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SECURITIES AND EXCHANGE COMMISSION
------------------------------------
WASHINGTON, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- ----------
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1999
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____________ to __________
Commission File Number: 000-25717
[GRAPHIC OMITTED][GRAPHIC OMITTED]
BETA OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0876964
(State of Incorporation) (I.R.S. Employer Identification No.)
901 Dove Street, Suite 230, Newport Beach, CA 92660
(Address of principal executive offices) (Zip Code)
(949) 752-5212
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
As of November 12, 1999, the Registrant had 9,055,334 shares of Common Stock,
$.001 par value, outstanding.
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<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
BETA OIL & GAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS
September 30, December 31,
1999 1998
--------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 453,637 $ 198,043
Accounts receivable -
Oil and gas sales 221,171 -
Other 9,678 9,678
Prepaid expenses 82,929 14,951
--------------- --------------
Total current assets 767,415 222,672
--------------- --------------
Oil and gas properties, at cost (full cost method):
Evaluated properties 8,405,024 3,387,300
Unevaluated properties 12,264,610 11,466,695
Less--accumulated depletion and impairments (1,825,452) (1,670,691)
--------------- --------------
Net oil and gas properties 18,844,182 13,183,304
--------------- --------------
Furniture, fixtures and equipment, at cost, less
Accumulated depreciation of $22,880 and $13,413 at
September 30, 1999 (unaudited) and December 31,1998, respectively 15,422 22,943
Other assets 703,742 166,028
Deferred offering costs - 23,524
--------------- -------------
$ 20,330,761 $ 13,618,471
=============== ==============
</TABLE>
(Continued)
<PAGE>
BETA OIL & GAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
September 30, December 31,
1999 1998
--------------- ----------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable, trade $ 133,142 $ 310,770
Payroll and payroll taxes payable 15,501 7,559
Other accrued expenses 25,132 800
--------------- ----------------
Total current liabilities 173,775 319,129
--------------- ----------------
Premiums payable 34,563 -
Shareholders' Equity:
Common stock, $.001 par value; 50,000,000 shares authorized;
8,985,482 and 7,029,492 shares issued and outstanding
at September 30, 1999 (unaudited) and December 31, 1998,
respectively 8,985 7,029
Additional paid-in capital 26,343,363 15,878,386
Accumulated deficit (6,229,925) (2,586,073)
--------------- ----------------
Total shareholders' equity 20,122,423 13,299,342
--------------- ----------------
--------------- ----------------
Total Liabilities and Shareholders' Equity $ 20,330,761 $ 13,618,471
=============== ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
<PAGE>
BETA OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
The three months ended The nine months ended
September 30, September 30,
----------------------------- ----------------------------
1999 1998 1999 1998
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues
Oil and gas sales $ 254,332 $ - $ 375,595 $ -
--------------- -------------- -------------- -------------
Costs and expenses:
Lease operating expense 12,190 - 24,141 -
General and administrative 401,340 171,781 883,727 555,608
Impairment expense - 21,090 1,227 1,618,432
Depreciation and depletion expense 114,819 3,183 163,002 8,853
--------------- -------------- -------------- -------------
Total costs and expenses 528,349 196,054 1,072,097 2,182,893
--------------- -------------- -------------- -------------
Loss from operations (274,017) (196,054) (696,502) (2,182,893)
Other income and (expense):
Interest expense (1,591,390) - (2,965,172) -
Interest income 13,868 10,960 17,822 39,867
-------------- -------------- -------------- -------------
Net loss $ (1,851,539) $ (185,094) $ (3,643,852) $ (2,143,026)
=============== ============== ============== =============
Basic and diluted loss
per common share ($0.21) ($0.03) ($0.46) ($0.35)
=============== ============== ============== =============
Weighted average number of
Common shares outstanding 8,750,411 6,361,003 7,852,341 6,154,036
=============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
<PAGE>
BETA OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
The nine months ended
September 30,
-----------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,643,852) $ (2,143,026)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and depletion 163,002 8,853
Amortization of notes payable discount
and debt issuance costs 2,843,100 -
Impairment expense 1,227 1,618,432
Salary contributed to Beta 10,000 45,000
Changes in operating assets and liabilities:
Accounts receivable (221,171) (15,464)
Prepaid expenses (67,978) (6,226)
Accounts payable, trade (177,629) 229,762
Commissions payable - (15,929)
Accrued payroll 7,942 (6,629)
Other accrued expenses (800) (14,000)
Net cash provided by (used in)
-------------- -------------
operating activities (1,086,159) (299,227)
-------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Oil and gas property expenditures (5,815,638) (8,765,218)
Change in other assets (537,714) (52,315)
Acquisition of furniture, fixtures & equipment (1,947) (2,762)
-------------- -------------
Net cash used in investing activities (6,355,299) (8,820,295)
-------------- -------------
</TABLE>
(Continued)
<PAGE>
BETA OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Continued)
<TABLE>
The nine months ended
September 30,
-----------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from sale of shares and warrants, net 7,746,830 5,225,490
Proceeds from exercise of warrants 75,000 -
Offering costs of previous private placements (42,996) -
Proceeds from premiums payable 65,651 -
Repayment of premiums payable (5,957) -
Proceeds from issuance of bridge notes, net 2,835,000 -
Repayment of bridge notes (3,000,000) -
Decrease in deferred offering costs 23,524 -
-------------- -------------
Net cash provided by financing activities 7,697,052 5,225,490
-------------- -------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS: 255,594 (3,894,032)
CASH AND CASH EQUIVALENTS:
Beginning of period 198,043 3,985,599
-------------- -------------
End of period $ 453,637 $ 91,567
============== =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ 120,555 $ -
============== =============
Cash paid for income taxes $ 5,410 $ -
============== =============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
The nine months ended
September 30,
----------------------------
1999 1998
-------------- ------------
<S> <C> <C>
Fair market value of common stock issued for:
Oil and gas properties $ - $ 25,000
Discount on notes payable $ 2,574,000 $ -
Interest on bridge notes $ 180,000 $ -
</TABLE>
The accompanying notes are an integral part to these condensed consolidated
financial statements
<PAGE>
PART I - ITEM 1 (CONTINUED)
FINANCIAL STATEMENTS
BETA OIL & GAS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. The accompanying condensed consolidated financial statements
of Beta Oil & Gas, Inc. and subsidiary ("Beta") have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions of Form 10-Q and Article 10 of Regulation S-X. The
balance sheet as of September 30, 1999, the statements of
operations for the three and nine months ended September 30, 1999
and 1998, and the statements of cash flows for the nine months
ended September 30, 1999 and 1998 are unaudited but include all
adjustments (consisting of normal recurring adjustments) which
Beta considers necessary for a fair presentation of the financial
position at such dates and the operating results and cash flows
for those periods. Although Beta believes that the disclosures in
these financial statements are adequate to make the information
presented not misleading, certain information normally included
in financial statements and related footnotes prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The December 31, 1998
condensed consolidated balance sheets were derived from audited
financial statements but do not include all disclosures required
by generally accepted accounting principles. The accompanying
financial statements should be read in conjunction with the
financial statements as contained in Beta's S-1 Registration
Statement which was declared effective July 1, 1999.
Note 2. The results of operations for the three and nine months ended
September 30, 1999 may not necessarily be indicative of the
results of operations that may be incurred for the entire fiscal
year. Prior to the three month period ended September 30, 1999,
Beta was in the development stage.
Note 3. Basic earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common
stock were exercised or converted into common stock, or resulted
in the issuance of common stock that then shared in the earnings
of the entity. All such securities or other contracts were
anti-dilutive for all periods presented and, therefore, excluded
from the computation of earnings per share.
Note 4. On July 30, 1999, Beta completed its initial public offering
of common stock. Beta sold 1,465,490 shares of common stock at
$6.00 per share out of the 1,500,000 maximum number of shares
offered pursuant to its S-1 Registration Statement which was
declared effective July 1, 1999. Beta realized gross proceeds of
$8,792,948 from the sale of its common stock in the initial
public offering, before deducting commissions and offering
expenses. On July 7, 1999, Beta applied $3,070,000 of the
proceeds from the offering towards the full repayment of the
bridge notes and accrued interest.
<PAGE>
PART I (CONTINUED)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion is to inform you about the financial position,
liquidity and capital resources of Beta as of September 30, 1999 and December
31, 1998 and the results of operations for the three and nine month periods
ended September 30, 1999 and 1998.
Disclosure Regarding Forward-Looking Statements
Included in this report are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward-looking
statements will prove to have been correct.
All forward looking statements contained in this section are based on
assumptions believed to be reasonable.
These forward looking statements include statements regarding:
q Beta's financial position
q Proved or possible reserve quantities and net present values of those
reserves
q Business strategy
q Plans and objectives of management of Beta for future operations and
capital expenditures
Beta can give no assurance that such expectations and assumptions will
prove to be correct. Reserve estimates of oil and gas properties are generally
different from the quantities of oil and natural gas that are ultimately
recovered or found. This is particularly true for estimates applied to
exploratory prospects. Additionally, any statements contained in this report
regarding forward-looking statements are subject to various known and unknown
risks, uncertainties and contingencies, many of which are beyond the control of
Beta. Such things may cause actual results, performance, achievements or
expectations to differ materially from the anticipated results, performance,
achievements or expectations.
Factors that may affect such forward-looking statements include, but are
not limited to:
q Beta's ability to generate additional capital to complete its planned
drilling and exploration activities
q Risks inherent in oil and gas acquisitions, exploration, drilling,
development and production; price volatility of oil and gas
q Competition from other oil and gas companies
q Shortages of equipment, services and supplies
q Government regulation
q Environmental matters
q Financial condition and operating performance of the other companies
participating in the exploration, development and production of oil and gas
ventures that Beta is involved in
In addition, since all of Beta's prospects are currently operated by third
parties, Beta may not be in a position to control costs, safety and timeliness
of work as well as other critical factors affecting a producing well or
exploration and development activities.
Financial Condition, Liquidity and Capital Resources
Beta's working capital was a surplus of $593,640 at September 30, 1999
compared to a deficit of ($96,457) at December 31, 1998. Beta's working capital
increased due primarily to Beta's completion of its initial public offering. In
order to fund capital expenditures in the first nine months of 1999, Beta
obtained short term debt financing in the form of $3,000,000 in bridge note
financing which is discussed below under "Bridge Note" and completed an initial
public offering in July 1999 which is discussed below under "Initial Public
Offering."
Historical Cash Used In and Provided by Operating, Investing and Financing
Activities
Beta financed all of its business activities through December 31, 1998
through issuances of its common stock in private placements. Beta raised net
proceeds of $9,221,783 during 1997 and $6,548,632 during 1998 in these private
placements. During the nine months ended September 30, 1999 Beta realized net
proceeds of $2,835,000 from a bridge note financing and net proceeds of
$7,781,562 from an initial public offering which is discussed below. The
$3,000,000 face amount of the bridge notes was repaid in full on July 7, 1999
from the proceeds of the initial public offering.
The net proceeds of the private placements, the bridge note financing and
the initial public offering have been primarily invested in oil and gas
properties totaling $5,815,638 and $8,765,218 for the nine months ended
September 30, 1999 and 1998.
Beta's cash balance at September 30, 1999 was $453,637 compared to a cash
balance of $198,043 at December 31, 1998. The change in Beta's cash balance is
summarized as follows:
<TABLE>
<S> <C>
Cash balance at December 31, 1998 $ 198,043
Sources of cash:
Cash provided by operating activities (1,086,159)
Cash provided by financing activities 7,697,052
----------------
Total sources of cash 6,610,893
Uses of cash:
Oil and gas property expenditures (5,815,638)
Other assets (increase in advances to industry partners) (537,714)
Furniture, fixtures and equipment (1,947)
----------------
(6,355,299)
----------------
Cash balance at September 30, 1999 453,637
================
</TABLE>
Long Term Liquidity and Capital Resources
The timing of most of Beta's capital expenditures is discretionary. Beta has
no material long-term commitments associated with its capital expenditure plans
or operating agreements. Consequently, Beta has a significant degree of
flexibility to adjust the level of such expenditures as circumstances warrant.
The level of capital expenditures will vary in future periods depending on the
success it experiences on planned exploratory drilling activities in 1999, gas
and oil price conditions and other related economic factors. Accordingly, Beta
has not yet prepared an estimate of capital expenditures for the year 2000 or
future periods.
Bridge Note
During the nine months ended September 30, 1999, Beta completed the private
placement of a $3,000,000 bridge note financing to three institutional investors
referred to as the "1999 bridge financing." Beta issued promissory notes having
a maturity date of one year and bearing an interest rate of 10%. In addition, a
total of 459,000 shares of Beta common stock were issued in connection with the
1999 bridge financing. The $3,000,000 in bridge notes was repaid in full with
accrued interest on July 7, 1999 from the proceeds of Beta's initial public
offering.
Beta received net cash proceeds of $2,835,000 from the bridge notes. The
estimated fair market value of 429,000 shares of common stock issued in
connection with the bridge note of $2,574,000 was treated as a discount and was
amortized over the term of the promissory notes using the interest method. The
estimated fair market value of 30,000 additional shares of common stock issued
per the terms of the bridge note of $180,000 was immediately expensed as
interest during the nine month period ended September 30, 1999. Accordingly,
Beta incurred additional interest expense of $2,754,000 because of the common
stock issued in connection with the bridge notes. The debt issuance costs of the
1999 bridge financing of $89,100 were amortized as additional interest expense
during the nine months ended September 30, 1999.
Plan of Operation for 1999
In the opinion of Beta's management, the existing working capital
of Beta, the net proceeds of Beta's initial public offering completed on July
30, 1999, and the exercise of common stock purchase warrants subsequent to
September 30, 1999 will be sufficient to fund the operations and projected
capital requirements of Beta until December 15, 1999. Beta is allocating its
cash resources from all sources, including the net proceeds of the initial
public offering, to the following categories of expenditures:
1) Drilling and completion costs for wells on Beta's prospects which are
estimated to be $1,800,000 for the period September 30 to December 31,
1999. It is anticipated that as many as 10 test wells will be drilled in
the fourth quarter of 1999 in which Beta will have an interest
participation ranging from 12.5% to 30%. While it is difficult to predict
the exact timing of when these wells will be proposed for drilling, Beta's
operating agreements generally provide a thirty day period in which to
elect participation in a proposed well. Generally funds must be advanced
within thirty days or less after the thirty day election period;
2) Leasehold acquisition costs estimated to be $200,000 for the period
September 30 to December 31, 1999;
3) 3-D seismic acquisition costs only if funds are available; and
4) General and administrative overhead estimated to be $300,000 for the
period September 30 to December 31, 1999.
At such time as Beta has fully utilized the proceeds of the offering and
Beta's existing working capital, it will be necessary for Beta to raise
additional funds. It is anticipated that additional funds will be raised from
one or more of the following sources:
1) Beta has approximately 797,000 callable common stock purchase warrants
outstanding exercisable at a price of $5.00 per share. Beta is able to
call these warrants at any time on and after the date that its common
stock is traded on any exchange, including the Over-the-Counter
Bulletin Board, at a market price equal to or exceeding $7.00 per share
for 10 consecutive days, of which there can be no assurance that such a
price level will occur. It is Beta's intent to call all or a portion of
these warrants at such time, if and when, the market price of the stock
is at a sufficient level to fund capital requirements. Beta will
receive proceeds equal to the exercise price times the number of shares
which are issued from the exercise of warrants net of commission to the
broker of record, if any. Beta could realize net proceeds of
approximately $3,800,000 from the exercise of these warrants. There is
no assurance that Beta will realize any proceeds from the warrant
calls. Beta has not called any warrants to date. Beta has received net
proceeds of approximately $295,000 during the month of October and
November 1999 from the voluntary exercise of warrants.
2) Beta may seek bank or other debt financing at such time that cash flow
from operations is established. Beta is not able to predict when, if
ever, such financing will be available. Beta is currently seeking bank
financing in the range of $1,000,000 to $5,000,000.
3) Beta may seek mezzanine financing, if available, on terms acceptable to
Beta. Mezzanine financing usually involves debt with a higher cost of
capital as compared to conventional bank financing. Beta is currently
seeking mezzanine financing in the range of $1,000,000 to $5,000,000.
4) Beta may realize cash flow from oil and gas wells, if found to be
productive. Beta owns a working interest in 6 wells that are currently
producing and in additional wells which are presently being completed
and equipped for production.
The net proceeds of the public offering and warrant exercises combined with
Beta's existing working capital may not be sufficient to fund Beta's capital
expenditures that are projected for 1999. If the above additional sources of
cash are insufficient or are unavailable on terms acceptable to Beta, Beta will
be compelled to reduce the scope of its business activities. If Beta is unable
to fund planned expenditures within a thirty to sixty day period after a well is
proposed for drilling, it may be necessary to:
1) Forfeit its interest in wells that are proposed to be drilled;
2) Farm-out its interest in proposed wells;
3) Sell a portion of its interest in proposed wells and use the sale
proceeds to fund its participation for a lesser interest; and
4) Reduce general and administrative expenses.
As stated above, Beta believes it has sufficient working capital to fund its
capital expenditure requirements until December 15, 1999. In the event that Beta
cannot raise additional capital , it may be necessary for Beta to curtail its
business activities until other financing is available.
These are forward looking statements that are based on assumptions which in
the future may not prove to be accurate. Although Beta's management believes
that the expectations reflected in such forward looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
achieved.
Comparison of Results of Operations for the Nine months Ended September 30, 1999
and 1998 (unaudited)
During the nine months ended September 30, 1999 Beta had oil and gas
revenues of $375,595. Beta's net production was 153,000 mcf at an average price
of $2.37 per mcf and 614 barrels of oil at an average price of $21.15 per
barrel. During the nine months ended September 30, 1998 Beta generated no
revenues.
During the nine months ended September 30, 1999 Beta incurred lease
operating expenses of $24,141. Beta's average lifting cost for this period was
$.15 per mcf equivalent. During the nine months ended September 30, 1998 Beta
incurred no lease operating expense.
General and administrative expenses for the nine months ended September 30,
1999 were $883,727 compared to $555,608 for the nine months ended September 30,
1998. This represents a $328,000 or a 59% increase over the prior year period.
The primary reasons for the increase were due to:
(1) An increase in operational activities in 1999 versus 1998;
(2) An increase in the number of employees from five in 1998 to six in 1999;
and
(3) Costs related to Beta's initial public offering and filing the S-1
registration statement.
Depreciation and depletion expense for the nine months ended September 30,
1999 was $163,002 compared to $8,853 for the nine months ended September 30,
1998. This represents a $154,149 increase over the prior year period. The
primary reason for the increase is due to the fact Beta had no oil or gas
production in the prior year period that would give rise to depletion expense.
Loss from operations totaled $(696,502) for the nine months ended September
30, 1999 compared to $(2,182,893) for the nine months ended September 30, 1998.
The primary reason for the decrease in the loss was due to an impairment
write-down in the prior year of approximately $1,600,000 associated with the
drilling of two Australian dry holes.
Other income for the nine months ended September 30, 1999 consisted of
interest income in the amount of $17,822. Beta realized $39,867 of interest
income for the nine month period in 1998. The reason for the decrease was lower
average cash and cash equivalents balances for the 1999 period as compared to
the 1998 period.
During the nine months ended September 30, 1999, Beta incurred interest
expense of $2,965,172, substantially all of which related to the bridge notes.
Interest expense related to the bridge notes for the 1999 period consists of the
following:
<TABLE>
<S> <C>
Cash interest expense $ 120,555
Amortization of note discount and fair market value of 30,000 shares 2,754,000
Amortization of deferred loan costs 89,100
--------------
Bridge note interest expense for the nine months ended September 30, 1999 $ 2,963,655
==============
</TABLE>
During the nine months ended September 30, 1998, Beta incurred no interest
expense.
Net loss for the nine months ended September 30, 1999 was $(3,643,852)
compared to $(2,143,026) for the nine months ended September 30, 1998. The
increase in net loss was primarily due to the interest expense related to the
bridge note.
Comparison of Results of Operations for the Three Months ended September 30,
1999 and 1998 (unaudited)
During the three months ended September 30, 1999 Beta had oil and gas
revenues of $254,332. Beta's net gas production was 91,000 mcf at an average
price of $2.65 per mcf. Beta's net oil production was 614 barrels at an average
price of $21.15 per barrel. During the three months ended September 30, 1998,
Beta generated no revenues.
During the three months ended September 30, 1999 Beta incurred lease
operating expenses of $12,190 Beta's average lifting cost for this period was
$.13 per mcf equivalent. During the three months ended September 30, 1998 Beta
incurred no lease operating expense.
General and administrative expenses for the three months ended September
30, 1999 were $401,340 compared to $171,781 for the three months ended September
30, 1998, representing a $230,000 or 134% increase over the prior year. The
primary reasons for the increase were due to:
(1) An increase in operational activities in 1999 versus 1998;
(2) An increase in the number of employees from five in 1998 to six in 1999;
and
(3) Costs related to Beta's initial public offering and filing the S-1
registration statement.
Depreciation and depletion expense for the three months ended September 30,
1999 was $114,819 compared to $3,183 for the three months ended September 30,
1998. This represents a $112,000 increase over the prior year period. The
primary reason for the increase is due to the fact Beta had no oil or gas
production in the prior year period that would give rise to depletion expense.
Loss from operations totaled $(274,017) for the three months ended
September 30, 1999 compared to $(196,054) for the three months ended September
30, 1998. The primary reason for the increase in the loss was due to higher
general and administrative costs in the latest period ended September 30, 1999.
Other income for the three months ended September 30, 1999 consisted of
interest income in the amount of $13,868. Beta realized $10,960 of interest
income for the three month period in 1998. The reason for the increase was
higher average cash and cash equivalents balances for the 1999 period as
compared to the 1998 period.
During the three months ended September 30, 1999, Beta incurred interest
expense of $1,591,390, substantially all of which relates to the bridge notes.
The bridge note interest expense consisted of the following:
<TABLE>
<S> <C>
Cash interest expense $ 8,918
Amortization of note discount and fair market value of 30,000 shares 1,526,909
Amortization of deferred loan costs 54,046
--------------
Bridge note interest expense for the three months ended September 30, 1999 $ 1,589,873
==============
</TABLE>
During the three months ended September 30, 1998, Beta incurred no interest
expense.
Net loss for the three months ended September 30, 1999 was $(1,851,739)
compared to $(185,094) for the three months ended September 30, 1998. The
increase in net loss was primarily due to the significant interest expense
associated with the 1999 bridge financing in the 1999 period.
Income Taxes
As of December 31, 1998, Beta had available, to reduce future taxable
income, a tax net operating loss carryforward of approximately $4,003,000 which
expires in the years 2012 through 2018. As of December 31, 1998, Beta has a
deferred tax asset of approximately $1,110,000 which is fully reserved for with
a valuation allowance. The deferred tax asset consists entirely of the net
operating loss carryforward. Utilization of the tax net operating loss
carryforward may be limited in the event a 50% or more change of ownership
occurs within a three year period. The tax net operating loss carryforward may
be limited by other factors as well.
Cancellation of Warrants
On June 21, 1999, certain warrant holders agreed to cancel 87,296 warrants
to purchase common stock consisting of 20,000 warrants exercisable at $5.00 per
share and 67,296 warrants exercisable at $7.00 per share. All of the cancelled
warrants were non-callable with expiration dates on March 12, 2003. The warrants
were cancelled for no consideration pursuant to a request by the National
Association of Securities Dealers, the "NASD". The warrant holders were certain
NASD member firms and their employees who participated in Beta's 1998 private
placement, as well as Beta's legal counsel. The cancellation request was made
and complied with because the NASD determined that these warrants could be
deemed "underwriter's compensation" and the continued existence of these
warrants could result in the compensation for the initial public offering
exceeding the NASD guidelines. Therefore, all such warrants which could be
deemed "underwriter's compensation" in excess of NASD guidelines have been
cancelled for no consideration.
<PAGE>
Drilling Activity
During the nine months ended September 30, 1999, Beta participated in the
drilling of 13 exploratory wells. Of the 13 wells drilled, 4 were completed as
dry-holes and 9 are either producing or in various stages of completion for
production. The wells are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Estimated First
Working Completion Date of
Well Name Location Interest % Status Production
1. Cobra Stream #1 Onshore Louisiana 15% Dry-hole N/A
2. Shark Prospect #1 Offshore Louisiana 15% Dry-hole N/A
3. Schluter #1 Jackson Co., TX 20% Dry-hole N/A
4. Buttonwillow #1 Kern Co., CA 30% Dry-hole N/A
=================
Total 80%
=================
1. Redfish #1 Offshore Louisiana 15% On production 9/99
2. Stingray #1 Offshore Louisiana 15% On production 9/99
3. Minkfish #2 Offshore Louisiana 9.4% On production 9/99
4. Minkfish #3 Offshore Louisiana 9.4% Awaiting production facility 6/2000
5. Pressley #1 Jackson Co., TX 12.5% On production 9/99
6. Wilbeck #1 Jackson Co., TX 12.5% On production 9/99
7. Alamo Realty #1 Jackson Co., TX 20% On production 9/99
8. Mark #1 Jackson Co., TX 12.5% Being completed 11/99
9. Faust #1 Jackson Co., TX 12.5% Being completed 11/99
=================
Total 118.8%
=================
</TABLE>
Initial Public Offering
On July 30, 1999, Beta completed its initial public offering of common
stock. Beta sold 1,465,490 shares of common stock at $6.00 per share out of the
1,500,000 maximum number of shares offered pursuant to its S-1 Registration
Statement which was declared effective July 1, 1999. Beta intends to withdraw
from registration the 34,510 unsold shares, the 150,000 shares registered to
satisfy an "Over-Allotment Option," and a total of 31,878 shares issuable upon
exercise of Selected Dealer Warrants in connection with the unsold portion of
the offering, including the Over-allotment Option.
Beta realized gross proceeds of $8,792,948 from the sale of its common
stock in the initial public offering, before deducting commissions and offering
expenses. On July 7, 1999, Beta applied $3,070,000 of the proceeds from the
offering towards the full repayment of the bridge notes and accrued interest.
Stock Option Plan
On August 27, 1999, the board of directors approved an Incentive and
Non-statutory stock option plan which authorizes the Compensation Committee to
grant stock option awards to officers, directors and employees. The plan
provides, among other things, the following:
q The maximum number of shares which may be optioned and sold under the plan
is 700,000 shares.
q The per share exercise price for common shares to be issued pursuant to the
exercise of an option shall be no less than the fair market value of Beta's
common stock as of the date of grant.
q The per share exercise price for common shares to be issued to persons
owning more than 10% of the voting stock of Beta at the date of grant,
shall be no less than 110% of the fair market value of Beta's common stock
as of the date of grant.
q The maximum term of the options shall be a maximum of ten years or such
lesser time period as the board of directors determines. The maximum time
period for options to be issued to persons owning more than 10% of the
voting stock of Beta at the date of grant shall be five years from the date
of grant.
The Compensation Committee of the board of directors granted 97,500 options
to officers, directors and employees as of August 27, 1999 at an exercise price
of $6.00 per share. All of the 97,500 options will expire on or before December
31, 2004. None of the 97,500 options, or any additional options issued under the
plan shall become exercisable until such time as the shareholders of Beta have
approved the plan as provided in Beta's bylaws.
Subsequent Events
I. Subsequent Drilling Activity
Subsequent to September 30, 1999, and up to the date of this report, Beta
participated in the drilling of the following wells:
<TABLE>
Estimated First
Working Completion Date of
Well Name Location Interest % Status Production
<S> <C> <C> <C> <C> <C>
1. Bowerbank #1 Kern Co., CA 30% Dry-hole N/A
2. Heron #1 Onshore Louisiana 12.5% Dry-hole N/A
=================
Total 42.5%
=================
1. Rayborn-Pressley #1 Jackson Co., TX 12.5% Being completed 12/99
2. SE Garrison City #1 Kern Co., CA 30.0% Being completed 1/2000
3. Hildebrandt #1 Jackson Co., TX 20.0% Unknown Unknown
4. Traylor #1 Jackson Co., TX 25.0% Unknown Unknown
=================
Total 87.5%
=================
</TABLE>
II. Beta Acquisition of Red River, LLC
Beta Oil & Gas, Inc. ("Beta") announced on October 14, 1999 that it has a
signed Letter of Intent to purchase Red River Energy, LLC. of Tulsa, Oklahoma, a
private oil and natural gas company. The purchase price will be paid by the
assumption of approximately $7.6 million existing debt and the issuance of
approximately 2.25 million shares of Beta common stock. The purchase is subject
to final due diligence, completion of a definitive acquisition agreement and
approval by Beta shareholders.
The assets of Red River Energy LLC consist of four components: 1) a 97.4%
working interest (80% net revenue interest) in a 30,160 acre unit which is
currently producing approximately 3.65 MMBTU/d and 120 Bopd from 22 active wells
in the Hunton Limestone formation in Central Oklahoma; 2) an 85% working
interest (68% net revenue interest) in 7,500 acres which are currently producing
960 MMBTU/d from 45 wells in the Atoka and Gilcrease formations in Eastern
Oklahoma; 3) a gas gathering system consisting of 40 miles of pipeline which is
currently transporting approximately 1650 MMBTU/d in Eastern Oklahoma; and 4) a
46 well coal bed methane project also located in Eastern Oklahoma which is
currently under development and producing approximately 600 MMBTU/d. Excluding
the coal bed methane project, the properties being acquired contain estimated
proved producing recoverable reserves totaling approximately 22.5 billion cubic
feet of natural gas and 504,000 barrels of oil having a net present value
discounted at 10% of approximately $23.5 million. Red River Energy, LLC is the
operator of all its properties.
<PAGE>
III. Exercise of Warrants
Subsequent to September 30, 1999, the following warrants to purchase Beta
common stock have been exercised:
<TABLE>
Exercise
Warrants exercised: Warrants Price $Amount
<S> <C> <C> <C>
10/7/99 10,000 $ 2.00 $ 20,000
10/15/99 1,000 $ 5.00 5,000
10/20/99 2,000 $ 2.00 4,000
10/20/99 2,000 $ 5.00 10,000
10/20/99 500 $ 5.00 2,500
10/21/99 20,154 $ 4.50 90,693
10/26/99 15,270 $ 5.00 76,350
10/26/99 2,000 $ 5.00 10,000
11/1/99 8,464 $ 4.50 38,088
11/1/99 8,464 $ 4.50 38,088
------------ ---------
69,852 $ 294,719
============ =========
</TABLE>
Impact of Recently Issued Standards
Beta intends to adopt SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," issued in June 1998 effective with its fiscal year
beginning January 1, 2000 as required by the Statement. Due to Beta's current
and anticipated limited use of derivative instruments, management anticipates
that adoption of SFAS 133 will not have any significant impact on Beta's
financial position or results of operations. SFAS 132, "Employees' Disclosures
about Pensions and other Postretirement Benefits," and SFAS 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise" were issued in 1998 and are not
expected to impact Beta regarding future financial statement disclosures,
results of operations and financial position.
Year 2000 "Y2K" Problem
Beta has begun to address possible remedial efforts in connection with
computer software that could be affected by the Year 2000 "Y2K" problem. The Y2K
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations. The Y2K
problem can affect any modern technology used by a business in the course of its
day. Any machine that uses embedded computer technology is susceptible to this
problem, including for example, telephone systems, postage meters and scales,
and of course, computers. The impact on a company is determined to a large
extent by the company's dependence on these technologies to perform their day to
day operations.
Internally, Beta has begun reviewing all such equipment and has determined
that many of its systems are Y2K compliant. This includes our telephone systems,
postage equipment and some of our software. We anticipate that all systems and
software will be fully reviewed and brought into compliance by November 1999. If
certain systems are not brought up to Y2K compliance by the end of November
1999, then the non-compliant technology will be disabled so as not to have an
impact on the systems that are compliant. Any such events would not have a
serious impact on our day to day operations, nor would any valuable information
be lost. Our company backs up all computer systems daily to protect us against
data loss and we have a system that utilizes 10 rotating back-up tapes as a
safeguard against having a tape that is unreadable. The costs of bringing our
company technology up to Y2K compliance is expected to be less than $5,000. This
is because the majority of the "patches" or programs designed to make software
Y2K compliant can be obtained over the internet from manufacturers for little or
no cost and we do not expect to rely heavily on outside consultants to upgrade
our systems as most of the work can be performed in-house.
Externally, the Year 2000 problem may impact other entities with which Beta
transacts business, and Beta cannot predict the effect of the Year 2000 problem
on such entities or Beta. With regard to those companies that we do business
with on a daily basis, we cannot guarantee that they will be vigilant about
their Y2K plan of action. We have, however, started mailing out a simple
questionnaire to these companies, requesting that they advise us of their Y2K
readiness. Should any of our oil and gas well operators experience a disruption
due to the Year 2000 problem, the most significant impact may be a delay in the
progress of drilling operations and/or interruption of production and revenue on
a producing well. In a worst case scenario, the former may ultimately cause Beta
to incur drilling cost overruns, while the latter may cause us to have an
interruption in revenues for several months. We have also assessed the
possibility of personal injury, loss of life, property damage and accidental
pollution resulting from equipment malfunctions. Although we believe these to be
a remote possibility, we have undertaken investigations to determine possible
problem areas and will communicate our findings, if any, to the project
operators.
In these unlikely events, Beta's plan of action is to have on hand a cash
reserve at December 31, 1999 to cover both the additional well costs and the
Company's overhead expenses until production resumes. We have not yet determined
the amount or source of such funds. We are contacting our insurance carriers to
determine the extent of insurance coverage, if any, in the event Y2K problems
affect any of Beta's project areas. In the event that Beta does experience Y2K
problems, it could result in a suspension of Beta's revenues. A suspension of
revenues could result in material losses from operations and a reduction in
Beta's working capital. Management is unable at this time to quantify the impact
that the Y2K problem could have on Beta's results of operations and financial
condition.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Beta is exposed to market risk related to adverse changes in oil and gas
prices. Beta's oil and gas revenues can be significantly affected by volatile
oil and gas prices. This volatility can be mitigated through the use of oil and
gas derivative financial hedging instruments. Beta does not currently use
derivative financial instruments to mitigate fluctuations in oil and gas prices
or interest rates and may continue to experience wide fluctuations in oil and
gas revenues as a result.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of knowledge of management there are no legal proceedings pending or
threatened against Beta which would have a materially adverse effect on its
financial condition or results of operations.
Item 2. Changes in Securities
(a) and (b) not applicable
(c) Recent sales of unregistered securities. Beta issued and sold the following
securities without registration under the Securities Act of 1933, as
amended ("Securities Act"), during the first nine months of 1999 and
through the date of this report:
1. In connection with the January 20, 1999 bridge financing, Beta issued
300,000 shares of common stock to the note holders and issued an
additional 29,000 shares as commissions in connection with the January
bridge financing. The certificates representing the shares issued bear
a restrictive legend prohibiting transfer without registration under
the Securities Act or the availability of an exemption from
registration and "stop transfer" instructions have been issued to the
transfer agent. The shares were issued subject to a "registration
rights" agreement, requiring among other things, that Beta file a
registration statement to register the shares under the Securities Act
180 days after the closing of Beta's initial public offering, which
was July 30, 1999.
2. In connection with the March 19, 1999 bridge financing, Beta issued
100,000 shares of common stock to the note holders on March 19 and
issued the note holders an additional 30,000 shares as follows:
April 19, 1999 10,000 additional shares
May 19, 1999 10,000 additional shares
June 19, 1999 10,000 additional shares
The certificates representing the shares issued bear a restrictive
legend prohibiting transfer without registration under the Securities
Act or the availability of an exemption from registration and "stop
transfer" instructions have been issued to the transfer agent. The
shares were issued subject to a "registration rights" agreement,
requiring among other things, that Beta file a registration statement
to register the shares under the Securities Act 180 days after the
closing of Beta's initial public offering, which was July 30, 1999.
3. On April 2, 1999 Beta issued 4,000 shares upon the exercise of
warrants to purchase common stock. The certificates representing the
shares issued bear a restrictive legend prohibiting transfer without
registration under the Securities Act or the availability of an
exemption from registration and "stop transfer" instructions were
issued to the transfer agent. The shares issued upon exercise of the
warrants were registered by Beta for resale by the holders in
Registration No. 333-68381.
4. On May 14, 1999 Beta issued 25,000 shares upon the exercise of
warrants to purchase common stock. The certificates representing the
shares issued bear a restrictive legend prohibiting transfer without
registration under the Securities Act or the availability of an
exemption from registration and "stop transfer" instructions were
issued to the transfer agent. The shares issued upon exercise of the
warrants were registered by Beta for resale by the holders in
Registration No. 333-68381.
In connection with the issuance of the above noted securities, Beta
relied upon Section 4(2) of the Securities Act in claiming exemption
for the registration requirement of the Securities Act. All of the
persons to whom the securities were issued had full information
concerning the business affairs of Beta and acquired the shares for
investment purposes. The certificates representing the shares issued
bear a restrictive legend prohibiting transfer without registration
under the Securities Act or the availability of an exemption from
registration and "stop transfer" instructions were issued to the
transfer agent.
(d) Use of proceeds.
(1) This use of proceeds information is being disclosed in connection with
Beta's S-1 Registration Statement No. 333-68381 which was declared
effective July 1, 1999.
(2) The offering to which the use of proceeds relates commenced on July 1,
1999.
(3) The offering terminated on July 30, 1999. Beta sold 1,465,490 shares
of common stock at $6.00 per share out of the 1,500,000 maximum number
of shares offered pursuant to its S-1 Registration Statement. Beta
withdrew from registration the 34,510 unsold shares, the 150,000
shares registered to satisfy an "Over-Allotment Option," and a total
of 31,878 shares issuable upon exercise of Selected Dealer Warrants in
connection with the unsold portion of the offering, including the
Over-allotment Option.
(4) The managing underwriter was Brookstreet Securities Corporation.
(5) The securities registered are Beta's common stock and common stock
underlying warrants.
(6) From the effective date of the Securities Act registration statement
No. 333-68381, July 1, 1999, through September 30, 1999, the amount of
expenses incurred for Beta's account in connection with the issuance
and distribution of the securities registered for underwriting
discounts and commissions, finders' fees, expenses paid to or for
underwriters, other expenses and total expenses were as follows:
<TABLE>
<S> <C>
Gross receipts: $ 8,792,948.00
Escrow fees (9,375.55)
Commissions (798,734.80)
SEC Registration Fee (19,424.25)
Nasdaq Listing Fee (10,000.00)
NASD Filing Fee (5,526.47)
Printing Expenses (48,004.89)
Blue Sky Fees (22,530.00)
Legal Fees and Expenses (70,490.54)
Accounting Fees and Expenses (85,212.26)
Road show expenses (30,062.23)
Due diligence expenses (13,536.17)
--------------------
Net proceeds of offering (a) : $ 7,680,050.84
====================
<FN>
(a) None of the offering expenses reflected above represent direct or indirect
payments to:
q Directors, officers, general partners of Beta or their associates.
q To persons owning ten (10) percent or more of any class of equity
securities of the issuer.
q To affiliates of the issuer.
</FN>
</TABLE>
(7) From the effective date of the Securities Act registration statement
No. 333-68381, July 1, 1999, through September 30, 1999, the amount of
net offering proceeds to Beta used for construction of plant, building
and facilities; purchase and installation of machinery and equipment;
purchases of real estate; acquisition of other business(es); repayment
of indebtedness; working capital; temporary investments; were as
follows:
<TABLE>
USE OF PROCEEDS: Proposed in Prospectus Actual Use of Proceeds
Description of Uses Maximum Offering Actual (a)(b) Offering
------------------------- -------------- -------------
<S> <C> <C> <C> <C>
Repayment of Bridge Debt $3,000,000.00 37% $3,000,000.00 39%
Accrued Interest - Bridge Note - 0% 68,492.00 1%
Working Capital - 0% 576,235.00 8%
Drilling and completion of wells:
Parallel Joint Venture, South Texas 1,750,000.00 22% 133,713.00 2%
Cheniere Joint Venture, South Louisiana 1,180,000.00 15% 2,456,995.00 32%
West Cameron Block 39, South Louisiana 1,200,000.00 15% 454,626.00 6%
Lapeyrouse Prospect, South Louisiana 545,000.00 7% 190,000.00 2%
Norcal Joint Venture, Central California 335,000.00 4% 147,409.00 1%
Land and seismic costs:
Parallel Joint Venture, South Texas - 0% 216,398.00 3%
Cheniere Joint Venture, South Louisiana - 0% 296,296.00 4%
West Cameron Block 39, South Louisiana - 0% - 0%
Lapeyrouse Prospect, South Louisiana - 0% 15,273.84 0%
Texoil Joint Venture, South Texas - 0% 124,613.00 2%
-------------- ------------------
Total net proceeds of offering $8,010,000.00 100% $7,680,050.84 100%
============== ==================
</TABLE>
(a) None of the expenditures reflected as actual use of proceeds represent
direct or indirect payments to:
q Directors, officers, general partners of Beta or their associates.
q To persons owning ten (10) percent or more of any class of equity
securities of the issuer.
q To affiliates of the issuer.
(b) The actual use of proceeds described above represents a material change
in the use of proceeds as described in the prospectus. The material
changes are as follows:
q The actual net proceeds of the offering were approximately
$427,000 less than the Maximum Offering estimated use of
proceeds disclosed in the prospectus.
q The actual use of net proceeds toward drilling and completion
of wells in the Parallel Joint Venture were approximately
$1,600,000 less than estimated in the prospectus. This was due
to the fact that a large portion of the anticipated drilling
activity was postponed until the fourth quarter of 1999 and
the first two quarters of 2000. The drilling was postponed
primarily because delays in acquiring all of the necessary
leases and permits.
q The actual use of net proceeds toward drilling and completion
of wells in the Cheniere Joint Venture were approximately
$1,300,000 more than estimated in the prospectus.
Approximately $700,000 of this amount represents Beta's
estimated share of constructing a production platform in the
West Cameron 49 area. Another $360,000 represents estimated
drilling costs associated with the Heron Prospect. The
remaining $240,000 represents additional costs of drilling and
completing the Stingray Prospect well at a deeper interval
than originally planned.
q The actual use of net proceeds toward drilling and completion
of wells in the West Cameron Block 39 were approximately
$750,000 less than estimated in the prospectus. This was due
to the fact that the anticipated drilling activity in this
prospect has been indefinitely postponed pending evaluation of
the production results of the existing three wells and further
evaluation of the seismic data.
q The actual use of net proceeds toward drilling and completion
of wells in the Lapeyrouse Prospect were approximately
$355,000 less than estimated in the prospectus. This was due
to the fact that Beta has only been required to advance its
proportionate share of location costs for the well to date.
Beta anticipates that it will be required to advance its share
of drilling costs in the fourth quarter of 1999, estimated to
be approximately $400,000.
q The actual use of net proceeds toward drilling and completion
of wells in the Lapeyrouse Prospect were approximately
$355,000 less than estimated in the prospectus. This is due to
the fact that Beta reduced its working interest participation
in the planned wells and lower than anticipated completion
costs.
q The actual use of net proceeds toward land and seismic costs
in the Parallel Joint Venture were approximately $200,000 more
than estimated in the prospectus. The prospectus contained no
estimate of land and seismic costs. The land and seismic costs
were incurred because some of the seismic data was reprocessed
and reinterpreted and additional leases were acquired as a
result.
q The actual use of net proceeds toward land and seismic costs
in the Cheniere Joint Venture were approximately $300,000 more
than estimated in the prospectus. The prospectus contained no
estimate of land and seismic costs. The land costs were
incurred because additional leases were acquired as a result
of the drilling successes in the Stingray and Redfish
Prospects. In addition, Beta acquired an interest in a new
prospect, the Heron Prospect as part of the Cheniere Joint
Venture.
q Beta acquired an interest in a new prospect located in Texas,
the Texoil Joint Venture. The interest was acquired for a
total consideration of approximately $125,000.
Limitation of Liability
Beta's Articles of Incorporation and its Bylaws limit the liability of
directors and officers to the extent permitted by Nevada law. Specifically, the
Articles of Incorporation provide that the directors and officers of Beta will
not be personally liable to Beta or its shareholders for monetary damages for
breach of their fiduciary duties as directors, including gross negligence,
except liability for acts or omissions "which involve intentional misconduct,
fraud or a knowing violation of law not in good faith, or the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes."
Beta has obtained a directors and officers liability insurance policy for
the purposes of indemnification which shall cover all elected and appointed
directors and officers of Beta up to $1,000,000 for each claim and $3,000,000 in
the aggregate. Beta believes that the limitation of liability provision in its
Articles of Incorporation, and the directors and officers liability insurance
will facilitate Beta's ability to continue to attract and retain qualified
individuals to serve as directors and officers of Beta.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of Beta, Beta
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable. Except for the payment by Beta of expenses incurred or paid by a
director, officer, or controlling person of Beta in the successful defense of
any action, suitor proceeding, if a claim for indemnification against such
liabilities is asserted by such director, officer or controlling person of Beta
in connection with the securities being registered, Beta will, unless in the
opinion of its counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issues.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under Beta's Articles of Incorporation. Beta is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the third
quarter ended September 30, 1999.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report:
(1) Exhibit 27-1, "Financial Data Schedule" - for the quarter ended
September 30, 1999
(b) There were two reports filed on Form 8-K during the quarter ended
September 30, 1999:
1. Form 8-K dated August 2, 1999 which is incorporated herein by
reference.
2. Form 8-K/A dated August 2, 1999 which is incorporated herein by
reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned who is duly authorized.
BETA OIL & GAS, INC.
Date: November 14, 1999 By /s/ J. Chris Steinhauser
------------------------
J. Chris Steinhauser
Chief Financial Officer,
Principal Accounting Officer
and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 453,637
<SECURITIES> 0
<RECEIVABLES> 230,849
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 767,415
<PP&E> 20,707,936
<DEPRECIATION> 1,848,332
<TOTAL-ASSETS> 20,330,761
<CURRENT-LIABILITIES> 173,775
<BONDS> 0
0
0
<COMMON> 8,985
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,330,761
<SALES> 375,595
<TOTAL-REVENUES> 375,595
<CGS> 24,141
<TOTAL-COSTS> 1,072,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (696,502)
<INTEREST-EXPENSE> 2,965,172
<INCOME-PRETAX> (3,643,852)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,643,852)
<EPS-BASIC> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
