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
[x] Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended June 30, 1997
or
[ ] Transition Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period .
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
incorporation or organization Identification No.)
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 X No
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 issuer's revenue for the fiscal year ended June 30, 1997
totaled $1,113,274.
The aggregate market value as of the Company's voting stock held
by non-affiliates of the Company as of September 19, 1997 could
not be determined because there is no established public trading
market.
As of September 25, 1997, 4,666,185 shares of registrant's Common
Stock $.0625 par value were issued and outstanding.
The Index to Exhibits appears at Page 20.
TABLE OF CONTENTS
PART I
PAGE
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 3
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 OPERATION 11
ITEM 7. FINANCIAL STATEMENTS 14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 14
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE
EXCHANGE ACT 14
ITEM 10. EXECUTIVE COMPENSATION 16
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 17
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 18
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 18
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Amber Resources Company ("Amber" or "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. As of June 30, 1997, 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 42 producing wells in western
Oklahoma (the "Oklahoma Properties"). At June 30, 1997, the
Company estimated its proved undeveloped reserves attributable to
its offshore California properties to be approximately 13.76 Bcf
of gas and 10,885,000 Bbls of oil and proved producing reserves
attributable to its onshore properties to be approximately 1.87
Bcf of gas and 5,800 Bbls of oil. There are 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,
1997, 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 which provides for the sharing of the
management between the two companies and allocation of expenses
related thereto.
At June 30, 1997, Amber had an authorized capital of
5,000,000 shares of $1.00 par value preferred stock of which no
shares were issued and 25,000,000 shares of $0.0625 common stock
of which 4,666,185 shares were issued and outstanding.
(b) Business of Issuer.
During the year ended June 30, 1997, Amber was engaged
in only one industry, namely the acquisition, exploration,
development, and production of oil and gas properties and related
business activities. The Company's oil and gas operations have
been comprised primarily of production of oil and gas. The
Company currently has producing oil and gas interests in the
Anadarko Basin in Oklahoma and interests in proven but
undeveloped offshore Federal leases and units near Santa Barbara,
California.
(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 three major customers for the sale of oil and gas as
of the date of this report, namely, Tristar Gas Marketing,
Chesapeake Gas Marketing and HS Resources. 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
review 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.
(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 Company since its inception. In addition, the
Company does not anticipate that such expenditures will be
material during the fiscal year ending June 30, 1998.
(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. Under this agreement, the
Company pays Delta for its proportionate share of rent,
secretarial and administrative, accounting and management
services of Delta's officers and employees.
(b) Oil and Gas Properties
The Company owns interests in oil and gas
properties located in Oklahoma and offshore 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 years ended June 30, 1997 and 1996.
Offshore Federal Waters: Santa Barbara, California Area
Amber Resources Company, owns interests in three proved
undeveloped federal units located in federal waters offshore
California near Santa Barbara.
At June 30, 1997, Amber's offshore California reserves
from these Units totaled approximately 13.76 Bcf of gas and
10,885,000 Bbls of oil for an aggregate oil and gas equivalent of
approximately 13,178,000 BOE.
The Santa Barbara Channel and the offshore Santa Maria
Basin are the seaward portions of geologically well-known onshore
basins with over 90 years of production history. These offshore
areas were first explored in the Santa Barbara Channel along the
near shore three mile strip controlled by the state. New field
discoveries in Pliocene and Miocene age reservoir sands led to
exploration into the federally controlled waters of the Pacific
Outer Continental Shelf ("POCS"). Eight POCS lease sales and
subsequent drilling conducted between 1966 and 1984 have resulted
in the discovery of an estimated two billion Bbls of oil and
three trillion cubic feet of gas. Of these totals, some 750
million Bbls of oil and 700 billion cubic feet of gas have been
produced and sold. POCS production is approximately 160,000 Bbls
of oil and 186 million cubic feet of gas per day according to the
Minerals Management Services of the Department of the Interior
("MMS").
Most of the early offshore production was from Pliocene
age sandstone reservoirs. The more recent developments are from
the highly fractured zones of the Miocene age Monterey Formation.
The Monterey is productive in both the Santa Barbara Channel and
the offshore Santa Maria Basin. It is the principal producing
horizon in the Point Arguello field, the Point Pedernales field,
and the Hondo and Pescado fields in the Santa Ynez Unit. Because
the Monterey is capable of relatively high productive rates, the
Hondo field, which has been on production since late 1981, has
already surpassed 150 million Bbls of production.
California's active tectonic history over the last few
million years has formed the large linear anticlinal features
which trap the oil and gas. Marine seismic surveys have been
used to locate and define these structures offshore. Recent
seismic surveying utilizing modern 3-D seismic technology,
coupled with exploratory well data, has greatly improved
knowledge of the size of reserves in fields under development and
in fields for which development is planned. Currently, 10 fields
are producing from 19 platforms in the Santa Barbara Channel and
offshore Santa Maria Basin. Implementation of extended
high-angle to horizontal drilling methods is reducing the number
of wells needed to develop reserves in the area. Use of these
new drilling methods and seismic technologies is expected to
improve development economics.
The first three miles off the shore of the coastline
are administered by each state and are known as "state waters".
Within the state waters offshore Santa Barbara County, the State
of California regulates oil and gas leases, drilling, and the
installation of permanent and temporary producing facilities.
Because the three units in which the Company owns interests are
located outside and beyond the state waters in the POCS, the
offshore area beyond the three-mile limit, leasing and drilling
of these units are not regulated by the State of California.
However, to the extent that the production will be transported to
an on-shore facility through the state waters, the Company's
pipelines (or other transportation facilities) will be subject to
California state regulations. Construction and operation of the
pipelines will require permits from the state. State regulations
also govern the construction and operations of on-shore
facilities such as terminals, pumping stations, and water
separation facilities, all of which require a comprehensive
permitting process. Ocean disposal of effluents, such as
drilling muds and produced waters, is administered by the EPA.
Additionally, all development plans must be consistent with the
Federal Coastal Zone Management Act ("CZM"). In California the
CZM consistency determination is taken by the California Coastal
Commission.
Santa Barbara County, through its Board of Supervisors,
also has a significant impact on the method and timing of any
offshore field development through its concurrent regulation of
the construction and operation of on-shore facilities.
Leasing, lease administration, development, and
production with the OCS all fall under Federal regulations
administered by the MMS.
The Company's Offshore California proved undeveloped
reserves are attributable to its interests in these 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 MMS. 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. 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 materially
change.
Current Status. On November 5, 1996, the MMS issued a
Directed Suspension of Operations for the POCS Non-Producing
Leases and Units, pursuant to CFR 250.10(b)(4), extending the
existing Suspension of Operations ("SOO") from January 1, 1997
until December 31, 1998. This action permitted Unit owners to
cease paying lease payments to the Federal government and
suspended the requirements relating to development of the leases
during this period. The Directive cited the fact that the MMS
had requested in 1992 that the lease owners participate in what
became known as the COOGER (California Offshore Oil and Gas
Energy Resources) Study and during the term of the Study that the
leases would be held under a SOO.
The MMS issued a second letter on December 24, 1996
with the intent to expand and clarify the November 5th Directive
and to notify all lease owners of the course of action to be
followed by the Lease and Unit Operators during 1997 and 1998
prior to the expiration of the SOO. This letter requests that
each Operator submit a Unit (or Lease) Plan of Operations to the
MMS by December 31, 1997. This will not be a binding document
but the MMS intends to use it in determining a strategy for
development. In early 1998 each Operator is to meet with the MMS
for a review of the Plan. Based on this meeting the Operator
will submit, by September 1, 1998, a final Plan of Operations for
approval. The approved Plans for the Units will go into effect
on January 1, 1999.
In order to carry out the requirements of this December
24, 1996 letter, all Operators of the units in which the Company
owns non-operating interests (described below) are currently
engaged in studies to develop a conceptual framework and general
timetable for continued delineation and development of the
leases. For delineation, the Operators will outline the mobile
drilling unit well activities, including number and location.
For development, the Operators' reports will cover the total
number of facilities involved, including platform(s), pipelines,
onshore processing facilities, transportation systems and
marketing plans. The Company is participating with the Operators
in meeting the MMS schedules through meetings and consultations
and is sharing in the costs as invoiced by the Operators.
Gato Canyon Unit. The Company holds a 6.97% working
interest in the Gato Canyon Unit. 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 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,
1997, Forrest A. Garb & Associates, Inc. ("Garb"), an independent
petroleum engineering firm based in Dallas, Texas, issued a
report indicating that Gato Canyon contains recoverable reserves
estimated to be 123.8 million Bbls of oil and 22.17 Bcf of
natural gas representing approximately 7.08 million Bbls of oil
and 9.9 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 $12.50 per Bbl and $1.41 per Mcf
and applicable regulatory parameters, the Company's 6.97% working
interest in the Gato Canyon Unit has a pretax discounted (10%)
present value of approximately $8,203,000. (See "--Oil and Gas
Reserves".)
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 Aera Energy, LLC, a subsidiary of 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 Garb, on July 1,
1997 the Lion Rock Unit contains proved undeveloped recoverable
reserves of 527.1 million Bbls of oil and 474.4 Bcf of natural
gas, equivalent to approximately 2,398,000 barrels of oil and 2.2
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 $12.50 per Bbl and $1.41 per Mcf and applicable regulatory
parameters, the Company's aggregate interest in the Lion Rock
Unit has a pre-tax present value (discounted at 10%) of
approximately $3,702,000 as of July 1, 1997. (See "--Oil
and Gas Reserves".)
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, 1997 report prepared by Garb, the
Sword Unit contains proved undeveloped recoverable reserves of
193.9 million Bbls of oil and 232.7 Bcf of natural gas
representing reserves of approximately 1.41 million Bbls of oil
(having an estimated average gravity of 10.6 API) and 1.69 Bcf of
natural gas to the Company's interest. Based on prices of $12.50
per Bbl and $1.41 per Mcf and applicable regulatory parameters,
the Company's interest in the Sword Unit has a pre-tax present
value (discounted at 10%) of approximately $1,388,000. (See
"--Oil and Gas Reserves".)
Oklahoma.
The Company owns non-operated working interests in 42
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.
(c) Production
The Company is not obligated to provide a fixed and
determined quantity of oil and gas in the future under existing
contracts or agreements. 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:
Year Ended Year Ended Year Ended
June 30, 1997 June 30, 1996 June 30, 1995
Average sales price:
Oil (per barrel) $21.19 20.85 15.27
Natural Gas (per Mcf) $2.28 1.73 1.55
Production costs (per
Mcf equivalent) $.50 .65 .57
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, 1997, 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(1) Gross(1) Net(2)
Oklahoma 0 0 42 2.52 6,720 444
(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, 1997, the Company held undeveloped acreage
by state as set forth below:
Undeveloped Acres (1)
Location Gross Net
California (2) 22,340 811
(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 years ended June 30, 1997 and 1996, the
Company participated in the recompletion of one well each year,
but did not participate in the drilling of any new wells.
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,
1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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. Quotations during 1996
and 1997 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, 1997 was approximately 1,000.
(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.
Liquidity and Capital Resources.
At June 30, 1997, the Company had a working
capital deficit of $953,060 compared to a working capital deficit
of $1,161,713 at June 30, 1996. The Company's working capital
deficit is primarily a result of amounts payable to Delta and
royalties payable. The Company's account payable to affiliate
has decreased from June 30, 1996 as the Company's available cash
flow during the period exceeded the Company's proportionate share
of rent, secretarial and administrative, accounting and
management services paid by Delta.
The Company's current liabilities include
royalties payable of $419,808 at June 30, 1997 which represent
the Company's estimate of royalties payable on production
attributable to it's interest in certain wells in Oklahoma. 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 has been informed by its legal
counsel that the applicable statue of limitations period for
actions on written contracts arising in the state of Oklahoma is
five years. The statute of limitation has expired for royalty
owners to make a claim for a portion of the estimated royalties
that had previously been accrued. Accordingly, these amounts
have been written off and recorded as other income in 1997 and
1996.
The Company believes that it is unlikely that all
claims that might be made for payment of 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.
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 seek 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. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
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. Delta has no
obligations or commitment to provide further financial support,
although it may do so from time to time as it elects.
Results of Operations
Net Earnings (Loss). The Company's net income
for the year ended June 30, 1997 was $64,260 compared to a net
loss for the year ended June 30, 1996 of $149,538.
Revenue. Total revenue for the year ended June
30, 1997 was $1,113,274 compared to $841,702 for the year ended
June 30, 1996. Oil and gas sales for the year ended June 30,
1997 was $936,929 compared to $555,268 for the year ended June
30, 1996. The increase in oil and gas sales for the year ended
June 30, 1997 compared to the year ended June 30, 1996 resulted
from an increase in oil and gas prices during fiscal 1997 and an
increase in the volumes of natural gas produced.
Production volumes and average prices received for
the years ended June 30, 1997 and 1996 are as follows:
Year Ended Year Ended
June 30, 1997 June 30, 1996
Production:
Oil (barrels) 1,025 961
Gas (Mcf) 400,725 309,709
Average Price:
Oil (per barrel) $21.19 20.85
Gas (per Mcf) $ 2.28 1.73
Lease Operating Expenses. Lease operating
expenses for the year ended June 30, 1997 was $203,731 compared
to $205,971 for the year ended June 30, 1996. On a MCF
equivalent basis production expenses and taxes were $.50 per Mcf
equivalent during the year ended June 30, 1997 compared to $.65
for the year ended June 30, 1996.
Depletion Expense. Depletion expense for the year
ended June 30, 1997 was $120,071 compared to $117,867 for the
year ended June 30, 1996. On a MCF equivalent basis the
depletion rate was $.30 per Mcf equivalent during year ended June
30, 1997 compared to $.37 per Mcf equivalent for the year ended
June 30, 1996. The slight increase in depletion expense for the
year ended June 30, 1997 can be attributed to the increase in
production during the year.
Exploration Expenses. Exploration expenses
consist of geological and geophysical costs and lease rentals.
The Company incurred exploration costs of $3,330 and $3,032 for
the years ended June 30, 1997 and 1996, respectively.
Abandonment and Impairment of Oil and Gas
Properties. The Company recorded an expense for abandoned and
impaired properties for the year ended June 30, 1997 of $42,000
in accordance with SFAS 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of".
General and Administrative Expenses. General and
administrative expense for the year ended June 30, 1997 was
$679,882 compared to $664,370 for the year ended June 30, 1996.
Recent Accounting Standards
Statement of Financial Accounting Standards 123.
"Accounting for Stock Based Compensation" (SFAS 123), was issued
by the Financial Accounting Standards Board in October 1995.
SFAS 123 establishes financial accounting and reporting standards
for stock-based employee compensation plans as well as
transactions in which an entity issues its equity instruments to
acquire goods and services from non-employees. Through the year
ended June 30, 1997, the Company has not granted options or
issued equity instruments to any individual as compensation or
for goods and services.
Statement of Financial Accounting Standards 128, "Earnings Per Share"
(SFAS 128), was issued by the Financial Accounting Standards
Board in February, 1997. SFAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share
for entities with publicly held common stock. This statement
simplifies the computation of earnings per share and is required to be
adopted by the Company in the year ending June 30, 1998. The Company
has not yet evaluated the effects of adopting this statement.
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
Not applicable.
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:
Aleron H. Larson, Jr. 52 Chairman of the Board, May 1987
Chief Executive Officer to Present
Secretary, Treasurer,
and a Director
Roger A. Parker 35 President and May 1987
a Director to Present
Terry D. Enright 48 Director November 1987
to Present
Jerrie F. Eckelberger 53 Director September 1996
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 or among any executive
officer and director of the Registrant.
Aleron H. Larson, Jr., age 52, has operated as 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 then listed on the American Stock Exchange which
presently owns approximately 17.75% of the outstanding equity
securities of Delta. Subsequent to a change of control, Mr.
Larson resigned from all positions with UFG effective March 31,
1993. Mr. Larson serves as Chairman, CEO, Secretary, Treasurer
and Director of Delta Petroleum Corporation, a public oil and gas
company which is the parent and majority owner of Amber. 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. 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 35, served as the President,
a Director and Chief Operating Officer of Underwriters Financial
Group from July of 1990 through March 31, 1993. Mr. Parker
resigned from all positions with UFG effective March 31, 1993.
Mr. Parker also serves as President, Chief Operating Officer and
Director of Delta Petroleum Corporation, which is the parent and
majority owner of Amber. 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 was at
various times, from 1982 to 1989, a Director, Executive Vice
President, President and Shareholder of Ampet, Inc. He received
a Bachelor of Science in Mineral Land Management from the
University of Colorado in 1983. He is a member of the Rocky
Mountain Oil and Gas Association and the Independent Producers
Association of the Mountain States (IPAMS).
Terry D. Enright, age 48, 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.
Jerrie F. Eckelberger, age 53, is an investor, real
estate developer and attorney who has practiced law in the State
of Colorado for 26 years. He graduated from Northwestern
University with a Bachelor of Arts degree in 1966 and received
his Juris Doctor degree in 1971 from the University Colorado
School of Law. From 1972 to 1975, Mr. Eckelberger was a staff
attorney with the eighteenth Judicial District Attorney's Office
in Colorado. After spending two years in the litigation
department of a Denver law firm, he founded Eckelberger &
Associates of which he is still the principal member. From 1982
to 1992 Mr. Eckelberger was the senior partner of Eckelberger &
Feldman, a law firm with offices in Englewood, Colorado. Mr.
Eckelberger previously served as an officer, director and
corporate counsel for Roxborough Development Corporation. He is
presently the President and Chief Executive Officer of 1998,
Ltd., a Colorado corporation actively engaged in the development
of real estate in Colorado. He is the Managing Member of The
Francis Companies, L.L.C., a Colorado limited liability company,
which actively invests in real estate. Additionally, Mr.
Eckelberger is the General Partner of 2003 Limited, a Colorado
limited partnership specializing in real estate
development.
There is no family relationship among any of the
Directors.
Messrs. Enright and Eckelberger serve as the Audit,
Compensation and Incentive Plan Committee.
ITEM 10. EXECUTIVE COMPENSATION.
No officer or director received compensation
directly from the Company during the years ended June 30, 1997,
1996 and 1995. 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 Percent
Beneficial Owners Beneficial Ownership 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
Jerrie F. Eckelberger 4,277,977(1) 91.68% (1)
5575 DTC Parkway, #118
Englewood, CO 80111
Management as a Group
(4 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.
Messrs. Enright and Eckelberger are also directors 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 amounts paid by the Company to Delta
were $736,145 for the year ended June 30, 1997, $184,053 for the
year ended June 30, 1996. The Company had a payable to Delta of
$635,139 at June 30, 1997, and $710,229 at June 30, 1996.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The Exhibits listed in the Index to Exhibits
appearing at page 20 are filed as part of this report.
(b) Reports on Form 8-K:
None
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.,
Secretary, Chairman of the
Board, Treasurer and Principal
Financial Officer
s/Kevin K. Nanke
Kevin K. Nanke, Controller and
Principal 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 10/9/97
By (Signature and Title) s/Roger A. Parker
Roger A. Parker, Director
Date 10/9/97
By (Signature and Title) s/Terry D. Enright
Terry D. Enright, Director
Date 10/9/97
By (Signature and Title) s/Jerrie F. Eckelberger
Jerrie F. Eckelberger, Director
Date 10/9/97
INDEX TO EXHIBITS
(2) Plan of Acquisitions, Reorganization, Arrangement,
Liquidation, or Succession. Not applicable.
(3) Articles of Incorporation and By-Laws' The Articles of
Incorporation (Certificate of Incorporation) and By-Laws of
the Registrant filed as Exhibits 4 and 5 to Registrant's
Form S-1 Registration Statement filed August 28, 1978 with
the Securities and Exchange Commission are incorporated
herein by reference. The Restated Articles of Incorporation
(Restated Certificate of Incorporation) dated January 26,
1988 and Amendment to Restated Certificate of Incorporation
dated September 18, 1989 are attached hereto as Exhibits 3.1
and 3.2, respectively.
(4) Instruments Defining the Rights of Security Holders.
4.1 Certificate of Designation of the Relative Rights of
the Class A Preferred Stock of Amber Resources Company
dated July 25, 1989.
(9) Voting Trust Agreement. Not applicable.
(10) Material Contracts.
10.1 Agreement dated March 31, 1993 between Delta Petroleum
Corporation and Amber Resources Company.
10.2 Amber Resources Company 1996 Incentive Plan. Incorporated
by reference to Exhibit 99.1 of the Company's December 4, 1996
Form 8-K.
(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. Filed herewith electronically.
(99) Additional Exhibits. Not applicable.
Independent Auditor's 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, 1997 and 1996
and the related statements of operations and accumulated deficit, and
cash flows for the years then ended. 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 misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Amber Resources
Company as of June 30, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended 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.
s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
September 16, 1997
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
BALANCE SHEET
June 30, 1997 and 1996
1997 1996
ASSETS
Current Assets:
Cash $6,440 36,137
Accounts receivable 111,728 114,560
Other current assets - 2,000
Total current assets 118,168 152,697
Oil and gas properties, successful
efforts method
of accounting (Note 1 and 5):
Undeveloped offshore California
properties 5,006,276 5,006,276
Developed onshore properties 1,405,645 1,429,967
6,411,921 6,436,243
Less accumulated depreciation
and depletion (846,755) (726,684)
Net oil and gas properties 5,565,166 5,709,559
$5,683,334 5,862,256
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $16,281 8,225
Affiliate (Note 4) 635,139 710,229
Royalties payable 419,808 595,956
Total current liabilities 1,071,228 1,314,410
Stockholders' Equity
Preferred stock, $1 par value.
Authorized 5,000,000
shares of Class A convertible
preferred stock, none
issued (Note 2) - -
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 (1,434,763) (1,499,023)
Total stockholders' equity 4,612,106 4,547,846
$5,683,334 5,862,256
AMBER RESOURCES COMPANY
(a subsidiary of Delta Petroleum Corporation)
STATEMENT OF OPERATIONS
Years ended June 30, 1997 and 1996
1997 1996
Revenue:
Oil and gas sales $936,929 555,268
Other income 176,345 286,434
Total revenue 1,113,274 841,702
Expenses:
Lease operating expenses 203,731 205,971
Depletion 120,071 117,867
Exploration expenses 3,330 3,032
Abandoned and impaired properties 42,000 -
General and administrative (Note 4) 679,882 664,370
Total expenses 1,049,014 991,240
Net income (loss) 64,260 (149,538)
Accumulated deficit at begining of year (1,499,023) (1,349,485)
Accumulated deficit at end of year ($1,434,763) (1,499,023)
Net income (loss) per share $0.01 (0.03)
Weighted average number of common
shares outstanding 4,666,185 4,666,185
<TABLE>
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $64,260 (149,538)
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Write-off of royalties payable (176,148) (286,244)
Depletion 120,071 117,867
Abandoned and impaired properties 42,000 -
Net changes in current assets and
and current liabilities:
Decrease (increase) in accounts receivable 2,832 (10,513)
Decrease (increase) in other current assets 2,000 (2,000)
Increase (decrease) in accounts payable 8,056 (70,262)
Increase in royalties payable - 23,512
Net cash provided by (used in) operating activities 63,071 (377,178)
Cash flows from investing activities:
Additions to property and equipment (17,678) (44,294)
Net cash used in investing activities (17,678) (44,294)
Cash flows from financing activities:
Decrease (increase) in accounts payable to affiliate (75,090) 453,858
Net cash (used in) provided by financing activities (75,090) 453,858
Net (decrease) increase in cash (29,697) 32,386
Cash at beginning of year 36,137 3,751
Cash at end of year $6,440 36,137
</TABLE>
See accompanying notes to financial statements.
AMBER RESOURCES COMPANY
(A subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Years Ended June 30, 1997 and 1996
(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 in
federal units offshore California, near Santa Barbara, and
developed oil and gas properties in the continental United
States.
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, 1997, the Company has a working capital
deficiency of $953,060. Current liabilities include royalties
payable of $419,808 at June 30, 1997 which represent the
Company's estimate of royalties payable on production
attributable to it's interest in certain wells in Oklahoma.
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 has been informed by its legal counsel
that the applicable statute of limitations period for actions on
written contracts arising in the state of Oklahoma is five years.
The statute of limitation has expired for royalty owners to make
a claim for a portion of the estimated royalties that had
previously been accrued. Accordingly, these amounts have been
written off and recorded as other income in 1997 and 1996.
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.
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.
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.
Capitalized costs of unproved properties are assessed
periodically and a provision for impairment is recorded, if
necessary, through a charge to operations.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" (SFAS 121) was issued in March 1995. This
statement requires that long-lived assets be reviewed for
impairment when events or changes in circumstances indicate that
the carrying value of such assets may not be recoverable. This
review consists of a comparison of the carrying value of the
asset with the asset's expected future undiscounted cash flows
without interest costs.
Estimates of expected future cash flows are to represent
management's best estimate based on reasonable and supportable
assumptions and projections. If the expected future cash flows
exceed the carrying value of the asset, no impairment is
recognized. If the carrying value of the asset exceeds the
expected future cash flows, an impairment exists and is measured
by the excess of the carrying value over the estimated fair value
of the asset. Any impairment provisions recognized in accordance
with SFAS 121 are permanent and may not be restored in the
future.
The Company's proved properties were assessed for impairment
on an individual field basis and the Company recorded an
impairment provision of $42,000 attributable to certain producing
properties for the year ended June 30, 1997.
Gas Balancing
The Company uses the sales method of accounting for gas
balancing of gas production. Under this method, all proceeds
from production credited to the Company 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, 1997, the Company had produced approximately
192,000 Mcf more than its entitled share of production. The
undiscounted value of this imbalance is approximately $420,000
using the lower of the price received for the natural gas, the
current market price or the contract price as applicable.
Royalties Payable
Recoupment gas royalties, included in royalties payable,
represent estimated royalties due on recoupment gas produced and
delivered to the gas purchaser pursuant to the terms of the
recoupment agreement described above. The Company has estimated
an amount that may be due 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.
Royalties payable also include estimated royalties payable
on other properties held in suspense. A significant portion of
the estimated royalties have not been paid pending a
determination of what amounts may have previously been paid by
the operator of the properties on behalf of the Company.
The statute of limitation has expired for royalty owners to
make a claim for a portion of the estimated royalties that had
previously been accrued. Accordingly, these amount have been
written off and recorded as other income in 1997 and 1996.
Income Taxes
The Company uses the asset and liability method of
accounting for income taxes as set forth in Statement of
Financial Accounting Standards 109 (SFAS 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 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.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires Management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reported
period actual. Actual results could differ from these estimates.
(2) 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.
(3) Income Taxes
At June 30, 1997 and 1996, the Company s significant
deferred tax assets and liabilities are summarized as follows:
1997 1996
Deferred tax assets:
Net operating loss
carryforwards $2,043,000 2,090,000
Oil and gas properties,
principally due to
differences in basis and
depreciation and depletion 9,000 4,000
Gross deferred tax assets 2,052,000 2,094,000
Less valuation allowance (2,052,000) (2,094,000)
Net deferred tax asset $ - -
No income tax expense was recorded for the year
ended June 30, 1997 since the deferred income taxes that would
have otherwise been provided were offset by a decrease in the
valuation allowance for the net deferred tax assets.
No income tax benefit has been recorded for the year ended
June 30, 1996 since the benefit of the net operating loss carryforward
and other net tax assets arising in that period has been offset by an
increase in the valuation allowance for such net deferred tax assets.
At June 30, 1997, the Company had net operating loss
carryforwards for regular and alternative minimum tax purposes of
approximately $5,000,000 and $5,000,000, respectively. If not
utilized, the tax net operating loss carryforwards will expire
during the period from 1998 through 2012.
(4) Related Party 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's
officers and employees. Amounts paid by the Company to Delta
were $736,145 for the year ended June 30, 1997 and $184,053 for
the year ended June 30, 1996. The Company had a payable to Delta
of $635,139 at June 30, 1997 and $710,229 at June 30, 1996.
(5) Disclosures About Capitalized Costs, Costs Incurred and
Major Customers
Capitalized costs related to oil and gas producing
activities are as follows:
June 30, June 30,
1997 1996
Undeveloped offshore
California properties $ 5,006,276 5,006,276
Developed onshore
domestic properties 1,405,645 1,429,967
6,411,921 6,436,243
Accumulated depreciation
and depletion (846,755) (726,684)
$ 5,565,166 5,709,559
Costs incurred in oil and gas producing activities for the
years ended June 30, 1997 and 1996 are as follows:
1997 1996
Exploration costs $ 3,330 3,032
Development costs 17,678 44,294
Sales of major customers accounted for approximately 62%, 22%
and 11% of 1997 oil and gas sales. Sales to major customers
accounted for approximately 51%, 26% and 15% of 1996 oil and gas
sales.
(6) 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.
A summary of changes in estimated quantities of proved reserves for the year
ended June 30, 1997 and 1996 are as follows:
<TABLE>
Onshore Offshore
GAS OIL GAS OIL
(MCF) (BBLS) (MCF) (BBLS)
<S> <C> <C> <C> <C>
Balance at July 1, 1995 1,912,996 5,143 12,965,321 10,582,158
Revisions of quantity estimates 244,595 1,108 (437,396) (425,072)
Production (308,713) (961) - -
Balance at June 30, 1996 1,848,878 5,290 12,527,925 10,157,086
Revisions of quantity estimates 423,641 1,551 1,229,841 727,676
Production (400,725) (1,025) - -
Balance at June 30, 1997 1,871,794 5,816 13,757,766 10,884,762
Proved developed reserves:
June 30, 1995 1,912,996 5,143 - -
June 30, 1996 1,848,878 5,290 - -
June 30, 1997 1,871,794 5,816 - -
The principal sources of changes in the standardized measure of discounted
net cash flows during the year ended June 30, 1997 and 1996 are as follows:
</TABLE>
<TABLE>
Offshore
Onshore California Total
<S> <C> <C> <C>
June 30, 1996:
Future cash inflows $3,269,173 122,000,784 125,269,957
Future costs:
Production 1,419,597 24,198,311 25,617,908
Development - 24,358,749 24,358,749
Income taxes - 22,466,026 22,466,026
Future net cash flows 1,849,576 50,977,698 52,827,274
10% discount factor 540,036 39,522,746 40,062,782
Standardized measure of discounted future
net cash flows $1,309,540 11,454,952 12,764,492
June 30, 1997
Future cash inflows $4,149,260 141,472,084 145,621,344
Future costs:
Production 1,559,326 39,050,005 40,609,331
Development - 27,732,752 27,732,752
Income taxes - 25,199,636 25,199,636
Future net cash flows 2,589,934 49,489,691 52,079,625
10% discount factor 799,581 41,187,165 41,986,746
Standardized measure of discounted future
net cash flows $1,790,353 8,302,526 10,092,879
</TABLE>
The principal sources of changes in the standardized measure of discounted
net cash flows during the year ended June 30, 1997 and 1996 are as follows:
1997 1996
Beginning of year $12,764,492 8,189,628
Sales of oil and gas produced during the
period, net of production costs (733,198) (349,297)
Net change in prices and production costs 63,007 334,973
Changes in estimated future development costs (938,661) (340,766)
Revisions of previous quantity estimates,
estimated timing of development and other (1,940,936) 5,154,944
Net change in income taxes (398,274) (1,043,951)
Accretion of discount 1,276,449 818,961
End of year $10,092,879 12,764,492
The standardized measure of discounted future net cash flows 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 Standards 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.
RESTATED CERTIFICATE OF INCORPORATION
OF
AMBER RESOURCES COMPANY
Amber Resources Company, a Delaware corporation (the
"Corporation") does hereby adopt, pursuant to Sections 242 and
245 of the Delaware General Corporation Law, the following
restatement with amendments of its Certificate of Incorporation,
which was originally filed with the Secretary of State on May 22,
1978, and subsequently amended. Pursuant to Sections 242 and
245, the Certificate of Incorporation is hereby further amended
in its entirety as set forth herein. The Restated Certificate of
Incorporation with amendments has been duly adopted by the
stockholders and directors on January@ 1988, as required by
Sections 242 and 245 and it supercedes the original Certificate
of Incorporation and all amendments thereto.
Pursuant to the foregoing, the undersigned President and
Assistant Secretary, respectively, of the Corporation do hereby
amend and restate the Certificate of Incorporation of this
Corporation, as follows:
ARTICLE I
Name
The name of the Corporation shall be Amber Resources
Company.
ARTICLE 11
Duration
The period of duration of the Corporation shall be
perpetual.
ARTICLE III
Objects, Purposes and Powers
The purposes for which the Corporation is organized are
to engage in any activity or business not in conflict with the
laws of the General Corporation Law of Delaware or of the United
States and, without limiting the generality of the foregoing,
specifically:
1. To explore, prospect, drill for, produce, market, sell, and
deal in and with petroleum, mineral, animal, vegetable, and other
oils, asphaltum, natural gas, gasoline, naphthene, hydrocarbons,
oil shales, sulphur, salt, clay, coal, minerals, aiiieral
substances, metals, ores of every kind or other mineral or non-
mineral, liquid, solid, or volatile substances and products, by-
products, combinations, and derivatives thereof, and to buy,
lease, hire, contract for, invest in, and otherwise acquire, and
to own, hold, maintain, equip, operate, manage, mortgage, create
security interests in, deal in and with, and to sell, lease,
exchange, and otherwise dispose of oil, gas, mineral, and mining
lands, wells, mines, quarries, rights, royalties, overriding
royalties, oil payments, and other oil, gas, and mineral
interests, claims, locations, patents, concessions, easements,
rights-of-way, franchises real and personal property, and all
interests therein, tanks, reservoirs, warehouses, storage
facilities, elevators, terminals, markets, docks, piers, wharves,
drydocks, bulkheads, pipe lines, pumping stations, tank cars,
trains, automobiles, trucks, cars, tankers, ships, tugs, barges,
boats, vessels, aircraft, and other vehicles, crafts or machinery
for use on land, water or air, for prospecting, exploring and
drilling for, producing, gathering, manufacturing, refining,
purchasing, leasing, exchanging, or otherwise disposing of such
mineral and non-mineral substances; and to do engineering and
contracting and to design, construct, drill, bore, sink, develop,
improve, extend, maintain, operate, and repair wells, mines,
plants, works, machinery, appliances, rigging, casing, tools,
storage, and transportation lines and systems for this
Corporation and other persons, associations, or corporations.
2. To establish and maintain a drilling business with authority
to own and operate drilling rigs, machinery, tools, or apparatus
necessary in the boring or otherwise sinking of wells for the
production of oil, gas, or water; to construct or acquire by
lease or otherwise, and to maintain and operate pipe lines for
the conveyance of oil and natural gas, oil storage tanks and
reservoirs, and tanks cars of all:kinds, tank steamers, and other
vessels, wharves, docks, warehouses, storage houses, loading
racks, and all other convenient instrumentalities for the
shipping and transportation of crude or refined petroleum or
natural gas and all other volatile, solid, or liquid mineral
substances in any and all forms- to manufacture, buy, sell,
lease, let, and hire machines and machinery, equipment, tools,
implements and appliances, and all other property, real and
personal, useful or available in prospecting for and in
producing, transporting, storing, refining or preparing for
market, petroleum and natural gas and all other volatile and
mineral substances and their products and by-products and of all
articles and materials in any way resulting from or connected
therewith; to purchase, lease, construct, or otherwise acquire,
exchange, sell, let, or otherwise dispose of, own, maintain,
develop, and improve any and all property, real or personal,
plants, refineries, factories, warehouses, stores, and buildings
of all kinds useful in connection with the business of the
Corporation including the drilling for oil and gas wells or
mining in any manner or by any method permitted by law on such
real property.
3. To prepares compound, manufacture, purchase, or otherwise
acquire; to sell or otherwise dispose of; and to import, export,
and trade in general merchandise of all and every kind, nature,
and description.
4. To enter into franchise or other marketing arrangements.
5. To acquire, own, hold, develop, maintain, operate, manage,
lease, sell, exchange, convey, mortgage, dispose of, and
otherwise deal in property of every nature and description, both
real and personal, including oil and gas or other mineral leases,
rights, claims or interest, whether situated in the United States
or elsewhere, so far as permissible by law; to pay for the same
in cash, the stock of this Corporation, bonds, or otherwise; to
hold, exploit and develop, or in any manner to dispose of or
assign, the whole or any part of the property so purchased; to
produce, refine, and market any and all minerals or other
products from any such operations.
6. To advance or negotiate the advance of money or
interest on securities or otherwise; to lend money or negotiate
loans; to draw, accept, endorse, discount, buy, sell, and deliver
bills of exchange, promissory notes, bonds, debentures, coupons,
and other negotiable instruments and securities; to issue on
commission, subscribe for, take, acquire, hold, sell, exchange
and deal in shares, stocks, bonds, obligations, and securities of
any government or authority or company.
7. To apply for, obtain, register, lease, purchase, or
otherwise acquire and to hold, use, sell, trade, exchange,
assign, mortgage, or otherwise dispose of trademarks, copyrights,
inventions, trade names, formulae, secret processes, and all
improvements and processes used in connection with or secured
under letters patent of the United States or of other countries
or otherwise; and to grant licenses in respect thereto and
otherwise turn the same to account.
8. To contract with the United States, or any agency
thereof, or any of the states or political
subdivisions thereof, or with any persons in authority,
municipalities, boards, bureaus or departments, or any political
subdivisions of any state of the United States or colonies or
territories thereof, or any foreign countries, or any
political subdivisions thereof, and all corporations, firms,
associations, and individuals in relation to or in connection
with any of the objects, purposes, or business of the
Corporation.
9. To enter into agreements for the sale of stocks and
bonds or other securities of the Corporation and to make and
enter into options for the sale of stock of the Corporation, upon
such terms and conditions as are permitted by the laws of the
State of Delaware and the United States.
10. To indemnify officers, directors and employees
against harm or loss resulting from their actions in their
capacities as such.
11. To lend the uninvested funds of the Corporation,
from time to time and to such extent, to such persons, firms,
associations, corporations, governments, or subdivisions thereof
and on such terms and on such security, if any, as the Board of
Directors of the Corporation may determine.
12. To conduct the business of the Corporation in
Delaware, other states, the District of Columbia, the territories
and colonies of the United States, and foreign countries and
territories and colonies thereof; to have one or more offices
outside of this state; and to acquire, purchase, hold,
mortgage, pledge, assign, transfer, and convey real and personal
property out of Delaware.
13. In furtherance of and not in limitation of the
powers conferred by the laws of the State of
Delaware, the Board of Directors is expressly authorized without
the assent or the vote of the stockholders to issue
bonds, debentures, or other obligations of the Corporation,
secured or unsecured, from time to time, for any of the
objects or purposes of the Corporation and to include therein
such provisions as to redeemability, convertibility into
stock, or otherwise and to sell or otherwise dispose of any or
all of them, all in such manner and upon such terms
as the Board of Directors may deem proper and as shall be fixed
and stated in a resolution or resolutions adopted
by the Board of Directors.
14. To such extent as is or may hereafter become
permissible under the laws of the State of Delaware, the
Corporation is authorized, either as principal or agent,
and either alone or in connection with other corporations, firms
or individuals, to do all and everything necessary, suitable,
convenient or proper for, in connection with, or incident
to the accomplishment of any of the purposes for the attainment
of any one or more of the objects herein enumerated or designed
directly or indirectly to promote the interests of the
Corporation or to enhance the value of its properties, and, in
general, to do any and all things and exercise any and all
powers, rights and privileges which a corporation may now or
hereafter be organized to do or to exercise under the laws of the
State of Delaware or under any act amendatory thereof,
supplemental thereto, or substituted therefor.
The several clauses contained in this statement of
purposes shall be construed as both purposes and powers; and the
statements contained in each clause shall be in nowise limited or
restricted by reference to or inference from the terms of any
other clause, but shall be regarded as independent purposes and
powers; and no recitation, expression, or declaration of specific
or special powers or purposes herein enumerated shall be deemed
to be exclusive; but it is hereby expressly declared that all
other lawful powers not inconsistent herewith are hereby
included.
ARTICLE IV
Capital Stock
The Corporation shall have the authority to issue 105,000,000
shares of capital stock, divided into 5,000,000 shares of
Preferred Stock, each of which shall have a par
value of $1.00 per share, and 100,000,000 shares of Common Stock,
each of which shall have a par value of $.003125 per share.
ARTICLE V
Preferences, Limitations and Relative
Rights of Capital Stock
A. General
1. All shares, when issued, shall be fully paid and
nonassessable.
2. The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any
stockholder "first right of refusal to purchase" the stock, by
making the stock redeemable, or by restricting the transfer of
the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the
laws of the State of Delaware. Any stock so restricted must
carry a conspicuous legend noting the restriction and the place
where such restriction may be found in the records of the
Corporation.
3. The judgment of the Board of Directors as to the adequacy of
any consideration received or to be
received for any shares, options, or any other securities which
the Corporation at any time may be authorized to issue
or sell or otherwise dispose of shall be conclusive in the
absence of fraud, subject to the provisions of this Restated
Certificate of Incorporation and the General Corporation Law of
Delaware.
B. Common Stock
No share of the Common Stock authorized in Article IV shall have
any preference over or limitation in respect to any other share
of such Common Stock. Ali shares of the Common Stock authorized
in Article IV shall have equal rights and privileges,
including the following:
1. After all accumulated and unpaid dividends required
to be paid upon any share of Preferred Stock for all previous
dividend periods shall have been paid, and sums sufficient for
full payment of the dividends on all shares of Preferred Stock
declared for the then current dividen(f'period have been set
apart, and after or concurrently with the setting aside of any
and all amounts then required to be set aside for any sinking
fund obligation or obligations of a similar nature in respect of
any series of Preferred Stock, then and not otherwise, and
subject to any other applicable provisions of Section C below,
dividends may be declared upon and paid to the holders of the
Common Stock, to the exclusion of the holders of the Preferred
Stock. All outstanding shares of Common Stock
shall share equally in dividends and upon liquidation. Dividends
shall be payable at the discretion of the Board of
Directors of the Corporation at such times and in such amounts as
it deems advisable, subject, however, to the
applicable provisions of the General Corporation Law of Delaware.
2. Except as expressly provided by law, by Section C
below or by resolution of the Board of Directors pursuant to the
authority granted under Section C below, all voting rights shall
be vested in the holders of the Common Stock. Each outstanding
share shall be entitled to one vote at stockholders'
meetings, either in person or by proxy.
3. Cumulative voting shall not be allowed in
elections of directors or for any other purpose.
4. No holder of shares of Common Stock of the
Corporation shall be entitled, as such, to any preemptive or
preferential right to subscribe to any unissued stock or any
other securities which the Corporation may now or hereafter be
authorized to issue. The Board of Directors of the Corporation,
however, in its discretion by resolution, may determine that any
unissued securities of the Corporation shall be offered for
subscription solely to the holders of Common Stock of the
Corporation, or solely to the holders of any class or classes of
such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock ownership
as said Board in its discretion may determine.
C. Preferred Stock
1. The Board of Directors shall have authority, by
resolution, to divide any or all of the shares of Preferred Stock
into, and to authorize the issuance of, one or more series and
with respect to each such series to establish and, prior to
issuance, to determine and fix:
(a) a distinguishing designation for such series and
the number of shares comprising such series, which number may be
increased or decreased from time to time (but not below the
number of shares then outstanding) by action of the Board of
Directors;
(b) the rate and times at which and the other
conditions upon which dividends on the shares may be declared and
paid or set aside for payment, whether dividends shall be
cumulative and the date from which any dividends shall accrue;
(c) whether or not the shares shall be redeemable
and, if so, the price and the terms and conditions of such
redemption;
(d) the amounts payable by preference or otherwise
upon shares in the event of voluntary or involuntary liquidation,
dissolution, winding up or distribution of the assets of the
Corporation;
(e) whether any shares shall be redeemed through
sinking fund payments, and, if so, on what terms;
(f) whether the shares shall be convertible or
exchangeable and, if so, the terms and conditions of such
conversion or exchange; and
(g) whether or not the shares shall have voting rights,
including the right to vote as a class on designated matters such
as, but not by way of limitation, the merger, consolidation or
sale of substantially all the Corporation's assets, or the
approval of designated action by a greater than two-thirds
affirmative vote and, if so, the terms, conditions, and any
limitations on such voting rights.
2. In the resolution establishing a new series of
Preferred Stockv the Board of Directors may provide for any other
relative powers, preferences, rights, qualifications,
limitations, and restrictions of such series as are consistent
with the rights of all outstanding shares of capital stock, with
all other provisions of this Article Vp and the
Delaware law.
3. All shares of Preferred Stock of all series shall
be identical except as to the above-mentioned rights and
preferences which the Board of Directors are authorized to
determine. Except to the extent that the resolution of the Board
of Directors establishing a particular series shall otherwise
provide, if amounts payable upon liquidation of all series are
not paid In full, all shares of Preferred Stock
of all series having a liquidation preference shall participate
ratably in any distribution in accordance with
the sums which would be payable on such distribution if all sums
payable to holders of all shares of Preferred Stock were
discharged in full.
4. Shares of Preferred Stock of any series which are
redeemed, purchased or otherwise acquired may be cancelled by the
Board of Directors and restored to the status of authorized but
unissued shares of Preferred Stock undesignated as to series.
ARTICLE VI
Place of Business
The principal office and the principal place of business
of the Corporation in the State of Delaware shall
be at the office of its registered agent. The Board of
Directors, however, from time to time may establish such other
offices, branches, subsidiaries, or divisions which it may
consider to be advisable. The address of the Corporation's
registered office in the State of Delaware for purposes of the
General Corporation Law of Delaware, is:
1209 Orange Street
Wilmington, New Castle County, Delaware 19801
The name of the Corporation's registered agent at the
address of the aforesaid registered office for purposes of this
Law shall be:
The Corporation Trust Company
ARTICLE VII
Directors
The affairs of the Corporation shall be governed by a board of
not less than three (3) nor more than seven (7) directors, who
shall be elected in accordance with the By-laws of the
Corporation. The conduct of the board shall be in accordance
with the following:
1. The directors of the Corporation need not be
residents of Delaware and shall not be required to hold shares of
the Corporation's capital stock.
2. Meetings of the Board of Directors, regular or
special, may be held within or without Delaware
upon such notice as may be prescribed by the By-laws of the
Corporation. Attendance of a director at a meeting
shall constitute a waiver by him of notice of such meeting unless
he attends only for the express purpose of objecting
to the transaction of any business thereat on the ground that the
meeting is not lawfully called or convened.
3. A majority of the number of directors at any time
constituting the Board of Directors shall constitute a quorum for
the transaction of business, and the act of a majority of the
directors present at a meeting which a quorum is present shall be
the act of the Board of Directors.
4. By resolution adopted by a majority of the
directors at any time constituting the Board of Directors,
the Board of Directors may designate two (2) or more directors to
constitute an Executive Committee which shall have and may
exercise, to the extent permitted by law or in such resolution,
all the authority of the Board of Directors in the management of
the Corporation; but the designation of any such committee and
the delegation of authority thereto shall not operate to relieve
the Board of Directors, or any member thereof, of any
responsibility imposed on it or him by law.
5. Any vacancy in the Board of Directors, however
caused or created, may be filled by the affirmative vote of a
majority of the remaining directors, though less than a quorum of
the Board of Directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor
in office and until his successor is duly elected and qualified.
ARTICLE VIII
Officiers
The officers of the Corporation shall consist of a
President, one or more Vice Presidents as may be prescribed by
the By-laws of the Corporation, a Secretary, and a Treasurer,
each of whom shall be elected by the Board of Directors at such
time and in such manner as may be prescribed by the By-
laws of the Corporation. Any two or more offices may be held by
the same person except the offices of President and Secretary.
ARTICLE IX
Meetings of Stockholders
Meetings of th@ stockholders of the Corporation shall be
held at such place within or without Delaware and at such times
as may be prescribed in the By-laws of the Corporation. Special
meetings of the stockholders of the Corporation may be called by
the President of the Corporation, the Board of Directors, or by
the record holder or holders of at least ten percent (10%) of all
shares entitled to vote at the meeting. At any meeting of the
stockholders, except to the extent otherwise provided by law, a
quorum shall consist of a majority of the shares
entitled to vote at the meeting; and, if a quorum is present, the
affirmative vote of the majority of shares represented
at the meeting and entitled to vote thereat shall be the act of
the stockholders unless the vote of a greater number
is required by law.
ARTICLE X
By-laws
The initial By-laws of the Corporation shall be adopted by its
Board of Directors, in which all shall be vested the power to
alter, amend or repeal the By-laws or to adopt new By-laws.
ARTICLE XI
Contracts and Indemnification
The following provisions are inserted as notice of the
specific intent of the Corporation concerning the management of
the business and the conduct of affairs of the Corporation, and
the same are in furtherance of, and not in limitation or
exclusion of the powers conferred by the laws of the State
of Delaware.
1. Contracts with Officers and Directors.
(a) No contract or transaction between the Corporation
and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or
officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer
is present at or participates in the meeting of the board or
committee thereof which authorizes the contract
or transaction, or solely because his or their votes are counted
for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the
board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors
may be less than a quorum; or
(2) The material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by
vote of the stockholders; or
(3) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors or a committee which
authorizes the contract or transaction.
2. Indemnification of Officers, Directors, Employees and
Agents; Insurance.
(a) The Corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo
contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) The Corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at
the'request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests
of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem
proper.
(c) To the extent that the director, officer, employee
or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) or (b), or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
(unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b) of this
Section. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or
(3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount
if it shall ultimately be determined that he is not entitled to
be indemnified by the Corporation as authorized in this Section.
(f) The indemnification and advancement of expenses
provided by or granted pursuant to the other subsections of this
Section shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of
stockholders, or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office.
(g) The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation, as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability
under the provisions of this Section.
(h) For purposes of this Section, references to "the
Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers
and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under this
Section with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any services as
a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent of the Corporation which imposes
duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to be in the
best interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the Corporation" as
referred to in this Section.
j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The personal liability of a director to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director is eliminated, except that this
provision shall not eliminate the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware C.orporation Law, or
(iv) for any transaction from which the director derived
an improper . personal benefit. This provision shall not
eliminate or limit the liability of a director for any act or
omission occurring prior to the date when this provision becomes
effective.
IN WITNESS WHEREOF, the Corporation has caused its
corporate seal to be hereunto affixed and this Restated
Certificate of Incorporation to be signed by its President and
attested by its Secretary this 26th dayof January, 1988.
ATTEST: AMBER RESOURCES COMPANY
s/Ardith J. Davis s/George M. Schneider
Ardith J. Davis George M. Schneider,
Assistant Secretary President
AMENDMENT
TO
RESTATED
CERTIFICATE OF INCORPORATION
AMBER RESOURCES COMPANY
The undersigned, being the President and the Assistant
Secretary of Amber Resources Company, certify that the following
amendment to the Certificate of Incorporation of Amber Resources
Company was duly adopted in accordance with the provisions of
Section 242 of the Delaware General Corporation Law at a duly
called meeting-of the shareholders on September 8, 1989.
(1) Article IV of the Restated Certificate of
Incorporation of Amber Resources Company Is amended to read in
its entirety as follows:
ARTICLE IV
Capital Stock
The Corporation shall have the authority to issue
30,000,000 shares of capital stock, divided into 5,000,000 shares
of Preferred Stock, each of which shall have a par value of $1.00
per share, and 25,000,000 shares of Common Stock, each of which
shall have a par value of $.0625 per share.
The undersigned acknowledge that the above. constitutes
the acts and deeds of Amber Resources' Company and that the facts
set forth above are true.
Dated this 18th day of September, 1989.
s/George M. Schneider
George M. Schneider, President
ATTEST:
s/Ardith J. Davis
Ardith J. Davis, Secretary
CERTIFICATE OF DESIGNATION
OF THE RELATIVE RIGHTS
OF THE CLASS A PREFERRED STOCK OF
AMBER RESOURCES COMPANY
This Certificate is made pursuant to the provisions of
S151 of the General Corporation Law of the State of Delaware.
Name of Corporation: Amber Resources Company
Adopted Resolution: The following resolution designating the
relative rights of the Class A Preferred Stock was adopted by the
Board of Directors of this Corporation.
RESOLVED, that the Board hereby creates a series of
Preferred Stock pursuant to the Restated Articles of Incorporation
filed on March 4, 1988 As follows:
(a) The designation of the series Preferred Stock created by
this resolution shall be "Class A Preferred Stock" (hereinafter in
this resolution referred to as "Class A Stock"). The Class A Stock
series shall consist of two million (2,000,000) shares.
(b) Subject to the applicable provisions of the General
Corporation Law of Delaware, when and as dividends are declared by
the Board of Directors, the Corporation will pay cumulative
dividends at the rate of nine percent (9%) per annum to the holder
of Class A Stock.
(c) Class A Stock shall not be separately redeemable and
shall be convertible at, the option of the Corporation only, as
provided in paragraph (f) below.
(d) In the event of voluntary or involuntary liquidation,
dissolution, winding up the distribution of the assets of the
Corporation, holders of Class A Stock shall be preferred over all
holders of Common Stock of the Corporation, to the amount of One
Dollar ($1.00) per share and accumulated or accrued and unpaid
dividends thereon.
(e) Class A Stock shall not be redeemable through sinking
fund payments.
(f) Class A Stock shall be convertible, at the option of the
Corporation only, into fully paid and nonassessable shares of
Common Stock of the Corporation at the rate of twelve and one-half
(12 1/2) shares of Common Stock for each one (1) share of Class A
Stock; subject, however, to the terms and conditions hereinafter
stated with respect to the adjustment of such rate. The
Corporation's option to convert may be exercised at any time by
written notice to the owners of Class A Stock as shown on the
Corporation's records.
In case the Corporation shall (i) pay a dividend on
its Common Stock in shares of this Corporation, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common
Stock into a smaller number of shares, or (iv) issue by
reclassification of its Common Stock (whether pursuant to a merger
of consolidation or otherwise) any shares of the Corporation, then
each holder of shares of Class A Stock shall be entitled to receive
upon the conversion of such share the number of shares of the
Corporation which such holder would have owned or have been
entitled to receive after the happening of any of the events
described above and had such shares been converted immediately
prior to the happening of such event. Such adjustment shall be
made whenever any of the events listed above shall occur. An
adjustment made pursuant to this paragraph shall become effective
retroactively with respect to conversions made subsequent to the
record data in the case of a dividend, and in the case of the
subdivision, combination, or reclassification. If any event occurs
of the type contemplated by the provisions of this paragraph, but
not expressly provided for by such provisions, the Board of
Directors of the Corporation will make an appropriate adjustment in
the conversion rate so as to protect the rights of the holders of
Class A Stock; provided that no such adjustment will decrease the
number of shares of Common Stock issuable upon conversion of each
share of Class A stock.
In addition to any voting rights provided by the General
Corporation Law of Delaware, holders of Class A Stock shall be
entitled to thirty (30) votes per share on all matters to be voted
on by the Corporation's Stockholders. However, if any event occurs
of the type contemplated in the immediately preceding paragraph,
the Board of Directors of the Corporation will make an
appropriate adjustment in the votes per share. Class A
Stockholders shall not be entitled to vote as a class. In all
voting matters, the votes of Class A Stockholders shall be treated
in the same manner as and counted along with the votes of Common
Stockholders.
The undersigned, being the President and Secretary
respectively, of Amber Resources Company, do hereby make this
Certificate, declaring and certifying that this is our act and deed
and the facts herein stated are true, and accordingly, have
hereunto set our hands this 25th day of July, 1989.
AMBER RESOURCES COMPANY
s/George M. Schneider
George M. Schneider
President
ATTEST:
s/A.J. Davis
A.J. Davis, Assistant Secretary
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
Authorized Officer
DELTA PETROLEUM CORPORATION
BY: S/Roger A. Parker
Authorized Officer
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