SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD FROM
__________ TO __________
Commission file number 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.)
555 17th Street, Suite 3310
Denver, Colorado 80202
(Address of principal (Zip Code)
executive offices)
(303) 293-9133
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
4,666,185 shares of common stock $.0625 par value were
outstanding as of May 10, 1999.
Form 10-QSB
3rd Qtr.
FY 1999
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
Balance Sheets
March 31, 1999 and
June 30, 1998 (unaudited).......... 1
Statements of Operations and
Accumulated Deficit for the
Three and Nine Months Ended
March 31, 1999 and 1998 (unaudited). 2
Statements of Cash Flows:
For the Nine Months
Ended March 31, 1999
and 1998 (unaudited)................ 4
Notes to Financial Statements (unaudited). 5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS...................... 6
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................... 12
Item 2. Changes in Securities.................. 12
Item 3. Defaults upon Senior Securities........ 12
Item 4. Submission of Matters to a Vote of
Security Holders....................... 12
Item 5. Other Information...................... 12
Item 6. Exhibits and Reports on Form 8-K....... 12
i
PART I - FINANCIAL INFORMATION
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Balance Sheets
(Unaudited)
ITEM 1. FINANCIAL STATEMENTS
March 31, June 30,
1998 1998
ASSETS
Current assets:
Cash $714 14,661
Accounts receivable 2,000 71,178
Total current assets 2,714 85,839
Oil and gas properties, successful efforts
method of accounting):
Undeveloped offshore California properties 5,006,276 5,006,276
Developed onshore domestic properties 195,531 1,264,134
5,201,807 6,270,410
Accumulated depletion (138,996) (848,104)
Net oil and gas properties 5,062,811 5,422,306
$5,065,525 5,508,145
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $19,744 41,059
Parent - 333,976
Royalties payable 131,720 232,832
Total current liabilities 151,464 607,867
Stockholders' equity:
Preferred stock, $1.00 par value;
authorized 5,000,000 shares of Class A
convertible preferred stock, none issued - -
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 (464,329) (1,146,591)
Advances to parent (668,479) -
Total stockholders' equity 4,914,061 4,900,278
$5,065,525 5,508,145
PART I - FINANCIAL INFORMATION
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Statements of Operations and Accumulated Deficit
(Unaudited)
Three Months Ended
March 31,
1999 1998
Revenue:
Oil and gas sales $6,430 135,816
Other income 17,400 41,907
Total revenue 23,830 177,723
Expenses:
Lease operating expenses 10,376 43,704
Depletion 3,150 19,600
General and administrative,
including $25,000 in 1999
and $131,003 in 1998 to parent 25,141 97,306
Total expenses 38,667 160,610
Net earnings (loss) (14,837) 17,113
Accumulated deficit at beginning of period (449,492) (1,040,254)
Accumulated deficit at end of period ($464,329) (1,023,141)
Loss per share * *
Weighted average number of common
shares outstanding 4,666,185 4,666,185
* less than $.01 per share
PART I - FINANCIAL INFORMATION
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Statements of Operations and Accumulated Deficit
(Unaudited)
Nine Months Ended
March 31,
1999 1998
Revenue:
Oil and gas sales $134,570 570,387
Gain on sale of oil and gas properties 731,752 283,993
Other income 101,133 145,267
Total revenue 967,455 999,647
Expenses:
Lease operating expenses 51,024 135,077
Depletion 25,735 69,672
Exploration expenss 532 -
General and administrative,
including $181,745 in 1999
and $264,000 in 1998 to parent 207,902 383,276
Total expenses 285,193 588,025
Net earnings 682,262 411,622
Accumulated deficit at beginning of period (1,146,591) (1,434,763)
Accumulated deficit at end of period ($464,329) (1,023,141)
Basic earnings per common share $0.15 0.09
Weighted average number of common
shares outstanding 4,666,185 4,666,185
PART I - FINANCIAL INFORMATION
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
1999 1998
Net cash provided by (used in) operating act ($77,004) 101,333
Cash flows from investing activities:
Additions to oil and gas properties (9,105) (1,318)
Proceeds from the sale of oil and gas properties 1,074,617 338,063
Net cash provided by investing activities 1,065,512 336,745
Cash flows from financing activities-
Changes in acccounts receivable from and
accounts payable to parent (1,002,455) (443,163)
Net decrease in cash (13,947) (5,085)
Cash at beginning of the period 14,661 6,440
Cash at end of the period $714 1,355
See accompanying notes to unaudited financial statements.
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Nine Months Ended March 31, 1999 and 1998
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, in
accordance with those rules, do not include all the information and
notes required by generally accepted accounting principles for
complete financial statements. As a result, these unaudited
financial statements should be read in conjunction with Amber
Resources Company's (the Company) audited financial statements and
notes thereto filed with the Company's most recent annual report on
Form 10-KSB. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered necessary
for a fair presentation of the financial position of the Company
and the results of its operations have been included. Operating
results for interim periods are not necessarily indicative of the
results that may be expected for the complete fiscal year.
(2) Oil and Gas Properties
On November 15, 1998, the Company completed the sale of 17 oil
and gas wells located in the Anardarko Basin of Oklahoma for
approximately $1,075,000 to an unrelated entity.
ITEM 2. MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Background
Amber Resources Company ("the Company") was
incorporated in January, 1978, and is principally engaged in
acquiring, exploring, developing, and producing oil and gas
properties. The Company owns interests in undeveloped oil and gas
properties offshore California, near Santa Barbara and developed
oil and gas properties in Western Oklahoma.
Liquidity and Capital Resources.
At March 31, 1999, the Company had a working capital
deficit of $148,750 compared to a working capital deficit of
$522,028 at June 30, 1998. The Company's current liabilities
include royalties payable of $131,720 at March 31, 1999 which
represents the Company's estimate of royalties payable on
production attributable to its 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 sufficient 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 Statue of
Limitations 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.
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 explore additional sources of both short-
term and long-term liquidity to fund its working capital deficit
and its capital requirements for development of its properties
including establishing a credit facility, sale of equity or debt
securities and sale of non-strategic properties. Many of the
factors which may affect the Company's future operating performance
and liquidity are beyond the Company's control, including oil and
natural gas prices and the availability of financing.
After evaluation of the consideration described above,
the Company believes that its cash flow from its existing producing
properties, proceeds from the sale of producing properties, the
repayment of advances from parent, and other sources of funds will
be adequate to fund its operating expenses and satisfy its other
current liabilities over the next year or longer.
Results of Operations
Net Income (Loss). The Company reported a net loss
of $14,837 and net income of $682,262 for the three and nine months
ended March 31, 1999 compared to a net income of $17,113 and
$411,622 for the same periods in 1998.
Revenue. Total revenues for the three and nine
months ended March 31, 1999 were $23,830 and $967,455 compared to
$177,723 and $999,647 for the same periods in 1998. Oil and gas
sales for the three and nine months ended March 31, 1999 were
$6,430 and $134,570 compared to $135,816 and $570,387 for the same
periods in 1998. The Company's oil and gas sales were impacted by
the decrease in oil and gas prices and the sale of most of the
Company's producing properties in November, 1998.
Production volumes and average prices received for
the three and nine months ended March 31, 1999 and 1998 are as
follows:
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
Production:
Oil (Bbls) 74 120 416 429
Gas (Mcfs) 2,978 61,143 68,698 232,328
Average Price:
Oil (per Bbls) $10.52 $17.32 $12.15 $18.66
Gas (per Mcf) $1.90 $2.19 $1.86 $2.42
Lease Operating Expenses. Lease operating expenses were
$10,376 and $51,024 for the three and nine months ended March 31,
1998 compared to $43,704 and $135,077 for the same periods in 1998.
The decrease in lease operating expense can be attributed to the
sale of most of the Company's producing properties in November,
1998.
Depletion Expense. Depletion expense for the three and
nine months ended March 31, 1999 were $3,150 and $25,735 compared
to $19,600 and $69,672 for the same periods in 1998.
General and Administrative Expenses. General and
administrative expenses for the three and nine months ended March
31, 1999 were $25,141 and $207,902 compared to $97,306 and $383,276
for the same periods as in 1998. Effective October 1, 1998, the
Company entered into an agreement with the Company's parent,
whereby the Company will pay its parent an administration fee of
$25,000 per quarter.
Future Operations
The Company's offshore California undeveloped properties
are attributable to its interests in three federal units located
offshore California near Santa Barbara.
The Company's development plan currently provides for 22
wells from one platform set in a water depth of approximately 328
feet for the Gato Canyon Unit; 63 wells from one platform set in a
water depth of approximately 1,300 feet for the Sword Unit; and 183
wells from two platforms for the Lion Rock Unit. On the Lion Rock
Unit, platform A would be set in a water depth of approximately 507
feet, and Platform B would be set in a water depth of approximately
484 feet. The reach of the deviated wells from each platform
required to drain each unit falls within the reach limits now
considered to be "state-of-the-art."
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 an SOO.
The MMS issued a second letter on December 24, 1996 with
the intent to notify all lease owners of the course of action to be
followed by the lease and unit operators prior to the expiration of
the SOO. In another letter, on December 3, 1998 (which superseded
a September 17, 1998 MMS letter), the MMS informed all owners and
operators that due to delays in the COOGER Study, the SOO's on the
units would be extended through the second quarter of 1999 and
revised the dates for actions required by the previous letters.
During the first half of 1999 each operator is to meet with the MMS
to discuss conceptual plans that will lead to the timely
development of the leases. By May 15, 1999, each operator has been
directed to submit what the MMS has termed a "Schedule of Events"
for a specific lease or unit that it operates and also a request
for a Suspension of Production time period to execute the Schedule
of Events. The lease Suspension of Operations and unit Schedule of
Events, when approved by the MMS, will go into effect on July 1,
1999.
In order to carry out the requirements of the December
31, 1996 and December 3, 1998 MMS letters, 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 platforms,
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.
Cost to Develop Offshore California Properties.
The cost to develop all of the offshore California
properties in which Amber owns an interest, including delineation
wells, environmental mitigation, development wells, fixed
platforms, fixed platform facilities, pipelines and power cables,
onshore facilities and platform removal over the life of the
properties (assumed to be 38 years), is estimated to be slightly in
excess of $3 billion. The Company's share of such costs over the
life of the properties is estimated to be $26,938,000.
To the extent that Amber does not have sufficient cash
available to pay its share of expenses when they become payable
under the respective operating agreements, it will be necessary for
Amber to seek funding from outside sources. Likely potential
sources for such funding are currently anticipated to include (a)
public and private sales of Amber Common Stock (which may result in
substantial ownership dilution to existing shareholders), (b) bank
debt from one or more commercial oil and gas lenders, (c) the sale
of debt instruments to investors, (d) entering into farm-out
arrangements with respect to one or more of Amber's interests in
the properties whereby the recipient of the farm-out would pay the
full amount of Amber's share of expenses and Amber would retain a
carried ownership interest (which would result in a substantial
diminution of Amber's ownership interest in the farmed-out
properties), (e) entering into one or more joint venture
relationships with industry partners, (f) entering into financing
relationships with one or more industry partners, and (g) the sale
of some or all of Amber's interests in the properties.
It is unlikely that any one potential source of funding
would be utilized exclusively. Rather, it is more likely that
Amber will pursue a combination of different funding sources when
the need arises. Regardless of the type of financing techniques
that are ultimately utilized, however, it currently appears likely
that because of Amber 's small size in relation to the magnitude of
the capital requirements that will be associated with the
development of the subject properties, Amber will be forced in the
future to issue significant amounts of additional shares, pay
significant amounts of interest on debt that presumably would be
collateralized by all of Amber 's assets (including its offshore
California properties), reduce its ownership interest in the
properties through sales of interests in the property or as the
result of farm-outs, industry financing arrangements or other
partnership or joint venture relationships, or to enter into
various transactions which will result in some combination of the
foregoing. In the event that Amber is not able to pay its share
of expenses as a working interest owner as required by the
respective operating agreements, it is possible that Amber might
lose some portion of its ownership interest in the properties under
some circumstances, or that Amber might be subject to penalties
which would result in the forfeiture of substantial revenues from
the properties.
While the cost to develop the offshore California
properties in which Amber owns an interest are anticipated to be
substantial in relation to Amber 's small size, management believes
that the opportunities for Amber to increase its asset base and
ultimately improve its cash flow are also substantial in relation
to its size. Although there are several factors to be considered
in connection with Amber 's plans to obtain funding from outside
sources as necessary to pay its proportionate share of the costs
associated with developing its offshore properties (not the least
of which is the possibility that prices for petroleum products
could continue to decline in the future to a point at which
development of the properties is no longer economically feasible),
management believes that the timing and rate of development in the
future will in large part be motivated by the prices paid for
petroleum products.
To the extent that prices for petroleum products decline
further from their current near historic lows, it is likely that
development efforts will proceed at a slower pace to the end that
costs will be incurred over a more extended period of time. In the
event that petroleum prices increase, however, management believes
that development efforts will intensify. Amber 's ability to
successfully negotiate financing to pay its share of development
costs on favorable terms will be inextricably linked to the prices
that are paid for petroleum products during the time period in
which development is actually occurring on each of the subject
properties.
Year 2000
The Company has completed a review of its computer system
and applications (which began in fiscal 1997) to identify the
systems that could be affected by the "Year 2000" issue. The Year
2000 problem is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of
the Company's programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or
miscalculations.
On the basis of its review, the Company currently
believes that the Year 2000 issue will not pose material
operational problems for the Company. To the Company's knowledge
after investigation, no "embedded technology" (such as microchips
in an electronic control system) of the Company poses a material
Year 2000 concern.
Because the Company believes that it has no material
internal Year 2000 problems, the Company has not and does not
expect to expend a significant amount of funds to address Year 2000
issues. It is Company policy to continue to review its suppliers'
Year 2000 compliance and require assurance of Year 2000 compliance
from new suppliers; however, such monitoring does not involve a
significant cost to the Company.
In addition to the foregoing, the Company has contacted
its major vendors and has received either oral or written
assurances from its major vendors or has reviewed assurances
contained on vendors' web sites that they have no material Year
2000 problems. The Company believes that its vendors are largely
fungible; therefore, in the event a vendor's representations
regarding its Year 2000 compliance were untrue for any reason, the
Company believes that it could find adequate Year 2000-compliant
vendors as substitutes.
The Company has also received either oral or written
assurances from its customers or has reviewed assurances contained
on its customers' web sites that they have no Year 2000 problems
which would materially adversely affect the business or operations
of the Company.
The information contained in this Year 2000 discussion is
forward-looking and involves risks and uncertainties that may cause
actual results to vary materially from those projected. Some
factors that could significantly impact Amber's expected Year 2000
compliance and the estimated cost thereof include internal computer
hardware or software problems which have not as yet been identified
by Amber, and currently undisclosed and unanticipated problems
which may be encountered by third parties with whom Amber has
business relationships.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 27. Financial Data Schedule.
Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMBER RESOURCES COMPANY
(Registrant)
Date: May 10, 1999 s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
Chairman\CEO
s/Kevin K. Nanke
Kevin K. Nanke, Controller and
Principal Accounting Officer
INDEX
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession. Not applicable.
(4) Instruments Defining the Rights of Security Holders,
Including Indentures. Not applicable.
(9) Voting Trust Agreement. Not applicable.
(10) Material Contracts. Not applicable.
(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.
(15) Letter Regarding Unaudited Interim Information.
Not applicable.
(16) Letter re: Change in Certifying Accountants. Not
applicable.
(17) Letter re: Director Resignation. Not applicable.
(18) Letter Regarding Changes in Accounting Principals.
Not applicable.
(19) Previously Unfiled Documents.
Not applicable.
(20) Report Furnished to Security Holders.
Not applicable.
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders. Not applicable.
(23) Consents of Experts and Counsel. Not applicable.
(24) Power of Attorney.
Not applicable.
(27) Financial Data Schedule. Filed herewith electronically.
(99) Additional Exhibits.
Not applicable.
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