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Form 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 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 Number: 1-7627
WAINOCO OIL CORPORATION
(Exact name of registrant as specified in its charter)
Wyoming 74-1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10000 Memorial Drive, Suite 600 77024-3411
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 688-9600
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock New York Stock Exchange
Alberta Stock Exchange
12% Senior Notes, due 2002 New York Stock Exchange
10 3/4% Subordinated Debentures, due 1998 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
7 3/4% Convertible Subordinated Debentures, due 2014
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No . . .
Indicate by check mark if disclosure of delinquent filers pursuant to rule 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.
Yes X No . . .
As of March 5, 1997, there were 27,258,502 common shares outstanding, and the
aggregate market value of the common shares (based upon the closing price of
these shares on the New York Stock Exchange) of Wainoco Oil Corporation held by
nonaffiliates was approximately $95.4 million at that date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1996 are incorporated by reference into Items 1 and 2 of Part 1 and Items 5
through 8 of Part II.
Portions of the Annual Proxy Statement for the year ended December 31, 1996 are
incorporated by reference into Items 10 through 13 of Part III.
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Page 1
Table of Contents
Part I
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
Part III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management 13
Item 13. Certain Relationships and Related Transactions 13
Part IV
Item 14. Exhibits, Financial Statements Schedules, and 13
Reports on Form 8-K
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PART 1
ITEM 1. BUSINESS
Overview
Wainoco Oil Corporation was originally incorporated in Canada in 1949 and
changed its jurisdiction of incorporation to Wyoming in 1976. As used herein,
the "Company" or "Wainoco" refers to Wainoco Oil Corporation and its
subsidiaries. The Company's Canadian assets are held by Wainoco Oil Corporation
and its refining assets are held through its subsidiary, Frontier Holdings Inc.
("Frontier"), a Delaware corporation. The Company directs its activities from
its corporate office in Houston, Texas and its division offices in Calgary,
Alberta, Canada and Denver, Colorado.
Wainoco explores for and produces oil and gas in western Canada. Prior to
the fourth quarter of 1994, Wainoco also explored for and produced oil and gas
in the United States. During the third quarter of 1994, the Company announced
that it intended to cease all exploration activities in the United States and to
sell its United States oil and gas assets. Wainoco finalized the sale of all of
its United States oil and gas properties during 1995.
Wainoco is also engaged in the business of crude oil refining and wholesale
marketing of refined petroleum products, including various grades of gasoline,
diesel fuel, asphalt and petroleum coke. In addition, the Company purchases the
crude oil to be refined and markets the refined petroleum products produced by
the Frontier refinery.
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Oil and Gas Exploration and Production Operations
The oil and gas activities of the Company consist of geological and
geophysical evaluation of prospective oil and gas properties, the acquisition of
oil and gas leases or other interests in exploratory prospects, the drilling of
test wells, the acquisition of interests in developed or partially developed
properties and the development and operation of properties for the production of
oil and gas. At December 31, 1996, approximately 90% of the Company's proved
reserves, on a British Thermal Unit ("BTU") equivalent basis, was natural gas.
During 1996, oil represented 31% and gas represented 69% of oil and gas
revenues. The Company's oil and gas exploration and production activities are
conducted directly by the Company or through joint drilling and operating
arrangements. Wainoco acts as the operator of the majority of its production
and prospects.
Canada
Activities in Canada are conducted through Wainoco Oil Corporation with
emphasis on exploration, development and production in the western Canadian
provinces of British Columbia and Alberta. At December 31, 1996, all estimated
proved reserves and approximately 31% of identifiable assets of the Company were
located in western Canada. For the year ended December 31, 1996, Canadian
operations contributed all of the Company's oil and gas revenue.
During 1996, the exchange rate of the Canadian dollar averaged approximately
U.S. $.7335. The accounts of the Canadian division have been translated in
accordance with generally accepted accounting principles as described in Note 2
of the Financial Statements in the 1996 Annual Report to Shareholders which is
incorporated herein by reference.
United States
Activities in the United States were conducted through Wainoco Oil & Gas
Company. During 1994, all United States exploration ceased and certain
properties were sold. During 1995, the remaining oil and gas properties were
sold. No oil and gas activity was conducted in the United States during 1996.
Refining Operations
Wainoco's refining activities are conducted through Frontier, which was
acquired in October 1991. The refining facilities are located on approximately
120 acres in Cheyenne, Wyoming, on property owned by Frontier. The refinery's
permitted crude capacity is 41,000 bpd with an effective operating capacity of
39,000 bpd, which represents approximately 8% of the rated crude distillation
capacity in the Rocky Mountain region. The refinery can also process in excess
of 4,000 bpd of purchased natural gasoline, butanes and other petroleum liquids.
One of Frontier's competitive advantages relative to most other Rocky Mountain
refineries is that it includes substantially all of the major refinery units
that comprise a complex refinery, including a coker. Therefore, the refinery
has the capability of producing a higher yield of lighter, more valuable
petroleum products such as gasoline and diesel fuel from heavier, less costly
feedstocks such as heavy sour crude oil. The refinery's units have the capacity
to process a high percentage (up to 100%) of lower cost, more abundant sour
crude oil. The plant's downstream unit configuration provides gasoline octane
capability equal to or higher than that of most of its competitors. Frontier
also owns an undivided interest equal to 25,000 bpd in a crude oil pipeline from
Guernsey, Wyoming to Cheyenne. This pipeline was constructed to help serve the
refinery's long-term strategic crude oil needs.
The Company's gasoline and distillates sales accounted for more than 86% of
1996 consolidated revenues. As a percent of consolidated revenue, gasoline
sales were 53%, 52% and 49% and distillates sales were 33%, 31% and 31% in 1996,
1995 and 1994, respectively.
Industry Segments
The Company's industry segment information for the three years ended December
31, 1996, and the disclosure of the restructuring of its United States oil and
gas operations is set forth in Note 6 and 8, respectively, of the Financial
Statements in the 1996 Annual Report to Shareholders which is incorporated
herein by reference.
Operating Hazards and Risks
The Company's oil and gas exploration and production operations are subject
to all of the risks normally incident to the exploration for and production of
oil and gas including blow-outs, cratering, pollution and fires, each of which
could result in damage to or destruction of oil and gas wells or production
facilities or damage to persons and property. A substantial portion, but not
all, of such loss would be covered by business interruption, property or other
insurance carried by the Company. The occurrence of a significant event that is
not fully insured against could have a material adverse effect on the Company
and its financial position and results of operation.
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The Company's refinery operations are subject to significant interruption if
the refinery were to experience a major accident or fire or if it were damaged
by severe weather or other natural disaster. Should the crude oil pipeline
become inoperative, crude oil would be supplied to the refinery by an
alternative pipeline and from additional tank trucks. A substantial portion,
but not all, of such loss would be covered by business interruption, property or
other insurance carried by Frontier. Frontier's safety measures substantially
mitigate but do not eliminate the risk of damage to the refinery or the
environment and personal injury should a major adverse event occur. The
occurrence of a significant event that is not fully insured against could have a
material adverse effect on the Company and its financial position and results of
operation.
Competition
Oil and gas operations
The Company encounters strong competition from other independent operators
and from major oil companies in acquiring properties suitable for exploration,
in contracting for drilling equipment, in securing trained personnel and in
marketing oil and gas production. Many of these competitors have financial
resources and staffs substantially larger than those available to the Company.
The availability of a ready market for oil and gas discovered by the Company
depends on numerous factors beyond its control including the extent of
production and imports and exports of oil and gas, the demand for its products,
the proximity and capacity of natural gas pipelines and the effect of state,
provincial or federal regulations.
Competition in the acquisition of oil and gas prospects and properties has
been intense and remains so for prime prospects. The Company's ability to
discover reserves depends on its ability to select and acquire suitable
prospects for future exploration. Although the Company generates the major
portion of its oil and gas prospects internally, it depends to some extent upon
prospects offered to it by independent consultants and other persons or entities
in the petroleum industry.
Refining operations
Frontier's business is highly competitive and price is the principal basis of
competition. The most important competitive product marketing area in the Rocky
Mountain region is the Denver market, principally because it is the major
population center in the Rockies. There are 15 refineries in the Rocky Mountain
region (including several owned by major integrated oil companies). In
addition, two refineries are located in Denver and three product pipelines from
outside the Rockies terminate in the area. Frontier also serves western Nebraska
and eastern Wyoming.
Many of the refineries in the Rocky Mountain region are owned by companies
that have significantly greater financial resources and/or refining capacity
than Frontier. Certain of these competitors, as integrated oil companies, also
have the advantage of owning or controlling crude oil reserves or other sources
of crude oil supply, crude oil and product pipelines and service stations and
other product marketing outlets.
Principal Competitors. Based on proximity to the Denver and Cheyenne areas,
Frontier's principal competitors in the wholesale segment are Sinclair Oil
Company ("Sinclair") with a 54,000 bpd refinery near Rawlins, Wyoming and a
22,000 bpd refinery in Casper, Wyoming, Total Petroleum (North America) Ltd.
("Total") with a 28,000 bpd refinery in Denver, Colorado and Conoco, Inc.
("Conoco") with a 57,500 bpd refinery in Denver, Colorado. Frontier sells its
products exclusively at wholesale, principally to independent retailers, jobbers
and major oil companies, while Sinclair, Total and Conoco service both the
retail and wholesale markets.
Frontier is favorably positioned to purchase its crude oil and feedstock
requirements. Because many other refiners in the Rocky Mountain region have
significantly lower sour crude capacity, Frontier is able to purchase a
significant amount of its sour crude oil and all of its sweet crude oil from the
region. Frontier also purchases Canadian sour crude oil, which is available via
pipeline into Guernsey, Wyoming. In addition, the 172,000 bpd Express Pipeline
from Hardisty, Alberta to Guernsey, Wyoming, expected to commence deliveries in
the second quarter of 1997, will provide additional sources of Canadian crude
oil for the refinery. Frontier has contracted for pipeline capacity of 13,800
bpd on Express commencing in 1997 for a period of fifteen years. The Company's
commitment for pipeline capacity is approximately $5.8 million per year.
Frontier and its principal competitors all service the Denver market. Because
their refineries are located in Denver, Total's and Conoco's product
transportation costs in servicing that area are lower than those of Frontier.
Conversely, Frontier has lower crude transportation costs due to its proximity
to Guernsey, Wyoming, the major crude oil pipeline hub in the Rocky Mountain
region, and further due to its ownership interest in the crude oil pipeline.
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Strategic Position. Because Frontier includes substantially all of the major
refinery units that comprise a complex refinery, Wainoco believes that it
potentially has three significant advantages over its principal competitors and
most other refineries in the region.
First, Frontier has the capacity to process a high percentage (up to 100%) of
sour crude oil, while most refineries in the Rocky Mountain region can process
only sweet crude or smaller percentages of sour crude. Refineries that have the
ability to process sour crude can benefit from the lower cost of sour relative
to sweet crude oil, which is often referred to as the "sweet/sour spread."
During 1996, Frontier's cost for sour crude oil was approximately $2.56 per
barrel lower than its cost for sweet crude.
Second, Frontier owns a 10,000 bpd coker, which, among other things, enables
the refinery to upgrade resid and other heavy feedstocks into lighter, more
valuable petroleum products. Under the 1991 10-year agreement to process heavy
feedstocks for Conoco, 3,300 bpd of the coker's capacity is reserved for Conoco.
There are presently only four other cokers in the region.
Third, because of Frontier's combination of downstream process units, the
Company believes that the refinery has octane capability equal to or greater
than most of its competitors. This capability enabled Frontier to be the first
to introduce 91 octane premium unleaded gasoline to the Rocky Mountain region.
(Due to different altitudes, gasoline used in the Rocky Mountain region
generally has an octane rating two points lower than corresponding grades of
gasoline elsewhere in the United States.)
In addition, as a result of stringent environmental protection laws and the
high cost of the requisite plant modifications, Wainoco believes that, in
general, refiners in the Rocky Mountain region will face barriers to
substantially expanding refinery capacities or sour crude processing capability.
Based in part on the foregoing factors, the Company believes that Frontier is
capable of competing effectively in its market. In particular, Frontier has
sold and expects to continue to sell refined products at competitive prices.
Markets. Frontier sells to a broad base of independent retailers, jobbers
and major oil companies in the region. Its largest customer, CITGO Petroleum
Products, comprises approximately 16% of Frontier's 1996 sales. Prices are
determined by local market conditions at the "terminal rack" and the customer
typically supplies his own truck transportation.
Effect of Crude Oil and Refined Product Prices. Frontier's income and cash
flow are derived from the margin between its costs to obtain and refine crude
oil and the price for which it can sell products produced in its refining
process. The price at which Frontier can sell gasoline and its other refined
products will be strongly influenced by the price of crude oil. Although an
increase or decrease in the price of crude oil generally results in a
corresponding increase or decrease in the price of gasoline and refined
products, changes in the prices of refined products generally lag behind changes
in the price for crude oil, both upward and downward. Frontier maintains
inventories of crude oil, intermediate products and refined products, the value
of each of which is subject to rapid fluctuations in market prices. Inventories
are recorded at the lower of cost on a first in, first out ("FIFO") basis or
market. A rapid and significant movement in the market prices for crude oil or
refined products could have an adverse short-term impact on earnings and cash
flow. Crude oil prices, in general, are affected by a number of factors,
including domestic and international demand, domestic and foreign energy
legislation, production guidelines established by the Organization of Petroleum
Exporting Countries ("OPEC"), relative supplies of other fuels, such as natural
gas, and changing international economic and political conditions.
Frontier can process a high percentage of sour crude oil, enabling it to
benefit from the lower cost of sour crude relative to sweet crude. Because
income and cash flow from refining operations are dependent in part on this cost
differential, any narrowing of the sweet/sour crude spread would likely cause a
reduction in operating margin and a decrease in earnings and cash flow of
Frontier. A narrowing of the sweet/sour crude spread could result from, among
other things, a decrease in the supply of sour crude or an increase in sour
crude refining capacity of the Frontier's competitors.
General
Wainoco competes with other oil and gas concerns and other investment
opportunities, whether or not related to the petroleum industry, in raising
capital. The Company's ability to compete successfully in the capital markets
is largely dependent on the success of its oil and gas exploration activities,
refining activities and the economic environment in which it operates.
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Gas Markets
The Company sells approximately 59% of its natural gas production under
long-term gas contracts managed by companies (aggregators) who purchase large
volumes of natural gas from many producers and resell this gas throughout North
America. The price paid for this gas is a "net-back" price per unit of gas
established by subtracting transportation, processing, storage and
administrative costs from the total revenue generated from the monthly sales of
gas. During earlier periods of lower load factors, the Company negotiated the
right to market such excess volumes not taken by the primary purchaser, to other
markets. Such excess volumes are available to be sold in the spot market.
To diversify gas sales, optimize production, and mitigate poor price
performance on the part of some aggregators, Wainoco sells about 41% of its
total 1996 gas production under short-term contracts. Generally, one-year
renewable contracts have been used for this purpose with gas prices that are
negotiated annually as a fixed price per unit of sales or a price indexed to the
New York Mercantile Exchange (NYMEX) futures price, or indexed to a specific
sales point such as Sumas, British Columbia or Empress, Alberta. Firm
transportation and gas processing capacity from major pipeline companies have
been obtained in Canada to ensure the continued ability to deliver gas pursuant
to these contracts. The tariffs associated with this firm pipeline capacity
must be paid regardless of the Company's natural gas productive capacity. During
1996 certain pipeline companies required longer term commitments to maintain
existing capacity, resulting in an increase in annual pipeline capacity
commitments. The Company has not committed for pipeline capacity in excess of
our existing deliverability dedicated to short-term gas contracts. Any
productive capacity above the Company's firm pipeline capacity must be marketed
on an interruptible basis. As of December 31, 1996, the Company's annual
commitment for firm pipeline capacity is estimated to approximate $3 million
from 1997 to 2001, decreasing to approximately $2 million from 2002 to 2007.
The 1997 commitment represents approximately 58% of gross productive capacity.
Government Regulations
Canadian Oil & Gas Operations
Environmental Laws and Regulations. The Company's oil and gas exploration
and production activities are subject to laws and regulations relating to
environmental quality and pollution control. Environmental legislation provides
for restrictions and prohibitions on spills, releases or emissions of various
substances produced in association with certain oil and gas industry operations.
It also requires that well and facility sites be abandoned and reclaimed to the
satisfaction of provincial authorities. A breach of such legislation may result
in the imposition of fines and penalties. In addition, certain types of
operations require the submission and approval of environmental impact
assessments. Environmental legislation is evolving in a manner which will mean
stricter standards and enforcement, civil liability, increased fines and
penalties for non-compliance (including jail terms), more stringent
environmental assessments of proposed projects and a heightened degree of
responsibility for the Company, its officers, directors and employees. As well,
the trend is away from confining liability to the polluter. Other responsible
parties can include present and prior owners, tenants and others. The Company
believes that such legislation and regulations have had no material adverse
effect on its present method of operation. In the future, changes in Canadian
federal, provincial and local government environmental controls could require
the Company to make significant expenditures. The magnitude of such
expenditures cannot be predicted.
Royalties and Incentives. Wainoco's Canadian oil and gas production is
subject to the payment to provincial governments, among others, of a specified
percentage of production revenue as a royalty. Royalties paid to the Province
of Alberta are subject to a rebate called the Alberta Royalty Tax Credit
("ARTC"). Prior to 1995, the ARTC was based on a price-sensitive formula using
the average West Texas Intermediate (WTI) quarterly oil price. Effective
January 1, 1995, gas prices were included in determination of the ARTC rate. The
maximum annual ARTC was $1.1 million in each of 1996 and 1995, and $1.4 million
in 1994. The Company recognized ARTC's of $.6 million, $.5 million, and $1.1
million in 1996, 1995 and 1994, respectively. The Alberta government has made
changes and continues to consider further changes in its royalty structure
(including royalty exemption periods).
Free Trade Agreement. The North American Free Trade Agreement ("NAFTA")
implemented in 1994 is among the Governments of Canada, the United States and
Mexico. NAFTA carries forward most of the material energy terms contained in
the Free Trade Agreement ("FTA"). The FTA implemented in 1989 between Canada
and the United States was intended to foster a more open North American
marketplace with a minimum of direct government interference. Under FTA both
countries are prohibited from imposing minimum export or import price
requirements or maintaining any discriminatory export taxes, duties or charges.
FTA also provides for the elimination of the United States tariffs and the
elimination of customs user fees which were previously imposed. NAFTA provides
for the reduction of Mexican restrictive trade practices in the energy sector
and prohibits discriminatory border restrictions and export taxes. NAFTA also
provides for clearer disciplines on regulators to avoid discriminatory actions
and to minimize disruption of contractual arrangements, which is important for
Canadian natural gas exports.
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United States - Canada Income Tax Convention. Effective January 1, 1996 as a
result of the implementation of the 1994 Protocol to the United States - Canada
Income Tax Convention, the Company ceased to be a Canadian resident for Canadian
income tax purposes. To minimize the effects of the implementation of the 1994
Protocol, the Company, effective December 1, 1995, undertook an internal
reorganization which allowed it to protect certain existing Canadian tax
benefits which otherwise would have been lost as a result of the Company ceasing
to be a Canadian resident for Canadian tax purposes.
Refinery Operations
The Company's refinery operations are subject to laws and regulations
relating to environmental quality and pollution control. Among these
requirements are regulations recently promulgated by the United States
Environmental Protection Agency under the authority of Title III of the Clean
Air Act Amendments of 1990 (the "Act") which will require the Company to expend
approximately $1 million by the statutory compliance deadline of August 1, 1998
to improve the refinery's control of emissions of certain petroleum materials
designated as hazardous by the Act. Subsequent rule making authorized by this
or other titles of the Act may necessitate additional expenditures in future
years. Because other refineries will be required to make similar expenditures,
the Company does not expect such expenditures to materially adversely impact its
competitive position.
Frontier is party to agreements with state and federal agencies requiring the
investigation and possible eventual remediation of certain areas of Frontier's
property which may have been impacted by past operational activities. Over the
past ten years, the Company has addressed tasks required under a consent decree
("Consent Decree") entered by the Wyoming State District Court on November 28,
1984 and involving the State of Wyoming, Department of Environmental Quality and
the predecessor owners of the refinery. This action primarily addressed the
threat of groundwater and surface water contamination at the refinery. As a
result of these investigative efforts, substantial capital expenditures and
remediation of conditions found to exist have already taken place or are in
progress. Additionally, Frontier entered into an administrative order on
consent ("Federal Order") with the Environmental Protection Agency on September
24, 1990 pursuant to the Resource Conservation and Recovery Act. The Federal
Order requires the technical investigation of the refinery to determine if
certain areas have been adversely impacted by past operational activities. Based
upon the results of the investigation, additional remedial action could be
required by a subsequent administrative order or permit.
In the wake of new state legislation, the Company and the Wyoming Department
of Environmental Quality have recently entered into an administrative consent
order ("State Order") that generally parallels the Federal Order and replaces
the Consent Decree. (In March 1995, the Consent Decree was dismissed and the
State Order issued). The State Order eliminates certain equivocal Consent
Decree requirements, unified state and federal regulatory expectations regarding
site investigation and remediation and, consequently, helps to streamline
certain of the Company's current environmental obligations. The Environmental
Protection Agency has proposed withdrawal of the Federal Order in recognition of
the State Order and of Wyoming's assumption of federal corrective action powers.
The Company has been and will be responsible for costs related to compliance
with or remediations resulting from environmental regulations. There are
currently no identified environmental remediation projects for which the costs
can be reasonably estimated. However, the continuation of the present
investigative process, other more extensive investigations over time or changes
in regulatory requirements could result in future liabilities.
Seasonality
Due to seasonal increases in tourist related volume and road construction
work, a higher demand exists in the Rocky Mountain region for gasoline and
asphalt products during the summer months than during the winter months. Diesel
demand is relatively constant throughout the year because two major east-west
truck routes, and at least two railroads, extend into or through Frontier's
principal marketing area. However, reduced road construction and agricultural
work during the winter months does somewhat reduce demand for diesel. The
refinery normally schedules its maintenance turnaround work during the spring or
fall of each year. During the fourth quarter of 1997, Frontier has scheduled a
significant turnaround on its crude unit and reformer unit.
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Employees
At December 31, 1996, the Company had 341 full-time employees, a decrease of
39 from a year earlier. The Company's 56 full-time employees in Canadian oil
and gas operations include 4 geologists and 2 land men in exploration and
development, and 4 petroleum engineers in drilling and production. The Company
employs 275 full-time employees in the refining operations, 36 at the Denver
office and 239 at the refinery. The refinery employees include 71
administrative and technical personnel and 168 union members. The union members
are represented by seven bargaining units, the largest being the Oil, Chemical
and Atomic Workers International Union ("OCAW"). Six AFL-CIO affiliated unions
represent Frontier's craft workers. On May 8, 1996 approximately 150 union
employees commenced a strike which settled July 29, 1996. The current three
year OCAW contract expires in July 1999, while the six year AFL-CIO affiliated
union's six year contract expires in June 2002. The Company considers relations
with all of its employees to be good.
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ITEM 2. PROPERTIES
As used herein and elsewhere in this Form 10-K, bbl means one barrel, bpd
means one barrel per day, bopd means one barrel of oil per day, mbbls means one
thousand barrels, mmbbls means one million barrels, mmbblse means one million
barrels equivalent, mcf means one thousand cubic feet, mmcf means one million
cubic feet, bcf means one billion cubic feet, and bcfe means one billion cubic
feet equivalent. Equivalent gas is based on British Thermal Units at a ratio of
six mcf of gas to one bbl of oil.
Refining Operations
Years Ended December 31, 1996 1995 1994
---------- ---------- ----------
Charges (bpd)
Sweet crude 4,322 8,098 6,165
Sour crude 31,677 27,174 27,025
Other feed and blend stocks 5,192 5,072 4,105
---------- ---------- ----------
Total 41,191 40,344 37,295
Manufactured product yields (bpd)
Gasoline 16,825 17,263 16,106
Distillates 13,712 13,744 13,094
Asphalt and other 9,215 7,951 6,575
---------- ---------- ----------
Total 39,752 38,958 35,775
Total product sales (bpd)
Gasoline 20,311 20,767 19,437
Distillates 12,561 13,265 12,628
Asphalt and other 7,306 6,781 6,724
---------- ---------- ----------
Total 40,178 40,813 38,789
Operating margin information (per sales bbl)
Average sales price $ 25.98 $ 22.14 $ 22.06
Material costs (under FIFO inventory accounting) 21.50 18.11 16.18
---------- ---------- ----------
Product spread 4.48 4.03 5.88
Operating expenses excluding depreciation 3.15 3.19 3.45
Depreciation .59 .55 .53
---------- ---------- ----------
Operating margin $ .74 $ .29 $ 1.90
Manufactured product margin
before depreciation (per bbl) $ 1.33 $ .84 $ 2.46
Purchased product margin
(per purchased product bbl) $ 2.03 $ .98 $ 1.35
Sweet/sour spread (per bbl) $ 2.56 $ 2.94 $ 3.61
Average sales price (per sales bbl)
Gasoline $ 28.78 $ 24.68 $ 24.57
Distillates 28.89 23.48 23.48
Asphalts and other 13.21 11.73 12.18
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Oil and Gas Operations
Wainoco sold all of its United States oil and gas properties reflected in the
following oil and gas information prior to December 31, 1995. See "Business -
Overview" for a discussion of the sale of United States properties.
Production
The following table summarizes the Company's net oil and gas production,
average daily production, average sales prices and average production "lifting"
cost per dollar of oil and gas sales for the periods indicated. Average daily
production is computed by dividing net production by the number of days per
year. Average sales prices are presented in United States dollars before
deduction of production taxes. Production costs are expressed in United States
dollars including lifting costs and production taxes. Average production cost
is computed by dividing production costs by oil and gas sales.
Years Ended December 31, 1996 1995 1994
---------- ---------- ----------
Net Gas Produced (mmcf)
Canada 12,518 15,359 15,325
United States - 593 2,993
---------- ---------- ----------
Total 12,518 15,952 18,318
Average Daily Gas Production (mmcf)
Canada 34 42 42
United States - 2 8
---------- ---------- ----------
Total 34 44 50
Average Gas Sales Price (per mcf)
Canada $ 1.03 $ .90 $ 1.31
United States - 1.62 2.08
Weighted Average 1.03 .93 1.43
Net Oil Produced (bbls)
Canada 329,000 284,000 224,000
United States - 409,000 696,000
---------- ---------- ----------
Total 329,000 693,000 920,000
Average Daily Oil Production (bbls)
Canada 899 778 614
United States - 1,121 1,907
---------- ---------- ----------
Total 899 1,899 2,521
Average Oil Sales Price (per bbl)
Canada $ 17.83 $ 14.46 $ 12.80
United States - 15.94 14.99
Weighted Average 17.83 15.33 14.45
Average Production Cost
(per dollar of oil and gas sales)
Canada $ .27 $ .35 $ .25
United States - .52 .43
Weighted Average .27 .40 .33
Average Production Cost
(per BTU equivalent mcf of production)
Canada $ .34 $ .37 $ .34
United States - 1.29 1.01
Weighted Average .34 .51 .54
- ------------
Page 10
Oil and gas drilling activities
The following table shows the number of completed wells in which the Company
has participated, the net interest to the Company in those wells and the results
thereof for the periods indicated (excluding those wells drilled under farm out
arrangements). As of December 31, 1996, the Company did not have any wells in
progress.
Exploratory Development
---------------------------------- ----------------------------------
Oil Gas Dry Total Oil Gas Dry Total
------- ------- ------- ------- ------- ------- ------- -------
Gross Wells
1996 - Canada 2 2 10 14 1 - - 1
1995 - Canada 8 2 6 16 2 - 1 3
1994 - Canada 3 12 10 25 - 12 3 15
United States 3 1 3 7 - 6 - 6
------- ------- ------- ------- ------- ------- ------- -------
6 13 13 32 - 18 3 21
Net Wells
1996 - Canada 1.10 1.10 5.42 7.62 0.60 - - 0.60
1995 - Canada 4.36 1.20 4.06 9.62 1.20 - 0.06 1.26
1994 - Canada 0.64 5.85 4.08 10.57 - 2.22 0.42 2.64
United States 1.50 0.25 0.95 2.70 - 0.12 - 0.12
------- ------- ------- ------- ------- ------- ------- -------
2.14 6.10 5.03 13.27 - 2.34 0.42 2.76
Principal oil and gas properties
The following presentation is a summary description of the Company's most
significant oil and gas properties. During 1996, the Company's production was
not curtailed other than for mechanical problems relating to pipeline and
compressor repairs and maintenance, with the exception of 317 MMCF which was
voluntarily held from the market by the Company due to extremely low natural gas
prices in British Columbia.
In the Monias area (British Columbia), the Company has an average working
interest of 41.9%. Two pipelines collect gas from the area, allowing the
Company flexibility in seeking gas purchasers. In 1996, Wainoco sold 85% of
its gas sales under long-term contracts to CanWest Gas Supply Inc. (CanWest),
Northwest Pacific Energy Marketing Inc. and B.C. Gas Inc. and 15% to Canadian
industrial gas users or exported to the United States under short-term
contracts.
In the Maple Glen-Leo area (Alberta), the Company has an average working
interest of 46.6%. During 1996, 69% of gas sales were made under long-term
contracts with Pan-Alberta Gas Ltd. (Pan-Alta) and Western Gas Marketing
Limited (WGML), while 31% was sold into the Alberta industrial gas market or
exported into the U.S. under short-term contracts.
In the Muskrat area (British Columbia), the Company has an average working
interest of 58.5% in the area. Oil production is sold to Northridge Petroleum
Marketing Inc., and all of the natural gas is sold to Canadian industrial gas
users or to export markets in the United States under short-term contracts.
In the Wardlow area (Alberta), the Company has an average working interest
of 85.3% and 7 additional undeveloped well locations on proved acreage.
Wainoco holds overriding royalty interests in 19,840 gross proved acres.
During 1996, 100% of production was sold under long-term contracts to Pan-Alta
and WGML.
- ------------
Page 11
In the Septimus area (British Columbia), the Company has an average working
interest of 58.8%. In 1996, Wainoco sold 38% of production under long-term
contracts to BC Gas Inc., and 62% of production was sold to Canadian industrial
gas users or to export markets in the United States under short-term contracts.
In the North Cache field (British Columbia), the Company has an average
working interest of 69.5%. During 1996, 50% of production was sold under
long-term contracts to CanWest and 50% was sold to Canadian industrial gas
users or to export markets in the United States under short-term contracts.
The following table summarizes Canadian principal property data for the year
and as of December 31, 1996.
Average Daily
Production Proved Reserves
Gross Acreage ---------------- ---------------- Discounted
Gross ----------------------- Gas Oil Gas Oil Net Cash
Wells Productive Undeveloped (mcf) (bbls) (mmcf) (mbbls) Flows
----- ---------- ----------- ------- ------- ------- ------- ------------
(in thousands)
Monias area, British Columbia 38 21,037 14,678 9,167 30 25,471 85 $ 28,663
Maple Glen-Leo area, Alberta 59 45,128 5,760 4,765 33 9,405 70 13,470
Muskrat area, British Columbia 14 3,869 9,092 447 348 4,042 741 11,074
Wardlow area, Alberta 116 18,240 2,080 3,076 - 7,917 - 10,411
Septimus area, British Columbia 4 1,947 13,573 2,232 13 8,220 44 7,945
North Cache field, British Columbia 5 2,760 2,810 1,849 28 5,740 79 6,648
Productive wells
The following table shows the Company's gross and net interests in Canadian
productive oil and gas wells at December 31, 1996.
Gross Net
--------- ---------
Oil 90 20.31
Gas 382 187.93
--------- ---------
Total 472 208.24
========= =========
One or more completions in the same bore hole are counted as one well. The data
in the table includes 41 gross (34.0 net) gas wells and 1 gross (0.6 net) oil
wells with multiple completions.
- ------------
Page 12
Acreage
The table below summarizes the Company's interest in Canadian productive and
undeveloped acreage as of December 31, 1996.
Productive Undeveloped
-------------------- --------------------
Gross Net Gross Net
--------- --------- --------- ---------
Alberta 258,911 60,553 168,134 65,751
British Columbia 71,648 26,192 103,780 54,574
Northwest Territories and Beaufort Sea - - 12,775 262
--------- --------- --------- ---------
330,559 86,745 284,689 120,587
========= ========= ========= =========
Reserves
The information which presents the estimated net quantities of the Company's
proved oil and gas reserves and the standardized measure of discounted future
net cash flows attributable to such reserves under the heading "Supplemental
Financial Information" in the 1996 Annual Report to Shareholders is incorporated
herein by reference.
Other Properties
The Company leases approximately 3,300 square feet of office space in
Houston for its corporate headquarters under a three and one half year lease
expiring in October 1999. Additionally, the Company continues to lease
approximately 27,000 square feet of office space in Houston previously utilized
for corporate headquarters and the U.S. oil and gas exploration and production
staff. The Company is continuing its efforts to market or sublease such space
which continues under lease until September 1998. In Canada, the Company
leases approximately 17,000 square feet in Calgary for its Canadian oil and gas
exploration and production office under a lease expiring in August 2000.
Frontier leases approximately 16,000 square feet in Englewood, Colorado for its
refining operations headquarters under a seven-year lease expiring in July
2002.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings which in the opinion of management would have
a material adverse impact on the Company. See Item 1. Business - Government
Regulations regarding certain ongoing proceedings regarding environmental
matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
- ------------
Page 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information in the 1996 Annual Report to Shareholders under the heading
"Common Stock" is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information in the 1996 Annual Report to Shareholders under the heading
"Five Year Financial Data" is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information in the 1996 Annual Report to Shareholders under the heading
"Management's Discussion and Analysis" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and the data contained in the 1996 Annual Report to
Shareholders are incorporated herein by reference. See index to financial
statements and supplemental data appearing under Item 14(a)1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information called for by Part III of this Form is incorporated by
reference from the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A within 120 days after the close of its
last fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements and Supplemental Data Page*
- -----------------------------------------------------------------
Consolidated Statements of Operations 17
Consolidated Balance Sheets 18
Consolidated Statements of Cash Flows 19
Consolidated Statements of Shareholders' Equity 20
Notes to Financial Statements 21
Report of Independent Public Accountants 28
Oil and Gas Producing Activities 29
Selected Quarterly Financial Data 15
*Reference to pages in the 1996 Annual Report to Shareholders (as published),
which portions thereof are incorporated herein by reference.
- -----------------------------------------------------------------
- ------------
Page 14
(a)2. Financial Statements Schedules
Report of Independent Public Accountants
Schedule I - Condensed Financial Information of Registrant
Other Schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in the
financial statements or notes thereto.
(a)3. List of Exhibits
* 3.1 - Articles of Domestication of the Company, as amended (filed as
Exhibit 2.3 to Registration Statement No. 2-62518 and Exhibit 2.2 to
Registration Statement No. 2-69149).
* 3.2 - Fourth restated By-Laws of the Company as amended through February
20, 1992 (filed as Exhibit 3.2 to Form 10-K dated December 31,
1992).
* 4.1 - Indenture dated as of October 1, 1978, between the Company and First
City National Bank of Houston, as Trustee relating to the Company's
10 3/4% Subordinated Debentures due 1998 (filed as Exhibit 2.5 to
Registration Statement No. 2-59649).
* 4.2 - Agreement of Resignation, Appointment and Acceptance by and among
the Company, First City National Bank of Houston (Resigning Trustee)
and Texas Commerce Bank National Association, Houston, (Successor
Trustee) relating to the Company's 10 3/4% Subordinated Debentures
due 1998 (filed as Exhibit 4.2 to Form 10-K dated December 31,
1985).
* 4.3 - First Supplemental Indenture dated as of January 20, 1987 between
the Company and Texas Commerce Bank National Association,
supplementing and amending the Indenture dated as of October 1,
1978, relating to the Company's 10 3/4% Subordinated Debentures due
1998 (filed as Exhibit 4.3 to Form 10-K dated December 31, 1986).
* 4.6 - Indenture dated as of June 1, 1989 between the Company and Texas
Commerce Trust Company of New York as Trustee relating to the
Company's 7 3/4% Convertible Subordinated Debentures due 2014 (filed
as Exhibit 4.6 to Form 10-K dated December 31, 1989).
* 4.7 - Indenture dated as of August 1, 1992 between the Company and Bank
One, N.A., as Trustee relating to the Company's 12% Senior Notes due
2002 (filed as Exhibit 4.7 to Form 10-K dated December 31, 1992).
* 10.1 - Amended and Restated Credit Agreement dated January 30, 1996 with
J.P. Morgan Bank Canada and Paribas Bank of Canada (filed as Exhibit
10.1 to Form 10-K dated December 31, 1995).
* 10.2 - First Amending Agreement dated September 30, 1996 to the Amended and
Restated Credit Agreement dated January 30, 1996 with certain banks
and J.P. Morgan Canada, as Agent (filed as Exhibit 10.01 to Form
10-Q dated September 30, 1996).
* 10.3 - Revolving Credit and Letter of Credit Agreement dated August 10,
1992 among Frontier Oil and Refining Company, certain banks and
Union Bank (filed as Exhibit 10.8 to Form 10-K dated December 31,
1992).
* 10.4 - First Amendment dated October 8, 1992 to Loan Agreement among
Frontier Oil and Refining Company, certain banks and Union Bank
(filed as Exhibit 10.9 to Form 10-K dated December 31, 1992).
* 10.5 - Waiver and Amendment dated March 17, 1993 to Loan Agreement dated
August 10, 1992 with certain banks and Union Bank (filed as Exhibit
10.19 to Form 10-K dated December 31, 1993).
* 10.6 - Second Amendment dated April 30, 1993 to Loan Agreement dated August
10, 1992 with certain banks and Union Bank (filed as Exhibit 10.20
to Form 10-K dated December 31, 1993).
* 10.7 - Third Amendment dated December 31, 1993 to Loan Agreement dated
August 10, 1992 with certain banks and Union Bank (filed as Exhibit
10.23 to Form 10-K dated December 31, 1993).
* 10.8 - Fourth Amendment dated July 6, 1994 to Loan Agreement dated August
10, 1992 with certain banks and Union Bank (filed as Exhibit 10.03
to Form 10-Q dated June 30, 1994).
* 10.9 - Fifth Amendment dated July 1, 1995 to Loan Agreement dated August
10, 1992 with certain banks and Union Bank (filed as Exhibit 10.04
to Form 10-Q dated June 30, 1995).
10.10 - Sixth Amendment dated July 1, 1996 to Loan Agreement dated August
10, 1992 with certain banks and Union Bank.
*+ 10.11 - The 1968 Incentive Stock Option Plan as amended and restated (filed
as Exhibit 10.1 to Form 10-K dated December 31, 1987).
*+ 10.12 - The 1977 Stock Option Plan as amended and restated (filed as Exhibit
10.2 to Form 10-K dated December 31, 1989).
*+ 10.13 - 1995 Stock Grant Plan for Non-employee Directors (filed as Exhibit
10.14 to Form 10-Q dated June 30, 1995).
*+ 10.14 - Wainoco Deferred Compensation Plan dated October 29, 1993 (filed as
Exhibit 10.19 to Form 10-K dated December 31, 1994).
- ------------
Page 15
*+ 10.15 - Wainoco Deferred Compensation Plan for Directors dated May 1, 1994
(filed as Exhibit 10.20 to Form 10-K dated December 31, 1994).
*+ 10.16 - Executive Employment Agreement dated April 3, 1995 between the
Company and James R. Gibbs (filed as Exhibit 10.09 to Form 10-Q
dated June 30, 1995).
*+ 10.17 - Executive Employment Agreement dated April 3, 1995 between the
Company and Julie H. Edwards (filed as Exhibit 10.10 to Form 10-Q
dated June 30, 1995).
*+ 10.18 - Executive Employment Agreement dated April 3, 1995 between the
Company and S. Clark Johnson (filed as Exhibit 10.11 to Form 10-Q
dated June 30, 1995).
*+ 10.19 - Executive Employment Agreement dated April 3, 1995 between the
Company and Robert D. Jones (filed as Exhibit 10.12 to Form 10-Q
dated June 30, 1995).
*+ 10.20 - Executive Employment Agreement dated April 3, 1995 between the
Company and George E. Aldrich (filed as Exhibit 10.13 to Form 10-Q
dated June 30, 1995).
*+ 10.21 - Executive Employment Agreement dated April 1, 1996 between the
Company and Joel M. Mann (filed as Exhibit 10.01 to Form 10-Q dated
June 30, 1996).
13.1 - Portions of the Company's 1996 Annual Report covering pages 10
through 15 and 17 through 32.
21.1 - Subsidiaries of the Registrant.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
* Asterisk indicates exhibits incorporated by reference as shown.
+ Plus indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the fourth
quarter of 1996.
(c) Exhibits
The Company's 1996 Annual Report is available upon request. Shareholders of
the Company may obtain a copy of any other exhibits to this Form 10-K at a
charge of $.25 per page. Requests should be directed to:
Larry Bell
Corporate Communications
Wainoco Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024-3411
- ------------
Page 16
(d) Schedules
Report of Independent Public Accountants on Financial Statement Schedules:
To Wainoco Oil Corporation:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Wainoco Oil Corporation's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 12, 1997. Our audits were made for the purpose
of forming an opinion on those statements taken as a whole. The schedule
listed in the index above is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 12, 1997
- ------------
Page 17
Wainoco Oil Corporation
Condensed Financial Information of Registrant
Balance Sheets
As of December 31, Schedule I
(in thousands)
1996 1995
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,528 $ 3,275
Receivables 3,827 3,457
Other current assets 212 132
---------- ----------
Total current assets 6,567 6,864
---------- ----------
Property, Plant and Equipment, at cost -
Oil and gas properties, on a full-cost basis 170,879 164,711
Furniture, fixtures and other 1,354 879
---------- ----------
172,233 165,590
Less - Accumulated depreciation,
depletion and amortization (102,800) (94,956)
---------- ----------
69,433 70,634
Investment in Subsidiaries 137,193 142,442
Other Assets 4,791 4,715
---------- ----------
$ 217,984 $ 224,655
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,914 $ 4,214
Other accrued liabilities 5,792 5,428
Current maturities of long-term debt 2,500 -
---------- ----------
Total current liabilities 11,206 9,642
---------- ----------
Deferred Income Taxes 1,718 1,718
Deferred Revenues and Other 1,077 863
Payable to Affiliated Companies 32,786 34,591
Long-Term Debt 145,928 145,377
Shareholders' Equity 25,269 32,464
---------- ----------
$ 217,984 $ 224,655
========== ==========
The "Notes to Condensed Financial Information of Registrant" and the "Notes to
Financial Statements of Wainoco Oil Corporation and Subsidiaries" are an
integral part of these financial statements.
- ------------
Page 18
Wainoco Oil Corporation
Condensed Financial Information of Registrant
Statements of Operations
For the three years ended December 31, Schedule I
(in thousands)
1996 1995 1994
---------- ---------- ----------
Revenues:
Oil and gas sales $ 18,738 $ 17,964 $ 22,901
Equity in earnings of subsidiaries 7,653 (1,149) 1,122
Other income 854 3,011 1,232
---------- ---------- ----------
27,245 19,826 25,255
---------- ---------- ----------
Costs and Expenses:
Oil and gas operating costs 4,986 6,287 5,672
Selling and general expenses 4,453 4,958 4,790
Depreciation, depletion and amortization 8,200 9,641 10,407
---------- ---------- ----------
17,639 20,886 20,869
---------- ---------- ----------
Operating Income (Loss) 9,606 (1,060) 4,386
Interest Expense, net 16,311 17,932 17,828
---------- ---------- ----------
Loss Before Income Taxes (6,705) (18,992) (13,442)
Provision (Benefit) for Income Taxes 187 133 (835)
---------- ---------- ----------
Net Income (Loss) $ (6,892) $ (19,125) $ (12,607)
========== ========== ==========
The "Notes to Condensed Financial Information of Registrant" and the "Notes to
Financial Statements of Wainoco Oil Corporation and Subsidiaries" are an
integral part of these financial statements.
- ------------
Page 19
Wainoco Oil Corporation
Condensed Financial Information of Registrant
Statements of Cash Flow
For the three years ended December 31, Schedule I
(in thousands)
1996 1995 1994
---------- ---------- ----------
Operating Activities
Net income (loss) $ (6,892) $ (19,125) $ (12,607)
Equity in earnings of subsidiaries (7,653) 1,149 (1,122)
Depreciation, depletion and amortization 8,200 9,641 10,407
Other (931) (246) (375)
---------- ---------- ----------
Net cash used by operating activities (7,276) (8,581) (3,697)
---------- ---------- ----------
Investing Activities
Additions to property, plant and equipment (8,989) (11,345) (10,817)
Proceeds from sale of property 990 2,692 928
Acquisition costs and other 429 486 (1,233)
---------- ---------- ----------
Net cash used by investing activities (7,570) (8,167) (11,122)
---------- ---------- ----------
Financing Activities
Long-term borrowings -
Bank debt 9,143 30,000 10,664
12% Senior Notes 3,000 - -
Repayments -
Bank debt (9,143) (30,000) (10,664)
12% Senior Notes - (8,000) -
Debentures - (2,500) (2,500)
Common stock offering & commitments - - -
Change in intercompany balances, net (1,805) 14,000 (3,829)
Dividends paid to Parent 12,902 14,450 22,750
Other (11) 9 38
---------- ---------- ----------
Net cash provided by financing activities 14,086 17,959 16,459
Effect of exchange rate changes on cash 13 (38) (36)
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents (747) 1,173 1,604
Cash and cash equivalents - beginning of period 3,275 2,102 498
---------- ---------- ----------
Cash and cash equivalents - end of period $ 2,528 $ 3,275 $ 2,102
========== ========== ==========
The "Notes to Condensed Financial Information of Registrant" and the "Notes to
Financial Statements of Wainoco Oil Corporation and Subsidiaries" are an
integral part of these financial statements.
- ------------
Page 20
Wainoco Oil Corporation
Notes to Condensed Financial Information of Registrant
December 31, 1996 Schedule I
(1) General
The accompanying condensed financial statements of Wainoco Oil Corporation
(Registrant) should be read in conjunction with the consolidated financial
statements of the Registrant and its subsidiaries included in the Registrant's
1996 Annual Report to Shareholders. Certain reclassifications have been made
to 1995 amounts to conform with the current year presentation which resulted in
an increase in Shareholders' Equity and Investment in Subsidiaries of
approximately $5.9 million.
(2) Oil and gas properties
All of the Registrant's oil and gas properties are located in Canada.
Information relating to the Registrant's oil and gas operations is disclosed in
the "Notes to the Financial Statements of Wainoco Oil Corporation and
Subsidiaries."
(3) Long-term debt
The components (in thousands) of long-term debt are as follows:
1996 1995
----------- -----------
12% Senior Notes $ 95,000 $ 92,000
7 3/4% Convertible Subordinated Debentures 46,000 46,000
10 3/4% Subordinated Debentures 4,928 7,377
----------- -----------
$ 145,928 $ 145,377
=========== ===========
At December 31, 1996 $2.5 million (1995 - nil) of 10 3/4% Subordinated
Debentures are classified as Current Liabilities.
(4) Five-year maturities of long-term debt
The estimated five-year maturities of long-term debt are $2.5 million in
1997, $5.0 million in 1998, $2.3 million in 2000, and $2.3 million in 2001.
(5) Restructuring of operations
Wainoco's subsidiary, Wainoco Oil & Gas Company, ceased oil and gas
exploration activities in the United States in 1994 and sold all of its United
States oil and gas properties in 1994 and 1995. Information relating to the
restructuring and sale are disclosed in the "Notes to Financial Statements of
Wainoco Oil Corporation and Subsidiaries."
- ------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the date
indicated.
WAINOCO OIL CORPORATION
By: /s/ James R. Gibbs
-------------------------
James R. Gibbs
President
(chief executive officer)
Date: March 5, 1997
- ---------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Wainoco Oil
Corporation and in the capacities and on the date indicated.
/s/ James R. Gibbs /s/ Paul B. Loyd, Jr.
- ------------------------- -------------------------
James R. Gibbs Paul B. Loyd, Jr.
President and Director Director
(chief executive officer)
/s/ Julie H. Edwards /s/ James S. Palmer
- ------------------------- -------------------------
Julie H. Edwards James S. Palmer
Senior Vice President - Finance and Director
Chief Financial Officer
(principal financial officer)
/s/ Joel M. Mann /s/ Derek A. Price
- ------------------------- -------------------------
Joel M. Mann Derek A. Price
Vice President - Controller Director
(principal accounting officer)
/s/ Douglas Y. Bech /s/ Carl W. Schafer
- ------------------------- -------------------------
Douglas Y. Bech Carl W. Schafer
Director Director
Date: March 5, 1997