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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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
[ ] 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: 1-11156
NGC CORPORATION
(Exact name of registrant as specified in its charter)
AND EACH OF THE SUBSIDIARY GUARANTORS OF CERTAIN DEBT SECURITIES
Delaware 94-3248415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Louisiana, Suite 5800
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 507-6400
Securities registered pursuant to
Section 12(b) of the Act:
Name of each exchange
Title of each class: on which registered:
Common Stock, par value $.01 per share New York Stock Exchange
Series A Participating Preferred Stock ----
6.75% Debt Securities due 2005 ----
7.625% Senior Notes due 2026 ----
Securities registered pursuant to Section 12(g)
of the Act: None
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 the filing
requirements for the past 90 days.
Yes X No
---- ----
The aggregate value of Common Stock held by non-affiliates of the registrant was
approximately $352,960,508 on March 27, 1997 (based on $15.375 per share, the
last sale price of the Common Stock as reported on the New York Stock Exchange
Composite Tape on such date). 150,358,638 shares of the registrant's Common
Stock were outstanding as of March 27, 1997.
DOCUMENTS INCORPORATED BY REFERENCE. PORTIONS OF PARTS I, II AND IV IN THE
ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996. AS
TO PART III (ITEMS 10, 11, 12 AND 13), NOTICE AND PROXY STATEMENT FOR THE 1997
ANNUAL MEETING OF STOCKHOLDERS TO BE FILED NOT LATER THAN 120 DAYS AFTER
DECEMBER 31, 1996.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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NGC CORPORATION
FORM 10-K
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business........................................................................ 1
Item 1A Executive Officers.............................................................. 12
Item 2. Properties...................................................................... 14
Item 3. Legal Proceedings............................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders............................. 20
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters....... 20
Item 6. Selected Financial Data......................................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 22
Item 8. Financial Statements and Supplementary Data..................................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure...................................................................... 22
PART III
Item 10. Directors and Executive Officers of the Registrant............................. 22
Item 11. Executive Compensation......................................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and Management................. 22
Item 13. Certain Relationships and Related Transactions................................. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 23
Signatures................................................................................. 30
For definitions of certain terms used herein, see "Item 1.
BUSINESS --DEFINITIONS."
PART I
ITEM 1. BUSINESS
THE COMPANY
GENERAL
NGC Corporation ("NGC" or the "Company") is a leading North American marketer
of natural gas, natural gas liquids, crude oil and power and is engaged in
natural gas gathering, processing and transportation through ownership and
operation of natural gas processing plants, fractionators, storage facilities
and pipelines. Acting in the role of a large-scale aggregator, processor,
marketer and reliable supplier of multiple energy products and services, NGC has
evolved into a reliable energy commodity and service provider. Through joint
ventures in both Canada and the United Kingdom, the Company has expanded
geographically its vision of providing customers with multiple energy commodity
needs combined with cost-effective products and value added services. For the
year ended December 31, 1996, the Company reported revenues of $7.3 billion and
net income of $113.3 million.
The Company is a holding company that conducts principally all of its business
through its subsidiaries. From inception of operations in 1984 until 1990,
Natural Gas Clearinghouse ("Clearinghouse") limited its activities primarily to
natural gas marketing. Starting in 1990, Clearinghouse began expanding its core
business operations through acquisitions and strategic alliances with certain of
its shareholders. In 1994, Clearinghouse initiated gas gathering, processing and
marketing operations in Canada through Novagas Clearinghouse Ltd. ("NCL"), a
joint venture with NOVA Corporation ("NOVA"), and energy marketing operations in
the United Kingdom through Accord Energy Limited ("Accord"), a joint venture
originally with British Gas plc ("British Gas") but now with Centrica plc
("Centrica") following that company's demerger from what is now called BG plc
("BG"). NOVA and BG are both major NGC shareholders. Effective March 1, 1995,
Clearinghouse and Trident NGL Holding, Inc. ("Holding"), a fully integrated
natural gas liquids company, merged and the combined entity was renamed NGC
Corporation ("Trident Combination"). On August 31, 1996, NGC completed a
strategic combination with Chevron U.S.A. Inc. and certain Chevron affiliates
(collectively "Chevron"), whereby substantially all of Chevron's midstream
assets were merged with NGC ("Chevron Combination"). By virtue of the growth of
NGC's core businesses combined with the synergies derived from the
aforementioned transactions, NGC has established itself as an industry leader
providing quality, competitively priced energy products and services to
customers throughout North America and in the United Kingdom.
The principal executive office of the Company is located at 1000 Louisiana,
Suite 5800, Houston, Texas 77002, and the telephone number of that office is
(713) 507-6400. NGC and its affiliates maintain marketing and/or regional
offices in Boston, Massachusetts; Phoenix, Arizona; Englewood, Colorado;
Rosemont, Illinois; Tulsa, Oklahoma; Oklahoma City, Oklahoma; Louisville,
Kentucky; Atlanta, Georgia; Tampa, Florida; Kansas City, Kansas; Dallas, Texas;
San Francisco, California; Pleasenton, California; Pittsburgh, Pennsylvania;
Mexico City, Mexico; London, England and Calgary, Canada.
________________________________________________________________________________
DEFINITIONS
As used in this Form 10-K, the abbreviations listed below are defined as
follows:
BBL. 42 U.S. gallons, the basic unit for measuring crude oil and
natural gas condensate.
MBBLS/D. Volume of one thousand barrels per day.
MMCF/D. Volume of one million cubic feet per day.
BCF. Volume of one billion cubic feet.
BPD. Barrels per day.
NGL. Natural Gas Liquids.
SPOT. The Henry Hub cash price posting for natural gas per the inside FERC
publication.
NYMEX New York Mercantile Exchange.
BUSINESS
The Company reports operations under two business segments: (i) the natural
gas and power marketing segment and (ii) the natural gas liquids, crude oil and
gas transmission segment.
NATURAL GAS AND ELECTRIC POWER MARKETING
The Company's natural gas marketing activities consist of contracting to
purchase specific volumes of natural gas from suppliers at various points of
receipt to be supplied over a specific period of time; aggregating natural gas
supplies and arranging for the transportation of these gas supplies through
proprietary and third-party transmission systems; negotiating the sale of
specific volumes of natural gas over a specific period of time to local
distribution companies, utilities, power plants and other end-users; and
matching natural gas receipts and deliveries based on volumes required by
customers.
The Company is also a provider of power products and services in the United
States through its wholly owned subsidiary Electric Clearinghouse, Inc. ("ECI").
ECI provides its customers with a 24-hour-a-day, real-time resource for the sale
and purchase of power through access to wholesale markets throughout North
America. ECI helps customers remarket their fuel, optimize generation assets and
capacity utilization and maximize energy conversion and tolling opportunities.
In addition, ECI provides market aggregation and sales assistance and offers
risk-management services and strategies, which complement its marketing
activities.
NATURAL GAS PURCHASES. The Company purchases natural gas from a variety of
suppliers under contracts with varying terms and conditions intended to ensure a
stable supply of natural gas. When purchasing natural gas, the Company considers
price, location, liquids content and quantities available. In 1996, the Company
purchased natural gas in every major producing basin in the United States and
Canada from over 700 suppliers, ranging from major producers to small
independent companies. Pursuant to an ancillary agreement(s) entered into as
part of the Chevron Combination, NGC acquired the right to purchase and/or
market substantially all of the natural gas produced or controlled by Chevron in
the United States (except Alaska). The Chevron relationship provides the
Company with a significant stable supply of natural gas which, when combined
with gas supplies available from its network of other supply sources, allows it
to effectively manage gas supplies and reduces the risk of short-term supply
shortages during periods of peak demand.
TRANSPORTATION. The Company arranges for transportation of the natural gas it
markets from the supplier receipt point to the delivery point requested by the
purchaser by utilizing its proprietary management information system to schedule
and nominate pipeline transportation and monitor transportation availability.
The Company generally retains title to the natural gas from the receipt point to
the delivery point and obtains transportation on unaffiliated pipelines. The
Company believes that its understanding of the United States' pipeline network,
along with the scale and geographic reach of its gas marketing efforts, are
important to the Company's success as a gas marketer. These factors, as well as
its efficiency in utilizing the gas transportation network, allow the Company to
provide its suppliers with multiple outlets for their natural gas and, in times
of significant changes in demand or supply due to weather or other factors, to
route gas to areas of the United States where it is most needed. The Company
attempts to reduce transportation charges by taking advantage of its broad array
of transportation agreements and by negotiating competitive discounts. The
Company uses a variety of transportation arrangements to move its customers'
volumes, including short-term and long-term firm and interruptible agreements
with pipelines and brokered firm contracts with its customers.
NATURAL GAS SALES. The Company sells natural gas under sales agreements that
have varying terms and conditions intended to match seasonal and other changes
in demand. The Company's customer base consists primarily of gas and electric
utilities and industrial and commercial end-users. In 1996, sales were made to
over 1,050 customers located throughout the United States and parts of Canada.
For the year ended December 31, 1996, the Company's North American operations
sold an aggregate average of 7.4 Bcf per day of natural gas and during the
fourth quarter of 1996 sold an aggregate 9.4 Bcf of natural gas per day. As
part of the Chevron Combination's ancillary agreement(s), NGC acquired the right
to supply natural gas feedstocks to Chevron refineries and chemical plants in
the United States providing the Company with a significant stable purchaser of
monthly physical gas volumes.
2
NATURAL GAS STORAGE, MARKETING HUBS AND MANAGEMENT INFORMATION SYSTEMS.
Natural gas storage capacity plays an important role in the Company's ability to
act as a full-service natural gas marketer by allowing it to manage relatively
constant gas supply volumes with uneven demand levels. Through the use of its
storage capabilities, the Company offers peak delivery services to satisfy
winter heating and summer electric-generating demands. Storage inventories also
provide performance security or "backup" service to the Company's customers. The
Company at various times leases short-term and long-term firm and interruptible
storage across the country.
The Company, together with three major gas utilities, maintains three natural
gas market area hubs to allow customers to manage short-term prices and help
solve imbalance and transportation problems. These strategic market hubs,
located where regional interstate pipelines converge, are designed to bring
buyers and sellers together over a broad geographic area. Services offered by
the hubs include wheeling, loaning, parking and title transfer, which complement
existing natural gas supply, transportation and storage services, and contribute
to a more efficient, reliable, cost-effective marketplace. Wheeling refers to
the simultaneous transfer of natural gas from one pipeline to another, while
loaning occurs when one party allows another party to borrow natural gas.
Parking services allow a customer to store natural gas in a hub for future
redelivery, while title transfer services allow a customer to assign title to
natural gas that is in storage.
The Company has developed an administrative, accounting and management
information system for its natural gas marketing and transportation businesses
and a complementary risk management information system. The Company believes
these proprietary systems provide it with a competitive advantage in its natural
gas marketing business.
FOREIGN MARKETS. In 1994, the Company formed joint ventures with two of its
principal stockholders, NOVA and British Gas for the purpose of providing energy
marketing services in Canada, the United Kingdom and Western Europe. At December
31, 1996, the Company owned an approximate 50 percent interest in NCL and a 49
percent interest in Accord and jointly controled each of these ventures. In
1997, the Company, along with NOVA and Centrica, have announced their intent to
restructure the ownership and operations of both NCL and Accord (see "STRATEGIC
BUSINESS COMBINATIONS AND RECENT DEVELOPMENTS").
NCL, formed by the Company and NOVA, is a full-service gas gathering,
processing, storage and marketing company operating in Canada. By combining the
Company's marketing and risk management capabilities with NOVA's established
operations and technical expertise, NCL strategically positioned itself to
provide Canadian producers and consumers with comprehensive, value-added
services. NCL supplies natural gas and provides related services to customers in
the utility, industrial, commercial and other core marketing segments across
Canada. During 1996, NCL marketed an average of 3.1 Bcf per day of natural gas.
Accord was formed by the Company and British Gas to develop energy marketing
and trading opportunities in the United Kingdom and, ultimately, Western Europe.
Accord is an active participant in the U.K. wholesale natural gas and crude oil
markets and purchases products from a wide assortment of producers, including
BG. During 1996, Accord sold an average 0.6 Bcf per day of natural gas.
ELECTRIC POWER MARKETING. The Company formed ECI in February 1994 to pursue
electric power marketing opportunities created as the domestic electric power
industry deregulates. On January 1, 1995, ECI's trading center began real-time
operations, trading and scheduling power 24 hours a day, 365 days a year. ECI
functions as an electricity risk management market maker, providing products and
services similar to those that are currently used in the natural gas industry to
manage customers' price risks and offers customers an individually tailored
package of services to manage fuel supply and power generation assets. The
Company sold 14.9 million megawatts of electricity during 1996 as compared with
3.5 million megawatts during 1995.
As power becomes deregulated and thus commoditized, its value relative to
natural gas will continue to become more closely intertwined. Complexity in the
marketplace will be ever-increasing and management of customer power
requirements will require a multi-commodity focus. NGC believes that
participation in the physical asset side of the power industry, achieved through
ownership of strategically located generating assets, will enable the Company to
expand services and to integrate the electric power marketing business more
fully into the Energy Store. As a result and as discussed further in STRATEGIC
BUSINESS COMBINATIONS AND RECENT
3
DEVELOPMENTS, the Company has announced its intent to acquire Destec Energy ,
Inc. a leading independent power producer.
NATURAL GAS LIQUIDS, CRUDE OIL AND GAS TRANSMISSION
The Company's natural gas liquids, crude oil and gas transmission segment
includes natural gas gathering and processing, fractionation, NGL marketing,
natural gas transmission and crude oil marketing and transportation operations.
The Company's natural gas liquids business complements its natural gas marketing
and power businesses by providing the Company's customers with a full range of
NGL products and related services.
NATURAL GAS GATHERING AND PROCESSING. The natural gas processing industry is
a major segment of the oil and gas industry, providing the necessary service of
refining raw natural gas into marketable pipeline quality natural gas and NGLs.
The Company currently owns interests in 57 gas processing plants, including 42
plants which it operates, and operates approximately 17,000 miles of natural gas
gathering pipeline systems. These assets are primarily located in the key
producing areas of Texas, Louisiana, Oklahoma and Kansas.
During the year ended December 31, 1996, the Company processed an average of
more than 2.5 Bcf per day of natural gas and produced an average of 94.3
thousand barrels per day of NGLs. As part of the Chevron Combination's ancillary
agreement(s), NGC acquired the right to process substantially all of Chevron's
processable natural gas in those geographic areas where it is economically
feasible for NGC to provide such service. Principally as a result of this
arrangement, the Company increased its volume activity during the fourth quarter
of 1996 to an average of more than 3.2 Bcf per day of natural gas processed
and an average of 140.9 thousand barrels per day of NGLs produced.
FRACTIONATION. The NGLs removed from the natural gas stream at gas processing
plants are generally in the form of a commingled stream of liquid hydrocarbons
(raw product). The commingled NGLs are separated at fractionation facilities
into the component products ethane, propane, normal butane, isobutane and
natural gasoline. At December 31, 1996, the Company had ownership interests in
three fractionation facilities, including the industry's largest, and received
169.1 thousand barrels per day of product for fractionation during the year. On
January 1, 1997, the Company divested itself of the Mont Belvieu I fractionator
in accordance with an agreement reached with the Federal Trade Commission
("FTC") related to the Chevron Combination. The Company realized a small after-
tax gain in 1997 relating to the sale. The Company is planning to construct a
fractionation facility in Louisiana that will have a production capacity of
55,000 barrels per day. The facility is expected to be operational in the fall
of 1998.
NGL MARKETING. The Company maintains a diversified NGL marketing program and
is the nation's leading service provider to propane retail marketers throughout
North America. The Company markets its own NGL production and also purchases
NGLs from third parties for resale. Through the Company's strategic combination
of pipeline connections, terminals, rail cars, trucks, barges and storage
facilities, the Company moves NGL products from producing regions in the Gulf
Coast and Midwest to most major domestic and international markets. The Company
operates large-scale marine terminals in Texas, Florida and Louisiana, which can
be used for both exporting and importing NGLs. These terminals offer importers a
variety of methods for transporting products to the marketplace. In addition,
Warren has access to over 60 million barrels of underground NGL storage
providing customers with the ability to store, trade, buy and sell specification
products. In 1996, the Company began utilizing Warren's storage, terminalling
and shipping assets and services to conduct international deepwater LPG
business. Management intends to expand these operations in 1997 through the
Company's wholly owned subsidiary NGC Global Energy, Inc. During 1996, the
Company sold approximately 245 thousand barrels per day of NGLs to over 1,000
customers and, during the fourth quarter of 1996, sold an approximate 431.5
thousand barrels per day of NGLs reflecting the material impact the Chevron
Combination had on this business.
TRANSMISSION OPERATIONS. The Company's transportation network is connected to
all of the nation's major gas liquids and natural gas pipeline systems. NGC
owns a 50 percent interest in a partnership which operates the West Texas
Pipeline, a pipeline capable of delivering 160,000 barrels per day of liquids to
fractionation facilities at Mont Belvieu, Texas. In addition, Warren's 12-inch
bi-directional Lake Charles, Louisiana, pipeline transports 50,000 barrels per
day of liquids and finished products between Lake Charles and Mont Belvieu.
Warren's extensive Houston-area gathering system provides market access to
refiners and chemical plants on the Houston
4
Ship Channel. The Ozark Gas Transmission System ("Ozark"), acquired in mid-1995,
expanded the Company's natural gas transmission capabilities providing
throughput capacity of 170 million cubic feet of gas per day. Ozark gathers gas
from eastern Oklahoma and transports it to central Arkansas, where the system
interconnects with interstate pipelines that serve the Midwest and Northeast
markets. The Company also operates an intrastate natural gas pipeline system in
south-central Kansas, which serves markets in the Wichita area and throughout
the Midwest and Mid-Continent areas on interconnected intrastate and interstate
pipelines.
CRUDE OIL MARKETING. The Company provides a full range of crude oil marketing
services to producers, and serves the United States refining community as a
regionally diversified supplier of crude oil. Through its participation in major
trading centers in the Mid-Continent, Rocky Mountain and Gulf Coast areas, the
Company has established itself as a dependable source of competitively priced
crude oil. During 1996, the Company continued to utilize the 1,300-mile crude
oil gathering pipeline system acquired in 1995 to facilitate aggregation and
delivery of product to market, which further established NOTTI as a dependable
source of crude oil supply. Through acquisitions during 1996, the Company's
crude oil marketing business has positioned itself to expand operations in the
Gulf Coast area and in Canada. In May 1996, NGC Oil Trading and Transportation,
Inc. ("NOTTI") acquired the Grand Lakes Liquids System crude and condensate
operations in Cameron Parish, Louisiana, which included a 20-mile crude oil
gathering pipeline, a 100,000 barrel storage facility and truck-unloading and
barge loading capabilities. Also in 1996, NOTTI acquired Wilmar Energy
Marketing, a Calgary, Canada-based crude oil marketer and established NOTTI-
Canada. NOTTI-Canada's initial focus will be on expanding marketing and
gathering services within Canadian markets.
INTERNATIONAL OPPORTUNITIES
NGC's strategic investors, British Gas, NOVA and Chevron, provide excellent
international business opportunities. By combining NGC's multi-commodity energy
trading expertise with these business partners' international asset positions
and understanding of local governments, markets and customer needs, NGC Global,
Inc., a wholly owned subsidiary of NGC, will focus on bringing the Energy
Store's multi-commodity concept to new markets. As countries privatize or
deregulate their energy industries, NGC will work closely with its business
partners to explore opportunities that optimize value in selected overseas
markets.
RISK MANAGEMENT ACTIVITIES
The natural gas and power marketing segment's operations, exclusive of risk-
management activities, is relatively insensitive to commodity price fluctuations
since most of the segment's purchases and sales contracts do not contain fixed-
price provisions. Operating margins associated with the natural gas liquids,
crude oil and gas transmission segment are sensitive to changes in NGL prices
principally as a result of the contractual terms under which products are sold
by this segment. However, this segment's operating margin is relatively
insensitive to changes in natural gas prices as a result of the mitigating
impact of fuel costs and residue gas sales. The Company attempts to manage its
exposure to commodity price fluctuations through its risk-management activities.
NGC utilizes certain types of fixed-price contracts in connection with its
natural gas, NGL and crude oil marketing lines of business. These contracts
include contracts which commit the Company to purchase or sell energy
commodities at fixed prices in the future (i.e., fixed-price forward purchase
and sales contracts), futures and options contracts traded on the NYMEX and
swaps and options traded in the over-the-counter financial markets. The
availability and use of these types of contracts allow NGC to manage and hedge
its fixed-price purchase and sales commitments, to provide fixed-price
commitments as a service to its customers and suppliers, to reduce its exposure
relative to the volatility of cash market prices and to protect its investment
in storage inventories. The Company may, at times, have a bias in the market,
within established limits, resulting from the management of its portfolio. In
addition, by utilizing exchange for physical transactions allowed by the NYMEX,
which enable entities to take delivery of, or sell, a physical quantity of
natural gas in exchange for a futures position, NGC is able to secure additional
sources of physical natural gas supply, or create additional markets for
existing supply, through the use of natural gas futures contracts. These fixed-
price activities are referred to herein as risk management activities.
Although the Company generally attempts to balance its fixed-price physical
and financial purchase and sales contracts in terms of contract volumes and the
timing of performance and delivery obligations, net open positions
5
often exist or are established due to the origination of new transactions and
the assessment of, and response to, changing market conditions. NGC will take
advantage of its bias in the market when it believes, based upon competitive
information gained from its energy marketing activities, that future price
movements will be consistent with its net open position. To the extent net open
positions exist, NGC is exposed to the risk that fluctuating market prices may
adversely impact its financial position or results of operations.
In addition to the risk associated with price movements, credit risk is also
inherent in the Company's risk management activities. Credit risk relates to the
risk of loss resulting from the nonperformance of contractual obligations by a
counterparty. NGC maintains credit policies with regard to its counterparties
which the Company believes significantly minimizes its overall credit risk.
NGC has established a risk management committee which oversees its risk
management activities. This committee meets regularly to establish the Company's
overall risk management strategy and to monitor and ensure compliance with risk
management limitations, policies and procedures.
STRATEGIC BUSINESS COMBINATIONS AND RECENT DEVELOPMENTS
STRATEGIC BUSINESS COMBINATIONS
CHEVRON COMBINATION. On August 31, 1996, NGC completed the Chevron
Combination with Chevron pursuant to which Chevron contributed substantially all
of its midstream assets (the "Contribution"), including substantially all of the
assets comprising Warren Petroleum Company and Chevron's Natural Gas Business
Unit and an undivided interest in those assets that constitute the West Texas
LPG Pipeline, into Midstream Combination Corp. ("Midstream"), a Delaware
corporation formed for purposes of the transaction. NGC which was formed
effective March 1, 1995, pursuant to the Trident Combination, was merged with
and into Midstream immediately following the Contribution and Midstream was
renamed NGC Corporation. In exchange for the Contribution, Chevron received
approximately 38.6 million shares of NGC common stock and approximately 7.8
million shares of NGC's Series A Participating Preferred Stock and NGC assumed
approximately $283 million of indebtedness. Immediately following closing of the
Chevron Combination, NGC paid approximately $128 million to Chevron and funded
such payment under the NGC Corporation Credit Agreement ("Credit Agreement").
In connection with the Chevron Combination, NGC and Chevron entered into
certain ancillary supply, sales and service agreements with respect to natural
gas, natural gas liquids and electricity. Pursuant to these ancillary
agreements, NGC has the right to, among other things, purchase and/or market
substantially all of the natural gas and natural gas liquids produced or
controlled by Chevron in the United States (except Alaska), to process
substantially all of Chevron's processable natural gas in those geographic areas
where it is economically feasible for NGC to provide such service, to supply
natural gas feedstocks to Chevron refineries and chemical plants in the United
States and to participate in existing and future opportunities to provide
electricity to Chevron's United States facilities as well as to purchase or
market excess electricity generated by those facilities.
TRIDENT COMBINATION. On March 14, 1995, NGC and Holding consummated the
Trident Combination. Pursuant to the terms of the Trident Combination, Holding,
the legally surviving corporation in the Combination, was renamed NGC
Corporation and (i) acquired through a tender offer (the "Tender Offer") 14.2
million shares of Holding common stock (representing approximately 50 percent of
the Holding common stock outstanding immediately prior to the consummation of
the Trident Combination) for $11.75 per share, net to the seller in cash; (ii)
acquired directly and indirectly, all of the outstanding general partnership
interests in Clearinghouse; (iii) the former owners of the partners of
Clearinghouse (the "Clearinghouse Owners") acquired 82 percent of the then
outstanding shares of NGC common stock (giving effect to the issuance, but not
allocation, of the "Contingent Shares" (as defined below)), and (iv) the
stockholders of Holding prior to consummation of the Combination retained shares
of common stock representing approximately 13 percent of the then outstanding
shares of NGC common stock (giving effect to the issuance, but not allocation,
of the Contingent Shares). The Contingent Shares totaled 5,461,538 shares of NGC
common stock and represented approximately 5 percent of the outstanding shares
of NGC common stock after giving effect to the issuance of such shares. Such
shares were allocated in March 1996 in a ratio of 17 percent to the former
stockholders of Holding and 83 percent to the Clearinghouse Owners.
6
RECENT DEVELOPMENTS
On February 18, 1997, NGC announced that it had signed a merger agreement to
acquire Destec Energy, Inc. ("Destec"), a leading independent power producer
("IPP"), in a deal valued at $1.27 billion, or $21.65 per share of Destec common
stock. Simultaneous with this merger, NGC will sell Destec's international
facilities and operations to The AES Corporation for $407 million, inclusive of
cash and monetizable assets. Closing of this transaction is expected to occur by
the end of the second quarter of this year. NGC intends to finance the
transaction with interim financing provided by commercial banks from its
existing bank-credit group and existing cash. The balance of the interim
financing is expected to be retired from a combination of sales of non-strategic
domestic Destec assets within six to 12 months of closing of the merger, long-
term debt and a common and/or preferred stock issuance. Destec currently
operates 20 power generation facilities in key energy markets across the United
States as well as five international projects.
On January 1, 1997, the Company divested itself of the Mont Belvieu I
fractionator in accordance with an agreement reached with the FTC related to the
Chevron Combination. The Company realized a small after-tax gain in 1997
relating to the sale.
In early 1997, British Gas completed a restructuring with Centrica being
demerged from British Gas with the latter being renamed BG. Centrica became the
Company's joint venture partner in Accord while BG now holds the approximate 26
percent stake in NGC's common stock formerly held by British Gas.
Effective March 2, 1997, Centrica and the Company signed an agreement in which
they stated their intent to restructure Accord by converting certain common
stock interests in Accord to participating preferred stock interests. After
closing, which is expected to occur in the second quarter of 1997, Centrica and
the Company will own 75 percent and 25 percent, respectively, of the
participating preferred stock of Accord. The participating preferred stock will
have (a) the right to receive cumulative dividends on a priority basis to other
corporate distributions by Accord, and (b) limited voting rights. In addition,
Centrica will have the option to purchase the Company's participating preferred
stock interest at any time after July 1, 2000, and the Company will have the
right to acquire Centrica's participating preferred interest during the period
from January 1, 2001, through March 1, 2001, at formula based prices as defined
in the agreement. As part of the reorganization, NGC UK Limited ("NGC UK") will
assume control of Accord's existing crude oil marketing business. The
restructuring is contingent upon certain U.K. regulatory approvals. NGC intends
to expand its multi-commodity, energy-marketing concept in the UK through NGC UK
which will market natural gas, natural gas liquids and crude oil as well as
provide international LPG trading and transportation.
In October 1996, the Company and NOVA jointly announced their intent to
restructure the companies' Canadian natural gas operations. Under the
agreement, NGC will assume full control of NCL's gas and gas liquids marketing
business. NGC and NOVA will pursue separate midstream asset businesses in
Canada, with NOVA assuming full ownership of NCL's existing gathering and
processing business. The restructuring may also result in amendments to or
termination of various agreements between NCL and the Company or NOVA, including
their respective affiliates. NOVA will also own 100 percent of Pan-Alberta,
which is currently a subsidiary of NCL. NGC will operate its Canadian
businesses under the name NGC Canada, Inc. The transaction is expected to close
by April 30, 1997.
COMPETITION
All phases of the businesses in which NGC is engaged are highly competitive.
In connection with both domestic and foreign operations, the Company encounters
strong competition from companies of all sizes, having varying levels of
financial and personnel resources.
NGC competes in its gas marketing business with other natural gas merchants,
producers and pipelines for sales based on its ability to aggregate
competitively priced supplies from a variety of sources and locations and to
efficiently utilize transportation through third-party pipelines. In past years,
the spot marketing business had a low cost barrier to entry; therefore, a number
of the Company's competitors were privately owned and relatively small in size
and may have been comparatively undercapitalized to meet the increasing
financial requirements of the natural gas industry. However, with respect to its
marketing operations, NGC believes that market customers will increasingly
scrutinize the financial condition of their suppliers to assure that contract
obligations will be
7
met; suppliers and transporters will demand more stringent credit terms to
secure the performance of natural gas merchants; the increased role of storage
and other risk management tools will add to the financial costs of doing
business; the increasing availability of pricing information to participants in
the natural gas industry will continue to exert downward pressure on per-unit
profit margins in the industry; suppliers will have to be multi-fuel marketers;
and large competitors, such as megamarketer alliances, will create competition
from entities having significant liquidity and other resources. As a result, NGC
believes its financial condition and its access to capital markets will play an
increasing role in distinguishing the Company from many of its competitors.
Operationally, NGC believes its ability to remain a low cost merchant and
effectively combine value-added services, competitively priced supplies and
price risk management will determine the level of success in its natural gas
marketing operations.
NGC's electric power business is similar to its gas marketing business in that
it provides natural gas contract services to electric utilities, markets and
supplies electricity and invests in power-related assets and joint ventures. As
a result, the competition issues incumbent upon the Company's gas marketing
operations similarly impact the Company's power marketing business. As with its
gas marketing operations, the Company believes it has the ability to establish
itself as a low cost and dependable merchant providing competitively priced
supplies and a variety of services which will differentiate NGC from the
competition.
The Company's natural gas liquids, NGL and crude oil marketing and gas
transmission businesses face significant competition from a variety of
competitors including major integrated oil companies, major pipeline companies
and their marketing affiliates and national and local gas gatherers, processors,
brokers, marketers and distributors of varying sizes and experience. The
principal areas of competition include obtaining gas supplies for gathering and
processing operations, obtaining supplies of raw product for fractionation, the
marketing of NGLs, crude oil, residue gas, helium, condensate and sulfur, and
the transportation of natural gas, NGLs and crude oil. Competition typically
arises as a result of the location and operating efficiency of facilities, the
reliability of services and price and delivery capabilities. The Company
believes it has the infrastructure, long-term marketing abilities, financial
resources and management experience to enable it to compete effectively.
REGULATION
GENERAL. The Company is subject to the laws, rules and regulations of the
countries in which it conducts its operations. Domestically, numerous
departments and agencies at federal, state and local levels have issued rules
and regulations affecting the energy industry, some of which carry substantial
penalties for non-compliance. Internationally, environmental and other
regulatory matters are evolving as detailed rules and procedures are established
and their application and interpretation defined. The regulatory burden on the
energy industry increases its cost of doing business and, consequently, affects
its profitability. Inasmuch as these rules and regulations are frequently
amended or reinterpreted, the Company is unable to predict the future cost or
impact of complying with such regulations. These rules and regulations affect
the industry as a whole; therefore, the Company does not believe that it is
affected in a significantly different manner from its competitors.
REGULATORY MATTERS. The transportation and sale for resale of natural gas is
subject to regulation by the Federal Energy Regulatory Commission ("FERC") under
the Natural Gas Act of 1938, as amended ("NGA") and, to a lesser extent, the
Natural Gas Policy Act of 1978, as amended ("NGPA"). Interstate transportation
and storage services by natural gas companies, including interstate pipeline
companies, and the rates charged for such services, are regulated by the FERC.
Certain of the Company's pipeline activities and facilities are involved in
interstate transportation of natural gas, crude oil and NGLs, and are subject to
these or other federal regulations.
Legislative and regulatory changes began in 1978 with the passage of the NGPA,
which initiated the process of price deregulation of gas sold at the wellhead.
Since 1978, various federal laws have been enacted which have resulted in the
termination on January 1, 1993 of all price and non-price controls for natural
gas sold in "first sales."
Commencing in 1985, the FERC promulgated a series of orders and regulations
adopting changes that significantly altered the business of transporting and
marketing natural gas by fostering competition. The thrust of these regulations
was to induce interstate pipeline companies to provide nondiscriminatory
transportation services to producers, distributors and other shippers. The
effect of the foregoing regulations has been the creation of a more open access
market for natural gas purchases and sales and the creation of a business
environment which
8
has fostered the evolution of various unregulated, privately negotiated natural
gas sales, purchase and transportation arrangements.
Order 636, issued in April 1992, as amended by Order 636-A (issued in August
1992) and Order 636-B (issued in November 1992), was a continuation of the
FERC's efforts to improve the competitive structure of the pipeline industry and
to maximize consumer benefits resulting from a competitive structure of the
pipeline industry and a competitive wellhead gas market. The FERC's goal, as
stated in Order 636, "is to recognize the current characteristics of the natural
gas industry -- and to create a regulatory framework that will accommodate the
meeting of as many gas sellers and gas buyers as possible."
In Order 636, the FERC required interstate pipelines that perform open access
transportation under blanket certificates to "unbundle" or separate their
traditional merchant sales services from their transportation and storage
services and to provide comparable transportation and storage services with
respect to all gas supplies whether purchased from the pipeline or from other
merchants such as marketers or producers. The pipelines must now separately
state the applicable rates for each unbundled service (i.e., for the gas
commodity, transportation and storage). The unbundling and separate pricing of
services has significantly affected the pipelines' merchant function and
required a major restructuring of the relationships between pipeline companies
and their customers.
Certain segments of the industry opposed aspects of Order 636, and many
parties sought judicial review of Order 636. Order 636 was substantially upheld
on appeal, with only a few issues being successfully challenged. While Supreme
Court review is certainly possible, it is not very likely that the Court will
hear an appeal from the D.C. Circuit. In addition, parties have sought judicial
review of most of the FERC orders approving individual pipeline restructuring
plans that were authorized pursuant to Order 636. While it appears that the
overall structure of Order 636 will remain intact, NGC cannot predict how
certain aspects of implementation by individual pipelines will fare.
On February 28, 1997, the FERC issued a Notice of Public Conference and
Opportunity to Comment relating to the natural gas industry. The FERC will take
public comment in both written and oral form on what its role should be in the
post Order 636 era. The FERC's Notice includes a broad array of subjects on
which it requests comment, portending a vibrant debate, but no particular
outcome.
GAS PROCESSING. The primary function of NGC's gas processing plants is the
extraction of NGLs and not natural gas transportation. The FERC has
traditionally maintained that a processing plant is not a facility for
transportation or sale for resale of natural gas in interstate commerce and
therefore is not subject to jurisdiction under the NGA. Even though the FERC has
made no specific declaration as to the jurisdictional status of the Company's
gas processing operations or facilities, NGC believes its gas processing plants
are primarily involved in removing NGLs and therefore exempt from FERC
jurisdiction. Nonetheless, certain facilities downstream of processing plants
are being considered for use in transporting gas between pipelines, which may
invoke FERC's jurisdiction. Such jurisdiction will apply to the downstream
facility as a pipeline, however, and not to the plants themselves.
GATHERING. The NGA exempts gas gathering facilities from the jurisdiction of
the FERC. Interstate transmission facilities, on the other hand, remain subject
to FERC jurisdiction. The FERC has historically distinguished between these two
types of facilities on a fact-specific basis. NGC believes its gathering
facilities and operations meet the current tests used by the FERC to determine a
nonjurisdictional gathering facility status. Some of the recent cases applying
these tests in a manner favorable to the determination of NGC's
nonjurisdictional status are still subject to rehearing and appeal. In addition,
the FERC's articulation and application of the tests used to distinguish between
jurisdictional pipelines and nonjurisdictional gathering facilities have varied
over time. While the Company believes current definitions create
nonjurisdictional status for NGC's gathering facilities, no assurance can be
given that such facilities will remain classified as gas gathering facilities
and the possibility exists that the rates, terms, and conditions of the services
rendered by those facilities, and the construction and operation of the
facilities will be subject to regulation by the FERC or by the various states in
the absence of FERC regulation.
PRORATION. The states of Texas and Oklahoma have adopted changes to oil and
gas production and proration regulations, as well as other regulatory changes,
that could affect volumes of gas available for purchase by NGC. To date, the
Company has not experienced any material reductions in available supplies due to
proration.
9
Nevertheless, these or future proration regulation revisions may materially
affect NGC's ability to purchase gas supplies.
MARKET HUBS. The market hubs for which Hub Services, Inc., a wholly owned
subsidiary of NGC, serves as hub administrator are combined gas storage,
transportation and interchange facilities. To the extent the market hubs provide
services in intrastate commerce, the rates, terms and conditions of service are
regulated by the applicable state public utility commissions. To the extent the
market hubs provide service in interstate commerce subject to the NGA or NGPA,
the FERC has overlapping regulatory authority with respect to rates, terms and
conditions of service.
STATE REGULATORY REFORMS. State versions of Order 636 are proceeding. To
date, most programs are limited in scope. As these programs mature, they may
impact NGC's traditional wholesale customers' ability to sell gas. These
customers could be replaced with other sellers of gas as a wholesale market for
NGC sales. In addition, some states are considering regulating retail
marketers. At this point, the regulation appears restricted to retail sellers
and is not price regulation, but instead oriented towards terms and conditions
of service. NGC presently makes only limited retail sales.
Other state regulatory reforms impacting the Company's processing and
gathering operations and other businesses are proceeding. While the ultimate
impact of such legislation on the Company's businesses cannot be predicted with
certainty, the Company does not believe that the outcome of these matters will
have a material adverse effect on the Company's operations or competitiveness.
ELECTRIC REGULATION. Federal law, specifically the Federal Power Act,
regulates the transmission of electric power in interstate commerce and sales
for resale of that power. Through ECI, NGC makes wholesale power sales to
utilities. The FERC has asserted jurisdiction over these sales, but allows ECI,
as well as others, to make sales at market-based rates.
In 1996, the FERC issued Order 888, which provides that utilities subject to
its jurisdiction must allow access to others to sell power at wholesale. ECI
utilizes this open-access transmission to make wholesale power sales. Order 888
was upheld by the FERC in March of 1997, and is now destined to be appealed in
the U.S. Courts of Appeal on numerous grounds. NGC cannot predict the outcome
of such appeals. Meanwhile, second generation implementation issues arising out
of Order 888 abound. These include issues relating to power pool structures and
transmission pricing. These too will likely find their way to the courts, and
their outcome cannot be predicted.
State regulation over the electric industry is also changing. Various state
regulatory authorities and legislatures are moving towards allowing retail
customers access to the transmission grid. Each state differs in its preferred
pace and scope of retail transmission access.
OTHER REGULATORY ISSUES. The Company's gas purchases and sales are generally
not regulated by the FERC; however, as a gas merchant, the Company depends on
the gas transportation and storage services offered by various interstate and
intrastate pipeline companies to enable the sale and delivery of its gas
supplies. Additionally, certain other pipeline activities and facilities of the
Company are involved in interstate and intrastate transportation and storage
services and are subject to various federal and state regulations which
generally regulate rates, terms and conditions of service.
ENVIRONMENTAL MATTERS
NGC's operations are subject to extensive federal, state and local statutes,
rules and regulations governing the discharge of materials into the environment
or otherwise relating to environmental protection. Compliance with these
statutes, rules and regulations requires capital and operating expenditures
including those related to monitoring and permitting at various operating
facilities and remediation obligations. The Company's environmental expenditures
have not been prohibitive in the past, but are anticipated to increase in the
future with the trend toward stricter standards, greater regulation, more
extensive permitting requirements and an increase in the number of assets
operated by the Company subject to environmental regulation.
The vast majority of federal environmental remediation provisions are
contained in the Superfund laws -- the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Superfund
10
Amendments and Reauthorization Act ("SARA") and in the corrective action
provisions of the Federal Resource Conservation and Recovery Act ("RCRA").
Typically, the Environmental Protection Agency ("EPA") acts pursuant to
Superfund legislation to remediate facilities that are abandoned or inactive or
whose owners are insolvent; however, the legislation may be applied to sites
still in operation. Superfund law imposes liability, regardless of fault or the
legality of the original conduct, on certain classes of persons that contributed
to the release of a "hazardous substance" into the environment. These persons
include the current or previous owner and operator of a site and companies that
disposed, or arranged for the disposal, of the hazardous substance found at a
site. CERCLA also authorizes the EPA and, in certain instances, private parties
to take actions in response to threats to public health or the environment and
to seek recovery from such responsible party. RCRA provisions apply to
facilities that have been used to manage or are currently managing hazardous
waste and which are either still in operation or have recently been closed. As
amended, RCRA requires facilities to remedy any releases of hazardous wastes or
hazardous waste constituents at waste treatment, storage or disposal facilities.
NGC is subject to the environmental risks normally incident to the operation
and construction of storage facilities, pipelines, plants and other facilities
for gathering, processing, treating, storing and transporting natural gas and
other products including, but not limited to, uncontrollable flows of natural
gas, fluids and other substances into the environment, fires, pollution and
other environmental and safety risks. These activities are subject to
environmental and safety regulation by federal authorities and state authorities
residing in those states in which the Company owns assets or conducts business.
In addition, the design, construction, operation and maintenance of the
Company's pipeline facilities are subject to the safety regulations established
by the Secretary of the Department of Transportation pursuant to the Natural Gas
Pipeline Safety Act ("NGPSA"), or by state regulations meeting the requirements
of the NGPSA.
In connection with the Chevron Combination, Chevron agreed to indemnify NGC
against certain environmental liabilities related to the gathering, processing
and transportation assets that comprised a part of the Contribution. In each
case, the indemnification was limited to the extent that such liabilities relate
to such assets' operations prior to August 31, 1996. This indemnity is limited
and, among other things, expires August 31, 2001, and only covers liabilities
under environmental laws and regulations in effect at August 31, 1996. The
Company believes that Chevron has sufficient financial resources to satisfy its
environmental indemnity obligations.
In connection with the acquisition of substantially all of the natural gas
liquids business of OXY USA, Inc. ("OXY USA") by Holding in 1991, OXY USA agreed
to indemnify Holding for any liability, claims, damages, costs, duties of
remediation or loss of use resulting from certain claims or assessments (as
defined in that Acquisition Agreement) associated with periods prior to the
acquisition date generally for a period of ten years from the acquisition date.
The Acquisition Agreement provided, however, that Holding would contribute 30
percent of the first $25 million (i.e., up to a maximum of $7.5 million) of any
such liabilities, claims, damages, costs, duties of remediation or loss of use
resulting from or relating to any such emissions of environmental contaminants.
Such indemnity inured to the Company at the date of the Trident Combination.
The Company believes that OXY USA has sufficient financial resources to satisfy
its environmental indemnity obligations.
In acquiring other operating assets from third parties, NGC has often been
required to indemnify the seller against losses arising from pre-closing
environmental liabilities, although in other instances it has been indemnified
against such losses by the seller. To minimize its exposure for such
liabilities, environmental audits of the assets NGC wishes to acquire are made,
either by NGC personnel, outside environmental consultants, or a combination of
the two.
The Company has not heretofore incurred any material environmental liabilities
arising from its acquisition activities. The incurrence of a material
environmental liability, and/or the failure of an indemnitor to meet its
indemnification obligations with respect thereto, could have a material adverse
effect on NGC's operations and financial condition.
To the Company's knowledge, it is in substantial compliance with, and is
expected to continue to comply in all material respects with, applicable
environmental laws, regulations, orders and rules. Further, to the best of the
Company's knowledge, there are no existing, pending or threatened actions,
suits, investigations, inquiries, proceedings or clean-up obligations by any
governmental authority or third party relating to any violations of any
environmental laws with respect to the Company's assets which would have a
material adverse effect on the
11
Company's operations and financial condition. NGC's aggregate expenditures for
compliance with laws and regulations related to the discharge of materials into
the environment or otherwise related to the protection of the environment
totaled $3.7 million in 1996. Total environmental expenditures for both capital
and operating maintenance and administrative costs are not expected to exceed
$15.6 million in 1997.
The Company's operations are subject to the requirements of the Federal
Occupational Safety and Health Act ("OSHA") and other comparable state statutes.
The OSHA hazard communication standard, the EPA community right-to-know
regulations under Title III of SARA and similar state statutes require that
information be organized and maintained about hazardous materials used or
produced in its operations. Certain of this information must be provided to
employees, state and local government authorities and citizens. The Company
believes it is in substantial compliance with these rules and regulations.
OPERATIONAL RISKS AND INSURANCE
NGC is subject to all risks inherent in the various businesses in which it
operates. These risks include, but are not limited to, explosions, fires and
product spillage, which could result in damage to or destruction of operating
assets and other property, or could result in personal injury, loss of life or
pollution of the environment, as well as curtailment or suspension of operations
at the affected facility.
NGC maintains general public liability, property and business interruption
insurance in amounts that it considers to be adequate for such risks. Such
insurance is subject to deductibles that the Company considers reasonable and
not excessive.
The occurrence of a significant event not fully insured or indemnified
against, and/or the failure of a party to meet its indemnification obligations,
could materially and adversely affect NGC's operations and financial condition.
Moreover, no assurance can be given that NGC will be able to maintain insurance
in the future at rates it considers reasonable.
In 1996, one of the Company's subsidiaries, NIPC, Inc., was designated to
assist the Company in the management of certain liabilities principally relating
to environmental, litigation and credit reserves. Together with the involvement
of a third party whose primary consideration will be based on the realization of
savings by the Company, the subsidiary will attempt to find new ways to handle
these costs in a more efficient manner.
EMPLOYEES
The Company employs approximately 722 employees at its administrative offices
and approximately 1,171 employees at its operating facilities. Approximately
131 employees at Company-operated facilities are subject to collective
bargaining agreements with the Oil, Chemical and Atomic Workers International
Union or the Lake Charles Metal Trades Council. Management considers relations
with both union and non-union employees to be satisfactory.
ITEM 1A. EXECUTIVE OFFICERS
Set forth below are the names and positions of the current executive officers
of the Company, together with their ages, position(s) and years of service with
the Company.
12
SERVED WITH
THE COMPANY
NAME AGE* POSITION(S) SINCE
C. L. Watson 47 Chairman of the Board, 1985
Chief Executive Officer, and
a Director of the Company
Thomas M. Matthews 53 President of the Company 1996
Stephen W. Bergstrom 39 Senior Vice President and a 1986
Director of the Company;
President of Clearinghouse
Stephen A. Furbacher 49 Senior Vice President of the 1996
Company and President of Warren
Petroleum Limited Partnership
James H. Current, Sr. 52 Senior Vice President of the 1996
Company and President of NGC
Global Energy Inc.
Kenneth E. Randolph 40 Senior Vice President, 1984
General Counsel and
Secretary of the Company
___________________________________________
* As of April 1, 1997.
The executive officers named above will serve in such capacities until the
next annual meeting of the Company's Board of Directors, or until their
respective successors have been duly elected and have been qualified, or until
their earlier death, resignation, disqualification or removal from office.
C. L. Watson serves as Chairman of the Board, Chief Executive Officer and a
Director of the Company. He also served as President of NGC from March 1995 to
December 1996. Mr. Watson served as Chairman and as a member of the
Clearinghouse Management Committee from May 1989 and through March 1995, and as
Chief Executive Officer and President of Clearinghouse from September 1985
through March 1995. Prior to his employment with Clearinghouse, Mr. Watson
served as Director of Gas Sales for the Western United States for Conoco Inc.
Thomas M. Matthews joined the Company in December 1996 as President of NGC.
Prior to joining the Company, Mr. Matthews served as President and Chief
Executive Officer of Texaco Natural Gas from January 1996 through November 1996
and Vice President of Texaco, Inc. from November 1993 through November 1996.
Mr. Matthews also served as President of Texaco Refining and Marketing, Inc.
from December 1993 through December 1995. He joined Texaco U.S.A. as Vice
President-Gas in 1989. Prior to joining Texaco, Mr. Matthews spent eight years
with Tenneco as President of Tennessee Gas pipeline Company and Executive Vice
President of Tenneco Gas and sixteen years with Exxon in various domestic and
international engineering, management and executive positions, having last
served as Vice President-Exxon Gas.
Stephen W. Bergstrom serves as Senior Vice President and a Director of the
Company and as President of Clearinghouse. He served as Executive Vice President
of Clearinghouse and as a member of the Clearinghouse Management Committee from
May 1989 through March 1995. In addition, Mr. Bergstrom served as Senior Vice
President Gas Marketing and Supply of Clearinghouse from May 1987 through May
1990 and as Vice President Gas Supply of Clearinghouse from July 1986 through
May 1987. Prior to his employment with the Clearinghouse, Mr. Bergstrom served
as Vice President Gas Supply of Enron Gas Marketing, a subsidiary of Enron
Corporation.
Stephen A. Furbacher serves as President of Warren Petroleum Limited
Partnership and Senior Vice President of NGC Corporation and is a member of the
Management Committee. Mr. Furbacher manages the operations of NGC's natural gas
liquids fractionation, storage, transportation, terminalling and marketing
services. Prior to joining the Company in September 1996, Mr. Furbacher served
as President of Warren Petroleum Company, a division of Chevron U.S.A. Inc.
13
James H. Current, Sr. serves as President of NGC Global Energy Inc., NGC's
international subsidiary, and is a Senior Vice President of the Company. Mr.
Current is responsible for expanding NGC's Energy Store concept worldwide
through the direction of non-U.S. natural gas, natural gas liquids and power
marketing businesses. Mr. Current also manages the Company's crude oil
marketing business worldwide. Prior to joining NGC in April 1996, Mr. Current
retired from Shell Oil Company as General Manager, Shell Gas Products and
Services.
Kenneth E. Randolph serves as Senior Vice President, General Counsel and
Secretary of the Company. He has served as Senior Vice President and General
Counsel of NGC (or its predecessor, Clearinghouse) since July 1987. In addition,
he served as a member of the Clearinghouse Management Committee from May 1989
through February 1994 and managed Clearinghouse's marketing operations in the
Western and Northwestern United States from July 1984 through July 1987. Prior
to his employment with the Company, Mr. Randolph was associated with the
Washington, D.C. office of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
ITEM 2. PROPERTIES
All of the Company's operating assets are held through wholly owned
subsidiaries. The Company's operations are principally located in Texas,
Oklahoma, Louisiana, Kansas, Arkansas, Utah, western Canada and the United
Kingdom. Current year activity conducted in these areas is discussed under "Item
1. BUSINESS -- General." Following is a description of such properties owned by
the Company at December 31, 1996.
GATHERING SYSTEMS AND PROCESSING FACILITIES
NGC's natural gas processing services are provided at two types of gas
processing plants, referred to as field plants and straddle plants. Field plants
aggregate volumes from multiple producing wells into quantities that can be
economically processed to extract NGLs and to remove water vapor, solids and
other contaminants. Straddle plants are situated on third-party mainline natural
gas pipelines and serve to provide flexibility to changing market conditions by
allowing operators to extract NGLs from a natural gas stream when the market
value of NGLs separated from the natural gas stream is higher than the market
value of the same unprocessed natural gas. NGC owns an interest in 40 field
plants which are each associated with a gas gathering system that collects and
transports natural gas from individual wells to the plant. The Company owns an
interest in 35 of the gas gathering systems associated with its field plants.
The gathering systems associated with the other 5 field plants are owned
entirely by third parties. The remaining 17 gas processing plants in which NGC
owns an interest are straddle plants. The Company owns an interest in the gas
gathering systems associated with 2 of these straddle plants, with the remainder
being owned entirely by third parties. The following table provides certain
information, including operational data for the year ended December 31, 1996,
concerning the gathering systems and gas processing plants in which NGC owns an
interest.
Location Total Plant
---------------------- ------------------------------
COUNTY/ PRACTICAL 1996 INLET GAS NGL
GAS PROCESSING FACILITIES % OWNED PARISH STATE CAPACITY(3) THROUGHPUT PRODUCTION
(MMCFD)(1) (BPD)(2)
COMPANY OPERATED:
*Ambrose(4)(10)(12)..................... 100.00 Kay OK 400 0.0 0.0
Arbuckle............................... 100.00 Murray OK 2 0.9 39.9
*Barracuda(8)........................... 100.00 Cameron LA 190 132.0 3,815.8
Binger(4).............................. 100.00 Caddo OK 10 7.1 714.4
Breckenridge(4)(12).................... 100.00 Stephens TX 15 8.2 1,343.5
Bridger Lake(9)........................ 100 - 33.33 Summit UT 25 18.1 543.5
Canadian/Tonkawa(4)(14)................ 100.00 Hemphill TX 25 20.8 666.9
*Cameron(4)(12)(13)..................... 50.00 Cameron LA 425 114.0 2,444.4
*Cheney(12)............................. 100.00 Kingman KS 85 69.3 3,896.4
Chico(4)(12)........................... 100.00 Wise TX 100 65.8 10,140.0
East Texas(4)(12)...................... 100.00 Gregg TX 34 26.2 4,641.0
Eunice(4)(14).......................... 100.00 Lea NM 68 52.3 2,096.4
Eustace(4)(12)......................... 100.00 Henderson TX 70 37.1 2,497.1
Fashing(4)(14)......................... 44.74 Atascosa TX 65 35.1 101.6
Haynesville I.......................... 96.00 Claiborne LA 35 29.0 1,019.8
Haynesville II......................... 100.00 Claiborne LA 50 46.0 2,546.9
*Jayhawk(12)............................ 100.00 Grant KS 480 407.8 11,955.0
14
Location Total Plant
---------------------- -------------------------------
COUNTY/ PRACTICAL 1996 INLET GAS NGL
GAS PROCESSING FACILITIES % OWNED PARISH STATE CAPACITY(3) THROUGHPUT PRODUCTION
(MMCFD)(1) (BPD)(2)
Kellerville(4)(12)..................... 100.00 Wheeler TX 10 6.8 1,417.5
Leedy(4)(12)........................... 100.00 Roger Mills OK 50 35.7 1,116.2
Lefors(4)(12).......................... 100.00 Gray TX 12 6.3 1,562.7
*Lowry(12)(4)........................... 100.00 Cameron LA 265 136.7 3,751.1
Madill(4)(12).......................... 100.00 Marshall OK 25 18.0 1,002.5
Moores Orchard(4)(14).................. 100.00 Fort Bend TX 7 4.4 45.8
Monahans/Worsham(4)(14)................ 100.00 Ward TX 31 26.0 857.5
Monument(4)(14)........................ 100.00 Lea NM 80 67.8 2,300.4
New Hope(16)........................... 100.00 Franklin TX 30 14.8 110.2
Ringwood(4)(11)........................ 100.00 Major OK 62 58.1 3,910.1
Roberts Ranch(4)(12)................... 56.25 Midland TX 82 24.1 2,477.9
Rodman(4)(12).......................... 100.00 Garfield OK 50 51.0 3,729.1
Sand Hills(4)(14)...................... 100.00 Crane TX 100 137.5 2,258.7
Saunders/Vada/Bluitt(4)(14)............ 100.00 Lea NM 47 37.0 1,762.1
Shackelford(4)(12)..................... 100.00 Shackelford TX 15 10.2 1,442.9
Sherman(4)(14)......................... 100.00 Grayson TX 33 5.0 237.9
Sligo.................................. 100.00 Bossier LA 40 35.9 706.2
Spivey(5)(6)(12)....................... 3.87 Harper KS 66 0.5 28.2
*Stingray(8)............................ 100.00 Cameron LA 300 259.2 2,991.8
Texarkana(4)........................... 100.00 Miller AR 22 12.8 440.0
Waskom................................. 50.00 Harrison TX 52 0.0 0.0
West Seminole(4)(12)................... 40.14 Gaines TX 15 5.3 443.9
*Yscloskey(6)(12)(15)................... 30.40 St. Bernard LA 1,750 170.6 3,006.6
OUTSIDE OPERATED:
*Bluewater (14)......................... 16.72 Acadia LA 725 60.0 396.2
*Calumet (6)(12)(15).................... 21.91 St. Mary's LA 1,400 33.9 1,141.7
Corney Bayou(12)....................... 10.05 Union LA 50 0.4 8.2
Diamond M (4).......................... 7.67 Scurry TX 25 0.4 109.0
Dover Hennessey (4).................... 7.36 Kingfisher OK 80 2.7 141.9
*Grand Chenier (6)(12)(15).............. 6.46 Cameron LA 450 11.3 176.1
Indian Basin (4)(14)................... 14.19 Eddy NM 210 33.7 433.8
*Iowa (14).............................. 9.92 Jefferson Davis LA 500 31.5 156.1
*Laverne (12)(15)....................... 13.75 Harper OK 190 7.4 480.5
Maysville (4)(12)(15).................. 44.00 Garvin OK 135 32.9 4,233.9
*North Terrebone Robin (14)............. 0.83 Terrebone LA 1,200 7.8 60.2
*Patterson (14)......................... 1.09 St. Mary LA 400 0.0 0.0
*Sea Robin (14)......................... 18.70 Vermillion LA 1,000 39.5 1,053.2
Snyder (7)(12)......................... 3.25 Scurry TX 60 1.5 128.7
*Toca (14).............................. 8.86 St. Bernard LA 1,050 69.9 1,755.7
- ---------------
* Indicates a straddle plant, all other gas processing
facilities are field plants.
(1) Gross to the facility.
(2) Gross production, net to the Company's ownership interest.
(3) Capacity data is at practical recovery rates.
(4) NGC owns the indicated percentage of an associated gas gathering system.
(5) NGC owns 2.19 percent of the associated gas gathering system.
(6) NGC ownership is adjustable and subject to periodic (usually annual)
redetermination.
(7) NGC owns the indicated percentage of the Snyder gas gathering system and
3.98 percent of the Diamond M gas gathering system which also supplies the
Snyder plant.
(8) This facility has no gathering lines.
(9) This facility consists of a 100 percent interest in a processing plant and
an NGL pipeline, a 100 percent interest in a crude oil pipeline and a 33.33
percent interest in reserves connected and dedicated to the plant. The
gathering system behind the processing plant gathers production from Utah
and Wyoming.
(10) This facility was shut down in December 1995.
(11) Includes Enid facility.
(12) These assets, or a portion thereof, were acquired in the Trident
Combination.
(13) Effective March 1, 1996, NGC no longer acts as operator of this facility.
15
(14) These assets were acquired in the Chevron Combination. Consequently, the
"1996 Inlet Gas Throughput" and "NGL Production" statistics are for the
four month period ended December 31, 1996.
(15) Additional interest in this facility was acquired as part of the Chevron
Combination. Consequently, a portion of the "1996 Inlet Gas Throughput" and
"NGL Production" statistics are for the twelve months ended December 31,
1996, and a portion are for the four month period ended December 31, 1996.
(16) These assets were acquired effective August 1, 1996. Consequently, the
"1996 Inlet Gas Throughput" and "NGL Production" statistics are for the
five month period ended December 31, 1996.
FRACTIONATION FACILITIES
NGLs removed from a natural gas stream at gas processing plants are in the
form of a commingled stream of liquid hydrocarbons. The commingled hydrocarbons
are separated at fractionation facilities into the component NGL products
ethane, propane, normal butane, isobutane and natural gasoline. The following
table provides certain information concerning the fractionation facilities in
which NGC owns an interest, including operational data for the year ended
December 31, 1996.
LOCATION TOTAL PLANT
-------------- ---------------------------
COUNTY/ PRACTICAL 1996 INLET GAS
FRACTIONATION FACILITIES: % OWNED PARISH STATE CAPACITY(1) THROUGHPUT
(MBbls/d)
Warren Mont Belvieu (2).. 100.00 Chambers TX 205 163.6
Mont Belvieu I (3)....... 80.00 Chambers TX 110 80.0
Mont Belvieu II.......... 38.75 Chambers TX 110 105.3
_________________
(1) Capacity data is at practical recovery rates.
(2) Interest in this facility was acquired as part of the Chevron Combination.
Consequently, the "1996 Inlet Gas Throughput"
statistics are for the four month period ended December 31, 1996.
(3) On January 1, 1997, the Company divested itself of the Mont Belvieu I
fractionator in accordance with an agreement reached with the FTC related
to the Chevron Combination. The Company realized a small after-tax gain in
1997 relating to the sale.
In August 1995, the Company shutdown operations of its Lake Charles
fractionation facility principally as a result of operational inefficiencies
resulting from the age of the facility. The Company diverted daily production in
part to a third-party fractionator and in part to its fractionation facilities
at Mont Belvieu. NGC owns the liquids gathering system associated with the Lake
Charles facility.
STORAGE AND TERMINAL FACILITIES
The following table provides information concerning terminal and storage
facilities owned by the Company:
LOCATION
-------------------
COUNTY/
STORAGE AND TERMINAL FACILITIES: % OWNED PARISH STATE DESCRIPTION
Hackberry Storage............... 100.00 Cameron LA NGL storage facility
Mont Belvieu Storage............ 100.00 Chambers TX NGL storage facility
Hattiesburg Storage............. 100.00 Washington MS NGL storage facility
Hackberry Terminal.............. 100.00 Cameron LA Marine import/export terminal
Mont Belvieu Terminal........... 100.00 Chambers TX Product terminal facility
Warrengas Terminal.............. 100.00 Harris TX LPG import/export terminal
Calvert City Terminal........... 100.00 Marshall KY Product transport terminal
Greenville Terminal............. 100.00 Washington MS Propane terminal
Hattiesburg Terminal............ 50.00 Forrest MS Propane terminal
Lampton-Love Terminal........... 100.00 Forrest MS Product transport terminal
Pt. Everglades Terminal......... 100.00 Broward FL Marine propane terminal
Tampa Terminal.................. 100.00 Hillsborough FL Marine propane terminal
Mont Belvieu Transport.......... 100.00 Chambers TX Administrative offices and repair shop
Abilene Transport............... 100.00 Taylor TX Raw LPG transport terminal
Bridgeport Transport............ 100.00 Jack TX Raw LPG transport terminal
Gladewater Transport............ 65.00 Gregg TX Raw LPG transport terminal
Grand Lakes Tank Farm........... 100.00 Cameron LA Condensate Storage
16
MARKETING HUBS
Effective in June 1995, the Company, through its wholly owned subsidiary Hub
Services, Inc. ("HSI"), participated in the formation of Enerchange L.L.C.
("Enerchange") which owns and operates three natural gas market area hubs. These
marketing hubs are transportation and interchange facilities located in the
vicinity of an interconnection of two or more interstate pipelines. Each hub
takes deliveries from a large number of suppliers and provides these suppliers
with a wide variety of markets in which to sell their gas. By providing access
to a large number of gas buyers and sellers, a hub improves the gas market by
reducing transaction costs of matching buyers and sellers of gas, enhances the
reliability of gas supply and provides buyers and sellers a wide range of gas
marketing services. Each marketing hub provides customers with "wheeling",
"loaning", "parking" and "title transfer" services. "Wheeling" refers to the
simultaneous transfer of gas from one pipeline to another, while "loaning"
occurs when one party allows another party to borrow gas. "Parking" services
allow a customer to store gas in a hub for future redelivery and "title
transfer" services allow a customer to assign title to gas that is in storage. A
fee is charged by the hub for services provided to its customers.
The three gas marketing hubs are the Chicago Hub, the California Energy Hub
and the Ellisburg-Leidy Northeast Hub. These hubs are each operated by
Enerchange and HSI provides administrative services with respect to these hubs.
The hub operator generally provides asset management services, such as
determining the availability of hub services, confirming all nominations for hub
services and providing personnel to operate the hub. The hub administrator
typically provides marketing, accounting and administrative services. The
accounting and administrative services include performing credit checks on
prospective customers, negotiating and executing agreements with hub customers,
billing and making collections from customers, distributing revenues to hub
partner(s) and maintaining accounting records. Although HSI owns a revenue
interest in each hub, HSI provides administrative services independent of any
influence of NGC and the Company may only use a hub's services on a non-
discriminatory basis in accordance with the mandates of pertinent federal and
state regulations and contractual terms with its hub partners.
The following table provides information with respect to the marketing hubs in
which NGC indirectly owns an interest.
HSI'S
REVENUE SERVICE NAMES OF
FACILITY NAME HSI'S PARTNERS INTEREST AREA CONNECTING PIPELINES
Chicago Hub............ NICOR Hub Services 51% Midwest ANR Pipeline Company, Midwestern Gas
Pacific Enerchange Transmission Company, Northern Natural
Leidy Hub Inc. Gas Company and Natural Gas Pipeline
Company of America
Ellisburg-Leidy
Northeast Hub........ NICOR Hub Services 51% Northeast Transcontinental Gas Pipeline Corporation,
Pacific Enerchange Tennessee Gas Pipeline, CNG
Leidy Hub Inc. Company, Columbia Gas Transmission
Company and National Fuel Gas Supply
Corporation
California Energy Hub.. NICOR Hub Services 51% California El Paso Natural Gas Company, Kern River
Pacific Enerchange Gas Transmission Company, Mojave
Leidy Hub Inc. Pipeline Operating Company, Pacific Gas
NATURAL GAS AND CRUDE OIL PIPELINES
NGC owns interests in various interstate and intrastate pipelines and
gathering systems, the more significant of which include: (i) the Ozark Gas
Transmission System, a 266-mile interstate natural gas pipeline with design
capacity of 170 MMcf/d that transports gas from eastern Oklahoma to central
Arkansas, where the system interconnects with interstate pipelines that serve
Midwest and Northeast markets; (ii) a 1,300-mile crude oil system which gathers
crude oil in 25 central and southern Oklahoma counties, accessing more than half
of the state's production, and serves the U.S. crude oil trading hub in Cushing,
Oklahoma and the Wynnewood, Oklahoma refinery; (iii) the Kansas Gas Supply
Corporation that owns and operates an approximate 1,200 mile regulated
intrastate gas pipeline system in south-central Kansas maintaining current
capacity to transport approximately 100 MMcf/d of natural gas; and (iv) an
17
extensive liquids gathering system at the Lake Charles fractionation facility
and a 12-inch liquids pipeline that connects the Lake Charles area facilities
with the Mont Belvieu fractionation facilities. The following table identifies
these and other pipeline and gathering system assets in which NGC owns an
interest:
1996
PIPELINE SYSTEMS: % OWNED THROUGHPUT STATE DESCRIPTION
Ozark Gas Transmission System.. 100.00 132.7 MMcf/d OK/AR Interstate natural gas pipeline
Crude Oil Pipeline System...... 100.00 54.5 MBbls/d OK Intrastate crude oil pipeline
Kansas Gas Supply.............. 100.00 70.1 MMcf/d KS/OK Intrastate natural gas pipeline
Warren NGL Pipeline............ 100.00 99.0 MBbls/d TX/LA Liquids pipeline between Lake
Charles and Mont Belvieu
Bridger Lake/Phantex Pipeline.. 100.00 1.6 MBbls/d UT/WY Interstate liquids pipeline
Cominco Pipeline............... 100.00 5.9 MMcf/d TX Intrastate natural gas pipeline
Pelican Pipeline............... 100.00 40.4 MMcf/d LA Gas gathering pipeline
Vermillion Pipeline............ 100.00 46.0 MMcf/d Gulf of Mexico Gas gathering pipeline
Western Gas Gathering.......... 100.00 3.4 MMcf/d KS Gas gathering pipeline
Pawnee Rock (1)................ 100.00 4.5 MMcf/d KS Gas gathering pipeline
Bradshaw Gathering............. 50.00 27.4 MMcf/d KS Gas gathering pipeline
Lake Boudreaux................. 100.00 1.3 MMcf/d LA Gas gathering pipeline
Grand Lakes Liquids System..... 100.00 0.7 MBbls/d LA Intrastate liquids pipeline
(1) Acquired in July of 1996 in exchange for the Company's interest in the Mesa
Pipeline. Throughput information reflects
statistics from the acquisition date through the end of 1996.
OTHER PROPERTY INVESTMENTS
Effective November 1, 1996, the Company and Chevron formed Venice Gas
Processing Company, a Texas Limited Partnership ("Partnership"), located in
Plaquemines Parish, Louisiana. The Partnership was formed for the purpose of
owning and operating the Venice Complex consisting of a 35,000 barrel per day
fractionator, gathering systems, a lean oil gas processing plant, NGL storage
facilities, a marine terminal and acreage. Expansion to the Venice Complex is
expected to include a 300 MMcf/d cryogenic gas processing plant and additional
gathering lines to access new Gulf of Mexico production. At December 31, 1996,
NGC owned an approximate 37 percent interest in the Partnership.
As part of the Contribution, NGC acquired an undivided 50 percent interest in
the West Texas Pipeline which is an interstate liquids pipeline capable of
transporting 160,000 Bpd from its origin in eastern New Mexico to fractionation
facilities in Mont Belvieu, Texas. The pipeline is owned and operated by the
West Texas Pipeline Limited Partnership and NGC owns a 50 percent interest in
that partnership.
TITLE TO PROPERTIES
The Company believes it has satisfactory title to its properties in accordance
with standards generally accepted in the energy industry, subject to such
exceptions which, in the opinion of the Company, in the aggregate would not have
a material adverse effect on the use or value of said properties.
The operating agreements for certain of the Company's natural gas processing
plants and fractionation facilities grant a preferential purchase right to the
plant owners in the event any owner desires to sell its interest. Such
agreements may also require the consent of a certain percentage of owners before
rights under such agreements can be transferred. The Company is subject, as a
plant owner under such agreements, to all such restrictions on transfer of its
interest. In addition, Warren has granted OXY USA certain rights of first
refusal with respect to any future sale of certain assets.
Substantially all of NGC's gathering and transmission lines are constructed on
rights-of-way granted by the apparent record owners of such property. In some
instances, land over which rights-of-way have been obtained may be subject to
prior liens that have not been subordinated to the right-of-way grants. Permits
have been obtained from public authorities to cross over or under, or to lay
facilities in or along, water courses, county roads, municipal streets and state
highways, and in some instances, such permits are revocable at the election of
the grantor. Permits have also been obtained from railroad companies to cross
over or under lands or rights-of-way, many of which are
18
also revocable at the grantor's election. Some such permits require annual or
other periodic payments. In a few minor cases, property was purchased in fee.
ACQUISITION AND CONSTRUCTION PROJECTS
A subsidiary of the Company is committed to contribute approximately $62
million to Venice during 1997. The funds will be used principally for the
construction of a cryogenic gas processing plant and an expansion of the
existing gas gathering system.
NGC, indirectly through subsidiaries, has formed a joint venture to develop
the Avoca storage project located in southeastern New York. The Company is
committed to contribute its respective share of construction costs of the
project. Current cost estimates commit the Company to approximately $10 million
of expenditures.
A subsidiary of the Company is committed to contribute a total of $10 million
to Indeck North American Power Fund, L.P. and Indeck North American Power
Partners, L.P. (collectively "Indeck"), two partnerships that are engaged in the
acquisition of electric power generating facilities. The contributions represent
the Company's pro rata share of funds to be used for selected acquisitions. At
December 31, 1996, the Company had paid $3.7 million of this commitment.
INDUSTRY SEGMENTS
Segment financial information is included in Note 13 of NGC's consolidated
financial statements and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
NGC is involved in certain legal proceedings that have arisen in the ordinary
course of business. Management believes the outcome of such proceedings, even
if adversely determined, will not have a material effect on NGC's business or
financial condition.
On February 26, 1996, Apache Corporation ("Apache") requested arbitration to
resolve issues arising under a gas marketing contract ("Contract") with
Clearinghouse pursuant to the arbitration provisions of such Contract. On
February 16, 1996, Clearinghouse responded by denying Apache's claims and by
alleging several counterclaims of its own with respect to Apache's performance
under the Contract. In connection with the arbitration proceedings, on April 9,
1996, Apache filed a lawsuit against Clearinghouse in the 55th Judicial District
Court of Harris County, Texas ("Court"). In that lawsuit, Apache alleges that
Clearinghouse is intentionally delaying the progress of the arbitration, and it
requests relief, pursuant to the Texas General Arbitration Act, in the form of
an order appointing a third arbitrator, compelling discovery and requiring
Clearinghouse to assign certain contracts allegedly belonging to Apache.
Clearinghouse filed a response to the lawsuit on May 6, 1996, asking that the
Court dismiss Apache's application for relief or abate the suit pending
resolution of all matters by the arbitration panel according to the terms of the
Contract. Clearinghouse also requested payment of all attorneys' fees and other
litigation expenses incurred in responding to and defending the lawsuit. On
September 18, 1996, the arbitration panel granted a revised discovery schedule
which moved the hearing previously scheduled for December 1996 to April 7, 1997.
On February 8, 1997, the arbitration was further postponed until
September 15, 1997. In the arbitration and again in the lawsuit, Apache claims
that it is entitled to actual damages in an undetermined amount in excess of $8
million and punitive damages.
Clearinghouse intends to vigorously defend the Apache suit and arbitration.
Based on review of the facts and through consultation with outside counsel, NGC
management believes the ultimate resolution of the Apache suit will not have an
adverse impact on the Company's financial position or results of operations, and
that any payments eventually made in connection with the arbitration and/or the
lawsuit will be substantially less than the amount claimed.
The Company assumed liability for various claims and litigation in connection
with the Chevron Combination, the Trident Combination and in connection with the
acquisition of certain gas processing and gathering facilities from Mesa
Operating Limited Partnership. NGC believes, based on its review of these
matters and consultation with outside legal counsel, that the ultimate
resolution of such items, individually or in the aggregate, will not have a
material adverse impact on the Company's financial position or results of
operations. Further, the Company is
19
subject to various legal proceedings and claims which arise in the normal course
of business. In the opinion of management, the amount of ultimate liability with
respect to these actions will not materially affect the financial position of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's $0.01 par value common stock ("Common Stock") is listed and
traded on the New York Stock Exchange under the ticker symbol "NGL". The number
of stockholders of record of the Common Stock as of March 27, 1997, was 247.
The following table sets forth the high and low closing prices for
transactions involving the Company's Common Stock for each calendar quarter, as
reported on the New York Stock Exchange Composite Tape and related dividends
paid per common share during such periods.
High Low Dividend
------- ------- --------
1996
----
First Quarter.................. $12.750 $ 8.625 $0.0125
Second Quarter................. 16.125 12.250 0.0125
Third Quarter.................. 17.000 14.250 0.0125
Fourth Quarter................. 24.750 15.625 0.0125
1995 (a)
----
First Quarter.................. $11.500 $ 9.000 $0.0125
Second Quarter................. 10.375 8.750 0.0125
Third Quarter.................. 10.375 9.000 0.0125
Fourth Quarter................. 9.625 8.375 0.0125
------- ------- -------
_____________________
(a) Stock price and per share dividend rate information relates to
Holding for the period commencing on January 1, 1995
and continuing through and including March 13, 1995, and NGC
thereafter.
The holders of the Common Stock are entitled to receive dividends if, when and
as declared by the Board of Directors of the Company out of funds legally
available therefor. Consistent with the Board of Directors' intent to establish
a policy of declaring quarterly cash dividends, a cash dividend of $0.0125 per
share was declared and paid in each of the four quarters of 1996. Beginning in
the third quarter of 1996, the Company has paid quarterly cash dividends on its
Series A Preferred Stock of $0.0125 per share, or $0.05 per share on an annual
basis.
The NGC Corporation Credit Agreement and the Company's 7.625% and 6.75% Senior
Notes do not contain any specific restrictions on the ability of the Company or
any of its subsidiaries to declare and pay dividends in respect of its or their
capital stock, although certain financial covenants contained in such credit
agreement and in the indenture covering the 7.625% and 6.75% Senior Notes may
limit the ability of the Company to do so.
The indenture setting forth the terms and conditions of the 14% Senior
Subordinated Notes of Warren due 2001 and the 10.25% Subordinated Notes of
Warren due 2003 contain restrictions on Warren's ability to pay cash dividends
to NGC, which in turn may adversely affect NGC's ability to pay dividends to its
shareholders.
20
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information presented below was derived from, and is
qualified by reference to, the Consolidated Financial Statements of the Company,
including the Notes thereto, incorporated herein by reference. Please refer to
the Notes to Consolidated Financial Statements for information on transactions
and accounting classifications which have affected the comparability of the
periods presented below. The selected financial information should be read in
conjunction with the Consolidated Financial Statements and related Notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Year Ended December 31,
-----------------------------------------------------------------
1996(1) 1995(2) 1994(3) 1993 1992
---------- --------- ---------- --------- -----------
(in thousands, except per share informaton)
STATEMENT OF OPERATIONS DATA:
Revenues $7,260,202 $3,665,946 $3,237,843 $2,790,977 $2,492,935
Operating margin 369,500 194,660 99,126 91,850 96,806
General and administrative expenses 100,032 68,057 47,817 36,585 41,103
Depreciation and amortization expense 71,676 44,913 8,378 7,594 7,221
Net income (4) $ 113,322 $ 92,705 $ 42,101 $ 45,997 $ 43,858
Net income per common share (5) $0.83 $0.82 n/a n/a n/a
Pro forma income per common share (6) n/a $0.40 $0.28 $0.30 $0.30
Weighted average common and common
equivalent shares outstanding 136,099 113,176 97,804 97,804 97,804
CASH FLOW DATA:
Cash flows from operating activities $ (30,954) $ 90,648 $ 17,170 $ 20,292 $ 66,869
Cash flows from investing activities (111,140) (310,623) (38,376) (7,911) (21,024)
Cash flows from financing activities 176,037 221,022 18,959 (46,418) (19,816)
OTHER FINANCIAL DATA:
EBITDA (7) $ 289,023 $ 142,538 $ 57,716 $ 57,553 $ 58,299
Dividends or distributions to partners, net 6,740 9,253 14,041 14,118 19,816
CAPEX, acquisitions and investments (8) 859,047 979,603 47,014 16,464 12,197
As of December 31,
-----------------------------------------------------------------
1996(1) 1995(2) 1994 1993 1992
---------- --------- ---------- --------- -----------
(in thousands)
BALANCE SHEET DATA:
Current assets $1,936,721 $ 762,939 $ 445,782 $ 402,602 $ 385,334
Current liabilities 1,548,987 705,674 404,144 375,662 357,946
Property and equipment, net (9) 1,691,379 948,511 114,062 84,539 90,037
Total assets 4,186,810 1,875,252 645,471 512,534 480,458
Long-term debt 988,597 522,764 33,000 --- 19,800
Total equity 1,116,733 552,380 152,213 120,689 88,745
_________________
(1) The Chevron Combination was accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as of
September 1, 1996, the effective date of the Chevron Combination for
accounting purposes, and the results of operations include Chevron's
operations from September 1, 1996, forward.
(2) The Trident Combination was accounted for under the purchase method of
accounting and, because the Clearinghouse Owners acquired approximately 82
percent of NGC, for accounting purposes Clearinghouse was considered the
acquiring company. Accordingly, the purchase price was allocated to the
Trident assets acquired and liabilities assumed based on their estimated
fair values as of March 1, 1995, the effective date of the Trident
Combination for accounting purposes, and the results of operations include
Trident's operations from March 1, 1995, forward.
(3) Results for the year ended December 31, 1994, include the effects of a
change to mark-to-market accounting for fixed-price natural gas
transactions.
(4) Net income does not include a provision for federal income taxes, other
than minimal amounts on the taxable income of Clearinghouse's corporate
subsidiaries, for the years ended December 31, 1994, 1993 and 1992,
respectively.
(5) Net income per common and common equivalent share is based on reported net
income for the period. The weighted average shares outstanding for the year
ended December 31, 1995, is based on the parameters discussed in
footnote (6).
(6) Pro forma net income per common and common equivalent share is based on
reported net income for the period adjusted for the incremental statutory
federal and state income taxes that would have been provided had
Clearinghouse been a taxpaying entity. The weighted average shares
outstanding for the year ended December 31, 1995, is based on the weighted
average number of common shares outstanding plus the common stock
equivalents that would arise from the exercise of outstanding options or
warrants, when dilutive. Pro forma weighted average shares outstanding of
97.8 million shares for the years ended December 31, 1994, 1993 and 1992,
respectively, give effect to the terms of the Trident Combination and the
common stock equivalent shares outstanding as of the effective date of the
Trident Combination assuming a common stock market price of $12 in all
periods.
(7) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is presented as a measure of the Company's ability to service its debt and
to make capital expenditures, not as a measure of operating results, and is
not presented in the Consolidated Financial Statements.
(8) Includes value assigned assets in the Chevron and Trident Combinations.
(9) The 1992 amount of $90.0 million includes $16.4 million of property, plant
and equipment classified as held for sale. These assets were sold in
March 1993.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears on pages 26 through 38 of the
Annual Report to Shareholders and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company appear on pages 39 through 62 of the
Annual Report to Shareholders and are incorporated herein by reference.
The financial statement schedule and supplementary data of the Company are set
forth at pages F-1 through F-5 inclusive, found at the end of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information required by this Item 10 will be contained in the
definitive Proxy Statement of the Company for its 1997 Annual Meeting of
Stockholders (the "Proxy Statement") under the headings "Proposal 1 -- Election
of Directors" and "Executive Compensation -- Section 16(a) Beneficial Ownership
Reporting Compliance" and is incorporated herein by reference. The Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after December 31, 1996. Reference is also made to the information
appearing in Part I of this Annual Report on Form 10-K under the caption "Item
1A. Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation will be contained in the
Proxy Statement under the heading "Executive Compensation" and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of certain of the Company's outstanding
securities will be contained in the Proxy Statement under the heading "Principal
Stockholders" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding related party transactions will be contained in the
Proxy Statement under the headings "Principal Stockholders", "Proposal 1 --
Election of Directors" and "Executive Compensation -- Indebtedness of
Management" and "-- Certain Relationships and Related Transactions" and is
incorporated herein by reference.
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON 8-K
ANNUAL FORM
REPORT 10-K
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants 39 F-1
Consolidated Balance Sheets as of
December 31, 1996 and 1995 40 --
Consolidated Statements of Operations for the
years ended December 31, 1996, 1995 and 1994 41 --
Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994 42 --
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1996,
1995 and 1994 43 --
Notes to Consolidated Financial Statements 44 --
FINANCIAL STATEMENT SCHEDULE
Condensed Financial Statements of the Registrant -- F-2
FINANCIAL STATEMENTS OF UNCONSOLIDATED AFFILIATE
Accord Energy Limited Annual Report for the year
ended December 31, 1996 and 1995 -- 1-20
23
EXHIBIT
NUMBER DESCRIPTION
2.1 - Combination Agreement and Plan of Merger, dated May, 22, 1996, by
and between NGC Corporation, Chevron U.S.A. Inc. and Midstream
Combination Corp.(14)
2.2 - Amendment to Combination Agreement, dated as of August 29, 1996,
by and among NGC Corporation, Chevron U.S.A. Inc. and Midstream
Combination Corp.(11)
+2.3 - Agreement and Plan of Merger by and among Destec Energy, Inc., The
Dow Chemical Company, NGC Corporation and NGC Acquisition
Corporation II dated as of February 17, 1997.
+2.4 - Asset Purchase Agreement by and between NGC Corporation and The
AES Corporation dated as of February 17, 1997.
+3.1 - Restated Certificate of Incorporation of NGC Corporation.
+3.2 - Amended and Restated By-Laws of NGC Corporation.
4.1 - Indenture, dated as of September 9, 1993, between Trident NGL,
Inc. and Ameritrust Texas National Association, as Trustee.(5)
4.2 - Form of Senior Subordinated Note (included in Exhibit 4.1).
4.3 - Indenture, dated as of August 30, 1991, between Trident NGL, Inc.
and Ameritrust Texas National Association, as Trustee.(1)
4.4 - Form of Senior Subordinated Note (included in Exhibit 4.3).
4.5 - Note Purchase Agreement, dated as of August 30, 1991, by and among
Trident NGL, Inc. and the Purchasers named therein.(2)
4.6 - Indenture, dated as of April 15, 1993, between Trident NGL, Inc.
and The First National Bank of Boston, as Trustee.(3)
4.7 - Form of Subordinated Note (included in Exhibit 4.6).
4.8 - First Supplemental Indenture, dated as of April 15, 1993, between
Trident NGL, Inc. and Ameritrust Texas National Association, as
Trustee.(3)
4.9 - Second Supplemental Indenture, dated as of September 9, 1993,
between Trident NGL, Inc. and Ameritrust Texas National
Association, as Trustee.(5)
4.10 - Warrant exercisable for 6,228 shares of Common Stock of NGC
Corporation registered in the name of J. Otis Winters.(4)
4.11 - Credit Agreement dated as of March 14, 1995, among NGC Corporation
and The First National Bank of Chicago, individually and as agent,
The Chase Manhattan Bank National Association and Nations Bank of
Texas N.A., individually and as co-agent, and certain other
lenders named therein.(9)
4.12 - Indenture, dated as of December 11, 1995, between NGC Corporation,
the Subsidiary Guarantors named therein and The First National
Bank of Chicago, as Trustee.(8)
4.13 - Form of Senior Notes (included in Exhibit 4.12).
4.14 - Consent and Second Amendment to Credit Agreement, dated as of July
26, 1996, among NGC Corporation and The First National Bank of
Chicago, individually and as agent, The Chase Manhattan
24
EXHIBIT
NUMBER DESCRIPTION
Bank National Association and NationsBank of Texas, N.A.,
individually as co-agent, and certain other lenders named
therein.(11)
4.15 - Letter of Credit Facility Agreement, dated as of September 1,
1996, by and among NGC Corporation and Canadian Imperial Bank of
Commerce, Individually and as Agent, and the Lenders named
therein. (11)
4.16 - Indenture, dated as of December 11, 1995, by and among NGC
Corporation, the Subsidiary Guarantors named therein and The First
National Bank of Chicago, as Trustee.(8)
4.17 - First Supplemental Indenture, dated as of August 31 1996, by and
among NGC Corporation, Midstream Combination Corp., the Subsidiary
Guarantors named therein and The First National Bank of Chicago,
as Trustee, supplementing and amending the Indenture dated as of
December 11, 1995.(11)
4.18 - Second Supplemental Indenture, dated as of October 11, 1996, by
and among NGC Corporation, Electric Clearinghouse, Inc. and The
First National Bank of Chicago, as Trustee, supplementing and
amending the Indenture dated as of December 11, 1995.(11)
4.19 - Indenture, dated September 26, 1996, among NGC, the Subsidiary
Guarantors named therein and The First National Bank of Chicago,
as Trustee.(12)
4.20 - Form of 7 5/8% Senior Debenture due October 15, 2026.(12)
10.1 - Agreement of Sale and Purchase of Assets, dated as of May 5, 1991,
as amended on June 6, 1991 and August 30, 1991, by and between OXY
USA Inc. and Trident Energy, Inc.(1)
10.2 - Master Agreement on Gas Processing, dated as of May 5, 1991, by
and between OXY USA Inc. and Trident NGL, Inc.(1)
10.3 - Product Sale and Delivery Agreement between Trident NGL, Inc., OXY
NGL Pipeline Company and OXY Petrochemicals, Inc. dated as of
August 30, 1991.(1)
10.4 - Right of First Refusal Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc. (Lake Charles
facilities and Trident NGL Pipeline).(1)
10.5 - Right of First Refusal Agreement, dated as of August 30, 1991, by
and between OXY USA Inc. and Trident NGL, Inc. (Hackberry storage
facilities and terminal).(1)
+10.6 - NGC Corporation Amended and Restated 1991 Stock Option Plan.
10.7 - Stock Purchase Agreement between Trident NGL Holding, Inc. and
J. Otis Winters.(5)
10.8 - Agreement for the Construction, Ownership and Operation of the
Mont Belvieu I Fractionation Facility between Trident NGL, Inc.
and Union Pacific Fuels, Inc. dated November 17, 1993.(6)
10.9 - Employment Agreement, dated as of May 19, 1992, between C. L.
Watson and Natural Gas Clearinghouse.(7)
10.10 - Employment Agreement, dated as of May 19, 1992, between Stephen W.
Bergstrom and Natural Gas Clearinghouse.(7)
10.11 - NGC Corporation Amended and Restated Employee Equity Option
Plan.(7) (See Appendix III to the Proxy Statement/Prospectus).
25
EXHIBIT
NUMBER DESCRIPTION
10.12 - The Amended and Restated Natural Gas Clearinghouse Deferred
Compensation Plan, dated February 28, 1992.(7)
10.13 - Natural Gas Clearinghouse Above Base Incentive Compensation Plan,
as amended and restated, effective as of January 1, 1994.(7)
10.14 - Unanimous Shareholder Agreement dated February 25, 1994, among
Novacorp International, Inc. (formerly NOVA Gas Services Ltd.),
NGC Canada Inc. and Novagas Clearinghouse Ltd.(7)
10.15 - First Amendment to Unanimous Shareholders Agreement, dated May 20,
1994, among Novacorp International, Inc. (formerly NOVA Gas
Services Ltd.), NGC Canada Inc. and Novagas Clearinghouse Ltd.(7)
10.16 - Limited Partnership Agreement, dated February 25, 1994, among
Novacorp International, Inc. (formerly NOVA Gas Services Ltd.),
NGC Canada Inc. and Novagas Clearinghouse Ltd.(7)
10.17 - Amended Contract for Processing Gas, dated January 1, 1995, by and
between Amoco Production Company and Trident NGL, Inc.(10)
10.18 - Employment Agreement dated April 2, 1996 by and between NGC
Corporation and Stephen A. Furbacher.(13)
10.19 - Lease Agreement entered into on June 12, 1996 between Metropolitan
Life Insurance Company and Metropolitan Tower Realty Company,
Inc., as landlord, and NGC Corporation, as tenant.(13)
10.20 - First Amendment to Lease Agreement entered into on June 12, 1996
between Metropolitan Life Insurance Company and Metropolitan Tower
Realty Company, Inc., as landlord, and NGC Corporation, as
tenant.(13)
10.21 - Contribution and Assumption Agreement, dated as of August 31,
1996, among Chevron U.S.A. Inc., Chevron Pipe Line Company,
Chevron Chemical Company and Midstream Combination Corp.(11)
10.22 - Scope of Business Agreement, dated May 22, 1996 between Chevron
Corporation and NGC Corporation.(13)
10.23 - Stockholders Agreement dated, May 22, 1996, among BG Holdings,
Inc., NOVA Gas Services (U.S.) Inc. and Chevron U.S.A. Inc.(13)
10.24 - Registration Rights Agreement, dated as of August 31,1996, among
NGC Corporation, BG Holdings, Inc., NOVA Gas Services (U.S.) Inc.
and Chevron U.S.A. Inc.(11)
10.25 - Master Alliance Agreement, dated as of September 1, 1996, among
Chevron U.S.A. Inc., Chevron Chemical Company, Chevron Pipe Line
Company, and other Chevron U.S.A. Inc. affiliates, NGC
Corporation, Natural Gas Clearinghouse, Warren Petroleum Company,
Limited Partnership, Electric Clearinghouse, Inc. and other NGC
Corporation affiliates.(11)
*10.26 - Natural Gas Purchase and Sale Agreement, dated as of August 30,
1996, among Chevron U.S.A. Inc. and Natural Gas Clearinghouse.(11)
*10.27 - Master Natural Gas Processing Agreement, dated as of September 1,
1996, among Chevron U.S.A. Inc. and Warren Petroleum Company,
Limited Partnership.(11)
*10.28 - Master Natural Gas Liquids Purchase Agreement, dated as of
September 1, 1996, among Warren Petroleum Company, Limited
Partnership and Chevron U.S.A. Inc.(11)
26
EXHIBIT
NUMBER DESCRIPTION
*10.29 - Gas Supply and Service Agreement, dated as of September 1, 1996,
among Chevron Products Company and Natural Gas Clearinghouse.(11)
10.30 - Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron U.S.A. Production
Company.(13)
10.31 - Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Chemical Company.(13)
10.32 - Master Power Service Agreement, dated as of May 16, 1996, among
Electric Clearinghouse, Inc. and Chevron Products Company.(13)
*10.33 - Feedstock Sale and Refinery Product Purchase Agreements, dated as
of September 1, 1996, among Chevron Products Company and Warren
Petroleum Company, Limited Partnership.(11)
*10.34 - Refinery Product Sale Agreement (Hawaii), dated as of
September 1, 1996, among Warren Petroleum Company, Limited
Partnership and Chevron Products Company.(11)
*10.35 - Feedstock Sale and Refinery Product Master Services Agreement,
dated as of September 1, 1996, among Chevron Products Company and
Warren Petroleum Company, Limited Partnership.(11)
*10.36 - CCC Product Sale and Purchase Agreement dated as of September 1,
1996, among Warren Petroleum Company, Limited Partnership and
Chevron Chemical Company.(11)
*10.37 - CCC/WPC Services Agreement, dated as of September 1, 1996, among
Chevron Chemical Company and Warren Petroleum Company, Limited
Partnership.(11)
*10.38 - Operating Agreement, dated as of September 1, 1996, among Warren
Petroleum Company, Limited Partnership and Chevron Pipe Line
Company.(11)
10.39 - Galena Park Services Agreement, dated as of September 1, 1996,
among Chevron Products Company and Midstream Combination Corp.(11)
*10.40 - Venice Complex Operating Agreement, dated as of September 1, 1996,
among Chevron U.S.A. Inc. and Warren Petroleum Company, Limited
Partnership.(13)
*10.41 - Product Storage Lease and Terminal Access Agreement, dated as of
September 1, 1996, among Chevron U.S.A. Inc. and Warren Petroleum
Company, Limited Partnership.(13)
10.42 - Lone Star Swap Transaction Confirmation Term Sheet, dated as of
September 1, 1996, among Chevron U.S.A. Inc. and NGC
Corporation.(11)
*10.43 - West Texas LPG Pipeline Limited Partnership Agreement, dated as of
September 1, 1996, by and between Chevron Pipe Line Company, or an
affiliate thereof, and an affiliate of NGC Corporation.(11)
*10.44 - West Texas LPG Pipeline Operating Agreement, dated as of September
1, 1996, by and between Chevron Pipe Line Company, or an affiliate
thereof, and the West Texas LPG Pipeline Partnership.(11)
*10.45 - Time Charter, dated as of August 31, 1996, by and between
Midstream Barge Company, L.L.C. and Warren Petroleum Company,
Limited Partnership.(11)
*10.46 - Limited Liability Company Agreement of Midstream Barge Company,
L.L.C., dated as of August 31, 1996, by and between Chevron U.S.A.
Inc. and Warren Petroleum Company, Limited Partnership.(11)
27
EXHIBIT
NUMBER DESCRIPTION
+10.47 - Employment Agreement, dated as of November 15, 1996, between
Thomas M. Matthews and NGC Corporation.
+13 - Annual Report (portions incorporated by reference in this
Form 10-K).
+22.1 - Subsidiaries of the Registrant.
+23.1 - Consent of Arthur Andersen LLP.
___________________
+ Filed herewith
* Exhibit omits certain information which the Company has filed separately with
the Commission pursuant to a confidential treatment request pursuant to Rule
406 promulgated under the Securities Act of 1933, as amended.
(1) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-43871.
(2) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL, Inc. on Form S-1, Registration No. 33-46416.
(3) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 31, 1993 of Trident NGL, Inc.,
Commission File No. 1-11156.
(4) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended September 30, 1993 of Trident NGL Holding,
Inc., Commission File No. 1-11156.
(5) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL Holding, Inc. on Form S-1, Registration No. 33-68842.
(6) Incorporated by reference to exhibits to the Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1993 of Trident NGL Holding, Inc.,
Commission File No. 1-11156.
(7) Incorporated by reference to exhibits to the Registration Statement of
Trident NGL Holding, Inc. on Form S-4, Registration No. 33-88907.
(8) Incorporated by reference to the Registration Statement of NGC Corporation
on Form S-3, Registration No. 33-97368.
(9) Incorporated by reference to exhibits to the Current Report on Form 8-K of
NGC Corporation, Commission File 1-11156, dated March 14, 1995.
(10) Incorporated by reference to exhibits to the Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1994, of NGC Corporation, Commission
File No. 1-11156.
(11) Incorporated by reference to exhibits to the Quarterly Report on Form 10-Q
for the Quarterly Period Ended September 30, 1996 of NGC Corporation,
Commission File No. 1-11156.
(12) Incorporated by reference to exhibits to the Current Report on Form 8-K of
NGC Corporation, dated October 16, 1996, Commission File No. 1-11156.
(13) Incorporated by reference to exhibits to the Registration Statement of
Midstream Combination Corp. on Form S-4, Registration No. 333-09419.
28
(14) Incorporated by reference to exhibits to the Current Report on Form 8-K of
NGC Corporation, dated May 22, 1996, Commission File No. 1-11156.
(b) Reports on Form 8-K of NGC Corporation.
Current Report on Form 8-K of NGC Corporation, Commission File No.
1-11156, dated October 9, 1996 (Announcement that the Company planned
to record a third-quarter pretax charge to earnings to provide a
reserve of approximately $4 million relating to the difference between
the cost associated with the Company's then-current lease at its
headquarters and the anticipated revenue from subletting that space
after the Company's relocation to downtown Houston in the first quarter
of 1997).
Current Report on Form 8-K on NGC Corporation, Commission File No.
1-11156 dated October 11, 1996 (Announcement of a lawsuit filed on
October 11, 1996, in the Queen's Bench of Alberta, Judicial District of
Calgary, by a group of Canadian producers against Pan-Alberta Gas Ltd.,
a 49.9% indirect subsidiary of the Company).
Current Report on Form 8-K of NGC Corporation, Commission File No.
1-11156, dated October 16, 1996 (On December 16, 1996, the Company sold
$175 million of its 7 5/8% Senior Debentures due October 15, 2026
pursuant to an underwritten public offering).
29
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.
NGC CORPORATION
Date: March 28,1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson, Chairman of the Board,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson, Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni, Vice President and
Controller (Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
-------------------------------------
Stephen W. Bergstrom, Senior Vice
President and Director
Date: March 28, 1997 By: /s/ Stephen J. Brandon
-------------------------------------
Stephen J. Brandon, Director
Date: March 28, 1997 By: /s/ David R. Varney
-------------------------------------
David R. Varney, Director
Date: March 28, 1997 By: /s/ P. Nicholas Woollacott
-------------------------------------
P. Nicholas Woollacott, Director
Date: March 28, 1997 By:
-------------------------------------
C. Kent Jespersen, Director
Date: March 28, 1997 By:
-------------------------------------
Jeffrey M. Lipton, Director
Date: March 28, 1997 By:
-------------------------------------
Albert Terence Poole, Director
30
Date: March 28, 1997 By: /s/ Darald W. Callahan
----------------------
Darald W. Callahan, Director
Date: March 28, 1997 By: /s/ Donald L. Paul
-------------------------------------
Donald L. Paul, Director
Date: March 28, 1997 By: /s/ Peter J. Robertson
-------------------------------------
Peter J. Robertson, Director
Date: March 28, 1997 By: /s/ Daniel L. Dienstbier
-------------------------------------
Daniel L. Dienstbier, Director
Date: March 28, 1997 By: /s/ J. Otis Winters
-------------------------------------
J. Otis Winters, Director
31
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.
NATURAL GAS CLEARINGHOUSE
By: NGC Corporation, its general partner
Date: March 28, 1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson, Chairman of the Board,
Chief Executive Officer and Director
of NGC Corporation
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 28, 1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson, Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni, Vice President and
Controller of NGC Corporation
(Principal Financial and Accounting
Officer)
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
-------------------------------------
Stephen W. Bergstrom, Senior Vice
President and Director of
NGC Corporation
Date: March 28, 1997 By: /s/ Stephen J. Brandon
-------------------------------------
Stephen J. Brandon, Director of NGC
Corporation
Date: March 28, 1997 By: /s/ David R. Varney
-------------------------------------
David R. Varney, Director of NGC
Corporation
Date: March 28, 1997 By: /s/ P. Nicholas Woollacott
-------------------------------------
P. Nicholas Woollacott, Director of
NGC Corporation
32
Date: March 28, 1997 By:
-------------------------------------
C. Kent Jespersen, Director of
NGC Corporation
Date: March 28, 1997 By:
-------------------------------------
Jeffrey M. Lipton, Director of
NGC Corporation
Date: March 28, 1997 By:
-------------------------------------
Albert Terence Poole, Director
of NGC Corporation
Date: March 28, 1997 By: /s/ Daniel L. Dienstbier
-------------------------------------
Daniel L. Dienstbier, Director
of NGC Corporation
Date: March 28, 1997 By: /s/ J. Otis Winters
-------------------------------------
J. Otis Winters, Director
of NGC Corporation
Date: March 28, 1997 By: /s/ Darald W. Callahan
-------------------------------------
Darald W. Callahan, Director
of NGC Corporation
Date: March 28, 1997 By: /s/ Donald L. Paul
-------------------------------------
Donald L. Paul, Director of
NGC Corporation
Date: March 28, 1997 By: /s/ Peter J. Robertson
-------------------------------------
Peter J. Robertson, Director
of NGC Corporation
33
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.
WARREN NGL, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni, Vice President
and Controller (Principal Financial
and Accounting Officer)
Date: March 28, 1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson, Director
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
-------------------------------------
Kenneth E. Randolph,
Senior Vice President and Director
34
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.
WARREN ENERGY RESOURCES, LIMITED
PARTNERSHIP
By: Warren Energy, Inc., its general
partner
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-----------------------------------
Stephen A. Furbacher, President
and Director of Warren Energy, Inc.
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 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher, President and
Director of Warren Energy, Inc.
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni, Vice President and
Controller of Warren Energy, Inc.
(Principal Financial and Accounting
Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
-------------------------------------
Kenneth E. Randolph,
Senior Vice President and
Director of Warren Energy, Inc.
Date: March 28, 1997 By: /s/ Michael B. Barton
-------------------------------------
Michael B. Barton, Vice President
and Director of Warren Energy, Inc.
35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WARREN PETROLEUM COMPANY,
LIMITED PARTNERSHIP
By: Warren Petroleum G.P., Inc., its
general partner
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher, President
and Director of Warren Petroleum
G.P., Inc.
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 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher, President and
Director of Warren Petroleum G.P., Inc.
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni, Vice President and
Controller of Warren Petroleum
G.P., Inc. (Principal Financial
and Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph,
Senior Vice President and
Director of Warren Petroleum
G.P., Inc.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
Senior Vice President and Director of
Warren Petroleum G.P., Inc.
36
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.
WARREN GAS LIQUIDS, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni, Vice President and
Controller (Principal Financial
and Accounting Officer)
Date: March 28, 1997 By: /s/ William A. Zartler
-------------------------------------
William A. Zartler,
Vice President and Director
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
------------------------------------
Kenneth E. Randolph,
Senior Vice President and Director
37
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.
NGC OIL TRADING AND TRANSPORTATION, INC.
Date: March 28, 1997 By: /s/ James H. Current, Sr.
-------------------------------------
James H. Current, Sr.,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ James H. Current, Sr.
-------------------------------------
James H. Current, Sr.,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
-------------------------------------
Kenneth E. Randolph,
Senior Vice President and Director
Date: March 28, 1997 By: /s/ Mike Barton
--------------------------------------
Mike Barton,
Vice President and Director
38
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.
NGC UK LIMITED
Date: March 28, 1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson,
Chairman of the Board and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ C. L. Watson
-------------------------------------
C. L. Watson, Chairman of the
Board and Director (Principal
Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Jacob S. Ulrich
-------------------------------------
Jacob S. Ulrich, Director
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
-------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ James H. Current, Sr.
-------------------------------------
James H. Current, Sr., Director
39
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.
NGC CANADA, INC.
Date: March 28, 1997 By: /s/ Rodney D. Wimer
-------------------------------------
Rodney D. Wimer, President
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 28, 1997 By: /s/ Rodney D. Wimer
---------------------------------------
Rodney D. Wimer, President
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ C. L. Watson
---------------------------------------
C. L. Watson, Director
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ James T. Bruvall
---------------------------------------
James T. Bruvall, Director
40
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.
WTLPS, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
-------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph,
Senior Vice President and Director
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
Senior Vice President and Director
41
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.
WPC LP, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
-------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Charles H. Brownman
----------------------------------------
Charles H. Brownman, Director
Date: March 28, 1997 By: /s/ Mark J. Gentile
---------------------------------------
Mark J. Gentile, Director
Date: March 28, 1997 By: /s/ Jesse A. Finkelstein
---------------------------------------
Jesse A. Finkelstein, Director
42
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.
NGC FUTURES, INC.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Joel M. Staib
---------------------------------------
Joel M. Staib, Director
43
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.
ELECTRIC CLEARINGHOUSE, INC.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ C.L. Watson
---------------------------------------
C.L. Watson, Director
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Dan W. Ryser
---------------------------------------
Dan W. Ryser, Director
44
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.
HUB SERVICES, INC.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Vincent T. McConnell
---------------------------------------
Vincent T. McConnell, Director
45
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.
NGC STORAGE, INC.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
------------------------
Stephen W. Bergstrom,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
---------------------------------------
Stephen W. Bergstrom,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and (Principal
Financial and Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Michael B. Barton
---------------------------------------
Michael B. Barton, Director
46
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.
NGC ANADARKO GATHERING SYSTEMS, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni, Vice President and
Controller (Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Stephen W. Bergstrom
----------------------------------------
Stephen W. Bergstrom, Director
47
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.
WARREN GAS MARKETING, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
--------------------0------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Michael B. Barton
---------------------------------------
Michael B. Barton, Director
48
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.
WARREN NGL PIPELINE COMPANY
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Michael B. Barton
---------------------------------------
Michael B. Barton, Director
49
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.
KANSAS GAS SUPPLY CORPORATION
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
----------------=----------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Michael B. Barton
---------------------------------------
Michael B. Barton, Director
50
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.
WARREN INSTRASTATE GAS SUPPLY, INC.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 28, 1997 By: /s/ Stephen A. Furbacher
---------------------------------------
Stephen A. Furbacher,
President and Director
(Principal Executive Officer)
Date: March 28, 1997 By: /s/ Melinda Tosoni
---------------------------------------
Melinda Tosoni,
Vice President and Controller
(Principal Financial and
Accounting Officer)
Date: March 28, 1997 By: /s/ Kenneth E. Randolph
---------------------------------------
Kenneth E. Randolph, Director
Date: March 28, 1997 By: /s/ Michael B. Barton
---------------------------------------
Michael B. Barton, Director
51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of NGC Corporation:
We have audited in accordance with generally accepted auditing standards the
financial statements included in NGC Corporation (a Delaware corporation) and
subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated March 14, 1997. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The financial statement schedule listed in Item 14 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 a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
March 14, 1997
F-1
SCHEDULE I
NGC CORPORATION
CONDENSED BALANCE SHEETS OF REGISTRANT
(in thousands, except share data)
DECEMBER 31, DECEMBER 31,
1995 1996
----------- ----------
ASSETS
CURRENT ASSETS
Cash $ -- $ 6
Accounts receivable 108 --
Intercompany accounts receivable 337,876 450,631
Prepayments and other assets 2,793 5,053
----------- -----------
340,777 455,690
----------- -----------
PROPERTY, PLANT AND EQUIPMENT 8,216 1,287
Less: accumulated depreciation (2,193) (196)
----------- -----------
6,023 1,091
----------- -----------
OTHER ASSETS
Investments in affiliates 1,219,027 547,866
Intercompany note receivable 237,000 237,000
Deferred taxes and other assets 13,262 36,393
----------- -----------
$ 1,816,089 $ 1,278,040
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Intercompany accounts payable $ 16,295 $ 390,233
Accrued liabilities 18,914 2,427
----------- -----------
35,209 392,660
Long-term debt 644,000 333,000
Deferred taxes 20,147 --
----------- -----------
699,356 725,660
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value,
50,000,000 shares authorized:
8,000,000 shares designated as
Series A Participating Preferred
Stock, 7,815,363 shares issued and
outstanding at December 31, 1996 75,418 --
Common stock, $0.01 par value,
400,000,000 shares
authorized: 149,846,503 shares issued
and outstanding at December 31, 1996,
and 110,493,411 shares issued and
105,031,874 shares outstanding at
December 31, 1995 1,498 1,105
Additional paid-in capital 896,432 515,785
Retained earnings 143,385 35,490
------------ -----------
1,116,733 552,380
------------ -----------
$ 1,816,089 $ 1,278,040
============ ============
See Note to Registrant's Financial Statements.
F - 2
SCHEDULE I
NGC CORPORATION
STATEMENTS OF OPERATIONS OF THE REGISTRANT
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE TEN MONTH PERIOD FROM INCEPTION (MARCH 1, 1995)
THROUGH DECEMBER 31, 1995
(in thousands)
1996 1995
------------- -------------
Depreciation and amortization $ (496) $ (196)
General and administrative expenses -- --
------------- -------------
Operating loss (496) (196)
Equity in earnings of affiliates 182,159 60,744
Intercompany interest and other income 17,968 13,570
Interest expense (28,071) (18,152)
Other expenses (1,915) (135)
------------- -------------
Income before income taxes 169,645 55,831
Income tax provision 56,323 16,056
------------- -------------
NET INCOME $ 113,322 $ 39,775
============= =============
See Note to Registrant's Financial Statements.
F - 3
SCHEDULE I
NGC CORPORATION
STATEMENTS OF CASH FLOWS OF THE REGISTRANT
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE TEN MONTH PERIOD FROM INCEPTION (MARCH 1, 1995) THROUGH
DECEMBER 31, 1995
(in thousands)
1996 1995
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 113,322 $ 39,775
Items not affecting cash flows from operating activities:
Depreciation and amortization 1,996 196
Equity in earnings of affiliates, net of cash distributions (182,159) (60,744)
Deferred taxes 45,896 17,303
Other 7,466 1,475
Change in assets and liabilities resulting from operating activities:
Accounts receivable (108) --
Intercompany transactions (298,592) (60,398
Prepayments and other assets 2,260 (5,053)
Accrued liabilities 8,487 2,427
Other, net (1,193) 4,150
------------ ------------
Net cash used in operating activities (302,625) (60,869)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,055) --
Acquisition of Trident NGL, Inc. -- (166,900)
Other -- (1,333)
------------ ------------
Net cash used in investing activities (2,055) (168,233)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,542,000 1,224,039
Repayments of long-term borrowings (1,231,000) (891,039)
Intercompany advances -- (237,000)
Proceeds from sale of capital stock, options and warrants 858 725
Capital contributions -- 135,000
Dividends and other distributions (7,184) (2,617)
------------ ------------
Net cash provided by financing activities
304,674 229,108
------------ ------------
Net (decrease) increase in cash and cash equivalents (6) 6
Cash and cash equivalents, beginning of period 6 --
------------ ------------
Cash and cash equivalents, end of period $ -- $ 6
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized)
$ 22,341 $ 16,339
============ ============
Taxes paid (net of refunds) $ 1,444 $ --
============ ============
Cash dividends paid to parent by consolidated or unconsolidated subsidiaries $ -- $ --
============ ============
See Note to Registrant's Financial Statements.
F - 4
SCHEDULE I
NGC CORPORATION
NOTE TO REGISTRANT'S FINANCIAL STATEMENTS
Note 1 -- BASIS OF PRESENTATION
NGC Corporation ("NGC" or the "Company") is a holding company that
principally conducts all of its business through its subsidiaries. The Company
is the result of a strategic business combination ("Trident Combination")
between Natural Gas Clearinghouse and Trident NGL Holding, Inc. ("Holding"),
under which Holding was renamed NGC Corporation. Pursuant to the terms of the
Trident Combination, Holding was the legally surviving corporation and
Clearinghouse was considered the acquiring company for accounting purposes
resulting in a new historical cost basis for Holding beginning March 1, 1995,
the effective date of the Trident Combination. The accompanying condensed
Registrant Financial Statements were prepared pursuant to rules promulgated by
the Securities and Exchange Commission. In accordance with these rules, the
accompanying statements reflect the financial position, results of operations
and cash flows of NGC, the holding company of NGC Corporation, at December 31,
1996, and for the year then ended, and at December 31, 1995, and for the ten
month period from the effective date of the Trident Combination through December
31, 1995. These statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto of NGC Corporation
incorporated by reference into this Form 10-K.
F - 5
ACCORD ENERGY LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 1996
REGISTERED NO: 2877398
ACCORD ENERGY LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 1996
Pages
-----
Director's Report...................................... 1-4
Statement of Directors' Responsibilities............... 5
Report of the Auditors................................. 6
Consolidated Profit and Loss Account................... 7
Balance Sheet.......................................... 8
Consolidated Cash Flow Statement....................... 9
Notes to the Financial Statements...................... 10-20
ACCORD ENERGY LIMITED
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1996
The Directors present their report and audited financial statements for the year
ended 31 December 1996.
PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS
The principal trading activities of the group in the year were the wholesale
trading of natural gas and crude oil. There was no trading of electricity
carried out in the year but the group has continued to explore opportunities in
this area as it sees electricity trading as an integral part of its strategic
objective to be a major player in wholesale energy trading markets.
The 1996 results represent a significant improvement on last year's performance
in terms of growth of the business and financial results. Turnover from gas and
oil trading increased by 43% with a corresponding improvement in overall pre-tax
profits. The major contribution to these improvements came from the gas trading
business which recorded substantial growth in volumes traded during a period
which saw growing competition and the entry of more players to the market.
The year also saw the introduction of the Network Code and the commencement of
flexibility mechanism trading in which the group was actively involved. Volumes
traded by the company in this first period of operation were relatively small
but provided a marginal contribution to profits.
Maintaining the level of performance achieved in the year is likely to become
increasingly more difficult in view of the uncertainties in the gas trading
market and the several changes taking place in the UK gas market. However, the
directors are committed to maximising returns by ensuring that the company
remains a major player in the energy trading markets and that is pursues and
fully exploits all opportunities and products in both the UK and European
markets. In this context, the company sees its trading on the IPE gas futures
market as an additional tool for effective risk management and for providing
added value to its gas trading activities.
FINANCIAL RESULTS AND DIVIDENDS
The financial results are set out on pages 7 to 20. An interim dividend of
(Pounds) 7.2 million was approved by the Board and paid during the year. A
second interim dividend of (Pounds) 14.814 million has been proposed bringing
the total dividends for the year ended 31 December 1996 to (Pounds) 22.014
million. The Directors do not recommend the payment of a final dividend and
retained profits in the year have been transferred to reserves.
DIRECTORS
The Directors who served during the period covered by this report are: -
NAME DATE APPOINTED DATE RESIGNED
- ---- -------------- ---------------
RA Gardner (Chairman) 30 January 1997
AW Burgess
30 January 1997
MS Clare
JH Current 23 September 1996 02 March 1997
CD Friedlander 12 February 1996
ML Hazelwood 08 July 1996 23 September 1996
P Jungels 12 February 1996 24 September 1996
HK Kaelber 02 March 1997
KE Randolph 02 March 1997
CL Watson 02 March 1997
Mr R A Gardner was appointed Director and Chairman on 1 December 1995.
DIRECTORS' INTERESTS
At no time during the year did any Director still holding office on
31 December 1996 have any beneficial interest in the shares of the Company or
any other company within the Group except for the interests in the shares of the
ultimate parent company, British Gas plc, as stated below: -
BENEFICIAL HOLDINGS
-------------------
1 JANUARY 1996 31 DECEMBER 1996
-------------- ----------------
AW Burgess 13,052 13,523
MS Clare - 471
Mr Gardner is also a Director of the ultimate parent company, British Gas plc.
His interests in the shares of British Gas plc and its subsidiary undertaking
are shown in the accounts of that company.
Details of options to purchase fully paid ordinary shares that were granted
under the parent company's Savings Related and Executive Share Option Schemes
and the awards of notional allocations of restricted shares under the parent
company's Long Term Incentive Scheme for Directors and other senior executives
are as follows:
SAVINGS RELATED OPTION SCHEME
-----------------------------
At 1 January 1996 Granted Exercised At 31 December 1996
----------------- ------- -------- -------------------
AW Burgess 8,075 - - 8,075
2
EXECUTIVE OPTION SCHEME
-----------------------
At 1 January 1996 Granted Exercised At 31 December 1996
----------------- ------- --------- -------------------
AW Burgess 108,962 - - 108,962
MS Clare 49,063 - - 49,063
LONG TERM INCENTIVE SCHEME
--------------------------
Awards
in
At 1 January 1996 Year At 31 December 1996
----------------- ------ -------------------
AW Burgess 10,936 - 10,936
MS Clare 12,833 - 12,833
The awards represent the maximum award possible if performance criteria are met
at the end of the performance and retention period of five or six years.
All options and awards were granted under the terms of the parent company's
Savings Related Share Option Scheme, Executive Share Option Scheme or Long Term
Incentive Scheme, details of which are given in that company's report and
accounts for the year ended 31 December 1996.
DIRECTORS' INSURANCE
The Company has through its ultimate parent company, British Gas plc, maintained
insurance for the Directors in respect of their duties as Directors of the
Company.
DONATIONS
Provision has been made in the accounts for a net contribution of (Pounds)
126,000 for charitable purposes, which will be paid in 1997. No donations to
political organisations were provided for or made during the period.
EMPLOYEES
The Company depends on the skills and commitment of its employees in order to
achieve its long term objectives and is therefore committed to the development
of its staff. Employees at all levels are encouraged to actively participate and
make the fullest contribution to the growth and success of the Company. The
company's recruitment, training and promotion policies, which are based on
merit, have been developed to ensure equal opportunities for all employees
regardless of gender, race or disability.
3
SHARE CAPITAL
The share capital is divided into 51 "A" shares and 49 "B" shares which at the
end of the year were held by GB Gas Holdings Limited and NGC Great Britain
Limited (formerly known as NGC UK Limited) respectively. The "A" shares held by
GB Gas Holdings were previously held by British Gas plc. In October 1996 British
Gas transferred legal and beneficial ownership of the "A" shares to GB Gas
Holdings Limited as a part of its corporate restructuring in advance of the
demerger. Following the demerger, approved in February 1997, the beneficial
ownership of the total issued capital of GB Gas Holdings Limited was transferred
to Centrica plc.
On 3rd March 1997 Centrica plc and NGC Corporation of Houston, Texas announced
that the two companies had reached agreement on the future ownership of Accord
Energy Limited. Under the terms of the agreement which is consistent with the
objectives set out at the time Centrica plc was demerged from British Gas,
Centrica plc will take operational control of Accord Energy Limited with NGC
Great Britain Limited's 49 shares being converted to participating preference
shares and 147 participating preference shares being issued to GB Gas Holdings.
The agreement is conditional upon regulatory clearances. The new share capital
of Accord Energy Limited will be approved at an Extraordinary General Meeting to
be convened once Centrica is satisfied regarding regulatory clearances.
Therefore the agreement does not yet have unconditional effect.
TAXATION STATUS
The close company provisions of the Income and Corporation Taxes Act 1988 do not
apply to the Company.
AUDITORS
Price Waterhouse have expressed their willingness to be re-appointed as Auditors
of the Company.
A resolution proposing the re-appointment of Price Waterhouse as Auditors to the
Company and to authorise the Directors to fix their remuneration will be put to
the Annual General Meeting.
BY ORDER OF THE BOARD Registered Office:
Charter Court
50 Windsor Road
Slough
Berkshire SL1 2HA
Registered in England
No 2877398
TERESA FURMSTON
COMPANY SECRETARY
DATE: 21 March 1997
4
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are required by the Companies Act 1985 to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the Company and of the Group as at the end of the financial year
and of the profit or loss for that period.
The Directors consider that in preparing the financial statements, appropriate
accounting policies have been used and applied consistently. The Directors also
consider that reasonable and prudent judgements and estimates have been made and
applicable accounting standards have been followed.
The Directors are responsible for maintaining adequate accounting records, for
safeguarding the assets of the Group and for preventing and detecting fraud and
other irregularities.
The Directors, having prepared the financial statements, have requested the
Auditors to take whatever steps and undertake whatever inspections they consider
to be appropriate for the purposes of enabling them to give their audit report.
5
REPORT OF THE AUDITORS TO THE MEMBERS OF ACCORD ENERGY LIMITED
We have audited the financial statements on pages 7 to 20 which have been
prepared under the historic cost principles and other accounting policies
described on pages 10 and 11.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 5, the Company's Directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes assessment of the significant estimates and judgements made by the
Directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary, in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and of the Group as at 31 December 1996 and of the
profit and cash flows of the Group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
Price Waterhouse
Chartered Accountants and Registered Auditors
Southwark Towers
32 London Bridge Street
London SE1 9SY
Date: 21 March 1997
6
ACCORD ENERGY LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 1996
Year Year
to 31 Dec to 31 Dec
1996 1995
Notes (Pounds) 000 (Pounds) 000
TURNOVER 2 426,057 298,619
Cost of Sales (386,785) (270,710)
-------- --------
GROSS PROFIT 39,272 27,909
Administration expenses (7,217) (5,689)
-------- --------
OPERATING PROFIT 3 32,055 22,220
Net interest 5 1,321 1,063
-------- --------
PROFIT ON ORDINARY ACTIVITIES BEFORE 33,376 23,283
TAXATION
Tax on profit on ordinary activities 6 (11,139) (7,708)
-------- --------
PROFIT FOR THE FINANCIAL YEAR 22,237 15,575
Dividends 7 (22,014) (15,400)
-------- --------
RETAINED PROFIT 223 175
======== ========
All gains or losses for the year have been derived from continuing operations.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 1996
There are no recognised gains or losses for the period other than those stated
in the profit and loss account.
The accompanying notes on pages 10 to 20 form part of these accounts.
7
ACCORD ENERGY LIMITED
BALANCE SHEETS AS AT 31 DECEMBER 1996
GROUP COMPANY
---------------------------- ----------------------------
1996 1995 1996 1995
Notes (Pounds) 000 (Pounds) 000 (Pounds) 000 (Pounds) 000
FIXED ASSETS
Tangible fixed assets 8 203 100 203 100
Investments 9 - - - -
---------- ---------- ---------- ----------
203 - 203 -
---------- ---------- ---------- ----------
CURRENT ASSETS
Stock 10 2,675 3,838 2,675 3,838
Debtors 11 53,700 38,453 53,700 38,453
(amounts falling due within one year
Cash at bank and in hand 22,416 10,184 22,416 10,184
---------- ---------- ---------- ----------
78,791 52,475 78,791 52,475
---------- ---------- ---------- ----------
CREDITORS 12 (78,137) (51,941) (78,137) (51,941)
(amounts falling due within one year)
NET CURRENT ASSETS 654 534 654 534
---------- ---------- ---------- ----------
Total assets less current liabilities 857 634 857 634
---------- ---------- ---------- ----------
CREDITORS 12 - - (414) (414)
(amounts falling due after more ---------- ---------- ---------- ----------
than one year)
NET ASSETS 857 634 443 220
---------- ---------- ---------- ----------
CAPITAL AND RESERVES
Called up share capital 13 - - - -
Profit and loss account 14 857 634 443 220
---------- ---------- ---------- ----------
SHAREHOLDERS' FUNDS 15 857 634 443 220
---------- ---------- ---------- ----------
The financial statements on pages 7 to 20 were approved by the Board of
Directors on 21 March 1997 and were signed on its behalf by: -
MS Clare
Director
The accompanying notes on pages 10 to 20 form part of these accounts.
8
ACCORD ENERGY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1996
Year Year
to 31 Dec to 31 Dec
1996 1995
Notes (Pounds) 000 (Pounds) 000
NET CASH INFLOW FROM OPERATING ACTIVITIES 16 26,931 26,304
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 1,591 1,105
Interest paid (270) (42)
TAXATION (8,695) (2,932)
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (125) (100)
ACQUISITIONS AND DISPOSALS - -
EQUITY DIVIDENDS PAID (7,200) (15,400)
MANAGEMENT OF LIQUID RESOURCES - -
FINANCING - -
--------- ---------
INCREASE IN CASH 12,232 8,935
9
ACCORD ENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost
convention and in accordance with applicable Accounting Standards in the
United Kingdom.
BASIS OF CONSOLIDATION
The consolidated profit and loss account, balance sheet and cash flow
statement include the financial statements of the Company and its
subsidiary undertakings made up to 31 December 1996.
GOODWILL
On the acquisition of a subsidiary or associated undertaking, fair values
are attributed to the net assets acquired. Goodwill which represents the
difference between the purchase consideration and the fair values, is
taken to reserves.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at purchase cost together with any
incidental costs of acquisition less depreciation.
Depreciation, which is charged in the year following the year of
acquisition, is calculated on a straight-line basis sufficient to write
off the cost of individual assets over their estimated useful lives. The
depreciation periods for the principal categories of assets are:
Fixtures and fittings : 5 years
Computer and office equipment : 5 years
INVESTMENTS
Investments are stated at cost less any permanent diminution in value.
STOCK
Stocks are valued at the lower of cost and net realisable value.
10
FOREIGN CURRENCIES
Assets and liabilities denominated in foreign currencies are translated
into pounds sterling at closing rates of exchange. Income and expenses in
foreign currencies are translated into pounds sterling at rates of
exchange prevailing at the time of the transactions.
TURNOVER
Turnover, which excludes value added tax, represents the invoiced value of
sales of energy products including gas, oil and electricity to customers
plus an estimate of sales not yet invoiced.
FORWARD COMMITMENTS
There is an exposure to price movements on open contracts and an accrual is
made for any potential losses on these contracts. Matched gains on open
contracts are recognised at time of delivery.
DEFERRED TAXATION
Provision is made for deferred taxation on all material timing differences
to the extent that it is probable that a liability or asset will
crystallise.
2. TURNOVER
Turnover of (Pounds)426.1 million (1995 - (Pounds) 298.6 million) comprises
sales of energy products.
3. Operating profit
The operating profit is stated after charging: -
1996 1995
(Pounds) 000 (Pounds) 000
Auditor's fees (statutory audit) 20 12
Auditor's fees (other non-audit services) - 11
-------- --------
20 23
-------- --------
11
4. DIRECTORS AND EMPLOYEES
(A) DIRECTORS' REMUNERATION
None of the Directors, including the Chairman, received any remuneration
in respect of their services to the Company.
The total emoluments of the highest paid director for the period of his
directorship were (Pounds) nil (1995 - (Pounds) 482,588), which includes
salary, allowances and incentive payments relating to the Company's
performance.
The emoluments of Directors, excluding pension contributions, were in the
following bands:
Number
-----------
1996 1995
(Pounds) 480,001 to (Pounds) 485,000 - 1
(B) EMPLOYEE INFORMATION
The average number of personnel employed by the Group, including
executive directors and secondees from the shareholder companies, during
the period was 23 (1995 - 20) who were all based in the United Kingdom.
Staff costs for these persons were as follows: -
1996 1995
(Pounds) 000 (Pounds) 000
Salaries & wages 1,296 853
Social Security 92 69
Pensions 56 43
-------- --------
1,444 965
-------- --------
In addition, provisions amounting to (Pounds) 4.7 million which includes
social security costs of (Pounds) 0.5 million (1995 - (Pounds) 3.9 million
which includes social security costs of (Pounds) 0.3 million) were made in
the year for incentive payments relating to company performance.
12
5. NET INTEREST
1996 1995
(Pounds) 000 (Pounds) 000
Interest receivable from Group undertakings 1,561 1,081
Interest receivable from third parties 30 24
Interest payable to Group undertakings (258) (31)
Interest payable to third parties (12) (11)
-------- --------
Net interest receivable 1,321 1,063
-------- --------
Interest payable is on loans and overdrafts wholly repayable within five
years.
6. TAXATION
1996 1995
(Pounds) 000 (Pounds) 000
UK - corporation tax @ 33% 9,208 8,846
- deferred corporation tax 1,899 (1,138)
- prior year adjustment 32 -
-------- --------
Taxation charge 11,139 7,708
There is no unprovided deferred taxation.
7. DIVIDENDS
1996 1995
(Pounds) 000 (Pounds) 000
Interim dividend 7,200 15,400
Second Interim dividend (proposed) 14,814 -
------- -------
22,014 15,400
------- -------
The interim dividend of (Pounds) 7.2 million (1995 - (Pounds) 15.4 million)
was paid in September 1996. No final dividend is proposed.
13
8. TANGIBLE FIXED ASSETS
Group Company
------------------ -----------------
1996 1995 1996 1995
(Pounds) 000 (Pounds) 000 (Pounds) 000 (Pounds) 000
COST
Balance at 1 January 1996 100 - 100 -
Additions 125 100 125 100
Disposals - - - -
------------ ------------ ----------- -----------
Balance at 31 December 1996 225 100 225 100
------------ ------------ ----------- -----------
DEPRECIATION
Balance at 1 January 1996 - - - -
Provision in year 22 - 22 -
Disposals - - - -
------------ ------------ ----------- -----------
Balance at 31 December 1996 22 - 22 -
------------ ------------ ----------- -----------
NET BOOK VALUE
As at 31 December 1996 203 100 203 100
The additions to tangible fixed assets in the year are computer and office
equipment type assets.
9. FIXED ASSET INVESTMENTS
Fixed asset investments represent shares in wholly owned subsidiaries and
are shown below at cost.
Company
------------
1996 1995
(Pounds) (Pounds)
Balance at 1 January 1996 5 5
Additions - -
Balance at 31 December 1996 5 5
-------- --------
14
SUBSIDIARY UNDERTAKINGS
Country of
registration of Class of Company
incorporation shares held holding
(%)
Accord Electric Limited England Ordinary 100
Accord Gas Limited England Ordinary 100
Accord Oil Limited England Ordinary 100
Accord Power Limited England Ordinary 100
As at 31 December 1996 these subsidiaries were dormant.
10. STOCK
Group Company
------------------ ------------------
1996 1995 1996 1995
(Pounds) 000 (Pounds) 000 (Pounds) 000 (Pounds) 000
Gas in storage 2,675 3,838 2,675 3,838
----------- ----------- ------------ -----------
11. DEBTORS
Group Company
----------------- -----------------
1996 1995 1996 1995
(Pounds) 000 (Pounds) 000 (Pounds) 000 (Pounds) 000
Trade debtors 88 56 88 56
Accrued income 40,529 36,240 40,529 36,240
Amounts owed by group undertakings 13,057 246 13,057 246
Other debtors 26 12 26 12
Deferred corporation tax - 1,899 - 1,899
------------ ------------ ------------ ------------
53,700 53,700 38,453 38,453
------------ ------------ ------------ ------------
15
12. CREDITORS
Group Company
------------------ ------------------
1996 1995 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
AMOUNTS FALLING DUE WITHIN ONE YEAR:-
-Trade creditors - 247 - 247
-Amounts owed to group undertakings 33,401 16,843 33,401 16,843
-Taxation and social security 9,467 6,904 9,467 6,904
-Other creditors 13,007 1,826 13,007 1,826
-Accruals and deferred income 22,262 26,121 22,262 26,121
----------- ------------ ------------ ------------
78,137 51,941 78,137 51,941
AMOUNTS FALLING DUE AFTER MORE
THAN ONE YEAR:-
-Amounts owed to subsidiary
undertakings - - 414 414
------------ ------------ ------------ ------------
- - 414 414
------------ ------------ ------------ ------------
As part of its normal trading operations the company has entered into
forward purchase and sales contracts totalling (Pounds) 999 million at 31
December 1996 (1995 - (Pounds) 634 million). It is exposed to market risk
of price movements in relation to any unmatched element of the above
commitments and included in the accruals amounts shown above is an accrual
of (Pounds) nil (1995 - (Pounds) 5.6 million) against potential losses
arising out of these contracts.
13. CALLED UP SHARE CAPITAL
AUTHORISED 1996 1995
(Pounds)000 (Pounds)000
51 ordinary "A" shares of (Pounds)1 each 51 51
49 ordinary "B" shares of (Pounds)1 each 49 49
----------- -----------
100 100
----------- -----------
ALLOTTED AND FULLY PAID
51 ordinary "A" shares of (Pounds)1 each 51 51
49 ordinary "B" shares of (Pounds)1 each 49 49
----------- -----------
100 100
----------- -----------
16
With the exception of voting rights which on aggregate are shared equally
by the two categories of shares, the amounts payable on a winding up and
the rights to dividends are on the basis of the percentage interests in
each category of shares.
14. RESERVES
Group Company
(Pounds) 000 (Pounds) 000
PROFIT AND LOSS ACCOUNT:
Balance at 1 January 1996 634 220
Transfer from profit and loss account
during the period 223 223
-------- --------
Balance at 31 December 1996 857 443
-------- --------
The Company's profit for the year after taxation was (Pounds) 22.237
million (1995 - (Pounds) 15.575 million).
As permitted by Section 230(3) of the Companies Act 1985, no profit and
loss account is presented for the Company.
15. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Group Company
---------------------------- ----------------------------
1996 1995 1996 1995
(Pounds) 000 (Pounds) 000 (Pounds) 000 (Pounds) 000
Profit for the period 22,237 15,575 22,237 15,575
Dividends (22,014) (15,400) (22,014) (15,400)
------------ ----------- ------------ -----------
Net addition to shareholders' funds 223 175 223 175
Shareholders' funds at 1 January 1996 634 459 220 45
------------ ----------- ------------ -----------
Shareholders' funds at 31 December 1996 857 634 443 220
------------ ----------- ------------ -----------
17
16. CASH FLOW STATEMENT
(a) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW
1996 1995
(Pounds) 000 (Pounds) 000
Operating profit 32,055 22,220
Depreciation 22 -
(Increase)/decrease in stock 1,163 (2,951)
(Increase)/decrease in debtors (17,129) (12,254)
Increase/(decrease) in creditors 10,820 19,289
----------- -----------
26,931 26,304
----------- -----------
(b) ANALYSIS OF CHANGES IN FINANCING DURING THE PERIOD
1996 1995
(Pounds) (Pounds)
Balance at 1 January 1996 100 100
----------- -----------
Balance at 31 December 1996 100 100
----------- -----------
(c) ANALYSIS OF CASH
1996 1995
(Pounds)000 (Pounds)000
Balance at 1 January 1996 10,184 1,249
Net increase in cash flow 12,232 8,935
--------- ---------
22,416 10,184
--------- ---------
Cash at bank and in hand 22,416 10,184
========= =========
18
17. RELATED PARTY TRANSACTIONS
As part of its normal trading activities during the year, the group
conducted business with the two shareholder companies and companies within
their group of companies. All transactions were of a trading nature under
arms length commercial arrangements and mainly relate to the purchase/sale
of energy products.
The net monetary value of related transactions during the year ended 31
December 1996 and the amount of the net outstanding balances at 31 December
1995 and 1996 are as follows:
CHARGED TO AMOUNTS OWED BY ACCORD ENERGY LTD.
ACCORD ENERGY ----------------------------------
LTD. IN AT AT
YEAR 31 DEC `96 31 DEC `95
(POUNDS) 000 (POUNDS) 000 (POUNDS) 000
British Gas Group 192,054 12,789 16,589
Natural Gas Clearinghouse 465 465 187
18. PENSIONS
The company's own defined contribution pension scheme commenced on 1
December 1995. Under the scheme, defined contributions are made by the
employer to an independently administered fund and in the case of certain
employees, who are not members of the company scheme, to their personal
pension arrangements. The assets of the scheme are held separately from
those of the company and managed by an external pension fund management
organisation appointed by the Trustees. The pensions cost charge for the
year includes contributions payable by the company under this scheme
amounting to (Pounds) 55,400 (1995 - (Pounds) 31,000), of which (Pounds)
6,600 was payable at year end and is included in creditors.
Prior to the commencement of the above scheme, the company made
contributions for those employees seconded from the parent company, British
Gas plc., in accordance with the pension scheme operated by that company.
The details of the scheme are given in that company's report and accounts
for the year ended 31 December 1996. The total contributions made by the
company for the year under these arrangements amounted to (Pounds) nil
(1995 - (Pounds) 12,000).
19
19. ULTIMATE PARENT COMPANY
The Directors regard British Gas plc, a company registered in England, as
the ultimate parent company as at 31 December 1996 and British Gas plc is
in the only company to consolidate the accounts of this Company. Copies of
the parent company's consolidated financial statements may be obtained from
100 Thames Valley Park Drive, Reading, Berkshire RG6 1PT.
Under the agreement reached between Centrica plc and NGC Corporation of
Houston, Texas in March 1997, Centrica plc, which was demerged from British
Gas plc, will take operational control of Accord Energy Limited subject to
regulatory clearances. As from this date the Directors will regard Centrica
plc, a company registered in England, as the ultimate parent company and
the only company to consolidate the accounts of the Company.
20