of common shares outstanding from 5,674,638 in 1993 to 7,080,227 in 1994. The average number of shares outstanding increased primarily as a result of the Company's sale of 3.45 million common shares in May 1993. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $509,000 ($337,000 net of tax benefit or $.05 per share) in 1994 compared to $68,000 ($45,000 net of tax benefit or $.01 per share) in 1993. The increase was attributable to operating losses from Magnolia Compression Services, Inc., which was formed in 1993, and Engine Power Systems, Inc., which was acquired in 1994. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital is closely related to and dependent on the current prices paid for its oil and gas. 28 29 The Company's current ratio at December 31, 1995 was 1.47 to 1.00. During 1995, working capital increased $3.8 million from $13.6 million to $17.4 million. The increase was primarily due to increases in cash ($8.7 million), accounts receivable ($15.0 million) and inventories ($2.6 million) related to the Quaker State and other 1995 acquisitions, which was largely offset by an increase in accounts payable and accrued expenses ($22.8 million) from these same 1995 acquisitions. The Company's operating activities provided cash flow of $21.9 million during 1995. On May 25, 1995, the Company's bank group amended its revolving bank facility. The facility was increased to $200 million, the maturity date was extended to March 31, 1999, and the borrowing base was increased to $81 million. The borrowing base is calculated by the bank group and is based on the cash flows generated by the Company's proved developed reserves, gas gathering systems and other corporate assets. Generally, the Company can expect to have the borrowing base increased by at least 50% of the present value before income taxes (discounted at 10% per annum) of any proved developed reserves added through acquisition or drilling. Outstanding balances under the agreement incurred interest at the Company's choice of either: (1) the one, two or three-month LIBOR + 2% (7.66% for the three-month LIBOR interest rate option at December 31, 1995) or (2) the bank's prime rate (8.50% at December 31, 1995). At December 31, 1995, the Company had $67 million outstanding under this facility. On February 16, 1996, the Company's bank group further amended its revolving bank facility. The maturity date was extended to March 31, 2001 and the LIBOR interest rate option was modified to decrease from LIBOR + 2% to a range of LIBOR + 1-1/4% to LIBOR + 3/4% as outstanding balances decrease in relation to the borrowing base. When market conditions are favorable, the Company may enter into interest rate swap arrangements, whereby a portion of the Company's floating rate exposure is exchanged for a fixed interest rate. The Company had no such derivative financial instruments at December 31, 1994 or 1995. The amended agreement will continue to restrict the sale of assets to no more than 15% of shareholders' equity in any one year and will require the Company to maintain certain levels of net worth, working capital and debt service coverage. During 1993, the Company placed $35 million of 7% fixed-rate senior notes with five insurance companies in a private placement. These notes, which are interest-only for four years, mature on September 30, 2005. Equal annual principal payments of $3,888,888 will be required on each September 30 commencing in 1997. The senior note agreement limits the Company's senior debt to 50% of the discounted present value (at 10%) of the Company's oil and gas reserves plus the net book value of its gas gathering systems. Other terms and covenants are substantially the same as those contained in the $200 million revolving credit facility. The Company issued 4,025,000 shares of common stock at a public offering price of $14.75 per share pursuant to an underwriting agreement dated July 26, 1995 with Johnson Rice & Company, McDonald & Company Securities, Inc. and Southcoast Capital Corporation, as representatives of the underwriters. Net proceeds were approximately $55.6 million and were used to purchase the Quaker State Properties for approximately $50 million with the balance used to reduce the outstanding balances under the Company's revolving bank facility. 29 30 The Company currently expects to spend approximately $27 million during 1996 on its drilling activities and approximately $9.2 million for other capital expenditures. The Company's acquisition program is expected to be financed with any available cash flow over $36.2 million and with its available bank credit line. The Company believes that its existing sources of working capital are sufficient to satisfy all currently anticipated working capital requirements. The level of the Company's cash flow in the future will depend on a number of factors including the demand and price levels for oil and gas, its ability to acquire additional producing properties and the scope and success of its drilling activities. The Company intends to finance such activities principally through its available cash flow, through additional borrowings and, to the extent necessary, the issuance of additional common or preferred stock. INFLATION AND CHANGES IN PRICES During 1993, the price paid for the Company's crude oil fell from a high of $19.00 per barrel at the beginning of the year to a low of $13.50 per barrel at year-end with an average price of $17.15 per barrel. During 1994, the price paid for the Company's crude oil increased from $13.50 per barrel to a high of $18.00 per barrel, then decreased to $15.50 per barrel at year-end, with an average price of $15.98 per barrel. During 1995, the price paid for the Company's crude oil increased from $15.50 per barrel to a high of $17.50 per barrel, then decreased to $16.50 per barrel at year-end, with an average price for the year of $16.78 per barrel. The average price of the Company's natural gas increased from $2.55 per Mcf in 1993 to $2.58 per Mcf in 1994 and decreased to $2.21 per Mcf in 1995. The price of oil and gas has a significant impact on the Company's results of operations. Oil and gas prices fluctuate based on market conditions and, accordingly, cannot be predicted. As a result of increased competition among drilling contractors and suppliers and reduced levels of drilling, costs to drill, complete, and service wells have remained relatively constant in recent years. Historically, a large portion of the Company's natural gas sales has been under long-term fixed price contracts. As a result of recent acquisitions, certain natural gas sales are currently based on indexed prices. The Company may, from time to time, enter into hedging transactions with financial institutions to reduce its exposure to variable commodity pricing. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Index to Consolidated Financial Statements and Schedules on page F-1 sets forth the financial statements and supplementary schedules included in this Annual Report on Form 10-K and their location herein. Schedules have been omitted as not required or not applicable because the information required to be presented is included in the financial statements and related notes. The financial statements have been prepared by management in conformity with generally accepted accounting principles. Management is responsible for the fairness and reliability of the financial statements and other financial data included in this report. In the preparation of the financial statements, it is necessary to make informed estimates and judgments based on currently available information on the effects of certain events and transactions. The Company maintains accounting and other controls which management believes provide reasonable assurance that financial records are reliable, assets are safeguarded, and that transactions are 30 31 properly recorded. However, limitations exist in any system of internal control based upon the recognition that the cost of the system should not exceed benefits derived. The Company's independent auditors, Ernst & Young LLP, are engaged to audit the financial statements and to express an opinion thereon. Their audit is conducted in accordance with generally accepted auditing standards to enable them to report whether the financial statements present fairly, in all material respects, the financial position and results of operations in accordance with generally accepted accounting principles. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- Not applicable. PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- The information with respect to the directors of the Company set forth under the caption "Election of Directors" in the Company's proxy statement to be filed for the Annual Meeting of Shareholders to be held on or about May 23, 1996 is incorporated herein by reference. See pages 18 through 21 of this report for information regarding executive officers. ITEM 11. EXECUTIVE COMPENSATION ---------------------- The information with respect to executive compensation set forth under the captions "Executive Compensation" and "Information about the Board of Directors" in the Company's proxy statement to be filed for the Annual Meeting of Shareholders to be held on or about May 23, 1996 is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- The information with respect to security ownership of certain beneficial owners and management set forth under the caption "Ownership of Voting Securities" in the Company's proxy statement to be filed for the Annual Meeting of Shareholders to be held on or about May 23, 1996 is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- The information set forth under the caption "Certain Transactions" in the Company's proxy statement to be filed for the Annual Meeting of Shareholders on or about May 23, 1996 is incorporated by reference. 31 32 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ----------------------------------------------------------------- (a) Documents filed as a part of this report: 1. Financial Statements The financial statements listed in the accompanying Index to Consolidated Financial Statements and Schedules are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedules No financial statement schedules are required to be filed as part of this Annual Report on Form 10-K. 3. Exhibits
No. Description --- ----------- 3.1 Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 3.2 Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 3.2(a) Amendment to Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated December 30, 1992 3.3 Amended Code of Regulations of the Company--incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 4.1 Amended and Restated Debenture Agreement between the Company and Petercam Securities--incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 4.2(a) Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Peake Operating Company, Bank One, Texas, National Association and NBD Bank, N.A. dated November 1993--incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 4.2(b)* First Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Bank One, Texas National Association and NBD Bank, N.A., effective as of August 1, 1994
32 33 4.2(c)* Second Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank, N.A., effective as of March 29, 1995 4.2(d)* Third Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank, effective as of May 25, 1995 4.2(e)* Fourth Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and The First National Bank of Chicago, effective as of February 15, 1996 4.3 Warrant Assumption Agreement between Belden & Blake Corporation and Belden & Blake Energy Company--incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992 4.4 Note Purchase Agreement dated as of November 15, 1993 among the Company, The Canton Oil & Gas Company, Peake Operating Company and Peake Energy, Inc. and the purchasers listed on Annex I thereto--incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 4.5 None of the other instruments defining the rights of holders of long-term debt of the Company or its subsidiaries involve long-term debt in an amount which exceeds ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of such other instruments to the Commission upon request. 10.1 Employment Agreement between the Company and Henry S. Belden IV dated September 16, 1991--incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.2 Form of Severance Agreement between the Company and each of the officers of the Company (except Henry S. Belden IV) officers--incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.3 Stock Option Plan of the Company--incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.3(a) Stock Option Plan of the Company (as amended)--incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-62785) 10.4 Restricted Stock Grant Plan of The Canton Oil & Gas Company (formerly known as Belden & Blake Corporation)-- incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.5 Belden & Blake Corporation Non-employee Director Stock Option Plan-- incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 10.6 Plan and Agreement of Consolidation dated as of October 10, 1991, as amended, among Belden & Blake Energy Company, Henry S. Belden IV, Belden & Blake International Limited and the Company--incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.7 Stock Purchase Agreement dated as of December 7, 1992 between Presidio Exploration, Inc. and Belden & Blake Acquisition, Inc. (a wholly-owned subsidiary of the Company)--incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated December 22, 1992 10.8 Amended and Restated Gas Sales and Purchase Contract between Peake Energy, Inc. and Kaiser Aluminum & Chemical Corporation dated as of
33 34 August 27, 1987--incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 (Registration No. 33-60228) 10.9 Agreement of Purchase and Sale between the Company and TGX Corporation dated December 17, 1993--incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated January 14, 1994. 10.10 Stock Purchase Agreement dated January 3, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated February 10, 1995 10.10(a) Agreement of Amendment dated January 16, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K dated February 10, 1995 10.10(b) Second Agreement of Amendment dated February 10, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K dated February 10, 1995 10.11 Asset Purchase Agreement dated July 26, 1995 among Quaker State Corporation, QSE&P, Inc. and the Company-- incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated August 9, 1995. 21* Subsidiaries of the Registrant 23* Consent of Ernst & Young LLP 27* Financial Data Schedule
*Filed herewith (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the last quarter of the year covered by this report. (c) Exhibits required by Item 601 of Regulation S-K Exhibits required to be filed by the Company pursuant to Item 601 of Regulation S-K are contained in the Exhibits listed under Item 14(a)3. (d) Financial Statement Schedules required by Regulation S-X The items listed in the accompanying index to financial statements are filed as part of this Annual Report on Form 10-K. 34 35 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. BELDEN & BLAKE CORPORATION March 13, 1996 By: /s/ HENRY S. BELDEN IV - ---------------------------- ------------------------------- Date Henry S. Belden IV Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ HENRY S. BELDEN, IV Chairman of the Board, March 13, 1996 - ------------------------- Chief Executive Officer ----------------- Henry S. Belden, IV and Director Date (Principal Executive Officer) /s/ RONALD E. HUFF Senior Vice President, March 13, 1996 - -------------------------- Chief Financial Officer ----------------- Ronald E. Huff and Director Date (Principal Financial and Accounting Officer) /s/ MAX L. MARDICK President, Chief Operating March 13, 1996 - -------------------------- Officer and Director ----------------- Max L. Mardick Date /s/ JOSEPH M. VITALE Senior Vice President, Legal, March 13, 1996 - ------------------------- Secretary and Director ----------------- Joseph M. Vitale Date Director - -------------------------- Paul R. Bishop
35 36 /s/ THEODORE V. BOYD - ------------------------- Director March 13, 1996 Theodore V. Boyd ----------------- Date - ------------------------- Director Gary R. Petersen - ------------------------- Director David P. Quint - ------------------------- Director Raymond D. Saunders /s/ GEORGE M. SMART - ------------------------- Director March 13, 1996 George M. Smart ----------------- Date *By:------------------------- Attorney-in-Fact
36 37 EXHIBIT INDEX -------------
Location in Sequentially Numbered No. Description Copy - --- ----------- --------------- 3.1 Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 3.2 Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 3.2(a) Amendment to Amended Articles of Incorporation of the Company--incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated December 30, 1992 3.3 Amended Code of Regulations of the Company--incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 4.1 Amended and Restated Debenture Agreement between the Company and Petercam Securities-- incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 4.2(a) Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Peake Operating Company, Bank One, Texas, National Association and NBD Bank, N.A. dated November 1993--incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 4.2(b)* First Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Bank One, Texas National Association and NBD Bank, N.A., effective as of August 1, 1994 4.2(c)* Second Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank, N.A., effective as of March 29, 1995 4.2(d)* Third Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and NBD Bank, effective as of May 25, 1995 4.2(e)* Fourth Amendment to Credit Agreement among the Company, The Canton Oil & Gas Company, Peake Energy, Inc., Ward Lake Drilling, Inc., Bank One, Texas National Association and The First National Bank of Chicago, effective as of February 15, 1996 4.3 Warrant Assumption Agreement between Belden & Blake Corporation and Belden & Blake Energy Company--incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992 4.4 Note Purchase Agreement dated as of November 15, 1993 among the Company, The Canton Oil & Gas Company, Peake Operating Company and Peake Energy, Inc. and the purchasers listed on Annex I thereto--incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 4.5 None of the other instruments defining the rights of holders of long-term debt of the Company or its subsidiaries involve long-term debt in an amount which exceeds ten percent of the total assets of
38 the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of such other instruments to the Commission upon request. 10.1 Employment Agreement between the Company and Henry S. Belden IV dated September 16, 1991-- incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.2 Form of Severance Agreement between the Company and each of the officers of the Company (except Henry S. Belden IV) officers--incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.3 Stock Option Plan of the Company--incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.3(a) Stock Option Plan of the Company (as amended)--incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-62785) 10.4 Restricted Stock Grant Plan of The Canton Oil & Gas Company (formerly known as Belden & Blake Corporation)--incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.5 Belden & Blake Corporation Non-employee Director Stock Option Plan--incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 10.6 Plan and Agreement of Consolidation dated as of October 10, 1991, as amended, among Belden & Blake Energy Company, Henry S. Belden IV, Belden & Blake International Limited and the Company--incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-43209) 10.7 Stock Purchase Agreement dated as of December 7, 1992 between Presidio Exploration, Inc. and Belden & Blake Acquisition, Inc. (a wholly-owned subsidiary of the Company)--incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated December 22, 1992 10.8 Amended and Restated Gas Sales and Purchase Contract between Peake Energy, Inc. and Kaiser Aluminum & Chemical Corporation dated as of August 27, 1987--incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 (Registration No. 33-60228)
39 10.9 Agreement of Purchase and Sale between the Company and TGX Corporation dated December 17, 1993--incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated January 14, 1994. 10.10 Stock Purchase Agreement dated January 3, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated February 10, 1995 10.10(a) Agreement of Amendment dated January 16, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K dated February 10, 1995 10.10(b) Second Agreement of Amendment dated February 10, 1995 among Keith Hardin Gornick, R. David Briney, William F. Rolinski, Charles Nelson and the Company--incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K dated February 10, 1995 10.11 Asset Purchase Agreement dated July 26, 1995 among Quaker State Corporation, QSE&P, Inc. and the Company--incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated August 9, 1995. 21* Subsidiaries of the Registrant 23* Consent of Ernst & Young LLP 27* Financial Data Schedule
*Filed herewith 40 BELDEN & BLAKE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES ITEM 14(a) (1) AND (2)
PAGE ----- CONSOLIDATED FINANCIAL STATEMENTS --------------------------------- Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . F-3 Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-8
All financial statement schedules have been omitted since the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements. F-1 41 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors Belden & Blake Corporation We have audited the accompanying consolidated balance sheets of Belden & Blake Corporation as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Belden & Blake Corporation at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Cleveland, Ohio February 29, 1996 F-2 42 BELDEN & BLAKE CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31 -------------------------- 1995 1994 ------------ ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 12,322 $ 3,649 Accounts receivable, net 28,123 13,069 Inventories 9,253 6,677 Deferred income taxes 2,254 1,741 Other current assets 2,198 957 ----------- ----------- TOTAL CURRENT ASSETS 54,150 26,093 PROPERTY AND EQUIPMENT Oil and gas properties (successful efforts method) 235,344 122,280 Gas gathering systems 25,416 18,120 Land, buildings, machinery and equipment 29,977 19,564 ----------- ----------- 290,737 159,964 Less accumulated depreciation, depletion and amortization 59,209 40,789 ----------- ----------- PROPERTY AND EQUIPMENT, NET 231,528 119,175 OTHER ASSETS 11,620 2,905 ----------- ----------- $ 297,298 $ 148,173 =========== ===========
F-3 43 BELDEN & BLAKE CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31 ------------------- 1995 1994 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 11,004 $ 4,885 Accrued expenses 23,811 7,149 Current portion of long-term liabilities 1,976 447 -------- -------- TOTAL CURRENT LIABILITIES 36,791 12,481 LONG-TERM LIABILITIES Bank and other long-term debt 67,223 4,240 Senior notes 35,000 35,000 Convertible subordinated debentures 6,800 7,350 Other 1,500 1,268 -------- -------- TOTAL LONG-TERM LIABILITIES 110,523 47,858 DEFERRED INCOME TAXES 7,693 6,692 SHAREHOLDERS' EQUITY Common stock without par value; $.10 stated value per share; authorized 12,000,000 shares; issued and outstanding 11,136,496 and 7,084,737 shares 1,114 709 Preferred stock without par value; $100 stated value per share; authorized 8,000,000 shares; issued and outstanding 24,000 shares 2,400 2,400 Paid in capital 126,063 70,379 Retained earnings 12,820 7,879 Unearned portion of restricted stock (106) (225) -------- -------- TOTAL SHAREHOLDERS' EQUITY 142,291 81,142 -------- -------- $297,298 $148,173 ======== ========
See accompanying notes. F-4 44 BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31 ----------------------------------- 1995 1994 1993 -------- -------- --------- REVENUES Oil and gas sales $ 46,853 $32,574 $ 26,631 Gas marketing and gathering 40,436 33,072 34,709 Oilfield sales and service 20,066 13,157 10,887 Interest and other 2,709 559 647 -------- ------- -------- 110,064 79,362 72,874 EXPENSES Production expense 11,919 7,935 5,946 Production taxes 2,060 1,357 1,244 Cost of gas and gathering expense 34,079 29,134 30,721 Oilfield sales and service 18,404 12,264 10,343 Exploration expense 4,938 2,807 2,538 General and administrative expense 4,464 3,966 3,940 Interest expense 6,073 3,503 3,187 Depreciation, depletion and amortization 19,717 11,886 9,693 -------- ------- -------- 101,654 72,852 67,612 -------- ------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 8,410 6,510 5,262 Provision for income taxes 2,150 2,330 1,997 -------- ------- -------- INCOME FROM CONTINUING OPERATIONS 6,260 4,180 3,265 LOSS FROM DISCONTINUED OPERATIONS (1,139) (337) (45) -------- ------- -------- NET INCOME $ 5,121 $ 3,843 $ 3,220 ======== ========= ======== PER COMMON SHARE: CONTINUING OPERATIONS $ 0.69 $ 0.57 $ 0.55 DISCONTINUED OPERATIONS (0.13) (0.05) (0.01) -------- --------- -------- NET INCOME $ 0.56 $ 0.52 $ 0.54 ======== ========= ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,785 7,080 5,675 ======== ========= ========
See accompanying notes. F-5 45 BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands)
UNEARNED COMMON COMMON PREFERRED PAID IN RETAINED RESTRICTED SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL ------ ------ --------- ------- -------- --------- ----- JANUARY 1, 1993 3,355 $ 336 $ 2,400 $ 25,550 $ 1,176 $(440) $ 29,022 Stock issued 3,678 368 43,968 44,336 Net income 3,220 3,220 Preferred stock dividend (180) (180) Employee stock bonus 22 2 238 240 Restricted stock vested 109 110 219 Other (2) -- -- -- - ------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1993 7,053 706 2,400 69,865 4,216 (330) 76,857 Stock issued 32 3 385 388 Net income 3,843 3,843 Preferred stock dividend (180) (180) Restricted stock vested 129 105 234 - ------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1994 7,085 709 2,400 70,379 7,879 (225) 81,142 Stock issued 4,028 403 55,264 55,667 Net income 5,121 5,121 Preferred stock dividend (180) (180) Stock options exercised 2 -- 25 25 Employee stock bonus 22 2 251 253 Restricted stock vested 144 119 263 - ------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1995 11,137 $ 1,114 $ 2,400 $126,063 $ 12,820 $(106) $ 142,291 =============================================================================================================
See accompanying notes. F-6 46 BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31 ------------------------------- 1995 1994 1993 --------- -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,121 $ 3,843 $ 3,220 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 20,154 12,021 9,704 Loss (gain) on disposal of property and equipment 177 91 (118) Deferred income taxes 488 1,570 1,552 Deferred compensation and stock grants 1,067 359 459 Change in operating assets and liabilities, net of effects of acquisition of businesses: Accounts receivable and other operating assets (14,485) (1,622) (5,951) Inventories 469 (2,328) (1,393) Accounts payable and accrued expenses 8,958 1,775 1,912 --------- -------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 21,949 15,709 9,385 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (99,837) (17,968) (560) Proceeds from property and equipment disposals 589 438 1,388 Additions to property and equipment (23,855) (19,844) (13,465) (Increase) decrease in other assets (867) 88 (971) --------- -------- --------- NET CASH USED IN INVESTING ACTIVITIES (123,970) (37,286) (13,608) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit and long-term debt 73,000 6,100 5,025 Proceeds from senior note placement -- -- 35,000 Repayment of long-term debt and other obligations (17,818) (2,938) (59,349) Preferred stock dividends (180) (180) (180) Proceeds from sale of common stock 59,438 -- 46,223 Common stock placement cost (3,746) -- (3,563) --------- -------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 110,694 2,982 23,156 --------- -------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,673 (18,595) 18,933 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,649 22,244 3,311 --------- -------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,322 $ 3,649 $ 22,244 ========= ======== =========
See accompanying notes. F-7 47 BELDEN & BLAKE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES BUSINESS - -------- The Company operates primarily in the oil and gas industry. The Company's principal business is the acquisition, exploration, development and production of oil and gas reserves, and the gathering and marketing of natural gas. Sales of oil and gas are ultimately made to refineries, gas utilities and industrial consumers in Ohio, West Virginia, New York, Pennsylvania and Michigan. The Company is also a distributor of a broad range of oilfield equipment and supplies. Its customers include other independent oil and gas companies, dealers and operators throughout Ohio, West Virginia, New York, Pennsylvania and Michigan. The price of oil and gas has a significant impact on the Company's working capital and results of operations. PRINCIPLES OF CONSOLIDATION AND FINANCIAL PRESENTATION - ------------------------------------------------------ The accompanying consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS - -------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts. Significant estimates used in the preparation of the Company's financial statements which could be subject to significant revision in the near term include estimated oil and gas reserves and the estimated net realizable value of the assets of discontinued operations. Although actual results could differ from these estimates, significant adjustments to these estimates historically have not been required. CASH EQUIVALENTS - ---------------- For purposes of the statements of cash flows, cash equivalents are defined as all highly liquid debt instruments purchased with an initial maturity of three months or less. CONCENTRATIONS OF CREDIT RISK - ----------------------------- Credit limits, ongoing credit evaluation and account monitoring procedures are utilized to minimize the risk of loss. Collateral is generally not required. Expected losses are provided for currently and actual losses have been within management's expectations. INVENTORIES - ----------- Inventories of material, pipe and supplies are valued at average cost. Crude oil and natural gas inventories are stated at average cost. PROPERTY AND EQUIPMENT - ---------------------- The Company utilizes the "successful efforts" method of accounting for its oil and gas properties. Under this method, property acquisition and development costs and certain productive exploration costs are capitalized while non-productive exploration costs, which include certain geological and geophysical costs, dry holes, expired leases and delay rentals, are expensed as incurred. Capitalized costs related to proved properties are depleted using the unit-of-production method. Depreciation, depletion and amortization of proved oil and gas properties is calculated on the basis of estimated recoverable reserve quantities. These estimates can change based on economic or other factors. No gains or losses are recognized upon the disposition of oil and gas properties except in extraordinary F-8 48 transactions. Sales proceeds are credited to the carrying value of the properties. Maintenance and repairs are expensed, and expenditures which enhance the value of properties are capitalized. Additional depreciation, depletion and amortization is recorded to the extent that the aggregate net carrying value of producing oil and gas properties exceeds the corresponding undiscounted future pretax net cash flows relating to estimated proved oil and gas reserves computed in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 69, "Disclosures About Oil and Gas Producing Activities". Unproved oil and gas properties are stated at cost and consist of undeveloped leases. These costs are assessed periodically to determine whether their value has been impaired, and if impairment is indicated, the costs are charged to expense. Gas gathering systems are stated at cost. Depreciation expense is computed using the straight-line method over 15 years. Property, plant and equipment are stated at cost. Depreciation of non-oil and gas properties is computed using the straight-line method over the useful lives of the assets. When assets other than oil and gas properties are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to income as incurred, and significant renewals and betterments are capitalized. NET INCOME PER COMMON SHARE - --------------------------- Net income per common share is computed by subtracting preferred dividends from net income and dividing the difference by the weighted average number of common and common equivalent shares outstanding. Outstanding options and warrants are included in the computation of net income per common share when their effect is dilutive. REVENUE RECOGNITION - ------------------- Oil and gas production revenue is recognized as production and delivery take place. Oil and gas marketing revenues are recognized when title passes. Oilfield sales and service revenues are recognized when the goods or services have been provided. STOCK-BASED COMPENSATION - ------------------------ The Company accounts for stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". INCOME TAXES - ------------ The Company uses the liability method of accounting for income taxes. Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes also are recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future federal income taxes. RECLASSIFICATIONS - ----------------- Certain reclassifications have been made in 1994 and 1993 to conform to the presentation in 1995. F-9 49 (2) CHANGE IN ACCOUNTING PRINCIPLE In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company is required to adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. (3) ACQUISITIONS The following acquisitions were accounted for as purchase business combinations. Accordingly, the results of operations of the acquired businesses are included in the Company's consolidated statements of operations from the date of the respective aquisitions. Effective in July 1995, the Company purchased from Quaker State Corporation most of its oil and gas properties and related assets in the Appalachian Basin (the "Quaker State Properties") for approximately $50 million. The Quaker State Properties included approximately 1,460 gross (1,100 net) wells with estimated proved reserves of 2.2 MMBbl (million barrels) of oil and 46.8 Bcf of gas at December 31, 1994, approximately 250 miles of gas gathering systems, undeveloped oil and gas leases and fee mineral interests covering approximately 250,000 acres, an extensive geologic and geophysical database and other assets. In January 1995, the Company purchased Ward Lake Drilling, Inc. ("Ward Lake"), a privately-held exploration and production company headquartered in Gaylord, Michigan, for $15.1 million. Ward Lake operates and holds a production payment interest and working interests averaging 13.6% in approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula. The purchase also included approximately 5,500 undeveloped leasehold acres that Ward Lake owns in Michigan. At December 31, 1994, the wells had estimated proved developed natural gas reserves totaling 98 Bcf (14 Bcf net to the Company's interest). Approximately one half of the purchase price represented payment for the proved reserves, with the balance associated with other oil and gas and corporate assets. Through the end of 1995, the Company purchased additional working interests averaging 24% in the wells operated by Ward Lake for approximately $12 million. The interests acquired had estimated proved developed reserves of 16 Bcf at December 31, 1994. The production from certain interests qualify for nonconventional fuel source tax credits. In addition, during 1995 the Company in four separate transactions acquired for approximately $29.2 million working interests in oil and gas wells in Michigan, Ohio, Pennsylvania and New York and drilling rights on more than 250,000 acres in Ohio. Estimated proved developed reserves associated with the wells totaled 35 Bcfe of natural gas net to the Company's interest at December 31, 1994. In January 1994, the Company purchased substantially all of TGX Corporation's Appalachian Basin assets for $15.5 million. The assets acquired included 1,034 gross (910 net) gas and oil wells on approximately 121,000 acres located in northeastern Ohio and southwestern New York and 15,000 undeveloped acres and related inventory, real estate and oilfield equipment. At December 31, 1993, the properties acquired had estimated proved reserves of 22.0 Bcf of natural gas and 28,700 Bbls of oil. F-10 50 The following table presents the unaudited pro forma results of operations for the years ended December 31, 1995 and 1994 as if the acquisitions above occurred at the beginning of each period presented.
PRO FORMA -------------------------- 1995 1994 ----------- ----------- (in thousands, except per share data) Total revenues $ 124,854 $ 113,074 Net income 8,532 11,632 Net income per share $ .75 $ 1 .03
(4) DETAILS OF BALANCE SHEETS
DECEMBER 31 --------------------------- 1995 1994 ---------- --------- ACCOUNTS RECEIVABLE (IN THOUSANDS) Accounts receivable $ 16,096 $ 7,399 Allowance for doubtful accounts (269) (170) Oil and gas production receivable 11,610 5,710 Current portion of notes receivable 686 130 ---------- --------- $ 28,123 $ 13,069 ========== ========= INVENTORIES Oil $ 1,574 $ 1,187 Natural gas 170 1,375 Material, pipe and supplies 7,509 4,115 ---------- --------- $ 9,253 $ 6,677 ========== ========= PROPERTY AND EQUIPMENT, GROSS OIL AND GAS PROPERTIES Producing properties $ 214,984 $117,222 Non-producing properties 11,286 5,058 Other 9,074 -- ---------- --------- $ 235,344 $122,280 ========== ========= LAND, BUILDINGS, MACHINERY AND EQUIPMENT Land, buildings and improvements $ 8,748 $ 5,633 Machinery and equipment 21,229 13,931 ---------- --------- $ 29,977 $ 19,564 ========== ========= ACCRUED EXPENSES Accrued expenses $ 9,924 $ 2,775 Accrued drilling and completion costs 4,902 -- Accrued income taxes 15 298 Ad valorem and other taxes 2,162 1,270 Compensation and related benefits 2,147 1,514 Undistributed production revenue 4,661 1,292 ---------- --------- $ 23,811 $ 7,149 ========== =========
F-11 51 (5) LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31 ------------------------- 1995 1994 ----------- --------- (IN THOUSANDS) Revolving line of credit $ 67,000 $ 4,000 Senior notes 35,000 35,000 Convertible subordinated debentures 6,800 7,350 Other 1,871 346 ----------- ----------- 110,671 46,696 Less current portion 1,648 106 ----------- ----------- Long term debt $ 109,023 $ 46,590 =========== ===========
The Company has a $200 million unsecured revolving credit facility with a group of banks that matures on March 31, 1999. Outstanding balances under the facility incurred interest at the Company's choice of either: (1) the one, two, or three-month LIBOR plus 2% (7.66% for the three-month LIBOR interest rate option at December 31, 1995) or (2) the bank's prime rate (8.50% at December 31, 1995). Borrowings under the credit agreement are limited to the borrowing base as established semi-annually by the bank group. The borrowing base at December 31, 1995 was $81 million. When market conditions are favorable, the Company may enter into interest rate swap arrangements, whereby a portion of the Company's floating rate exposure is exchanged for a fixed interest rate. The Company had no such derivative financial instruments at December 31, 1994 or 1995. The Company has $35 million of 7% fixed-rate senior notes outstanding with five insurance companies. These notes, which are interest-only through 1996, mature on September 30, 2005. Equal principal payments of $3,888,888 will be required on each September 30 commencing in 1997. The convertible subordinated debentures have a fixed interest rate of 9.25% and mature on June 30, 2000. The debentures are currently convertible by the debenture holders at the rate of one share of the Company's common stock for each $20.15 of principal. The debt agreements contain various covenants restricting payment of dividends on common stock to $5 million plus 50% of cumulative net income, restricting sales of assets to 15% of shareholders' equity in any one year and requiring the maintenance of certain levels of net worth, working capital and other financial ratios. At December 31, 1995, the aggregate long-term debt maturing in the next five years is as follows: $1,648,000 (1996); $3,918,000 (1997); $3,907,000 (1998); $70,907,000 (1999); $10,707,000 (2000) and $19,584,000 (2001 and thereafter). The fair value of long-term debt approximated its carrying value at December 31, 1995. (6) LEASES The Company leases certain computer equipment, vehicles and office space under noncancelable agreements with lease periods of one to five years. Rent expense amounted to approximately $1.4 F-12 52 million, $742,000 and $1.1 million for the years ended December 31, 1995, 1994, and 1993, respectively. Future commitments under leasing arrangements were not significant at December 31, 1995. (7) SHAREHOLDERS' EQUITY In August 1995, the Company sold 4,025,000 shares of common stock. Net proceeds, after deducting underwriting discounts and expenses, totaled approximately $55.6 million. Approximately $50 million of the net proceeds were used to purchase the Quaker State Properties, and the remaining proceeds were used to reduce the outstanding balance under the Company's revolving credit agreement. In December 1995, the Company awarded 26,085 shares of common stock to employees as profit sharing and bonuses. These shares were issued in January 1996. Outstanding warrants for the purchase of 13,801 shares of the Company's common stock at a price of $21.74 per share are exercisable by the holder in whole or part any time prior to February 15, 1997. On December 31, 1992, the Company issued 24,000 shares of Class II Serial Preferred Stock with a stated value of $100 per share. In preference to shares of common stock, each share is entitled to cumulative cash dividends of $7.50 per year, payable quarterly. The Preferred Stock is subject to redemption at $100 per share at any time by the Company and is convertible into common stock, at the holder's election, at any time after five years from the date of issuance at a conversion price of $15.00 per common share. Holders of the Preferred Stock are entitled to one vote per preferred share. The Company has reserved a total of 511,110 shares of common stock for the conversion of the convertible subordinated debentures and the Class II Serial Preferred Stock and the exercise of the outstanding warrants referred to above. In May 1993, the Company sold 3,450,000 shares of common stock in a public offering. Net proceeds to the Company after underwriting discounts and offering costs were approximately $42.2 million. In August 1995, May 1994 and March 1993, non-statutory stock options to purchase 250,000, 183,000 and 87,000 common shares, respectively, of the Company's stock were granted to certain executive officers and employees under the Company's Stock Option Plan. The exercise price of options may not be less than the fair market value of a share of common stock on the date of grant. Options expire on the tenth anniversary of the grant date unless cessation of employment causes earlier termination. The options become exercisable in 25% increments over a four-year period beginning one year from date of grant. As of December 31, 1995, there were 551,000 shares available for grant under the Plan. On May 27, 1994, the shareholders approved the Non-Employee Directors Stock Option Plan. In May 1995, May 1994 and March 1993 non-statutory stock options to purchase 10,000, 10,000 and 8,000 common shares, respectively, of the Company's stock were granted under the Plan. Additional options for 2,000 shares will be granted each year to each non-employee director. The exercise price of options under the Plan is equal to the fair market value on the date of grant. Options expire on the tenth anniversary of the grant date. The options become exercisable on the anniversary of the grant date at a rate of one third of the shares each year. As of December 31, 1995, there were 92,000 shares available for grant under the Plan. F-13 53 As of December 31, 1995, there were 544,750 options outstanding under the two plans, of which 95,580 were exercisable at prices ranging from $10.00 to $16.375. The Company's Articles of Incorporation include certain anti-takeover provisions. The provisions grant the Board of Directors the authority to issue and fix the terms of preferred stock as well as the ability to take certain other actions that could have the effect of discouraging unsolicited takeover attempts. In addition, the Company has entered into contracts with its officers that provide for severance payments, in certain circumstances, in the event that their employment is terminated following a change in control. The senior notes may, at the noteholder's discretion, be accelerated and become due and payable upon a change in control of the Company. (8) RESTRICTED STOCK GRANT AND BONUS PLAN In 1992, Henry S. Belden IV (HSB IV) contributed a total of 119,600 shares of the Company's common stock to fund the Company's Restricted Stock Grant and Bonus Plan, as amended (the "Plan"). The shares contributed by HSB IV were used to make restricted stock grant and bonus awards to employees of the Company. The shares of common stock awarded to an employee under the Plan are fully paid and nonassessable and are represented by a certificate or certificates registered in the employee's name. The employee has all the rights of a shareholder with respect to such shares, including the right to vote the shares and receive all dividends paid with respect to such shares. Certain shares awarded are subject to forfeiture and to restrictions prohibiting their sale, transfer, pledge or other disposition until the restrictions are released. Such shares are released from such restrictions at the rate of 25% for each full year of employment completed by the employee after the date of the award and are fully vested after four full years of continued employment, except that the shares will immediately vest and be released from restrictions in the event of the death, retirement at normal retirement age or permanent disability of the employee. The employee will forfeit all rights to shares not previously released from restrictions in the event of the termination of his or her employment with the Company for any reason other than death, retirement at normal retirement age or permanent disability or in the event of a change in control of the Company. The ownership of all forfeited shares shall revert to HSB IV or his estate. Unearned compensation was charged for the market value of the restricted shares on the date of grant and is amortized over the restricted period. The unamortized portion of unearned compensation is presented as a reduction of shareholders' equity in the accompanying consolidated balance sheet. F-14 54 (9) INCOME TAXES The provision for income taxes on income from continuing operations in the Consolidated Statements of Operations includes the following:
YEAR ENDED DECEMBER 31 ------------------------------------ 1995 1994 1993 ------- ------- ------- (IN THOUSANDS) CURRENT Federal $ 1,103 $ 454 $ 276 State 111 190 159 ------- ------- ------- 1,214 644 435 DEFERRED Federal 826 1,539 1,367 State 110 147 195 ------- ------- ------- 936 1,686 1,562 ------- ------- ------- TOTAL $ 2,150 $ 2,330 $ 1,997 ======= ======= =======
The effective tax rate for continuing operations differs from the U.S. federal statutory tax rate, as follows:
YEAR ENDED DECEMBER 31 ---------------------------------------- 1995 1994 1993 -------- ------- -------- Statutory federal income tax rate 34.0 % 34.0 % 34.0 % Increases (reductions) in taxes resulting from: State income taxes, net of federal tax benefit 1.7 3.4 4.4 Nonconventional fuel source tax credits (10.0) -- -- Statutory depletion (.3) (2.3) -- Other, net .2 .7 (.5) -------- ------- -------- Effective income tax rate for the year 25.6 % 35.8 % 37.9 % ======== ======= ========
F-15 55 Significant components of the Company's deferred income tax liabilities and assets are as follows:
DECEMBER 31 ------------------------------- 1995 1994 ----------- ------------ (IN THOUSANDS) Deferred income tax liabilities: Property and equipment, net $ 10,891 $ 9,860 Other, net 155 213 ----------- ------------ Total deferred income tax liabilities 11,046 10,073 Deferred income tax assets: Accrued expenses 1,984 1,559 Inventories 212 217 Net operating loss carryforwards 966 1,580 Tax credit carryforwards 2,263 1,356 Other, net 182 410 ----------- ------------ Total deferred income tax assets 5,607 5,122 ----------- ------------ Net deferred income tax liability $ 5,439 $ 4,951 =========== ============ Long-term liability $ 7,693 $ 6,692 Current asset (2,254) (1,741) ----------- ------------ Net deferred income tax liability $ 5,439 $ 4,951 =========== ============
At December 31, 1995, the Company had approximately $2,600,000 of net operating loss carryforwards available for federal income tax reporting purposes. Substantially all of the net operating loss carryforwards are limited as to their annual utilization as a result of prior ownership changes. The net operating loss carryforwards, if unused, will expire from 2000 to 2009. The Company has alternative minimum tax credit carryforwards of approximately $2,263,000 which have no expiration date. (10) RETIREMENT PLANS The Company has a 401(k) salary reduction plan covering substantially all of the employees of the Company. Under the plan, an amount equal to 2% of participants' compensation is contributed by the Company to the plan each year. Eligible employees may also make voluntary plan contributions which the Company matches $.25 for every $1.00 contributed up to 6% of an employee's annual compensation. Retirement plan expense for the years ended December 31, 1995, 1994 and 1993 was $372,213, $286,446 and $251,305, respectively. The Company established non-qualified deferred compensation plans in 1994 which permit certain key employees and directors to elect to defer a portion of their compensation. (11) COMMITMENTS AND CONTINGENCIES The Company is involved in various legal actions arising in the normal course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial position of the Company. The Company has a claim in the Columbia Gas Transmission Corporation ("Columbia") bankruptcy reorganization proceedings arising from the rejection of certain contracts for the purchase of F-16 56 natural gas. In Columbia's Amended Plan of Reorganization dated April 17, 1995, Columbia scheduled proposed allowed amounts for the Company of approximately $2 million. The anticipated payout amount currently stated in Columbia's reorganization plan is approximately sixty-eight (68%) of such proposed allowed amount. In the third quarter of 1995 the Company recognized $1.3 million of these anticipated proceeds. The amount is included in "Interest and other" revenues. The Company believes that Columbia's proposed allowed amount is inadequate and intends to pursue the recovery of a greater amount from Columbia and anticipates hearings with respect to its claims to take place during 1996, but the amount of any additional recovery is not presently determinable. (12) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
YEAR ENDED DECEMBER 31 ---------------------------------- 1995 1994 1993 -------- -------- --------- (IN THOUSANDS) CASH PAID DURING THE YEAR FOR: Interest $ 5,592 $ 3,146 $ 3,207 Income taxes 1,296 90 776 NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of assets in exchange for long-term liabilities $ 8,460 $ 527 $ 1,006 Acquisition of assets in exchange for stock -- 388 1,680 Sale of assets in exchange for note receivable -- 689 --
(13) SUPPLEMENTARY INFORMATION ON OIL AND GAS ACTIVITIES The following disclosures of costs incurred related to oil and gas activities are presented in accordance with SFAS No. 69.
YEAR ENDED DECEMBER 31 ------------------------------------------------- 1995 1994 1993 ------------ ----------- ------------ (IN THOUSANDS) Acquisition costs Proved properties $ 79,464 $ 20,274 $ 3,883 Unproved properties 4,705 1,744 622 Developmental costs 19,906 9,142 6,365 Exploratory costs 4,968 2,130 1,895
PROVED OIL AND GAS RESERVES (UNAUDITED) The Company's proved developed and undeveloped reserves are all located within the United States. Proved undeveloped reserves have been included beginning in 1993. The Company cautions that there are many uncertainties inherent in estimating proved reserve quantities and in projecting future production rates and the timing of development expenditures. In addition, estimates of new discoveries are more imprecise than those of properties with a production history. Accordingly, these estimates are expected to change as future information becomes available. Material revisions of reserve estimates may occur in the future, development and production of the oil and gas reserves may not occur in the periods assumed, and actual prices realized and actual costs incurred may vary significantly from those used. Proved reserves represent estimated quantities of natural gas, crude oil and condensate that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions existing at the time the estimates were made. F-17 57 Proved developed reserves are proved reserves expected to be recovered through wells and equipment in place and under operating methods being utilized at the time the estimates were made. The estimates of proved developed reserves have been reviewed by independent petroleum engineers. The estimates of proved undeveloped reserves were prepared by the Company's petroleum engineers. The following table sets forth changes in estimated proved and proved developed reserves for the three years ended December 31, 1995.
OIL GAS (BBL) (MCF) --------- ----------- DECEMBER 31, 1992 4,163,023 79,158,001 Inclusion of proved undeveloped reserves 388,342 19,687,024 Extensions and discoveries 182,957 5,198,126 Purchase of reserves in place 119,216 4,121,079 Sales of reserves in place (52,072) (9,557) Revisions of previous estimates (815,743) (6,516,472) Production (452,844) (7,373,252) --------- ----------- DECEMBER 31, 1993 3,532,879 94,264,949 Extensions and discoveries 242,365 8,554,382 Purchase of reserves in place 222,981 26,876,534 Sale of reserves in place (11,178) (1,022,027) Revisions of previous estimates 622,462 3,880,633 Production (496,039) (9,562,862) --------- ----------- DECEMBER 31, 1994 4,113,470 122,991,609 Extensions and discoveries 229,957 22,287,564 Purchase of reserves in place 2,197,414 111,360,991 Sale of reserves in place (28,693) (278,013) Revisions of previous estimates 326,771 (419) Production (555,913) (16,961,424) --------- ----------- DECEMBER 31, 1995 6,283,006 239,400,308 ========= =========== PROVED DEVELOPED RESERVES December 31, 1993 3,144,537 74,577,925 ========= =========== December 31, 1994 3,714,671 101,355,451 ========= =========== December 31, 1995 5,592,579 206,998,924 ========= ===========
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (UNAUDITED) The following tables, which present a standardized measure of discounted future net cash flows and changes therein relating to proved oil and gas reserves, are presented pursuant to SFAS No. 69. In computing this data, assumptions other than those required by the FASB could produce different results. Accordingly, the data should not be construed as representative of the fair market value of the Company's proved oil and gas reserves. The following assumptions have been made: - Future revenues were based on year-end oil and gas prices. Future price changes were included only to the extent provided by existing contractual agreements. F-18 58 - Production and development costs were computed using year-end costs assuming no change in present economic conditions. - Future net cash flows were discounted at an annual rate of 10%. - Future income taxes were computed using the approximate statutory tax rate and giving effect to available net operating losses, tax credits and statutory depletion. The standardized measure of discounted future net cash flows relating to proved oil and gas reserves is presented below:
DECEMBER 31 ------------------------------------------- 1995 1994 1993 ----------- ---------- ---------- (IN THOUSANDS) Estimated future cash inflows (outflows) Revenues from the sale of oil and gas $ 679,286 $ 395,610 $ 315,271 Production and development costs (293,601) (165,766) (132,314) ----------- ---------- ---------- Future net cash flows before income taxes 385,685 229,844 182,957 Future income taxes (80,715) (54,762) (39,956) ----------- ---------- ---------- Future net cash flows 304,970 175,082 143,001 10% timing discount (134,053) (85,228) (71,915) ----------- ---------- ---------- Standardized measure of discounted future net cash flows $ 170,917 $ 89,854 $ 71,086 =========== ========== ==========
The principal sources of changes in the standardized measure of future net cash flows are as follows:
YEAR ENDED DECEMBER 31 ----------------------------------------- 1995 1994 1993 --------- -------- -------- (IN THOUSANDS) Beginning of year $ 89,854 $ 71,086 $ 76,540 Sale of oil and gas, net of production costs (32,874) (23,287) (19,451) Extensions and discoveries, less related estimated future development and production costs 24,441 14,317 9,668 Purchase of reserves in place less estimated future production costs 104,270 20,715 4,807 Sale of reserves in place less estimated future production costs (329) (635) (180) Revisions of previous quantity estimates 1,129 4,972 (9,773) Inclusion of proved undeveloped reserves -- -- 6,611 Net changes in prices and production costs (4,723) 94 (2,564) Change in income taxes (17,756) (8,852) (4,443) Accretion of 10% timing discount 11,647 8,944 9,087 Changes in production rates (timing) and other (4,742) 2,500 784 --------- -------- -------- End of year $ 170,917 $ 89,854 $ 71,086 ========= ======== ========
F-19 59 (14) INDUSTRY SEGMENT FINANCIAL INFORMATION The table below presents certain financial information regarding the Company's industry segments of its continuing operations. Intersegment sales are billed on an intercompany basis at prices for comparable third party goods and services.
1995 1994 1993 ----------- ---------- ---------- (IN THOUSANDS) REVENUES Oil and gas operations $ 88,632 $ 65,646 $ 61,340 Oilfield sales and service 25,178 17,360 14,158 Intersegment sales (5,112) (4,203) (3,271) ----------- ---------- ---------- $ 108,698 $ 78,803 $ 72,227 =========== ========== ========== OPERATING INCOME Oil and gas operations $ 12,444 $ 9,104 $ 7,645 Oilfield sales and service 673 350 157 ----------- ---------- ---------- $ 13,117 $ 9,454 $ 7,802 =========== ========== ========== IDENTIFIABLE ASSETS Oil and gas operations $ 274,021 $ 132,538 $ 128,353 Oilfield sales and service 20,348 12,408 6,821 ----------- ---------- ---------- $ 294,369 $ 144,946 $ 135,174 =========== ========== ========== DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE Oil and gas operations $ 18,729 $ 11,343 $ 9,316 Oilfield sales and service 988 543 377 ----------- ---------- ---------- $ 19,717 $ 11,886 $ 9,693 =========== ========== ========== CAPITAL EXPENDITURES Oil and gas operations $ 129,219 $ 33,956 $ 15,977 Oilfield sales and service 4,735 3,391 1,015 ----------- ---------- ---------- $ 133,954 $ 37,347 $ 16,992 =========== ========== ==========
Oil and gas sales and gas marketing and gathering revenue from one customer that exceeded 10% of total consolidated revenue during the year ended December 31, 1995 amounted to $11,111,822. Oil and gas sales and gas marketing and gathering revenue from one customer that exceeded 10% of total consolidated revenue during the years ended December 31, 1994 and 1993 amounted to $9,600,612 and $8,616,069, respectively. F-20 60 (15) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The results of operations for the four quarters of 1995 and 1994 are shown below.
FIRST SECOND THIRD FOURTH ------------ ---------- ---------- ---------- 1995 (IN THOUSANDS, EXCEPT PER SHARE DATA) ----- Sales and other operating $ 20,872 $ 22,063 $ 30,566 $ 35,197 revenues Gross profit 3,250 3,865 5,178 5,288 Net income 739 916 1,155 2,311 Net income per common share .10 .12 .11 .20 1994 ---- Sales and other operating revenues $ 20,079 $ 19,311 $ 20,365 $ 19,048 Gross profit 3,074 3,829 3,415 3,102 Net income 807 1,105 1,080 851 Net income per common share .11 .15 .15 .11
Income tax expense in the fourth quarter of 1995 was reduced by approximately $600,000 to record the reduction of the effective tax rate for the first nine months of 1995 as a result of the recognition of nonconventional fuel source tax credits. During the third quarter of 1995 the Company recorded a loss (net of tax benefit) of approximately $678,000 from discontinued operations (see note 16). Sales and gross profit from all prior quarters presented have been restated to reflect the discontinued operations. (16) DISCONTINUED OPERATIONS During September, 1995 the Company announced plans to sell Engine Power Systems, Inc. (EPS), its wholly-owned subsidiary engaged in engine sales and system packaging for power generation and compression applications. The Company is actively seeking a buyer for EPS and expects to complete the sale of this business in 1996. The results of operations of EPS have been presented as discontinued operations in the accompanying financial statements for all periods presented. Net revenues generated by EPS were approximately $4,173,000 in 1995, $3,742,000 in 1994 and $225,000 in 1993. The remaining net assets of EPS were approximately $2,100,000 at December 31, 1995.
DECEMBER 31 ------------------------------------ 1995 1994 1993 -------- -------- ------- (IN THOUSANDS) Loss from operations of discontinued $ (760) $ (509) $ (68) business Income tax benefit 268 172 23 -------- -------- ------- (492) (337) (45) Estimated loss on disposal (1,001) -- -- Income tax benefit 354 -- -- -------- -------- ------- (647) -- -- -------- -------- ------- LOSS FROM DISCONTINUED OPERATIONS $ (1,139) $ (337) $ (45) ======== ======== =======
F-21 61 (17) SUBSEQUENT EVENTS In February 1996, the Company sold or agreed to sell certain interests that qualify for the nonconventional fuel source tax credit . The interests were sold for approximately $750,000 in cash and a volumetric production payment under which 100% of the cash flow from the properties will go to the Company until approximately 11.7 Bcf of gas has been produced and sold. In addition to receiving 100% of the cash flow from the properties, the Company will receive quarterly payments based on production from the interests. The Company has the option to repurchase the interests at a future date. F-22 EX-4.2.B 2 EXHIBIT 4.2(B) 1 FIRST AMENDMENT TO CREDIT AGREEMENT AMONG BELDEN & BLAKE CORPORATION, THE CANTON OIL & GAS COMPANY, PEAKE ENERGY, INC., BANK ONE, TEXAS, NATIONAL ASSOCIATION AND NBD BANK, N.A. EFFECTIVE AS OF AUGUST 1, 1994 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . 1 1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . 1 1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . 1 1.3 References . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 Articles and Sections . . . . . . . . . . . . . . . . . . 2 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . 2 2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . 2 2.2 Amendment of Section 2.7(a) . . . . . . . . . . . . . . . 2 2.3 Amendment of Section 4.17 . . . . . . . . . . . . . . . . 3 2.4 Amendment of Section 9.3 . . . . . . . . . . . . . . . . . 3 2.5 Deletion of Peake Operating as Borrower . . . . . . . . . 3 ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 3 3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . 3 3.2 No Material Adverse Change . . . . . . . . . . . . . . . . 4 3.3 No Default or Event of Default . . . . . . . . . . . . . . 4 3.4 Accuracy of Representations and Warranties . . . . . . . . 4 3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . 4 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 4 ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 5 6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . 5 6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . 5 6.3 Successors and Assigns; Rights of Third Parties . . . . . 5 6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 5 6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 5 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . 6 6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . 6 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . 6
-i- 3 FIRST AMENDMENT TO CREDIT AGREEMENT ----------------------------------- This FIRST AMENDMENT TO CREDIT AGREEMENT (this "FIRST AMENDMENT") is made and entered into effective as of August 1, 1994, by and among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE ENERGY;" with BBC and COG each a "BORROWER" and collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK ONE"), and NBD BANK, N.A., a national banking association ("NBD;" with Bank One, together with each financial institution that becomes a party hereto or entitled to benefits and subject to obligations hereunder subsequent to the date hereof, each a "LENDER" and collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as agent for the Lenders (in such capacity and together with any successors designated pursuant hereto, the "AGENT"). W I T N E S S E T H: ------------------- WHEREAS, the above named parties did execute and exchange counterparts of the Credit Agreement dated November 15, 1993 (the "AGREEMENT"), pursuant to which the Lenders have extended credit to the Borrowers; and WHEREAS, the parties to the Agreement desire to amend the Agreement in the particulars hereinafter set forth; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth in this First Amendment and the Agreement, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS AND INTERPRETATION ------------------------------ 1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT," "AGREEMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG," "FIRST AMENDMENT," "LENDER," "LENDERS," "NBD," and "PEAKE ENERGY" shall have the meaning assigned to such term hereinabove. 1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the Agreement shall have the meaning assigned to such term in the Agreement, unless expressly provided herein to the contrary. 1.3 REFERENCES. References in this First Amendment to Article or Section numbers shall be to Articles and Sections of this First Amendment, unless expressly stated to the contrary. References in this First Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder" 4 shall be to this First Amendment in its entirety and not only to the particular Article or Section in which such reference appears. 1.4 ARTICLES AND SECTIONS. This First Amendment, for convenience only, has been divided into Articles and Sections and it is understood that the rights, powers, privileges, duties, and other legal relations of the parties hereto shall be determined from this First Amendment as an entirety and without regard to such division into Articles and Sections and without regard to headings prefixed to such Articles and Sections. 1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made to the single number shall be understood to include the plural and likewise the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine and neuter, when such construction is appropriate, and specific enumeration shall not exclude the general, but shall be construed as cumulative. Definitions of terms defined in the singular and plural shall be equally applicable to the plural or singular, as the case may be. ARTICLE II ---------- AMENDMENT OF AGREEMENT ---------------------- Each of the Borrowers, the Lenders, and the Agent hereby amend the Agreement in the following particulars, effective as of and after the effective date of this First Amendment: 2.1 AMENDMENT OF SECTION 1.2. Terms defined in Section 1.1 are hereby incorporated into or substituted for, as the case may be, the definitions contained in Section 1.2 of the Agreement. In addition, the following definitions of Section 1.2 of the Agreement are hereby amended to read as follows: "COMMITMENT AMOUNT" shall mean the amount of $30,000,000 or such higher amount as determined by the Lenders from time to time, which higher amount shall become effective upon written notification thereof to the Borrowers from the Lenders. "COMMITMENT TERMINATION DATE" shall mean March 31, 1998. 2.2 AMENDMENT OF SECTION 2.7(a). Section 2.7(a) of the Agreement is hereby amended to read as follows: "(a) The Borrowing Base as of August 1, 1994 is acknowledged by each Borrower and each Lender to be $65,000,000." 2 5 2.3 AMENDMENT OF SECTION 4.17. The first and third sentences of Section 4.17 of the Agreement are hereby amended to read as follows: "BBC has no Subsidiaries as of the date of the First Amendment to this Agreement except for COG, Peake Energy, and Engine Power Systems, Inc., an Ohio corporation." "Peake Energy has no Subsidiaries as of the date of the First Amendment to this Agreement." 2.4 AMENDMENT OF SECTION 9.3. Section 9.3(a), (b), and (c) are hereby amended to read as follows: "(a) If to Bank One or the Agent, to: BANK ONE, TEXAS, NATIONAL ASSOCIATION 910 Travis, 6th Floor Houston, Texas 77002 Attention: Mr. Richard G. Sylvan Telecopy: (713) 751-3544 (b) if to NBD, to: NBD BANK, N.A. 611 Woodward Avenue Detroit, Michigan 48226 Attention: Mr. Joseph Giampetroni Telecopy: (313) 225-2649 (c) if to any Borrower, to: BELDEN & BLAKE CORPORATION 5200 Stoneham Road North Canton, Ohio 44720-1543 Attention: J.M. Vitale Telecopy: (216) 497-5463" 2.5 DELETION OF PEAKE OPERATING AS BORROWER. All references in the Agreement to Peake Operating are hereby deleted. ARTICLE III ----------- CONDITIONS ---------- The obligations of the Lenders and the Agent to enter into this First Amendment are subject to the fulfillment of the following conditions precedent, with all documents to be delivered to the Agent to be in form and substance satisfactory to the Lenders: 3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the following: 3 6 (a) this First Amendment, duly executed by each Borrower; (b) an extension fee, payable in immediately available funds, in the amount of $75,000; (c) a Notice of Final Agreement; and (d) such other agreements, documents, items, instruments, opinions, certificates, waivers, consents, and evidence as the Agent may reasonably request on its own behalf or on behalf of any Lender. 3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required Lenders, no material adverse change shall have occurred in the property, business, operations, conditions (financial or otherwise) or prospects of any Borrower since the date of the last Financial Statements delivered to the Lenders. 3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing. 3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties contained in Article IV of the Agreement, as amended hereby, and in any other Loan Document, as each has been supplemented, if applicable, shall be true and correct in all material respects, except as affected by the transactions contemplated in the Agreement and this First Amendment. 3.5 ADDITIONAL MATTERS. All matters incident to the consummation of the transactions contemplated hereby shall be satisfactory to the Required Lenders. ARTICLE IV ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ Each of the Borrowers hereby expressly remakes, in favor of the Lenders and the Agent, all of the representations and warranties set forth in Article IV of the Agreement, as amended hereby, and in any other Loan Document, and represents and warrants that all such representations and warranties, as each has been supplemented, if applicable, remain true and unbreached in all material respects, except as affected by the transactions contemplated in the Agreement and this First Amendment and except for such representations and warranties which may be limited to the date made. 4 7 ARTICLE V --------- RATIFICATION ------------ Each of the parties hereto does hereby adopt, ratify, and confirm the Agreement and each other Loan Document to which it is a party, in all things in accordance with the terms and provisions thereof, as amended by this First Amendment. ARTICLE VI ---------- MISCELLANEOUS ------------- 6.1 SCOPE OF AMENDMENT. The scope of this First Amendment is expressly limited to the matters addressed herein and this First Amendment shall not operate as a waiver of any past, present, or future breach, Default, or Event of Default under the Agreement, except to the extent, if any, that any such breach, Default, or Event of Default is remedied by the effect of this First Amendment. 6.2 AGREEMENT AS AMENDED. All references to the Agreement in any document heretofore or hereafter executed in connection with the transactions contemplated in the Agreement shall be deemed to refer to the Agreement as amended by this First Amendment. 6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All covenants and agreements by each of the Borrowers in this First Amendment shall be binding upon such Borrower and its legal representatives, successors, and assigns and shall inure to the benefit of the Agent and each of the Lenders and their legal representatives, successors, and assigns. All provisions of this First Amendment, the Agreement, and the other Loan Documents are imposed solely and exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No other Person shall have standing to require satisfaction of such provisions in accordance with their terms, and any or all of such provisions may, subject to the provisions of Section 9.9 of the Agreement as to the rights of the Lenders, be freely waived in whole or in part by the Agent at any time if in its sole discretion it deems it advisable to do so. 6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute, acknowledge, and deliver, at any time as requested by the Agent, such other documents and instruments as the Required Lenders shall deem necessary in their sole discretion to fulfill the terms of the Agreement, as amended hereby, including, without limitation, modifications of and amendments to any of the Loan Documents. 6.5 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). 5 8 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS FIRST ------------------------------------ AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS WRITTEN FIRST AMENDMENT, THE AGREEMENT, AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS ---------------------- WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION. 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. ---------------------------------------------------- EACH OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS FIRST AMENDMENT. 6 9 Executed effective as of the 1st day of August, 1994. BORROWERS: BELDEN & BLAKE CORPORATION By: /s/ Ronald E. Huff ---------------------------------- Printed Name: Ronald E. Huff ------------------------ Title: Senior Vice President ------------------------------- THE CANTON OIL & GAS COMPANY By: /s/ Ronald E. Huff ---------------------------------- Printed Name: Ronald E. Huff ------------------------ Title: Senior Vice President ------------------------------- PEAKE ENERGY, INC. By: /s/ Ronald E. Huff ---------------------------------- Printed Name: Ronald E. Huff ------------------------ Title: Senior Vice President ------------------------------- AGENT AND LENDER: BANK ONE, TEXAS, NATIONAL ASSOCIATION By: /s/ Beth Hunter ---------------------------------- Printed Name: Elizabeth Hunter ------------------------ Title: Vice President ------------------------------- LENDER: NBD BANK, N.A. By: /s/ J.C. Giampetroni ---------------------------------- Printed Name: J.C. Giampetroni ------------------------ Title: Second Vice President ------------------------------- 7 EX-4.2.C 3 EXHIBIT 4.2(C) 1 FIRST AMENDMENT TO CREDIT AGREEMENT AMONG BELDEN & BLAKE CORPORATION, THE CANTON OIL & GAS COMPANY, PEAKE ENERGY, INC., BANK ONE, TEXAS, NATIONAL ASSOCIATION AND NBD BANK, N.A. EFFECTIVE AS OF AUGUST 1, 1994 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . 1 1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . 1 1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . 1 1.3 References . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 Articles and Sections . . . . . . . . . . . . . . . . . . 2 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . 2 2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . 2 2.2 Amendment of Section 2.7(a) . . . . . . . . . . . . . . . 2 2.3 Amendment of Section 4.17 . . . . . . . . . . . . . . . . 3 2.4 Amendment of Section 9.3 . . . . . . . . . . . . . . . . . 3 2.5 Deletion of Peake Operating as Borrower . . . . . . . . . 3 ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 3 3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . 3 3.2 No Material Adverse Change . . . . . . . . . . . . . . . . 4 3.3 No Default or Event of Default . . . . . . . . . . . . . . 4 3.4 Accuracy of Representations and Warranties . . . . . . . . 4 3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . 4 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 4 ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 5 6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . 5 6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . 5 6.3 Successors and Assigns; Rights of Third Parties . . . . . 5 6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 5 6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 5 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . 6 6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . 6 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . 6
-i- 3 FIRST AMENDMENT TO CREDIT AGREEMENT ----------------------------------- This FIRST AMENDMENT TO CREDIT AGREEMENT (this "FIRST AMENDMENT") is made and entered into effective as of August 1, 1994, by and among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE ENERGY;" with BBC and COG each a "BORROWER" and collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK ONE"), and NBD BANK, N.A., a national banking association ("NBD;" with Bank One, together with each financial institution that becomes a party hereto or entitled to benefits and subject to obligations hereunder subsequent to the date hereof, each a "LENDER" and collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as agent for the Lenders (in such capacity and together with any successors designated pursuant hereto, the "AGENT"). W I T N E S S E T H: ------------------- WHEREAS, the above named parties did execute and exchange counterparts of the Credit Agreement dated November 15, 1993 (the "AGREEMENT"), pursuant to which the Lenders have extended credit to the Borrowers; and WHEREAS, the parties to the Agreement desire to amend the Agreement in the particulars hereinafter set forth; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth in this First Amendment and the Agreement, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS AND INTERPRETATION ------------------------------ 1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT," "AGREEMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG," "FIRST AMENDMENT," "LENDER," "LENDERS," "NBD," and "PEAKE ENERGY" shall have the meaning assigned to such term hereinabove. 1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the Agreement shall have the meaning assigned to such term in the Agreement, unless expressly provided herein to the contrary. 1.3 REFERENCES. References in this First Amendment to Article or Section numbers shall be to Articles and Sections of this First Amendment, unless expressly stated to the contrary. References in this First Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder" 4 shall be to this First Amendment in its entirety and not only to the particular Article or Section in which such reference appears. 1.4 ARTICLES AND SECTIONS. This First Amendment, for convenience only, has been divided into Articles and Sections and it is understood that the rights, powers, privileges, duties, and other legal relations of the parties hereto shall be determined from this First Amendment as an entirety and without regard to such division into Articles and Sections and without regard to headings prefixed to such Articles and Sections. 1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made to the single number shall be understood to include the plural and likewise the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine and neuter, when such construction is appropriate, and specific enumeration shall not exclude the general, but shall be construed as cumulative. Definitions of terms defined in the singular and plural shall be equally applicable to the plural or singular, as the case may be. ARTICLE II ---------- AMENDMENT OF AGREEMENT ---------------------- Each of the Borrowers, the Lenders, and the Agent hereby amend the Agreement in the following particulars, effective as of and after the effective date of this First Amendment: 2.1 AMENDMENT OF SECTION 1.2. Terms defined in Section 1.1 are hereby incorporated into or substituted for, as the case may be, the definitions contained in Section 1.2 of the Agreement. In addition, the following definitions of Section 1.2 of the Agreement are hereby amended to read as follows: "COMMITMENT AMOUNT" shall mean the amount of $30,000,000 or such higher amount as determined by the Lenders from time to time, which higher amount shall become effective upon written notification thereof to the Borrowers from the Lenders. "COMMITMENT TERMINATION DATE" shall mean March 31, 1998. 2.2 AMENDMENT OF SECTION 2.7(a). Section 2.7(a) of the Agreement is hereby amended to read as follows: "(a) The Borrowing Base as of August 1, 1994 is acknowledged by each Borrower and each Lender to be $65,000,000." 2 5 2.3 AMENDMENT OF SECTION 4.17. The first and third sentences of Section 4.17 of the Agreement are hereby amended to read as follows: "BBC has no Subsidiaries as of the date of the First Amendment to this Agreement except for COG, Peake Energy, and Engine Power Systems, Inc., an Ohio corporation." "Peake Energy has no Subsidiaries as of the date of the First Amendment to this Agreement." 2.4 AMENDMENT OF SECTION 9.3. Section 9.3(a), (b), and (c) are hereby amended to read as follows: "(a) If to Bank One or the Agent, to: BANK ONE, TEXAS, NATIONAL ASSOCIATION 910 Travis, 6th Floor Houston, Texas 77002 Attention: Mr. Richard G. Sylvan Telecopy: (713) 751-3544 (b) if to NBD, to: NBD BANK, N.A. 611 Woodward Avenue Detroit, Michigan 48226 Attention: Mr. Joseph Giampetroni Telecopy: (313) 225-2649 (c) if to any Borrower, to: BELDEN & BLAKE CORPORATION 5200 Stoneham Road North Canton, Ohio 44720-1543 Attention: J.M. Vitale Telecopy: (216) 497-5463" 2.5 DELETION OF PEAKE OPERATING AS BORROWER. All references in the Agreement to Peake Operating are hereby deleted. ARTICLE III ----------- CONDITIONS ---------- The obligations of the Lenders and the Agent to enter into this First Amendment are subject to the fulfillment of the following conditions precedent, with all documents to be delivered to the Agent to be in form and substance satisfactory to the Lenders: 3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the following: 3 6 (a) this First Amendment, duly executed by each Borrower; (b) an extension fee, payable in immediately available funds, in the amount of $75,000; (c) a Notice of Final Agreement; and (d) such other agreements, documents, items, instruments, opinions, certificates, waivers, consents, and evidence as the Agent may reasonably request on its own behalf or on behalf of any Lender. 3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required Lenders, no material adverse change shall have occurred in the property, business, operations, conditions (financial or otherwise) or prospects of any Borrower since the date of the last Financial Statements delivered to the Lenders. 3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing. 3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties contained in Article IV of the Agreement, as amended hereby, and in any other Loan Document, as each has been supplemented, if applicable, shall be true and correct in all material respects, except as affected by the transactions contemplated in the Agreement and this First Amendment. 3.5 ADDITIONAL MATTERS. All matters incident to the consummation of the transactions contemplated hereby shall be satisfactory to the Required Lenders. ARTICLE IV ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ Each of the Borrowers hereby expressly remakes, in favor of the Lenders and the Agent, all of the representations and warranties set forth in Article IV of the Agreement, as amended hereby, and in any other Loan Document, and represents and warrants that all such representations and warranties, as each has been supplemented, if applicable, remain true and unbreached in all material respects, except as affected by the transactions contemplated in the Agreement and this First Amendment and except for such representations and warranties which may be limited to the date made. 4 7 ARTICLE V --------- RATIFICATION ------------ Each of the parties hereto does hereby adopt, ratify, and confirm the Agreement and each other Loan Document to which it is a party, in all things in accordance with the terms and provisions thereof, as amended by this First Amendment. ARTICLE VI ---------- MISCELLANEOUS ------------- 6.1 SCOPE OF AMENDMENT. The scope of this First Amendment is expressly limited to the matters addressed herein and this First Amendment shall not operate as a waiver of any past, present, or future breach, Default, or Event of Default under the Agreement, except to the extent, if any, that any such breach, Default, or Event of Default is remedied by the effect of this First Amendment. 6.2 AGREEMENT AS AMENDED. All references to the Agreement in any document heretofore or hereafter executed in connection with the transactions contemplated in the Agreement shall be deemed to refer to the Agreement as amended by this First Amendment. 6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All covenants and agreements by each of the Borrowers in this First Amendment shall be binding upon such Borrower and its legal representatives, successors, and assigns and shall inure to the benefit of the Agent and each of the Lenders and their legal representatives, successors, and assigns. All provisions of this First Amendment, the Agreement, and the other Loan Documents are imposed solely and exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No other Person shall have standing to require satisfaction of such provisions in accordance with their terms, and any or all of such provisions may, subject to the provisions of Section 9.9 of the Agreement as to the rights of the Lenders, be freely waived in whole or in part by the Agent at any time if in its sole discretion it deems it advisable to do so. 6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute, acknowledge, and deliver, at any time as requested by the Agent, such other documents and instruments as the Required Lenders shall deem necessary in their sole discretion to fulfill the terms of the Agreement, as amended hereby, including, without limitation, modifications of and amendments to any of the Loan Documents. 6.5 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). 5 8 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS FIRST ------------------------------------ AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS WRITTEN FIRST AMENDMENT, THE AGREEMENT, AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS ---------------------- WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION. 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. ---------------------------------------------------- EACH OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS FIRST AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS FIRST AMENDMENT. 6 9 Executed effective as of the 1st day of August, 1994. BORROWERS: BELDEN & BLAKE CORPORATION By: /s/ Ronald E. Huff ---------------------------------- Printed Name: Ronald E. Huff ------------------------ Title: Senior Vice President ------------------------------- THE CANTON OIL & GAS COMPANY By: /s/ Ronald E. Huff ---------------------------------- Printed Name: Ronald E. Huff ------------------------ Title: Senior Vice President ------------------------------- PEAKE ENERGY, INC. By: /s/ Ronald E. Huff ---------------------------------- Printed Name: Ronald E. Huff ------------------------ Title: Senior Vice President ------------------------------- AGENT AND LENDER: BANK ONE, TEXAS, NATIONAL ASSOCIATION By: /s/ Beth Hunter ---------------------------------- Printed Name: Elizabeth Hunter ------------------------ Title: Vice President ------------------------------- LENDER: NBD BANK, N.A. By: /s/ J.C. Giampetroni ---------------------------------- Printed Name: J.C. Giampetroni ------------------------ Title: Second Vice President ------------------------------- 7 10 - ------------------------------------------------------------------------------- SECOND AMENDMENT TO CREDIT AGREEMENT AMONG BELDEN & BLAKE CORPORATION, THE CANTON OIL & GAS COMPANY, PEAKE ENERGY, INC., WARD LAKE DRILLING, INC., BANK ONE, TEXAS, NATIONAL ASSOCIATION AND NBD BANK, N.A. EFFECTIVE AS OF MARCH 29, 1995 - ------------------------------------------------------------------------------- 11 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . 1 1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Articles and Sections . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Amendment of Section 2.3 . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Amendment of Section 2.9 . . . . . . . . . . . . . . . . . . . . . . . . 4 2.4 Amendment of Section 2.17 . . . . . . . . . . . . . . . . . . . . . . . 5 2.5 Addition of Section 2.22 . . . . . . . . . . . . . . . . . . . . . . . . 6 2.6 Addition of Section 2.23 . . . . . . . . . . . . . . . . . . . . . . . . 8 2.7 Addition of Section 2.24 . . . . . . . . . . . . . . . . . . . . . . . . 8 2.8 Addition of Section 3.3 . . . . . . . . . . . . . . . . . . . . . . . . 9 2.9 Amendment of Section 4.17 . . . . . . . . . . . . . . . . . . . . . . . 10 2.10 Addition of Section 5.16 . . . . . . . . . . . . . . . . . . . . . . . . 10 2.11 Amendment of Section 7.1 . . . . . . . . . . . . . . . . . . . . . . . . 11 2.12 Addition of Ward Lake . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 12 3.3 No Default or Event of Default . . . . . . . . . . . . . . . . . . . . . 12 3.4 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 12 3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.3 Successors and Assigns; Rights of Third Parties . . . . . . . . . . . . . 13 6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . 14 6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . . . . . . . . 14
-i- 12 SECOND AMENDMENT TO CREDIT AGREEMENT ------------------------------------ This SECOND AMENDMENT TO CREDIT AGREEMENT (this "SECOND AMENDMENT") is made and entered into effective as of March 29, 1995, by and among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE ENERGY"), WARD LAKE DRILLING, INC., a Michigan corporation ("WARD LAKE;" with BBC, COG and Peake Energy each a "BORROWER" and collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK ONE"), and NBD BANK, N.A., a national banking association ("NBD;" with Bank One, together with each financial institution that becomes a party hereto or entitled to benefits and subject to obligations hereunder subsequent to the date hereof, each a "LENDER" and collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as agent for the Lenders (in such capacity and together with any successors designated pursuant hereto, the "AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, BBC, COG, Peake Energy, Peake Operating Company, and the Lenders did execute and exchange counterparts of the Credit Agreement dated November 15, 1993, as amended by the First Amendment to Credit Agreement dated August 1, 1994, by and among BBC, COG, Peake Energy, and the Lenders (collectively, the "AGREEMENT"), pursuant to which the Lenders have extended credit to the Borrowers; and WHEREAS, the parties to the Agreement desire to amend the Agreement in the particulars hereinafter set forth; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth in this Second Amendment and the Agreement, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS AND INTERPRETATION ------------------------------ 1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT," "AGREEMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG," "LENDER," "LENDERS," "NBD," "PEAKE ENERGY," "SECOND AMENDMENT," and "WARD LAKE" shall have the meaning assigned to such term hereinabove. 1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the Agreement shall have the meaning assigned to such term in the Agreement, unless expressly provided herein to the contrary. 13 1.3 REFERENCES. References in this Second Amendment to Article or Section numbers shall be to Articles and Sections of this Second Amendment, unless expressly stated to the contrary. References in this Second Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder" shall be to this Second Amendment in its entirety and not only to the particular Article or Section in which such reference appears. 1.4 ARTICLES AND SECTIONS. This Second Amendment, for convenience only, has been divided into Articles and Sections and it is understood that the rights, powers, privileges, duties, and other legal relations of the parties hereto shall be determined from this Second Amendment as an entirety and without regard to such division into Articles and Sections and without regard to headings prefixed to such Articles and Sections. 1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made to the single number shall be understood to include the plural and likewise the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine and neuter, when such construction is appropriate, and specific enumeration shall not exclude the general, but shall be construed as cumulative. Definitions of terms defined in the singular and plural shall be equally applicable to the plural or singular, as the case may be. ARTICLE II ---------- AMENDMENT OF AGREEMENT ---------------------- Each of the Borrowers, the Lenders, and the Agent hereby amend the Agreement in the following particulars, effective as of and after the effective date of this Second Amendment: 2.1 AMENDMENT OF SECTION 1.2. Section 1.2 of the Agreement is amended as follows: (a) The following definitions are hereby amended to read as follows: "AVAILABLE COMMITMENT" shall mean, at any time, an amount equal to the remainder, if any, of (a) the lesser of the Commitment Amount or the Borrowing Base in effect at such time MINUS (b) the sum of the Loan Balance at such time plus the L/C Exposure at such time. "COMMITMENT" shall mean the obligation of each Lender, subject to applicable provisions of this Agreement, to make Loans to or for the benefit of the Borrowers pursuant to Section 2.1 in an amount up to the Commitment Percentage of such Lender and the obligations 2 14 of the Agent to issue and the Lenders to participate in Letters of Credit pursuant to Section 2.22. "LOAN" shall mean any loan made by any Lender to or for the benefit of the Borrowers pursuant to this Agreement and any Letter of Credit Payment. "LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Intercreditor Agreement, the Letter of Credit Applications, the Letters of Credit, and all other documents and instruments now or hereafter delivered pursuant to the terms of or in connection with this Agreement, the Notes, the Intercreditor Agreement, the Letter of Credit Applications, or the Letters of Credit, and all renewals and extensions of, amendments and supplements to, and restatements of, any or all of the foregoing from time to time in effect. "NOTES" shall mean the promissory notes of the Borrowers to each Lender evidencing Indebtedness with respect to Loans made by such Lender to the Borrowers, each in the form attached to the Second Amendment to this Agreement as Exhibit A, with appropriate insertions, together with any and all renewals, extensions for any period, increases and rearrangements thereof. "OBLIGATIONS" shall mean, without duplication, (a) all Indebtedness evidenced by the Notes, (b) the obligation of the Borrowers to provide to or reimburse the Agent, as the issuer of Letters of Credit, or the Lenders, as the case may be, for, amounts payable, paid, or incurred with respect to Letters of Credit, (c) the undrawn, unexpired amount of all outstanding Letters of Credit, (d) the obligation of the Borrowers for the payment of Commitment Fees, Engineering Fees, and Facility Fees, and (e) all other obligations and liabilities of the Borrowers to the Agent and the Lenders, now existing or hereafter incurred, under, arising out of or in connection with any Loan Document, together with all interest accruing thereon and costs, expenses, and attorneys' fees incurred in the enforcement or collection thereof, whether such obligations and liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and 3 15 several, and with respect to any of the foregoing that includes or refers to the payment of amounts deemed or constituting interest, only so much thereof as shall have accrued, been earned and which remains unpaid at each relevant time of determination. (b) The following definitions are hereby added to read as follows: "L/C EXPOSURE" shall mean, at any time, the aggregate maximum amount available to be drawn under outstanding Letters of Credit at such time. "LETTER OF CREDIT" shall mean any standby letter of credit issued for the account of any Borrower pursuant to Section 2.22. "LETTER OF CREDIT APPLICATION" shall mean the standard letter of credit application employed by the Agent, as the issuer of the Letters of Credit, from time to time in connection with letters of credit. "LETTER OF CREDIT PAYMENT" shall mean any payment made by the Agent on behalf of the Lenders under a Letter of Credit, to the extent that such payment has not been repaid by the Borrowers. 2.2 AMENDMENT OF SECTION 2.3. Section 2.3 of the Agreement is hereby amended to read as follows: "2.3 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. (a) Proceeds of all Loans shall be used by the Borrowers solely for the acquisition and development of Oil and Gas Properties, the acquisition of businesses or assets related to the oil and gas business of any Borrower, and to provide general working capital. (b) Letters of Credit shall be used solely for general corporate purposes; provided, however, no Letter of Credit may be used in lieu of or in support of stay or appeal bonds." 2.3 AMENDMENT OF SECTION 2.9. Section 2.9 of the Agreement is hereby amended in its entirety to read as follows: "2.9 MANDATORY PREPAYMENTS. If at any time (a) the sum of the Loan Balance and the L/C Exposure exceeds the lesser of the Commitment Amount or the Borrowing Base then in effect or (b) the sum of the Loan Balance, the L/C Exposure, and the outstanding principal balance of 4 16 the Senior Notes exceeds the Borrowing Base then in effect, the Borrowers shall, within 30 Business Days of notice from the Agent of such occurrence, prepay, or make arrangements acceptable to the Required Lenders for the prepayment of, the amount of such excess for application on the Loan Balance. In the event that a mandatory prepayment is required under this Section and the Loan Balance is less than the amount required to be prepaid, the Borrowers shall repay the entire Loan Balance and, in accordance with the provisions of the relevant Letter of Credit Applications executed by the Borrowers or otherwise to the satisfaction of the Agent, deposit with the Agent, as additional collateral securing the Obligations, an amount of cash, in immediately available funds, equal to the L/C Exposure minus the lesser of the Commitment Amount or the Borrowing Base. The cash deposited with the Agent in satisfaction of the requirement provided in this Section may be invested, at the sole discretion of the Agent and then only at the express direction of the Borrowers as to investment vehicle and maturity (which shall be no later than the latest expiry date of any then outstanding Letter of Credit), for the account of the Borrowers in cash or cash equivalent investments offered by or through the Agent." 2.4 AMENDMENT OF SECTION 2.17. Section 2.17 of the Agreement is amended as follows: (a) The first sentence of Section 2.17(d) is hereby amended to read as follows: "(d) Determinations by any Lender or the Agent, as the case may be, for purposes of this Section of the effect of any Regulatory Change on capital maintained, its costs or rate of return, maintaining Loans, issuing Letters of Credit, its obligation to make Loans and issue Letters of Credit, or on amounts receivable by it in respect of Loans, Letters of Credit, or such obligations, and the additional amounts required to compensate such Lender or the Agent under this Section shall be conclusive, absent manifest error, provided that such determinations are made on a reasonable basis." (b) A new subsection (e) is hereby added to read as follows: "(e) Without limiting the effect of the other provisions of this Section (but without duplication), in the event that any Requirement of Law or Regulatory Change or the compliance by the Agent or any Lender 5 17 therewith shall (i) impose, modify, or hold applicable any reserve, special deposit, or similar requirement against any Letter of Credit or obligation to issue Letters of Credit, or (ii) impose upon the Agent or such Lender any other condition regarding any Letter of Credit or obligation to issue Letters of Credit, and the result of any such event shall be to increase the cost to the Agent or such Lender of issuing or maintaining any Letter of Credit or obligation to issue Letters of Credit or any liability with respect to Letter of Credit Payments, or to reduce any amount receivable in connection therewith, then upon demand by the Agent or such Lender, as the case may be, the Borrowers shall pay to the Agent or such Lender, from time to time as specified by the Agent or such Lender, additional amounts which shall be sufficient to compensate the Agent or such Lender for such increased cost or reduced amount receivable." 2.5 ADDITION OF SECTION 2.22. A new Section 2.22 is hereby added to the Agreement to read as follows: "2.22 LETTER OF CREDIT FACILITY. (a) Upon the terms and conditions and relying on the representations and warranties contained in this Agreement, the Agent, as issuing bank for the Lenders, agrees, from the date of this Agreement until the date which is thirty days prior to the Commitment Termination Date, to issue on behalf of the Lenders in their respective Commitment Percentages Letters of Credit for the account of the Borrowers or any of them and to renew and extend such Letters of Credit. Letters of Credit shall be issued, renewed, or extended from time to time on any Business Day designated by the applicable Borrower following the receipt in accordance with the terms hereof by the Agent of the written (or oral, confirmed promptly in writing) request by a Responsible Officer of such Borrower therefor and a Letter of Credit Application. Letters of Credit shall be issued in such amounts as such Borrower may request; provided, however, that (i) no Letter of Credit shall have an expiration date which is more than 24 months after the issuance thereof or subsequent to five days prior to the Commitment Termination Date, (ii) the Loan Balance plus the L/C Exposure shall not exceed at any time the lesser of the Commitment Amount or the Borrowing Base, and (iii) the L/C Exposure shall not exceed at any time $5,000,000. (b) Prior to any Letter of Credit Payment in respect of any Letter of Credit, each Lender shall be 6 18 deemed to be a participant through the Agent with respect to the relevant Letter of Credit in the obligation of the Agent, as the issuer of such Letter of Credit, in an amount equal to the Percentage Share of such Lender of the maximum amount which is or at any time may become available to be drawn thereunder. Upon delivery by such Lender of funds requested pursuant to Section 2.22(c), such Lender shall be treated as having purchased a participating interest in an amount equal to such funds delivered by such Lender to the Agent in the obligation of the Borrowers to reimburse the Agent, as the issuer of such Letter of Credit, for any amounts payable, paid, or incurred by the Agent, as the issuer of such Letter of Credit, with respect to such Letter of Credit. (c) Each Lender shall be unconditionally and irrevocably liable, without regard to the occurrence of any Default or Event of Default, to the extent of the Commitment Percentage of such Lender at the time of issuance of each Letter of Credit, to reimburse, on demand, the Agent, as the issuer of such Letter of Credit, for the amount of each Letter of Credit Payment under such Letter of Credit. Each Letter of Credit Payment shall be deemed to be a Floating Rate Loan by each Lender to the extent of funds delivered by such Lender to the Agent with respect to such Letter of Credit Payment and shall to such extent be deemed a Floating Rate Loan under and shall be evidenced by the Note of such Lender and shall be payable by the Borrowers upon demand by the Agent. (d) EACH LENDER AGREES TO INDEMNIFY THE AGENT, AS THE ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWERS TO DO SO), RATABLY ACCORDING TO THE COMMITMENT PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, 7 19 ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION 2.5(d) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT." 2.6 ADDITION OF SECTION 2.23. A new Section 2.23 is hereby added to the Agreement to read as follows: "2.23 LETTER OF CREDIT FEE. The Borrowers shall pay to the Agent for the Ratable Benefit of the Lenders, in immediately available funds, a letter of credit fee in the amount of the greater of (a) one percent (1%) per annum, calculated on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day), on the average daily amount of the L/C Exposure or (b) $500.00. Accrued letter of credit fees shall be payable on the first day of July, 1995, the first day of each third calendar month thereafter during the Commitment Period, and on the Commitment Termination Date. The Borrowers also agree to pay on demand to the Agent for its own account as the issuer of the Letters of Credit its customary letter of credit transactional fees, including, without limitation, amendment fees, payable with respect to each Letter of Credit." 2.7 ADDITION OF SECTION 2.24. A new Section 2.24 is hereby added to the Agreement to read as follows: "2.24 OBLIGATIONS ABSOLUTE. Subject to the further provisions of this Section, the Obligations of the Borrowers under this Article shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim, or defense to payment or performance which the Borrowers or any of them may have or have had against the Agent, any Lender, or any beneficiary of any Letter of Credit. Each Borrower agrees that none of the Agent or the Lenders shall be responsible for, nor shall the Obligations be affected by, among other things, (a) the validity or genuineness of documents or any endorsements thereon presented in connection with any Letter of Credit, even if such 8 20 documents shall in fact prove to be in any and all respects invalid, fraudulent or forged, AND EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY LENDER, so long as the Agent, as the issuer of such Letter of Credit, has no actual knowledge of any such invalidity, lack of genuineness, fraud, or forgery prior to the presentment for payment of a corresponding Letter of Credit or any draft thereunder; provided, however, with respect to the preceding matters in this Section, the Agent, as the issuer of the Letters of Credit, agrees to exercise ordinary care in examining each document required to be presented pursuant to each Letter of Credit to ascertain that each such document appears on its face to comply with the terms thereof, or (b) any dispute between or among the Borrowers or any of them and any beneficiary of any Letter of Credit or any other party to which any Letter of Credit may be transferred, or any claims whatsoever of the Borrowers or any of them against any beneficiary of any Letter of Credit or any such transferee, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY LENDER; provided, in all respects, that the Agent, as the issuer of Letters of Credit, shall be liable to the Borrowers to the extent, but only to the extent, of any direct, as opposed to consequential or punitive, damages suffered by the Borrowers as a result of the willful misconduct or gross negligence of the Agent as the issuer of Letters of Credit in determining whether documents presented under a Letter of Credit complied with the terms of such Letter of Credit that resulted in either a wrongful payment under such Letter of Credit or a wrongful dishonor of a claim or draft properly presented under such Letter of Credit. In theabsence of gross negligence or willful misconduct by the Agent as the issuer of Letters of Credit, the Agent shall not be liable for any error, omission, interruption or delay, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT, in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Agent, the Lenders, and the Borrowers agree that any action taken or omitted by the Agent, as issuer of any Letter of Credit, under or in connection with any Letter of Credit or the related drafts or documents, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY LENDER, if done in the absence of gross negligence or willful misconduct, shall be binding as among the Agent, as issuer of such Letter of Credit or otherwise, the Lenders, and the Borrowers and shall not put the Agent, as issuer of such Letter of Credit or otherwise, or any Lender under any liability to the Borrowers." 2.8 ADDITION OF SECTION 3.3. A new Section 3.3 is hereby added to the Agreement to read as follows: 9 21 "3.3 CONDITIONS PRECEDENT TO ISSUANCE OF LETTERS OF CREDIT. The obligation of the Agent, as the issuer of the Letters of Credit, to issue, renew, or extend any Letter of Credit is subject to the satisfaction of the following additional conditions precedent: (a) the Borrowers shall have delivered to the Agent a written (or oral, confirmed promptly in writing) request for the issuance, renewal, or extension of a Letter of Credit at least three Business Days prior to the requested issuance, renewal, or extension date and a Letter of Credit Application at least one Business Day prior to the requested issuance date; and each statement or certification made in such Letter of Credit Application shall be true and correct in all material respects on the requested date for the issuance of such Letter of Credit; (b) no Default or Event of Default shall exist or will occur as a result of the issuance, renewal, or extension of such Letter of Credit; and (c) the terms, provisions, and beneficiary of the Letter of Credit or such renewal or extension shall be satisfactory to the Agent, as the issuer of the Letters of Credit, in its sole discretion." 2.9 AMENDMENT OF SECTION 4.17. Section 4.17 of the Agreement is hereby amended in its entirety to read as follows: "4.17 SUBSIDIARIES. As of the date of the Second Amendment to this Agreement, (a) BBC has no Subsidiaries except for COG, Peake Energy, Ward Lake, and Engine Power Systems, Inc., an Ohio Corporation; (b) COG has no Subsidiaries except for Target Oilfield Pipe & Supply Company, Belden & Blake (U.K.) Inc., and Belden & Blake Securities, Inc., all Ohio corporations; and (c) neither Peake Energy nor Ward Lake has any Subsidiaries. All Subsidiaries mentioned herein are wholly-owned Subsidiaries of the relevant Person." 2.10 ADDITION OF SECTION 5.16. Section 5.16 of the Agreement is hereby amended in its entirety to read as follows: "5.16 INDEMNIFICATION OF LENDERS AND AGENT. INDEMNIFY AND ------------------------------------ HOLD EACH LENDER AND THE AGENT AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (EACH SUCH PERSON AN "INDEMNITEE") HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, 10 22 JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES AND DISBURSEMENTS) INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN ANY WAY CONNECTED WITH, OR AS A RESULT OF (A) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, (B) THE PERFORMANCE BY THE PARTIES TO THE LOAN DOCUMENTS OF THEIR RESPECTIVE OBLIGATIONS THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, (C) THE USE OF LOANS BY THE BORROWERS, (D) ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A WRONGFUL DISHONOR BY THE AGENT OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR (E) THE ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY MATTER ARISING BY REASON OF ANY DEFENSE, SET-OFF, COUNTERCLAIM, RECOUPMENT, OR REDUCTION OF LIABILITY WHATSOEVER OF THE OBLIGOR UNDER ANY CONTRACT, AGREEMENT, INTEREST, OR OBLIGATION WHICH GIVES RISE TO ANY ACCOUNT AS THE RESULT OF A BREACH BY THE PERSON OF ANY OBLIGATION THEREUNDER OR OF ANY OTHER AGREEMENT, INDEBTEDNESS, OR LIABILITY AT ANY TIME OWING TO OR IN FAVOR OF ANY SUCH OBLIGOR FROM SUCH PERSON, SUCH OBLIGATIONS OF SUCH PERSON BEING ENFORCEABLE AGAINST AND ONLY AGAINST SUCH PERSON AND NOT AGAINST ANY LENDER OR THE AGENT (ALL THE FOREGOING IN THIS SECTION, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"), INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE AGENT OR ANY LENDER OR ANY OF THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES; PROVIDED THAT SUCH PERSON SHALL HAVE NO OBLIGATION UNDER THIS SECTION TO ANY INDEMNITEE WITH RESPECT TO INDEMNIFIED LIABILITIES THAT ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR FROM THE BREACH BY SUCH INDEMNITEE OF ITS OBLIGATIONS UNDER ANY LOAN DOCUMENT. THE OBLIGATIONS OF EACH PERSON UNDER THIS SECTION SHALL SURVIVE THE SATISFACTION OF ALL OBLIGATIONS, THE TERMINATION OF THE COMMITMENT, AND THE NONASSUMPTION OF THIS AGREEMENT IN A CASE COMMENCED UNDER TITLE 11 OF THE UNITED STATES CODE OR OTHER SIMILAR LAW OF THE UNITED STATES, THE STATE OF TEXAS, OR ANY OTHER JURISDICTION AND BE BINDING UPON SUCH PERSON AND ANY TRUSTEE, RECEIVER OR LIQUIDATOR OF SUCH PERSON APPOINTED IN ANY SUCH CASE." 2.11 AMENDMENT OF SECTION 7.1. Section 7.1(g) of the Agreement is hereby amended in its entirety to read as follows: "(g) the Borrowers shall be unable to satisfy any condition or cure any circumstance specified in Article III, the satisfaction or curing of which is precedent to the right of the Borrowers to receive a Loan or the 11 23 issuance of a Letter of Credit, and such inability shall continue for a period in excess of 30 days." 2.12 ADDITION OF WARD LAKE. Ward Lake is hereby added for all purposes as a Borrower under the Agreement and all references to a Borrower or the Borrowers in any document heretofore or hereafter executed in connection with the transactions contemplated in the Ageement shall be deemed to refer to and include Ward Lake. ARTICLE III ----------- CONDITIONS ---------- The obligations of the Lenders and the Agent to enter into this Second Amendment are subject to the fulfillment of the following conditions precedent, with all documents to be delivered to the Agent to be in form and substance satisfactory to the Lenders: 3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the following: (a) this Second Amendment, duly executed by each Borrower; (b) the Notes; (c) a Letter of Credit Application and Letter of Credit Fees; (d) a Notice of Final Agreement; and (e) such other agreements, documents, items, instruments, opinions, certificates, waivers, consents, and evidence as the Agent may reasonably request on its own behalf or on behalf of any Lender. 3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required Lenders, no material adverse change shall have occurred in the property, business, operations, conditions (financial or otherwise) or prospects of any Borrower since the date of the last Financial Statements delivered to the Lenders. 3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing. 3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties contained in Article IV of the Agreement, as amended hereby, and in any other Loan Document, as each has been supplemented, if applicable, shall be true and correct in all material respects, except as affected by the transactions contemplated in the Agreement and this Second Amendment. 12 24 3.5 ADDITIONAL MATTERS. All matters incident to the consummation of the transactions contemplated hereby shall be satisfactory to the Required Lenders. ARTICLE IV ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ Each of the Borrowers hereby expressly remakes, in favor of the Lenders and the Agent, all of the representations and warranties set forth in Article IV of the Agreement, as amended hereby, and in any other Loan Document, and represents and warrants that all such representations and warranties, as each has been supplemented, if applicable, remain true and unbreached in all material respects, except as affected by the transactions contemplated in the Agreement and this Second Amendment and except for such representations and warranties which may be limited to the date made. ARTICLE V --------- RATIFICATION ------------ Each of the parties hereto does hereby adopt, ratify, and confirm the Agreement and each other Loan Document to which it is a party, in all things in accordance with the terms and provisions thereof, as amended by this Second Amendment. ARTICLE VI ---------- MISCELLANEOUS ------------- 6.1 SCOPE OF AMENDMENT. The scope of this Second Amendment is expressly limited to the matters addressed herein and this Second Amendment shall not operate as a waiver of any past, present, or future breach, Default, or Event of Default under the Agreement, except to the extent, if any, that any such breach, Default, or Event of Default is remedied by the effect of this Second Amendment. 6.2 AGREEMENT AS AMENDED. All references to the Agreement in any document heretofore or hereafter executed in connection with the transactions contemplated in the Agreement shall be deemed to refer to the Agreement as amended by this Second Amendment. 6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All covenants and agreements by each of the Borrowers in this Second Amendment shall be binding upon such Borrower and its legal representatives, successors, and assigns and shall inure to the benefit of the Agent and each of the Lenders and their legal representatives, successors, and assigns. All provisions of this 13 25 Second Amendment, the Agreement, and the other Loan Documents are imposed solely and exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No other Person shall have standing to require satisfaction of such provisions in accordance with their terms, and any or all of such provisions may, subject to the provisions of Section 9.9 of the Agreement as to the rights of the Lenders, be freely waived in whole or in part by the Agent at any time if in its sole discretion it deems it advisable to do so. 6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute, acknowledge, and deliver, at any time as requested by the Agent, such other documents and instruments as the Required Lenders shall deem necessary in their sole discretion to fulfill the terms of the Agreement, as amended hereby, including, without limitation, modifications of and amendments to any of the Loan Documents. 6.5 GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE DEEMED TO BE ------------- A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS SECOND ------------------------------------ AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS WRITTEN SECOND AMENDMENT, THE AGREEMENT, AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH ---------------------- RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS SECOND AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION. 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. EACH --------------------------------------------------- OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS SECOND AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS SECOND AMENDMENT, THE 14 26 AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS SECOND AMENDMENT. Executed effective as of the 29th day of March, 1995. BORROWERS: BELDEN & BLAKE CORPORATION By: /s/ H.S. Belden IV --------------------------------- Printed Name: H.S. Belden IV ----------------------- Title: Chief Executive Officer ------------------------------ THE CANTON OIL & GAS COMPANY By: /s/ H.S. Belden IV --------------------------------- Printed Name: H.S. Belden IV ----------------------- Title: Chief Executive Officer ------------------------------ PEAKE ENERGY, INC. By: /s/ H.S. Belden IV --------------------------------- Printed Name: H.S. Belden IV ----------------------- Title: Chief Executive Officer ------------------------------ WARD LAKE DRILLING, INC. By: /s/ R.L. Clements --------------------------------- Printed Name: R.L. Clements ----------------------- Title: Chief Executive Officer ------------------------------ (Signatures Continued on Next Page) 15 27 AGENT AND LENDER: BANK ONE, TEXAS, NATIONAL ASSOCIATION By: /s/ Beth Hunter --------------------------------- Printed Name: Elizabeth W. Hunter ----------------------- Title: Vice President ------------------------------ LENDER: NBD BANK, N.A. By: /s/ Joseph C. Giempetroni --------------------------------- Printed Name: Joseph C. Giempetroni ----------------------- Title: Vice President ------------------------------ 16 28 EXHIBIT A --------- FORM OF NOTES ------------- $[__________] Houston, Texas March 29, 1995 FOR VALUE RECEIVED, the undersigned (whether one or more, "MAKER") promise to pay to the order of [______________________________] ("PAYEE"), at its banking quarters in [_______], [______] County, [_____], the sum of [_____] MILLION DOLLARS ($[_________]), or so much thereof as may be advanced against this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker, Payee, and others (as amended, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), together with interest at the rate and calculated as provided in the Credit Agreement. The indebtedness evidenced by this Note, both principal and interest, is payable as provided in the Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any part of this Note without the payment of any premium or fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment as it becomes due of any payment on this Note provided for in the Credit Agreement. This Note is issued pursuant to, is a "Note" under, and is entitled to all benefits of, the Credit Agreement; and reference is made to the Credit Agreement for matters governed thereby, including, without limitation, certain events which will entitle the holder hereof to accelerate the maturity of all amounts due hereon. This Note is issued, in whole or in part, in renewal and extension, but not in novation or discharge, of the remaining principal balance of that certain Promissory Note dated November 15, 1993, in the original principal amount of $[__________], executed by Belden & Blake Corporation, The Canton Oil & Gas Company, Peake Energy, Inc., and Peake Operating Company and payable to the order of Payee. THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL ----------------- ----------- STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT - --------- LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE. BELDEN & BLAKE CORPORATION By:_______________________________ Printed Name:_____________________ Title:____________________________ A-i 29 THE CANTON OIL & GAS COMPANY By:_______________________________ Printed Name:_____________________ Title:____________________________ PEAKE ENERGY, INC. By:_______________________________ Printed Name:_____________________ Title:____________________________ WARD LAKE DRILLING, INC. By:_______________________________ Printed Name:_____________________ Title:____________________________ A-ii EX-4.2.D 4 EXHIBIT 4.2(D) 1 - -------------------------------------------------------------------------------- THIRD AMENDMENT TO CREDIT AGREEMENT AMONG BELDEN & BLAKE CORPORATION, THE CANTON OIL & GAS COMPANY, PEAKE ENERGY, INC., WARD LAKE DRILLING, INC., BANK ONE, TEXAS, NATIONAL ASSOCIATION AND NBD BANK EFFECTIVE AS OF MAY 25, 1995 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . 1 1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . 1 1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . 1 1.3 References . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Articles and Sections . . . . . . . . . . . . . . . . . . 2 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . 2 2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . 2 2.2 Amendment of Section 2.1 . . . . . . . . . . . . . . . . . 4 2.3 Amendment of Section 2.3 . . . . . . . . . . . . . . . . . 6 2.4 Amendment of Section 2.5 . . . . . . . . . . . . . . . . . 6 2.5 Amendment of Section 2.7 . . . . . . . . . . . . . . . . . 6 2.6 Amendment of Section 2.9 . . . . . . . . . . . . . . . . . 7 2.7 Amendment of Section 2.11 . . . . . . . . . . . . . . . . 8 2.8 Amendment of Section 2.13 . . . . . . . . . . . . . . . . 8 ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . 9 3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . 9 3.2 No Material Adverse Change . . . . . . . . . . . . . . . . 9 3.3 No Default or Event of Default . . . . . . . . . . . . . . 9 3.4 Accuracy of Representations and Warranties . . . . . . . . 9 3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 10 ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 10 6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . 10 6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . 10 6.3 Successors and Assigns; Rights of Third Parties . . . . . 10 6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 11 6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 11 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . 11 6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . 11 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . 11
-i- 3 THIRD AMENDMENT TO CREDIT AGREEMENT ----------------------------------- This THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and entered into effective as of May 25, 1995, by and among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE ENERGY"), WARD LAKE DRILLING, INC., a Michigan corporation ("WARD LAKE;" with BBC, COG and Peake Energy each a "BORROWER" and collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK ONE"), and NBD BANK, a Michigan banking corporation, formerly known as NBD Bank, N.A., a national banking association ("NBD;" with Bank One, together with each financial institution that becomes a party hereto or entitled to benefits and subject to obligations hereunder subsequent to the date hereof, each a "LENDER" and collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as agent for the Lenders (in such capacity and together with any successors designated pursuant hereto, the "AGENT"). W I T N E S S E T H: ------------------- WHEREAS, BBC, COG, Peake Energy, Peake Operating Company, and the Lenders did execute and exchange counterparts of the Credit Agreement dated November 15, 1993, as amended by the First Amendment to Credit Agreement dated August 1, 1994, by and among BBC, COG, Peake Energy, and the Lenders and the Second Amendment to Credit Agreement dated as of March 29, 1995, by and among the parties hereto (collectively, the "AGREEMENT"), pursuant to which the Lenders have extended credit to the Borrowers; and WHEREAS, the parties to the Agreement desire to amend the Agreement in the particulars hereinafter set forth; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth in this Amendment and the Agreement, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS AND INTERPRETATION ------------------------------ 1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT," "AGREEMENT," "AMENDMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG," "LENDER," "LENDERS," "NBD," "PEAKE ENERGY," and "WARD LAKE" shall have the meaning assigned to such term hereinabove. 1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the Agreement shall have the meaning assigned to such term in the Agreement, unless expressly provided herein to the contrary. 4 1.3 REFERENCES. References in this Amendment to Article or Section numbers shall be to Articles and Sections of this Amendment, unless expressly stated to the contrary. References in this Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder" shall be to this Amendment in its entirety and not only to the particular Article or Section in which such reference appears. 1.4 ARTICLES AND SECTIONS. This Amendment, for convenience only, has been divided into Articles and Sections and it is understood that the rights, powers, privileges, duties, and other legal relations of the parties hereto shall be determined from this Amendment as an entirety and without regard to such division into Articles and Sections and without regard to headings prefixed to such Articles and Sections. 1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made to the single number shall be understood to include the plural and likewise the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine and neuter, when such construction is appropriate, and specific enumeration shall not exclude the general, but shall be construed as cumulative. Definitions of terms defined in the singular and plural shall be equally applicable to the plural or singular, as the case may be. ARTICLE II ---------- AMENDMENT OF AGREEMENT ---------------------- Each of the Borrowers, the Lenders, and the Agent hereby amend the Agreement in the following particulars, effective as of and after the effective date of this Amendment: 2.1 AMENDMENT OF SECTION 1.2. Section 1.2 of the Agreement is amended as follows: (a) The following definitions are hereby amended to read as follows: "ADJUSTED LIBO RATE" shall mean, for any LIBO Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the sum of the LIBO Rate for such Loan PLUS the Applicable Margin for such Loan, but in no event exceeding the Highest Lawful Rate. "BORROWING BASE" shall mean, at any time, the sum of the Tranche A Borrowing Base then in effect and the Tranche B Borrowing Base then in effect. 2 5 "COMMITMENT AMOUNT" shall mean the sum of the Tranche A Commitment Amount and the Tranche B Commitment Amount. "COMMITMENT TERMINATION DATE" shall mean March 31, 1999. "FLOATING RATE" shall mean, for any Floating Rate Loan, an interest rate per annum equal to the Base Rate from time to time in effect, plus the Applicable Margin for such Loan, but in no event exceeding the Highest Lawful Rate. "NOTES" shall mean the promissory notes of the Borrowers to each Lender evidencing Indebtedness with respect to Loans made by such Lender to the Borrowers, each in the form attached to the Third Amendment to this Agreement as Exhibit A, with appropriate insertions, together with any and all renewals, extensions for any period, increases and rearrangements thereof. (b) The following definitions are hereby added to read as follows: "APPLICABLE MARGIN" shall mean (a) as to each Floating Rate Loan which is (i) a Tranche A Loan, one-fourth percent (1/4%), except (A) if any Indebtedness is outstanding as a Tranche B Loan, the margin shall be one-half percent (1/2%) and (B) if all Tranche B Loans have been repaid and/or the Lenders have no further obligation to make Tranche B Loans, the margin shall be zero or (ii) a Tranche B Loan, one percent (1%) or (b) as to each LIBO Rate Loan which is (i) a Tranche A Loan, two percent (2%), except that if any Indebtedness is outstanding as a Tranche B Loan or the Lenders have any obligation to make Tranche B Loans, the margin shall be two and one-half percent (2-1/2%), or (ii) a Tranche B Loan, three percent (3%). "QUAKER STATE PROPERTIES" shall mean the Oil and Gas Properties to be acquired by BBC pursuant to that certain Purchase and Sale Agreement by and between BBC, Quaker State Corporation and QSE&P, Inc. and located in Ohio, Pennsylvania, New York and West Virginia. 3 6 "TRANCHE A BORROWING BASE" shall mean at any time, the amount determined by the Required Lenders in accordance with Section 2.7 and then in effect pursuant to the terms of Section 2.7. "TRANCHE A COMMITMENT AMOUNT" shall mean (a) the amount of $81,000,000, $21,000,000 of which will be available upon and after the acquisition of the Quaker State Properties but not prior thereto, or (b) such higher amount as determined by the Lenders from time to time, which higher amount shall become effective upon written notification thereof to the Borrowers from the Lenders. "TRANCHE A LOAN" shall mean any Loan made by any Lender to the Borrowers pursuant to Section 2.1(a)(i). "TRANCHE B BORROWING BASE" shall mean, at any time, the amount determined by the Required Lenders in accordance with Section 2.7 and then in effect pursuant to the terms of Section 2.7. "TRANCHE B COMMITMENT AMOUNT" shall mean (a) zero, (b) upon and after the acquisition of the Quaker State Properties, the amount of $22,000,000, as such amount is reduced pursuant to Section 2.1(d), or (c) such higher amount as determined by the Lenders from time to time, which higher amount shall become effective upon written notification thereof to the Borrowers from the Lenders. "TRANCHE B LOAN" shall mean any Loan made by any Lender to the Borrowers pursuant to Section 2.1(a)(ii). 2.2 AMENDMENT OF SECTION 2.1. Section 2.1 of the Agreement is hereby amended to read as follows: "2.1 REVOLVING LINE OF CREDIT. (a) Upon the terms and conditions (including, without limitation, the right of the Lenders to decline to make any Loan so long as any Default or Event of Default exists) and relying on the representations and warranties contained in this Agreement, each Lender, severally and not jointly, agrees, (i) during the Commitment Period, to make Tranche A Loans, and (ii) during the period from and including the date of the acquisition of the Quaker State Properties to but not including October 15, 1997, to make Tranche B Loans, in immediately available funds at the 4 7 Principal Office, to the Borrowers from time to time on any Business Day designated by the Borrowers following receipt by the Agent of a Request for Advance in an amount equal to such Lender's Commitment Percentage of the requested Loan; PROVIDED, HOWEVER, that (i) the Loan Balance shall not exceed the lesser of the Commitment Amount or the Borrowing Base then in effect, (ii) the Loan Balance plus the outstanding principal balance of the Senior Notes shall not exceed the Borrowing Base then in effect, (iii) the outstanding principal amount of all Tranche A Loans shall not exceed the lesser of the Tranche A Commitment Amount or the Tranche A Borrowing Base, (iv) the outstanding principal amount of all Tranche B Loans shall not exceed the lesser of the Tranche B Commitment Amount or the Tranche B Borrowing Base, (v) the outstanding principal amount of all Loans by any Lender to the Borrowers shall not exceed an amount equal to the Commitment Percentage of such Lender multiplied by the lesser of the Commitment Amount or the Borrowing Base then in effect, (vi) no Loan shall exceed the then existing Available Commitment, (vii) no borrowing, conversion, or prepayment of principal of Loans, except for prepayments made pursuant to Section 2.9, shall be in an amount less than $100,000 and (viii) if Tranche B is not drawn upon in connection with the acquisition of the Quaker State Properties, the Commitment with regard to the entire Tranche B shall terminate and be of no further force and effect until such time, if at all, as it is reinstated in writing, signed by all the parties hereto. (b) Subject to the terms of this Agreement, the Borrowers may borrow, repay, and reborrow and convert Loans of one type or with one Interest Period into Loans of another type or with a different Interest Period. Each borrowing, prepayment, or conversion of or into a Loan of a different type or, in the case of a LIBO Rate Loan, having a different Interest Period, shall be deemed a separate borrowing, conversion, and prepayment for purposes of the foregoing, one for each type of Loan or Interest Period. Anything in this Agreement to the contrary notwithstanding, the aggregate principal amount of LIBO Rate Loans having the same Interest Period shall be at least equal to $100,000; and if any LIBO Rate Loan would otherwise be in a lesser principal amount for any period, such Loan shall be a Floating Rate Loan during such period. (c) The Loans shall be made and maintained at the Principal Office and shall be evidenced by the Notes. (d) Commencing on September 1, 1995 and continuing thereafter on the first day of each calendar month through October 1, 1997, the Tranche B Commitment 5 8 Amount shall be reduced by the amount of $1,725,000; PROVIDED, HOWEVER, the Lenders may at their discretion redetermine the amount by which the Tranche B Commitment Amount shall be reduced each calendar month in connection with each redetermination of the Tranche B Borrowing Base or otherwise at any time and from time to time and such redetermined reducing amount shall become effective upon verbal notification thereof to the Borrowers (subsequently confirmed in writing) and shall remain in effect until the next subsequent redetermination. (e) The Borrowers' obligation to pay, and the Lenders' right to receive payment of the Tranche B Loans is expressly subordinate and junior to the prior payment in full of all other Obligations and the Senior Notes; PROVIDED, HOWEVER, so long as no Default or Event of Default has occurred and is continuing, the Borrowers may repay the Tranche B Loans according to the terms of this Agreement." 2.3 AMENDMENT OF SECTION 2.3. Section 2.3 of the Agreement is hereby amended to read as follows: "2.3 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. (a) Proceeds of Tranche A Loans shall be used by the Borrowers for the acquisition and development of Oil and Gas Properties, the acquisition of businesses or assets related to the oil and gas business of any Borrower, and to provide general working capital. (b) Proceeds of Tranche B Loans shall be used by the Borrowers for the acquisition of the Quaker State Properties and any other purpose set forth in subsection (a) above. (c) Letters of Credit shall be used for general corporate purposes; provided, however, no Letter of Credit may be used in lieu of or in support of stay or appeal bonds." 2.4 AMENDMENT OF SECTION 2.5. The third sentence of Section 2.5 of the Agreement is hereby amended to read as follows: "The Loan Balance of each Note, together with all accrued and unpaid interest thereon, shall be due and payable on the Commitment Termination Date; PROVIDED, HOWEVER, the portion of the Loan Balance evidencing Tranche B Loans, together with all accrued and unpaid interest thereon, shall be due and payable on or before October 15, 1997." 2.5 AMENDMENT OF SECTION 2.7. Section 2.7 of the Agreement is hereby amended in its entirety to read as follows: 6 9 "2.7 BORROWING BASE DETERMINATIONS. (a) The Tranche A Borrowing Base is acknowledged by each Borrower and each Lender to be $95,000,000. The Tranche B Borrowing Base is acknowledged by each Borrower and each Lender to be zero. Each Borrower and each Lender acknowledge that, after the acquisition of the Quaker State Properties, the Tranche A Borrowing Base shall be $116,000,000 and the Tranche B Borrowing Base shall be $22,000,000. (b) Each Borrowing Base shall be redetermined by the Lenders semi-annually on the basis of information supplied by the Borrowers in compliance with the provisions of this Agreement, including, without limitation, Reserve Reports, Financial Statements, and all other information available to the Lenders. Notwithstanding the foregoing, any two Lenders may, in their discretion, require that a redetermination of either Borrowing Base be made at any time and from time to time. Upon such a requirement by any two Lenders, such redetermination shall be made by the Lenders as otherwise provided in this Section. (c) Upon each determination of either Borrowing Base as provided in this Section, the Agent shall notify the Borrowers verbally (confirming such notice promptly in writing) of such determination, and the Borrowing Base so communicated shall become effective upon such verbal notification and shall remain in effect until the next subsequent determination of such Borrowing Base. (d) Each Borrowing Base shall represent the lowest amount among the Lenders based upon the determination by each of the Lenders, in its sole discretion and in accordance with its standard engineering and lending policies and practices customary for loans of this nature, of the value, for loan purposes, of the Oil and Gas Properties of the Borrowers which are unencumbered by Liens other than Liens existing at any time for the benefit of the Lenders. Furthermore, each Borrower acknowledges that each determination of either Borrowing Base reflects a margin or discount below market value which may change from time to time, which is acknowledged by the Borrowers to be essential for the adequate protection of the Lenders." 2.6 AMENDMENT OF SECTION 2.9. Section 2.9 of the Agreement is hereby amended in its entirety to read as follows: "2.9 MANDATORY PREPAYMENTS. If at any time (a) the Loan Balance exceeds the lesser of the Commitment Amount or the Borrowing Base then in effect, (b) the Loan Balance plus the outstanding principal balance of the Senior Notes exceeds the Borrowing Base then in effect, 7 10 (c) the outstanding principal amount of all Tranche A Loans exceeds the lesser of the Tranche A Commitment Amount or the Tranche A Borrowing Base, or (d) the outstanding principal balance of all Tranche B Loans exceeds the lesser of the Tranche B Commitment Amount or the Tranche B Borrowing Base, the Borrowers shall, within 30 Business Days of notice from the Agent of such occurrence, prepay, or make arrangements acceptable to the Required Lenders for the prepayment of, the amount of such excess for application on the Loan Balance." 2.7 AMENDMENT OF SECTION 2.11. Section 2.11 of the Agreement is hereby amended in its entirety to read as follows: "2.11 COMMITMENT FEES. In addition to interest on the Notes as provided herein, the Facility Fees and the Engineering Fees payable hereunder, and to compensate the Lenders for maintaining funds available, the Borrowers shall pay to the Agent for the Ratable Benefit of the Lenders, in immediately available funds, on the first day of July, 1995, and on the first day of each third calendar month thereafter, a fee in the amount of one-half of one percent (1/2%) per annum, calculated on the basis of a year of 360 days, but counting the actual days elapsed (including the first day but excluding the last day), on the average daily amount of the Available Commitment during the preceding three-month period." 2.8 AMENDMENT OF SECTION 2.13. Section 2.13 of the Agreement is hereby amended in its entirety to read as follows: "2.13 FACILITY FEES. In addition to interest on the Notes as provided herein, the Commitment Fees and the Engineering Fees payable hereunder, and to compensate the Lenders for the costs of the extension of credit hereunder, the Borrowers shall pay to the Agent for the Ratable Benefit of the Lenders, in immediately available funds, (a) on the date of the acquisition of the Quaker State Properties, a fee in the amount of $165,000, plus a fee in the amount of the three-fourths of one percent (3/4%) of the difference between $70,000,000 and the increased Commitment Amount for Tranche A Loans, (b) on the date of the first Tranche B Loan, a fee in the amount of $220,000, (c) on the date of each subsequent increase in the Tranche A Commitment Amount, a fee in the amount of three-fourths of one percent (3/4%) of the difference between the Tranche A Commitment Amount in effect immediately preceding the Commitment Amount increase and the new Tranche A Commitment Amount, and (d) on the date of each subsequent increase in the Tranche B Commitment Amount, a fee in the amount of three percent (3%) of the difference between the Tranche B Commitment Amount in effect immediately preceding the Commitment Amount increase and the new Tranche B Commitment Amount; 8 11 PROVIDED, HOWEVER, in the event that the Commitment Amount should be decreased at any time and thereafter increased there shall be no fee due on the portion of such Commitment Amount increase which has previously had a fee assessed against it hereunder." ARTICLE III ----------- CONDITIONS ---------- The obligations of the Lenders and the Agent to enter into this Amendment are subject to the fulfillment of the following conditions precedent, with all documents to be delivered to the Agent to be in form and substance satisfactory to the Lenders: 3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the following: (a) this Amendment, duly executed by each Borrower; (b) the Notes; (c) a Notice of Final Agreement; and (d) such other agreements, documents, items, instruments, opinions, certificates, waivers, consents, and evidence as the Agent may reasonably request on its own behalf or on behalf of any Lender. 3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required Lenders, no material adverse change shall have occurred in the property, business, operations, conditions (financial or otherwise) or prospects of any Borrower since the date of the last Financial Statements delivered to the Lenders. 3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing. 3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties contained in Article IV of the Agreement, as amended hereby, and in any other Loan Document, as each has been supplemented, if applicable, shall be true and correct in all material respects, except as affected by the transactions contemplated in the Agreement and this Amendment. 3.5 ADDITIONAL MATTERS. All matters incident to the consummation of the transactions contemplated hereby shall be satisfactory to the Required Lenders. 9 12 ARTICLE IV ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ Each of the Borrowers hereby expressly remakes, in favor of the Lenders and the Agent, all of the representations and warranties set forth in Article IV of the Agreement, as amended hereby, and in any other Loan Document, and represents and warrants that all such representations and warranties, as each has been supplemented, if applicable, remain true and unbreached in all material respects, except as affected by the transactions contemplated in the Agreement and this Amendment and except for such representations and warranties which may be limited to the date made. ARTICLE V --------- RATIFICATION ------------ Each of the parties hereto does hereby adopt, ratify, and confirm the Agreement and each other Loan Document to which it is a party, in all things in accordance with the terms and provisions thereof, as amended by this Amendment. ARTICLE VI ---------- MISCELLANEOUS ------------- 6.1 SCOPE OF AMENDMENT. The scope of this Amendment is expressly limited to the matters addressed herein and this Amendment shall not operate as a waiver of any past, present, or future breach, Default, or Event of Default under the Agreement, except to the extent, if any, that any such breach, Default, or Event of Default is remedied by the effect of this Amendment. 6.2 AGREEMENT AS AMENDED. All references to the Agreement in any document heretofore or hereafter executed in connection with the transactions contemplated in the Agreement shall be deemed to refer to the Agreement as amended by this Amendment. 6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All covenants and agreements by each of the Borrowers in this Amendment shall be binding upon such Borrower and its legal representatives, successors, and assigns and shall inure to the benefit of the Agent and each of the Lenders and their legal representatives, successors, and assigns. All provisions of this Amendment, the Agreement, and the other Loan Documents are imposed solely and exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No other Person shall have standing to require satisfaction of such provisions in accordance with their terms, and any or all of such provisions may, subject to the provisions of Section 9.9 of the Agreement as to the rights of the Lenders, be 10 13 freely waived in whole or in part by the Agent at any time if in its sole discretion it deems it advisable to do so. 6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute, acknowledge, and deliver, at any time as requested by the Agent, such other documents and instruments as the Required Lenders shall deem necessary in their sole discretion to fulfill the terms of the Agreement, as amended hereby, including, without limitation, modifications of and amendments to any of the Loan Documents. 6.5 GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE ------------- A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS ------------------------------------- AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS WRITTEN AMENDMENT, THE AGREEMENT, AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS ----------------------- WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION. 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. ---------------------------------------------------- EACH OF THE BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR 11 14 OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AMENDMENT. Executed effective as of the 25th day of May, 1995. BORROWERS: BELDEN & BLAKE CORPORATION By: /s/ H.S. Belden IV ----------------------------------- Printed Name: H.S. Belden IV ------------------------- Title: Chief Executive Officer -------------------------------- THE CANTON OIL & GAS COMPANY By: /s/ H.S. Belden IV ----------------------------------- Printed Name: H.S. Belden IV ------------------------- Title: Chief Executive Officer -------------------------------- PEAKE ENERGY, INC. By: /s/ H.S. Belden IV ----------------------------------- Printed Name: H.S. Belden IV ------------------------- Title: Chief Executive Officer -------------------------------- WARD LAKE DRILLING, INC. By: /s/ R.L. Clements ----------------------------------- Printed Name: R.L. Clements ------------------------- Title: Chief Executive Officer -------------------------------- (Signatures Continued on Next Page) 12 15 AGENT AND LENDER: BANK ONE, TEXAS, NATIONAL ASSOCIATION By: /s/ Elizabeth W. Hunter ------------------------------------- Printed Name: Elizabeth W. Hunter --------------------------- Title: Vice President ---------------------------------- LENDER: NBD BANK By: /s/ Joseph C. Giampetroni ------------------------------------- Printed Name: Joseph C. Giampetroni --------------------------- Title: Vice President ---------------------------------- 13 16 EXHIBIT A FORM OF NOTES $[__________] Houston, Texas ____________, 1995 FOR VALUE RECEIVED, the undersigned (whether one or more, "MAKER") promise to pay to the order of [____________________________ __] ("PAYEE"), at its banking quarters in [_______], [______] County, [_____], the sum of [_____] MILLION DOLLARS ($[_________]), or so much thereof as may be advanced against this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker, Payee, and others (as amended, supplemented, or restated from time to time, the "CREDIT AGREEMENT"), together with interest at the rate and calculated as provided in the Credit Agreement. The indebtedness evidenced by this Note, both principal and interest, is payable as provided in the Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any part of this Note without the payment of any premium or fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment as it becomes due of any payment on this Note provided for in the Credit Agreement. This Note is issued pursuant to, is a "Note" under, and is entitled to all benefits of, the Credit Agreement; and reference is made to the Credit Agreement for matters governed thereby, including, without limitation, certain events which will entitle the holder hereof to accelerate the maturity of all amounts due hereon. This Note is issued, in whole or in part, in renewal and extension, but not in novation or discharge, of the remaining principal balance of that certain Promissory Note dated March 29, 1995, in the original principal amount of $[__________], executed by Maker and payable to the order of Payee. THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE. BELDEN & BLAKE CORPORATION By:_______________________________ Printed Name:_____________________ Title:____________________________ A-i 17 THE CANTON OIL & GAS COMPANY By:_______________________________ Printed Name:_____________________ Title:____________________________ PEAKE ENERGY, INC. By:_______________________________ Printed Name:_____________________ Title:____________________________ WARD LAKE DRILLING, INC. By:_______________________________ Printed Name:_____________________ Title:____________________________ A-ii EX-4.2.E 5 EXHIBIT 4.2(E) 1 - ------------------------------------------------------------------------------ FOURTH AMENDMENT TO CREDIT AGREEMENT AMONG BELDEN & BLAKE CORPORATION, THE CANTON OIL & GAS COMPANY, PEAKE ENERGY, INC., WARD LAKE DRILLING, INC., BANK ONE, TEXAS, NATIONAL ASSOCIATION AND THE FIRST NATIONAL BANK OF CHICAGO EFFECTIVE AS OF FEBRUARY 15, 1996 - ------------------------------------------------------------------------------ 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Terms Defined in Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Articles and Sections . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II AMENDMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Amendment of Section 1.2 . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Amendment of Section 2.7 . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Amendment of Section 2.11 . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.4 Amendment of Section 2.13 . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.5 Amendment of Section 6.14 . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.6 Amendment of Section 9.3 . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1 Receipt of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.3 No Default or Event of Default . . . . . . . . . . . . . . . . . . . . . . . 6 3.4 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . 6 3.5 Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE V RATIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 6.1 Scope of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 6.2 Agreement as Amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 6.3 Successors and Assigns; Rights of Third Parties . . . . . . . . . . . . . . 7 6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 8 6.7 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES . . . . . . . . . . . . 8
i 3 FOURTH AMENDMENT TO CREDIT AGREEMENT ------------------------------------ This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and entered into effective as of February 15, 1996, by and among BELDEN & BLAKE CORPORATION, an Ohio corporation ("BBC"), THE CANTON OIL & GAS COMPANY, an Ohio corporation ("COG"), PEAKE ENERGY, INC., a Delaware corporation ("PEAKE ENERGY"), WARD LAKE DRILLING, INC., a Michigan corporation ("WARD LAKE;" with BBC, COG and Peake Energy each a "BORROWER" and collectively, the "BORROWERS"), BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association ("BANK ONE"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association, as assignee of NBD Bank, a Michigan banking corporation ("FNBC;" with Bank One, together with each financial institution that becomes a party hereto or entitled to benefits and subject to obligations hereunder subsequent to the date hereof, each a "LENDER" and collectively, the "LENDERS"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, as agent for the Lenders (in such capacity and together with any successors designated pursuant hereto, the "AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, BBC, COG, Peake Energy, Peake Operating Company, the Agent, and the Lenders did execute and exchange counterparts of the Credit Agreement dated November 15, 1993, as amended by the First Amendment to Credit Agreement dated August 1, 1994, the Second Amendment to Credit Agreement dated as of March 29, 1995, and the Third Amendment to Credit Agreement dated as of May 25, 1995 (collectively, the "AGREEMENT"), pursuant to which the Lenders have extended credit to the Borrowers; and WHEREAS, the parties to the Agreement desire to amend the Agreement in the particulars hereinafter set forth; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth in this Amendment and the Agreement, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS AND INTERPRETATION ------------------------------ 1.1 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT," "AGREEMENT," "AMENDMENT," "BANK ONE," "BBC," "BORROWER," "BORROWERS," "COG," "FNBC," "LENDER," "LENDERS," "PEAKE ENERGY," and "WARD LAKE" shall have the meaning assigned to such term hereinabove. 1.2 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the Agreement shall have the meaning assigned to such term in the Agreement, unless expressly provided herein to the contrary. 4 1.3 REFERENCES. References in this Amendment to Article or Section numbers shall be to Articles and Sections of this Amendment, unless expressly stated to the contrary. References in this Amendment to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder" shall be to this Amendment in its entirety and not only to the particular Article or Section in which such reference appears. 1.4 ARTICLES AND SECTIONS. This Amendment, for convenience only, has been divided into Articles and Sections and it is understood that the rights, powers, privileges, duties, and other legal relations of the parties hereto shall be determined from this Amendment as an entirety and without regard to such division into Articles and Sections and without regard to headings prefixed to such Articles and Sections. 1.5 NUMBER AND GENDER. Whenever the context requires, reference herein made to the single number shall be understood to include the plural and likewise the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine and neuter, when such construction is appropriate, and specific enumeration shall not exclude the general, but shall be construed as cumulative. Definitions of terms defined in the singular and plural shall be equally applicable to the plural or singular, as the case may be. ARTICLE II ---------- AMENDMENT OF AGREEMENT ---------------------- Each of the Borrowers, the Lenders, and the Agent hereby amend the Agreement in the following particulars, effective as of and after the effective date of this Amendment: 2.1 AMENDMENT OF SECTION 1.2. Section 1.2 of the Agreement is amended as follows: (a) The following definitions are hereby amended to read as follows: "APPLICABLE MARGIN" shall mean (a) as to each Floating Rate Loan which is a Tranche A Loan, the margin shall be zero, (b) as to each LIBO Rate Loan which is a Tranche A Loan, (i) if Utilization is less than 50% of the Borrowing Base, the margin shall be 0.75%; (ii) if Utilization is less than 75% of the Borrowing Base but more than or equal to 50% of the Borrowing Base, the margin shall be 1.0%; and (iii) if Utilization is more than or equal to 75% of the Borrowing Base, then the margin shall be 1.25%. There is no Commitment as of the date of the Fourth Amendment to this 2 5 Agreement to lend under Tranche B and in the event there is ever a Commitment under Tranche B, the margin shall be mutually agreed upon by the parties hereto. "COMMITMENT TERMINATION DATE" shall mean March 31, 2001. "LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Intercreditor Agreement, the Letter of Credit Applications, the Letters of Credit, the Master Agreement, and all other documents and instruments now or hereafter delivered pursuant to the terms of or in connection with this Agreement, the Notes, the Intercreditor Agreement, the Letter of Credit Applications, the Letters of Credit, or the Master Agreement, and all renewals and extensions of, amendments and supplements to, and restatements of, any or all of the foregoing from time to time in effect. "OBLIGATIONS" shall mean, without duplication, (a) all Indebtedness evidenced by the Notes, (b) the obligation of the Borrowers to provide to or reimburse the Agent, as the issuer of Letters of Credit, or the Lenders, as the case may be, for, amounts payable, paid, or incurred with respect to Letters of Credit, (c) the undrawn, unexpired amount of all outstanding Letters of Credit, (d) the obligation of the Borrowers for the payment of Commitment Fees, Engineering Fees, and Facility Fees, (e) all amounts owing or to be owing by BBC to Bank One under the Master Agreement, and (f) all other obligations and liabilities of the Borrowers to the Agent and the Lenders, now existing or hereafter incurred, under, arising out of or in connection with any Loan Document, together with all interest accruing thereon and costs, expenses, and attorneys' fees incurred in the enforcement or collection thereof, whether such obligations and liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, and with respect to any of the foregoing that includes or refers to the payment of amounts deemed or constituting interest, only so much thereof as shall have accrued, been earned and which remains unpaid at each relevant time of determination. 3 6 "TRANCHE A COMMITMENT AMOUNT" shall mean (a) the amount of $70,000,000, or (b) such higher amount as determined by the Lenders from time to time, which higher amount shall become effective upon written notification thereof to the Borrowers from the Lenders. "TRANCHE B COMMITMENT AMOUNT" shall mean (a) zero, or (b) such higher amount as determined by the Lenders from time to time, which higher amount shall become effective upon written notification thereof to the Borrowers from the Lenders. (b) The following definitions are hereby added to read as follows: "MASTER AGREEMENT" shall mean the ISDA Master Agreement by and between the Borrowers and Bank One dated of even date with the Fourth Amendment to this Agreement, as it may be amended, supplemented, or restated from time to time, and any option with respect to any transaction under such agreement. "UTILIZATION" shall mean the Borrowing Base less the Available Commitment. 2.2 AMENDMENT OF SECTION 2.7. Section 2.7(a) of the Agreement is hereby amended in its entirety to read as follows: "(a) The Tranche A Borrowing Base is acknowledged by each Borrower and each Lender to be $105,000,000. The Tranche B Borrowing Base is acknowledged by each Borrower and each Lender to be zero." 2.3 AMENDMENT OF SECTION 2.11. Section 2.11 of the Agreement is hereby amended in its entirety to read as follows: "2.11 COMMITMENT FEES. In addition to interest on the Notes as provided herein, the Facility Fees and the Engineering Fees payable hereunder, and to compensate the Lenders for maintaining funds available, the Borrowers shall pay to the Agent for the Ratable Benefit of the Lenders, in immediately available funds, on the first day of April 1, 1996, and on the first day of each third calendar month thereafter, a fee in the amount of three-eighths of one percent (3/8%) per annum, calculated on the basis of a year of 360 days, but counting the actual days elapsed (including the first day but excluding the last day), on the average daily amount of the Available Commitment during the preceding three-month period." 4 7 2.4 AMENDMENT OF SECTION 2.13. Section 2.13 of the Agreement is hereby amended in its entirety to read as follows: "2.13 FACILITY FEES. In addition to interest on the Notes as provided herein, the Commitment Fees and the Engineering Fees payable hereunder, and to compensate the Lenders for the costs of the extension of credit hereunder, the Borrowers shall pay to the Agent for the Ratable Benefit of the Lenders, in immediately available funds, on the date of each increase in the Tranche A Commitment Amount, a fee in the amount of one-half of one percent (1/2%) of the difference between the Tranche A Commitment Amount in effect immediately preceding the Commitment Amount increase and the new Tranche A Commitment Amount; PROVIDED, HOWEVER, in any event that any Commitment Amount should be decreased at any time and thereafter increased there shall be no fee due on the portion of such Commitment Amount increase which has previously had a fee assessed against it hereunder." 2.5 AMENDMENT OF SECTION 6.14. Subsection (c) of Section 6.14 of the Agreement is hereby amended in its entirety to read as follows: "(c) contracts entered into with the purpose and effect of fixing interest rates on a principal amount of Indebtedness of the Borrowers that is accruing interest at a variable rate, including, without limitation, the Master Agreement, provided that (i) the aggregate notional amount of such contracts never exceeds the greater of $60,000,000 or seventy-five percent (75%) of the anticipated outstanding principal balance of the Indebtedness of the Borrowers to be hedged by such contracts or an average of such principal balances calculated using a generally accepted method of matching interest swap contracts to declining principal balances, (ii) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding Indebtedness of the Borrowers to be hedged by such contract, and (iii) each such contract shall be with Bank One or other counterparty or have a guarantor of the obligation of such other counterparty who, at the time the contract is made, has long-term obligations rated at least BBB+ or Baa1 or its equivalent by a Recognized Rating Agency (or a successor credit rating agency)." 2.6 AMENDMENT OF SECTION 9.3. Subsection (b) of Section 9.3 of the Agreement is hereby amended in its entirety to read as follows: "(b) if to FNBC, to: THE FIRST NATIONAL BANK OF CHICAGO 5 8 One First National Plaza, Suite 0363 Chicago, Illinois 60670 Attention: Mr. William Laird Telecopy: (312) 732-4840 with a copy to: NBD BANK 611 Woodward Avenue Detroit, Michigan 48226 Attention: Mr. Joseph Giampetroni Telecopy: (313) 225-2649" ARTICLE III ----------- CONDITIONS ---------- The obligations of the Lenders and the Agent to enter into this Amendment are subject to the fulfillment of the following conditions precedent, with all documents to be delivered to the Agent to be in form and substance satisfactory to the Lenders: 3.1 RECEIPT OF DOCUMENTS. The Agent shall have received the following: (a) this Amendment, duly executed by each Borrower; (b) the Master Agreement, duly executed by each Borrower; (c) a Notice of Final Agreement; and (d) such other agreements, documents, items, instruments, opinions, certificates, waivers, consents, and evidence as the Agent may reasonably request on its own behalf or on behalf of any Lender. 3.2 NO MATERIAL ADVERSE CHANGE. In the opinion of the Required Lenders, no material adverse change shall have occurred in the property, business, operations, conditions (financial or otherwise) or prospects of any Borrower since the date of the last Financial Statements delivered to the Lenders. 3.3 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing. 3.4 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties contained in Article IV of the Agreement, as amended hereby, and in any other Loan Document, as each has been supplemented, if applicable, shall be true and correct in all material respects, except as affected by the transactions contemplated in the Agreement and this Amendment. 6 9 3.5 ADDITIONAL MATTERS. All matters incident to the consummation of the transactions contemplated hereby shall be satisfactory to the Required Lenders. ARTICLE IV ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ Each of the Borrowers hereby expressly remakes, in favor of the Lenders and the Agent, all of the representations and warranties set forth in Article IV of the Agreement, as amended hereby, and in any other Loan Document, and represents and warrants that all such representations and warranties, as each has been supplemented, if applicable, remain true and unbreached in all material respects, except as affected by the transactions contemplated in the Agreement and this Amendment and except for such representations and warranties which may be limited to the date made. ARTICLE V --------- RATIFICATION ------------ Each of the parties hereto does hereby adopt, ratify, and confirm the Agreement and each other Loan Document to which it is a party, in all things in accordance with the terms and provisions thereof, as amended by this Amendment. ARTICLE VI ---------- MISCELLANEOUS ------------- 6.1 SCOPE OF AMENDMENT. The scope of this Amendment is expressly limited to the matters addressed herein and this Amendment shall not operate as a waiver of any past, present, or future breach, Default, or Event of Default under the Agreement, except to the extent, if any, that any such breach, Default, or Event of Default is remedied by the effect of this Amendment. 6.2 AGREEMENT AS AMENDED. All references to the Agreement in any document heretofore or hereafter executed in connection with the transactions contemplated in the Agreement shall be deemed to refer to the Agreement as amended by this Amendment. 6.3 SUCCESSORS AND ASSIGNS; RIGHTS OF THIRD PARTIES. All covenants and agreements by each of the Borrowers in this Amendment shall be binding upon such Borrower and its legal representatives, successors, and assigns and shall inure to the benefit of the Agent and each of the Lenders and their legal representatives, successors, and assigns. All provisions of this Amendment, the Agreement, and the other Loan Documents are imposed solely and 7 10 exclusively for the benefit of the Borrowers, the Agent, and the Lenders. No other Person shall have standing to require satisfaction of such provisions in accordance with their terms, and any or all of such provisions may, subject to the provisions of Section 9.9 of the Agreement as to the rights of the Lenders, be freely waived in whole or in part by the Agent at any time if in its sole discretion it deems it advisable to do so. 6.4 FURTHER ASSURANCES. Each of the Borrowers shall execute, acknowledge, and deliver, at any time as requested by the Agent, such other documents and instruments as the Required Lenders shall deem necessary in their sole discretion to fulfill the terms of the Agreement, as amended hereby, including, without limitation, modifications of and amendments to any of the Loan Documents. 6.5 GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE -------------- UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). 6.6 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. THIS AMENDMENT CONSTITUTES THE ------------------------------------- ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS WRITTEN AMENDMENT, THE AGREEMENT, AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 6.7 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ----------------------- ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. EACH OF THE BORROWERS HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN ACCORDANCE WITH THIS SECTION. 6.8 WAIVER OF RIGHTS TO JURY TRIAL AND PUNITIVE DAMAGES. EACH OF THE ---------------------------------------------------- BORROWERS, THE AGENT, AND EACH OF THE LENDERS HEREBY (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AMENDMENT, THE AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO, (B) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND 11 UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, AND (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AMENDMENT. Executed effective as of the 15th day of February, 1996. BORROWERS: BELDEN & BLAKE CORPORATION By: /s/ Henry S. Belden IV ----------------------------------- Printed Name: Henry S. Belden IV ------------------------- Title: Chief Executive Officer -------------------------------- THE CANTON OIL & GAS COMPANY By: /s/ Henry S. Belden IV ----------------------------------- Printed Name: Henry S. Belden IV ------------------------- Title: Chief Executive Officer -------------------------------- PEAKE ENERGY, INC. By: /s/ Henry S. Belden IV ----------------------------------- Printed Name: Henry S. Belden IV ------------------------- Title: Chief Executive Officer -------------------------------- WARD LAKE DRILLING, INC. By: /s/ R.L. Clements ----------------------------------- Printed Name: R.L. Clements ------------------------- Title: Chief Executive Officer -------------------------------- (Signatures Continued on Next Page) 9 12 AGENT AND LENDER: BANK ONE, TEXAS, NATIONAL ASSOCIATION By: /s/ Richard G. Sylvan ------------------------------------- Printed Name: Richard G. Sylvan --------------------------- Title: Senior Vice President ---------------------------------- LENDER: THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Steven P. Capouch ------------------------------------- Printed Name: Steven P. Capouch --------------------------- Title: Vice President ---------------------------------- 10 EX-21 6 EXHIBIT 21 1 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT
STATE OF SUBSIDIARY INCORPORATION - ---------- ------------- The Canton Oil & Gas Company Ohio Target Oilfield Pipe & Supply Company Ohio Ward Lake Drilling, Inc. Michigan Peake Energy, Inc. Delaware Engine Power Systems, Inc. Ohio
As of December 31, 1995, the other subsidiaries included in the registrant's consolidated financial statments, and all other subsidiaries considered in the aggregate as a single subsidiary, did not constitute a significant subsidiary. EX-23 7 EXHIBIT 23 1 EXHIBIT 23 Consent of Independent Auditors To the Shareholders and Board of Directors Belden & Blake Corporation We consent to the incorporation by reference of our report dated February 29, 1996, with respect to the consolidated financial statements of Belden & Blake Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1995, in the following Registration Statements and related Prospectuses: Registration Number Description of Registration Statement ---------------- -------------------------------------------------- 33-62785 Non-Employee Director Stock Option Plan -- Form S-8 33-69802 Employees 401(K) Profit Sharing Plan -- Form S-8 ERNST & YOUNG LLP Cleveland, Ohio March 11, 1996 EX-27 8 EXHIBIT 27
5 0000880114 BELDEN & BLAKE CORPORATION 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 12,322 0 28,123 0 9,253 54,150 290,737 59,209 297,298 36,791 110,523 1,114 0 2,400 138,777 297,298 107,355 110,064 66,462 66,462 29,119 0 6,073 8,410 2,150 6,260 (1,139) 0 0 5,121 .56 .56
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