ITEM 3. LEGAL PROCEEDINGS.
Information regarding the Company's legal proceedings is presented in Note 14 under the heading "Notes to Consolidated Financial Statements" in Part II, Item 8. - "Financial Statements and Supplementary Data."
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITIONS _________________________________________________________________ H. Leighton Steward (62) Chairman of the Board, President and Chief Executive Officer since November 1996. Chairman of the Board and Chief Executive Officer since September 1995. Chairman of the Board, President and Chief Executive Officer from 1989 to 1995.
Louis A. Raspino, Jr. (44) Senior Vice President-Chief Financial Officer since September 1995. Treasurer from 1992 to 1995.
John A. Williams (52) Senior Vice President-Exploration and Production since September 1995. Vice President from 1988 to 1995.
Suzanne V. Baer (49) Vice President and Treasurer since September 1995. Director- Investor and Shareholder Relations from 1988 to 1995.
Jerry D. Carlisle (51) Vice President and Controller since 1984.
Robert J. Chebul (49) Vice President-Algeria since January 1997. Vice President-New Orleans Division from 1992 to 1997. Vice President-Oklahoma City Division from 1991 to 1992.
William N. Hahne (45) Vice President-Worldwide Asset Management since November 1996. Vice President-Houston Division from 1994 to 1996. General Manager-Production from 1993 to 1994. Vice President to NERCO Oil & Gas, Inc. from 1991 to 1993.
C. Scott Kirk (47) Vice President-Production Marketing since September 1995. General Manager-Natural Gas Marketing from 1989 to 1995.
John O. Lyles (51) Vice President-Strategic Planning since September 1995. Vice President-Operational Support Team from 1992 to 1995. Vice President and Treasurer from 1984 to 1992.
Kevin J. McMichael (41) Vice President-Domestic Exploration since November 1996. Held various managerial positions in domestic exploration from 1988 to 1996.
James E. Orth (44) Vice President-Acquisitions since January 1997. Vice President- Production from 1995 to 1996. General Manager-Denver District from 1991 to 1995.
Frederick J. Plaeger, II (43) Vice President, General Counsel and Corporate Secretary since September 1995. General Counsel and Corporate Secretary from 1992 to 1995.
James N. Wood, Jr. (48) Vice President-Administration since November 1996. General Manager-Information Technology from 1992 to 1996.
C. A. Zackary (52) Vice President-Human Resources since September 1995. Director- Human Resources from 1987 to 1995.
Each officer holds office until the first meeting of the Board of Directors following the annual meeting of shareholders and until his successor shall have been elected and qualified, or until he shall have resigned or been removed as provided in the LL&E By- Laws. No family relationship exists between any of the above listed executive officers or between any such executive officer and any Director of LL&E.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information regarding the Company's Capital Stock is presented under the heading "Capital Stock, Dividends and Other Market Data" in Item 7. - "Management's Discussion and Analysis of Financial Condition and Results of Operations." and under the heading "Market Price and Dividend Data" in Item 8. - "Financial Statements and Supplementary Data."
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
The information required hereunder is presented under the heading "Selected Financial Data" in Item 8. - "Financial Statements and Supplementary Data."
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required hereunder is presented under the heading "Management's Discussion and Analysis" in Item 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and supplementary data of the Company are included herein:
Financial Statements: Report of Management Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Earnings (Loss) Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements
Unaudited Supplemental Data: Management's Discussion and Analysis Data on Oil and Gas Activities Oil and Gas Operating Data Oil and Gas Properties Wells Drilled Selected Financial Data Quarterly Data Market Price and Dividend Data
The following financial statements of 50% or less owned persons required by Regulation S-X, Rule 3-09, are included herein:
MaraLou Netherlands Partnership and its wholly owned consolidated subsidiary, CLAM Petroleum Company:
Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Partners' Capital Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements
_________________________________________________________________ REPORT OF MANAGEMENT
_________________________________________________________________ The consolidated financial statements of The Louisiana Land and Exploration Company and subsidiaries and the related information included in this Annual Report have been prepared by Management in accordance with generally accepted accounting principles and include certain estimates and judgments which Management considers appropriate. To meet its responsibilities for the fair present- ation of consolidated financial statements, Management maintains a system of internal controls, including internal accounting controls, considered appropriate in view of the costs associated with the benefits to be derived. In addition, the Audit Committee meets periodically with the Company's Management, the internal auditors and KPMG Peat Marwick LLP, independent auditors, to review and discuss audit activities and results, internal control procedures and other matters relative to accounting and financial reporting.
Based on the results of these procedures, Management is of the opinion that the system of internal controls in effect during the year ended December 31, 1996 provided reasonable assurance that all transactions were executed in accordance with Management's authorizations, that assets were safeguarded from loss and unauthorized use and that the accounting records and financial statements properly reflect the transactions of the Company.
H. Leighton Steward Louis A. Raspino, Jr. Chairman, President and Senior Vice President - Chief Executive Officer Chief Financial Officer
_________________________________________________________________ INDEPENDENT AUDITORS' REPORT
_________________________________________________________________ The Board of Directors and Stockholders The Louisiana Land and Exploration Company:
We have audited the accompanying consolidated balance sheets of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Louisiana Land and Exploration Company and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in 1994 the Company changed its methods of assessing the impairment of the capitalized costs of proved oil and gas properties and other long-lived assets.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
New Orleans, Louisiana February 7, 1997
In 1995, the Company sold various oil and gas properties for approximately $16.1 million resulting in a gain of $2.3 million (before income taxes of $.8 million).
In 1994, the Company sold various domestic oil and gas producing properties for approximately $15 million resulting in a gain of $6.8 million (before income taxes of $2.3 million).
4. Cash Flows All of the Company's cash investments are liquid short-term debt instruments and are considered to be cash equivalents. These cash investments are carried in the accompanying consolidated balance sheets at cost plus accrued interest, which approximates fair value. Cash flows related to hedging activities are classified in the same categories as that from the items being hedged.
5. Nonrecurring Credit As reported in prior years, the State of Louisiana had asserted claims against the Company in its capacity as sublessor to Texaco of certain State leases, based upon Texaco's alleged royalty miscalculations. In February 1994, a settlement was agreed to by all parties. The amounts previously provided in the financial statements for this litigation exceeded the cash payment required by $10 million, which was reversed during the first quarter of 1994. This adjustment to the litigation accrual is included in "Net increase in payables" in the accompanying Consolidated Statements of Cash Flows.
6. Investments in Affiliates
The Company's equity in earnings of affiliates, which is included in "Other income (expense), net" in the accompanying Consolidated Statements of Earnings (Loss), amounted to $9.3 million, $5.8 million and $4.2 million in 1996, 1995 and 1994, respectively. Cash dividends received from MaraLou/CLAM in 1996, 1995 and 1994 totaled $20 million, $10 million and $6 million, respectively.
The consolidated financial position of MaraLou and its wholly owned subsidiary, CLAM, as of December 31, 1996 and 1995 and the results of their operations for each of the years in the three-year period ended December 31, 1996 are summarized below.
The common stock of CLAM is pledged as collateral under a revolving credit agreement between MaraLou and a group of banks. The credit agreement is nonrecourse to the partners of MaraLou.
7. Property, Plant and Equipment
8. Financial Instruments and Hedging Activities The Company uses derivative financial instruments to manage well- defined interest rate and commodity price risks and does not use them for speculative purposes.
The carrying amounts of cash and cash equivalents and long-term, variable-rate debt approximate fair value. The Company estimates the fair value of its long-term, fixed-rate debt as $412 million and $423 million at December 31, 1996 and 1995, respectively, based upon quoted market prices for the same or similar issues. Such debt was recorded at carrying amounts of $400 million at December 31, 1996 and 1995, resulting in an unrealized loss of $12 million and an unrealized loss of $23 million for the respective periods.
The Company's commodity price hedging program is designed to minimize the price risks associated with future natural gas and crude oil production. This program utilizes futures, forwards, options and swap contracts in series of transactions designed to set a floor price for future production and at the same time allow
the Company to participate in market price increases above a set level over the floor price and outside of specific ranges. At December 31, 1996, approximately 93 trillion BTU of domestic natural gas production for 1997 were covered by a series of transactions designed to set an average floor price of $1.84 per million BTU with the Company's nonparticipation in market price increases above the floor price limited to $0.18 per million BTU. For 1998, approximately 50 trillion BTU of domestic natural gas were similarly hedged at an average floor price of $1.76 per million BTU with the Company's nonparticipation in market price increases above the floor price limited to $0.20 per million BTU. While these transactions have nominal carrying values, their fair value, represented by the estimated amount that would be required to terminate the contracts, were a net benefit of $3.2 million for the 1997 hedges and a net benefit of $2.7 million for the 1998 hedges. (The Company estimates that its domestic natural gas production averages approximately 1.07 million BTU for each thousand cubic feet.) In addition, approximately 1.8 million barrels of the Company's worldwide crude oil production for 1997 were similarly hedged at an average floor price of $20.01 per barrel with the Company's nonparticipation in market price increases above the floor price limited to $2.32 per barrel. These transactions also have nominal carrying values, but their fair value at December 31, 1996 amounted to a net cost of $0.3 million.
These financial instruments are generally executed on the New York Mercantile Exchange or with major financial or commodities trading institutions which, along with cash and cash equivalents and accounts receivable, expose the Company to acceptable levels of market or credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The credit worthiness of counterparties is subject to continuing review and full performance is anticipated.
9. Long-term Debt
Debt maturities for the years 1997 through 2000 are less than $.1 million each year with maturities of $104.9 million in the year 2001.
The Company entered into a $790 million credit facility with a syndicate of banks in September 1993. The revolving credit facility, which was subsequently reduced to $450 million, was renegotiated in 1994 and converted to a reducing revolving loan. In June 1995, the reducing revolving loan was replaced by a $450 million revolving credit facility due June 30, 2000. Amounts outstanding under the revolving credit facility bear interest at fluctuating rates subject to certain options chosen in advance by the Company. In June 1996, the Company amended the reducing revolving loan to reduce the banks' commitments to $350 million, extend the maturity one year to June 30, 2001, reduce interest rates and fees and improve other terms and conditions favorable to the Company. Borrowings under the facilities in 1996 and 1995 were at average interest rates of 6.2% and 6.5%, respectively. Fees ranging from .10% to .25% based upon debt ratings are charged on the facility.
In June 1992, the Company registered under the Securities and Exchange Commission's shelf registration rules $300 million of senior unsecured debt securities to be issued from time to time on terms to be then determined. In June 1992, the Company sold $100 million of 8-1/4% Notes due 2002. In April 1993, the Company completed its second $100 million public offering of debt securities under the existing shelf registration filed in 1992 with the issuance of 7-5/8% Debentures due 2013. In November 1993, the Company registered up to $500 million of senior unsecured debt securities under the Securities and Exchange Commission's shelf registration rules, which included the $100 million available under the shelf registration filed in 1992. In December 1993, the Company completed a $200 million public offering with the issuance of 7.65% Debentures due 2023. In November, 1996, the Company registered up to $500 million of securities under the Securities and Exchange Commission's shelf registration rules, which included the $300 million available under the shelf registration filed in 1993.
During 1996, the average monthly balance of commercial paper notes outstanding was $189 million; the maximum amount outstanding during that period was $296 million. Commercial paper borrowings during 1996 and 1995 were at average interest rates of 5.5% and 6.1%, respectively. The commercial paper program is supported by the unused portion of the aforementioned revolving credit facility.
10. Interest and Debt Expenses For the years ended December 31, 1996, 1995 and 1994, interest costs incurred, which were essentially the same as interest payments, were $45.6 million, $54.3 million and $47.9 million, respectively, of which $11.1 million, $15.7 million and $22.3 million, respectively, were capitalized as part of the cost of property, plant and equipment.
11. Income Taxes The components of earnings (loss) before income taxes were taxed under the following jurisdictions:
Components of income tax expense (benefit) are as follows:
Tax expense (benefit) differs from the amounts computed by applying the U.S. Federal tax rate of 35% to earnings (loss) before income tax. The reasons for the differences are as follows:
Total income tax expense (benefit) was allocated as follows:
The significant components of income tax expense (benefit) attri- butable to income from continuing operations are as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
The net changes in the valuation allowance for the years ended December 31, 1996, 1995 and 1994 were increases of $2.4 million, $3.6 million and $10.5 million, respectively. These changes were made to provide for uncertainties surrounding the realization of certain foreign tax credits and carryforwards. The remaining balance of the deferred tax assets should be realized through future operating results and the reversal of taxable temporary differences.
For the years ended December 31, 1996, 1995 and 1994, the Company's net cash payments (refunds) of income taxes totaled $4.4 million, $.7 million and $(1.1) million, respectively.
At December 31, 1996, the Company has foreign tax credit carryforwards for Federal income tax purposes of $4.1 million which are available through 1998 to offset future Federal income taxes, if any. The Company has Federal net operating loss carryforwards totaling $38.7 million which are available to offset future Federal taxable income through 2012. The Company also has alternative minimum tax credit carryforwards of $8.2 million which are available to reduce Federal regular income taxes, if any, over an indefinite period.
12. Retirement Benefits The Company has a noncontributory defined benefit pension plan covering all eligible employees, with benefits based on years of service and the employee's highest three-year average monthly earnings. The Company's funding policy is intended to provide for both benefits attributed to service to-date and for those expected to be earned in the future. Plan assets consist primarily of stocks, bonds and short-term cash investments. Funding requirements for the years ended December 31, 1996 and 1995 amounted to $5.1 million and $5.6 million, respectively.
As a result of the sale of the Company's refinery, the eligible employees there retired resulting in a distribution from plan assets amounting to $6.4 million and the deferral of an actuarial gain of $1.0 million. The settlement of the obligations resulted in the recognition of the previously unrecognized losses/assets resulting in a net loss of $1.6 million which was included in the calculation of the gain on the sale of the refinery.
The following tables set forth the plan's funded status and amounts recognized in the statements of financial position and results of operations at December 31:
The Company has postretirement medical and dental care plans for all eligible retirees and their dependents with eligibility based on age and years of service upon retirement. The Company also maintains a Medicare Part B reimbursement plan and life insurance coverage for a closed group of retirees of a former subsidiary. As a result of the aforementioned refinery sale, the curtailment of the benefits of eligible employees resulted in an actuarial gain of $1.4 million which was applied against the previously unrecognized net loss.
The postretirement benefit plans are unfunded and the Company funds claims on a cash basis. The following tables set forth the amounts recognized in the statements of financial position and results of operations at December 31:
Assumptions utilized to measure the accumulated postretirement obligation at December 31, 1996 and 1995 were: discount rates of 7-1/2% and 7-1/4%, respectively; health care cost trend rates of: 1996 - 8% declining to 4% in the year 2002; 1995 - 9% declining to 5% in the year 2003 and held constant thereafter. A 1% increase in the assumed trend rates would have resulted in increases in the accumulated postretirement benefit obligation at December 31, 1996 and 1995 of $2.7 million and $2.7 million, respectively; the aggregate of service cost and interest cost for the years ended December 31, 1996 and 1995 would have increased by $.5 million and $.5 million, respectively.
13. Capital Stock, Options and Rights Under the 1988 Long Term Stock Incentive Plan (the Employee Plan), the Company may grant to officers and key employees stock options, stock appreciation rights, performance shares, performance units, restricted stock or restricted stock units for up to 2.8 million shares of the Company's capital stock. Under the 1990 and 1995 Stock Option Plans for Non-Employee Directors (the Non-Employee Plans), the Company may grant stock options to non-employee directors for up to 247,500 shares of the Company's capital stock. As prescribed by the plans, the stock options are exercisable at the market price of the Company's capital stock on the date of grant and vest over a two-year period at the rate of 50% each year commencing on the first anniversary of the date of grant. All options expire ten years from the date of grant.
A summary of the status of stock options granted under the Employee Plan and the Non-Employee Plans is presented below for the periods indicated.
A summary of information about stock options outstanding at December 31, 1996 is presented below:
The restricted stock and performance shares awarded under the Employee Plan entitle the grantee to the rights of a shareholder, including the right to receive dividends and to vote such shares, but the shares are restricted as to sale, transfer or encumbrance. Restricted stock is released to the grantee over varying periods after a one-year waiting period has expired. In 1996, 1995 and 1994, awards were granted for 10,700 shares, 11,000 shares and 9,000 shares, respectively. During those same years, 16,414 shares, 16,088 shares and 12,081 shares, respectively, were re-
leased to grantees. In order for unrestricted performance shares to be released to the grantee, the Company must attain certain performance goals by the end of a three-year performance cycle which begins with the year of the award. Awards granted in 1996, 1995 and 1994 amounted to 19,000 shares, 29,700 shares and 19,500 shares, respectively. During those same years, performance shares released to grantees amounted to 11,273 shares, 16,228 shares and 10,496 shares, respectively. The weighted average grant date fair value of restricted stock and performance share awards in 1996, 1995 and 1994, based on the market value of the Company's capital stock on the date of the awards, were $42.47, $35.56 and $37.32, respectively.
The Company accounts for its stock-based compensation plans under the principles prescribed by the Accounting Principles Board's Opinion No. 25, "Accounting for Stock Issued to Employees" (Opinion No. 25). Accordingly, stock options awarded under the Employee Plan and the Non-Employee Plans are considered to be "non- compensatory" and do not result in the recognition of compensation expense. However, the restricted stock and performance shares awarded under the Employee Plan are considered to be "compensatory" and the Company recognized compensation expense in 1996, 1995 and 1994 of $1.3 million, $1.2 million and $1 million, respectively.
In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," (SFAS No. 123), which encouraged the use of a fair value based method of accounting for compensation expense associated with stock option and similar plans. However, SFAS No. 123 permits the continued use of the intrinsic value based method prescribed by Opinion No. 25 but requires additional disclosures, including pro forma calculations of net earnings and earnings per share as if the fair value method of accounting prescribed by SFAS No. 123 had been applied in 1996 and 1995. The pro forma data presented below is not representative of the effects on reported amounts for future years because SFAS No. 123 does not apply to awards prior to 1995 and additional awards are expected in the future.
In 1986, the Company's Board of Directors declared a dividend to shareholders consisting of one Capital Stock Purchase Right on each outstanding share of capital stock which was intended to cause substantial ownership dilution to a person or group attempting to acquire the Company without approval of the Company's Board of Directors. A right would also be issued with each share of capital stock that became outstanding prior to the time the rights become exercisable or expired. Prior to the expiration of the rights in June 1996, the Company's Board of Directors extended the term of the rights to June 2006 and approved amendments to and restated the rights.
Under the amendments, if a person or group acquires beneficial ownership of 20% or more or announces a tender offer that would result in beneficial ownership of 20% or more of the shares of outstanding capital stock, each right becomes exercisable ten days thereafter and entitles its holder to purchase one share of capital stock for $175. If the Company is acquired in a business combination transaction, each right not owned by the 20% holder entitles its holder to purchase for $175 common shares of the acquiring company having a market value of $350. Alternatively, if a 20% holder were to acquire the Company through a reverse merger in which the Company and its capital stock survive or were to engage in certain "self-dealing" transactions, each right not owned by the acquiring person would entitle its holder to purchase for $175 capital stock of the Company having a market value of $350. Each right can be redeemed by the Company for $.01, subject to the occurrence of certain events and other restrictions. The rights should not interfere with a business combination transaction that has been approved by the Board of Directors.
14. Contingencies The Company has been notified by the U.S. Environmental Protection Agency that it is one of many Potentially Responsible Parties (PRP) with respect to certain National Priorities List sites. Based on its evaluation of the potential total cleanup costs, its estimate of its potential exposure, and the viability of the other PRP's, the Company believes that any costs ultimately required to be borne by it at these sites will not have a material adverse effect on its results of operations, cash flow or financial position.
The Company is subject to other legal proceedings, claims and liabilities which arise in the ordinary course of its business. In the opinion of Management, the amount of ultimate liability with respect to these actions will not have a material adverse effect on results of operations, cash flow or financial position of the Company.
The table below sets forth estimates of the domestic sulfur reserves attributable to the Company's interests as of December 31:
_________________________________________________________________ Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves
The following supplemental data on the Company's oil and gas activities were prepared in accordance with the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards No. 69 - "Disclosures About Oil and Gas Producing Activities." Estimated future net cash flows are determined by: (1) applying the respective yearend oil and gas prices to the Company's estimates of future production of proved reserves; (2) deducting estimates of the future costs of development and production of proved reserves based on the assumed continuation of the cost levels and economic conditions existing at the respective yearend; and (3) deducting estimates of future income taxes based on the respective yearend and future statutory tax rates. Present value is determined using the FASB-prescribed discount rate of 10% per annum.
Although the information presented is based on the Company's best estimates of the required data, the methods and assumptions used in preparing the data were those prescribed by the FASB. Although unrealistic, they were specified in order to achieve uniformity in assumptions and to provide for the use of reasonably objective data. It is important to note here that this information is neither fair market value nor the present value of future cash flows and it does not reflect changes in oil and gas prices experienced since the respective yearend. It is primarily a tool designed by the FASB to allow for a reasonable comparison of oil and gas reserves and changes therein through the use of a standardized method. Accordingly, the Company cautions that this data should not be used for other than its intended purpose.
Independent Auditors' Report
The Partners MaraLou Netherlands Partnership:
We have audited the accompanying consolidated balance sheets of MaraLou Netherlands Partnership and subsidiary as of December 31, 1996 and 1995, and the related consolidated statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MaraLou Netherlands Partnership and subsidiary as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Houston, Texas January 28, 1997
(Continued)
(Continued)
MARALOU NETHERLANDS PARTNERSHIP
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
1. Organization and summary of significant accounting policies
Organization and ownership: MaraLou Netherlands Partnership (MaraLou), a Texas general partnership, was formed on March 27, 1985 by LL&E (Netherlands), Inc. (LL&E Netherlands) and Marathon Petroleum Netherlands, Ltd. (Marathon Netherlands) for the purpose of owning their interests in CLAM Petroleum Company (CLAM) and for the purpose of purchasing the outstanding shares of CLAM held by Netherlands-Cities Service, Inc. On March 27, 1985 both partners agreed to contribute their respective ten thousand shares of CLAM to MaraLou. These shares were transferred to MaraLou on June 21, 1985. The remaining shares held by Netherlands-Cities Service, Inc. were acquired by MaraLou for $85,381,881 on March 29, 1985. The acquisition has been accounted for using the purchase method of accounting effective January 1, 1985.
On December 6, 1991 an agreement was concluded whereby LL&E Netherlands Petroleum Company, an affiliated company to LL&E Netherlands (both of which are wholly owned subsidiaries of The Louisiana Land and Exploration Company) contributed Netherlands North Sea license interests and other assets valued at $11,629,000 for five hundred newly issued shares of CLAM stock. For financial reporting purposes, the contribution made by LL&E Netherlands Petroleum Company in excess of its calculated minority interest is reflected in Partners' capital as an addition to the LL&E Netherlands capital balance. MaraLou made a cash contribution of $11,629,000 for an additional five hundred newly issued shares of CLAM stock. The contributed cash is to be used to develop the North Sea license interest contributed by LL&E Netherlands Petroleum Company. MaraLou subsequently sold all of its newly issued shares of CLAM stock to Marathon Netherlands, a partner in MaraLou, which purchased the shares with a note valued at $11,629,000, on which $6,000,000 was paid in 1991 and $6,000,000, inclusive of interest, was paid in 1992. These newly issued shares of CLAM stock have been pledged as security for MaraLou and CLAM's revolving credit agreement (see Note 6).
CLAM Petroleum Company, a Delaware Corporation, was formed in October 1975 by LL&E Netherlands, Marathon Netherlands and Netherlands-Cities Service, Inc. (stockholders) for the purpose of owning their interest in certain licenses and agreements covering hydrocarbon operations in The Netherlands and for the purpose of entering into agreements with lending
institutions to finance such interest. Effective May 24, 1976 the stockholders assigned their interests and obligations under the licenses and related agreements to CLAM. CLAM has no operations outside the oil and gas industry or in areas other than The Netherlands North Sea.
The financial statements reflect the consolidation of CLAM Petroleum Company (the Company) with MaraLou for the period from January 1, 1985. The financial statements also reflect the interests and earnings of the minority shareholders, LL&E Netherlands Petroleum Company and Marathon Netherlands. Currently, MaraLou has no interests other than in the operation of CLAM.
Joint venture agreements: CLAM, together with unrelated parties, has interests in certain prospecting and production licenses and related operating agreements which provide for the joint conduct of seismic, geological, exploration and development activities on the continental shelf of The Netherlands. The accompanying financial statements include CLAM's share of operations as reported to it by the six operators of the joint ventures. The amounts reported by the operators of the joint ventures are subject to annual audits by the non-operators. A deter- mination is made annually as to the requirement for an audit based on the materiality of each operator's expenditures. Audits for the year 1995 have been conducted for two of the more significant joint ventures with no material items discovered. The remaining operators' 1995 expenditures were not material enough to require an audit.
Petroleum exploration and development costs: CLAM follows the successful efforts method of accounting for oil and gas properties. Exploration expenses, including geological and geophysical costs, prospecting costs, carrying costs and exploratory dry hole costs are charged against income as incurred. The acquisition costs of unproved properties are capitalized with appropriate provision for impairment based upon periodic assessments of such properties. All development costs, including development dry hole costs, are capitalized. Capitalized costs are adjusted annually for cash adjustments relating to changes in CLAM's share in gas reserve estimates (see Note 7).
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in March 1995. Effective December 31, 1995, CLAM adopted SFAS No. 121.
The adoption of SFAS No. 121 resulted in no write-down of long-lived assets. Under SFAS No. 121, the Company performed its impairment review of proved gas and condensate properties on a depletable unit basis. For each depletable unit deter- mined to be impaired, an impairment loss equal to the dif- ference between the carrying value and the fair value of the
depletable unit would be recognized. Fair value, on a depletable unit basis, was estimated to be the present value of expected future cash flows computed by applying estimated future gas and condensate prices, as determined by Management, to estimated future production of gas and condensate reserves over the economic lives of the reserves.
Depletion, amortization and depreciation: Depletion is provided under the unit-of-production method based upon estimates of proved-developed reserves. Depreci- ation is based on estimated useful life of the assets. Reserve determinations are management's best estimates and generally are related to economic and operating conditions. Depletion and depreciation rates are adjusted for future estimated salvage values.
CLAM property, plant and equipment retirements: Upon sale or retirement of property, plant and equipment, the cost and related accumulated depletion, amortization and de- preciation are eliminated from the accounts and the gain or loss is reflected in income.
CLAM platform abandonment amortization: Platform abandonment amortization is provided under the unit- of-production method based upon estimates of proved-developed reserves. Amortization rates are adjusted for future esti- mated abandonment costs. Platform abandonment amortization is charged to operating expense.
Geographic concentration: All concessions in which CLAM has interests are located in the Netherlands.
Use of estimates: Management of CLAM and MaraLou have made a number of estimates and assumptions relating to the reporting of assets and lia- bilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.
2. Related party transactions
CLAM transactions with related parties consisted of charges for geological, geophysical and administrative services rendered by an affiliate under two service contracts and administrative services rendered by another affiliate. Such charges were approximately $3,032,408, $2,803,322 and $2,183,002 for 1996, 1995 and 1994, respectively. Salaries and related social charges included therein amounted to $154,603, $2,007,984 and $1,449,062 for 1996, 1995 and 1994, respectively.
MaraLou transactions with related parties consisted of charges for administrative services rendered by an affiliate amounting to $63,252, $60,900 and $59,880 in 1996, 1995 and 1994, respectively.
3. Property, plant and equipment
Changes in property, plant and equipment for the years ended December 31, 1996, 1995 and 1994 are as follows (in thousands of U.S. dollars):
4. Federal and foreign income taxes
MaraLou is a partnership and, therefore, does not pay income taxes. Since CLAM (wholly owned by MaraLou) is a corporation, income taxes included in the accompanying consolidated financial statements have been determined utilizing applicable domestic and foreign tax rates.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable to those years in which the temporary differences between financial statement carrying amounts and tax bases are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted.
Details of federal and foreign income taxes (benefits) - (in thousands of U.S. dollars) are as follows:
Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35% to income before income taxes of CLAM as a result of the following (in thousands of U.S. dollars):
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1996, 1995 and 1994 relate to the following (in thousands of U.S. dollars):
The Company provides a valuation allowance against deferred tax assets to reflect the amount of deferred tax asset, net of valuation allowance, that more likely than not will be utilized to offset future taxes. The valuation allowance increased from December 31, 1995 to December 31, 1996 due to changes in the Company's estimate of the amount and timing of the reversal of its abandonment accrual.
The Company's current tax liability was determined on a regular tax basis.
5. CLAM foreign currency translation adjustment
As of January 1, 1983 CLAM adopted Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" (SFAS No. 52), under which the functional currency is deemed to be the Dutch guilder. Effective January 1, 1987, CLAM changed its functional currency from the Dutch guilder to the U.S. dollar. The change was precipitated by the significant effect on CLAM's operation of a new dollar-driven gas sales contract which was effective January 1, 1987 and the Tax Reform Act of 1986. In accordance with SFAS No. 52, there is no restatement of prior years' financial statements and the translated amounts for nonmonetary assets as of December 31, 1986 have become the accounting basis for those assets in the year of the change.
6. Debt
On July 25, 1985 MaraLou and CLAM entered into a revolving credit agreement, which was amended and restated as of June 19, 1992, with a syndicate of major international banks to fund the purchase by MaraLou of CLAM shares previously owned by Netherlands-Cities Service, Inc. and to provide working capital for CLAM. The banks' total commitment as of December 31, 1996 and December 31, 1995 was $110,000,000. Interest is paid, at the borrower's option, based on the prime rate, the London Interbank Offered Rate (LIBOR), or an
adjusted CD rate. A contractual margin is added to LIBOR and CD based borrowings. The all-in interest rates for CLAM for December 31, 1996 and December 31, 1995 were 6.250% and 6.1875%, respectively. During the revolving credit period, the borrowers are obligated to pay a commitment fee of 1/4% on the unused committed portion of the facility. All of the CLAM common stock held by MaraLou has been pledged as security for the facility. In addition, under certain circumstances MaraLou can exercise an option to purchase the shares held by LL&E Netherlands Petroleum Company and Marathon Petroleum Netherlands, Ltd. for a nominal amount. The option agreement has been assigned to the banks as security for the facility.
The credit agreement permits CLAM and MaraLou to incur total debt up to an agreed borrowing base which at December 31, 1996 and December 31, 1995 was $125,000,000 and $132,000,000, respectively. The agreement provides that the borrowing base is reduced periodically over the term of the facility which is currently scheduled to expire on September 30, 2002. The borrowing base and the scheduled reductions may be adjusted based on a redetermination of the net present value of the projections of certain cash flows included in an Engineering Report prepared by petroleum engineers.
The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $96,000,000, at December 31, 1996 of which $-0- was due within one year. The outstanding balances for MaraLou and CLAM, respectively, were $-0- and $96,000,000 at December 31, 1995. At December 31, 1996, the required reductions to the borrowing base in each of the next five years are $-0- in 1997, $9,600,000 in 1998, $28,000,000 in 1999, $22,400,000 in 2000, $22,000,000 in 2001 and $14,000,000 thereafter.
CLAM has an unsecured combined short-term loan and overdraft facility of Dfl. 80,000,000 ($46,248,121 at year-end exchange rates). On December 31, 1996 and December 31, 1995 the out- standing balances relating to this facility were $-0-. Interest rates are determined at the time borrowings are made.
7. Annual evaluation of gas reserves
Under the provisions of the Joint Development Operating Agreement to which CLAM is a party, an annual estimate of gas reserves is to be made and agreed upon by the Area Management Committee. Based upon such estimate, each participant's investment in the area properties, as defined, is to be adjusted so that a participant's investment is in proportion to its interest in the remaining reserves. Adjustments to the investments are made in cash in the year following the date the reserve revision is agreed upon and effective.
In 1992, the Area Management Committee agreed to freeze each participant's interest through 1994, at the level agreed upon in 1992. However, in 1994 new entitlements were agreed upon effective January 1, 1994. CLAM made a cash payment of $15,382,204 to equalize past investment. Effective January 1, 1995, new entitlements were agreed upon and CLAM made a cash payment of $3,439,966 to equalize past investment. Effective January 1, 1996, new entitlements were agreed upon and CLAM made a cash payment of $7,881,509 to equalize past investment.
8. Reserves of oil and gas (unaudited)
CLAM's share, including net profits interest, of proven gas reserves at January 1, 1997 and 1996 are 270,148 MMCF and 245,107 MMCF, respectively.
9. Major customer
CLAM has one major customer from which it derives 96% of its sales revenue. CLAM is required under its production license to offer its production first to this customer, which is partially owned by The Netherlands government. Production is sold to this customer under five contracts representing various partnership interests and gas qualities.
10. Net profits interest agreement
CLAM entered into an agreement dated November 1, 1981 which requires CLAM to pay a portion of its net profits ("net profits interest") to an unrelated party in exchange for a 7-1/2% participation interest in certain blocks. The "net profits interest" is equal to one twenty-fourth (1/24) of CLAM's revenues from the contract area, after various deductions, as defined in the agreement.
11. Issuance of production licenses
In March 1990, a production license was granted by the Minister of Economics Affairs of the Netherlands covering the L12a and L12b/L15b blocks. As a result, the Dutch Government, through Energie Beheer Nederland (EBN) (a Dutch company wholly owned by the Dutch Government) exercised its option to participate 40% in the L12a block and 50% in the L12b/L15b block. CLAM was subsequently reimbursed $10,628,572 during 1990, all of which was included in income because there were costs associated with these blocks which had been written-off in prior years. Components of the reimbursement were:
Exploration well cost (previously written off as dry wells) $ 5,595,076
Exploration administrative expense 1,818,220
Interest 3,215,276
Total reimbursement $10,628,572
In 1991, it was determined that the portion of the above noted reimbursement allocable to trapping unit L12-FC, within blocks L12b/L15b, would be refunded to EBN as production on this trapping unit is not expected to commence within the 48-month requirement stipulated by the contractual agreement with EBN (the Agreement). The refundable amount, which CLAM expected to repay in 1994, was recorded as a long-term receivable of $3.6 million, interest expense of $1.5 million and an accrued liability of $5.1 million. The Agreement calls for EBN to reimburse the funds to CLAM net of interest upon first production from trapping unit L12-FC, which is expected to occur in 1999.
In 1992, it was determined that the portion of the above noted reimbursement allocable to trapping units L12-FA and L12-FB, within blocks L12a and L12b/L15b, would be refunded to EBN as production on these trapping units are not expected to commence within the 48-month requirement stipulated by the Agreement. The refundable amount for L12-FA and L12-FB, which CLAM expected to repay in 1994, was recorded as a long-term receivable of $0.5 and $1.6 million, respectively, interest expense of $0.2 million and $0.6 million, respectively, and an accrued liability of $0.7 million and $2.2 million, respectively. The Agreement calls for EBN to reimburse the respective funds to CLAM net of interest upon first production from trapping units L12-FA and L12-FB, which is expected to occur in 2000 and 1999, respectively.
In 1994, the contractual agreement with EBN (the Agreement) was renegotiated with the result being that the refundable amounts for the L12-FB and L12-FC trapping units will have to be repaid by December 31, 1999 unless production has commenced prior to this date. Additionally, it was agreed there is no repayment obligation for the L12-FA trapping unit, and resulting in a reversal of the associated long-term receivable, interest expense and accrued liability.
12. Disclosures about fair value of financial instruments
Cash and Cash Equivalents, Receivables, Due from Operator of Joint Venture, Due to Affiliated Company, Accounts Payable, and Due to Operator of Joint Venture
- The carrying amount approximates fair value because of the short maturity of these instruments.
Long-Term Receivable
- The estimated fair value of the Company's $5,792,577 long-term receivable, based on discounted cash flows, is approximately $4,545,000.
Long-Term Debt Due to Banks
- The carrying amount approximates fair value because of the variable rate of interest associated with this debt.
Derivatives
- MaraLou has no derivative financial instruments.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to directors of the Registrant will be contained in the definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 8, 1997, which the Registrant will file pursuant to Regulation 14A not later than 120 days after December 31, 1996, and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K. Information relating to executive officers of the Registrant appears herein under the heading "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to the compensation of the Registrant's executive officers and directors will be contained in the definitive Proxy Statement referred to above in Item 10. - "Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to beneficial ownership of securities will be contained in the definitive Proxy Statement referred to above in Item 10. - "Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to transactions with management and others and certain business relationships regarding directors will be contained in the definitive Proxy Statement referred to above in Item 10. - "Directors and Executive Officers of the Registrant," and such information is incorporated herein by reference in accordance with General Instruction G(3) of Form 10-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements - the information required hereunder is included in Item 8. - "Financial Statements and Supplementary Data."
(a)(2) Financial Statement Schedules - all financial statement schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
(a)(3) Index to Exhibits - the information required hereunder is included herein.
(b) Reports on Form 8-K - no reports on Form 8-K were filed during the quarter ended December 31, 1996.
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
The following Exhibits have been filed with the Securities and Exchange Commission:
Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Regis- trant's Registration Statement No. 2-45541 on Form S-1.); Articles Supplementary pursuant to Section 3-603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commis- sion File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.).
Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1-959.).
Exhibit 4(a) Rights Agreement dated as of May 25, 1986 (as amended and restated on May 9, 1996) among the Registrant and First Chicago Trust Company (as Rights Agent) - (Incorporated by reference to Exhibit 4 to the Registrant's Current Report on Form 8-K dated May 10, 1996 - Commission File No. 1-959.).
Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) - (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.).
Exhibit 10(a)(i) Form of Termination Agreement with Certain Senior Management Personnel (as amended) (Incorporated by reference to the Exhibit 10(a)(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 - Commission File No. 1-959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(a)(ii) Form of Termination Agreement with Certain Senior Management Personnel (Incorporated by reference to the Exhibit 10(a)(ii) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 - Commission File No. 1-959.).
Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incor- porated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982.) and the amendment thereto dated December 8, 1982 (Incorporated by re- ference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1- 959.).
Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993.).
Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(e) Pension Agreement dated December 27, 1994 (Incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 - Commission File No. 1-959.).
Exhibit 10(f) The Louisiana Land and Exploration Company 1995 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 28, 1995.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by re- ference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(i) Form of The LL&E Change in Control Severance Plan for Key Executives (Incorporated by reference to the Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 - Commission File No. 1-959.).
Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorpo- rated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(l) Credit Agreement dated as of June 8, 1995 among the Registrant, the Banks listed there- in, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 - Commission File No. 1-959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(l)(i) Amendment No. 1 to Credit Agreement dated as of June 8, 1995 (Incorporated by reference to Exhibit 10(l)(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 - Commission File No. 1-959.).
Exhibit 10(m) Agreement and General Release.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Consent of Experts.
Exhibit 24 Powers of Attorney.
Exhibit 27 Financial Data Schedules: Year Ended December 31, 1996 Year Ended December 31, 1995 (Restated) Year Ended December 31, 1994 (Restated)
Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE LOUISIANA LAND AND EXPLORATION COMPANY (Registrant)
Date: March 14, 1997 By /s/ Frederick J. Plaeger, II __________________________________ Frederick J. Plaeger, II Vice President, General Counsel and Corporate Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 14, 1997 *H. Leighton Steward _____________________________________ H. Leighton Steward Director, Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: March 14, 1997 *Robert E. Howson _____________________________________ Robert E. Howson Director
Date: March 14, 1997 *Eamon M. Kelly _____________________________________ Eamon M. Kelly Director
Date: March 14, 1997 *Kenneth W. Orce _____________________________________ Kenneth W. Orce Director
Date: March 14, 1997 *Victor A. Rice _____________________________________ Victor A. Rice Director
Date: March 14, 1997 *John F. Schwarz _____________________________________ John F. Schwarz Director
Date: March 14, 1997 *Orin R. Smith _____________________________________ Orin R. Smith Director
Date: March 14, 1997 *Carroll W. Suggs _____________________________________ Carroll W. Suggs Director
Date: March 14, 1997 *Arthur R. Taylor _____________________________________ Arthur R. Taylor Director
Date: March 14, 1997 *W. R. Timken, Jr. _____________________________________ W. R. Timken, Jr. Director
Date: March 14, 1997 *Carlisle A. H. Trost _____________________________________ Carlisle A. H. Trost Director
Date: March 14, 1997 *Louis A. Raspino, Jr. _____________________________________ Louis A. Raspino, Jr. Senior Vice President-Chief Financial Officer (Principal Financial Officer)
Date: March 14, 1997 *Jerry D. Carlisle _____________________________________ Jerry D. Carlisle Vice President and Controller (Principal Accounting Officer)
*/s/ Frederick J. Plaeger, II _________________________________________ Frederick J. Plaeger, II Vice President, General Counsel and Corporate Secretary (As attorney-in-fact for each of the persons indicated)
________________________________________________________________ ________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
__________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
__________________________
THE LOUISIANA LAND AND EXPLORATION COMPANY (Exact name of registrant as specified in its charter)
EXHIBITS
________________________________________________________________ ________________________________________________________________
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
The following Exhibits have been filed with the Securities and Exchange Commission:
Exhibit 3(a) Certificate of Incorporation (Incorporated by reference to Exhibit 1-3(a) to the Regis- trant's Registration Statement No. 2-45541 on Form S-1.); Articles Supplementary pursuant to Section 3-603(d)(4) of the Maryland General Corporation Law (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1983 - Commission File No. 1-959.); Articles of Amendment of Charter dated May 30, 1985 (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985 - Commis- sion File No. 1-959.); Articles of Amendment of Charter dated May 12, 1988 (Incorporated by reference to Exhibit 3(c) to the Registrant's Form 8 dated April 24, 1989 - Commission File No. 1-959.).
Exhibit 3(b) By-Laws (Incorporated by reference to Exhibit (1) to the Registrant's Current Report on Form 8-K dated October 1, 1989 - Commission File No. 1-959.).
Exhibit 4(a) Rights Agreement dated as of May 25, 1986 (as amended and restated on May 9, 1996) among the Registrant and First Chicago Trust Company (as Rights Agent) - (Incorporated by reference to Exhibit 4 to the Registrant's Current Report on Form 8-K dated May 10, 1996 - Commission File No. 1-959.).
Exhibit 4(b) Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) - (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-50991 on Form S-3, as amended.).
Exhibit 10(a)(i) Form of Termination Agreement with Certain Senior Management Personnel (as amended) (Incorporated by reference to the Exhibit 10(a)(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 - Commission File No. 1-959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(a)(ii) Form of Termination Agreement with Certain Senior Management Personnel (Incorporated by reference to the Exhibit 10(a)(ii) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 - Commission File No. 1-959.).
Exhibit 10(b) The Louisiana Land and Exploration Company 1982 Stock Option Plan as adopted (Incor- porated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 26, 1982.) and the amendment thereto dated December 8, 1982 (Incorporated by re- ference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1- 959.).
Exhibit 10(c) The Louisiana Land and Exploration Company 1988 Long-Term Stock Incentive Plan as amended (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 22, 1993.).
Exhibit 10(d) Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1982 - Commission File No. 1-959.).
Exhibit 10(e) Pension Agreement dated December 27, 1994 (Incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 - Commission File No. 1-959.).
Exhibit 10(f) The Louisiana Land and Exploration Company 1995 Stock Option Plan for Non-Employee Directors as adopted (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement dated March 28, 1995.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(g) Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Incorporated by re- ference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(h) Retirement Plan for Directors of The Louisiana Land and Exploration Company dated March 1, 1987 (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990 - Commission File No. 1-959.).
Exhibit 10(i) Form of The LL&E Change in Control Severance Plan for Key Executives (Incorporated by reference to the Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 - Commission File No. 1-959.).
Exhibit 10(j) The LL&E Supplemental Excess Plan (Incorpo- rated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(k) Form of Compensatory Benefits Agreement (Incorporated by reference to Exhibit 10(l) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 - Commission File No. 1-959.).
Exhibit 10(l) Credit Agreement dated as of June 8, 1995 among the Registrant, the Banks listed there- in, Morgan Guaranty Trust Company of New York, as Agent, and Texas Commerce Bank National Association and NationsBank of Texas, N.A., as Co-Agents (Incorporated by reference to Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 - Commission File No. 1-959.).
(continued)
THE LOUISIANA LAND AND EXPLORATION COMPANY AND SUBSIDIARIES
Index to Exhibits
Exhibit 10(l)(i) Amendment No. 1 to Credit Agreement dated as of June 8, 1995 (Incorporated by reference to Exhibit 10(l)(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 - Commission File No. 1-959.).
Exhibit 10(m) Agreement and General Release.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Consent of Experts.
Exhibit 24 Powers of Attorney.
Exhibit 27 Financial Data Schedules: Year Ended December 31, 1996 Year Ended December 31, 1995 (Restated) Year Ended December 31, 1994 (Restated)
Certain debt instruments have not been filed. The Company agrees to furnish a copy of such agreement(s) to the Commission upon request.