-----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, WyWQIl2Of/gCSvD5AkZtHerHNx3sOMghX/itTNNygiqERqTHXEH9j9D8MGBT+/Pm qvQXmORi3dVUpuD8bfrseQ== 0000950134-97-002236.txt : 19970327 0000950134-97-002236.hdr.sgml : 19970327 ACCESSION NUMBER: 0000950134-97-002236 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970326 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORYX ENERGY CO CENTRAL INDEX KEY: 0000836442 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 231743284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10053 FILM NUMBER: 97564143 BUSINESS ADDRESS: STREET 1: 13155 NOEL RD CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2147154000 MAIL ADDRESS: STREET 1: 13155 NOEL ROAD CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: SUN EXPLORATION & PRODUCTION CO DATE OF NAME CHANGE: 19890503 10-K405 1 FORM 10-K405 FISCAL YEAR END DECEMBER 31, 1996 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ----------- ----------- COMMISSION FILE NO. 1-10053 ------------------------------ ORYX ENERGY COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 23-1743284 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 13155 NOEL ROAD DALLAS, TEXAS 75240-5067 (Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 715-4000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE 8% NOTES DUE OCTOBER 15, 2003 NEW YORK STOCK EXCHANGE 8 3/8% NOTES DUE JULY 15, 2004 NEW YORK STOCK EXCHANGE 8 1/8% NOTES DUE OCTOBER 15, 2005 NEW YORK STOCK EXCHANGE 7 1/2% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE DEBENTURES DUE MAY 15, 2014
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: MEDIUM TERM NOTES, SERIES A DUE JANUARY 4, 1999 THROUGH FEBRUARY 1, 2002 10% NOTES DUE JUNE 15, 1999 9 1/2% NOTES DUE NOVEMBER 1, 1999 10% NOTES DUE APRIL 1, 2001 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. [X] 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 ----- ----- The aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 1, 1997, was approximately $2,106 million. The number of shares of Common Stock, $1 par value, outstanding as of March 1, 1997, was 105,312,881. Selected portions of the Oryx Energy Company Annual Report to Shareholders to the fiscal year ended December 31, 1996 are incorporated by reference in Parts I, II, and IV of this Form 10-K. Selected portions of the Oryx Energy Company definitive Proxy Statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 1996, are incorporated by reference in Part III of this Form 10-K. ================================================================================ 2 CERTAIN ABBREVIATIONS AND OTHER MATTERS As used herein and with the Oryx Energy Company Annual Report to Shareholders for the Fiscal Year Ended December 31, 1996 incorporated by reference in Parts I, II and IV of this Form 10-K, the following terms have specific meanings: m thousand bc/d barrels of condensate per day bbl barrel mm million mmb million barrels mb thousand barrels mmcf million cubic feet mcf thousand cubic feet eb equivalent barrel bcf billion cubic feet b/d barrels per day meb thousand equivalent barrels WTI West Texas Intermediate spot price mmeb million equivalent barrels HH Henry Hub spot price mmcf/d million cubic feet per day ED&A exploration, development and acquisition* mmcfe/d million cubic feet equivalent per day FD&A finding, development and acquisition
- --------------- * ED&A outlays represent capital expenditures and cash exploration costs, excluding capitalized interest. Natural gas equivalents are determined under the relative energy content method by using the ratio of 6 mcf of natural gas to 1 bbl of crude oil, condensate or natural gas liquids. With respect to information on the working interest in wells, drilling locations and acreage, "net" oil and gas wells, drilling locations and acres are determined by multiplying the whole numbers by the Company's working interest. 3 PART I ITEMS 1. AND 2. BUSINESS AND PROPERTIES GENERAL Oryx Energy Company (together with its consolidated subsidiaries, unless the context otherwise requires, Company) engages in the oil and gas exploration and production business. The Company has operations in six oil producing countries around the world: the onshore and offshore U.S., the U.K. North Sea, Ecuador, Kazakstan, Australia and Algeria. The Company also had producing assets in Indonesia and Gabon which were sold in 1995. The Company's business in the United States is conducted through Sun Energy Partners, L.P. (Partnership), of which the Company is the Managing General Partner and owns a 98 percent interest. In 1995, the Company implemented a plan which refocused strategic direction, significantly reduced debt, restored profitability and is designed to set the Company on a course for sustained long-term growth in cash flow. The Company reoriented its strategic direction by changing the nature of its capital investing program. Investing has been supported by proven technology. Exploration spending is directed toward areas of proven success. The primary geographic focus of both exploration and development spending is the Gulf of Mexico. For the five years 1992 through 1996, the Company's average production replacement rate was 101 percent at a cost of $4.86 per eb. In 1996, the Company replaced 153 percent of its production at $4.50 per eb. The Company determines its ED&A investing plans primarily based on the cash flow that it expects to generate. For 1996, the Company invested $500 million for ED&A programs. The Company plans to invest approximately $520 million for ED&A in 1997, with the primary emphasis being the Gulf of Mexico. The Company is basing its 1997 investing plans on oil and gas spot prices averaging $19.75 per barrel (WTI) and $2.05 per mmbtu (HH). The Company's cash flow available for investment will continue to be affected by prevailing oil and gas prices, costs and volumes. In 1996, about 18 percent of the Company's total ED&A investing was on exploration and about 82 percent on development and acquisitions. About 64 percent of total ED&A outlays were made in the U.S., and this percentage is planned to increase to 67 percent in 1997. PROVED RESERVES As of December 31, 1996, the Company's estimated proved reserves were 395 mmb of liquids and 1,199 bcf of natural gas which represents an aggregate of 595 mmeb of reserves. The Company's liquids reserves were located in the United States (52 percent), the United Kingdom (31 percent) and other foreign countries (17 percent). The Company's natural gas reserves were located in the United States (98 percent) and the United Kingdom (2 percent). More information on the estimated quantities of proved oil and gas reserves, proved developed reserves, and the Standardized Measure, are presented in the "Consolidated Financial Statements -- Supplementary Financial and Operating Information" in the Company's 1996 Annual Report to Shareholders. The Company files oil and gas reserve estimates with various governmental regulatory authorities and agencies, the variability of which does not exceed 5 percent. ASSET SALES During 1995, the Company generated $517 million of net proceeds from the sale of certain assets in order to reduce debt. The U.K. North Sea Alba field and Block 48/15a interests were sold for $270 million and $120 million respectively. The Company also sold certain assets in the U.S. for $77 million and all of its assets in Indonesia and Gabon for $67 million and $2 million respectively. Asset dispositions, totaling $536 million of gross proceeds, represented 138 million equivalent barrels of proved reserves and 43 thousand average equivalent barrels of production per day. OFFSHORE UNITED STATES The Company has identified the Gulf of Mexico as the primary focus of its growth strategy. The Company has a significant presence in the Gulf of Mexico with an interest in 148 blocks in various stages of 2 4 exploration, development and production. The Company has an interest in 39 producing platforms, 21 of which it operates. The Company also holds interests in various offshore pipelines and facilities. In 1996, the Company achieved a 7 percent reduction in its offshore operating cost. Exploration As of December 31, 1996, the Company held 328 thousand net undeveloped acres offshore, as compared to 275 thousand as of December 31, 1995. Of the 148 Gulf of Mexico blocks in which the Company owns an interest, 81 are undeveloped. In 1996, the Company spent $22 million to acquire interests in 34 blocks. In early 1996, the Company participated in a discovery well, Garden Banks (GB) 216 #2, which encountered 214 net feet of pay in three zones. The well is located approximately three miles to the northeast of the GB 260 development project. Also in early 1996, the Company drilled a discovery well on the Brazos A-21 Block which encountered 108 net feet of pay in three zones. The well began producing at about 18 mmcf/d during the summer. The Company is operator of the Block with a 51 percent interest. As of December 31, 1996, 2 exploratory wells were being drilled. The Company drilled 9 gross (3 net) exploratory wells offshore in 1996 and 6 gross (3 net) in 1995. Of the wells drilled in 1996, 2 gross (1 net) wells were successful. Production and Development Average daily production of crude oil and condensate offshore was 15, 16 and 10 mbbls in 1996, 1995 and 1994. Average daily production of natural gas offshore was 189, 180 and 203 mmcf in 1996, 1995 and 1994. The Company owns a 100 percent interest in the High Island A-576 block. In 1994, the HI A-576 #1 discovery well encountered 168 feet of net pay from the Lower Pleistocene sands. The well is located 110 miles off the Texas coast in 290 feet of water. This development, which has been named the Sherman Project, began production in December 1995. In 1996, the HI A-576 #2 well was tested at 24 mmcf and 2,300 barrels of condensate per day. The Company owns a 100 percent interest in the four-block High Island 384 unit. The High Island 384 unit is located approximately 112 miles off the Texas coast in water with an average depth of 360 feet. In 1993, the Company announced an oil discovery in High Island 379 which encountered 179 feet of oil pay. In the early part of 1994, the Company announced an oil and gas discovery in High Island 385. The High Island 385 discovery encountered 80 feet of net pay. This new development, which has been named the Patton Project, began production in January 1995 and in September 1995 achieved the expected peak production of 20 meb per day. Late in 1995, the Company confirmed the presence of natural gas reserves in a previously untested area of the High Island 384 Unit. The High Island 385 #3 well encountered 158 feet of net gas pay. Two subsequent delineation wells found the same pay interval in nearby fault blocks. In the second phase of Patton, the Company installed the "D" platform in 360 feet of water and developed the new gas reservoir. First production occurred in the fourth quarter of 1996 with gross production of 35 mmcf/d. In addition, two wells were drilled and the "E" platform installed to develop a previously discovered reservoir on the High Island 379. These wells came on stream during the fourth quarter of 1996 at 24 mmcfe/d. In 1995, the Company approved a plan for the development of Viosca Knoll 826 which lies 80 miles off the Alabama coast in water depths of 1,500 to 2,500 feet. This development has been named the Neptune Project. The Company operates the four-block Viosca Knoll unit and owns a 50 percent interest. The project is utilizing a new type of floating production facility called a spar. The spar is a cylindrical-shaped vessel which floats in a vertical position, similar to a buoy. Production risers have been routed through the cylinder to allow the spar to float around them. The field will be developed in multiple phases with the spar being moved from location to location. The spar was installed in the fourth quarter of 1996. First production occurred in March 1997. 3 5 In early 1995, the Company confirmed the presence of hydrocarbons in a previously untested fault block on the GB 260 discovery in the Gulf of Mexico. The GB 215 #2 well, which drilled a new fault block about two miles north of the original discovery well on GB 260, encountered approximately 170 feet of net pay. The GB 259 #2 well was then drilled as a side-track, and encountered over 115 feet of new pay in the same reservoir sands. This development, which has been named the Baldpate Project, is in federal waters offshore Louisiana in water depths of approximately 1,700 feet. In 1995, the Company entered into a plan of development to install a compliant tower platform and processing facility. The Company expects to begin production in 1998 with gross peak production of 50-60 meb per day. The Company owns a 50 percent interest in the four-block area. As of December 31, 1996, the Company was drilling 3 gross (2 net) offshore development wells. The Company drilled 30 gross (19 net) development wells offshore in 1996 and 14 gross (11 net) in 1995. Of the development wells drilled in 1996, 26 gross (17 net) were successful. ONSHORE UNITED STATES The onshore area continues to be a major contributor of production volumes and cash flow with relatively modest reinvestment needs. This is important for the funding of the Company's plans in other strategic areas. In 1995, the Company initiated significant cost-reduction measures at its operated fields. As a result, the Company achieved an overall 19 percent reduction in onshore U.S. operating costs in 1996. The Company has interests in 60 major onshore fields in five states and operates about 75 percent of its production. In addition, the Company has increased its drilling activity to more rapidly exploit its onshore asset portfolio. The Company is applying 3-D technology to create opportunities in new fault blocks and deeper pool horizons which provide new volumes and reserves. The Company will continue to exploit its waterflood operations. The U.S. onshore will be managed for maximum cash flow generation. Exploration The Company drilled no exploratory wells onshore in 1996, and at December 31, 1996, none were being drilled. Production and Development Average daily production of crude oil and condensate onshore was 28, 30 and 38 mb in 1996, 1995 and 1994. The decrease in 1996 crude oil and condensate production compared to 1995 and in 1995 compared to 1994 was due primarily to asset sales and normal declines. Average daily net production of natural gas onshore was 302, 288 and 335 mmcf in 1996, 1995 and 1994. Development wells drilled in 1996 and their test results include Seabreeze #12, 21 mmcf/d and 500 bc/d; Belle Isle 3-10, 15 mmcf/d and 700 bc/d; Belle Isle 11-5, 18 mmcf/d and 600 bc/d; Belle Isle 10-4, 15 mmcf/d and 500 bc/d; Garcia #20, 9 mmcf/d and 500 bc/d and Alabama Coushatta #7, 9 mmcf/d and 900 bc/d. As of December 31, 1996, the Company was drilling or participating in the drilling of 18 gross (12 net) development wells onshore. Of the 148 gross (103 net) development wells drilled onshore during 1996, 134 gross (93 net) were successful. UNITED KINGDOM The U.K. North Sea provides a strong stream of earnings and cash flow with relatively modest reinvestment needs. This is important for the funding of the Company's plans in other strategic areas. In 1995, the Company initiated significant cost-reduction measures at its operated fields. As a result, the Company achieved an overall 25 percent reduction of U.K. operating costs in 1996. Drilling activities are concentrated on infield and near-field opportunities near existing infrastructure. In total, the Company has an interest in 35 blocks in the North Sea. 4 6 Exploration The Company held 132 thousand net undeveloped acres in the North Sea as of December 31, 1996, compared to 212 thousand net undeveloped acres as of December 31, 1995. In 1996, the Company entered into an agreement to farm out approximately 50 percent of its U.K. North Sea exploration acreage. Under the terms of the agreement, the Company will be carried on a $55 million exploration and appraisal program over the next three to four years. Following any discovery, the Company would fund its share of development costs. In 1996, the Company drilled 1 successful exploratory well in the North Sea, and at December 31, 1996, none were being drilled. Production and Development The Company's producing fields, set forth in the table below, are located in the northern sector of the North Sea. As of December 31, 1996, the Company was drilling or participating in the drilling of 2 gross (1 net) development wells in the North Sea. All of the 14 gross (6 net) development wells drilled in the U.K. in 1996 were successful. The Company's average daily net production of crude oil and condensate in the United Kingdom was 56, 55 and 54 mb during 1996, 1995 and 1994. The increase in production in 1996 was due to the acquisition of additional interests in the Ninian, Hutton, Lyell and Murchison fields and the results of development work at Hutton and Murchison. Average daily production of natural gas was 9, 50 and 62 mmcf during 1996, 1995 and 1994. The decrease in net daily production of natural gas in 1996 was due to the sale of the Audrey field in 1995. The decrease in net daily production of natural gas in 1995 was due to reduced takes by British Gas plc and asset sales. The following table sets forth the North Sea producing fields held at December 31, 1996 and their net daily production:
1996 NET PERCENT DAILY PRODUCTION PRODUCING FIELDS OIL/GAS OWNERSHIP (MEB) ---------------- ------- --------- ---------------- Columba................................. Oil 52.5 2 Dunlin.................................. Oil 14.4 5 Hutton.................................. Oil 58.8 9 Murchison............................... Oil 68.7 12 Ninian.................................. Oil 44.9 18 Lyell................................... Oil/Gas 88.3 7 Strathspey.............................. Oil/Gas 6.5 3
The Company also receives tariff income on production from several satellite fields that produce through the Ninian facilities. Effective July 1, 1996, the Company acquired additional interests in the Ninian, Hutton, Lyell and Murchison fields as well as Columba and surrounding acreage for $91 million cash. The Company was operator of the Hutton, Lyell and Murchison fields and took over as operator of Ninian in February 1997. In the third quarter of 1996, the Company drilled the Columba B-1 well and encountered a total of 77 net feet of pay in three zones. Subsurface studies have indicated two follow-up well locations which the Company expects to drill in 1997. Additional development wells drilled in 1996 and their test results include Dunlin DA-16, 15,700 b/d; Murchison M-38, 13,000 b/d and Hutton H-38, 15,000 b/d. 5 7 In early 1994, the Company began producing oil from the Alba field. Alba is located on Block 16/26 in the central sector of the North Sea. The Company owned a 15.5 percent interest in the field which it sold in 1995. In the third quarter of 1994, the Company exchanged its interest in the undeveloped Britannia field for additional interests in the Hutton, Lyell and Murchison producing fields and $40.4 million in cash. This transaction increased near-term production volumes and considerably reduced future development capital expenditures. Effective January 9, 1995, the Company took over operatorship of the Hutton, Lyell and Murchison fields. In late 1994, the Company completed a development well for 20,000 gross b/d in a newly discovered extension to the Hutton field. The well encountered in excess of 150 feet of net pay in the Brent sandstone. In the fourth quarter of 1994, the Company began producing gas from the Galleon field at a net of 19 mmcf per day. Galleon is located in the southern portion of the North Sea. The Company had a 10 percent interest, subject to unitization, in the field which it sold in 1995. In addition, the Company has interests in and receives tariff income from North Sea transportation systems, terminal storage facilities and certain other related income producing assets, including the Brent and Ninian Pipeline Systems and the Sullom Voe Terminal in the Shetland Islands. OTHER FOREIGN Exploration As of December 31, 1996, the Company held 2,704 thousand net undeveloped acres in other foreign countries, as compared to 2,266 thousand net undeveloped acres as of December 31, 1995. In September 1995, the Company farmed-out 50 percent of its exploration venture in Kazakstan in exchange for a carry on the initial exploration phase. The Company drilled 1 successful gross exploratory well in 1995 in the Zone of Cooperation between Australia and Indonesia. The Bayu #1 discovery well was drilled on ZOCA 91-13 and encountered 570 gross feet of pay (353 net feet) and flowed at a cumulative rate of 90 mmcf/d of gas and 5250 b/d of condensate from four zones. Since then, 9 successful appraisal wells have been drilled on ZOCA 91-13 and the adjacent block with results that indicate a consistent gas-water contact across the field and similar reservoir properties. Preliminary estimates for recoverable reserves from the field are 3.5-4 trillion cubic feet of natural gas and 175-200 mmb of hydrocarbon liquids (approximately 750-850 mmeb). The field is located 185 miles off the northern coast of Australia in 240 feet of water. The Company owns 25 percent of ZOCA 91-13. In 1996, the Company obtained an offshore exploration permit over Area AC95-1 in the Timor Sea region of Australia's Northwest Shelf. The permit, which covers an area of 1,251 square miles, is located 80 miles west of ZOCA 91-13. Water depths across the permit range between 262 and 1,640 feet. The Company has one-third interest in the permit which covers an initial six year term. At December 31, 1996, the Company was drilling or participating in the drilling of 1 gross exploratory well. Production and Development In Ecuador, production increased in 1996 due to development work on Block 7 which contains the Gacela, Jaguar and Mono fields. The Company is conducting geophysical work on the Yuralpa prospect in Block 21. In 1996, production increased in Kazakstan where, during 1994, the Company signed two oil and gas agreements with the Republic of Kazakstan. The agreements involve both the development of a known field as well as the rights to explore a large block in western Kazakstan. A joint venture agreement was signed for development of the Arman Field which was discovered in the 1980's but had not been developed. The Company jointly operates the venture and currently holds a 50 percent interest with two Kazakstani partners. 6 8 The Arman Field is located on the Caspian Sea. In 1995, the first 380 thousand net barrels of oil were produced and sold from four wells in the Arman Field. The Company has a production sharing agreement for approximately 3 million acres located east of the Arman Field. In 1996, the Company entered into an agreement with Russia, Kazakstan, Oman and seven other international energy companies to construct a pipeline system that will run from the Tengiz field area in Kazakstan, around the Caspian Sea through Russia to the Black Sea. The Company has a 1.75 percent interest and a 3.50 percent cost sharing interest in the pipeline. The Company's average daily net production of crude oil and condensate from other foreign areas was 10, 13 and 19 mb in 1996, 1995 and 1994. The average daily production of crude oil and condensate decreased in 1995 compared to 1994, due to the sale of Indonesian assets, partially offset by increased production in Ecuador. The Company drilled 12 gross (6 net) development wells, all of which were successful, in 1996. As of December 31, 1996, the Company was in the process of drilling or participating in the drilling of 1 gross development well. In 1995, the Company sold all its interests in Indonesia and Gabon. PRODUCTION In 1996, the Company's production was concentrated primarily in the United States and the United Kingdom. In 1996, the Company produced 48 mmeb from its properties in the United States, 20.5 mmeb from its properties in the United Kingdom, and 4 mmeb from its other foreign properties. The following table sets forth the Company's average daily net production for 1996, 1995 and 1994: AVERAGE DAILY NET PRODUCTION
YEAR ENDED DECEMBER 31 ------------------------ 1996 1995 1994 ---- ---- ---- Crude and Condensate (mb): United States Onshore................................................ 28 30 38 Offshore............................................... 15 16 10 --- --- --- 43 46 48 --- --- --- U.K....................................................... 56 55 54 Other foreign............................................. 10 13 19 --- --- --- 66 68 73 --- --- --- Processed Natural Gas Liquids (mb): United States............................................. 7 6 6 --- --- --- 116 120 127 === === === Natural Gas (mmcf): United States Onshore................................................ 302 288 335 Offshore............................................... 189 180 203 --- --- --- 491 468 538 U.K....................................................... 9 50 62 --- --- --- 500 518 600 === === ===
7 9 ACREAGE, WELLS AND PER UNIT DATA The following table sets forth the Company's undeveloped and developed oil and gas acreage (in thousands) held at December 31, 1996 and 1995: UNDEVELOPED ACREAGE
GROSS NET -------------- -------------- 1996 1995 1996 1995 ----- ----- ----- ----- United States Onshore........................................... 916 983 506 533 Offshore.......................................... 472 380 328 275 ----- ----- ----- ----- 1,388 1,363 834 808 U.K................................................. 446 605 132 212 Other Foreign....................................... 6,253 5,479 2,704 2,266 ----- ----- ----- ----- 8,087 7,447 3,670 3,286 ===== ===== ===== =====
DEVELOPED ACREAGE
GROSS NET -------------- -------------- 1996 1995 1996 1995 ----- ----- ----- ----- United States Onshore........................................... 987 982 558 551 Offshore.......................................... 222 231 104 102 ----- ----- ----- ----- 1,209 1,213 662 653 U.K................................................. 69 72 46 36 Other Foreign....................................... 149 58 75 29 ----- ----- ----- ----- 1,427 1,343 783 718 ===== ===== ===== =====
8 10 The following table sets forth the Company's exploratory and development oil and gas wells drilled during 1996, 1995 and 1994: EXPLORATORY WELLS DRILLED
GROSS NET -------------------- -------------------- 1996 1995 1994 1996 1995 1994 ---- ---- ---- ---- ---- ---- Oil United States Onshore.............................. - - - - - - Offshore............................. - 1 - - 1 - -- -- -- -- -- -- - 1 - - 1 - U.K..................................... - - - - - - Other foreign........................... - - 3 - - - -- -- -- -- -- -- - 1 3 - 1 - -- -- -- -- -- -- Gas United States Onshore.............................. - - 1 - - - Offshore............................. 2 1 1 1 - 1 -- -- -- -- -- -- 2 1 2 1 - 1 U.K..................................... 1 - - - - - Other Foreign........................... 3 1 1 1 - 1 -- -- -- -- -- -- 6 2 3 2 - 2 -- -- -- -- -- -- Dry United States Onshore.............................. - - - - - - Offshore............................. 7 4 3 2 2 2 -- -- -- -- -- -- 7 4 3 2 2 2 U.K..................................... - - 1 - - - Other foreign........................... - - 14 - - 3 -- -- -- -- -- -- 7 4 18 2 2 5 -- -- -- -- -- -- Total.............................. 13 7 24 4 3 7 == == == == == ==
9 11 DEVELOPMENT WELLS DRILLED
GROSS NET -------------------- -------------------- 1996 1995 1994 1996 1995 1994 ---- ---- ---- ---- ---- ---- Oil United States Onshore.............................. 62 56 27 43 41 11 Offshore............................. 12 7 5 9 7 2 --- --- --- --- --- -- 74 63 32 52 48 13 U.K..................................... 14 7 20 6 2 4 Other foreign........................... 12 14 35 6 2 4 --- --- --- --- --- -- 100 84 87 64 52 21 --- --- --- --- --- -- Gas United States Onshore.............................. 72 65 49 50 39 23 Offshore............................. 14 7 9 8 4 3 --- --- --- --- --- -- 86 72 58 58 43 26 U.K..................................... -- 1 2 -- -- -- --- --- --- --- --- -- 86 73 60 58 43 26 --- --- --- --- --- -- Dry United States Onshore.............................. 14 11 4 10 9 4 Offshore............................. 4 -- 2 2 -- 1 --- --- --- --- --- -- 18 11 6 12 9 5 U.K..................................... -- -- -- -- -- -- Other foreign........................... -- -- -- -- -- -- --- --- --- --- --- -- 18 11 6 12 9 5 --- --- --- --- --- -- Total.............................. 204 168 153 134 104 52 === === === === === ==
The following table sets forth the Company's gross and net producing oil and gas wells at December 31, 1996: PRODUCING OIL AND GAS WELLS
GROSS* NET ------------ ------------ OIL GAS OIL GAS ----- --- ----- --- United States Onshore.............................................. 2,855 830 1,587 512 Offshore............................................. 88 165 48 81 ----- --- ----- --- 2,943 995 1,635 593 U.K.................................................... 130 4 56 -- Other Foreign.......................................... 55 -- 20 -- ----- --- ----- --- Total............................................. 3,128 999 1,711 593 ===== === ===== ===
- ------------------------------ * Gross producing wells include 132 multiple completion wells (more than one formation producing into the same well bore). 10 12 The following table sets forth the Company's average revenues and production costs per unit of oil and gas production for 1996, 1995 and 1994: AVERAGE PER UNIT REVENUES AND PRODUCTION COSTS
YEAR ENDED DECEMBER 31 -------------------------- 1996 1995 1994 ------ ------ ------ Revenues: Crude and condensate (per bbl) U.S............................................... $20.43 $16.44 $14.69 U.K............................................... $19.88 $16.73 $15.44 Other foreign..................................... $13.89 $14.51 $14.89 Worldwide......................................... $19.56 $16.35 $15.06 Natural Gas (per mcf) U.S............................................... $ 2.14 $ 1.73 $ 1.87 U.K............................................... $ 2.05 $ 2.20 $ 2.15 Worldwide......................................... $ 2.14 $ 1.77 $ 1.90
Average production cost per unit of oil and gas production (per eb):* U.S. Operating costs................................... $ 3.14 $ 3.64 $ 3.96 Production taxes.................................. .87 .72 .89 ------ ------ ------ Total production costs............................ $ 4.01 $ 4.36 $ 4.85 U.K. Operating costs................................... $ 4.69 $ 6.45 $ 6.13 Production taxes.................................. 5.38 2.12 1.17 ------ ------ ------ Total production costs............................ $10.07 $ 8.57 $ 7.30 Other foreign Operating costs................................... $ 3.08 $ 3.53 $ 4.43 Production taxes.................................. 3.27 4.95 5.71 ------ ------ ------ Total production costs............................ $ 6.35 $ 8.48 $10.14 Worldwide Operating costs................................... $ 3.40 $ 4.52 $ 4.65 Production taxes.................................. 2.29 1.43 1.39 ------ ------ ------ Total production costs............................ $ 5.69 $ 5.95 $ 6.04
- ------------------------------ * Excludes natural gas liquids production. ACQUISITIONS AND DIVESTMENTS Assets are managed on a portfolio basis. The Company will continue to buy and sell assets with the intention of upgrading its asset base. RECOVERY METHODS During 1996, the Company obtained 61 and 39 percent of its U.S. crude production from primary and secondary recovery methods. This compares to 62 and 37 percent, plus 1 percent from tertiary, of its crude oil production in 1995. At December 31, 1996, the Company was participating in no major tertiary oil recovery programs. The terms "secondary recovery" and "tertiary recovery" relate to those methods used to increase the quantity of crude oil and condensate and natural gas that can be recovered in excess of the quantity recoverable using the primary energy found in a reservoir. Secondary recovery methods include pressure maintenance by waterflooding or natural gas injection. 11 13 MARKETING OF OIL AND GAS Distribution In the U.S., crude oil, condensate and natural gas are distributed through pipelines and/or trucks to traders, end users, gatherers and transportation companies and in foreign locations by tankers and/or pipelines to traders and end users. Worldwide, sufficient distribution systems exist and are readily available in the areas of the Company's production to enable the Company to effectively market its oil and gas. In some instances, the Company owns an interest in these systems. Crude and Condensate During 1996, sales to Morgan Stanley Capital Groups, Inc., J. Aron & Company and Amoco Production Co. totaled approximately 16, 14 and 12 percent of the Company's sales of crude oil and condensate. No other customer purchased more than 10 percent of the Company's sales of crude oil and condensate. Since most of the Company's crude and condensate is produced in areas where there are other buyers offering to purchase at market prices, the Company believes that the loss of any major purchaser would not have a material adverse effect on the Company's business. In 1996, the ten largest customers, including Morgan Stanley Capital Groups, Inc., J. Aron & Company and Amoco Production Co., accounted for approximately 77 percent of such sales. Currently, approximately 79 percent of domestic sales are made pursuant to arrangements that are cancelable upon 30 days' written notice by the Company or the purchaser, with substantially all of the remainder of the domestic production being sold pursuant to contracts of varying terms of up to eight years in length. The Company markets its foreign crude oil production, which is sold under short-term contracts, on a cargo/lot basis. Natural Gas During the fourth quarter of 1995, the Company, Apache Corporation and Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC (ProEnergy). ProEnergy purchases the majority of its members' U.S. gas production at index prices. During 1996, sales to ProEnergy totaled approximately 50 percent of the Company's sales of natural gas. No other customer purchased more than 10 percent of the Company's sales of natural gas. Natural gas production which was not dedicated to third party purchasers under the terms of existing contracts as of the date of the formation of ProEnergy became dedicated to ProEnergy under the terms of the Member Gas Purchase Agreement as of April 1, 1996. As of December 31, 1996 approximately 27% of the Company's natural gas was contracted to various end users of natural gas on a term basis. The duration of these agreements ranges from three months to five years. Hedging Because of the volatility of oil and gas prices, the Company periodically enters into crude oil and natural gas hedging activities. REGULATION General The oil and gas industry is subject to regulation by the public policies of national, state and local governments relating to such matters as the award of exploration and production interests, the imposition of specific drilling obligations, environmental protection controls, control over the development and abandonment of a field (including restrictions on production and abandonment of production facilities) and, in some cases, possible nationalization, expropriation, regulatory taking, cancellation or frustration of contract rights. The industry is also subject to the payment of royalties and taxes, which tend to be high compared to those levied 12 14 on other commercial activities. The Company cannot predict the impact of future regulatory and taxation initiatives. Natural Gas The natural gas industry in the United States remains under federal regulation pursuant to the Natural Gas Act and the Natural Gas Policy Act. Environmental Matters The Company is subject to, and makes every effort to comply with, various environmental quality control regulations of national, state and local governments. Although environmental requirements can have a substantial impact upon the energy industry, generally these requirements do not appear to affect the Company any differently or to any greater or lesser extent than other exploration and production companies. The Company has been named as a potentially responsible party (PRP) at four sites pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. At two of these sites, the Company has been named as a de minimis party and therefore expects its liability to be small. At a third site, the Company is reviewing its options and anticipates that it will participate in steering committee activities with the Environmental Protection Agency (EPA). At the fourth and largest site, the Operating Industries, Inc. site in California, the Company has participated in a steering committee consisting of 139 companies. The steering committee and other PRP's previously entered into two partial consent decrees with the EPA providing for remedial actions which have been or are to be completed. The steering committee has successfully negotiated a third partial consent decree which provides for the following remedial actions: a clay cover, methane capturing wells and leachate destruction facilities. The remaining work at the site involves groundwater evaluation and long-term operation and maintenance. Based on the facts outlined above and the Company's ongoing analyses of the actions where it has been identified as a PRP, the Company believes that it has accrued sufficient reserves to absorb the ultimate costs of such actions and that such costs will not have a material impact on the Company's liquidity, capital resources or financial condition. While liability at superfund sites is typically joint and several, the Company has no reason to believe that defaults by other PRPs will result in the anticipated liability of the Company being materially larger than expected. COMPETITION The oil and gas industry is highly competitive. Integrated companies, independent companies and individual producers and operators are active bidders for desirable oil and gas properties, as well as for the equipment and labor required to operate and develop such properties. Although several of these competitors have financial resources substantially greater than those of the Company, management believes that the Company is in a position to compete effectively. The availability of a ready market for the Company's oil and gas production depends on numerous factors beyond its control, including the level of prices and consumer demand, the extent of worldwide oil and gas production, the cost and availability of alternative fuels, the cost and proximity of pipelines and other transportation facilities, regulation by national and local authorities and the cost of compliance with applicable environmental regulations. TECHNOLOGY The Company's exploration, development and production activities depend upon the use of applied technology. In support of this, the Company has 24 engineers, geoscientists, technicians and support personnel focusing on the technology used in the exploration for, and development and production of, energy resources. The Company's expenditures on technology activities, including employee-related costs, were $8 million, $8 million and $11 million for the years 1996, 1995 and 1994, respectively. 13 15 THE PARTNERSHIP Since December 1, 1985, the Company has functioned as the managing general partner for, and has conducted its business operations in the United States principally through the Partnership, a Delaware limited partnership. As of December 31, 1996, the Company had a 98 percent interest in the Partnership. The remaining 2 percent partnership interest is a limited partnership interest and is held by public unitholders in the form of depositary units. There were 7,543,100 depositary units outstanding at December 31, 1996. The Partnership operates through Sun Operating Limited Partnership, which is a Delaware limited partnership, and several other operating partnerships. Certain conflicts of interest may arise as a result of the relationships between the Company and the Partnership. The directors and officers of the Company have fiduciary duties to manage the Company in the best interest of its stockholders. The Company, as managing general partner of the Partnership, has a fiduciary duty to manage the Partnership in a manner that is fair to the public unitholders. The duty of the directors of the Company to its stockholders may therefore come into conflict with the duties of the Company to the public unitholders. The Partnership may sell limited partnership units to the Company for the purpose of funding the Partnership's property acquisition, exploration and development cash requirements. The Audit Committee of the Board of Directors of the Company (Audit Committee), none of whose members is affiliated with the Company except as Company directors or stockholders or as holders of units, reviews policies and procedures developed by the Company for dealing with various matters as to which a conflict of interest may arise. The Audit Committee also monitors the application of such policies and procedures. EMPLOYEES At December 31, 1996, the number of full-time active employees of the Company was 976. ITEM 3. LEGAL PROCEEDINGS The historical method used by the oil industry in the United States to establish the price at which crude oil is bought and sold is being challenged. Buyers and sellers have traditionally determined the market price of crude oil by reference to "posted prices", which are prices published by certain crude oil buyers such as crude oil refiners and transporters as the price at which they are willing to buy. A number of suits have been brought alleging that posted prices have been set consistently below market value, and that, as a result, royalties have been underpaid. The Company was named as a defendant in such a case filed in state court in Starr County, Texas in April, 1995 and a co-defendant in cases filed in state courts in Lee County, Texas and in Louisiana and in federal court in Alabama. All of these lawsuits seek certification as class actions on behalf of royalty owners in specific geographic areas, except the Alabama case, which seeks certification of a nationwide class of royalty owners. The Alabama case also alleges that the co-defendants have conspired and acted in concert to establish the price of crude oil in violation of antitrust statutes. These suits are similar to those brought in Texas by the Texas General Land Office, and in Texas, New Mexico, Oklahoma and Florida by private royalty owners against major crude oil producers. Suits are also being brought by natural gas royalty interest owners regarding royalty valuation and deductions of post-production costs from royalty. In addition to these suits, the Minerals Management Service ("MMS") of the United States Department of the Interior is challenging the prices on which royalties were assessed. The MMS has claimed that a number of crude oil producers including the Company underpaid royalties owed the federal government on California crude oil production from 1980 to 1988 and has sent Orders to Pay to a number of producers including the Company. The MMS is also auditing royalty valuation in other parts of the country. The Department of Justice is independently investigating whether oil and gas producers have violated the False Claims Act in connection with royalty payments on production from federal and Indian lands. 14 16 While a number of claims and suits against the Company and other crude oil and natural gas producers have already been brought by a variety of governmental and private plaintiffs in a number of jurisdictions, the fact that these suits challenge practices common to the industry suggests that additional lawsuits against the Company may be filed. The suits filed to date, to include the actions in which the Company is a party, are in the preliminary stage. The Company believes it has meritorious defenses and intends to defend these claims and lawsuits vigorously. The Company is involved in a number of other legal and administrative proceedings arising in the ordinary course of its oil and gas business. Although the ultimate outcome of these proceedings cannot be ascertained at this time, it is reasonably possible that some of the proceedings could be resolved unfavorably to the Company. Management of the Company believes that any liabilities which may arise out of legal claims or proceedings would not be material in relation to its financial position at December 31, 1996. The Company intends to maintain liability and other insurance of the type customary in the oil and gas business with such coverage limits as the Company deems prudent. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS On May 2, 1996, the Annual Meeting of Shareholders of Oryx Energy Company was held to vote on proposals as follows: (a) To elect three directors to Class II of the Company's Board of Directors.
ROBERT L. PAUL R. IAN L. KEISER SEEGERS WHITE-THOMSON ----------- ----------- ------------- Affirmative................................ 79,941,770 79,941,727 79,949,037 Negative................................... -- -- -- Abstained.................................. -- -- -- Withheld................................... 3,174,241 3,174,284 3,166,974 Broker non-votes........................... -- -- -- Shares without executed proxies and not present for vote......................... 21,450,693 21,450,693 21,450,693 ----------- ----------- ----------- Shares entitled to vote.................... 104,566,704 104,566,704 104,566,704 =========== =========== ===========
(b) To approve the appointment of Coopers & Lybrand L.L.P. as independent accountants for the fiscal year 1996. Affirmative................................................. 82,056,185 Negative.................................................... 734,889 Abstained................................................... 324,419 Withheld.................................................... -- Broker non-votes............................................ 518 Shares without executed proxies and not present for vote.... 21,450,693 ----------- Shares entitled to vote..................................... 104,566,704 ===========
15 17 (c) To approve the Equity and Deferred Compensation Plan for Non-Employee Directors. Affirmative................................................. 77,181,847 Negative.................................................... 5,212,172 Abstained................................................... 479,074 Withheld.................................................... -- Broker non-votes............................................ 242,918 Shares without executed proxies and not present for vote.... 21,450,693 ----------- Shares entitled to vote..................................... 104,566,704 ===========
(d) To approve the Executive Variable Incentive Plan. Affirmative................................................. 77,296,672 Negative.................................................... 5,212,523 Abstained................................................... 605,998 Withheld.................................................... -- Broker non-votes............................................ 818 Shares without executed proxies and not present for vote.... 21,450,693 ----------- Shares entitled to vote..................................... 104,566,704 ===========
EXECUTIVE OFFICERS The following table sets forth information as to the Company's executive officers. All officers of the Company hold their offices at the pleasure of the Board of Directors.
NAME, AGE AND BUSINESS EXPERIENCE POSITION WITH THE COMPANY DURING PAST FIVE YEARS ------------------------- ---------------------- Jerry W. Box, 58 Mr. Box has been in this position since December 1995. From Executive Vice President, December 1994 through November 1995 he served as Chief Operating Officer and Director Executive Vice President, Exploration and Production. From January 1992 through November 1994, he served as Senior Vice President, Exploration and Production of the Company. Sherri T. Durst, 47 Ms. Durst has been in this position since December 1993. General Auditor From February 1990 to December 1993, she served as Manager, Financial Processes. Steven J. Flowers, 36 Mr. Flowers assumed this position on November 8, 1996. He Treasurer joined the Company in August 1995 as Assistant Treasurer. Prior to joining Oryx, Mr. Flowers held various financial and planning positions, including Assistant Treasurer at Maxus Energy Corporation from 1988 to 1995. Frances G. Heartwell, 50 Ms. Heartwell assumed this position in December 1995. From Vice President, Human Resources and February 1993 to December 1995, she served the Company as Administration Director, Human Resources. From December 1991 to February 1993, Ms. Heartwell was Director of Employee and Community Relations. Robert L. Keiser, 54 Mr. Keiser assumed this position in December 1994. From Chairman of the Board, January 1992 through November 1994, he was President and Chief Executive Officer, and President Chief Operating Officer of the Company.
16 18
NAME, AGE AND BUSINESS EXPERIENCE POSITION WITH THE COMPANY DURING PAST FIVE YEARS ------------------------- ---------------------- William C. Lemmer, 52 Mr. Lemmer assumed this position in February 1995. From Vice President, General Counsel and June 1994 until February 1995, he served as Vice Secretary President and General Counsel to the Company. For the five previous years, he was Chief Counsel, Corporate of the Company. Edward W. Moneypenny, 55 Mr. Moneypenny has been in this position since December Executive Vice President, Finance, 1994. From January 1992 through November 1994, he was Chief Financial Officer, and Director Senior Vice President, Finance and Chief Financial Officer of the Company. Robert L. Thompson, 50 Mr. Thompson assumed this position in February 1995. From Comptroller and February 1993 through January 1995, he served the Company Corporate Planning Director as Director of Business Planning and Acquisitions. From January 1992 through January 1993, he was Director of Planning and Analysis.
PART II ITEM 5. MARKET FOR ORYX ENERGY COMPANY COMMON STOCK AND RELATED SECURITY HOLDER MATTERS Market for Oryx Energy Company Common Stock and Related Security Holder Matters on page 47 of the Company's 1996 Annual Report to Shareholders is incorporated herein by reference. The market exchange on which the Company's stock is traded is listed on the cover page of this Form 10-K Annual Report. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated herein by reference to page 17 of the Company's 1996 Annual Report to Shareholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated herein by reference to pages 13-16 of the Company's 1996 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following information in the Company's 1996 Annual Report to Shareholders is incorporated herein by reference: the Consolidated Financial Statements on pages 18-21; the Notes to Consolidated Financial Statements on pages 22-40; the Report of Independent Accountants on page 41; and the Supplementary Financial and Operating Information (Unaudited) on pages 42-46. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 17 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information on directors required by this Item is incorporated herein by reference to the section entitled "Election of Directors" on pages 3-5 of the Company's definitive Proxy Statement dated March 26, 1997. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to the section entitled "Executive Compensation" on pages 9-17 of the Company's definitive Proxy Statement dated March 26, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated herein by reference to the sections entitled "Security Ownership of Certain Beneficial Owners" on page 2 and "Security Ownership of Management" on page 8 of the Company's definitive Proxy Statement dated March 26, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1. Consolidated Financial Statements: The information in the Company's 1996 Annual Report to Shareholders as described in Item 8 is incorporated herein by reference. Other schedules and separate financial statements of unconsolidated subsidiaries are omitted because the information is shown elsewhere in this report, is not required or is not applicable. 2. Exhibits:
*3.1 -- Restated Certificate of Incorporation of the Registrant, as currently in effect **3.2 -- Amended and Restated Bylaws of the Registrant, as currently in effect ***4.1 -- Form of Common Stock of the Registrant ****4.2 -- Rights Agreement dated as of September 11, 1990, between the Registrant and Manufacturers Hanover Trust Company +4.3 -- Indenture dated as of September 11, 1990, between the Registrant and Manufacturers Hanover Trust Company ++4.4 -- First Supplemental Indenture by and between The Bank of New York and the Registrant +++10.1 -- Second Amended and Restated Agreement of Limited Partnership of Sun Energy Partners, L.P. +++10.2 -- Agreement of Limited Partnership of Sun Operating Limited Partnership, as amended 10.3 + -- Registrant's Equity and Deferred Compensation Plan for Non-Employee Directors 10.4 + -- Registrant's Executive Variable Incentive Plan
18 20
++++10.5 -- Registrant's Pension Restoration Plan ++10.5a -- Amendment to Registrant's Pension Restoration Plan ++++10.6 + -- Registrant's Executive Retirement Plan As Amended and Restated as of January 1, 1995 ++++10.6a + -- Amendment No. One to Registrant's Executive Retirement Plan As Amended and Restated Effective January 1, 1995 10.6b + -- Amendment No. Two to Registrant's Executive Retirement Plan As Amended and Restated Effective January 1, 1995 ++++++10.7 + -- Registrant's Executive Long-Term Incentive Plan ++++++++10.7a + -- Amendment to Registrant's Executive Long-Term Incentive Plan, dated February 1, 1989 ++++++++10.7b + -- Amendment to Registrant's Executive Long-Term Incentive Plan, dated February 6, 1989 m10.8 + -- Registrant's 1992 Long-Term Incentive Plan As Amended Through December 2, 1993 and Restated 10.8a + -- Amendment to Registrant's 1992 Long-Term Incentive Plan As Amended Through December 2, 1993 and Restated Effective as of September 4, 1996 ++++10.9 + -- Registrant's Savings Restoration Plan As Amended and Restated as of September 6, 1995 ++++10.10 + -- Registrant's Executive Deferred Compensation Plan as Amended and Restated as of September 6, 1995 ++++10.11 + -- Registrant's Deferred Compensation and Benefits Trust ++++10.12 -- Registrant's Special Employee Severance Plan m10.13 + -- Registrant's Amended and Restated Special Executive Severance Plan mmm10.15 -- Oryx Energy Company $500,000,000 Revolving Credit Agreement Dated as of June 1, 1995 mmm10.16 -- Sale and Purchase Agreement by and between Novus Petroleum Limited and the Registrant dated February 17, 1995 mmm10.17 -- Sale and Purchase Agreement by and between Union Texas Petroleum Limited and the Registrant dated May 31, 1995 mmm10.18 -- Sale and Purchase Agreement by and between Powergen North Sea Limited and the Registrant dated June 14, 1995 12 -- Computation of Consolidated Ratio of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividend Requirements 13 -- Oryx Energy Company 1996 Annual Report to Shareholders m18 -- Accountant's Preferability Letter mmmm19 -- Distribution Agreement dated August 28, 1991 relating to Medium-Term Notes, Series A ++21 -- Subsidiaries 23 -- Consent of Coopers & Lybrand L.L.P. 24 -- Power of Attorney 27 -- Financial Data Schedule
19 21 - ------------------------------
* Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 1-10053) filed with the Commission on May 15, 1992. ** Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990 (File No. 1-10053) filed with the Commission on November 14, 1990. *** Incorporated by reference to the Registrant's Form 8-K (File No. 1-10053) filed with the Commission on September 25, 1990. **** Incorporated by reference to the Registrant's Registration Statement on Form 8-A (File No. 1-10053) filed with the Commission on September 19, 1990. + Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-24214) filed with the Commission on September 8, 1988. ++ Incorporated by reference to the Registrant's Amendment No. 2 on Form S-3 (File No. 33-33361) filed with the Commission on June 29, 1990. +++ Incorporated by reference to the Form SE of Sun Energy Partners, L.P. filed with the Commission on March 20, 1986. + Management contracts or compensatory plan or arrangement required to be filed as an exhibit hereto. ++++ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-27723) filed with the Commission on March 22, 1989. ++ Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-10053) filed with the Commission on March 19, 1992. ++++ Incorporated by reference to the registrant's Annual report on Form 10-K for the fiscal year ended December 31, 1995 (File no. 1-10053) filed with the Commission on March 29, 1996. ++++++ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-24214) filed with the Commission on September 8, 1988. ++++++++ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-33361) filed with the Commission on February 6, 1990. m Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-10053) filed with the Commission on March 23, 1995. mm Incorporated by reference to the Registrant's Form 8-K (File No. 1-10053) filed with the Commission on December 26, 1989. mmm Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (File No. 1-10053) filed with the Commission on August 9, 1995. mmmm Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 (File No. 1-10053) filed with the Commission on November 14, 1991.
(b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the year ended December 31, 1996. 20 22 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. ORYX ENERGY COMPANY By: /s/ EDWARD W. MONEYPENNY ---------------------------------- Edward W. Moneypenny Executive Vice President, Finance, Chief Financial Officer, and Date: March 21, 1997 Director 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 date indicated.
SIGNATURE TITLE DATE --------- ----- ---- ROBERT L. KEISER* Chairman of the Board, President, ) - ----------------------------------------------------- and Chief Executive Officer ) Robert L. Keiser (principal executive officer) ) ) /s/ EDWARD W. MONEYPENNY Executive Vice President, Finance, ) - ----------------------------------------------------- Chief Financial Officer ) Edward W. Moneypenny (principal financial officer), ) and Director ) ) ROBERT L. THOMPSON* Comptroller and Corporate Planning ) - ----------------------------------------------------- Director (principal accounting ) Robert L. Thompson officer) ) ) JERRY W. BOX* Executive Vice President, Chief ) - ----------------------------------------------------- Operating Officer and Director ) Jerry W. Box ) ) WILLIAM E. BRADFORD* Director ) - ----------------------------------------------------- ) William E. Bradford ) ) SYLVIA A. EARLE* Director ) March 21, 1997 - ----------------------------------------------------- ) Sylvia A. Earle ) ) DAVID C. GENEVER-WATLING* Director ) - ----------------------------------------------------- ) David C. Genever-Watling ) ) ROBERT B. GILL * Director ) - ----------------------------------------------------- ) Robert B. Gill ) ) DAVID S. HOLLINGSWORTH* Director ) - ----------------------------------------------------- ) David S. Hollingsworth ) ) CHARLES H. PISTOR, JR.* Director ) - ----------------------------------------------------- ) Charles H. Pistor, Jr. ) ) PAUL R. SEEGERS* Director ) - ----------------------------------------------------- ) Paul R. Seegers ) ) IAN L. WHITE-THOMSON* Director ) - ----------------------------------------------------- ) Ian L. White-Thomson ) ) *By: /s/ EDWARD W. MONEYPENNY ) ------------------------------------------------ ) Edward W. Moneypenny ) Attorney-in-Fact ) )
- ------------------------------ * A Power of Attorney authorizing Robert L. Keiser and Edward W. Moneypenny, and each of them, to sign this Form 10-K Annual Report on behalf of the directors, constituting a majority of the Board of Directors, and certain officers of Oryx Energy Company, is being filed with the Securities and Exchange Commission. 21 23 INDEX TO EXHIBITS
Exhibit Description Number ------- ----------- *3.1 -- Restated Certificate of Incorporation of the Registrant, as currently in effect **3.2 -- Amended and Restated Bylaws of the Registrant, as currently in effect ***4.1 -- Form of Common Stock of the Registrant ****4.2 -- Rights Agreement dated as of September 11, 1990, between the Registrant and Manufacturers Hanover Trust Company +4.3 -- Indenture dated as of September 11, 1990, between the Registrant and Manufacturers Hanover Trust Company ++4.4 -- First Supplemental Indenture by and between The Bank of New York and the Registrant +++10.1 -- Second Amended and Restated Agreement of Limited Partnership of Sun Energy Partners, L.P. +++10.2 -- Agreement of Limited Partnership of Sun Operating Limited Partnership, as amended 10.3 + -- Registrant's Equity and Deferred Compensation Plan for Non-Employee Directors 10.4 + -- Registrant's Executive Variable Incentive Plan
24 ++++10.5 -- Registrant's Pension Restoration Plan ++10.5a -- Amendment to Registrant's Pension Restoration Plan ++++10.6 + -- Registrant's Executive Retirement Plan As Amended and Restated as of January 1, 1995 ++++10.6a + -- Amendment No. One to Registrant's Executive Retirement Plan As Amended and Restated Effective January 1, 1995 10.6b + -- Amendment No. Two to Registrant's Executive Retirement Plan As Amended and Restated Effective January 1, 1995 ++++++10.7 + -- Registrant's Executive Long-Term Incentive Plan ++++++++10.7a + -- Amendment to Registrant's Executive Long-Term Incentive Plan, dated February 1, 1989 ++++++++10.7b + -- Amendment to Registrant's Executive Long-Term Incentive Plan, dated February 6, 1989 m10.8 + -- Registrant's 1992 Long-Term Incentive Plan As Amended Through December 2, 1993 and Restated 10.8a + -- Amendment to Registrant's 1992 Long-Term Incentive Plan As Amended Through December 2, 1993 and Restated Effective as of September 4, 1996 ++++10.9 + -- Registrant's Savings Restoration Plan As Amended and Restated as of September 6, 1995 ++++10.10 + -- Registrant's Executive Deferred Compensation Plan as Amended and Restated as of September 6, 1995 ++++10.11 + -- Registrant's Deferred Compensation and Benefits Trust ++++10.12 -- Registrant's Special Employee Severance Plan m10.13 + -- Registrant's Amended and Restated Special Executive Severance Plan mmm10.15 -- Oryx Energy Company $500,000,000 Revolving Credit Agreement Dated as of June 1, 1995 mmm10.16 -- Sale and Purchase Agreement by and between Novus Petroleum Limited and the Registrant dated February 17, 1995 mmm10.17 -- Sale and Purchase Agreement by and between Union Texas Petroleum Limited and the Registrant dated May 31, 1995 mmm10.18 -- Sale and Purchase Agreement by and between Powergen North Sea Limited and the Registrant dated June 14, 1995 12 -- Computation of Consolidated Ratio of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividend Requirements 13 -- Oryx Energy Company 1996 Annual Report to Shareholders m18 -- Accountant's Preferability Letter mmmm19 -- Distribution Agreement dated August 28, 1991 relating to Medium-Term Notes, Series A ++21 -- Subsidiaries 23 -- Consent of Coopers & Lybrand L.L.P. 24 -- Power of Attorney 27 -- Financial Data Schedule
25 - ------------------------------ * Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 1-10053) filed with the Commission on May 15, 1992. ** Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990 (File No. 1-10053) filed with the Commission on November 14, 1990. *** Incorporated by reference to the Registrant's Form 8-K (File No. 1-10053) filed with the Commission on September 25, 1990. **** Incorporated by reference to the Registrant's Registration Statement on Form 8-A (File No. 1-10053) filed with the Commission on September 19, 1990. + Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-24214) filed with the Commission on September 8, 1988. ++ Incorporated by reference to the Registrant's Amendment No. 2 on Form S-3 (File No. 33-33361) filed with the Commission on June 29, 1990. +++ Incorporated by reference to the Form SE of Sun Energy Partners, L.P. filed with the Commission on March 20, 1986. + Management contracts or compensatory plan or arrangement required to be filed as an exhibit hereto. ++++ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-27723) filed with the Commission on March 22, 1989. ++ Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-10053) filed with the Commission on March 19, 1992. ++++ Incorporated by reference to the registrant's Annual report on Form 10-K for the fiscal year ended December 31, 1995 (File no. 1-10053) filed with the Commission on March 29, 1996. ++++++ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-24214) filed with the Commission on September 8, 1988. ++++++++ Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-33361) filed with the Commission on February 6, 1990. m Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-10053) filed with the Commission on March 23, 1995. mm Incorporated by reference to the Registrant's Form 8-K (File No. 1-10053) filed with the Commission on December 26, 1989. mmm Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (File No. 1-10053) filed with the Commission on August 9, 1995. mmmm Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 (File No. 1-10053) filed with the Commission on November 14, 1991. EX-10.3 2 REGISTRANTS EQUITY & DEFERRAL COMPENSATION PLAN 1 EXHIBIT 10.3 ORYX ENERGY COMPANY EQUITY AND DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS Effective as of May 2, 1996 2 ORYX ENERGY COMPANY EQUITY AND DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS SECTION 1. ESTABLISHMENT AND PURPOSE. Oryx Energy Company, a Delaware corporation (the "Company"), hereby establishes this Oryx Energy Company Equity and Deferred Compensation Plan for Non-Employee Directors (the "Plan"). The purposes of the equity compensation features of the Plan are to encourage non-employee directors of the Company to acquire shares of the Company's common stock, and thereby to align their interests more closely with the interests of the other stockholders of the Company, and to encourage the highest level of director performance by providing the non-employee directors with a more direct interest in the Company's attainment of its financial goals. The purpose of the elective deferral features of the Plan is to permit non-employee directors of the Company to defer to the date of termination of their service as directors of the Company or other fixed date all or part of their regular cash compensation. SECTION 2. CERTAIN DEFINITIONS. For purposes of the Plan, the following terms shall have the indicated meanings: (a) "annual retainer" shall have the meaning specified in Section 6(a) hereof. (b) "Average Share Price" means the average of the Fair Market Value of the Common Stock on each of the following days within the period for which Average Share Price is being determined under the Plan: (i) the last Trading Day of the calendar quarter ending on March 31; (ii) the last Trading Day of the calendar quarter ending on June 30; (iii) the last Trading Day of the calendar quarter ending on September 30; and (iv) the last Trading Day of the calendar quarter ending on December 31 (as appropriately adjusted to take into account any stock dividend, split, or combination during such period with respect to the Common Stock). (c) "Board of Directors" means the Board of Directors of the Company. (d) "Cash Compensation" means the cash compensation earned by an Outside Director for his services as a director of the Company. (e) "cash retainer" shall have the meaning specified in Section 6(a) hereof. (f) "Cash Unit" shall have the meaning specified in Section 8(d) hereof. (g) "Common Stock" means the Common Stock, par value $1.00 per share, of the Company, or any stock or other securities of the Company hereafter issued or issuable in substitution or exchange for the Common Stock. 3 (h) "Compensation Committee" means the Compensation Committee of the Board of Directors. (i) "Deferred Compensation Account" shall have the meaning specified in Section 8(d) hereof. (j) "Fair Market Value" of the Common Stock on any Trading Day shall be the average of the high and low sales prices of the Common Stock for such day, or if no such sale is made on such day, the average of the closing bid and asked prices of the Common Stock for such day, in each case as officially reported on the New York Stock Exchange (or, if the Common Stock is not then listed or admitted to trading on the New York Stock Exchange, the principal national stock exchange or stock market on which the Common Stock is then listed or admitted to trading). (k) "Initial Restricted Period" shall have the meaning specified in Section 7(a)(i) hereof. (l) "Interest Equivalent" shall have the meaning specified in Section 8(d) hereof. (m) "Outside Director" means an individual duly elected or chosen as a director of the Company who is not also an officer or employee of the Company or its subsidiaries. (n) "Participant" shall have the meaning specified in Section 8(a) hereof. (o) "plan quarter" means each three-month period ending on July 31, October 31, January 31, and April 30 of each Plan Year, except that the plan quarters for the first Plan Year hereunder shall be the three-month period ending on September 30, 1996, the three-month period ending on December 31, 1996, and the four-month period ending on April 30, 1997. (p) "Plan Year" means each 12-month period commencing on May 1 and ending on and including the next following April 30, except that the first Plan Year hereunder shall commence on July 1, 1996 and end on and include April 30, 1997. (q) "Required Share Amount" means an amount of money constituting 50% of an Outside Director's annual retainer earned by such Outside Director for his services as a director of the Company for a Plan Year, which amount is payable in shares of Common Stock pursuant to Section 6(c) hereof. The Required Share Amount is not Cash Compensation for purposes of the Plan. (r) "Restricted Period" shall have the meaning specified in Section 7(a)(i) hereof. (s) "Restricted Shares" means shares of Common Stock issued pursuant to the Plan that are subject to the restrictions imposed by the provisions of Section 7 hereof. -2- 4 (t) "Share Award" means an award, grant, sale, or other issuance of Shares, Restricted Shares or Unrestricted Shares to an Outside Director pursuant to the provisions of the Plan. (u) "Shares" means shares of Common Stock issued pursuant to the Plan that are not subject to the restrictions imposed by the provisions of Section 7 hereof, but are subject to the restrictions on transfer set forth in Section 10 hereof. (v) "Term of Office" means the term of office as a director of the Company for which the Outside Director has been elected pursuant to and in accordance with the provisions of the certificate of incorporation and bylaws of the Company. (w) "Trading Day" means any day on which the stock exchange or stock market referred to in Section 2(j) hereof is open for trading on a regular basis. (x) "Unrestricted Shares" means shares of Common Stock issued pursuant to the Plan that are not subject to the restrictions imposed by the provisions of Section 7 or 10 hereof. (y) "Voluntary Share Amount" means the amount of Cash Compensation (including the cash retainer) earned by an Outside Director for a Plan Year which the Outside Director elects to apply to the purchase of shares of Common Stock pursuant to Section 6(b) hereof. SECTION 3. PLAN ADMINISTRATION. The Compensation Committee shall be responsible for the administration of the Plan. However, the Compensation Committee shall have no authority, discretion, or power to select the Outside Directors who will receive Share Awards, determine the Share Awards to be made pursuant to the Plan, the number of Shares, Restricted Shares or Unrestricted Shares to be issued thereunder, or the time at which Share Awards are to be made, establish the duration or nature of the restrictions applicable to Shares or Restricted Shares, or alter any other terms or conditions specified in the Plan, except in the sense of administering the Plan subject to the express provisions hereof, including Section 12 hereof. Subject to the foregoing limitations, the Compensation Committee is authorized to interpret the Plan, prescribe, amend, and rescind rules and regulations relating to the Plan, provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company in connection with the operation of the Plan, and make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan or any agreement entered into pursuant to the Plan. The determinations, interpretations, and other actions of the Board of Directors and the Compensation Committee pursuant to the provisions of the Plan shall be binding and conclusive for all purposes and on all persons. SECTION 4. STOCK SUBJECT TO THE PLAN. (a) Number of Shares. Three hundred thousand (300,000) shares of Common Stock are authorized for issuance under the Plan in accordance with the provisions of the Plan. Shares of Common Stock that are issued as Shares, Restricted Shares or Unrestricted Shares shall be -3- 5 applied to reduce the maximum number of shares of Common Stock remaining available for use under the Plan. Any Restricted Shares that are forfeited to the Company pursuant to the provisions of Section 7(b) hereof shall again be available for use under the Plan. Any shares of Common Stock issuable to an Outside Director under the Plan that for any reason are not issued to the Outside Director shall automatically become available for use under the Plan. The Company shall at all times during the term of the Plan retain as authorized and unissued Common Stock at least the number of shares from time to time required under the provisions of the Plan or otherwise assure itself of its ability to perform its obligations hereunder. Shares of Common Stock issued pursuant to the Plan may be shares of original issuance or treasury shares or a combination of the foregoing, as the Board of Directors, in its discretion, shall from time to time determine. (b) Adjustments Upon Changes in Common Stock. In the event the Company shall effect a split of the Common Stock or a dividend payable in Common Stock, or in the event the outstanding Common Stock shall be combined into a smaller number of shares, (i) the maximum number of shares of Common Stock that may be issued under the Plan shall be increased or decreased proportionately and (ii) the Board of Directors shall make an appropriate adjustment in the number of shares of Common Stock then subject to issuance under Sections 5(b) and 5(c) hereof. In the event of a reclassification of the Common Stock not covered by the foregoing, or in the event of a liquidation or reorganization (including a merger, consolidation, or sale of assets) of the Company, the Board of Directors shall make such adjustments, if any, as it may deem appropriate in the number and kind of shares that are authorized for issuance or are issuable pursuant to the Plan. SECTION 5. INITIAL AND ANNUAL AUTOMATIC GRANTS OF COMMON STOCK. (a) Initial Grants to Current Directors. Effective as of the next business day after the 1996 annual meeting of stockholders of the Company, the Company shall issue 5,500 shares of Common Stock to each person who is an Outside Director on such date. (b) Initial Grants to Newly Elected Directors. Commencing after the date of the 1996 annual meeting of stockholders of the Company, 5,000 shares of Common Stock shall be issued by the Company automatically to each Outside Director who is newly elected to the Board of Directors after such date, irrespective of whether such Outside Director is elected by the Board of Directors or by the stockholders. The effective date of issuance of such shares shall be the effective date of such Outside Director's election to the Board of Directors. For purposes of this Section 5(b), the term "newly elected to the Board of Directors" shall mean that the Outside Director was not serving as a director of the Company immediately prior to the time of his election in respect of which such shares are issued. (c) Annual Grants. Beginning with the year 1997, 500 shares of Common Stock shall be issued by the Company automatically effective as of the date of each annual meeting of stockholders of the Company, to each person who (i) is an Outside Director on the date of and immediately following such annual meeting and (ii) has served in that capacity for at least six months immediately preceding the date of such annual meeting. -4- 6 (d) Form of Share Awards. Each Share Award granted to an Outside Director pursuant to this Section 5 shall be made either (i) all in Restricted Shares or (ii) all in Shares, as shall be designated by the recipient of such award by notice in writing delivered to the Company (A) prior to March 15, 1996 (in the case of an award under Section 5(a) hereof), (B) prior to the effective date of issuance of such shares (in the case of an award under Section 5(b) hereof), or (C) prior to the January 1 immediately preceding the annual meeting of stockholders in respect of which the award is made (in the case of an award under Section 5(c) hereof). All such designations shall be on a form prescribed for this purpose by the Compensation Committee and shall be irrevocable. If no such designation is made with respect to a Share Award granted under this Section 5, such award shall be made all in Shares. (e) Declinations. Any Outside Director may decline to accept any Share Award granted to him pursuant to this Section 5 by giving written notice to the Company of his election to decline to accept such award. SECTION 6. SHARE AWARDS APPLICABLE TO RETAINER AND OTHER CASH COMPENSATION. (a) Retainer; Required Share Amount. The amount of the retainer to be paid to each Outside Director for each Plan Year (the "annual retainer") shall be determined by the Board of Directors from time to time; 50% of the annual retainer shall be the cash component of the retainer, payable in cash as Cash Compensation (the "cash retainer"), and the other 50% of the annual retainer shall be the equity component of the retainer, payable in shares of Common Stock as the Required Share Amount. The cash retainer for each Plan Year shall be payable in installments as of the last day of each plan quarter of the Plan Year in arrears. An Outside Director must be serving as an Outside Director on the last day of the plan quarter in order to earn his cash retainer for such plan quarter; provided, however, that an Outside Director serving in such capacity on such day who has served in such capacity for less than the entire plan quarter shall have his cash retainer for such plan quarter pro-rated based on his number of days of service as an Outside Director during such plan quarter. An Outside Director must be serving as an Outside Director on the last day of the Plan Year in order to earn his Required Share Amount for such year; provided, however, that an Outside Director serving in such capacity on such day who has served in such capacity for less than the entire Plan Year shall have his Required Share Amount for such Plan Year pro-rated based on his number of days of service as an Outside Director during such Plan Year. (b) Voluntary Share Amount. For any Plan Year, an Outside Director may elect to have up to 100% of his cash retainer earned for such Plan Year and any other Cash Compensation earned by him for such Plan Year for his services as a director of the Company, which amounts have not been deferred by the Outside Director pursuant to the provisions of Section 8 hereof (collectively referred to herein as his Voluntary Share Amount), applied to the purchase of shares of Common Stock pursuant to the provisions of Section 6(c) hereof. An Outside Director must notify the Company in writing of such election prior to the first day of the Plan Year for which the election is made (or prior to such later date as may be approved by the Compensation Committee); provided, however, that a newly elected Outside Director (within the meaning of Section 5(b) hereof) may make such an election prior to the commencement of such Outside Director's initial Term of Office with respect to Cash Compensation earned by him -5- 7 in the balance of the Plan Year of his initial election to the Board of Directors. Unless otherwise determined by the Compensation Committee, a separate election must be made for each Plan Year. An election made pursuant to this Section 6(b) for a Plan Year shall be irrevocable from and after the first day of such Plan Year; provided, however, that an election made pursuant to this Section 6(b) during a Plan Year for the remaining portion of such Plan Year shall be irrevocable from and after the date the election is made. Such elections shall be on a form prescribed for this purpose by the Compensation Committee. (c) Issuance of Shares. Promptly following the end of each Plan Year, the Company shall, subject to the further provisions of this Section 6, issue to each Outside Director, effective as of the last day of such Plan Year: (A) a number of whole shares of Common Stock determined by dividing (x) the Required Share Amount earned by such Outside Director for such Plan Year by (y) the Average Share Price of the Common Stock for such Plan Year or, if such Outside Director did not serve as an Outside Director during the entire Plan Year, for that portion of the Plan Year during which he served in that capacity (for purposes of calculating such Average Share Price, the Outside Director shall always be deemed to have served in that capacity for at least the last plan quarter of the Plan Year), and (B) a number of whole shares of Common Stock determined by dividing (x) such Outside Director's Voluntary Share Amount, if any, for such Plan Year by (y) the Average Share Price of the Common Stock for such Plan Year or, if such Outside Director did not serve as an Outside Director during the entire Plan Year, for that portion of the Plan Year during which he served in that capacity (for purposes of calculating such Average Share Price, the Outside Director shall always be deemed to have served in that capacity for at least the last plan quarter of the Plan Year). The issuance of shares of Common Stock to the Outside Director pursuant to clause (A) above and the issuance of shares of Common Stock to the Outside Director pursuant to clause (B) above shall each be deemed to be a separate Share Award made to the Outside Director. No fractional shares of Common Stock shall be issued by the Company pursuant to this Section 6(c), and no cash payment or other adjustment shall be made in respect of any such fractional share that would otherwise be issuable. (d) Eligibility. An Outside Director must be serving as an Outside Director on the last day of the Plan Year in order to be eligible to receive shares of Common Stock pursuant to Section 6(c) hereof in respect of his Required Share Amount and Voluntary Share Amount, if any, for such Plan Year. Any Outside Director who becomes ineligible to receive shares of Common Stock in respect of his Voluntary Share Amount for a Plan Year because his service as an Outside Director terminated prior to the last day of such Plan Year shall be paid any earned amounts of such Voluntary Share Amount in cash, without interest, as promptly as practicable following the date of such termination of service, and the election made by such -6- 8 Outside Director with respect to such Voluntary Share Amount pursuant to Section 6(b) hereof shall be null and void effective as of the date of such termination of service. (e) Form of Share Awards. Each Share Award made to an Outside Director with respect to his Required Share Amount for a Plan Year pursuant to Section 6(c) hereof shall be made either (i) all in Restricted Shares or (ii) all in Shares, and each Share Award made to an Outside Director with respect to his Voluntary Share Amount, if any, for a Plan Year pursuant to Section 6(c) hereof shall be made either (i) all in Restricted Shares or (ii) all in Unrestricted Shares, in each case as shall be designated by the Outside Director by notice in writing delivered to the Company prior to the first day of such Plan Year; provided, however, that a newly elected Outside Director (within the meaning of Section 5(b) hereof) may make such designations prior to the commencement of such Outside Director's initial Term of Office with respect to his Required Share Amount and Voluntary Share Amount, if any, earned by him in the balance of the Plan Year of his initial election to the Board of Directors. Unless otherwise determined by the Compensation Committee, a separate designation must be made for each Plan Year. A designation made pursuant to this Section 6(e) for a Plan Year shall be irrevocable from and after the first day of such Plan Year; provided, however, that a designation made pursuant to this Section 6(e) during a Plan Year for the remaining portion of such Plan Year shall be irrevocable from and after the date the designation is made. Such designations shall be on a form prescribed for this purpose by the Compensation Committee. If no such designation is made with respect to a Share Award made under this Section 6, such award shall be made all in Shares (in the case of an award with respect to a Required Share Amount) or all in Unrestricted Shares (in the case of an award with respect to a Voluntary Share Amount). (f) Effectiveness. The provisions of this Section 6 shall be effective for Required Share Amounts and Cash Compensation earned by Outside Directors on and after July 1, 1996. SECTION 7. RESTRICTIONS ON RESTRICTED SHARES. (a) Restricted Period. (i) All Restricted Shares issued to an Outside Director pursuant to the Plan shall be subject to a restricted period, which shall commence on the effective date of issuance of such Restricted Shares and end on April 30 of the calendar year in which the Outside Director's then current Term of Office is scheduled to expire (the "Initial Restricted Period"). The term "Restricted Period", as hereinafter used, means (A) the Initial Restricted Period and (B) the Initial Restricted Period as it may be extended pursuant to the following provisions of this Section 7(a)(i). Each Outside Director to whom Restricted Shares have been issued shall have the right to extend the Restricted Period applicable to such Restricted Shares so that such Restricted Period ends on April 30 of the calendar year in which the Outside Director's next succeeding Term of Office (assuming for this purpose that he continues to serve as a director of the Company) would be scheduled to expire, provided that such Outside Director notifies the Company in writing of such extension on or prior to April 30 of the calendar year immediately preceding the calendar year of expiration of the then current Restricted Period. Subject to the foregoing provisions of this Section 7(a)(i), such right to extend the Restricted Period may be exercised on any one or more occasions. An election to extend the Restricted Period shall be irrevocable. -7- 9 (ii) Notwithstanding the foregoing provisions of Section 7(a)(i) hereof: (A) With respect to (x) Restricted Shares issued pursuant to Section 5(b) or 6(c) hereof to an Outside Director whose then current Term of Office is scheduled to expire in the calendar year of the effective date of issuance of such shares, (y) Restricted Shares issued pursuant to Section 5(b) hereof on or after November 1 of a calendar year, but prior to the end of such calendar year, to an Outside Director whose then current Term of Office is scheduled to expire in the calendar year next following the calendar year of the effective date of issuance of such shares and (z) Restricted Shares issued pursuant to Section 9(b) hereof to an Outside Director whose then current Term of Office is scheduled to expire in the calendar year next following the calendar year of the effective date of issuance of such shares, the Initial Restricted Period of such shares shall end on April 30 of the calendar year in which the Outside Director's next succeeding Term of Office (assuming for this purpose that he continues to serve as a director of the Company) would be scheduled to expire. (B) With respect to (x) Restricted Shares issued pursuant to Section 5(a) or 5(c) hereof to an Outside Director whose then current Term of Office is scheduled to expire in the calendar year next following the calendar year of the effective date of issuance of such shares and (y) Restricted Shares issued pursuant to Section 5(b) hereof on or after April 30 of a calendar year, but prior to November 1 of such calendar year, to an Outside Director whose then current Term of Office is scheduled to expire in the calendar year next following the calendar year of the effective date of issuance of such shares, the Initial Restricted Period of such shares shall end on either (1) April 30 of the calendar year in which the Outside Director's then current Term of Office is scheduled to expire or (2) April 30 of the calendar year in which the Outside Director's next succeeding Term of Office (assuming for this purpose that he continues to serve as a director of the Company) would be scheduled to expire, as shall be designated by the Outside Director by notice in writing delivered to the Company on or prior to the effective date of issuance of such shares. If no such designation is made, the Initial Restricted Period of such shares shall end on the date specified in clause (1) of the preceding sentence. All such designations shall be irrevocable on and after the effective date of issuance of such shares. (b) Forfeiture. Restricted Shares issued to an Outside Director pursuant to the Plan shall be forfeited to the Company at no cost to the Company if the Outside Director's service as a director of the Company terminates prior to the expiration or termination of the Restricted Period applicable to such shares; provided, however, that the Restricted Shares shall become fully vested and the Restricted Period applicable thereto shall terminate upon (i) the Outside Director's termination of service as a director of the Company during the Restricted Period due to death, Disability (as defined in Section 7(h) hereof), or a Permitted Event (as defined in Section 7(h) hereof) or (ii) the occurrence of a Corporate Change (as defined in Section 7(h) hereof) during the Restricted Period. Unless and until Restricted Shares are delivered to the Outside Director upon vesting, the Restricted Shares shall not be sold, assigned, transferred, discounted, exchanged, pledged, or otherwise encumbered or disposed of by the Outside Director in any manner. -8- 10 (c) Stock Certificates. The Company shall issue, in the name of each Outside Director to whom Restricted Shares have become issuable pursuant to the Plan (or, at the option of the Company, in the name of a nominee of the Company), stock certificates representing the total number of Restricted Shares to be issued to the Outside Director, as soon as reasonably practicable after the effective date of issuance of such shares. The Company or its agent, at the direction of the Compensation Committee, shall hold such certificates, together with stock powers and any other instrument of transfer reasonably requested by the Company duly endorsed in blank, for the Outside Director's benefit until such time as the Restricted Shares represented by such certificates are forfeited to the Company or the restrictions thereon terminate. (d) Rights as Stockholder. Upon the issuance of a certificate representing Restricted Shares to or on behalf of an Outside Director, the Outside Director shall become the owner thereof for all purposes and shall have all rights as a stockholder, including voting rights and the right to receive dividends and distributions, with respect to such shares, subject to the restrictions of the Plan and any restrictions imposed by law. If the Company shall pay or declare a dividend or make a distribution of any kind, whether due to a reorganization, recapitalization, or otherwise, with respect to the shares of Common Stock constituting the Restricted Shares, then the Company shall pay or make such dividend or other distribution with respect to the Restricted Shares; provided, however, that the cash, stock or other securities, and other property constituting such dividend or other distribution shall be held by the Company subject to the restrictions applicable to the Restricted Shares until the Restricted Shares with respect to which such dividend or other distribution was paid or made are either vested or forfeited. If any Restricted Shares with respect to which such dividend or distribution was paid or made do not vest but instead are forfeited pursuant to the provisions hereof, then the Outside Director shall not be entitled to receive such dividend or distribution with respect to such forfeited shares and such dividend or distribution with respect to such forfeited shares shall likewise be forfeited and automatically transferred to and reacquired by the Company. If any Restricted Shares with respect to which such dividend or distribution was paid or made become vested pursuant to the provisions hereof, then the Outside Director shall be entitled to receive such dividend or distribution with respect to such vested shares, without interest, and such dividend or distribution with respect to such vested shares shall likewise be delivered to the Outside Director. (e) Adjustments. If any of the following events shall occur at any time while Restricted Shares are outstanding and prior to the vesting or forfeiture thereof, the following adjustments shall be made in the number of shares of Common Stock then constituting such Restricted Shares, as appropriate: (i) If the Company pays a dividend on its outstanding shares of Common Stock in shares of Common Stock or subdivides its outstanding shares of Common Stock into a greater number of shares of Common Stock, the number of shares of Common Stock then constituting the Restricted Shares shall be proportionately increased. Conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, the number of shares of Common Stock then constituting the Restricted Shares shall be proportionately reduced. An adjustment made pursuant to this Section 7(e)(i) shall become effective as of the record date in the case -9- 11 of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. (ii) In case of any recapitalization or reclassification of the Common Stock, or any merger or consolidation of the Company with or into one or more other corporations, or any sale of all or substantially all the assets of the Company, as a result of which the holders of Common Stock receive other stock, securities, or property in lieu of or in addition to, but on account of, their shares of Common Stock, (A) such other stock, securities, or property allocable (as provided in clause (B) below) to the shares of Common Stock then constituting the Restricted Shares shall be paid and delivered with respect to such Restricted Shares, subject to the same restrictions applicable to such Restricted Shares, and (B) the Company shall make or cause to be made lawful and adequate provision whereby, upon the vesting of the Restricted Shares after the record date for the determination of the holders of Common Stock entitled to receive such other stock, securities, or property, the Outside Director shall receive, in lieu of or in addition to the Restricted Shares that have vested, as the case may be, the shares of stock, securities, or property that would have been allocable to such Restricted Shares had such shares vested immediately prior to such record date. The subdivision or combination of shares of Common Stock at any time outstanding into a greater or smaller number of shares of Common Stock shall not be deemed to be a recapitalization or reclassification of the Common Stock for the purposes of this Section 7(e)(ii). (f) Termination of Restrictions. Upon the expiration or termination of the Restricted Period applicable to Restricted Shares, the restrictions applicable to the Restricted Shares that have not theretofore been forfeited shall terminate, and as soon as practicable thereafter, a stock certificate for the number of Restricted Shares with respect to which the restrictions have terminated, together with any dividends or other distributions with respect to such shares then being held by the Company pursuant to the provisions of this Section 7, shall be delivered, free of all such restrictions, to the Outside Director or his beneficiary or estate, as the case may be. (g) Restricted Share Agreements. Each recipient of a Share Award relating to Restricted Shares made pursuant to the Plan shall, as a condition precedent to the issuance of the Restricted Shares to or on behalf of such person, enter into an agreement with the Company, in such form as the Compensation Committee shall prescribe and which is consistent with the provisions of the Plan, setting forth or incorporating the restrictions, terms, and conditions of the Share Award. In the event of any inconsistency between the provisions of the Plan and any such agreement, the provisions of the Plan shall govern. (h) Certain Definitions. For purposes of this Section 7, the following terms shall have the indicated meanings: Disability: The "Disability" of an Outside Director shall be deemed to have occurred if the Outside Director shall become unable to continue the proper performance of his duties as a director of the Company on a full-time basis as a result of his physical or mental incapacity. -10- 12 Permitted Event: A "Permitted Event" shall be deemed to have occurred if: (i) the Outside Director shall have resigned as a director of the Company because the Outside Director is unable to continue the proper performance of his duties as a director of the Company as a result of an injury or illness affecting a member of the Outside Director's immediate family and such inability is likely to exist for a period of six months or more; (ii) the Outside Director shall have retired as a director of the Company because he has reached the mandatory retirement age for directors of the Company as established by Company policy; (iii) the Outside Director, after being nominated by the Board of Directors, shall not be re-elected by the stockholders of the Company in an election of directors; or (iv) the Outside Director's directorship shall have ceased at the end of his term because such Outside Director was not nominated for re-election as a director of the Company in connection with an election of directors. Corporate Change: A "Corporate Change" shall be deemed to have occurred upon (i) the dissolution or liquidation of the Company; (ii) a reorganization, merger, or consolidation of the Company with one or more corporations (other than a merger or consolidation effecting a reincorporation of the Company in another state or any other merger or consolidation in which the shareholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation); (iii) the sale of all or substantially all of the assets of the Company; or (iv) the occurrence of a Change in Control. A "Change in Control" shall be deemed to have occurred for purposes of this definition if (a) individuals who were directors of the Company immediately prior to a Control Transaction shall cease, within two years of such Control Transaction, to constitute a majority of the Board of Directors of the Company (or of the Board of Directors of any successor to the Company or to a company which has acquired all or substantially all of its assets) or (b) any entity, person, or Group acquires shares of the Company in a transaction or series of transactions that result in such entity, person, or Group directly or indirectly owning beneficially 50% or more of the outstanding shares of Common Stock of the Company. As used herein, "Control Transaction" shall be (a) any tender offer for or acquisition of capital stock of the Company, (b) any merger or consolidation of the Company, (c) any contested election of directors of the Company, or (d) any combination of the foregoing, any one of which results in a change in voting power sufficient to elect a majority of the Board of Directors of the Company. As used herein, "Group" shall mean persons who act "in concert" as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended. SECTION 8. DEFERRAL OF CASH COMPENSATION. Outside Directors shall have the right to defer the receipt of their Cash Compensation in accordance with the following provisions of this Section 8. (a) Election to Defer. An Outside Director may elect to defer the receipt of all or a portion of his Cash Compensation (other than his Voluntary Share Amount) for a Plan Year in accordance with the provisions of this Section 8 by filing a written election to defer with the Compensation Committee. Such election shall be made on a form or forms prescribed for this purpose by the Compensation Committee. Such election must include the following: (i) the percentage of Cash Compensation to be deferred; (ii) an irrevocable election of a method of payment as provided in Section 8(e) hereof; and (iii) a designation of beneficiary as provided -11- 13 in Section 8(f) hereof. Except as provided in Section 8(c) hereof, a deferral election shall apply only to Cash Compensation to be earned in the Plan Year next following the Plan Year in which the election is made. An election to defer made under this Section 8 shall be irrevocable. For purposes of the Plan, the term "Participant" means an Outside Director who has elected to defer the receipt of his Cash Compensation in accordance with the provisions of this Section 8. (b) Amount of Deferral. The amount of Cash Compensation to be deferred in any Plan Year shall be designated by the Outside Director as a percentage of his Cash Compensation in integral multiples of 5%, but shall not be less than 10%. (c) Time of Election. Except as otherwise determined by the Compensation Committee, an election to defer Cash Compensation hereunder must be received by the Compensation Committee prior to the commencement of the Plan Year in which the Cash Compensation is earned; provided, however, that a newly elected Outside Director (within the meaning of Section 5(b) hereof) may make a deferral election prior to the commencement of such Outside Director's initial Term of Office with respect to Cash Compensation earned by him in the balance of the Plan Year of his initial election to the Board of Directors. Unless otherwise determined by the Compensation Committee, a separate deferral election must be made for each Plan Year. A deferral election by an Outside Director with respect to Cash Compensation in a given year will not preclude a different action by the Outside Director with respect to Cash Compensation in subsequent years. (d) Deferred Compensation Accounts. Cash Compensation deferred by a Participant pursuant to this Section 8 shall be credited to an account ("Deferred Compensation Account") established by the Company for such Participant. Cash Units (as defined below) in an amount equal to the deferred Cash Compensation shall be credited to the Participant's Deferred Compensation Account at the time the deferred Cash Compensation would otherwise have been paid had no election to defer been made. As additional deferred compensation for Participants with Cash Units credited to their Deferred Compensation Accounts, the Company shall credit a Participant's Deferred Compensation Account on a quarterly basis with an Interest Equivalent (as defined below). The amounts credited to a Participant's Deferred Compensation Account in accordance with this Section 8(d) shall represent the total amount of the Company's liability to the Participant for the payment of deferred compensation under this Section 8. For purposes of this Section 8, (i) a "Cash Unit" means the entry in a Deferred Compensation Account of a credit equal to One Dollar and (ii) an "Interest Equivalent" means the entry in a Deferred Compensation Account of an interest credit with respect to a Cash Unit, the interest factor being equal to the quarterly rate of return generated under the Stable Value Fund of the Company's Capital Accumulation Plan (or such successor or other fund within the Capital Accumulation Plan as the Compensation Committee may approve). (e) Payment of Deferred Compensation. All payments of a Participant's Deferred Compensation Account shall be made at, or shall commence on, the first day of the calendar year selected by the Participant in accordance with the provisions of Section 8(a) hereof and this Section 8(e). The date on which payment will commence must be designated by the Outside Director. The Outside Director may elect to defer the receipt of his Cash Compensation to: (a) the first day of any calendar year that is at least one year after the calendar year in which -12- 14 the Cash Compensation is earned; or (b) the first day of the calendar year following (i) the calendar year he retires as a director of the Company; (ii) the calendar year his membership on the Board of Directors terminates; or (iii) the calendar year of his death. The benefit commencement date may not be later than the third calendar year following the attainment of mandatory retirement age for directors of the Company. Upon the death of a Participant prior to the final payment of all amounts credited to his Deferred Compensation Account, the balance of the Deferred Compensation Account shall be paid in accordance with the provisions of Section 8(f) hereof commencing on the first day of the calendar year following the year of death. A Participant shall have the option of selecting either a single payment schedule or a series of annual installments (not exceeding ten), provided such election is irrevocable and made at the date of deferral. A Participant shall receive in cash all deferred compensation credited to his Deferred Compensation Account. (f) Designation of Beneficiary. Each Participant shall name a beneficiary to receive any payments due him at the time of his death, with the right to change such beneficiary at any time. In case of a failure to designate a beneficiary or the death of the designated beneficiary without a designated successor, such payments shall be made to the person or persons designated as beneficiary in the designation most recently filed by the Participant under the Directors Group Life Insurance Plan of the Company, or if no such designation has been made or the Participant is not participating in such plan, then to the surviving spouse of a deceased Participant, or, if there is no surviving spouse, the children of the Participant in equal shares (the share of any child who predeceases the Participant to go in equal shares to the issue of such deceased child), or if there is no surviving spouse, children, or issue of such children, the estate of the Participant. No designation of beneficiary shall be valid unless in writing signed by the Participant, dated and filed with the Compensation Committee. Upon the Participant's death, any balance in his Deferred Compensation Account shall be payable under the method and form elected by the Participant or in such other manner as the Compensation Committee may determine in its sole discretion. (g) Source of Payments. All payments of deferred compensation under this Section 8 shall be made in cash from the general funds of the Company, and the Company shall be under no obligation to segregate any assets in connection with the maintenance of a Deferred Compensation Account. Nothing contained in the Plan and no action taken pursuant to the Plan shall create or be construed to create a trust of any kind in favor of a Participant or any other person or a fiduciary relationship between the Company and a Participant. Title to the beneficial ownership of any assets, whether cash or investments, that the Company may designate to pay the amounts credited to Deferred Compensation Accounts shall at all times remain in the Company, and Participants shall have no property interest whatsoever in any specific assets of the Company. A Participant's interest in his Deferred Compensation Account shall be limited to the right to receive payments pursuant to the terms of the Plan, and such right shall be no greater than the right of any other unsecured general creditor of the Company. (h) Effectiveness. Except as otherwise provided in Section 9 hereof, the provisions of this Section 8 shall be effective for Cash Compensation earned by Outside Directors on and after July 1, 1996. -13- 15 SECTION 9. TERMINATION OF DIRECTORS' DEFERRED COMPENSATION PLAN. (a) Termination; Transfer of Units. Effective as of July 1, 1996, the Oryx Energy Company Directors' Deferred Compensation Plan, as amended and restated effective September 7, 1995 (the "Deferred Compensation Plan"), shall terminate, and all cash units and share units credited as of such date to an Outside Director's deferred compensation account thereunder shall automatically be transferred and credited to a Deferred Compensation Account established for such Outside Director under Section 8 hereof. Thereafter, except as provided in Section 9(b) hereof, such cash units shall be governed by the provisions of Section 8 hereof to the same extent as if they had originally been credited as Cash Units under the Plan. Such cash units are herein referred to as "Subject Cash Units". (b) Conversion of Subject Cash Units. Each Outside Director with Subject Cash Units credited to his Deferred Compensation Account under the Plan may elect to have up to 100% of the Subject Cash Units credited to his account as of July 1, 1996 applied to the purchase of Restricted Shares in accordance with the provisions of this Section 9(b) effective as of July 1, 1996; provided that the Outside Director must notify the Company in writing of such election on or prior to July 1, 1996, which election will be irrevocable on and after such date. Such election shall be on a form prescribed for this purpose by the Compensation Committee. Promptly following, and effective as of, July 1, 1996, the Company shall, subject to the further provisions of this Section 9(b), issue to each Outside Director who has made an election to purchase Restricted Shares pursuant to this Section 9(b) a number of whole Restricted Shares determined by dividing (x) the amount of the Subject Cash Units that the Outside Director elected to have applied to the purchase of Restricted Shares by (y) the Fair Market Value of the Common Stock on July 1, 1996. No fractional shares of Common Stock shall be issued by the Company pursuant to this Section 9(b), and no cash payment or other adjustment shall be made in respect of any such fractional share that would otherwise be issuable. An Outside Director must be serving as an Outside Director on July 1, 1996 in order to be eligible to receive Restricted Shares pursuant to this Section 9(b). An election made pursuant to this Section 9(b) by an Outside Director who becomes ineligible to receive Restricted Shares pursuant to this Section 9(b) because his service as an Outside Director terminated prior to July 1, 1996 shall be null and void effective as of the date of such termination of service. Any Subject Cash Units (or portion thereof) not converted into Restricted Shares pursuant to this Section 9(b) shall remain subject to the provisions of Section 8 hereof. (c) Share Units. An Outside Director with share units credited to his Deferred Compensation Account under the Plan shall continue to hold such units subject to the terms and conditions that were in effect with respect thereto under the Deferred Compensation Plan immediately prior to its termination. The Board of Directors may, in its discretion, grant to such Outside Director the right to convert such share units into shares of Common Stock under the Plan on such terms and conditions as the Board of Directors may prescribe. -14- 16 SECTION 10. RESTRICTIONS ON TRANSFER OF SHARES. No Shares issued to an Outside Director pursuant to the Plan shall be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Outside Director, other than by will or pursuant to the laws of descent and distribution, until six months have elapsed from the effective date of issuance of such Shares. The Company shall hold the certificates representing such Shares for the Outside Director's benefit until such time as the restrictions on transfer of such Shares set forth in the preceding sentence have lapsed. All securities received by an Outside Director on account of his Shares as a result of an event described in Section 7(e)(i) or (ii) hereof shall be deemed to be Shares for purposes of this Section 10 and shall be restricted as to transfer pursuant to the provisions of this Section 10 to the same extent and for the same period as if such securities were the original Shares with respect to which they were issued. Subject to the restrictions of this Section 10, an Outside Director shall have all rights as a stockholder, including voting rights and the right to receive dividends and distributions, with respect to his Shares. SECTION 11. FREEZE OF NON-EMPLOYEE DIRECTORS RETIREMENT PLAN. Effective as of July 1, 1996, the Non-Employee Directors Retirement Plan of the Company (the "Retirement Plan") shall be "frozen" such that (i) no directors of the Company newly elected to the Board of Directors after such date shall be entitled to participate therein, (ii) the retirement benefit under the Retirement Plan for all Outside Directors serving on the Board of Directors as of such date shall be fixed from and after such date as that amount which the Outside Director would have been entitled to receive under the Retirement Plan had he retired as a director of the Company effective as of such date (disregarding for this purpose the Retirement Plan's years of service eligibility requirement), and (iii) no future benefits under the Retirement Plan shall accrue from and after July 1, 1996. The Board of Directors may, in its discretion, provide for the discharge of the Company's obligations with respect to such frozen retirement benefits on such terms and conditions as the Board of Directors may prescribe, which may include the grant to Outside Directors of the right to exchange such frozen retirement benefits for shares of Common Stock under the Plan (which may be Shares, Restricted Shares or Unrestricted Shares) or other securities or cash, or a combination thereof. SECTION 12. PLAN AMENDMENT, MODIFICATION, AND TERMINATION. The Board of Directors may at any time suspend, terminate, amend, or modify the Plan; provided, however, that no amendment or modification of the Plan shall become effective without the approval of such amendment or modification by the stockholders of the Company if the Company, on the advice of counsel, determines that stockholder approval is necessary or desirable; and provided further that the provisions of the Plan governing (a) the Share Awards to be made pursuant to Section 5 hereof and the Share Awards to be made pursuant to Section 6(c) hereof in respect of Required Share Amounts, (b) the number of shares of Common Stock to be issued under such awards, (c) the time at which such awards are to be made, and (d) the duration and nature of the restrictions applicable to such awards, shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, or the rules promulgated thereunder. No suspension, termination, amendment, or modification of the Plan shall in any manner adversely affect any Share Award theretofore made under the Plan or the rights of a Participant with respect to amounts theretofore credited to his Deferred Compensation Account under the Plan, without the consent of the recipient of such award or such Participant. All Restricted Shares issued prior to any termination of the Plan that have not theretofore vested or been forfeited shall continue to be subject to the terms of the Plan. -15- 17 SECTION 13. PLAN EFFECTIVENESS. The Plan shall be submitted for approval by the stockholders of the Company at the 1996 annual meeting of stockholders. The Plan shall become effective on the date of its approval by the holders of a majority of the shares of Common Stock present, or represented, and entitled to vote at such annual meeting. If the Plan is not so approved, the Plan shall terminate and all actions hereunder shall be null and void. SECTION 14. GENERAL PROVISIONS. (a) No Continuing Right as Director. Neither the adoption or operation of the Plan, nor the Plan itself or any document describing or relating to the Plan, or any part hereof, shall confer upon any Outside Director any right to continue as a director of the Company or any subsidiary of the Company. (b) Nonalienation of Benefits. No Outside Director or Participant shall have the right to sell, assign, transfer, or otherwise convey or encumber in whole or in part the right to receive any award or payment under the Plan, except in accordance with the express provisions hereof. (c) Binding Effect. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation, or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company. The terms and conditions of the Plan shall be binding upon each Outside Director and any other recipient of Restricted Shares hereunder and each such person's heirs, legatees, distributees, and legal representatives. (d) Severability. If any provision of the Plan or any agreement hereunder is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan or such agreement, as the case may be, but such provision shall be fully severable and the Plan or such agreement, as the case may be, shall be construed and enforced as if the illegal or invalid provision had never been included herein or therein. (e) Expenses. All expenses incident to the administration, protection, or termination of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Company. (f) Notices. Whenever any notice is required or permitted under the Plan or any agreement hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder or under an agreement shall be deemed to be delivered on the date on which it is personally delivered, or on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address that such person has theretofore specified by written notice delivered in accordance herewith. The Company or an Outside Director may change, at any time and from time to time, by written notice to the other, the -16- 18 address that it or he had theretofore specified for receiving notices. Until such address is changed in accordance herewith, notices hereunder or under an agreement shall be delivered or sent (i) to the Outside Director at his address as set forth in the records of the Company or (ii) to the Company or the Compensation Committee at the principal executive offices of the Company clearly marked "Attention: President". (g) No Restriction of Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any subsidiary thereof from taking any corporate action that is deemed by the Company or such subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Share Award made or to be made under the Plan. No Outside Director or other person shall have any claim against the Company or any subsidiary thereof as a result of such action. (h) Governing Law. The provisions of the Plan, and all agreements hereunder, shall be governed by and construed in accordance with the laws of the State of Texas. (i) Miscellaneous. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction of the Plan or any provisions hereof. The use of the masculine gender shall also include within its meaning the feminine. Wherever the context of the Plan dictates, the use of the singular shall also include within its meaning the plural, and vice versa. -17- EX-10.4 3 EXECUTIVE VARIABLE INCENTIVE PLAN 1 EXHIBIT 10.4 ORYX ENERGY COMPANY EXECUTIVE VARIABLE INCENTIVE PLAN ("EXECUTIVE VIP") Effective as of January 1, 1996 2 TABLE OF CONTENTS
ARTICLE DESCRIPTION PAGE - ------- ----------- ---- Article I Purpose of the Plan . . . . . . . . . . . . . . . . . . 1 Article II Definitions . . . . . . . . . . . . . . . . . . . . . . 1 Article III Eligibility . . . . . . . . . . . . . . . . . . . . . . 4 Article IV Administration of the Plan . . . . . . . . . . . . . . . 5 Article V Target Award Levels . . . . . . . . . . . . . . . . . . 6 Article VI Determination of Performance Goals and Amount of Awards . . . . . . . . . . . . . . . . . . 6 Article VII Form and Timing of Awards . . . . . . . . . . . . . . . 8 Article VIII Voluntary Election to Defer . . . . . . . . . . . . . . 8 Article IX Voluntary Election to Receive Restricted Stock . . . . . 9 Article X No Right of Employment . . . . . . . . . . . . . . . . . 13 Article XI Miscellaneous . . . . . . . . . . . . . . . . . . . . . 14
3 Article I Purpose of the Plan The purpose of this Executive Variable Incentive Plan (hereinafter referred to as the "Plan") for Oryx Energy Company is to provide incentive compensation opportunities for certain executive employees of the Company and to provide certain participants the option of taking all or a portion of their annual incentive compensation awards in restricted common stock of the Company. The Plan seeks to reinforce three significant Company values: teamwork, sharing success, and the rewarding of individual performance. It is also designed to assist in the attraction, motivation, and retention of superior employees and to link employees to the Company's strategic objectives and the interests of stockholders. Each year, Participants in the Plan will have the opportunity to earn incentive compensation awards based upon the attainment of specific Performance Goals established at the beginning of each Plan Year by the Compensation Committee of the Board of Directors. Article II Definitions When used in the Plan, the following terms shall have the following meanings: 2.1 Base Salary means the annualized weekly base salary in effect as of the last pay period ending during the Plan Year as reflected in the personnel records of the Company. 2.2 Board of Directors means the Board of Directors of the Company. 2.3 Common Stock means the common stock, par value $1.00 per share, of the Company or any stock or other securities of the Company hereafter issued or issuable in substitution or exchange for the Common Stock. 2.4 Company means Oryx Energy Company. 2.5 Compensation Committee means the Compensation Committee of the Board of Directors, which will have the overall responsibility for administering the Plan. 1 4 2.6 Corporate Change: A "Corporate Change" shall be deemed to have occurred for the purposes of Article IX hereof upon (i) the dissolution or liquidation of the Company; (ii) a reorganization, merger, or consolidation of the Company with one or more corporations (other than a merger or consolidation effecting a reincorporation of the Company in another state or any other merger or consolidation in which the shareholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation); (iii) the sale of all or substantially all of the assets of the Company; or (iv) the occurrence of a Change in Control. A "Change in Control" shall be deemed to have occurred for purposes of Article IX hereof if (a) individuals who were directors of the Company immediately prior to a Control Transaction shall cease, within two years of such Control Transaction, to constitute a majority of the Board of Directors of the Company (or of the Board of Directors of any successor to the Company or to a company which has acquired all or substantially all of its assets) or (b) any entity, person, or Group acquires shares of the Company in a transaction or series of transactions that result in such entity, person, or Group directly or indirectly owning beneficially 50% or more of the outstanding shares of Common Stock of the Company. As used herein, "Control Transaction" shall be (a) any tender offer for or acquisition of capital stock of the Company, (b) any merger or consolidation of the Company, (c) any contested election of directors of the Company, or (d) any combination of the foregoing, any one of which results in a change in voting power sufficient to elect a majority of the Board of Directors of the Company. As used herein, "Group" shall mean persons who act "in concert" as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended. 2.7 Disability: For purposes of Articles III and IX hereof, the "Disability" of a Participant shall be deemed to have occurred if, in the good faith judgment of the Compensation Committee, the Participant shall become unable to continue the proper performance of his or her duties as an employee of the Company or a subsidiary thereof on a full-time basis as a result of his or her physical or mental incapacity. 2.8 Executive Deferred Compensation Plan means the nonqualified deferred compensation plan of the Company in which certain executive employees of the Company may voluntarily elect to participate by deferring their cash awards earned pursuant to the Plan as set forth in Article VIII hereof. 2.9 Fair Market Value means the average of the reported high and low sales prices of the Common Stock (rounded up to the nearest one-eighth of a dollar) on the date Fair Market Value is to be determined (or if there was no reported sale on such date, the next preceding date on which any reported sale occurred) on the New York Stock Exchange (or, if the Common Stock is not then listed or admitted to trading on such 2 5 exchange, on the principal exchange or in such other principal market on which the Common Stock is then listed or admitted to trading). 2.10 Just Cause means willful misconduct or dishonesty by the Participant, conviction of the Participant for a felony or failure by the Participant to contest prosecution for a felony, or excessive absenteeism on the part of the Participant not related to illness. 2.11 Participant means any employee of the Company or any subsidiary thereof who is described as eligible to participate in the Plan as set forth in Article III hereof. 2.12 Performance Goals mean the performance goals established each year pursuant to the Plan upon which performance will be measured. 2.13 Plan means the Executive Variable Incentive Plan of Oryx Energy Company, effective as of January 1, 1996, as described herein. 2.14 Plan Year means the performance period of the Plan, commencing on January 1 and ending December 31 each year, commensurate with the Company's fiscal year. 2.15 Restricted Stock means Common Stock issued pursuant to, and with such restrictions as are imposed by, Article IX hereof. 2.16 Retirement: For purposes of Articles III and IX hereof, the term "Retirement" shall mean a termination of employment with the Company or a subsidiary thereof by reason of retirement either (i) on a voluntary basis by a Participant who is at least 60 years of age or (ii) with the written consent of the Compensation Committee in its sole discretion (in the case of the retirement of the Chief Executive Officer of the Company) or with the written consent of the Chief Executive Officer of the Company in his sole discretion (in the case of the retirement of any other Participant). The preceding provisions of this Section to the contrary notwithstanding, at any time prior to one year preceding the date on which a Participant attains age 60, a Participant may make a written irrevocable election to defer his or her voluntary retirement age set forth in clause (i) to age 61 or such later age the Participant may designate in such election. In addition, any Participant who makes such an election may make a subsequent written irrevocable election to further defer his or her voluntary retirement age to any age at least one year older than the age previously designated provided that such election must be made at least one year prior to the attainment of the previously elected voluntary retirement age. 3 6 2.17 Target means the level of performance that is judged to be acceptable or standard for which 100% of the award will be paid for attainment of that performance objective. 2.18 Target Award Level means the percentage of Base Salary that may be earned by each Participant based upon the attainment of the Target (100%) level of performance. 2.19 Threshold means the level of performance that is judged to be the minimum acceptable for which some percentage, less than 100%, of the award will be paid for attainment of that performance objective. Article III Eligibility 3.1 Subject to the provisions of this Article III, only those employees of the Company or a subsidiary thereof who are "officers" of the Company as defined in Rule 16a-1(f) promulgated by the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended, are eligible to participate in this Plan and only those so eligible who are designated by the Compensation Committee as "Participants" in the Plan for any Plan Year will participate in the Plan for such Plan Year. 3.2 An employee must be on the regular payroll (including approved annual vacation leave) as of December 31 of the Plan Year and have at least 26 completed weeks of active service during the Plan Year in order to be eligible to receive an award pursuant to the Plan for such Plan Year. Any employee who satisfies the criteria for receiving an award pursuant to the Plan for a Plan Year but who had fewer than 52 completed weeks of active service during the Plan Year shall have his or her award pro-rated based on his or her number of completed weeks of active service during the Plan Year. An employee whose employment terminates during the Plan Year for any reason other than those reasons set forth in Section 3.4 hereof is not eligible to receive an award pursuant to the Plan for such Plan Year. 3.3 Any provision of the Plan to the contrary notwithstanding: (i) for purposes of determining an employee's completed weeks of active service during a Plan Year under this Article III, any period of approved annual vacation leave, and any period of a leave of absence (whether paid or unpaid) to which the employee is entitled pursuant to the Family and Medical Leave Act, shall be included as active service for such Plan Year; (ii) for purposes of determining whether an employee is on the regular payroll as of December 31 of a Plan Year under this Article III, an employee 4 7 on a leave of absence as of December 31 of a Plan Year (whether paid or unpaid) to which the employee is entitled pursuant to the Family and Medical Leave Act shall be deemed to be on the regular payroll as of such date; and (iii) for purposes of determining whether an employee is on the regular payroll as of December 31 of a Plan Year under this Article III, an employee receiving benefits pursuant to the Company's Short-Term Disability Program or Long-Term Disability Plan shall be deemed to be on the regular payroll as of such date if such employee had at least 26 completed weeks of active service during the Plan Year. 3.4 Any Participant whose employment terminates during a Plan Year (but prior to December 31 of such Plan Year) due to Disability, Retirement or death shall be eligible for a pro rata award for the Plan Year based on the number of his or her completed weeks of active service during the Plan Year, provided such Participant has accumulated at least 26 completed weeks of active service in the Plan Year. In the event of an employee's death, the designated beneficiary of the employee under the Plan shall be the same as his or her designated beneficiary under the Company's Death Benefit Plan. Article IV Administration of the Plan 4.1 The Plan shall be administered by the Compensation Committee. Subject to the express provisions of the Plan, the Compensation Committee shall have the right and authority, in its sole and absolute discretion, (a) to adopt, amend, or rescind administrative and interpretive rules and regulations relating to the Plan; (b) to construe the Plan; (c) to make all other determinations necessary or advisable for administering the Plan; (d) to determine the terms and provisions of the respective agreements (which need not be identical) relating to the award of shares of Restricted Stock pursuant to Article IX hereof; (e) to construe such agreements; and (f) to exercise the powers conferred on the Compensation Committee under the Plan. The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem expedient to carry it into effect, and it shall be the sole and final judge of such expediency. The determinations of the Compensation Committee on the matters referred to in this Section 4.1 shall be final and conclusive. 4.2 Subject to the express provisions of the Plan, the Compensation Committee shall have the exclusive authority to amend, modify, suspend, or terminate the Plan at any time; provided, however, that no amendment, modification, suspension or termination of the Plan shall in any manner adversely affect the right of any Participant to receive 5 8 any amount to which such Participant has become entitled prior to such amendment, modification, suspension or termination. 4.3 At the beginning of the Plan Year, the Chief Executive Officer of the Company shall make recommendations to the Compensation Committee regarding Performance Goals and the respective Threshold and Target levels of performance associated with each. Within the first 90 days of the Plan Year the Compensation Committee will review the recommendations of the Chief Executive Officer and approve or modify the recommendations as presented. In addition, as provided in more detail in Articles V and VI hereof, at the completion of the Plan Year, the Compensation Committee shall review and certify the Plan award levels based upon actual performance during the Plan Year, and may exercise discretion in approving the award for any Participant such that the Compensation Committee may reduce (but may not increase) any or all of a Participant's award otherwise determined in accordance with the formula set forth in this Plan and the performance results for such Plan Year. The Compensation Committee may, in its discretion, design the award levels and performance goals for any Plan Year for any individual or group of individuals in a manner which will except any compensation paid to any such individual or group from the deduction limitations of Section 162(m) of the Internal Revenue Code of 1986, but the Compensation Committee is not obligated to do so. Article V Target Award Levels 5.1 Participants in the Plan shall have Target Award Levels expressed as a percentage, not to exceed 100%, of their respective Base Salaries during the Plan Year. The Target Award Levels for a Plan Year will be established for each Participant by the Compensation Committee within the first 90 days of the Plan Year. Article VI Determination of Performance Goals and Amount of Awards 6.1 Within the first 90 days of each Plan Year, the Compensation Committee shall establish the Performance Goals which shall provide the basis for calculating the annual incentive compensation award for Participants for such Plan Year. The Performance Goals established by the Compensation Committee for a Plan Year may be based on stock price, cash flows, net income, operating income, expense levels, debt balance, debt ratings, total shareholder return, return on investment, return on equity, economic value added, production volumes, reserve additions, profit or cost 6 9 per equivalent barrel, earnings per share, net asset value per share, or such other goals as the Compensation Committee may determine appropriate for a Plan Year. The Performance Goals may be based on the performance of the Company generally, in the absolute or in relation to its peers, or the performance of a particular employee, division, department, branch, subsidiary or other unit to which a particular employee is assigned. In establishing the Performance Goals for the applicable Plan Year, the Compensation Committee may establish different Performance Goals for individual Participants or groups of Participants. Each Performance Goal will be weighted to reflect its relative performance to the Company's strategic business plans for the Plan Year. The sum of the weightings of the Performance Goals at the Target level for particular Participants or groups of Participants will equal 100% for the Plan Year. Each Performance Goal will have stated Threshold and Target levels of performance which will provide a range of award possibilities. 6.2 As of the end of each Plan Year, a performance score will be determined by the Compensation Committee for each Performance Goal wherein achievement will be based upon actual performance compared to the Threshold and Target levels of performance. The Compensation Committee shall certify the degree of achievement of each Performance Goal based upon the actual performance results for the Plan Year. The results of the Performance Goals will be summed to determine the basis for the annual incentive compensation award for the Participant or group of Participants to which they apply, which sum may exceed 100%. 6.3 As of the end of the Plan Year, a Participant's incentive compensation award based upon attainment of Performance Goals for the Plan Year shall be calculated by multiplying such Participant's Base Salary by the Participant's Target Award Level for such Plan Year. The result shall then be multiplied by the performance score applicable to such Participant as determined by the Compensation Committee for such Plan Year in accordance with Section 6.2 hereof. After such amount is determined, the Compensation Committee may, in its sole discretion, reduce or eliminate (but may not increase) the amount of the award for a particular Participant based upon such factors as the Compensation Committee may determine to be relevant, including but not limited to such Participant's individual performance, but also shall take into consideration reliance placed on the Plan by the Participant in rendering performance during the Plan Year. Any provision of this Plan to the contrary notwithstanding, the maximum incentive compensation award based upon attainment of Performance Goals that may be payable to any Participant for a Plan Year calculated as described above shall be 200% of his or her annualized weekly base salary in effect as of the first pay period ending during the Plan Year to which the award relates. 6.4 In addition to the incentive compensation awards based upon attainment of Performance Goals as set forth above, the Compensation Committee may, in its sole discretion, grant ad hoc incentive compensation awards to any Participant or group of Participants in such amount or amounts as it shall determine to be appropriate based 7 10 upon such factors as it shall deem to be relevant. Any such ad hoc incentive compensation awards shall be determined and granted by the Compensation Committee after the Plan Year to which the award relates but prior to April 30 following the end of such Plan Year. Article VII Form and Timing of Awards 7.1 Incentive compensation awards under the Plan may be paid in cash or shares of Common Stock, or in any combination thereof, at the discretion of the Compensation Committee. Awards so paid in Common Stock shall be valued based on the Fair Market Value of the Common Stock as of the first business day following the completion of the Plan Year. The manner of payment will be at the discretion of the Compensation Committee. Awards shall be paid by April 30 following the completion of the Plan Year. Awards shall be subject to the normal rules and regulations regarding the withholding for taxes and other deductions, if any, as may be in effect from time to time. 7.2 Certain Participants may elect to have their cash incentive compensation awards earned under the Plan (a) deferred in accordance with the provisions of Article VIII hereof or (b) paid to them in shares of Restricted Stock in accordance with the provisions of Article IX hereof. Article VIII Voluntary Election to Defer 8.1 Participants eligible to participate in the Executive Deferred Compensation Plan may elect to defer their cash incentive compensation awards pursuant to the Plan by their voluntary election to participate in the Executive Deferred Compensation Plan. Based upon the terms and provisions of the Executive Deferred Compensation Plan, certain Participants may irrevocably elect to defer the receipt of all or a portion of their earned cash incentive compensation awards to a specified future date such as retirement. The election to participate in the Executive Deferred Compensation Plan must be made in writing and submitted to the Company's Human Resources Department before the commencement of the Plan Year. 8 11 Article IX Voluntary Election to Receive Restricted Stock 9.1 Subject to the provisions of this Article IX, eligible Participants may elect to have their cash incentive compensation awards earned under the Plan for any Plan Year paid to them in shares of Restricted Stock. An election made by an eligible Participant pursuant to this Article IX (a) may be made only as to increments of 25%, 50%, 75%, or 100% of the Participant's cash incentive compensation award, (b) must be made in writing on a form approved for this purpose by the Compensation Committee and submitted to the Company's Human Resources Department on or before March 1 of the Plan Year in respect of which the award is earned (or on or before such later date as the Compensation Committee may approve), and (c) shall be irrevocable. The elections provided for under this Article IX are hereinafter referred to as "Restricted Stock Elections". The payment of shares of Restricted Stock pursuant to this Article IX shall be subject to the approval of the Compensation Committee, which shall have the discretion to cause the Company to settle all or any part of the Company's payment obligation under a Restricted Stock Election by the payment to the Participant of his or her cash incentive compensation award in lieu of the shares of Restricted Stock the Company would otherwise be obligated to deliver. 9.2 Prior to February 15 of each Plan Year, the Compensation Committee shall designate the Participants or class or classes of Participants (if any) who shall be eligible to make Restricted Stock Elections with respect to awards earned under the Plan for such Plan Year. Such determinations shall be in the sole discretion of the Compensation Committee. A Participant who has made a Restricted Stock Election shall be eligible to receive shares of Restricted Stock pursuant thereto only if such Participant is an employee of the Company or a subsidiary thereof on the date that such shares are issued. If the Participant is not so employed, then the Participant's prior election to receive shares of Restricted Stock in lieu of all or part of his or her cash incentive compensation award for such Plan Year shall be void. 9.3 The total number of shares of Restricted Stock to be paid to a Participant who has made a Restricted Stock Election shall be determined by dividing (x) the product obtained (the "Subject Amount") by multiplying (i) the amount of the Participant's cash incentive compensation award earned under the Plan for the Plan Year times (ii) the percentage of such 9 12 amount that the Participant elected to have paid in shares of Restricted Stock pursuant to his or her Restricted Stock Election, by (y) the Fair Market Value of the Common Stock as of the first business day following the completion of the Plan Year. In determining the number of shares of Restricted Stock to be paid to a Participant, the Compensation Committee may, in its discretion, increase the value of such Participant's Subject Amount by multiplying it by a factor, which shall not be greater than 150%, as determined by the Compensation Committee. The factor shall be established by the Compensation Committee prior to February 15 of the Plan Year and shall be that rate which the Compensation Committee, in its sole discretion, determines to be appropriate for such Plan Year to reflect the Participant's election to forego cash compensation in exchange for shares of Restricted Stock. No fractional shares of Common Stock shall be issued pursuant to this Section 9.3; instead, the Company shall pay to the Participant the amount of his or her cash incentive compensation award not converted into whole shares of Restricted Stock pursuant to this Section 9.3. 9.4 All shares of Restricted Stock issued to Participants pursuant to this Article IX with respect to a Plan Year shall be subject to a restricted period (the "Restricted Period"), the duration of which shall be determined by the Compensation Committee in its sole discretion prior to February 15 of such Plan Year. The Restricted Period for shares of Restricted Stock issued to a Participant shall commence on the first business day following completion of the Plan Year. Shares of Restricted Stock issued to a Participant pursuant to this Article IX shall be forfeited to the Company at no cost to the Company if the Participant's employment with the Company or a subsidiary of the Company terminates prior to the expiration or termination of the Restricted Period applicable to such shares; provided, however, that the shares of Restricted Stock shall become fully vested and the Restricted Period shall terminate upon (a) the Participant's termination of employment during the Restricted Period due to death, Disability, or Retirement, (b) the involuntary termination of the Participant's employment with the Company and its subsidiaries by action of the Company (or its subsidiary, with respect to a Participant employed by a subsidiary of the Company) during the Restricted Period for reasons other than Just Cause, or (c) the occurrence of a Corporate Change during the Restricted Period. Unless and until shares of Restricted Stock are delivered to the Participant upon vesting, the shares of Restricted Stock shall not be sold, assigned, transferred, discounted, exchanged, pledged, or otherwise encumbered or disposed of by the Participant in any manner. The Compensation Committee may from time to time, in its discretion, and subject to such terms and conditions as the Compensation Committee may prescribe, grant to Participants to whom shares of Restricted Stock have been issued pursuant to this 10 13 Article IX the right to extend the Restricted Period applicable to such shares for an additional period of time or until the occurrence of a specified event or events, in which case such shares shall remain subject to the restrictions of this Article IX for the period of such extension. 9.5 The Company shall issue, in the name of each Participant to whom shares of Restricted Stock have become payable pursuant to this Article IX (or, at the option of the Company, in the name of a nominee of the Company), stock certificates representing the total number of shares of Restricted Stock to be paid to the Participant with respect to a Plan Year, as soon as reasonably practicable after the date on which the Compensation Committee approves, certifies and announces the awards for such Plan Year. The Company or its agent, at the direction of the Compensation Committee, shall hold such certificates, together with stock powers and any other instrument of transfer reasonably requested by the Company duly endorsed in blank, for the Participant's benefit until such time as the shares of Restricted Stock represented by such certificates are forfeited to the Company or the restrictions thereon terminate. 9.6 Upon the issuance of a certificate representing shares of Restricted Stock to a Participant, the Participant shall become the owner thereof for all purposes and shall have all rights as a stockholder, including voting rights and the right to receive dividends and distributions, with respect to such shares, subject to the provisions of this Article IX. If the Company shall pay or declare a dividend or make a distribution of any kind, whether due to a reorganization, recapitalization, or otherwise, with respect to the shares of Common Stock constituting the shares of Restricted Stock, then the Company shall pay or make such dividend or other distribution with respect to the shares of Restricted Stock; provided, however, that the cash, stock or other securities and other property constituting such dividend or other distribution shall be held by the Company subject to the restrictions applicable to the shares of Restricted Stock until the shares with respect to which such dividend or other distribution was paid or made are either vested or forfeited. If any shares of Restricted Stock with respect to which such dividend or distribution was paid or made do not vest but instead are forfeited pursuant to the provisions hereof, then the Participant shall not be entitled to receive such dividend or distribution with respect to such forfeited shares and such dividend or distribution with respect to such forfeited shares shall likewise be forfeited and automatically transferred to and reacquired by the Company. If any shares of Restricted Stock with respect to which such dividend or distribution was paid or made become vested pursuant to the provisions hereof, then the Participant shall be entitled to receive such dividend or distribution with respect to such vested shares, without interest, and such dividend or distribution with respect to such vested shares shall likewise be delivered to the Participant. 11 14 9.7 If any of the following events shall occur at any time while shares of Restricted Stock are outstanding and prior to the vesting or forfeiture thereof, the following adjustments shall be made in the number of shares of Common Stock then constituting such shares of Restricted Stock, as appropriate: (a) If the Company pays a dividend on its outstanding shares of Common Stock in shares of Common Stock or subdivides its outstanding shares of Common Stock into a greater number of shares of Common Stock, the number of shares of Common Stock then constituting the shares of Restricted Stock shall be proportionately increased. Conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, the number of shares of Common Stock then constituting the shares of Restricted Stock shall be proportionately reduced. An adjustment made pursuant to this Section 9.7(a) shall become effective as of the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. (b) In case of any recapitalization or reclassification of the Common Stock, or any merger or consolidation of the Company with or into one or more other corporations, or any sale of all or substantially all the assets of the Company, as a result of which the holders of Common Stock receive other stock, securities, or property in lieu of or in addition to, but on account of, their shares of Common Stock, (A) such other stock, securities, or property allocable (as provided in clause (B) below) to the shares of Common Stock then constituting the shares of Restricted Stock shall be paid and delivered with respect to such shares of Restricted Stock, subject to the same restrictions applicable to such Restricted Stock, and (B) the Company shall make or cause to be made lawful and adequate provision whereby, upon the vesting of the shares of Restricted Stock after the record date for the determination of the holders of Common Stock entitled to receive such other stock, securities, or property, the Participant shall receive, in lieu of or in addition to the shares of Restricted Stock that have vested, as the case may be, the shares of stock, securities, or property that would have been allocable to such shares of Restricted Stock had such shares vested immediately prior to such record date. The subdivision or combination of shares of Common Stock at any time outstanding into a greater or smaller number of shares of Common Stock shall not be deemed to be a recapitalization or reclassification of the Common Stock for the purposes of this Section 9.7(b). 9.8 Upon the expiration or termination of the Restricted Period applicable to shares of Restricted Stock, the restrictions applicable to the shares of Restricted Stock that have 12 15 not theretofore been forfeited shall terminate, and as soon as practicable thereafter a stock certificate for the number of shares of Restricted Stock with respect to which the restrictions have terminated, together with any dividends or other distributions with respect to such shares then being held by the Company pursuant to the provisions of this Article IX, shall be delivered, free of all such restrictions, to the Participant or the Participant's beneficiary or estate, as the case may be. 9.9 Each recipient of shares of Restricted Stock pursuant to this Article IX shall, as a condition precedent to the issuance of such shares to or on behalf of such person, enter into an agreement with the Company, in such form as the Compensation Committee shall prescribe and which is consistent with the provisions of the Plan, setting forth or incorporating the restrictions, terms, and conditions of the award of Restricted Stock. An agreement may contain such provisions as the Compensation Committee deems appropriate to enable the Company or its appropriate affiliate to satisfy its federal and any applicable state and local tax withholding obligations, including provisions permitting the Company, upon the vesting of shares of Restricted Stock, to withhold delivery of shares of Restricted Stock or accept delivery of other shares of Common Stock owned by the Participant to satisfy such tax withholding obligations. In the event of any inconsistency between the provisions of the Plan and any such agreement, the provisions of the Plan shall govern. 9.10 Notwithstanding anything contained in the Plan to the contrary, the Compensation Committee shall have the right to cancel all or any portion of any outstanding restrictions prior to the expiration or termination of such restrictions with respect to any or all shares of Restricted Stock on such terms and conditions as the Compensation Committee may, in writing, deem appropriate. Article X No Right of Employment 10.1 Nothing in the Plan, including the employee's eligibility for participation in the Plan, will infer any right of employment by the Company or any subsidiary thereof to such employee. 13 16 Article XI Miscellaneous 11.1 The total number of shares of Common Stock that may be issued, transferred, or awarded pursuant to Section 7.1 or Article IX of the Plan shall not exceed a maximum of 300,000 in the aggregate. In the event the Company shall effect a split of the Common Stock or a dividend payable in Common Stock, or in the event the outstanding Common Stock shall be combined into a smaller number of shares, the maximum number of shares that may be issued or awarded under the Plan shall be increased or decreased proportionately. Shares that have been previously delivered to a Participant as Restricted Stock that have since been forfeited shall be available for further issuance or award under the Plan. Shares of Common Stock issued pursuant to the Plan may be shares of original issuance or treasury shares or a combination of the foregoing, as the Compensation Committee, in its discretion, shall from time to time determine. 11.2 Subject to the provisions of Article IX hereof, a Participant shall not have the right to anticipate, alienate, sell, transfer, assign, pledge, or encumber his or her right to receive any award made under the Plan. 11.3 No Participant shall have any lien on any assets of the Company or any subsidiary thereof by reason of any rights to any award made under the Plan. 11.4 No member of the Compensation Committee shall be liable for any act, omission, or determination taken or made in good faith with respect to the Plan or any awards made hereunder; and the members of the Compensation Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage, or expenses (including counsel fees) arising therefrom to the full extent permitted by law and under any directors' and officers' liability or similar insurance coverage that may be in effect from time to time. 11.5 The adoption of the Plan or any modification or amendment hereof does not imply any commitment to continue or adopt the same plan, or any modification hereof, or any other plan for incentive compensation for any succeeding year, provided that no termination, modification or amendment of the Plan shall adversely affect the right of any Participant to receive any amount to which such Participant has become entitled prior to such termination, modification, or amendment. 11.6 The laws of the State of Texas shall govern the Plan. 14 17 11.7 The Plan shall be binding on the successors of the Company. 11.8 The Plan shall be deemed adopted by the Board of Directors as of January 1, 1996. The Plan shall be deemed effective as of the date of its adoption by the Board of Directors, provided it is duly approved by the holders of a majority of the shares of Common Stock present, or represented, and entitled to vote at the 1996 annual meeting of stockholders of the Company. If the Plan is not approved by the stockholders, the Plan shall terminate and all actions taken hereunder shall be null and void. IN WITNESS WHEREOF, Oryx Energy Company has caused this Plan to be executed by its duly authorized representative this _____ day of ______________, 1996. ORYX ENERGY COMPANY By: ----------------------------- ATTEST: By: --------------------------- Title: ------------------------ 15 EX-10.6B 4 AMENDMENT NO. 2 EXECUTIVE RETIREMENT PLAN 1 EXHIBIT 10.6b Amendment No. Two to the Oryx Energy Company Executive Retirement Plan As Amended And Restated Effective January 1, 1995 WHEREAS, Oryx Energy Company (the "Company") last amended and restated the Executive Retirement Plan (the "Plan") effective January 1, 1995 and last amended the Plan effective January 1, 1996; and WHEREAS, the Company desires further to amend the Plan; NOW, THEREFORE, pursuant to the powers reserved in Article IX of the Plan, the Plan is hereby amended as follows: I. Effective January 1, 1997, the first sentence of the first paragraph in Section 3.08(b) is amended to include the year 1997, by the revision of the phrase "under an outplacement program during 1995 or 1996" to read "under an outplacement program during 1995, 1996, or 1997". II. Except for the amendments reflected in this instrument, the Plan shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this instrument to be executed this 5th day of September, 1996. ORYX ENERGY COMPANY By: /s/ FRANCES G. HEARTWELL ------------------------------------ Name: Frances G. Heartwell ---------------------------------- Title: Vice President, Human Resources --------------------------------- and Administration ATTEST: By: /s/ WILLIAM C. LEMMER ------------------------------------ Title: Vice President, General Counsel --------------------------------- and Secretary EX-10.8A 5 1992 LONG TERM INCENTIVE PLAN 1 EXHIBIT 10.8a AMENDMENT TO ORYX ENERGY COMPANY 1992 LONG-TERM INCENTIVE PLAN Pursuant to the provisions of Section 15.1 of the Oryx Energy Company 1992 Long-Term Incentive Plan, as amended through December 2, 1993 and restated (the "Plan"), the Plan is hereby amended, effective as of September 4, 1996, as follows: 1. Restate the first sentence of Section 4.1 of the Plan in its entirety to read as follows: This Plan shall be administered by the Committee, which shall consist of three or more directors of the Company, all of whom are "Non-Employee Directors," as such term is defined under the rules and regulations adopted, from time to time, by the Securities and Exchange Commission pursuant to Section 16(b) of the Exchange Act, including specifically but without limitation, Rule 16b-3 or any successor rule thereto. ORYX ENERGY COMPANY By: /s/ FRANCES G. HEARTWELL ------------------------------------ Name: Frances G. Heartwell ---------------------------------- Title: Vice President, Human Resources ---------------------------------- and Administration Dated as of September 4, 1996. EX-12 6 COMPUTATION TABLE 1 EXHIBIT 12 ORYX ENERGY COMPANY COMPUTATIONS OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS - UNAUDITED (A) (MILLIONS OF DOLLARS)
YEAR ENDED DECEMBER 31 ----------------------------------------- 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------ RATIO OF EARNINGS TO FIXED CHARGES: Fixed Charges: Consolidated interest cost and debt expense $ 110 $ 144 $ 162 $ 163 $ 187 Interest allocable to rental expense (b) 6 14 13 11 11 ----- ----- ----- ----- ----- Total $ 116 $ 158 $ 175 $ 174 $ 198 ===== ===== ===== ===== ===== Earnings: Consolidated income (loss) before provision (benefit) for income taxes $ 265 $ 136 $(100) $(108) $ (4) Fixed charges 116 158 175 174 198 Interest capitalized (17) (10) (11) (46) (43) Amortization of previously capitalized interest 4 5 14 7 3 ----- ----- ----- ----- ----- Total $ 368 $ 289 $ 78 $ 27 $ 154 ===== ===== ===== ===== ===== Ratio of Earnings to Fixed Charges (c) 3.17 1.83 .45 .16 .78 ===== ===== ===== ===== ===== RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS: Fixed Charges: Consolidated interest cost and debt expense $ 110 $ 144 $ 162 $ 163 $ 187 Preferred stock dividend requirements -- -- 2 8 14 Interest allocable to rental expense (b) 6 14 13 11 11 ----- ----- ----- ----- ----- Total $ 116 $ 158 $ 177 $ 182 $ 212 ===== ===== ===== ===== ===== Earnings: Consolidated income (loss) before provision (benefit) for income taxes $ 265 $ 136 $(100) $(108) $ (4) Fixed charges 116 158 177 182 212 Interest capitalized (17) (10) (11) (46) (43) Amortization of previously capitalized interest 4 5 14 7 3 ----- ----- ----- ----- ----- Total $ 368 $ 289 $ 80 $ 35 $ 168 ===== ===== ===== ===== ===== Ratio of Earnings to Fixed Charges (c) 3.17 1.83 .45 .19 .79 ===== ===== ===== ===== =====
- ----------- (a) The consolidated financial statements of Oryx Energy Company include the accounts of all subsidiaries (more than 50 percent owned and/or controlled). (b) Represents one-third of total operating lease rental expense which is that portion deemed to be interest. (c) Earnings for 1994 were inadequate to cover fixed charges, or fixed charges and preferred stock dividend requirements by $97 million. Earnings for 1993 were inadequate to cover fixed charges, or fixed charges and preferred stock dividend requirements by $147 million. Earnings for 1992 were inadequate to cover fixed changes, or fixed charges and preferred stock dividend requirements, by $44 million. EX-13 7 ANNUAL REPORT TO SECURITY HOLDERS 1 EXHIBIT 13 AS WE CONTINUE TO FOCUS ON THE KEY FACTORS THAT HAVE DRIVEN OUR TURNAROUND, WE BELIEVE THAT THE FUTURE WILL BE EVEN MORE SUCCESSFUL. [PHOTO]
NET EXPLORATORY WELLS DRILLED 92 13 93 10 94 7 95 3 96 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Management's discussion and analysis of the Company's financial position and results of operations which follows should be read in conjunction with the Consolidated Financial Statements and Selected Financial Data included in this report. LIQUIDITY AND CAPITAL RESOURCES ED&A outlays were $500 million in 1996, $300 million in 1995 and $314 million in 1994. In 1996, 18 percent of the Company's total ED&A investment was on exploration and 82 percent on development and acquisition. In 1997, total ED&A outlays are expected to be $520 million of which about 72 percent is targeted for development and 28 percent for exploration, primarily in the U.S. FD&A costs per eb were $4.50 in 1996. The average FD&A cost for the five years 1992 through 1996 was $4.86 per eb and the average production replacement rate was 101 percent. In 1996, the Company replaced 153 percent of its production. The Company's cash flow available for investment will continue to be affected by prevailing oil and gas prices, costs and volumes. Volatility in oil and gas prices experienced over the past several years is expected to continue. The Company is basing its 1997 investment plans on oil and gas spot prices averaging $19.75 per barrel WTI and $2.05 per mmbtu HH. These assumptions are subject to change, along with the associated investment levels. On October 29, 1996, the Company completed the acquisition of additional interests in the Ninian, Hutton, Lyell and Murchison fields as well as the Columba field and surrounding 13 2
RESERVES ADDED/DISCOVERY NUMBER OF EMPLOYEES PRODUCTION PER EMPLOYEE (mmeb/well) (hundreds) (meb/employee) 92 12.8 92 16 92 53 93 19.7 93 15 93 51 94 30.2 94 12 94 67 95 35.8 95 12 95 61 96 32.6 96 10 96 70
acreage in the U.K. North Sea for $91 million cash. Oryx was operator of three of the fields and became operator of Ninian in February 1997. During 1995, the Company generated $517 million of net proceeds from the sale of certain assets in order to reduce debt. The U.K. North Sea Alba Field and Block 48/15a interests were sold for $270 million and $120 million respectively. The Company also sold certain assets in the U.S. for $77 million and all of its assets in Indonesia and Gabon for $67 million and $2 million respectively. In 1994, the Company exchanged its interest in the undeveloped U.K. Britannia field for a doubling of its interests in the U.K. Hutton, Lyell and Murchison producing fields and $40.4 million in cash. This transaction increased near-term production volumes and considerably reduced future development expenditures. Effective January 9, 1995, the Company took over operatorship of the Hutton, Lyell and Murchison fields. Effective June 1, 1995, the Company replaced its $620 million revolving credit facility with a $500 million revolving credit facility (Revolver) which matures on June 30, 1998. The terms of the $500 million Revolver incorporate restrictive covenants, including limitations on total debt, minimum cash flow interest coverage and certain dividend limitations. In August 1995, as a result of the sale of the Company's interest in the Alba field, the Company was required by the holder to repay the 7.2% $100 million note. In connection with the aforementioned, the Company recognized a non-cash extraordinary loss of $15 million (net of $8 million of income tax). The $15 million extraordinary loss is comprised of $14 million from the write-off of debt issuance costs deferred under the $620 million revolving credit facility and a prepayment penalty of $1 million on the 7.2% $100 million note. In August 1995, a swap option, in the notional amount of $250 million sold by the Company in 1993 for $14 million, was exercised by the counterparties, thereby obligating the Company, commencing September 15, 1995 and continuing through September 15, 1998, to pay an annual rate of 9.75 percent while receiving LIBOR (5.875 percent at September 15, 1996, to be reset at six-month intervals). The $14 million of proceeds previously received is being amortized and netted against the interest expense associated with the exercise of the swap option. The Company called for redemption on October 30, 1995 its $138 million 10 3/8% Debentures at 106.471 percent of par plus accrued interest, which resulted in an $8 million extraordinary loss (net of $3 million of income tax) in the fourth quarter. The redemption was funded with proceeds from divestments. On October 20, 1995, the Company issued $100 million 8% Notes Due October 15, 2003 and $150 million 8.125% Notes Due October 15, 2005. The net proceeds of $245 million were applied to the redemption of the Company's $250 million 9.75% Notes Due September 15, 1998 on November 30, 1995 at par plus accrued interest. The Company's total debt was $1,187 million, $1,203 million and $1,711 million at December 31, 1996, 1995 and 1994. On July 11, 1996, the Company issued $150 million 8 3/8% Notes Due July 15, 2004. The net proceeds of $149 million were used to refinance debt outstanding under the Company's Revolver, uncommitted lines of credit and commercial paper. These vehicles had been utilized to refinance $100 million of the Company's 9.30% Notes that matured in May 1996 and $35 million of the Company's 6.05% Medium Term Notes that matured in February 1996. 14 3
CRUDE & CONDENSATE PRICE CRUDE & CONDENSATE PRODUCTION NATURAL GAS PRICE 92 18.77 92 119 92 1.83 93 16.08 93 110 93 1.98 94 15.06 94 121 94 1.90 95 16.53 95 114 95 1.77 96 19.56 96 109 96 2.14
Cash was $9 million at the end of 1996 and $20 million at the end of 1995. The Company's current borrowing capacity is more than adequate to meet its needs under existing economic conditions. Moreover, the Revolver is available to support the outstanding commercial paper program, potential refinancing needs and general liquidity. During 1996, Moody's Investors Service upgraded the Company's senior unsecured debentures to Ba2 from Ba3 and the convertible subordinated debenture to B1 from B2. During 1995, holders of the Company's Series B Junior Cumulative Convertible Preference Stock (Series B Preference) converted the remaining shares of Series B Preference into common stock on a share-for-share basis. Following a reduction of the amount of the quarterly dividend on common stock in 1992, from $.30 per share to $.10 per share, in 1994, the Board of Directors suspended the dividend. Any shortfall in expected cash flow from operating activities may require adjustment of business plans. Among its options, the Company can defer discretionary ED&A outlays, draw against the unused portion of the Revolver, seek additional bank borrowings or seek access to capital markets. The Company is in compliance with all the covenants in its Revolver and expects to remain in compliance under existing conditions. The ability to incur additional indebtedness as well as the long-term cash generation capability is ultimately tied to the value of the Company's proved reserve base. FINANCIAL PERFORMANCE Net income in 1996 was $163 million. The realized oil price in 1996 increased 20 percent to $19.56 per barrel. The increase in 1996 followed a 9 percent increase in 1995 compared to 1994. The Company's realized U.S. gas price in 1996 increased 24 percent to $2.14 per mcf. In 1996, production volumes decreased 4 percent as a direct result of 1995 asset sales. Total costs and expenses decreased 9 percent to $882 million in 1996 from $968 million in 1995, excluding the 1995 restructuring provision. Operating costs decreased 28 percent in 1996 due to divestments and cost efficiency measures. Interest and debt expense decreased 24 percent in 1996 due to lower debt. Production taxes increased 52 percent in 1996 primarily due to higher prices. Net income in 1995 was $135 million which included net gains of $137 million from the sale of assets, a $23 million extraordinary item related to early extinguishment of debt (see Note 12 to the Consolidated Financial Statements) and a $16 million net restructuring charge. Production volumes decreased 10 percent as a direct result of the sale of producing assets. Total costs and expenses decreased 10 percent to $968 million in 1995 from $1,080 in 1994, excluding the restructuring provision. The net loss for 1994 was $1,025 million, which included a $948 million cumulative effect of an accounting change (see Note 8 to the Consolidated Financial Statements), a $12 million extraordinary item related to early retirement of debt (see Note 12 to the Consolidated Financial Statements) and a $59 million restructuring charge (net of $33 million of income tax). Production volumes increased 5 percent primarily from the U.K. North Sea. Depreciation, depletion and amortization expense declined 31 percent because of the accounting change which decreased the Company's producing property balance $1,355 million. (See Note 8 to the Consolidated Financial Statements.) General and administrative expense decreased 20 percent primarily because of fewer employees and capitalized interest decreased 76 percent because of the completion of certain development projects. Total costs and expenses decreased 7 percent to $1,080 million in 1994 excluding the restructuring provision. 15 4
NATURAL GAS PRODUCTION TOTAL DEBT LEVELS (mmcf/d) ($ billion) 92 679 92 1.71 93 603 93 1.77 94 600 94 1.71 95 518 95 1.20 96 500 96 1.19
RESTRUCTURING CHARGES The Company incurred provisions for restructuring of $25 million in 1995 and $92 million in 1994. The 1994 provision consisted of a charge of $161 million provided in the first quarter, revised to $76 million because of the accounting change, and $16 million provided in the fourth quarter. The restructuring program involves some consolidation of the Company's business. The net result of these actions was a reduction of approximately 600 positions which, along with other actions taken, led to cost reductions for 1996. For analysis of the restructuring provisions, see Note 6 to the Consolidated Financial Statements. HEDGING ARRANGEMENTS The Company, from time to time, enters into hedging arrangements for foreign currencies, interest rates and oil and gas prices. The Company has entered into contracts to hedge approximately 33 percent of its 1997 crude oil production. Collar agreements were employed to hedge approximately 12 percent of production at an average floor price of $19.90 WTI per barrel and an average ceiling price of $22.49 WTI per barrel, put contracts comprise 11 percent of production at an average floor price of $19.65 WTI per barrel and swap agreements hedge 2 percent of production at an average price of $19.25 WTI per barrel. In addition, the Company has sold forward Brent crude at $19.23 per barrel which is approximately 8 percent of its estimated 1997 crude oil production. Approximately 35 percent of its estimated 1997 U.S. gas production is under hedging agreements at an average price of $2.08 HHper mmbtu comprised of 18 percent hedged using collars at an average floor price of $2.13 HH per mmbtu and an average ceiling price of $2.51 HH per mmbtu, 14 percent hedged via put contracts at an average floor price of $2.02 HH per mmbtu, and 3 percent utilizing swap agreements at an average price of $2.06 HH per mmbtu. (See Note 2 to the Consolidated Financial Statements.) MARKETING During the fourth quarter of 1995, the Company, Apache Corporation and Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC (ProEnergy). ProEnergy purchases substantially all of its members' U.S. gas production at index prices. INCOME TAXES Oryx Energy adopted SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1992. The effect for remeasurement of foreign deferred tax was a charge of $2 million in 1994, no effect in 1995 and a charge of $6 million in 1996. As a result of applying the provisions of SFAS No. 109, a non-cash charge or credit is included in business results based on the change in foreign exchange rates and the corresponding impact on the net deferred tax liability. The Company believes these items tend to distort current period business results and should be disregarded in analyzing its current business. ENVIRONMENTAL The Company's oil and gas operations are subject to stringent environmental regulations. The Company is dedicated to the preservation of the environment and has committed significant resources to comply with such regulations. Although it has been named as a potentially responsible party at sites related to past operations, the Company believes it is in general compliance with applicable governmental regulations and that the potential costs to it, in the aggregate, are not material to its financial condition. However, risks of substantial costs and liabilities are inherent to the oil and gas business. Should other developments occur, such as increasingly strict environmental laws, regulations and enforcement policies or claims for damages resulting from the Company's operations, they could result in additional costs and liabilities in the future. (See Note 19 to the Consolidated Financial Statements.) 16 5 SELECTED FINANCIAL DATA Oryx Energy Company
YEAR ENDED DECEMBER 31 (Millions of Dollars, Except Per Share Amounts) 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- FOR THE PERIOD Revenues $ 1,147 $ 1,129 $ 1,072 $ 1,054 $ 1,392 Income (loss) before extraordinary item and cumulative effect of accounting change (1) $ 163 $ 158 $ (65) $ (93) $ 73 Net income (loss) (1) $ 163 $ 135 $(1,025) $ (100) $ 14 Income (loss) per share of common stock before extraordinary item and cumulative effect of accounting change (1) $ 1.55 $ 1.54 $ (.68) $ (1.01) $ .74 Net income (loss) per share of common stock (1) $ 1.55 $ 1.32 $(10.53) $ (1.08) $ .06 Cash dividends per share of common stock (2) $ -- $ -- $ -- $ .40 $ .80 Cash dividends per share of preferred stock (3) $ -- $ .05 $ .175 $ .725 $ 1.25 ED&A outlays (4) $ 500 $ 300 $ 314 $ 451 $ 390 AT END OF PERIOD Total assets (1) $ 1,935 $ 1,666 $ 2,118 $ 3,624 $ 3,738 Long-term debt $ 1,183 $ 1,051 $ 1,546 $ 1,741 $ 1,489 Shareholders' equity (deficit)(5) $ (37) $ (209) $ (347) $ 676 $ 817
(1) Net income for 1996 includes a $6 million charge for remeasurement of foreign deferred taxes and a $1 million after-tax loss on asset disposals. Net income for 1995 includes $137 million of after-tax gains on asset disposals, a $16 million after-tax charge for costs associated with the Company's restructuring and a $23 million extraordinary loss net of taxes from debt costs. (See Notes 6 and 12 to the Consolidated Financial Statements.) Effective January 1, 1994, the Company adopted a new policy for determining the ceiling test for its oil and gas properties. A one-time non-cash charge of $948 million after-tax for the cumulative effect of the change was recognized in the earnings for 1994 (see Note 8 to the Consolidated Financial Statements). Additionally, net loss for 1994 includes a $59 million after-tax charge for costs associated with the Company's restructuring program, a $12 million extraordinary loss net of taxes from debt costs and a $2 million charge for the remeasurement of foreign deferred taxes (see Notes 6 and 12 to the Consolidated Financial Statements). Net loss for 1993 includes $5 million of after-tax losses on asset disposals, a $7 million extraordinary loss net of taxes from the repurchase of indebtedness and a $5 million benefit for remeasurement of foreign deferred taxes (see Note 12 to the Consolidated Financial Statements). Net income for 1992 includes $19 million of after-tax gains on asset disposals, a $9 million after-tax charge for costs associated with the Company's restructuring program and a $59 million benefit for remeasurement of foreign deferred taxes. (2) In June 1992, the Company announced the reduction of the quarterly cash dividend on its $1.00 par value common stock (Common Stock) from $.30 to $.10 per share. In January 1994, the Company announced the suspension of its quarterly cash dividend of $.10 per share. (3) On September 11, 1990, the Company issued 7,259,394 shares of Series B Junior Cumulative Convertible Preference Stock (Series B Preference Stock). In November 1994, 2 million shares of Series B Preference Stock were converted into Common Stock. During 1995, the remaining 5,259,394 shares of Series B Preference Stock were converted into Common Stock. (4) Exploration, development and acquisition outlays (ED&A outlays) exclude capitalized interest of $17 million, $10 million, $11 million, $46 million and $43 million for 1996, 1995, 1994, 1993 and 1992. (5) Shareholders' equity (deficit) at December 31, 1996, 1995 and 1994 includes the $948 million charge for the cumulative effect of the change in the Company's policy for determining the ceiling test for its oil and gas properties (see Note 8 to the Consolidated Financial Statements). Shareholders' equity (deficit) at December 31, 1996, 1995, 1994, 1993 and 1992 includes the effects of the sale of 17,250,000 shares of Common Stock in August 1992. 17 6 CONSOLIDATED STATEMENTS OF INCOME Oryx Energy Company
YEAR ENDED DECEMBER 31 (Millions of Dollars, Except Per Share Amounts) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------ REVENUES Oil and gas (Note 3) $ 1,168 $ 1,014 $ 1,082 Other-net (Note 4) (21) 115 (10) ------- ------- ------- 1,147 1,129 1,072 ------- ------- ------- COSTS AND EXPENSES Operating costs 239 330 374 Production taxes (Note 5) 160 105 112 Exploration costs 56 59 104 Depreciation, depletion and amortization 276 276 271 General and administrative expense 58 64 68 Interest and debt expense 110 144 162 Interest capitalized (17) (10) (11) Provision for restructuring (Note 6) -- 25 92 ------- ------- ------- 882 993 1,172 ------- ------- ------- Income (loss) before extraordinary item, cumulative effect of accounting change and provision (benefit) for income taxes 265 136 (100) Provision (benefit) for income taxes (Note 7) 96 (22) (37) Remeasurement of foreign deferred tax (Notes 1 and 7) 6 -- 2 ------- ------- ------- Income (loss) before extraordinary item and cumulative effect of accounting change 163 158 (65) Extraordinary item (Note 12) -- (23) (12) Cumulative effect of accounting change (Note 8) -- -- (948) ------- ------- ------- NET INCOME (LOSS) 163 135 (1,025) Less preferred stock dividends -- -- 1 ------- ------- ------- NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK $ 163 $ 135 $(1,026) ======= ======= ======= NET INCOME (LOSS) PER SHARE OF COMMON STOCK (Note 9): Before extraordinary item and cumulative effect of accounting change $ 1.55 $ 1.54 $ (.68) Extraordinary item -- (.22) (.12) Cumulative effect of accounting change -- -- (9.73) ------- ------- ------- Net income (loss) $ 1.55 $ 1.32 $(10.53) ======= ======= ======= Weighted average number of common and common equivalent shares outstanding (millions of shares) 105.0 102.4 97.4 ======= ======= =======
(See Accompanying Notes) 18 7 CONSOLIDATED BALANCE SHEETS Oryx Energy Company
DECEMBER 31 (Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 9 $ 20 Accounts receivable and other current assets 241 161 ------- ------- Total Current Assets 250 181 Properties, Plants and Equipment (Note 10) 1,627 1,426 Deferred Charges and Other Assets 58 59 ------- ------- Total Assets $ 1,935 $ 1,666 ======= ======= LIABILITIES AND SHAREHOLDERS' DEFICIT Current Liabilities Accounts payable $ 130 $ 106 Accrued liabilities (Note 11) 251 196 Current portion of long-term debt (Note 12) 4 152 ------- ------- Total Current Liabilities 385 454 Long-Term Debt (Note 12) 1,183 1,051 Deferred Income Taxes (Note 7) 248 207 Deferred Credits and Other Liabilities (Note 19) 156 163 Commitments and Contingent Liabilities (Note 13) Shareholders' Deficit (Note 14) Preferred stock, $1 par value; 22,740,606 shares authorized; none issued or outstanding -- -- Common stock, $1 par value; 250,000,000 shares authorized; 126,703,550 shares issued in 1996 and 1995, 104,982,628 and 104,454,562 shares outstanding in 1996 and 1995 124 124 Additional paid-in capital 1,821 1,821 Accumulated deficit (895) (1,051) ------- ------- 1,050 894 Less common stock in treasury, at cost; 18,719,046 and 19,247,112 shares in 1996 and 1995 (988) (1,004) Less loan to ESOP (99) (99) ------- ------- Shareholders' Deficit (37) (209) ------- ------- Total Liabilities and Shareholders' Deficit $ 1,935 $ 1,666 ======= =======
The successful efforts method of accounting is followed. (See Accompanying Notes) 19 8 CONSOLIDATED STATEMENTS OF CASH FLOWS Oryx Energy Company
YEAR ENDED DECEMBER 31 (Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS FROM OPERATING ACTIVITIES Net Income (Loss) $ 163 $ 135 $(1,025) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation, depletion and amortization 276 276 271 Dry hole costs and leasehold impairment 20 21 57 Deferred income taxes 66 33 10 (Gain) loss on sale of assets, net of taxes 1 (137) -- Provision for restructuring, net of taxes -- 16 59 Extraordinary item -- 23 12 Cumulative effect of accounting change -- -- 948 Other 14 10 5 ------- ------- ------- 540 377 337 Changes in working capital: Accounts receivable and other current assets (81) 9 14 Accounts payable 24 -- (14) Accrued liabilities 52 (61) (41) ------- ------- ------- NET CASH FLOW PROVIDED FROM OPERATING ACTIVITIES 535 325 296 ------- ------- ------- CASH AND CASH EQUIVALENTS FROM INVESTING ACTIVITIES Capital expenditures (484) (273) (281) Proceeds from divestments, net of current taxes 7 517 78 Other (51) (25) (30) ------- ------- ------- NET CASH FLOW PROVIDED FROM (USED FOR) INVESTING ACTIVITIES (528) 219 (233) ------- ------- ------- CASH AND CASH EQUIVALENTS FROM FINANCING ACTIVITIES Proceeds from borrowings 221 259 123 Repayments of long-term debt (239) (793) (185) Cash dividends paid on preferred stock -- -- (1) ------- ------- ------- NET CASH FLOW USED FOR FINANCING ACTIVITIES (18) (534) (63) ------- ------- ------- CHANGES IN CASH AND CASH EQUIVALENTS (11) 10 -- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20 10 10 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9 $ 20 $ 10 ======= ======= =======
(See Accompanying Notes) 20 9 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT Oryx Energy Company
COMMON STOCK PREFERRED STOCK COMMON STOCK ------------------- ------------------ ADDITIONAL HELD IN TREASURY LOAN NUMBER PAR NUMBER PAR PAID-IN ACCUMULATED ---------------- TO OF SHARES VALUE OF SHARES VALUE CAPITAL DEFICIT SHARES COST ESOP - ------------------------------------------------------------------------------------------------------------------------------------ (Millions of Dollars, Thousands of Shares) At December 31, 1993 123,702 $ 124 7,259 $ 7 $ 2,204 $ (155) (26,769) $ (1,402) $ (102) Net loss (1,025) Issuance from treasury (1) 13 1 Preferred stock conversion (2,000) (2) (105) 2,000 107 Cash dividends declared: Preferred - $.175 per share (1) Repayment of loan to ESOP 3 ------- -------- ----- -------- -------- -------- ------- -------- -------- At December 31, 1994 123,702 124 5,259 5 2,098 (1,181) (24,756) (1,294) (99) Net income 135 Issuance from treasury (5) 250 7 Preferred stock conversion (5,259) (5) (277) 5,259 283 Cash dividends declared: Preferred - $.05 per share -- ------- -------- ----- -------- -------- -------- ------- -------- -------- At December 31, 1995 123,702 124 -- -- 1,821 (1,051) (19,247) (1,004) (99) Net income 163 Issuance from treasury (7) 528 16 ------- -------- ----- -------- -------- -------- ------- -------- -------- At December 31, 1996 123,702 $ 124 -- $ -- $ 1,821 $ (895) (18,719) $ (988) $ (99) ======= ======== ===== ======== ======== ======== ======= ======== ========
(See Accompanying Notes) 21 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION Oryx Energy Company together with its consolidated subsidiaries (the Company) was incorporated in Delaware in 1971 and became a publicly traded company on November 1, 1988. The Company's business operations consist of the exploration for and development and production of oil and natural gas reserves. Since December 1, 1985, the Company has functioned as the managing general partner for and has conducted its United States operations through Sun Energy Partners, L.P. The majority of the Company's operations located outside of the United States were acquired effective January 1, 1990 and are identified herein by the separate geographic areas of the United Kingdom and Other Foreign. The consolidated financial statements contain the accounts of the Company after elimination of intercompany balances and transactions. The Company's interests in Sun Energy Partners, L.P. and its related operating partnerships (Partnership) are fully consolidated. CASH AND CASH EQUIVALENTS The Company considers highly liquid investments with original maturities of less than three months to be cash equivalents. Cash equivalents are stated at cost which approximates market value. PROPERTIES, PLANTS AND EQUIPMENT The successful efforts method of accounting is followed for costs incurred in oil and gas operations. CAPITALIZATION POLICY Acquisition costs are capitalized when incurred. Costs of unproved properties are transferred to proved properties when proved reserves are added. Exploration costs,including geological and geophysical costs and costs of carrying unproved properties, are charged against income as incurred. Exploratory drilling costs are capitalized initially; however, if it is determined that an exploratory well did not find proved reserves, such capitalized costs are charged to expense, as dry hole costs, at that time. Development costs are capitalized. Costs incurred to operate and maintain wells and equipment are expensed. LEASEHOLD IMPAIRMENT AND DEPRECIATION, DEPLETION AND AMORTIZATION Periodic valuation provisions for impairment of capitalized costs of unproved properties are expensed. The acquisition costs of proved properties are depleted by the unit-of-production method based on proved reserves by field. Capitalized exploratory drilling costs which result in the addition of proved reserves and development costs are amortized by the unit-of-production method based on proved developed reserves by field. CEILING TEST The Company performs its ceiling test comparisons on an individual field basis. In December 1995, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Under SFAS No. 121, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the Company reviews for impairment by comparing estimated future cash flows expected to result from the use of an asset and its eventual disposition to the carrying amount of the asset (Note 8). If impairment is indicated, the asset is written down to its fair value based upon its expected future discounted cash flows. DISMANTLEMENT, RESTORATION AND ABANDONMENT COSTS Estimated costs of future dismantlement, restoration and abandonment are accrued as a component of depreciation, depletion and amortization expense; actual costs are charged to the accrual. RETIREMENTS Gains and losses on the disposals of fixed assets are generally reflected in income. For certain property groups, the cost less salvage value of property sold or abandoned is charged to accumulated depreciation, depletion and amortization except that gains and losses for these groups are taken into income for unusual retirements or retirements involving an entire property group. CAPITALIZED INTEREST The Company capitalizes interest costs incurred as a result of the acquisition and installation of significant assets. 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company INCOME TAXES Deferred income taxes are provided to reflect the tax consequences in future years of differences between financial statements and tax basis of assets and liabilities at year end in accordance with SFAS No. 109, "Accounting for Income Taxes." The remeasurement provisions of SFAS No. 109 have affected the reported earnings of the Company for 1996 and 1994. Earnings for 1996 and 1994 were decreased by $6 million and $2 million from remeasuring the Company's foreign deferred tax liabilities. Management believes that such non-cash remeasurements distort current period economic results and should be disregarded in analyzing the Company's current business. Future economic results may also be distorted because payment of the deferred tax liability is not expected to occur in the near-term and it is likely that exchange rates will fluctuate prior to the eventual settlement of the liability. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS The Company has established noncontributory defined benefit plans and defined contribution plans to provide retirement benefits for most of its employees. Pension benefits are charged against earnings over the periods in which they are earned by the employees (Note 15). In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees and certain insurance and other postemployment benefits for individuals whose employment is terminated by the Company prior to their normal retirement. Substantially all of the Company's employees may become eligible for postretirement benefits if they reach normal retirement age while working for the Company. The Company recognizes the costs of postretirement benefits other than pensions and postemployment benefits on an accrual basis. SALES OF OIL AND GAS Sales of oil and gas are recorded on the entitlement method. Differences between actual production and entitlements result in amounts due when underproduction occurs and amounts owed when overproduction occurs. FOREIGN CURRENCY TRANSLATION The U.S. dollar is the functional currency for the Company's consolidated foreign operations. For those operations, all transaction gains or losses from currency fluctuations are included in income currently. FOREIGN EXCHANGE HEDGING CONTRACTS The Company, from time to time, enters into foreign currency hedging arrangements to hedge the impact of changes in exchange rates on its receivables and payables denominated in British pounds. Gains and losses realized from such arrangements offset transaction gains and losses which are included in the measurement of the related foreign currency transactions (Note 2). INTEREST RATE HEDGING AGREEMENTS The Company, from time to time, enters into interest rate hedging agreements to alter the floating rate portion of its underlying debt portfolio. Advance proceeds received under such agreements are included in deferred credits and other liabilities and are amortized as offsets to interest and debt expense over the relevant periods. The differentials paid or received during the terms of such agreements are accrued as interest rates change and are recorded as adjustments to interest and debt expense (Note 2). OIL AND GAS PRICE HEDGING ACTIVITY The Company, from time to time, enters into arrangements to hedge the impact of price fluctuations on anticipated crude oil and natural gas sales. Advance payments under such contracts are deferred and charged to oil and gas revenue during the anticipated sales periods. The differentials paid or received during the terms of such agreements are accrued as oil and gas prices change and are charged or credited to oil and gas sales (Note 2). ENVIRONMENTAL COSTS The Company establishes reserves for environmental liabilities as such liabilities are incurred (Note 19). 23 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company STATEMENT PRESENTATION The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain items in years prior to 1996 have been reclassified to conform to the 1996 presentation. 2. FINANCIAL INSTRUMENTS DERIVATIVES As discussed in Note 1, the Company enters into hedging arrangements for foreign exchange, interest rates and crude oil and natural gas prices with major financial institutions. The Company does not enter into derivative transactions for trading purposes. The Company is active in the foreign exchange market to hedge its economic exposures to the British pound. In addition, the Company has minor exposures to other currencies in countries in which it does business. At December 31, 1996 and 1995, the Company had forward and option contracts outstanding with various expiration dates to purchase 13 million and 52 million net British pounds at various prices. At December 31, 1996 and 1995, the fair values of the Company's outstanding foreign exchange contracts, based on quoted market prices, were nil, which approximated their associated carrying values. For the year ended December 31, 1996, the Company did not recognize a net transaction gain or loss but did recognize a net transaction loss of $1 million for the year ended December 31, 1995. The Company also participates in various interest rate hedging arrangements to manage the floating rate portion of its debt. At December 31, 1996 and 1995, the Company was a party to interest rate hedging agreements having notional amounts of $600 million, of which $350 million represented interest rate caps (Caps) with maturities in 1997 and 1998. The remaining $250 million represented interest rate swaps (Swaps) expiring in 1998 that had been under option at December 31, 1994 and were subsequently exercised on August 15, 1995. The terms of the Caps expose the Company to interest rate risk when LIBOR (5.6875 percent at December 31, 1996) exceeds 5 percent per year. Under the terms of the Caps, the Company received advance proceeds of $19 million from the counterparties and must pay the excess by which LIBOR exceeds 5 percent on the notional amounts. Under the terms of the Swaps, the Company received advance proceeds of $14 million from the counterparties and must pay an annual rate of 9.75 percent while receiving LIBOR (5.875 percent at September 15, 1996, to be reset at six-month intervals). The terms of the Swaps decrease the exposure of the Company to increases in LIBOR. At December 31, 1996 and 1995, the aggregate carrying values of the gains deferred from the Company's interest rate futures agreements were $15 million and $25 million, and their estimated fair market values, based on market quotes, were $23 million and $37 million. At December 31, 1996, the Company was a party to crude oil hedging contracts to hedge about 22 percent of its estimated 1997 crude oil production at an average price of $20.30 WTI per barrel. Approximately 31 percent of its estimated 1997 U.S. natural gas production was hedged at $2.24 HH per mmbtu. At December 31, 1995, the Company was a party to crude oil and natural gas hedging contracts to hedge about 8 percent of its estimated 1996 crude oil production at $18.34 WTI per barrel and approximately 40 percent of its 1996 U.S. natural gas production at $1.81 HH per mmbtu. These arrangements serve to reduce the volatility associated with prices of crude oil and natural gas. The aggregate carrying values of these assets at December 31, 1996 and 1995 were $10 million and $5 million and the aggregate fair values, subject to daily fluctuation, based on quotes from brokers, were approximately $(3) million and $(21) million. All of the above mentioned derivative contracts expose the Company to credit risks. The Company has established controls to manage this risk and closely monitors the creditworthiness of its counterparties, which are major institutions. The Company believes that losses from nonperformance are unlikely to occur. OTHER FINANCIAL INSTRUMENTS At December 31, 1996 and 1995, the carrying values of the Company's long-term debt, including amounts due within one year, were $1,187 million and $1,203 million (Note 12). At December 31, 1996 and 1995, the aggregate fair values of the Company's long-term debt were approximately $1,220 million and $1,233 million, estimated primarily based on quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. 24 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 3. RELATED PARTY TRANSACTIONS During the fourth quarter of 1995, the Company, Apache Corporation and Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC (ProEnergy) to jointly market natural gas. As of December 31, 1996, the Company had an ownership interest of 46 percent in ProEnergy; however, ownership varies based on the Company's share of natural gas throughput for the preceding quarter. The Company accounts for its investment in ProEnergy using the equity method and, as of December 31, 1996, had recorded an investment in ProEnergy of $5 million. The Company sells the majority of its domestic natural gas production to ProEnergy at index prices. Full operations commenced in April of 1996 and natural gas sales to ProEnergy totaled $195 million for the nine months ended December 31, 1996. At December 31, 1996, the Company had an outstanding receivable balance of $48 million from ProEnergy. 4. OTHER REVENUES-NET The components of other revenues were as follows:
(Millions of Dollars) 1996 1995 1994 - --------------------------------------------------------------------------------- Interest income $ 2 $ 8 $ 2 Gain (loss) on sale of assets (2) 124* -- Miscellaneous (21) (17) (12) --------- -------- --------- $ (21) $ 115 $ (10) ========= ======== =========
* Gains generated in 1995 substantially from the sale of the Company's interest in the following properties. During 1995, the Company generated $517 million of net proceeds from the sale of certain assets in order to reduce debt. The U.K. North Sea Alba Field and Block 48/15a interests were sold for $270 million and $120 million respectively. The Company also sold certain assets in the U.S. for $77 million and all of its assets in Indonesia and Gabon for $67 million and $2 million respectively. Asset dispositions, totaling $536 million of gross proceeds, represented 138 million equivalent barrels of proved reserves and 43 thousand average equivalent barrels of production per day. 5. PRODUCTION TAXES Production taxes consisted of the following:
(Millions of Dollars) 1996 1995 1994 - --------------------------------------------------------------------------------- International royalties $ 37 $ 46 $ 54 U.S. severance taxes 31 22 28 U.S. property taxes 9 11 15 U.K. petroleum revenue taxes 83 26 15 --------- -------- --------- $ 160 $ 105 $ 112 ========= ======== =========
25 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 6. CHANGES IN BUSINESS In the fourth quarter of 1995, the Company recognized a net $25 million ($16 million after-tax) charge for restructuring. The charge is comprised of a $4 million adjustment to the 1994 restructuring provision (see below) and a $29 million restructuring provision for a plan to achieve further cost reductions. An analysis of the 1995 provision for restructuring follows:
ACTIVITY BALANCE ACTIVITY BALANCE INITIAL THROUGH AT THROUGH AT (Millions of Dollars) PROVISION 12/31/95 12/31/95 12/31/96 12/31/96 - --------------------------------------------------------------------------------------------------------------------------- Termination and associated costs * $ 10 $ (1) $ 9 $ (9) $ -- SFAS No. 88 and SFAS No. 106 (retirement and postretirement costs) ** 5 (5) -- -- -- Office lease obligation *** 14 -- 14 (1) 13 --------- --------- -------- --------- -------- Total $ 29 $ (6) $ 23 $ (10) $ 13 ========= ========= ======== ========= ========
* Termination and associated cash costs are primarily comprised of severance pay and associated employee benefit costs for 250 operational and administrative employees. ** Costs primarily represent non-cash adjustments due to special termination benefits and the acceleration of a portion of the transition obligation as a result of a reduction in the remaining expected future years of service of active employees. *** Represents contractual obligation existing prior to the commitment date that will continue with no economic benefit to the Company. The expenditures for the 1994 restructuring were substantially complete at December 31, 1995. As a result of $1 million of termination payments made during the first quarter of 1996, expenditures for the 1994 restructuring were completed. 7. INCOME TAXES Income (loss) before extraordinary item, cumulative effect of accounting change and provision (benefit) for income taxes consisted of the following:
(Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------- Before interest expense United States income (loss) $ 220 $ 48 $ (2) Foreign income 138 222 53 Interest expense (93) (134) (151) -------- ------- -------- $ 265 $ 136 $ (100) ======== ======= ========
The provision (benefit) for income taxes for each of the years 1996, 1995 and 1994 is applicable to continuing operations. 26 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company The components of the provision (benefit) for income taxes on income (loss) before extraordinary item and accounting change were as follows:
(Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Federal Current tax provision (benefit) $ 15 $ (18) $ (14) Deferred tax provision (benefit) 44 (9) (16) State tax provision (benefit) 2 1 (6) Foreign Current tax provision 17 3 9 Deferred tax provision (benefit) 18 1 (10) --------- -------- --------- $ 96 $ (22) $ (37) ========= ======== =========
Deferred taxes are provided for the impact of differences between the tax basis of assets and liabilities and their reported amounts. Significant components of the Company's deferred income tax assets and liabilities at December 31, 1996 and 1995 were as follows:
(Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------- Deferred Tax Assets AMT credit carryforward $ 54 $ 64 Dismantlement, restoration and abandonment 41 38 Loss on controlled foreign corporations 11 12 Geological and geophysical expenditures 15 11 Contingency accruals 20 17 Employee benefit accruals 29 38 Foreign tax credit 9 9 Other 3 -- ------- -------- 182 189 ------- -------- Deferred Tax Liabilities Items associated with capitalized costs and write-offs 405 352 Miscellaneous accrued liabilities 25 44 ------- -------- 430 396 ------- -------- Net Deferred Tax Liability $ 248 $ 207 ======= ========
No valuation allowance was provided at December 31, 1996 or 1995 as the Company anticipates the results of operations in future years are more likely than not to generate taxable income sufficient to allow utilization of the existing deferred tax assets. 27 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company Following is the reconciliation of the tax provision (benefit) calculated at the U.S. statutory tax rate to the Company's actual tax provision (benefit) on income (loss) before extraordinary item and accounting change:
(Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- U.S. statutory rate calculation $ 93 $ 48 $ (35) Increase (reduction) in taxes resulting from: Benefit of additional tax basis on assets sold -- (58) -- Other 3 (12) (2) --------- -------- --------- Provision (benefit) for income taxes before remeasurement of foreign deferred tax 96 (22) (37) Remeasurement of foreign deferred tax as required by SFAS No. 109 6 -- 2 --------- -------- --------- Provision (benefit) for income taxes $ 102 $ (22) $ (35) ========= ======== =========
8. ACCOUNTING CHANGE In December 1995, the Company adopted SFAS No. 121, which had no material impact for the years ended December 31, 1996 and 1995. Effective January 1, 1994, the Company changed its accounting policy for calculating the oil and gas asset ceiling test from a total company basis to an individual field basis. The Company believes the field basis is preferable because it is the way the Company manages its business. The basis underlying the calculation of the cumulative effect of this change is a comparison of the undiscounted pre-tax cash flows of each field's then existing proved reserves to its net book value at each quarter-end during the life of the asset. This subjects the ceiling test valuation to the lowest quarter-end price experienced over the asset's life. Prior to this change, the Company compared its worldwide undiscounted standardized measure of future net cash flows from estimated production of proved oil and gas reserves before income taxes to its net proved property, plant and equipment. As a result of this change, the Company recognized a non-cash cumulative effect charge of $948 million ($1,355 million pre-tax) to 1994 results. Excluding the cumulative charge, the Company's net loss for 1994 was $77 million ($.68 per share before extraordinary item and $.80 per share after extraordinary item). 9. INCOME PER SHARE The 5,259,394 shares of Series B Preference Stock in 1994 were common stock equivalents. During 1995, all of these shares were converted to Common Stock and issued from treasury on a share-for-share basis. Conversion of the Series B Preference Stock in 1994 would have been anti-dilutive to the Company's loss per share. The Company has reserved 5,111,438 shares of Common Stock for issuance to the owners of its 7 1/2% Convertible Subordinated Debentures Due 2014 (Debentures). The Debentures are convertible into the Company's Common Stock at any time prior to maturity at $39.125 per share of Common Stock. The Debentures are not common stock equivalents. If conversion of the Debentures were assumed to have occurred, the result would have been anti-dilutive to 1996, 1995 and 1994 income (loss) per share. 28 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 10. PROPERTIES, PLANTS AND EQUIPMENT At December 31, the Company's properties, plants and equipment and accumulated depreciation, depletion and amortization were as follows:
(Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------- Gross investment Proved properties $ 5,167 $ 4,945 Unproved properties 147 126 Other 40 62 -------- --------- 5,354 5,133 -------- --------- Less accumulated depreciation, depletion and amortization Proved properties* 3,699 3,650 Other 28 57 -------- --------- 3,727 3,707 -------- --------- Net investment $ 1,627 $ 1,426 ======== =========
* Includes $123 million and $116 million for dismantlement, restoration and abandonment at December 31, 1996 and 1995. 11. ACCRUED LIABILITIES At December 31, the Company's accrued liabilities were comprised of the following:
(Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------- Drilling and operating costs $ 90 $ 78 Restructuring reserve (Note 6) 13 24 Interest payable 25 25 Employee related costs and benefits 31 33 Royalties payable 24 10 Taxes payable 39 1 Other 29 25 -------- --------- $ 251 $ 196 ======== =========
29 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 12. LONG-TERM DEBT At December 31, long-term debt consisted of the following:
(Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------- 8.375% Notes Due 2004 $ 150 $ -- 8% Notes Due 2003 100 100 8.125% Notes Due 2005 150 150 10% Notes due 1999 and 2001 payable $100 in 1999 and $150 in 2001 250 250 7.50% Convertible Subordinated Debentures payable $10 annually 1999 - 2013 and $50 in 2014 200 200 Medium Term Notes, variable and fixed interest rates ranging from 8.65% to 9.50% at December 31, 1996 due during 1999 - 2002 28 75 9.30% Notes due 1996 -- 100 9.50% Notes Due 1999 100 100 Commercial Paper, variable interest rate ranging from 6.10% to 6.25% at December 31, 1996* 70 50 Variable interest rate (ranging from 6.06% to 6.68% at December 31, 1996) revolving credit facility (Revolver) 65 132 Capitalized lease obligations and other long-term debt due 1997 - 2002 74 46 -------- --------- 1,187 1,203 Less current portion 4 152 -------- --------- $ 1,183 $ 1,051 ======== =========
* Commercial paper matures from 29 - 49 days. Such debt is classified as long-term due to management's intention to continue to use it as a financing vehicle and the availability of credit under the Company's Revolver. Long-term debt maturities are $4 million, $4 million, $228 million, $13 million and $163 million for each of the years 1997 through 2001. The maturing amount for 1998 excludes $191 million under the Revolver which management intends to replace no later than June 30, 1998. During the third quarter of 1996, the Company issued $150 million 8.375 percent notes due July 15, 2004. The net proceeds of $149 million were used to refinance debt outstanding under the Company's Revolver, uncommitted line of credit and commercial paper. During 1996, Moody's Investors Service upgraded the Company's senior unsecured debentures to Ba2 from Ba3 and the convertible subordinated debentures to B1 from B2. During the fourth quarter of 1995, the Company repurchased its 10.375 percent debentures at a total cost of $149 million resulting in an after-tax extraordinary loss of $8 million. In the third quarter of 1995, as a result of the sale of the Company's interest in the U.K. Alba field, the Company was required by the holder to repay the 7.2 percent $100 million note, resulting in an after-tax extraordinary loss of $1 million. In the second quarter of 1995, the Company replaced its $620 million revolving credit facility with a $500 million Revolver which is scheduled to mature on June 30, 1998, resulting in an after-tax extraordinary loss of $14 million. The Company pays a fee ranging from .375 percent to .5 percent of the unused portion of its $500 million Revolver. At year end 1996, the Company had the capacity to borrow $330 million under such facility; however, the amount can change daily. The commitments are subject to withdrawal if there were to be an event of default. The Company's long-term debt contains restrictive covenants, including a limitation on total indebtedness; restriction on the payment of common stock dividends and minimum cash flow interest coverage. At December 31, 1996, the Company was in compliance with all of its debt covenants. During 1994, Standard & Poor's downgraded the Company's senior unsecured debt from BBB- to BB, subordinated debt from BB+ to B+ and commercial paper to B from A-3. Subsequently, the holders of the Company's senior ESOP notes (approxi- 30 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company mately $100 million principal amount outstanding) exercised their right to require the Company to repay the notes in full at par plus a makewhole premium tied to prevailing rates of interest on U.S. Treasury obligations. As a result of the downgrade, the Company recognized a $12 million (net of $5 million of tax) extraordinary loss associated with the notes which were paid in full subsequent to year-end 1994. During 1994, the Company repurchased $33 million of its 10.375 percent debentures at a total cost of $33 million. 13. COMMITMENTS AND CONTINGENT LIABILITIES The Company has operating leases for office space and other property and equipment. Total rental expense for such leases for the years 1996, 1995 and 1994 was $20 million, $41 million and $37 million. Under contracts existing as of December 31, 1996, future minimum annual rental payments applicable to non-cancelable operating leases that have initial or remaining lease terms in excess of one year, less minimum rentals to be received under non-cancelable subleases, were as follows (in millions of dollars):
YEAR ENDING DECEMBER 31: - ---------------------------------------------------------------------------------------------------------- 1997 $ 11 1998 9 1999 8 2000 6 2001 8 Later years 54 --------- Total minimum payments required $ 96 =========
Minimum rentals to be received under non-cancelable subleases are $4 million, $5 million, $5 million, $5 million and $4 million for the years 1997 through 2001 and none for later years. Several legal and administrative proceedings are pending against the Company. Although the ultimate outcome of these proceedings cannot be ascertained at this time, and it is reasonably possible that some of them could be resolved unfavorably to the Company, management believes that any liabilities which may arise would not be material. 14. SHAREHOLDERS' DEFICIT Effective in October 1988, 3,001,876 shares of Common Stock of the Company were issued to an operating partnership of the Partnership in exchange for certain assets, which shares have been deducted from the number of shares shown in the Consolidated Balance Sheets as outstanding. Such shares are not entitled to be voted at the annual meeting of shareholders. All other shares of Common Stock are entitled to one vote per share. On August 1, 1989, the Company privately placed $110 million of notes (ESOP Notes) pursuant to the provisions of the Oryx Energy Company Capital Accumulation Plan (CAP). The Company loaned the proceeds to the CAP which used the funds to purchase Common Stock of the Company. Prior to 1995 and resuming in 1997, the CAP made scheduled loan payments using Company contributions to the CAP. In 1995 and 1996, repayments were deferred pending a ruling requested from the Internal Revenue Service. The Company has 272,740,606 authorized shares of stock, consisting of (i) 250,000,000 shares of Common Stock having a par value of $1.00 per share, (ii) 7,740,606 shares of Cumulative Preference Stock (Preference Stock) having a par value of $1.00 and a liquidation preference of $.001 per share, and (iii) 15,000,000 shares of Preferred Stock (Preferred Stock) having a par value of $1.00 per share. As of December 31, 1996, there were 104,982,628 shares of Common Stock outstanding. There are two series of Preference Stock designated, of which there were no shares of Series B Preference Stock outstanding and 120,000 shares of Series A Preference Stock designated and reserved for issuance upon exercise of the Stock Purchase Rights, of which none were outstanding. The Preferred Stock was authorized by vote of the shareholders on May 5, 1992 and there are currently no shares of Preferred Stock designated or outstanding. In addition, on December 31, 1996 the Company had reserved for issuance 5,111,438 shares of Common Stock on conversion of the outstanding 7 1/2% Convertible Debentures and 2,695,584 shares of Common Stock upon the exercise of outstanding management options. 31 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company COMMON STOCK Each share of Common Stock entitles its record owner to one vote on all matters submitted to the stockholders for action. The stockholders are not entitled to cumulative voting rights in the election of directors. Subject to the rights of holders of any class of Preference Stock or Preferred Stock, the holders of Common Stock are entitled to share ratably in dividends in such amount as may be declared by the Company's Board of Directors (Board) from time to time out of funds legally available therefor. The payment of dividends on the Common Stock is restricted under the Revolver and is prohibited in the event of a default. PREFERENCE STOCK The Board is authorized by the Certificate to issue Preference Stock in one or more series and to fix for each such series such qualifications, privileges, limitations, options, conversion rights and other special rights as are stated and adopted by the Board and as are permitted by the Certificate and the Delaware General Corporation Law, including the designation and number of shares issuable, the dividend rate, voting rights, conversion rights, redemption and sinking fund provisions and liquidation values of each such series. Holders of Preference Stock are entitled to receive, when and as declared by the Board out of assets legally available for that purpose, annual cumulative dividends payable in quarterly installments. Unless full cumulative dividends on the Preference Stock have been paid, no dividend may be declared or paid on, or other distributions made upon, Preferred Stock or Common Stock, nor may any Preferred Stock or Common Stock be redeemed or purchased by the Company. Subject to certain conditions, the Company may redeem all or any part of the Preference Stock then outstanding. During 1995, the holders of Series B Preference Stock converted the remaining shares of Series B Preference Stock into Common Stock on a share-for-share basis. PREFERRED STOCK The Board is authorized by the Certificate to issue Preferred Stock in one or more series and to fix for each such series such qualifications, privileges, limitations, options, conversion rights and other special rights as are stated and adopted by the Board and as are permitted by the Certificate and the Delaware General Corporation Law, including the designation and number of shares issuable, the dividend rate, voting rights, conversion rights, redemption and sinking fund provisions and liquidation values of each such series. Subject to the rights of holders of any class of Preference Stock, if any, the holders of Preferred Stock are entitled to receive dividends, when and as declared by the Board out of funds legally available for that purpose. As to dividends and rights upon liquidation, dissolution or winding up, the Preferred Stock will rank junior and subordinate to any series of Preference Stock and prior to the Common Stock. RIGHTS On September 11, 1990, the Board declared a dividend distribution of one Stock Purchase Right (Rights) on each outstanding share of Common Stock, payable September 28, 1990, to holders of record of the Common Stock on that date. The Rights are also issuable upon the issuance of additional shares of Common Stock prior to the time the Rights are redeemed or expire. Initially, the Rights are represented by the certificates for the Common Stock and trade only with the Common Stock. The Rights expire September 11, 2000 unless earlier redeemed by the Company. 32 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 15. EMPLOYEE AND RETIREE BENEFIT PLANS DEFINED BENEFIT PENSION PLANS The Company has noncontributory defined benefit plans which provide retirement benefits for most of its employees. Plan benefits are generally based on years of service, age at retirement and the employee's compensation. It is the Company's policy to fund defined benefit pension contributions, at a minimum, in accordance with the requirements of the Internal Revenue Code. The cost of the Company's primary defined benefit pension plans consisted of the following:
(Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Service cost (cost of benefits earned during the year) $ 5 $ 6 $ 5 Interest cost on projected benefit obligation 35 36 36 Actual return on plan assets (53) (85) 4 Net amortization and deferral* 11 47 (47) --------- -------- --------- Net periodic pension cost (benefit)** $ (2) $ 4 $ (2) ========= ======== =========
* Estimated returns on assets are used in determining net periodic pension cost. Differences between estimated and actual returns are included in net amortization and deferral. ** Does not include $1 million curtailment loss in 1995 and 1994 and $2 million, $4 million and $13 million cost of special termination benefits due to the reduction in workforce in 1996, 1995 and 1994. The following table sets forth the funded status and amounts recognized in the Company's Consolidated Balance Sheets at December 31:
1996 1995 ----------------------------- ----------------------------- PLANS IN PLANS IN PLANS IN WHICH PLANS IN WHICH WHICH ASSETS ACCUMULATED WHICH ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED (Millions of Dollars) BENEFITS ASSETS BENEFITS ASSETS - --------------------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested $ (381) $ (83) $ (406) $ (86) Nonvested (11) -- (13) -- --------- -------- --------- -------- Accumulated benefit obligation (392) (83) (419) (86) Effect of projected future salary increases (24) (3) (23) (3) --------- -------- --------- -------- Projected benefit obligation (416) (86) (442) (89) Less plan assets at fair value* 457 -- 443 -- --------- -------- --------- -------- Projected benefit obligation less than (in excess of) plan assets 41 (86) 1 (89) Unrecognized net transition obligation (asset) (20) 9 (26) 12 Unrecognized prior service cost (benefit) 3 (1) 2 (2) Unrecognized net loss 16 26 50 30 Additional minimum liability -- (31) -- (37) --------- -------- --------- -------- Accrued pension asset (liability)** $ 40 $ (83) $ 27 $ (86) ========= ======== ========= ========
* Plan assets consist principally of commingled trust funds, marketable equity securities, corporate and government debt securities and real estate. At December 31, 1996 and 1995, less than 1 percent of plan assets was invested in Common Stock of the Company. ** Accrued pension liability is included in "Accrued Liabilities" and "Deferred Credits and Other Liabilities" in the Consolidated Balance Sheets. 33 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company As of December 31, 1996 and 1995, the projected benefit obligations were determined using weighted average assumed discount rates of 7.3 and 6.75 percent and a rate of compensation increase of 4 percent. The weighted average expected long-term rate of return on plan assets was 9.5 percent in 1996 and 1995. All of these rates are subject to change in the future as economic conditions change. DEFINED CONTRIBUTION PENSION PLANS Defined contribution plans, which are designed to provide retirement benefits, are available to substantially all employees. Contributions, which are principally based on employees' compensation, are expensed as incurred. At December 31, 1996, the principal defined contribution plan is CAP, which is a combined stock bonus and leveraged ESOP available to substantially all U.S. employees. The first 5 percent of employee contributions are matched by the Company at 110 percent up to the first $50,000 of employee base salary and at 100 percent thereafter. In 1994, the Company's contributions to CAP were used to repay the debt issued to fund the purchase of Common Stock held by the leveraged ESOP. In 1995 and 1996, stock allocations to employees from the leveraged ESOP were suspended pending a ruling requested from the IRS; therefore, there was no debt service in the form of Company matching contributions made to the ESOP. Instead, Company matching contributions were made using Treasury Stock. Benefit expense recognized for defined contribution plans amounted to $3 million, $3 million and $11 million for 1996, 1995 and 1994. Additional information with respect to the leveraged ESOP portion of CAP is as follows:
(Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Interest cost on ESOP debt $ -- $ -- $ 8 Company cash contributions to the ESOP $ -- $ -- $ 13
HEALTH CARE AND LIFE INSURANCE BENEFITS The Company sponsors unfunded defined benefit health care and life insurance benefit plans to substantially all employees and retirees. Benefits under the health care plan are provided on a self-insured basis or through Health Maintenance Organizations. The health care plan provides comprehensive major medical coverage which integrates with Medicare and contains provisions for cost sharing with participants through contributions, coinsurance, deductibles and caps on employer costs. Benefits under the life insurance plan are provided through an insurance contract. The life insurance plan contains provisions for retiree cost sharing through contributions and provides benefits based on preretirement compensation with a scheduled reduction in benefits commencing at age 66 and termination of all benefits at age 70 for substantially all participants. The cost of health care and life insurance benefit plans was $14 million, $15 million and $19 million, of which $10 million, $11 million and $14 million was for retirees in 1996, 1995 and 1994. The Company uses the accrual accounting method in computing postretirement health care and life insurance benefit plan expense in accordance with SFAS No. 106. The cost, net of retiree contributions, of the postretirement health care and life insurance benefit plans calculated in accordance with the provisions of SFAS No. 106 is as follows:
(Millions of Dollars) 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- Service cost (cost of benefits earned during the year) $ 1 $ 1 $ 1 Interest cost on the accumulated postretirement benefit obligation 6 7 8 Amortization of transition obligation 3 3 4 Net amortization of other components -- -- 1 --------- -------- --------- Net periodic postretirement benefit cost * $ 10 $ 11 $ 14 ========= ======== =========
* Does not include $10 million and $13 million curtailment loss due to the reduction in workforce in 1995 and 1994. 34 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company The following table sets forth the funded status and amounts reported in the Company's Consolidated Balance Sheets at December 31:
(Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ (67) $ (87) Active employees eligible to retire (3) (3) Active employees not yet eligible to retire (6) (9) -------- --------- Total accumulated postretirement benefit obligation (76) (99) Less plan assets at fair value -- -- -------- --------- Accumulated obligation in excess of plan assets (76) (99) Unrecognized net loss (gain) (2) 9 Unrecognized prior service benefit -- -- Unrecognized transition obligation 35 51 -------- --------- Accrued postretirement benefit liability* $ (43) $ (39) ======== =========
* Accrued postretirement benefit liability is included in "Accrued Liabilities" and "Deferred Credits and Other Liabilities" in the Consolidated Balance Sheets. The assumed health care cost trend rate used to measure the expected cost of benefits covered by the plan is approximately 6 percent. Health care cost trend rates for future years are assumed to gradually trend downward over a five year period to meet and thereafter parallel the projected rate of general inflation of 4.5 percent. A 1-percent increase in the assumed health care cost trend rates for future years would result in no significant increase in annual cost but an increase of $5 million in the accumulated postretirement benefit obligation for the Company's health care plan. The weighted average assumed discount rates used to measure the accumulated postretirement benefit obligation are 7.75 and 7 percent in 1996 and 1995. For the life insurance plan, an assumed rate of increase of compensation of 4 percent was used to measure the accumulated postretirement benefit obligation. 16. MANAGEMENT INCENTIVE PLANS The principal management incentive plans are the 1992 Long-Term Incentive Plan (1992 LTIP), the Long-Term Incentive Plan (LTIP) and the Executive Long-Term Incentive Plan (ELTIP). The ELTIP provides that no awards may be granted after November 1, 1988 and was replaced by the LTIP which provides that no awards may be granted after December 31, 1991. All previous awards granted under both the ELTIP and LTIP remain in effect in accordance with their terms. As of December 31, 1995, there were no outstanding awards granted under the ELTIP. The 1992 LTIP replaced the LTIP and became effective January 1, 1992. A maximum of 3,000,000 shares of Common Stock were authorized for issuance under the 1992 LTIP. Under the provisions of these plans, stock options, stock appreciation rights and limited rights were granted in various tandem combinations so that the exercise of any one of them will reduce, on a one-for-one basis, the tandem options or rights. In addition, certain stock options were granted which become exercisable (subject to the option vesting schedule) only upon the cancellation of the related performance shares for non-attainment of performance targets. The Company grants certain executives and other key employees stock option awards which vest at a rate of 25% per year over four years. Effective with 1996 grants, accelerated vesting is contingent on the Company's stock price performance over a specified period of time. The exercise price of each option, which has a 10-year life, is equal to the market price on the date of grant. 35 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company The following table summarizes information with respect to Common Stock options awarded under the 1992 LTIP, the LTIP and the ELTIP:
1996 1995 1994 ----------------------------------- --------------------------------- ------------------------- WEIGHTED WEIGHTED SHARES AVERAGE SHARES AVERAGE SHARES UNDER OPTION PRICE EXERCISE UNDER OPTION PRICE EXERCISE UNDER OPTION PRICE OPTION PER SHARE PRICE OPTION PER SHARE PRICE OPTION PER SHARE - ---------------------------------------------------------------------------------------------------------------------------------- Outstanding, January 1 2,722,374 $11.81-$44.13 $22.88 2,456,103 $17.44-$44.13 $25.14 1,914,832 $19.63-$44.13 Granted 444,150 $13.50 $13.50 407,350 $11.81 $11.81 643,900 $17.44 Exercised (207,524) $11.81-$19.63 $15.49 -- -- -- -- -- Canceled (263,416) $11.81-$44.13 $28.39 (141,079) $11.81-$44.13 $30.24 (102,629) $17.44-$44.13 --------- --------- --------- Outstanding, December 31 2,695,584 $11.81-$44.13 $21.37 2,722,374 $11.81-$44.13 $22.88 2,456,103 $17.44-$44.13 ========= ========= ========= Exercisable, December 31 1,982,386 $11.81-$44.13 $23.88 1,713,446 $11.81-$44.13 $26.64 1,278,033 $17.44-$44.13 ========= ========= ========= Available for grant, December 31* 674,720 978,663 1,262,086 ========= ========= ========= Weighted average fair value of options granted during the year ** $ 7.17 $ 6.93 ========= =========
* Shares available for grant does not include 300,000 shares available for issue under the provisions of the Executive Variable Incentive Plan approved by stockholders May 2, 1996. ** The fair value of each option grant is estimated using the Black-Scholes option-pricing model with the following assumption for 1996 and 1995, respectively: risk-free interest rates of 6.0 and 7.9 percent; volatility of 30.7 and 36.7 percent; no dividend yield; and expected life of 9 and 8 years. The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees" and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost for the Company's plans been determined based on the fair value at the grant dates for awards under the plans consistent with the method of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
1996 1995 - ---------------------------------------------------------------------------------------------------------- Net income As Reported $ 163 $ 135 Pro Forma $ 161 $ 134 Earnings per share As Reported $1.55 $1.32 Pro Forma $1.54 $1.31
The following table summarizes information about stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------------------------------------------------- ----------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE RANGE OF NUMBER CONTRACTED EXERCISE NUMBER EXERCISE EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICES - ----------------------------------------------------------------------------------------------------------- $11.81 - $ 19.63 1,672,096 7.5 $15.89 958,898 $17.01 $24.16 - $ 26.00 679,168 3.2 $25.79 679,168 $25.79 $36.00 - $ 44.13 344,320 3.7 $39.24 344,320 $39.24 --------- --------- 2,695,584 6.0 $21.37 1,982,386 $23.88 ========= =========
36 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company 17. GEOGRAPHIC SEGMENT INFORMATION Sales of oil to the Company's top purchaser in 1996, 1995 and 1994 totaled approximately 16, 15 and 18 percent of oil revenue. Sales of gas to the Company's top purchaser in 1996 totaled approximately 50 percent of gas revenue and for 1995 and 1994 totaled approximately 12 percent of gas revenue. The Company believes that the loss of any major purchaser would not have a material adverse effect on the Company's business. Financial information by segment for the years ended December 31, 1996, 1995 and 1994 are summarized as follows:
UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ----------------------------------------------------------------------------------- DECEMBER 31, 1996 Revenues Oil and gas $ 707 $ 411 $ 50 $ 1,168 Gain (loss) on sale of assets (2) -- -- (2) Other (21) 1 1 (19) ------- ------- ------- ------- Total Revenues 684 412 51 1,147 ------- ------- ------- ------- Operating Expenses Operating costs 144 84 11 239 Production taxes 40 108 12 160 Exploration costs 45 4 7 56 Depr., depl. and amort. 181 85 10 276 Miscellaneous -- 1 1 2 ------- ------- ------- ------- Total Operating Expenses 410 282 41 733 ------- ------- ------- ------- Operating Profit* $ 274 $ 130 $ 10 414 ======= ======= ======= General and administrative expense (58) Interest, net (91) Provision for income taxes (96) Remeasurement of foreign deferred tax (6) ------- Net Income $ 163 ======= Capital Expenditures $ 318** $ 143 $ 23 $ 484 ======= ======= ======= ======= Identifiable Assets $ 1,479 $ 428 $ 28 $ 1,935 ======= ======= ======= =======
* Provision for income taxes on 1996 operating profits, calculated at statutory rates, are $99 million, $43 million and $3 million for the United States, United Kingdom and Other Foreign. ** Includes capitalized interest of $17 million. 37 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company
UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ---------------------------------------------------------------------------------- DECEMBER 31, 1995 Revenues Oil and gas $ 571 $ 377 $ 66 $ 1,014 Gain (loss) on sale of assets (15) 122 17 124 Other (15) 5 1 (9) ------- ------- ------- ------- Total Revenues 541 504 84 1,129 ------- ------- ------- ------- Operating Expenses Operating costs 164 150 16 330 Production taxes 33 49 23 105 Exploration costs 44 8 7 59 Depr., depl. and amort. 166 96 14 276 Miscellaneous 1 5 2 8 ------- ------- ------- ------- Total Operating Expenses 408 308 62 778 ------- ------- ------- ------- Operating Profit* $ 133 $ 196 $ 22 351 ======= ======= ======= General and administrative expense (64) Interest, net (126) Provision for restructuring (25) Benefit for income taxes 22 Extraordinary item (23) ------- Net Income $ 135 ======= Capital Expenditures $ 208** $ 37 $ 28 $ 273 ======= ======= ======= ======= Identifiable Assets $ 1,221 $ 410 $ 35 $ 1,666 ======= ======= ======= =======
* Provision for income taxes on 1995 operating profits, calculated at statutory rates, are $48 million, $65 million and $12 million for the United States, United Kingdom and Other Foreign. ** Includes capitalized interest of $10 million. 38 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company
UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ------------------------------------------------------------------------------------- DECEMBER 31, 1994 Revenues Oil and gas $ 624 $ 355 $ 103 $ 1,082 Other (10) -- -- (10) ------- ------- ------- ------- Total Revenues 614 355 103 1,072 ------- ------- ------- ------- Operating Expenses Operating costs 197 146 31 374 Production taxes 44 28 40 112 Exploration costs 54 12 38 104 Depr., depl. and amort. 167 86 18 271 Miscellaneous -- 1 -- 1 ------- ------- ------- ------- Total Operating Expenses 462 273 127 862 ------- ------- ------- ------- Operating Profit (Loss)* $ 152 $ 82 $ (24) 210 ======= ======= ======= General and administrative expense (68) Interest, net (150) Provision for restructuring (92) Benefit for income taxes 37 Remeasurement of foreign deferred tax (2) Extraordinary item (12) Cumulative effect of accounting change (948) ------- Net Loss $(1,025) ======= Capital Expenditures $ 168** $ 65***$ 48 $ 281 ======= ====== ======= ======= Identifiable Assets $ 1,508 $ 470 $ 140 $ 2,118 ======= ======= ======= =======
* Provision (benefit) for income taxes on 1994 operating profits, calculated at statutory rates, are $55 million, $27 million and $(3) million for the United States, United Kingdom and Other Foreign. ** Includes capitalized interest of $5 million. *** Includes capitalized interest of $6 million. 18. STATEMENT OF CASH FLOWS Amounts paid for interest and income taxes were as follows:
(Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Interest paid (net of capitalized interest) $ 95 $ 144 $ 128 Income taxes paid (refunded) $ 41 $ (15) $ (11)
39 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oryx Energy Company During 1996, the Company recognized deferred tax liabilities of $11 million associated with the acquisition of additional interests in the U.K. North Sea. During 1994, the Company exchanged its interests in the undeveloped Britannia field and certain other undeveloped domestic properties for interests in the developed Hutton, Lyell and Murchison fields and certain undeveloped interests. This transaction was accounted for by the Company as a non-cash property exchange, except for $40 million of associated divestment proceeds received by the Company. In accordance with SFAS No. 95, "Statement of Cash Flows," non-cash transactions are not reflected within the accompanying Consolidated Statements of Cash Flows. 19. DEFERRED CREDITS AND OTHER LIABILITIES At December 31, the Company's deferred credits and other liabilities were comprised of the following:
(Millions of Dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------- Employee benefit obligations $ 81 $ 92 Deferred gains on interest rate hedges 15 25 Minority interest in consolidated subsidiaries 18 14 Accrued environmental cleanup costs 20 20 Other 22 12 -------- --------- $ 156 $ 163 ======== =========
Environmental cleanup costs have been accrued in response to the identification of several sites that require cleanup based on environmental pollution, some of which have been designated as superfund sites by the Environmental Protection Agency (EPA). The Company has been named as a potentially responsible party (PRP) at four sites pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. At two of these sites, the Company has been named as a de minimis party and therefore expects its liability to be small. At a third site, the Company is reviewing its options and anticipates that it will participate in steering committee activities with the EPA. At the fourth and largest site, the Operating Industries, Inc. site in California, the Company has participated in a steering committee consisting of 139 companies. The steering committee and other PRPs previously entered into two partial consent decrees with the EPA providing for remedial actions which have been or are to be completed. The steering committee has successfully negotiated a third partial consent decree which provides for the following remedial actions: a clay cover, methane capturing wells, and leachate destruction facilities. The remaining work at the site involves groundwater evaluation and long-term operation and maintenance. The Company is a member of the group that is responsible for carrying out the first phase of the work, which is expected to take 5 to 8 years. Completion of all phases is estimated to take up to 30 years. The maximum liability of the group, which is joint and several for each member of the group, is expected to range from approximately $450 million to $600 million, of which the Company's share is expected to be approximately $13 million. Cleanup costs are payable over the period that the work is completed. Based on the facts outlined above and the Company's ongoing analyses of the actions where it has been identified as a PRP, the Company believes that it has accrued sufficient reserves to absorb the ultimate cost of such actions and that such costs therefore will not have a material impact on the Company's liquidity, capital resources or financial condition. While liability at superfund sites is typically joint and several, the Company has no reason to believe that defaults by other PRPs will result in liability of the Company materially larger than expected. In October 1996, Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities," was issued. It requires companies to recognize the costs of environmental remediation on an accrual basis. The Company currently recognizes the costs required by the SOP; therefore, adoption in 1997 will have no material impact. 40 28 REPORT OF INDEPENDENT ACCOUNTANTS Oryx Energy Company TO THE SHAREHOLDERS AND BOARD OF DIRECTORS, ORYX ENERGY COMPANY: We have audited the accompanying consolidated balance sheets of Oryx Energy Company and its Subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of income, cash flows and changes in shareholders' deficit for each of the three years in the period ended December 31, 1996. 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 Oryx Energy Company and its Subsidiaries as of December 31, 1996 and 1995 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 8 to the consolidated financial statements, the Company changed its accounting policy for calculating the oil and gas asset ceiling test in 1994. /s/ COOPERS & LYBRAND L.L.P. Dallas, Texas February 19, 1997 41 29 SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION (UNAUDITED) Oryx Energy Company
OIL AND GAS DATA CAPITALIZED COSTS UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ---------------------------------------------------------------------------------------------------------- DECEMBER 31, 1996 Proved properties $ 3,721 $ 1,334 $ 112 $ 5,167 Unproved properties 59 87 1 147 --------- --------- -------- --------- Total capitalized costs 3,780 1,421 113 5,314 Less accum. depr., depl. and amort. 2,699 962 38 3,699 --------- --------- -------- --------- Net capitalized costs $ 1,081 $ 459 $ 75 $ 1,615 ========= ========= ======== ========= DECEMBER 31, 1995 Proved properties $ 3,671 $ 1,184 $ 90 $ 4,945 Unproved properties 38 84 4 126 --------- --------- -------- --------- Total capitalized costs 3,709 1,268 94 5,071 Less accum. depr., depl. and amort. 2,743 877 30 3,650 --------- --------- -------- --------- Net capitalized costs $ 966 $ 391 $ 64 $ 1,421 ========= ========= ======== ========= COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ---------------------------------------------------------------------------------------------------------- 1996 Property acquisition costs: Proved $ 6 $ 94 $ -- $ 100 Unproved 24 -- -- 24 Exploration costs 47 5 14 66 Development costs 244* 51 15 310 --------- --------- -------- --------- Total $ 321 $ 150 $ 29 $ 500 ========= ========= ======== ========= 1995 Property acquisition costs: Proved $ 6 $ -- $ -- $ 6 Unproved 6 -- -- 6 Exploration costs 41 8 10 59 Development costs 167* 37 25 229 --------- --------- -------- --------- Total $ 220 $ 45 $ 35 $ 300 ========= ========= ======== ========= 1994 Property acquisition costs: Unproved $ 4 $ -- $ -- $ 4 Exploration costs 41 11 39 91 Development costs 144* 56** 19 219 --------- --------- -------- --------- Total $ 189 $ 67 $ 58 $ 314 ========= ========= ======== =========
* Excludes capitalized interest of $17 million, $10 million and $5 million for 1996, 1995 and 1994. ** Excludes capitalized interest of $6 million for 1994. 42 30 SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION (UNAUDITED) Oryx Energy Company
EXPLORATION COSTS UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ---------------------------------------------------------------------------------------------------------- 1996 Dry hole costs $ 18 $ -- $ -- $ 18 Leasehold impairment 2 -- -- 2 Geological and geophysical 23 4 7 34 Other 2 -- -- 2 --------- --------- -------- --------- $ 45 $ 4 $ 7 $ 56 ========= ========= ======== ========= 1995 Dry hole costs $ 12 $ -- $ -- $ 12 Leasehold impairment 9 -- -- 9 Geological and geophysical 22 8 6 36 Other 1 -- 1 2 --------- --------- -------- --------- $ 44 $ 8 $ 7 $ 59 ========= ========= ======== ========= 1994 Dry hole costs $ 10 $ 4 $ 25 $ 39 Leasehold impairment 18 -- -- 18 Geological and geophysical 25 7 13 45 Other 1 1 -- 2 --------- --------- -------- --------- $ 54 $ 12 $ 38 $ 104 ========= ========= ======== =========
ESTIMATED NET QUANTITIES OF PROVED OIL AND GAS RESERVES Proved reserve quantities were based on estimates prepared by Company engineers in accordance with guidelines established by the Securities and Exchange Commission and were reviewed by Gaffney, Cline & Associates, Inc., independent petroleum engineers. The Company considers such estimates to be reasonable; however, due to inherent uncertainties and the limited nature of reservoir data, estimates of underground reserves are imprecise and subject to change over time as additional information becomes available. There has been no major discovery or other favorable or adverse event that has caused a significant change in estimated proved reserves since December 31, 1996. The Company has no long-term supply agreements or contracts with governments or authorities in which it acts as producer nor does it have any interest in oil and gas operations accounted for by the equity method. 43 31 SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION (UNAUDITED) Oryx Energy Company
PROVED RESERVES NATURAL CRUDE OIL AND CONDENSATE GAS LIQUIDS NATURAL GAS --------------------------------- ----------------------- ------------------------ (Millions of Barrels) (Millions of Barrels) (Billions of Cubic Feet) OTHER OTHER U.S. U.K. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S.* U.K. TOTAL - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 238 188 61 487 21 -- 21 1,431 450 1,881 Revisions of previous estimates (2) 1 (1) (2) 3 -- 3 23 4 27 Improved recovery -- -- -- -- -- -- -- -- -- -- Purchases of minerals in place -- 24 ** -- 24 -- -- -- 2 4 ** 6 Sales of minerals in place (22) (19) -- (41) -- -- -- (115) (248) (363) Extensions and discoveries 6 -- 23 29 -- -- -- 188 -- 188 Production (17) (20) (7) (44) (3) -- (3) (196) (23) (219) --- --- -- --- -- -- -- ---- ---- ----- BALANCE AT DECEMBER 31, 1994 203 174 76 453 21 -- 21 1,333 187 1,520 Revisions of previous estimates (6) 1 (1) (6) 3 -- 3 62 5 67 Improved recovery 5 -- -- 5 -- -- -- 1 -- 1 Purchases of minerals in place 1 -- -- 1 -- -- -- 4 -- 4 Sales of minerals in place (10) (54) (36) (100) (4) -- (4) (56) (149) (205) Extensions and discoveries 12 -- 3 15 -- -- -- 125 -- 125 Production (17) (20) (5) (42) (2) -- (2) (171) (18) (189) --- --- -- --- -- -- -- ---- ---- ----- BALANCE AT DECEMBER 31, 1995 188 101 37 326 18 -- 18 1,298 25 1,323 Revisions of previous estimates 9 5 (1) 13 2 -- 2 (22) -- (22) Improved recovery 1 -- -- 1 -- -- -- -- -- -- Purchases of minerals in place 3 29 -- 32 -- -- -- 8 2 10 Sales of minerals in place (3) -- -- (3) -- -- -- (32) -- (32) Extensions and discoveries 5 7 24 36 2 10 12 102 1 103 Production (16) (20) (4) (40) (2) -- (2) (180) (3) (183) --- --- -- --- -- -- -- ---- ---- ----- BALANCE AT DECEMBER 31, 1996 187 122 56 365 20 10 30 1,174 25 1,199 === === == === == == == ===== ==== ===== PROVED DEVELOPED RESERVES AT DECEMBER 31 1993 156 85 31 272 16 -- 16 1,010 95 1,105 1994 130 112 31 273 16 -- 16 907 143 1,050 1995 116 80 13 209 13 -- 13 881 15 896 1996 118 96 19 233 14 -- 14 816 21 837
* Natural gas reserve volumes include liquefiable hydrocarbons approximating 5 percent of total gas reserves which are recoverable downstream. Such recoverable liquids also have been included in natural gas liquids reserve volumes. ** Represents reserves received in the asset exchange. These amounts have been excluded in calculating FD&A and reserve replacement (see Note 18). 44 32 SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION (UNAUDITED) Oryx Energy Company STANDARDIZED MEASURE The standardized measure of discounted future net cash flows from estimated production of proved oil and gas reserves after income taxes is presented in accordance with the provisions of SFAS No. 69, "Disclosures about Oil and Gas Producing Activities." In computing this data, assumptions other than those mandated by SFAS No. 69 could produce substantially different results. The Company cautions against viewing this information as a forecast of future economic conditions or revenues. The standardized measure has been prepared assuming year-end selling prices adjusted for future fixed and determinable contractual price changes, year-end development and production costs, year-end statutory tax rates adjusted for future tax rates already legislated and a 10 percent annual discount rate. The year-end realized prices were $23.18, $17.95 and $15.31 per barrel of oil and $4.05, $2.27 and $1.82 per mcf of gas for 1996, 1995 and 1994.
UNITED UNITED OTHER (Millions of Dollars) STATES KINGDOM FOREIGN TOTAL - ---------------------------------------------------------------------------------------------------------- 1996 Future cash inflows $ 9,480 $ 3,223 $ 1,351 $ 14,054 Future production and development costs (2,623) (2,247) (694) (5,564) Future income tax expenses (2,326) (275) (237) (2,838) --------- --------- -------- ---------- Future net cash flows 4,531 701 420 5,652 Discount at 10 percent (1,739) (152) (270) (2,161) --------- --------- -------- ---------- Standardized measure $ 2,792 $ 549 $ 150 $ 3,491 ========= ========= ======== ========== 1995 Future cash inflows $ 6,558 $ 2,237 $ 548 $ 9,343 Future production and development costs (2,618) (1,661) (353) (4,632) Future income tax expenses (1,289) (129) (47) (1,465) --------- --------- -------- ---------- Future net cash flows 2,651 447 148 3,246 Discount at 10 percent (1,060) (61) (68) (1,189) --------- --------- -------- ---------- Standardized measure $ 1,591 $ 386 $ 80 $ 2,057 ========= ========= ======== ==========
SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE (Millions of Dollars) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 2,057 $ 2,030 $ 1,428 Increase (decrease) in discounted future net cash flows: Sales of oil and gas production, net of related costs (769) (579) (596) Revisions to estimates of proved reserves: Prices net of production taxes 1,834 588 973 Development costs (64) 20 390 Production costs 125 150 (798) Quantities 91 71 14 Other (232) (140) 292 Extensions, discoveries and improved recovery, less related costs 504 345 233 Development costs incurred during the period 310 229 219 Purchases of reserves in place 208 12 89 Sales of reserves in place (9) (536) (83) Accretion of discount 283 219 177 Income taxes (847) (352) (308) ---------- ------- --------- Balance, end of year $ 3,491 $ 2,057 $ 2,030 ========== ======= =========
45 33 SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION (UNAUDITED) Oryx Energy Company QUARTERLY FINANCIAL INFORMATION
QUARTER ENDED ----------------------------------------------------- (Millions of Dollars, Except Per Share Amounts) MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL - ---------------------------------------------------------------------------------------------- -------- Revenue: 1996 $247 $253 $ 289 $358 $1,147 ==== ==== ===== ==== ====== 1995 $293 $285 $ 345 $206 $1,129 ==== ==== ===== ==== ====== Gross profit:* 1996 $ 91 $ 83 $ 108 $157 $ 439 ==== ==== ===== ==== ====== 1995 $ 84 $ 68 $ 45 $ 50 $ 247 ==== ==== ===== ==== ====== Net income (loss): 1996 $ 32 $ 28 $ 40 $ 63 $ 163 ==== ==== ===== ==== ====== 1995 Before extraordinary item $ 13 $ 25 $ 108 $ 12 $ 158 Extraordinary item -- (14) (1) (8) (23) ---- ---- ----- ---- ------ $ 13 $ 11 $ 107 $ 4 $ 135 ==== ==== ===== ==== ====== Net income (loss) per share of common stock: 1996 $.31 $.27 $ .38 $.60 $ 1.55 ==== ==== ===== ==== ====== 1995 Before extraordinary item $.13 $.25 $1.04 $.12 $ 1.54 Extraordinary item -- (.14) (.01) (.08) (.22) ---- ---- ----- ---- ------ $.13 $.11 $1.03 $.04 $ 1.32 ==== ==== ===== ==== ======
* Gross profit equals oil and gas revenues plus gas plant margins less production cost, exploration cost and depreciation, depletion and amortization. 46 34 OF INTEREST TO SHAREHOLDERS Oryx Energy Company PRINCIPAL OFFICE TRANSFER AGENT AND REGISTRAR ANNUAL MEETING 13155 Noel Road Chase Mellon Shareholder Services, LLC Thursday, May 1, 1997 Dallas, Texas 75240 Shareholder Relations Department 9:00 a.m. P.O. Box 3068 Cityplace Conference Center New York, N.Y. 10116-3068 2711 North Haskell 1-800-648-8393 Dallas, Texas 75204
For further information about the meeting, please contact the Company's Secretary at our principal office. PUBLICATIONS AVAILABLE TO SHAREHOLDERS We will be pleased to furnish the following reports to shareholders who write to Shareholder Relations at our principal office, or call 1-800-846-ORYX: Quarterly Report - a review of new developments and quarterly financial and operating results, published for quarters ending in March, June and September Form 10-K - Annual Report for 1996 filed with the SEC (excluding exhibits) Exhibits are available upon request at a reasonable charge. ORYX ENERGY HOMEPAGE Oryx annual reports, quarterly reports and news releases can be viewed on the Internet: http://www.oryx.com NOTICE OF ANNUAL MEETING AND PROXY STATEMENT The Company's notice of annual meeting, proxy statement and proxy card are mailed about one month before the annual meeting. MARKET FOR ORYX ENERGY COMMON STOCK AND RELATED SECURITY MATTERS The Common Stock, $1 par value, of the Company trades on the New York Stock Exchange under the symbol "ORX." The following table sets forth the high and low sales prices, as reported on the New York Stock Exchange Composite Transactions quotations. No dividends were paid for the periods indicated:
HIGH LOW - -------------------------------------------------------------------------------------------- 1996 First quarter $14 3/4 $12 3/8 Second quarter $17 3/8 $14 Third quarter $18 1/4 $14 1/8 Fourth quarter $25 3/4 $17 1/2 1995 First quarter $13 1/4 $ 9 7/8 Second quarter $14 3/4 $12 Third quarter $14 3/4 $12 5/8 Fourth quarter $14 $10 3/4
The Company had 28,943 holders of record of Common Stock as of February 28, 1997. 47 35 Oryx Energy Company DIRECTORS OF ORYX ENERGY COMPANY JERRY W. BOX Executive Vice President and Chief Operating Officer WILLIAM E. BRADFORD Dresser Industries, Inc. Chairman and Chief Executive Officer SYLVIA A. EARLE Deep Ocean Exploration and Research, Inc. President DAVID C. GENEVER-WATLING General Electric Industrial and Power Systems Business Retired President and Chief Executive Officer ROBERT B. GILL J.C. Penney Company, Inc. Retired Vice Chairman of the Board DAVID S. HOLLINGSWORTH Hercules Incorporated Retired Chairman of the Board and Chief Executive Officer ROBERT L. KEISER Chairman of the Board, Chief Executive Officer, and President EDWARD W. MONEYPENNY Executive Vice President, Finance, and Chief Financial Officer CHARLES H. PISTOR, JR. Southern Methodist University Retired Vice Chair PAUL R. SEEGERS Seegers Enterprises President Centex Corporation Retired Chairman of the Board and Chief Executive Officer IAN L. WHITE-THOMSON U.S. Borax Inc. President and Chief Executive Officer COMMITTEES OF THE BOARD AUDIT COMMITTEE Paul R. Seegers, Chairman William E. Bradford Sylvia A. Earle Robert B. Gill Ian L. White-Thomson BOARD POLICY AND NOMINATING COMMITTEE Charles H. Pistor, Jr., Chairman William E. Bradford Sylvia A. Earle David S. Hollingsworth Paul R. Seegers COMPENSATION COMMITTEE David S. Hollingsworth, Chairman David C. Genever-Watling Robert B. Gill Charles H. Pistor, Jr. Ian L. White-Thomson EXECUTIVE COMMITTEE Robert L. Keiser, Chairman Jerry W. Box William E. Bradford Edward W. Moneypenny Charles H. Pistor, Jr. MLP COMMITTEE Jerry W. Box Robert L. Keiser Edward W. Moneypenny PRINCIPAL OFFICERS OF ORYX ENERGY COMPANY JERRY W. BOX Executive Vice President and Chief Operating Officer SHERRI T. DURST General Auditor STEVEN J. FLOWERS Treasurer FRANCES G. HEARTWELL Vice President, Human Resources and Administration ROBERT L. KEISER Chairman of the Board, Chief Executive Officer, and President WILLIAM C. LEMMER Vice President, General Counsel and Secretary EDWARD W. MONEYPENNY Executive Vice President, Finance, and Chief Financial Officer ROBERT L. THOMPSON Comptroller and Corporate Planning Director 48 EX-23 8 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Form S-8 registration statements of the Oryx Energy Company Long-Term Incentive Plan (File No. 33-25032), the Oryx Energy Company Capital Accumulation Plan (File No. 33-24918), the Oryx Energy Company 1992 Long-Term Incentive Plan (File No. 33-42695), the Oryx Energy Company Equity and Deferred Compensation Plan for Non-Employee Directors (File No. 333-03075), the Oryx Energy Company Executive Variable Incentive Plan (File No. 333-03089) and the Form S-3 registration statements of Oryx Energy Company (File No.'s 33-33361, 33-36799 and 33-45611), of our report dated February 19, 1997, on our audit of the consolidated financial statements of Oryx Energy Company and its Subsidiaries as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996, which report is incorporated by reference in this Form 10-K from page 41 of the Oryx Energy Company 1996 Annual Report to Shareholders. /s/ COOPERS & LYBRAND L.L.P. Dallas, Texas March 20, 1997 EX-24 9 POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert L. Keiser and Edward W. Moneypenny, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and his agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign the Annual Report of ORYX ENERGY COMPANY for the fiscal year ended December 31, 1996 on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 and any or all amendments to the Annual Report and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ROBERT L. KEISER Chairman of the Board, Chief March 6, 1997 - ----------------------------------------------------- Executive Officer, President, (Robert L. Keiser) and Director (principal executive officer) /s/ JERRY W. BOX Executive Vice President, Chief March 6, 1997 - ----------------------------------------------------- Operating Officer, and Director (Jerry W. Box) /s/ EDWARD W. MONEYPENNY Executive Vice President, Finance, March 6, 1997 - ----------------------------------------------------- Chief Financial Officer, and (Edward W. Moneypenny) Director (principal financial officer) /s/ ROBERT L. THOMPSON Comptroller and Corporate Planning March 6, 1997 - ----------------------------------------------------- Director (principal accounting (Robert L. Thompson) officer) /s/ WILLIAM E. BRADFORD Director March 6, 1997 - ----------------------------------------------------- (William E. Bradford) /s/ SYLVIA A. EARLE Director March 6, 1997 - ----------------------------------------------------- (Sylvia A. Earle) /s/ DAVID C. GENEVER-WATLING Director March 6, 1997 - ----------------------------------------------------- (David C. Genever-Watling) /s/ ROBERT B. GILL Director March 6, 1997 - ----------------------------------------------------- (Robert B. Gill) /s/ DAVID S. HOLLINGSWORTH Director March 6, 1997 - ----------------------------------------------------- (David S. Hollingsworth) /s/ CHARLES H. PISTOR, JR. Director March 6, 1997 - ----------------------------------------------------- (Charles H. Pistor, Jr.) /s/ PAUL R. SEEGERS Director March 6, 1997 - ----------------------------------------------------- (Paul R. Seegers) /s/ IAN L. WHITE-THOMSON Director March 6, 1997 - ----------------------------------------------------- (Ian L. White-Thomson)
EX-27 10 FINANCIAL DATA SCHEDULE
5 This schedule contains Summary Financial information extracted from the Consolidated Financial Statements included in the 1996 Oryx Energy Company Annual Report and is qualified in its entirety by reference to such Financial Statements. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 9 0 232 0 3 250 5,354 3,727 1,935 385 1,183 0 0 124 (161) 1,935 1,168 1,147 675 675 114 0 93 265 102 163 0 0 0 163 1.55 1.55
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