SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
[ ] Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended .
or
[X] Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from January 1, 1994
to June 30, 1994.
Commission File No. 0-8874
AMBER RESOURCES COMPANY
(Exact name of registrant as specified in its charter)
Delaware 84-0750506
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 3310, 555 Seventeenth Street,
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 293-9133
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0625 par value
(Title of Class)
Check whether issuer (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 No X
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no
disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]
The aggregate market value as of the Company's voting stock held by
non-affiliates of the Company as of February 29, 1996 could not be
determined because there is no established public trading market.
As of May 28, 1996, 4,666,185 shares of registrant's Common Stock
$.0625 par value were issued and outstanding.
The Index to Exhibits appears at Page 22.
TABLE OF CONTENTS
PART I
PAGE
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 4
ITEM 3. LEGAL PROCEEDINGS 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 9
PART II
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS 11
ITEM 7. FINANCIAL STATEMENTS 16
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE
EXCHANGE ACT 17
ITEM 10. EXECUTIVE COMPENSATION 19
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 20
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 20
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Amber Resources Company (the "Company") is engaged in the
exploration, development and production of oil and gas properties.
The Company's business is conducted onshore in the continental
United States and in the coastal waters of California. At present,
the Company's principal assets include interests in three
undeveloped Federal units located in the Santa Barbara Channel and
the Santa Maria Basin offshore California and interests in 48
producing wells in western Oklahoma (the "Oklahoma Properties").
There are significant uncertainties as to the timing of the
development of the offshore properties. (See "Description of
Properties"; Item 2 herein.)
The Company, a Delaware corporation, was established
January 17, 1978. The Company's offices are located at Suite 3310,
555 17th Street, Denver, Colorado 80202. As of June 30, 1994,
Delta Petroleum Corporation ("Delta") owned 4,277,977 shares
(91.68%) of the Company's outstanding common stock. The Company is
managed by Delta under a management agreement effective March 31,
1993.
In September 1989, the Company's common stock was reverse
split on the basis of one share for each 20 shares previously
outstanding. All references to common stock herein give effect to
the reverse split.
From August 20, 1991 through December 31, 1991,
Underwriters Financial Group, Inc. ("UFG") acquired 80.08% of the
outstanding common stock of the Company (3,736,775 shares). The
shares of the Company were acquired in exchange for shares of
common stock of UFG, shares of convertible preferred stock of UFG,
and a note payable secured by a portion of the shares acquired. On
April 30, 1992, UFG acquired an additional 373,885 shares of the
Company's common stock in exchange for shares of its common stock,
thereby increasing its ownership of the Company to 88.09%. In
October 1992, UFG concluded a series of agreements with Delta
Petroleum Corporation ("Delta"), then a majority owned public
subsidiary of UFG, to participate in a plan to reorganize and
recapitalize Delta (the "Plan of Reorganization"). Under the terms
of the Plan of Reorganization, UFG transferred the 4,110,660 shares
of the Company it owned to Delta. Also in connection with the Plan
of Reorganization, Delta issued shares of its common stock to
Messrs. Burdette A. Ogle and Ronald Heck (collectively "Ogle"),
shareholders of Delta, in exchange for 167,317 shares of common
stock of the Company. As a result of these transactions, at June
30, 1994, Delta owns 4,227,377 shares, or 91.68% of the outstanding
common stock of the Company. As of that date, 3,357,003 shares of
common stock of the Company owned by Delta are pledged to secure a
note payable by UFG to Snyder Oil Corporation in the amount of
$2,091,761, including accrued interest. The note is currently in
default.
The Company adjusted the basis of its assets and
liabilities in 1991 to reflect the new basis of accounting
resulting from the acquisition for more than 80% of its common
shares by UFG. The Company's net assets were adjusted to reflect
UFG's acquisition costs of the shares of $5,406,408. The minority
shareholders' interest in the Company was not reflected in this
adjustment as accumulated losses had exceeded their original
investment at that date. The subsequent acquisition of additional
shares of the Company by UFG in 1992 was accounted for as an
increase in oil and gas properties and an increase in additional
paid-in capital of $595,461, representing the estimated fair value
of the UFG shares issued in the exchange. The acquisition by Delta
of additional shares from Ogle was also accounted for in 1992 as an
increase in oil and gas properties and an increase in additional
paid-in capital of $45,000, representing Ogle's predecessor cost of
the shares of the Company. The additional shares acquired from
Ogle by Delta were accounted for at predecessor cost due to the
related party nature of the transaction.
Ownership by Delta. At June 30, 1994, Delta owned
4,277,977 shares of the common stock of Amber, which were the
equivalent of 91.68% of the outstanding common stock of Amber.
Delta and Amber entered into an agreement effective March 31, 1993
which provides for the sharing of the management between the two
companies. Under the agreement, Amber pays Delta for its
proportionate share of rent, secretarial and administrative,
accounting and management services of Delta officers, employees and
consultants.
(b) Business of Issuer.
(1) Principal Products or Services and Their Markets.
The principal products produced by the Company are crude oil and
natural gas. The products are generally sold at the wellhead to
purchasers in the immediate area where the product is produced.
The principal markets for oil and gas are refineries and
transmission companies which have facilities near the Company's
producing properties.
(2) Distribution Methods of the Products or Services.
Oil and natural gas produced from the Company's wells are normally
sold to the purchasers referenced in (6) below. Oil is picked up
and transported by the purchaser from the wellhead. In some
instances the Company is charged a fee for the cost of transporting
the oil, which fee is deducted from or calculated into the price
paid for the oil. Natural gas wells are connected to pipelines
owned by the natural gas purchasers. A variety of pipeline
transportation charges are usually included in the calculation of
the price paid for the natural gas.
(3) Status of Any Publicly Announced New Product or
Service. The Company has not made a public announcement of, and no
information has otherwise become public about, a new product or
industry segment requiring the investment of a material amount of
the Company's total assets.
(4) Competitive Business Conditions. Oil and gas
exploration and acquisition of undeveloped properties is a highly
competitive and speculative business. The Company competes with a
number of other companies, including major oil companies and other
independent operators which are more experienced and which have
greater financial resources. The Company does not hold a
significant competitive position in the oil and gas industry.
(5) Sources and Availability of Raw Materials and Names
of Principal Suppliers. Oil and gas may be considered raw
materials essential to the Company's business. The acquisition,
exploration, development, production, and sale of oil and gas are
subject to many factors which are outside of the Company's control.
These factors include national and international economic
conditions, availability of drilling rigs, casing, pipe, and other
equipment and supplies, proximity to pipelines, the supply and
price of other fuels, and the regulation of prices, production,
transportation, and marketing by the Department of Energy and other
federal and state governmental authorities.
(6) Dependence on One or a Few Major Customers. The
Company has five major customers for the sale of oil and gas as of
the date of this report, namely, Apache Corporation, Natural Gas
Clearinghouse, El Paso Natural Gas Company, Transok and Twister
Transmission Company. The loss of any one or all of these
customers would not have a material adverse effect on the Company's
business.
(7) Patents, Trademarks, Licenses, Franchises,
Concessions, Royalty Agreements and Labor Contracts. The Company
does not own any patents, trademarks, licenses, franchises,
concessions, or royalty agreements except oil and gas interests
acquired from industry participants, private landowners and state
and federal governments. The Company is not a party to any labor
contracts.
(8) Need for Any Governmental Approval of Principal
Products or Services. Except that the Company must obtain certain
permits and other approvals from various governmental agencies
prior to drilling wells and producing oil and/or natural gas, the
Company does not need to obtain governmental approval of its
principal products or services.
(9) Effect of Existing or Probable Governmental
Regulations on the Business. The oil and gas industry is
extensively regulated by federal, state and local authorities.
Legislation affecting the oil and gas industry is under constant
view for amendment or expansion. Numerous departments and
agencies, both federal and state, have issued rules or regulations
binding on the oil and gas industry and its individual members,
some of which carry substantial penalties for the failure to
comply. The regulatory burden on the oil and gas industry
increases its cost of doing business and consequently affects its
profitability. Inasmuch as such laws and regulations are
frequently amended or reinterpreted, the Company is unable to
predict the future cost or impact of complying with such
regulations.
(10) Research and Development. The Company does not
engage in any research and development activities. Since its
inception, the Company has not had any customer or government-
sponsored material research activities relating to the development
of any new products, services or techniques, or the improvement of
existing products, services or techniques.
(11) Environmental Protection. Because the Company is
engaged in acquiring, operating, exploring for and developing
natural resources, it is subject to various state and local
provisions regarding environmental and ecological matters.
Therefore, compliance with environmental laws may necessitate
significant capital outlays, may materially affect the Company's
earnings potential, and could cause material change in the
Company's proposed business. At the present time, however, the
existence of environmental law does not materially hinder nor
adversely affect the Company's business. Capital expenditures
relating to environmental control facilities have not been material
to the operation of the Company since its inception. In addition,
the Company does not anticipate that such expenditures will be
material during the fiscal year ending June 30, 1995.
(12) Employees. The Company has no full time employees.
ITEM 2. DESCRIPTION OF PROPERTIES
(a) Office Facilities:
The Company shares offices with Delta under its
management agreement with Delta.
(b) Oil and Gas Properties
The Company owns interests in oil and gas properties
located in Oklahoma and California. Wells from which the Company
receives revenues are owned only partially by the Company. The
Company did not file oil and gas reserve estimates with any federal
authority or agency other than the SEC during its fiscal years
ended December 31, 1992, December 31, 1993, or for the six month
period ended June 30, 1994.
California.
The Company's Offshore California proved undeveloped
reserves are attributable to its interests in three federal units
located offshore California near Santa Barbara. While these
interests represent ownership of substantial oil and gas reserves
classified as proved undeveloped, the cost to develop the reserves
will be very substantial. The Company may be required to farm out
all or a portion of its interests in these properties if it cannot
fund its share of the development costs. There can be no assurance
that the Company can farm out its interests on acceptable terms.
If the Company were to farm out its interests in these properties,
its share of the proved reserves attributable to the properties
would be decreased substantially. The Company may also incur
substantial dilution of its interests in the properties if it
elects to use other methods of financing the development costs.
These units have been formally approved and are
regulated by the Minerals Management Service of the Federal
Government. However, due to a history of opposition to offshore
drilling and production in California by some individuals and
groups, the process of obtaining all of the necessary permits and
authorizations to develop the properties will be lengthy and even
after all required approvals are obtained, lawsuits may possibly be
filed to attempt to further delay the development of the
properties. While the Federal Government has recently attempted to
expedite this process, there can be no assurance that it will be
successful in doing so. The Company does not have a controlling
interest in and does not act as the operator of any of the offshore
California properties and consequently will not control the timing
of either the development of the properties or the expenditures for
development. Management and its independent engineering consultant
have considered the these factors relating to timing of the
development of the reserves in the preparation of the reserve
information relating to these properties. As additional
information becomes available in the future, the Company's
estimates of the proved undeveloped reserves attributable to these
properties could change, and such changes could be substantial.
Gato Canyon Unit. The most significant unit is known as
the Gato Canyon Unit, in which the Company owns a 6.97% working
interest. This 10,100 acre unit is operated by Samedan Oil
Corporation. Four of the five wells drilled on the unit to date
have indicated the presence of oil and gas reserves. In April
1989, Samedan announced the completion and test of the Samedan P-
0460 #2 yielded a test flow rate of 5,500 barrels of oil per day
from the Monterey Formation between 5,000 and 6,800 feet of drill
depth. The Monterey Formation is a highly fractured shale
formation. The Monterey (which ranges from 1,500' to 2,900' in
thickness) is the main productive and target zone in many offshore
California oil fields (including the Company's federal lease
units). As of July 1, 1994, Mannon Associates, Inc., an
independent petroleum engineering firm based in Santa Barbara,
California, issued a report indicating that Gato Canyon contains
recoverable reserves estimated to be 72.6 million Bbls of oil and
102.6 Bcf of natural gas representing 5,060,365 Bbls of oil and 7.1
Bcf of natural gas net to the Company's 6.97% working interest.
The oil has an estimated average gravity of 16 degrees API. Based on
prices of $11 per Bbl and $1.68 per Mcf and SEC parameters, the
Company's 6.97% working interest in the Gato Canyon Unit has a
pretax discounted (10%) present value of approximately $8,309,000.
(See "--Oil and Gas Reserves".) No production in the Gato Canyon
Unit is presently anticipated before 2000.
Lion Rock Unit. The Company holds a 1% net profits
interest in 28,800 acres of the Lion Rock Unit. Lion Rock is
operated by Shell Oil Company. An aggregate of seven wells have
been drilled on this unit of which four have been completed and
tested which indicate producible oil and gas reserves in the
Monterey Formation. Additionally, the unit is immediately
contiguous with the San Miguel Field which is in the same reservoir
as defined by drilling and testing of six wells, seismic data and
geological analysis to date. Based on a report prepared by Mannon
Associates, Inc., on July 1, 1994 the Lion Rock Unit contains
proved undeveloped recoverable reserves of 453 million Bbls of oil
and 409 Bcf of natural gas, equivalent to 3,242,375 barrels of oil
and 2.9 Bcf of natural gas net to the Company's interest. The oil
has an average estimated gravity of 10.7 degrees API. Based on prices of
$11.00 per Bbl and $1.68 per Mcf and SEC parameters, the Company's
aggregate interest in the Lion Rock Unit has a pre-tax present
value (discounted at 10%) of approximately $3,919,000 as of July 1,
1994. (See "--Oil and Gas Reserves".) No production is presently
anticipated before 2001.
Sword Unit. The Company holds a .87% working interest in
the Sword Unit. This 12,240 acre unit is operated by Conoco, Inc.
In aggregate, three wells have been drilled on this unit of which
two wells have been completed and tested to date with calculated
flow rates of from 4,000 to 5,000 Bbls per day, which indicate
producible oil and gas reserves in the Monterey Formation. Based
on a July 1, 1994 report prepared by Mannon Associates, Inc., the
Sword Unit contains proved undeveloped recoverable reserves of 261
million Bbls of oil and 330 Bcf of natural gas representing
reserves of 2,279,418 barrels of oil (having an estimated average
gravity of 10.6 API) and 2.9 Bcf of natural gas to the Company's
interest. Based on prices of $11.00 per Bbl and $1.68 per Mcf and
SEC parameters, the Company's interest in the Sword Unit has a pre-
tax present value (discounted at 10%) of approximately $1,876,000.
(See "--Oil and Gas Reserves".) No production is presently
anticipated before 2004.
Oklahoma.
The Company owns non-operated working interests in 48
natural gas wells in the Anadarko Basin of Oklahoma. The wells
range in depth from 14,000 to 20,000 feet and produce from the Red
Fork, Atoka, Morrow and Springer formations. Most of the Company's
reserves are in the Atoka formation. Apache Corporation operates
20 of the wells in which the Company owns an interest. Other major
operators include Samson Resources Corporation, Meridian Oil
Company and Ricks Exploration. The working interests range from
less than 1% to 40% and average about 7.5% per well. Many of the
wells have remaining productive lives of 20 to 30 years. During
1993, the Company assigned all of its existing acreage, except for
its interest in producing wellbores, to Delta in exchange for
$20,000 and a 10% working interest after "pay-out" in any wells
drilled thereon.
Approximately half of the Oklahoma wells were acquired by
the Company subject to a recoupment agreement with a gas purchaser.
Under the terms of the recoupment agreement, the gas purchaser is
entitled to receive up to 75% of future production to recoup gas
purchased in connection with the settlement of a previous take or
pay contract covering the properties. The gas purchaser has
recourse only to the properties subject to the agreement and as a
result, if the dedicated properties deplete prior to full
recoupment, all further obligations to deliver gas are
extinguished. The Company is responsible for royalties and for
production costs associated with the properties subject to the
recoupment agreement. In no case is Amber liable for any cash
payments to the purchaser. The taking of less than the maximum
recoupment extends the time period over which the gas can be
recovered.
The obligation under the recoupment agreement has been
accounted for in a manner similar to a production payment. The
estimated present value of the obligation at the date of the
acquisition of the properties was recorded as a liability. The
liability was calculated based on remaining volumes of gas due,
using the price of gas at the date of the acquisition of the
properties, discounted at 15% over the period the gas is expected
to be recouped. The liability is periodically increased by the
accretion of the discount and is reduced as the gas is delivered to
the gas purchaser. The gas produced and delivered to the gas
purchaser (recoupment gas) is recorded as revenue at the then
current price of natural gas. Any difference between the revenue
recorded for the recoupment gas and the reduction in the recoupment
obligation is accounted for as an increase or decrease in interest
expense.
Recoupment gas royalties represent royalties due on
recoupment gas produced and delivered to the gas purchasers
pursuant to the terms of the recoupment agreement described above.
The Company has estimated the liability to the royalty owners
based on the market price of the gas during the period the gas was
produced and delivered to the gas purchaser. The Company's method
of estimating the liability to royalty owners is based upon its
interpretation of existing law in the jurisdiction as applied to
the circumstances relating to its properties. There is no
assurance that the Company's method of estimating liability to the
royalty owners would prevail in court if challenged and that
another method less favorable to the Company would not be imposed
upon the Company.
Subsequent to June 30, 1994, on November 18, 1994, the
Company entered into an agreement with El Paso Natural Gas Company
("El Paso") under which the Company agreed to transfer to El Paso
it's interest in four wells and the associated acreage in complete
satisfaction of the recoupment gas obligation to El Paso which was
reflected as a liability of $967,911 at June 30, 1994 in the
Company's financial statements. As a result of this agreement, the
Company will no longer be obligated to El Paso for recoupment gas
from the remaining wells subject to the recoupment agreement.
Consequently, the Company will lose the revenues from the wells
transferred to El Paso and gain the revenues from the remaining
wells attributable to production amounts freed from the recoupment
requirements.
(c) Production
During the last three fiscal years the Company has not
had, nor does it now have, any long-term supply or similar
agreements with governments or authorities pursuant to which the
Company acted as producer. The following table sets forth the
Company's net production of oil and gas, average sales prices and
average production costs during the periods indicated.
The average oil and gas price per unit and average
production costs per unit for the Company are set forth below:
Six Year Ended
Months Ended December 31,
June 30, 1994 1993 1992
Average sales price:
Oil (per barrel) $14.52 $13.54 $19.08
Natural Gas (per MCF) $ 1.57 $ 1.89 $ 1.54
Production costs (per
Mcf equivalent) $ .61 $ .48 $ .44
The profitability of the Company's oil and gas production
activities is affected by the fluctuations in the sale prices of
its oil and gas production. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations.")
(d) Productive Wells and Acreage.
The table below shows, as of June 30, 1994, the
approximate number of gross and net producing oil and gas wells by
state and their related developed acres owned by the Company.
Productive wells are producing wells capable of production,
including shut-in wells. Developed acreage consists of acres
spaced or assignable to productive wells.
Oil (3) Gas (3) Developed Acres
Gross (1) Net (1) Gross (1) Net (2) Gross (1) Net(2)
Oklahoma 0 0 48 3.55 7,680 576
(1) A "gross well" or "gross acre" is a well or acre in which
a working interest is held. The number of gross wells or
acres is the total number of wells or acres in which a
working interest is owned.
(2) A "net well" or "net acre" is deemed to exist when the
sum of fractional ownership interests in gross wells or
acres equals one. The number of net wells or net acres
is the sum of the fractional working interests owned in
gross wells or gross acres expressed as whole numbers and
fractions thereof.
(3) See "Oil and Gas Reserves" below for reserve data.
(e) Undeveloped Acreage.
At June 30, 1994, the Company held undeveloped acreage by
state as set forth below:
Undeveloped Acres (1)
Location Gross Net
California (2) 41,060 2,358
(1) Undeveloped acreage is considered to be those lease acres
on which wells have not been drilled or completed to a
point that would permit the production of commercial
quantities of oil and gas, regardless of whether such
acreage contains proved reserves.
(2) Consists of Federal leases offshore near Santa Barbara,
California.
(f) Drilling Activities
During the six months ended June 30, 1994, the
Company did not drill any wells. During 1993 the Company
participated in one gross (.0078 net) well in Oklahoma which was
productive of gas. During 1992, the Company participated in one
gross (.041 net) well in Oklahoma which was nonproductive.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation pending or threatened by or
against the Registrant or any of its properties as of June 30,
1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's
security holders through the solicitation of proxies or otherwise
during the six months ended June 30, 1994.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market or Markets:
The Company currently has, and has had for the past three
years, only limited trading in the over-the-counter market and
there is no assurance that this trading market will expand or even
continue. Recent regulations and rules by the SEC and the National
Association of Securities Dealers virtually assure that there will
be little or no trading in the Company's stock unless and until the
Company is listed on NASDAQ or another exchange. There is no
assurance that the Company will be able to meet the requirements
for such listing in the foreseeable future. Further, the Company's
capital stock may not be able to be traded in certain states until
and unless the Company is able to qualify, exempt or register its
stock. During 1993 there were limited and sporadic quotations
which did not necessarily constitute an established public trading
market. Quotations during 1994 have not been available.
(b) Approximate Number of Holders of Common Stock:
The number of holders of record of the Company's
securities at June 30, 1994 was approximately 1,031.
(c) Dividends:
The Company has not declared any cash dividends and has
no plan for the payment of dividends on its Common Stock in the
foreseeable future. Future payment of such dividends, if any, will
depend on the applicable legal and contractual restrictions
including those discussed above, as well as the financial condition
and financial requirements of the Company and general conditions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.
Background
Amber Resources Company ("the Company") was
incorporated in January, 1978, and is principally engaged in
acquiring, exploring, developing, and producing oil and gas
properties. The Company owns interest in undeveloped oil and gas
properties offshore California, near Santa Barbara and developed
(and undeveloped) oil and gas properties in the continental United
States.
From August 20, 1991 through December 31, 1991,
Underwriters Financial Group, Inc. ("UFG") acquired 80.08% of the
outstanding common stock of the Company (3,736,775 shares). The
shares of the Company were acquired in exchange for shares of
common stock of UFG, shares of convertible preferred stock of UFG,
and a note payable secured by a portion of the shares acquired. On
April 30, 1992, UFG acquired an additional 373,885 shares of the
Company's common stock in exchange for shares of its common stock,
thereby increasing its ownership of the Company to 88.09%. In
October 1992, UFG concluded a series of agreements with Delta
Petroleum Corporation ("Delta"), then a majority owned public
subsidiary of UFG, to participate in a plan to reorganize and
recapitalize Delta (the "Plan of Reorganization"). Under the terms
of the Plan of Reorganization, UFG transferred the 4,110,660 shares
of the Company it owned to Delta. Also in connection with the Plan
of Reorganization, Delta issued shares of its common stock to
Messrs. Burdette A. Ogle and Ronald Heck (collectively "Ogle"),
shareholders of Delta, in exchange for 167,317 shares of common
stock of the Company. As a result of these transactions, at June
30, 1994, Delta owns 4,227,377 shares, or 91.68% of the outstanding
common stock of the Company. As of that date, 3,357,003 shares of
common stock of the Company owned by Delta are pledged to secure a
note payable by UFG to Snyder Oil Corporation in the amount of
$2,091,761, including accrued interest. The note is currently in
default.
The Company adjusted the basis of its assets and
liabilities in 1991 to reflect the new basis of accounting
resulting from the acquisition for more than 80% of its common
shares by UFG. The Company's net assets were adjusted to reflect
UFG's acquisition costs of the shares of $5,406,408. The minority
shareholders' interest in the Company was not reflected in this
adjustment as accumulated losses had exceeded their original
investment at that date. The subsequent acquisition of additional
shares of the Company by UFG in 1992 was accounted for as an
increase in oil and gas properties and an increase in additional
paid-in capital of $595,461, representing the estimated fair value
of the UFG shares issued in the exchange. The acquisition by Delta
of additional shares from Ogle was also accounted for in 1992 as an
increase in oil and gas properties and an increase in additional
paid-in capital of $45,000, representing Ogle's predecessor cost of
the shares of the Company. The additional shares acquired from
Ogle by Delta were accounted for at predecessor cost due to the
related party nature of the transaction.
Liquidity and Capital Resources.
At June 30, 1994, the Company had a working capital
deficit of $860,890 compared to a working capital deficit of
$661,489 at December 31, 1993. The Company's working capital
deficit is in part a result of the royalties payable and recoupment
royalties payable held in suspense. The Company's royalties
payable in suspense at June 30, 1994 is $185,123 which represent
the Company's estimate of royalties payable on production
attributable to its interest in certain wells in Oklahoma. The
Company is attempting to identify the royalty owners and calculate
the amounts owed to each owner, which it expects will require some
time. To date, no significant claims have been asserted against
the Company by royalty owners for amounts due for prior production.
The Company has estimated that royalties are payable on recoupment
gas produced on certain of its wells of $643,841 at June 30, 1994.
The Company is awaiting the outcome of litigation in various courts
which may impact the method of calculating the Company's obligation
for royalties payable on recoupment gas. To date no claims have
been asserted against the Company by royalty owners for royalties
due on recoupment gas produced. The Company believes that the
operators of the affected wells have paid some of the royalties on
behalf of the Company and have withheld such amounts from revenues
attributable to the Company's interest in the wells. The Company
has contacted the operators of the wells in an attempt to determine
what amounts the operators have paid on behalf of the Company over
the past five years, which amounts would reduce the amounts owed by
the Company. To date the Company has not received information
sufficient to allow it to determine the amounts paid by the
operators.
The Company believes that it is unlikely that all
claims that might be made for payment of royalties payable in
suspense or for recoupment royalties payable would be made at one
time. The Company believes, although there can be no assurance,
that it may ultimately be able to settle with potential claimants
for less than the amounts recorded for royalties payable in
suspense and recoupment royalties payable.
Subsequent to June 30, 1994, on November 18, 1994,
the Company entered into an agreement with El Paso Natural Gas
Company ("El Paso") under which the Company agreed to transfer to
El Paso the Company's interest in four wells and the associated
acreage in complete satisfaction of the recoupment gas obligation
to El Paso which was reflected as a liability of $967,911 at June
30, 1994 in the Company's financial statements. As a result of
this agreement, the Company will no longer be obligated to El Paso
for recoupment gas from the remaining wells subject to the
recoupment agreement. Consequently, the Company will lose the
revenues from the wells transferred to El Paso and gain the
revenues from the remaining wells attributable to production
amounts freed from the recoupment requirements.
The Company does not currently have a credit
facility with any bank and it has not determined the amount, if
any, that it could borrow against its existing properties. The
Company will continue to explore additional sources of both short-
term and long-term liquidity to fund its working capital deficit
and its capital requirements for development of its properties
including establishing a credit facility, sale of equity or debt
securities and sale of non-strategic properties. Many of the
factors which may affect the Company's future operating performance
and liquidity are beyond the Company's control, including oil and
natural gas prices and the availability of financing.
The financial statements have been prepared on a
going concern basis which contemplates the realization of assets
and the satisfaction of liabilities and commitments in the normal
course of business. Several factors, described below, raise
substantial doubt about the ability of the Company to continue as
a going concern.
Currently, the Company's operations are not
generating sufficient cash flow to fund operations and discharge
the Company's liabilities. The Company has been economically
dependent upon the Company's parent, Delta Petroleum Corporation.
Through the period ended June 30, 1994, Delta
continued to advance funds to the Company. Delta has no
obligations or commitment to provide further financial support
although it may do so from time to time as it elects.
Due to the uncertainties regarding the Company's
ability to generate sufficient cash flow to fund operations and
satisfy its liabilities, there is substantial doubt about the
ability of the Company to continue as a going concern. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Results of Operations
Net Earnings (Loss). The Company's net loss for the
six months ended June 30, 1994 was $249,183 compared to a net loss
of $366,797 for the year ended December 31, 1993 and a net loss of
$614,671 for the year ended December 31, 1992. The loss for the
six months ended June 30, 1994 included $21,491 for abandoned and
impaired properties. The losses for the years ended December 31,
1993 and 1992 included $8,252 and $198,230, respectively, for
abandoned and impaired properties.
Revenue. Oil and gas sales for the six months
ended June 30, 1994 were $368,304 compared to $1,077,905 for the
year ended December 31, 1993 and $1,249,373 for the year ended
December 31, 1992. The decrease in oil and gas sales in the six
months ended June 30, 1994 resulted from a decline in the average
prices for both oil and natural gas and the normal decline in
production rates from the Company's wells. The Company's oil and
gas sales were also impacted by the over production of gas by other
working interest owners in certain gas wells in Oklahoma. The
Company expects to recover the production attributable to its
underbalanced position in future periods, as the wells are brought
back into balance. Revenue from oil and gas sales includes
amortization of the Company's recoupment gas obligation of $255,859
for the six months ended June 30, 1994 and $609,750 and $587,084,
respectively, for the years ended December 31, 1993 and 1992.
Revenue is recorded as the recoupment gas is produced and
delivered to the gas purchaser. The amount of revenue recorded
varies with the amount of gas recouped by the purchaser and the
current price of gas.
Production volumes and average prices received for
the six months ended June 30, 1994 and the years ended December 31,
1993 and 1992 are as follows:
Six Months Ended Year Ended December 31,
June 30, 1994 1993 1992
Production:
Oil (barrels) 469 1,940 1,616
Gas (Mcf) 230,481 557,254 787,241
Recoupment gas (per Mcf) 146,205 322,508 357,978
Average Price:
Oil (per barrel) $14.52 $13.54 $19.08
Gas (per Mcf) $ 1.57 $ 1.89 $ 1.54
Lease Operating Expenses. Lease operating expenses
for the six months ended June 30, 1994 were $141,772 compared to
$275,861 and $352,570 for the years ended December 31, 1993 and
1992, respectively. On a MCF equivalent basis, excluding
recoupment gas, production expenses and taxes were $.61 per Mcf
equivalent during the six months ended June 30, 1994 compared to
$.48 and $.44, respectively, per Mcf equivalent, for the years
ended December 31, 1993 and 1992.
Depreciation and Depletion Expense. Depreciation
and depletion expense for the six months ended June 30, 1994 was
$184,547 compared to $393,395 and $587,669, respectively, for the
years ended December 31, 1993 and 1992. On a MCF equivalent basis,
excluding recoupment gas, the depletion rate was $.79 per Mcf
equivalent during the six month period ended June 30, 1994 compared
to $.70 and $.73 per Mcf equivalent, respectively, for the years
ended December 31, 1993 and 1992.
Exploration Expenses. Exploration expenses consist
of geological and geophysical costs and lease rentals. Exploration
expenses were $4,088 for the six months ended June 30, 1994
compared to $7,352 and $67,340, respectively, for the years ended
December 31, 1993 and 1992. Exploration expenses in 1994 and 1993
decreased primarily as a result of decreased exploration activity
in Oklahoma.
Abandonment and Impairment of Oil and Gas
Properties. The Company recorded an expense for abandoned and
impaired properties for the six months ended June 30, 1994 of
$21,491 compared to $8,252 and $198,230, respectively, for the
years ended December 31, 1993 and 1992 primarily relating to the
abandonment or impairment of undeveloped properties.
General and Administrative Expenses. General and
administrative expense for the six months ended June 30, 1994 was
$165,986 compared to $313,705 and $287,696, respectively, for the
years ended December 31, 1993 and 1992. General and administrative
expenses increased from 1992 to 1993 and in 1994 as the Company's
level of activity increased following the reorganization of Delta.
Interest on Recoupment Gas Obligation Expense.
Imputed interest expense on the recoupment gas obligation was
$99,603 for the six months ended June 30, 1994 and $443,676 and
$348,837, respectively, for the years ended December 31, 1993 and
1992. This expense fluctuates with the change in gas prices and
declined during the six months ended June 30, 1994 on an annualized
basis compared to previous periods as a result of a decline in gas
prices and correspondingly increased in 1993 compared to 1992 as a
result of increases in gas prices.
Interest on Notes Payable. Interest on notes
payable was $25,367 for the year ended December 31, 1992. Interest
expense for the 1992 period included interest on the Company's
convertible note payable which was repaid in November 1992.
Future Operations
The Company's Offshore California proved undeveloped
reserves are attributable to its interests in three federal units
located offshore California near Santa Barbara. While these
interests represent ownership of substantial oil and gas reserves
classified as proved undeveloped, the cost to develop the reserves
will be very substantial. The Company may be required to farm out
all or a portion of its interests in these properties if it cannot
fund its share of the development costs. There can be no assurance
that the Company can farm out its interests on acceptable terms.
If the Company were to farm out its interests in these properties,
its share of the proved reserves attributable to the properties
would be decreased substantially. The Company may also incur
substantial dilution of its interests in the properties if it
elects to use other methods of financing the development costs.
These units have been formally approved and are regulated
by the Minerals Management Service of the Federal Government.
However, due to a history of opposition to offshore drilling and
production in California by some individuals and groups, the
process of obtaining all of the necessary permits and
authorizations to develop the properties will be lengthy and even
after all required approvals are obtained, lawsuits may possibly be
filed to attempt to further delay the development of the
properties. While the Federal Government has recently attempted to
expedite this process, there can be no assurance that it will be
successful in doing so. The Company does not have a controlling
interest in and does not act as the operator of any of the offshore
California properties and consequently will not control the timing
of either the development of the properties or the expenditures for
development. Management and its independent engineering consultant
have considered the these factors relating to timing of the
development of the reserves in the preparation of the reserve
information relating to these properties. As additional
information becomes available in the future, the Company's
estimates of the proved undeveloped reserves attributable to these
properties could change, and such changes could be substantial.
ITEM 7. FINANCIAL STATEMENTS
Financial Statements are included beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Effective June 24, 1994 the Company dismissed its prior
auditors and on that date the accounting firm of KPMG Peat Marwick
was appointed as the Company's auditors. The Company filed a Form
8-K dated June 24, 1994 reporting the change of accountants.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Executive Officers and Directors:
Information with respect to the executive officers
and directors of the Company is set forth below:
The directors and officers of the Registrant are as
follows:
Name Position Period of Service
Aleron H. Larson, Jr. Chairman, Chief Executive August 1991 to Present
Officer, Secretary
Treasurer and Director
Roger A. Parker President, Chief Operating August 1991 to Present
Officer and Director
Terry D. Enright Director August 1994 to Present
All of the directors of the Registrant hold office
until the next annual meeting of the Registrant's stockholders and
until their successors have been elected and have qualified. There
is no family relationship between any executive officer and
director of the Registrant.
Aleron H. Larson, Jr., age 50, has operated as an
investor and an independent in the oil and gas industry
individually and through public and private ventures since 1978.
From July of 1990 through March 31, 1993, Mr. Larson served as the
Chairman, Secretary, C.E.O. and a Director of Underwriters
Financial Group, Inc. ("UFG") (formerly Chippewa Resources
Corporation), a public company listed on the American Stock
Exchange which presently owns in excess of 20% of the outstanding
equity securities of Delta. Mr. Larson submitted his resignation
from all positions with UFG effective March 31, 1993. Mr. Larson
serves as Chairman, CEO, Secretary, Treasurer and a Director of the
Company, which was a majority-owned subsidiary of UFG from August
1991 until October 1992, at which time it became a majority-owned
subsidiary of Delta. Mr. Larson serves as the Chairman, CEO,
Secretary, Treasurer and a Director of Delta. He has also served,
since 1983, as the President and Board Chairman of Western
Petroleum Corporation, a public Colorado oil and gas Company which
is now inactive. During part of 1989 and part of 1990, he served
as a Director of Apex Operating Company, Inc. and P & G Exploration
(formerly Texco Exploration, Inc.). Mr. Larson has been
principally involved in the oil and gas business since 1978. Mr.
Larson practiced law in Breckenridge, Colorado from 1971 until
1974. During this time he was a member of a law firm, Larson &
Batchellor, engaged primarily in real estate law, land use
litigation, land planning and municipal law. In 1974, he formed
Larson & Larson, P.C., and was engaged primarily in areas of law
relating to securities, real estate, and oil and gas until 1978.
Mr. Larson received a Bachelor of Arts degree in Business
Administration from the University of Texas at El Paso in 1967 and
a Juris Doctor degree from the University of Colorado in 1970.
Roger A. Parker, age 34, served as the President, a
Director and Chief Operating Officer of Underwriters Financial
Group from July of 1990 through March 31, 1993. Mr. Parker
submitted his resignation from all positions with UFG effective
March 31, 1993. Mr. Parker also serves as President, Chief
Operating Officer and a Director of both the Company and Delta. He
also serves as a Director and Executive Vice President of P & G
Exploration, Inc., a private oil and gas company (formerly Texco
Exploration, Inc.). Mr. Parker has also been the President and a
Director of Apex Operating Company, Inc. since its inception in
1987. He has operated as an investor and an independent in the oil
and gas industry individually and through public and private
ventures since 1982. He was at various times, from 1982 to 1989,
a Director, Executive Vice President, President and Shareholder of
Ampet, Inc. He was a Director of Universal Exploration, Inc., from
1986 to 1989. He attended the University of Colorado where he
received a Bachelor of Science in Mineral Land Management in the
spring of 1983. He is a member of the Rocky Mountain Oil and Gas
Association and the National Federation of Independent Businesses.
Terry D. Enright, age 46, has been in the oil and
gas business since 1980. He serves as a Director of both the
Company and Delta. Mr. Enright was a reservoir engineer until 1981
when he became Operations Engineer and Manager for Tri-Ex Oil &
Gas. In 1983, Mr. Enright founded and is President and a Director
of Terrol Energy, a private, independent oil company with wells and
operations primarily in the Central Kansas Uplift and D-J Basin. In
1989, he formed and became President and a Director of a related
company, Enright Gas & Oil, Inc. Since then, he has been involved
in the drilling of prospects for Terrol Energy, Enright Gas & Oil,
Inc., and for others in Colorado, Montana and Kansas. He has also
participated in brokering and buying of oil and gas leases and has
been retained by others for engineering, operations, and general
oil and gas consulting work. Mr. Enright received a B.S. in
Mechanical Engineering with a minor in Business Administration from
Kansas State University in Manhattan, Kansas in 1972, and did
graduate work toward an MBA at Wichita State University in 1973.
He is a member of the Society of Petroleum Engineers and a past
member of the American Petroleum Institute and the American Society
of Mechanical Engineers.
There is no family relationship among any of the Directors.
The Company has no executive or audit committees, nor any
nominating or compensation committees.
ITEM 10. EXECUTIVE COMPENSATION.
No officer or director received compensation directly
from the Company during 1991, 1992, 1993 or the six month period
ended June 30, 1994. Messers. Larson and Parker (Chairman and
President, respectively,) are compensated by Delta which is paid
under a management agreement with the Company. No officer or
director received stock appreciation rights, restricted stock
awards, options, warrants or other similar compensation reportable
under this section during any of the above referenced periods.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a)&(b) Security Holdings of Management and Persons
Controlling More than 5% of Shares of Common Stock Outstanding on
a Fully-Diluted Basis.
Name and Address of Amount & Nature of
Beneficial Owners Beneficial Ownership Percent of Class
Delta Petroleum Corporation 4,277,977 (1) 91.68% (1)
555 17th Street, Suite 3310
Denver, Colorado 80202
Roger A. Parker 4,277,977 (1) 91.68% (1)
(3) (6) (7) (8) (11)
555 17th St., Ste. 3310
Denver, CO 80202
Aleron H. Larson, Jr. 4,277,977 (1) 91.68% (1)
(2) (6) (7) (11)
555 17th St., Ste. 3310
Denver, CO 80202
Terry D. Enright 4,277,977 (1) 91.68% (1)
P.O. Box 227
Hygiene, Colorado 80533
Management as a Group
(3 people) 4,277,977 (1) 91.68% (1)
(1) All shares are owned by Delta; Messrs. Larson and Parker are
officers, directors and controlling shareholders of Delta. Mr.
Enright is also a director of Delta.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective March 31, 1993, the Company and Delta entered
into an agreement which provides for the sharing of management
between the two companies. Under this agreement the Company pays
Delta for its proportionate share of rent, secretarial and
administrative, accounting and management services of Delta
officers and employees. The Company paid Delta $191,788 for the
six months ended June 30, 1994. The Company had a payable to Delta
of $52,072 at June 30, 1994.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The Exhibits listed in the Index to Exhibits
appearing at page 22 are filed as part of this report.
(b) Reports on Form 8-K:
The following current reports on Form 8-K were filed
during 1994.
Form 8-K (dated June 24, 1994)
Item 4. Changes in Registrant's Auditors
Form 8-K (dated August 8, 1994)
Item 6. Resignation of Director
Item 8. Change in Fiscal Year
SIGNATURE
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.
(Registrant) Amber Resources Company
By (Signature and Title) s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.,
Chairman/C.E.O.
s/Kevin K. Nanke
Kevin K. Nanke, Controller and Principal
Financial and Accounting Officer
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.
By (Signature and Title) s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr., Director
Date 5/31/96
By (Signature and Title) s/Roger A. Parker
Roger A. Parker, Director
Date 5/31/96
By (Signature and Title) s/Terry D. Enright
Terry D. Enright, Director
Date 5/31/96
INDEX TO EXHIBITS
(2) Plan of Acquisitions, Reorganization, Arrangement,
Liquidation, or Succession. Not applicable.
(4) Instruments Defining the Rights of Security Holders. Not
applicable.
(9) Voting Trust Agreement. Not applicable.
(10) Material Contracts.
10.1 Agreement between Delta Petroleum Corporation and Amber
Resources
10.2 Settlement Agreement between El Paso Natural Gas and
Amber Resources Company.
(11) Statement Regarding Computation of Per Share Earnings. Not
applicable.
(12) Statement Regarding Computation of Ratios. Not applicable.
(13) Annual Report to Security Holders, Form 10-Q or Quarterly
Report to Security Holders. Not applicable.
(16) Letter re: Change in Certifying Accountants. Not applicable.
(17) Letter re: Director Resignation. Not applicable.
(18) Letter Regarding Change in Accounting Principals. Not
applicable.
(19) Previously Unfiled Documents. Not applicable.
(21) Subsidiaries of the Registrant. Not applicable.
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders. Not applicable.
(23) Consent of Experts and Counsel. Not applicable.
(24) Power of Attorney. Not applicable.
(27) Financial Data Schedule.
(99) Additional Exhibits. Not applicable.
Independent Auditors' Report
The Board of Directors and Stockholders
Amber Resources Company
We have audited the accompanying balance sheets of Amber Resources
Company (a subsidiary of Delta Petroleum Corporation) as of June 30, 1994
and December 31, 1993 and the related statements of operations and
accumulated deficit, and cash flows for the six months ended June 30, 1994
and the years ended December 31, 1993 and 1992. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We beleive
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respsects, the financial position of Amber Resources Company
as of June 30, 1994 and December 31, 1993, and the results of its operations
and its cash flows for the six months ended June 30, 1994 and the years
ended December 31, 1993 and 1992 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in note 1 to
the financial statements, the Company has suffered recurring losses
from operations and has a working capital deficiency that raises
doubt about its ability to continue as a going concern. Management's
plans with regard to these matters are also described in note 1. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As discussed in note 2 to the financial statements, the Company changed
its method of accounting for oil and gas properties to the successful
efforts method in 1994.
KPMG Peat Marwick LLP
Denver, Colorado
November 18, 1994
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
BALANCE SHEET
June 30, December 31,
1994 1993
(Restated - Note 2)
ASSETS
Current Assets:
Cash $4,064 4,616
Accounts receivable:
Trade 59,494 137,485
Affiliate (Note 5) - 31,102
Other current assets 2,500 2,500
Total current assets 66,058 175,703
Oil and gas properties,at cost,
(using the successful
efforts method of accounting)
(Notes 2 and 6):
Undeveloped offshore California
properties 5,006,276 5,006,276
Developed onshore properties 2,722,260 2,745,774
7,728,536 7,752,050
Less accumulated depreciation
and depletion (1,083,517) (900,993)
Net oil and gas properties 6,645,019 6,851,057
$6,711,077 7,026,760
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable trade:
Trade $45,912 77,815
Affiliate (Note 5) 52,072 -
Royalties payable held in suspense 185,123 171,020
Recoupment gas royalties payable 643,841 588,357
Total current liabilities 926,948 837,192
Recoupment gas obligation 967,911 1,124,167
Stockholders' Equity
Preferred stock, $1 par value.
Authorized 5,000,000 shares of
Class A convertible preferred
stock, none issued (Note 3) - -
Common stock, $.0625 par value;
authorized 25,000,000 shares,
4,666,185 shares issued
and outstanding 291,637 291,637
Additional paid-in capital 5,755,232 5,755,232
Accumulated deficit (1,230,651) (981,468)
Total stockholders' equity 4,816,218 5,065,401
$6,711,077 7,026,760
<TABLE>
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<CAPTION>
Six Months Year Ended Year Ended
June 30, December 31, December 31,
1994 1993 1992
Revenue: (Restated - Note 2)
<S> <C> <C>
Oil and gas sales, including recoupment
gas of $226,907 in 1994 and $609,750 in 1993
and $587,084 in 1992 (Note 1) $368,304 1,077,905 1,249,373
Interest income - 539 3,665
Total revenue 368,304 1,078,444 1,253,038
Expenses:
Lease operating expenses 141,772 275,861 352,570
Depletion 184,547 393,395 587,669
Exploration expenses 4,088 7,352 67,340
Abandoned and impaired properties 21,491 8,252 198,230
General and administrative 165,986 316,705 287,696
Interest on recoupment gas obligation (Note 1) 99,603 443,676 348,837
Interest on notes payable - - 25,367
Total expenses 617,487 1,445,241 1,867,709
Net loss (249,183) (366,797) (614,671)
Accumulated deficit at begining of period (981,468) (614,671) -
Accumulated deficit at end of period ($1,230,651) (981,468) (614,671)
Net loss per common share ($0.05) (0.08) (0.13)
Weighted average number of common
shares outstanding 4,666,185 4,666,185 4,666,185
</TABLE>
<TABLE>
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Year Ended Year Ended
Ended June 30, December 31, December 31,
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($249,183) (366,797) (614,671)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Recoupment gas revenue (226,907) (609,750) (587,084)
Interest on recoupment gas obligation 99,603 443,676 348,837
Depletion 184,547 393,395 587,669
Abandoned and impaired properties 21,491 8,252 198,230
Net changes in current assets and
and current liabilities:
Decrease (increase) in accounts
receivable 77,991 (4,479) (13,445)
(Increase) decrease in other current assets - (2,500) 40,000
Decrease in accounts payable (31,903) (75,732) (47,909)
Increase in royalties payable held in suspense 14,103 27,987 71,492
Increase in recoupment gas royalties payable 55,484 139,453 135,029
Net cash provided by (used in) operating activities (54,774) (46,495) 118,148
Cash flows from investing activities:
Additions to property and equipment - (11,247) (2,782)
Proceeds from sale of oil and gas properties - - 129,711
Net cash provided by (used in) investing activities - (11,247) 126,929
Cash flows from financing activities:
Change in accounts payable to/receivable from
affiliate 54,222 62,358 25,097
Payment of notes payable - - (270,174)
Net cash provided by (used in) financing activities 54,222 62,358 (245,077)
Net (decrease) increase in cash (552) 4,616 -
Cash at beginning of period 4,616 - -
Cash at end of period $4,064 4,616 -
Supplemental cashflow information:
Cash paid for interest - - 25,367
</TABLE>
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Six Months Ended June 30, 1994, and
Years Ended December 31, 1993 and 1992
(1) Summary of Significant Accounting Policies
Organization and Basis of Presentation
Amber Resources Company (the Company) was incorporated in
January, 1978, and is principally engaged in acquiring, exploring,
developing, and producing oil and gas properties. The Company owns
interests in undeveloped oil and gas properties offshore
California, near Santa Barbara and developed oil and gas properties
in the continental United States.
From August 20, 1991 through December 31, 1991, Underwriters
Financial Group , Inc. (UFG) acquired 80.08% of the outstanding
common stock of the Company (3,736,775 shares). The shares of the
Company were acquired in exchange for shares of common stock of
UFG, shares of convertible preferred stock of UFG, and a note
payable secured by a portion of the shares acquired. On April 30,
1992, UFG acquired an additional 373,885 shares of the Company's
common stock in exchange for shares of its common stock, thereby
increasing its ownership of the Company to 88.09%. In October,
1992, UFG concluded a series of agreements with Delta Petroleum
Corporation (Delta), then a subsidiary of UFG, to participate in a
plan to reorganize and recapitalize Delta (the Plan of
Reorganization). Under the terms of the Plan of Reorganization,
UFG transferred the 4,110,660 shares of the Company it owned to
Delta. Also in connection with the Plan of Reorganization, Delta
issued 1,030,000 shares of its common stock to Messrs. Burdette A.
Ogle and Ronald Heck (collectively, Ogle), shareholders of Delta,
in exchange for their working interests in two federal offshore
California oil and gas units and 167,317 shares of common stock of
the Company. As a result of these transactions, at June 30, 1994,
Delta owned 4,277,377 shares, or 91.68% of the outstanding common
stock of the Company. As of that date, 3,357,003 shares of common
stock of Amber transferred to the Company by UFG were pledged to
secure a note payable to Snyder Oil Corporation (the Snyder Note).
The note is currently in default.
The Company adjusted the basis of its assets and liabilities
in 1991 to reflect the new basis of accounting resulting from the
acquisition of more than 80% of its common shares by UFG. The
Company's net assets were adjusted to reflect UFG's acquisition
cost of the shares of $5,406,408. The minority shareholders
interest in the Company was not reflected in this adjustment as
accumulated losses had exceeded their original investment at that
date. The subsequent acquisition of additional shares of the
Company by UFG in 1992 was accounted for as an increase in oil and
gas properties and an increase in additional paid-in capital of
$595,461, representing the estimated fair value of the UFG shares
issued in the exchange. The acquisition by Delta of additional
shares from Ogle was also accounted for in 1992 as an increase in
oil and gas properties and an increase in additional paid-in
capital of $45,000, representing Ogle's predecessor cost of the
shares of the Company. The additional shares acquired from Ogle by
Delta were accounted for at predecessor cost due to the related
party nature of the transaction.
Going Concern Basis of Presentation
The financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. Certain factors, described below, raise substantial
doubt about the ability of the Company to continue as a going
concern.
At June 30, 1994, the Company has a working capital deficiency
of $860,890. Included in the Company's current liabilities are
royalties payable held in suspense of $185,123 at June 30, 1994
which represent the Company's estimate of royalties payable on
production attributable the Company's interest in certain wells in
Oklahoma. The Company is attempting to identify the royalty owners
and calculate the amounts owed to each owner, which it expects will
require some time. To date, no significant claims have been
asserted against the Company by royalty owners for amounts due for
prior production. The Company's current liabilities also include
royalties payable on recoupment gas produced on certain wells of
$643,841 at June 30, 1994. The Company is awaiting the outcome of
litigation in various courts which may impact the method of
calculating the Company's obligation for royalties payable on
recoupment gas. To date no claims have been asserted against the
Company by royalty owners for royalties due on recoupment gas
produced. The Company believes that the operators of the affected
wells have paid some of the royalties on behalf of the Company and
have withheld such amounts from revenues attributable to the
Company's interest in the wells. The Company has contacted the
operators of the wells in an attempt to determine what amounts the
operators have paid on behalf of the Company over the past five
years, which amounts would reduce the amounts owed by the Company.
To date the Company has not received information adequate to allow
it to determine the amounts paid by the operators.
The Company believes that it is unlikely that all
claims that might be made for payment of royalties payable in
suspense or for recoupment royalties payable would be made at one
time. The Company believes, although there can be no assurance,
that it may ultimately be able to settle with potential claimants
for less than the amounts recorded for royalties payable in
suspense and recoupment royalties payable.
Currently, the Company's operations are not generating
sufficient cash flow to fund operations and discharge the Company's
liabilities. The Company has been economically dependent upon the
Company's parent, Delta Petroleum Corporation.
Through the period ended June 30, 1994, Delta continued to
advance funds to the Company. Delta has no obligations or
commitment to provide further financial support although it may do
so from time to time as it elects.
Due to the uncertainties regarding the Company's ability to
generate sufficient cash flow to fund operations and satisfy its
liabilities, there is substantial doubt about the ability of the
Company to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome
of this uncertainty.
Property and Equipment
The Company follows the successful efforts method of
accounting for its oil and gas activities. Accordingly, costs
associated with the acquisition, drilling, and equipping of
successful exploratory wells are capitalized. Geological and
geophysical costs, delay and surface rentals and drilling costs of
unsuccessful exploratory wells are charged to expense as incurred.
Costs of drilling development wells, both successful and
unsuccessful, are capitalized.
Upon the sale or retirement of oil and gas properties, the
cost thereof and the accumulated depreciation and depletion are
removed from the accounts and any gain or loss is credited or
charged to operations.
Depreciation and depletion of capitalized acquisition,
exploration and development costs is computed on the
units-of-production method by individual fields as the related
proved reserves are produced. The Company assesses impairment of
proved oil and gas properties on an aggregate basis using
undiscounted estimated future net revenue, calculated using
constant prices and costs. Capitalized costs of unproved
properties are assessed periodically and a provision for impairment
is recorded, if necessary, through a charge to operations.
Gas Balancing
The Company uses the sales method of accounting for gas
balancing of gas production. Under this method, all proceeds from
production are recorded as revenue until such time as the Company
has produced its share of related reserves. Thereafter, additional
amounts received are recorded as a liability.
As of June 30, 1994, the Company had received payment for
approximately 124,000 MCF of gas less than its entitlement share on
certain properties. Accordingly, these amounts have been included
in the reserve quantities as set forth in note 7.
Recoupment Gas Obligation
Certain oil and gas properties were acquired by Amber subject
to a recoupment agreement with a gas purchaser. Under the terms of
the recoupment agreement, the gas purchaser was entitled to receive
up to 75% of future production to recoup gas purchased in
connection with the settlement of a previous take or pay contract
covering the properties. The gas purchaser had recourse only to
the properties subject to the agreement.
The obligation under the recoupment agreement was accounted
for in a manner similar to a production payment. The estimated
present value of the obligation at the date of the acquisition of
the properties was recorded as a liability. The liability was
calculated based on remaining volumes of gas due, using the price
of gas at the date of the acquisition of the properties, discounted
at 15% over the period the gas was expected to be recouped. The
liability was periodically increased by the accretion of the
discount and was reduced as the gas was delivered to the gas
purchaser. The gas produced and delivered to the gas purchaser
(recoupment gas) is recorded as revenue at the then current price
of natural gas. Any difference between the revenue recorded for
the recoupment gas and the reduction in the recoupment obligation
was accounted for as an increase or decrease in interest expense.
The Company is responsible for royalties and for production
costs associated with the properties subject to the recoupment
agreement.
Subsequent to year end, the Company entered into an agreement
with El Paso Natural Gas Company (El Paso) under which the Company
agreed to transfer to El Paso, the Company's interest in four wells
and the associated acreage in complete satisfaction of the
Company's recoupment gas obligation. As a result of this
agreement, the Company is no longer obligated to El Paso for
recoupment gas from the remaining wells originally subject to the
recoupment agreement.
Recoupment Gas Royalties Payable
Recoupment gas royalties represent royalties due on recoupment
gas produced and delivered to the gas purchasers pursuant to the
terms of the recoupment agreement described above. The Company has
estimated the liability to the royalty owners based on the market
price of the gas during the period the gas was produced and
delivered to the gas purchaser.
Income Taxes
The Company uses the asset and liability method of accounting
for income taxes as set forth in Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), Accounting for Income Taxes.
Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and net operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income
in the years in which those differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred
tax assets and liabilities of a change in income tax rates is
recognized in the results of operations in the period that includes
the enactment date.
Income (Loss) Per Common Share
Income (loss) per share is computed by dividing the net income
or loss for the period by the weighted average number of shares of
common stock outstanding during the year. Common stock options and
warrants have not been considered in the calculation of loss per
share as their effect is antidilutive.
(2) Restatements
The Company changed its method of accounting for oil and gas
properties to the successful efforts method from the full cost
method. In the opinion of management, the successful efforts
method of accounting is preferable in the Company's circumstance,
as it is more generally accepted as industry practice, it more
accurately reflects the current activities of the Company, which
include only limited exploration activities, and it results in a
better matching of revenue and expenses. The financial statements
have been restated to apply the new method of accounting
retroactively.
The financial statements were also restated (i) to record as
a liability the Company's obligation under the recoupment agreement
with a gas purchaser, (ii) to adjust the amount previously recorded
for recoupment gas royalties, (iii) to revise the adjustments
previously recorded in 1991 resulting from the acquisition of
80.08% of the Company's common shares by UFG, and (iv) to record
other adjustments.
Summarized financial information as of December 31, 1993 and
for the years ended December 31, 1993 and 1992 as previously
reported and as restated follows:
As previously As
reported Adjustments restated
As of December 31, 1993:
Current assets $ 205,470 (29,767) 175,703
Property and equipment,
net 3,389,953 3,461,104 6,851,057
Other assets 8,901 (8,901) -
Total assets $ 3,604,324 3,422,436 7,026,760
As of December 31, 1993
(continued):
Current liabilities $ 962,829 (125,637) 837,192
Recoupment gas obligation - 1,124,167 1,124,167
Recoupment royalties 272,338 (272,338) -
Stockholders' equity 2,369,157 2,696,244 5,065,401
Total liabilities
and stockholders'
equity $ 3,604,324 3,422,436 7,026,760
Year ended December 31, 1993:
Revenue $ 468,694 609,750 1,078,444
Expenses (478,635) (966,606) (1,445,241)
Net loss $ (9,941) (356,856) (366,797)
Year ended December 31, 1992:
Revenue $ 665,954 587,084 1,253,038
Expenses (601,643) (1,266,066) (1,867,709)
Net income (loss) $ 64,311 (678,982) (614,671)
(3) Preferred Stock
The Board of Directors is authorized to issue 5,000,000 shares
of 9% Class A convertible preferred stock having a par value of $1
per share. At the option of the Company, this preferred stock is
convertible at a rate of .625 shares of common stock for each share
of Class A convertible preferred stock.
(4) Income Taxes
At June 30, 1994 and December 31, 1993, the Company's
significant deferred tax assets and liabilities are summarized as
follows:
1994 1993
Deferred tax assets:
Net operating loss
carryforwards $ 1,806,000 1,711,000
Allowance for doubtful
accounts not deductible
for tax purposes - 11,000
Recoupment gas obligation 368,000 427,000
Gross deferred tax assets 2,174,000 2,149,000
Less valuation allowance (365,000) (251,000)
Net deferred tax assets 1,809,000 1,898,000
Deferred tax liabilities:
Oil and gas properties,
principally due to
differences in basis and
depreciation and depletion (1,809,000) (1,898,000)
Net deferred tax asset $ - -
No income tax benefit has been recorded for the six months
ended June 30, 1994 or the years ended December 31, 1993 and 1992
since the benefit of the net operating loss carryforward and other
net deferred tax assets arising in those periods has been offset by
an increase in the valuation allowance for such net deferred tax
assets.
At June 30, 1994, the Company had net operating loss
carryforwards for regular and alternative minimum tax purposes of
approximately $4,750,000 and $4,500,000, respectively. If not
utilized, the tax net operating loss carryforwards will expire
during the period from 1996 through 2009.
(5) Related Party Transactions
Effective August 20, 1991, the Company entered into a
management agreement with UFG whereby UFG received $6,000 per month
for providing the Company with management and other services.
Effective October 21, 1992, Delta was assigned the management
agreement from UFG. The Company paid UFG and Delta $72,000 for the
year ended December 31, 1992.
Effective March 31, 1993, the Company and Delta entered into
an agreement which provides for the sharing of management between
the two companies. Under this agreement the Company pays Delta for
its proportionate share of rent, secretarial and administrative,
accounting and management services of Delta officers and employees.
The Company paid Delta $191,788 for the six months ended June 30,
1994, and $243,357 for the year ended December 31, 1993. The
Company had a payable to Delta of $52,072 at June 30, 1994 and a
receivable from Delta of $31,102 at December 31, 1993.
During the year ended December 31, 1993, the Company sold to
Delta various non-producing leasehold interests which were assigned
to Delta in exchange for $20,000 and a 10% working interest, after
well payout.
During the year ended December 31, 1992, the Company received
advances from UFG. The Company accrued interest at a rate of 1.25%
per month in accordance with the terms of the convertible
promissory note payable to UFG. The note was repaid during 1992.
Interest paid to UFG amounted to $17,469 for the year ended
December 31, 1992.
(6) Disclosures About Capitalized Costs, Costs Incurred and Major
Customers
Capitalized costs related to oil and gas producing activities
are as follows:
June 30, December 31,
1994 1993
Undeveloped offshore
California properties $ 5,006,276 5,006,276
Developed onshore
domestic properties 2,722,260 2,745,774
7,728,536 7,752,050
Accumulated depreciation
and depletion (1,083,517) (900,993)
$ 6,645,019 6,851,057
Cost incurred in oil and gas producing activities for the six
months ended June 30, 1994 and the years ended December 31, 1993
and 1992 are as follows:
1994 1993 1992
Exploration costs $ 4,088 7,352 67,340
Development costs - 11,247 2,782
Sales to major customers accounted for approximately 62%, 18%
and 11% of 1994 oil and gas sales. Sales to major customers
accounted for approximately 57%, 12%, and 10% of 1993 oil and gas
sales. Sales to major customers accounted for 53% and 12% of 1992
oil and gas sales.
(7) Information Regarding Proved Oil and Gas Reserves (Unaudited)
Proved oil and gas reserves are the estimated quantities of
crude oil, natural gas, and natural gas liquids which geological
and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed oil and gas
reserves are those expected to be recovered through existing wells
with existing equipment and operating methods. The determination
of oil and gas reserves is highly complex and interpretive. The
estimates are subject to continuing changes as additional
information becomes available.
The Company's offshore California proved undeveloped reserves
are attributable to its interests in three federal units located
offshore California near Santa Barbara. While these interests
represent ownership of substantial oil and gas reserves classified
as proved undeveloped, the cost to develop the reserves will be
very substantial. The Company may be required to farm out all or
a portion of its interests in these properties if it cannot fund
its share of the development costs. There can be no assurance that
the Company can farm out its interests on acceptable terms. If the
Company were to farm out its interests in these properties, its
share of the proved reserves attributable to the properties would
be decreased substantially. The Company may also incur substantial
dilution of its interests in the properties if it elects to use
other methods of financing the development costs.
These units have been formally approved and are regulated by
the Minerals Management Service of the Federal Government.
However, due to a history of opposition to offshore drilling and
production in California by some individuals and groups, the
process of obtaining all of the necessary permits and
authorizations to develop the properties will be lengthy and even
after all required approvals are obtained, lawsuits may possibly be
filed to attempt to further delay the development of the
properties. While the Federal Government has recently attempted to
expedite this process, there can be no assurance that it will be
successful in doing so. The Company does not have a controlling
interest in and does not act as the operator of any of the offshore
California properties and consequently will not control the timing
of either the development of the properties or the expenditures for
development. Management and its independent engineering consultant
have considered these factors relating to timing of the development
of the reserves in the preparation of the reserve information
relating to these properties. As additional information becomes
available in the future, the Company s estimates of the proved
undeveloped reserves attributable to these properties could change,
and such changes could be substantial.
<TABLE>
AMBER RESOURCES COMPANY
(A SUBSIDIARY OF DELTA PETROLEUM CORPORATION
Notes to Consolidated Financial Statements
(7)Information Regarding Proved Oil and Gas Reserves (Unaudited) - Continued
A summary of changes in estimated quantities of proved reserves, net of recoupment gas, for the six
months ended June 30, 1994 and the years ended December 31, 1993 and 1992 are as follows:
<CAPTION>
Onshore Offshore
GAS OIL GAS OIL
(MCF) (BBLS) (MCF) (BBLS)
<S> <C> <C> <C> <C>
Balance at January 1, 1992 5,069,961 37,128 14,108,162 11,843,499
Revisions of quantity estimates (553,803) (21,442) (1,132,315) (1,251,134)
Sale of properties (98,284) (1,231) - -
Production (429,263) (1,616) - -
Balance at December 31, 1992 3,988,611 12,839 12,975,847 10,592,365
Revisions of quantity estimates 411,759 8,506 - -
Sale of properties (408,032) (1,005) - -
Production (234,746) (1,940) - -
Balance at December 31, 1993 3,757,592 18,400 12,975,847 10,592,365
Revisions of quantity estimates (675,625) (322) - -
Production (84,276) (469) - -
Balance at June 30, 1994 2,997,691 17,609 12,975,847 10,592,365
Proved developed reserves:
December 31, 1991 6,255,513 26,521 - -
December 31, 1992 3,580,579 11,834 - -
December 31, 1993 3,757,592 18,400 - -
June 30, 1994 2,997,691 17,609 - -
</TABLE>
<TABLE>
AMBER RESOURCES COMPANY
(A SUBSIDIARY OF DELTA PETROLEUM CORPORATION)
Notes to Consolidated Financial Statements, Continued
(7) Information Regarding Proved Oil and Gas Reserves (Unaudited) - Continued
Future net cash flows presented below are computed using year-end prices
and costs and exclude amounts attributable to recoupment gas.
Future corporate overhead expenses and interest expense have not been
included.
<CAPTION>
Offshore
Onshore California Total
<S> <C> <C> <C>
December 31, 1992:
Future cash inflows $7,075,699 150,643,614 157,719,313
Future costs:
Production 2,235,804 18,741,837 20,977,641
Development 336,503 22,948,450 23,284,953
Income taxes - 37,044,131 37,044,131
Future net cash flows 4,503,392 71,909,196 76,412,588
10% discount factor 2,540,446 59,245,373 61,785,819
Standardized measure of discounted future
net cash flows $1,962,946 12,663,823 14,626,769
December 31, 1993:
Future cash inflows $7,637,089 118,736,564 126,373,653
Future costs:
Production 2,510,610 18,611,457 21,122,067
Development 77,198 22,948,450 23,025,648
Income taxes - 26,240,063 26,240,063
Future net cash flows 5,049,281 50,936,594 55,985,875
10% discount factor 2,668,854 42,056,470 44,725,324
Standardized measure of discounted future
net cash flows $2,380,427 8,880,124 11,260,551
June 30, 1994:
Future cash inflows $5,073,304 118,736,564 123,809,868
Future costs:
Production 2,004,387 18,611,457 20,615,844
Development - 22,948,450 22,948,450
Income taxes - 23,486,944 23,486,944
Future net cash flows 3,068,917 53,689,713 56,758,630
10% discount factor 1,483,544 46,361,790 47,845,334
Standardized measure of discounted future
net cash flows $1,585,373 7,327,923 8,913,296
</TABLE>
<TABLE>
AMBER RESOURCES COMPANY
(A SUBSIDIARY OF DELTA PETROLEUM CORPORATION)
Notes to Consolidated Financial Statements, Continued
(7) Information Regarding Proved Oil and Gas Reserves (Unaudited) - Continued
The principal sources of changes in the standardized measure of
discounted net cash flows during the six months
ended June 30, 1994 and the years ended December 31, 1993
and 1992 are as follows:
<CAPTION>
Six Months Year Ended Year Ended
Ended June 30, December 31, December 31,
1994 1993 1992
<S> <C> <C> <C>
Beginning of year $11,260,551 14,626,769 17,591,679
Sales of oil and gas produced during the
period , net of production costs 375 (192,294) (309,719)
Net change in prices and production costs (755,956) (6,483,906) 1,705,629
Changes in estimated future development costs (170,601) (41,593) (371,123)
Revisions of previous quantity estimates and
other (2,522,336) 50,732 (6,288,832)
Net change in income taxes 538,235 1,949,178 933,967
Sales of reserves in place - (111,012) (394,000)
Accretion of discount 563,028 1,462,677 1,759,168
End of year $8,913,296 11,260,551 14,626,769
</TABLE>
The standardized measure of discounted future net cash flows
relating to proved oil and gas reserves and the changes in
standardized measure of discounted future net cash flows relating
to proved oil and gas reserves were prepared in accordance with
the provisions of Statement of Financial Accounting
Standard No. 69 future cash inflows were computed by applying
current prices at year-end to estimated future production.
Future production and development costs are computed by estimating
the expenditures to be incurred in developing and producing the
proved oil and gas reserves at year-end, based on year-end costs
and assuming continuation of existing economic conditions.
Future income tax expenses are calculated by applying appropriate
year-end tax rates to future pre-tax net cash flows relating to
proved oil and gas reserves, less the tax basis of properties
involved and tax credits and loss carryforwards relating to oil
and gas producing activities. Future net cash flows are discounted
at a rate of 10% annually to derive the standardized
measure of discounted future net cash flows. This calculation
procedure does not necessarily result in an estimate of the fair
market value or the present value of the Company's oil and gas
properties.
AGREEMENT
IT IS AGREED that effective March 31, 1993 between Delta
Petroleum Corporation ("Delta") and Amber Resources Company
("Amber") that, subsequent to March 31, 1993, all management-
related and general and administrative costs of Amber and Delta,
except direct costs for a) LOE's; b) royalties; and c) similar
company specific items shall be borne by Delta and Amber in
proportion to their respective net oil and gas production revenues
received and Amber shall reimburse Delta for its portions of such
costs (as accrued) on a monthly basis.
AMBER RESOURCES COMPANY
BY: /s/Aleron H. Larson, Jr., CEO
Authorization Officer
DELTA PETROLEUM CORPORATION
BY: /s/Roger A. Parker
Authorization Officer
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into this
18th day of November 1994 by and between EL PASO NATURAL GAS
COMPANY, a Delaware corporation,, with principal offices at 304
Texas Avenue, El Paso, Texas 79999-0304 (hereinafter "El Paso") ,
and AMBER RESOURCES COMPANY, a Delaware corporation, with principal
offices at Suite 3310,, 555 Seventeenth Street, Denver, Colorado
80202 (hereinafter "Amber").
WHEREAS, Amber has succeeded to all right, title and interest
of The Federal Deposit Insurance corporation, Shallow Gas Partners,
Ltd., and Shallow Gas Partners 1980-2, in and to the oil and gas
interests and wells more fully described on Exhibit "All hereto
(hereinafter "Properties") , which Exhibit by this reference is
incorporated herein; and
WHEREAS, El Paso, The Federal Deposit Insurance Corporation,
Shallow Gas Partners, Ltd., and Shallow Gas Partners 1980-2,,
entered into a certain Settlement Agreement and Release dated March
29, 1988 (hereinafter "Settlement") , pursuant to which the
Properties were subject to El Paso's right to receive certain
"Recoupment Volumes" and "Recoupment Quantity" of natural gas all
as more fully described in the Settlement; and
WHEREAS, the parties hereto wish to release the Properties
from El Paso's right to receive "Recoupment Volumes" and
"Recoupment Quantity," and to convey to El Paso certain working and
net revenue interests more fully described herein.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
1 . Amber hereby agrees to execute and deliver to El Paso,
with special warranty of title and with the other warranties
contained herein, interests it owns in and to the wells set forth
in Exhibit "B" which Exhibit is incorporated herein by this
reference (hereinafter the "Interests") . Said assignments shall be
in this form of Exhibit "C" hereto, which Exhibit by this reference
is incorporated herein, and the assignment effective on December 1,
1994 (the "Effective Date") . If any defects of title are later
discovered, which defects constitute a breach of the special
warranty of title, in addition to any rights under paragraph 3
hereof, El Paso will be entitled to any and all remedies afforded
under Oklahoma law. The Interests shall be conveyed subject to all
royalties, overriding royalties or other burdens on production,
however described, and subject to all obligations inherent in all
operating agreements, unit or pooling agreements, communitization
agreements, forced-pooling orders, and other agreements or rulings
affecting the Interests; provided, however, from and after the
Effective Date, El Paso shall be solely responsible for all rights,
duties and obligations associated with the Interests, with Amber
being solely responsible for all rights, duties and obligations
associated with the Interests prior to the Effective Date. Amber
shall execute and deliver all other documents, instruments and
affidavits reasonably requested by El Paso necessary to confirm the
assignments provided for herein, including without limitation,
bills of sale to tangible personal property. El Paso shall execute
and deliver, if necessary, all documents and instruments requiring
El Paso's signature which affect or burden the Interests.
Specifically, but not by way of limitation, El Paso shall send
executed copies of letters, in the form attached hereto as Exhibit
I'D," to each party with whom Amber has an agreement to sell or
deliver oil or gas, relinquishing and disclaiming any claim or
interest of entitlement to any production or call on production
from the interests and wells listed on Exhibit "All hereto, other
than the wells listed on Exhibit "B" hereto.
2. Amber hereby represents and warrants as follows:
a. That its net revenue interest in the Interests described
on Exhibit "B" is free and clear of any conveyances or liens made
or created by Amber, and that there is no notice of default or
litigation outstanding in connection with the Interests being
assigned. If any such liens, notices of default or litigation do exist?
Amber will defend against such.
b. That, to Amber's knowledge, there are no pending or
potential claims or threatened litigation in connection with the
Interests being assigned, including but not limited to any
environmental claims relating to groundwater or soil contamination.
c. That all taxes and rents heretofore accruing with respect
to the Interests being assigned have been paid. If any such taxes
or rents have not been paid, Amber will be responsible for paying
them.
d. That some royalties heretofore accruing with respect to
the Interests being assigned have not been paid, and if and when it
is determined what those royalties are, Amber will be responsible
for paying them.
3. Other than the warranties expressed in paragraphs 1 and
2, Amber makes no further warranties with respect to this
Settlement Agreement, provided however, that El Paso may rescind
this Settlement Agreement in its entirety, if at all, at any time
within six (6) months subsequent to the date of execution of this
Settlement Agreement if El Paso discovers any material defects in
title to the Interests identified on Exhibit "B". Promptly after
the execution of this Settlement Agreement, Amber agrees to provide
El Paso with all files containing title opinions, or any
information Amber may have relating to Amber's title to the
Interests.
4. Subject to the provisions of paragraph 3, El Paso hereby
agrees that all right, title and interest of El Paso in and to the
Properties, including the right to receive "Recoupment Volumes"
and/or "Recoupment Quantity," provided for in the Settlement are
hereby extinguished, and the provisions of the Settlement shall no
longer apply to the Properties. Provided, nothing contained herein
shall be construed as requiring or obligating Amber to reimburse El
Paso any portion of the Settlement Amount (as defined in the
Settlement).
5. El Paso and Amber hereby release, waive and discharge one
another, their respective successors, assigns, officers, directors,
partners and agents, from any and all claims, claims for relief,
causes of action, damages, demands, costs and expenses of
whatsoever kind and nature which either of the releasing parties
may have or claim to have against the released party as of the date
of this Agreement, whether know or unknown, relating to the Settlement
or to the Interests conveyed herein.
6. El Paso and Amber mutually acknowledge that there are no
other agreements or representations, either oral or written,
expressed or implied, with respect to the transaction contemplated
hereby that are not embroiled in this Agreement, and this Agreement
represents a complete integration of all prior and contemporaneous
agreements and understandings of the parties with respect to such
matters.
7. Notwithstanding the fact that this Agreement may be
executed in whole or in part elsewhere,, the parties hereby
stipulate that the substantive laws of the State of Oklahoma,
without regard to its choice of law rules, shall apply with respect
to all disputes hereunder and this Agreement shall be construed in
accordance with 'the laws of the State of Oklahoma. If any
provision hereof is in conflict with any statute or rule or law of
the State of Oklahoma or is otherwise unenforceable, such provision
shall be deemed null and void only to the extent of such conflict
or unenforceability, and shall be deemed separate from and shall
not invalidate any other provision of this Agreement.
8. It is understood and agreed that this Agreement may be
executed in several counterparts, each of which shall, for all
purposes, be deemed an original and all such counterparts taken
together, shall constitute one in the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first written above.
EL PASO NATURAL GAS COMPANY
By: /s/Thomas S. Jensen
AMBER RESOURCES COMPANY
By: /s/Roger A. Parker
STATE OF TEXAS
ss.
COUNTY OF EL PASO
Subscribed and sworn to before me this 28th day of November,
1994 by Thomas S. Jensen as Vice President of El Paso Natural
Gas Company.
Witness my hand and official seal.
My commission expires: 7-22-97
[SEAL] /s/Maria G. Duarte
Notary Public
STATE OF COLORADO
ss.
COUNTY OF DENVER
Subscribed and sworn to before me this 18th day of November,
1994 by Roger A. Parker as President of Amber Resources
Company.
Witness my hand and official seal.
My commission expires: 5/18/97
[SEAL] /s/Sheryl K. Shelton
Notary Public
EXHIBIT "A"
NAME LOCATION COUNTY
BARHAM #1-32 SEC 32, T11N, R21W BECKHAM
FINNEY #1-35 SEC 35, T07N, R12W CADDO
HEATH #1-7 SEC 07, T04N, R08W GRADY
K.C. CATTLE #3-2 SEC 02, T11N, R22W BECKHAM
K.C. CATTLE #1-34 SEC 34, T12N, R22W BECKHAM
K.C. CATTLE #1-11 SEC 11, T11N, R22W BECKHAM
KILHOFFER #1-21 SEC 21, T10N, R20W WASHITA
MCCLAIN #1-23 SEC 23, T10N, R12W CADDO
MCINTOSH #1-11 SEC 11, T04N, R09W COMANCHE
MERRICK #1-7 SEC 07, T12N, R21W ROGER MILLS
MERRICK #1-22 SEC 22, T12N, R22W BECKHAM
MOLLETT #1-4 SEC 04, T11N, R22W BECKHAM
MORTON #1-25 SEC 25, T13N, R22W ROGER MILLS
MORSE B #1 SEC 14, T11N, R22W BECKHAM
NUTLEY MORGAN #1-33 SEC 33, T10N, R20W WASHITA
PARTAIN #1-6 SEC 06, T11N, R21W BECKHAM
PORTER #1-13 SEC 13, T04N, R08W GRADY
REA #1-15 SEC 15, T11N, R22W BECKHAM
ROGER SPEARS #1-21 SEC 21, T10N, R20W WASHITA
SCHWEN #1-14 SEC 14, T05N, R11W CADDO
SCRUGGS #1 SEC 32, T04N, R08W GRADY
SIMMONS #2-17 SEC 17, T12N, R22W ROGER MILLS
SIMMONS #1A-17 SEC 17, T12N, R22W ROGER MILLES
SNAVELY #1-2 SEC 02, T05N, R10W CADDO
THURMOND #1-21 SEC 21, T12N, R22W BECKHAM
TWYMAN #1-17 SEC 17, T11N, R19W WASHITA
VERMA #1-34 SEC 34, T07N, R12W CADDO
K.C. CATTLE #2-3 SEC 03, T11N, R22W BECKHAM
MERRICK #1-28 SEC 28, T12N, R22W BECKHAM
SIMMONS #1-29 SEC 29, T12N, R22W BECKHAM
THURMOND #1-27 SEC 27, R12N, R22W BECKHAM
EXHIBIT "B"
GWI NRI
1. K.C. Cattle #2-3 .07642167 .0586505
3-11N-22W
Beckham County, Oklahoma
2. Merrick #1-28 .1029723 .0809198
28-12N-22W
Beckham County, Oklahoma
3. Simmons #1-29 .17007833 .1296810
29-12N-22W
Beckham County, Oklahoma
4. Thurmond #1-27 .09749804 .0774525
27-12N-22W
Beckham County, Oklahoma
EXHIBIT "D"
To: Addressee
Re: Amber Resources Company
Dear Sir or Madam:
El Paso Natural Gas Company ("El Paso") hereby releases
and relinquishes all of its right, title and interest in and to the
wells identified on Exhibit "All hereto, and all rights to any call
on production or other entitlements to production therefrom.
If you have any questions with respect to the contents of
this letter, please contact the undersigned at El Paso Natural Gas
Company at (915) 541-5519.
Very truly yours,
EL PASO NATURAL GAS COMPANY
EXHIBIT "C"
ASSIGNMENT
THE STATE OF OKLAHOMA
KNOW ALL MEN BY THESE PRESENTS
COUNTY OF BECKHAM
THAT the undersigned, Amber Resources Company, a Delaware
corporation, with principal offices at Suite 3310, 555 Seventeenth
Street, Denver, Colorado 80202, (hereinafter referred to as
"Assignor") for and in consideration of the sum of Ten Dollars
($10-00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, pursuant to the terms
and provisions of that certain Settlement Agreement of even date
herewith, which terms and provisions are incorporated herein by
this reference, do hereby ASSIGN, TRANSFER, SELL, and CONVEY, with
special warranty of title only, unto El Paso Natural Gas Company,
a Delaware corporation, with offices at 100 North Stanton, El Paso,
Texas 79901 (hereinafter ref erred to as "Assignee") , effective as
of 7:00 a.m. (CST) on December 1, 1994, all of Assignors' right,
title, and interest in and to properties identified in Exhibit "1"
hereto ("the Properties") and the production therefrom and the
equipment, materials, and other fixtures used or obtained in
connection with the Properties or with the production, treatment,
sale, or disposal of hydrocarbons or waste therefrom or
attributable thereto.
This Assignment is made and accepted subject to, and Assignee
expressly assumes all duties, obligations, and liabilities, fixed
or contingent, that may now or hereafter exist with respect to the
Properties.
IN WITNESS WHEREOF, this, Assignment is executed this 18th day
of November 1994.
ASSIGNOR
AMBER RESOURCES COMPANY
By:/s/Roger A. Parker
Name: Roger A. Parker
Title: President
ASSIGNEE
By:/s/Thomas S. Jensen
Name: Thomas S. Jensen
Title: Vice President
EXHIBIT 1
GWI NRI
1. K.C. Cattle #2-3 .07642167 .0586505
3-11N-22W
Beckham County, Oklahoma
2. Merrick #1-28 .1029723 .0809198
28-12N-22W
Beckham County, Oklahoma
3. Simmons #1-29 .17007833 .1296810
29-12N-22W
Beckham County, Oklahoma
4. Thurmond #1-27 .09749804 .0774525
27-12N-22W
Beckham County, Oklahoma
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