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
DECEMBER 31, 1998 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 February 5, 1999.
Form 10-QSB
2nd Qtr.
FY 1999
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
Balance Sheets
December 31, 1998 and
June 30, 1998 (unaudited)........... 1
Statements of Operations and
Accumulated Deficit for
the Three and Six Months Ended
December 31, 1998 and
1997 (unaudited)..................... 2
Statements of Cash Flows
for the Three and Six Months Ended
December 30, 1998 and 1997
(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
PART I - FINANCIAL INFORMATION
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Balance Sheets
(Unaudited)
ITEM 1. FINANCIAL STATEMENTS
December 31, June 30,
1998 1998
ASSETS
Current assets:
Cash $6,111 14,661
Accounts receivabl 2,000 71,178
Total current assets 8,111 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 (135,846) (848,104)
Net oil and gas properties 5,065,961 5,422,306
$5,074,072 5,508,145
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $43,220 41,059
Parent - 333,976
Royalties payable 149,116 232,832
Total current liabilities 192,336 607,867
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 (449,492) (1,146,591)
Advances to parent (715,641) -
Total stockholders' equity 4,881,736 4,900,278
$5,074,072 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
December 31,
1998 1997
Revenue:
Oil and gas sales $4,226 250,594
Gain on sale of oil and gas properties 731,752 196,768
Other income 41,862 51,697
Total revenue 777,840 499,059
Expenses:
Lease operating expenses 5,123 38,330
Depletion 2,417 20,079
Exploration expense 532 -
General and administrative,
including $25,000 in 1998
and $131,003 in 1997 to parent 29,843 136,719
Total expenses 37,915 195,128
Net earnings 739,925 303,931
Accumulated deficit at beginning of period (1,189,417) (1,344,185)
Accumulated deficit at end of period ($449,492) (1,040,254)
Basic earnings per common share $0.16 0.07
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 Operations and Accumulated Deficit
(Unaudited)
Six Months Ended
December 31,
1998 1997
Revenue:
Oil and gas sales $128,140 434,571
Gain on sale of oil and gas properties 731,752 283,993
Other income 83,733 103,360
Total revenue 943,625 821,924
Expenses:
Lease operating expenses 40,648 91,373
Depletion 22,585 50,072
Exploration expense 532 -
General and administrative,
including $156,745 in 1998
and $264,000 in 1997 to parent 182,761 285,970
Total expenses 246,526 427,415
Net earnings 697,099 394,509
Accumulated deficit at beginning of period (1,146,591) (1,434,763)
Accumulated deficit at end of period ($449,492) (1,040,254)
Basic earnings per common share $0.15 0.08
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)
Six Months Ended
December 31,
1998 1997
Net cash (used in) provided by operating act ($24,445) 80,865
Cash flows from investing activities:
Additions to oil and gas properties (9,105) (257)
Proceeds from the sale of oil and gas properties 1,074,617 338,063
Net cash provided by investing activities 1,065,512 337,806
Cash flows from financing activities-
Changes in acccounts receivable and accounts payable
to and from parent (1,049,617) (395,163)
Net (decrease) increase in cash (8,550) 23,508
Cash at beginning of the period 14,661 6,440
Cash at end of the period $6,111 29,948
See accompanying notes to unaudited financial statements.
AMBER RESOURCES COMPANY
(A Subsidiary of Delta Petroleum Corporation)
Notes to Financial Statements
Six Months Ended December 31, 1998 and 1997
(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. For a
more complete understanding of the Company's operations and
financial position, reference is made to the consolidated financial
statements of the Company, and related notes thereto, filed with
the Company's annual report on Form 10-KSB for the year ended June
30, 1998, previously filed with the Securities and Exchange
Commission.
(2) Oil and Gas Properties
On November 16, 1998, the Company completed the sale of 17 oil
and gas wells located in the Anadarko 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 interest in undeveloped oil and gas properties
offshore California, near Santa Barbara and developed oil and gas
properties in Western Oklahoma.
Liquidity and Capital Resources.
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 December 31, 1998, the Company had a working capital deficit
of $184,225 compared to a working capital deficit of $522,028 at June
30, 1998. The Company's current liabilities include royalties payable
of $149,116 at December 31, 1998 which represent 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.
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.
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 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 considerations described above
the Company believes that its cash flow from its existing producing
properties, proceeds from the sale of producing properties, 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
Basic Earnings. The Company reported net income of
$739,925 and $697,099 for the three and six months ended December
31, 1998 compared to net income of $303,931 and $394,509 for the
same periods in 1997.
Revenue. Total revenues for the three and six
months ended December 31, 1998 were $777,840 and $943,625 compared
to $499,059 and $821,924 for the same periods in 1997. Oil and gas
sales for the three and six months ended December 31, 1998 were
$4,226 and $128,140 compared to $250,594 and $434,571 for the same
periods in 1997. The Company's oil and gas sales decreased
substantially from the sale of most of the Company's producing
properties in November, 1998.
Production volumes and average prices received for the
three months ended December 31, 1998 and 1997 are as follows:
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
Production:
Oil (Bbls) 127 222 342 441
Gas (Mcfs) 1,370 89,970 65,720 173,702
Average Price:
Oil (per Bbls) $12.77 $20.98 $11.49 $21.00
Gas (per Mcf) $ 1.90 $2.50 $1.88 $2.27
Lease Operating Expenses. Lease operating expenses were
$5,123 and $40,648 for the three and six months ended December 31,
1998 compared to $38,330 and $91,373 for the same periods in 1997.
The decrease in lease operating expense can be attributed to the
sale of certain oil and gas properties.
Depletion Expense. Depletion expense for the three and
six months ended December 31, 1998 was $2,417 and $22,585 compared
to $20,079 and $50,072 for the same periods in 1997. On a MCF
equivalent basis, depletion expense was $1.13 and $.33,
respectively, per Mcf equivalent during the three and six month
periods ended December 31, 1998 compared to $.22 and $.28,
respectively, per Mcf equivalent for the same periods in 1997.
General and Administrative Expenses. General and
administrative expenses for the three and six months ended December
31, 1998 were $29,843 and $182,761 compared to $136,719 and
$285,970 for the same periods as in 1997. Effective October 1,
1998, the Company entered into an agreement with the Company's
parent, whereby the Company would pay its parent an administration fee
of $25,000 per quarter.
Future Operations
The Company's Offshore California proved undeveloped
reserves are attributable to its interests in three federal units
located offshore California near Santa Barbara. While these
interests represent ownership of substantial oil and gas reserves
classified as proved undeveloped, the cost to develop the reserves
will be substantial. The estimated cost, which will be incurred
over the life of the properties (assumed to be 38 years), for the
complete development of all of the 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
is currently estimated to be slightly in excess of approximately $3
billion. The Company's share of such costs is estimated to be
approximately $26,938,000. Operating expenses for the same
properties over the same period of time, including platform
operating costs, well maintenance and repair costs, oil, gas and
water treating costs, lifting costs and pipeline transportation
costs are expected to be approximately $2,286,486,000 with the
Company's share estimated to be $36,354,000.
Each working interest owner will be required to pay its
proportionate share of these costs based upon the amount of the
interest that it owns. The size of Amber's working interest varies
from .87% to 6.97%. The Company may be required to farm out all or
a portion of its interests in these properties to a third party 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. Net
revenues over the same time period, to be shared by all of the
working interest owners in proportion to the size of their
respective working interests, are estimated to be approximately
$2,216,067,000 after the payment of all of the above expenses and
amounts due to owners of royalty interests with Amber's share
estimated to be approximately $35,833,000 before taxes.
These units have been formally approved and are regulated
by the MMS. While the Federal Government has recently attempted to
expedite the process of obtaining permits and authorizations
necessary to develop the properties, 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 generally
not control the timing of either the development of the properties
or the expenditures for development unless Amber chooses to
unilaterally propose the drilling of wells under the relevant
operating agreements. 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. It is anticipated that,
based upon discussions with appropriate governmental agencies,
development of the subject leases will require from three to five
years for permitting. Because of the substantial reserves contained
in the projects, it is generally accepted that they will be
developed; however, the time required to complete development may
be from five to ten years. As additional information becomes
available in the future, the Company's estimates of the proved
undeveloped reserves attributable to these properties could
materially change.
The MMS initiated the California Offshore Oil and Gas
Energy Resources (COOGER) study at the request of the local
regulatory agencies of the three counties (Ventura, Santa Barbara
and San Luis Obispo) affected by offshore oil and gas development.
A private consulting firm is currently conducting the study under
a contract with the MMS. The COOGER study seeks to present a long-
term regional perspective of potential onshore constraints that
should be considered when developing existing undeveloped offshore
leases. COOGER will project the economically recoverable oil and
gas production from offshore leases which have not yet been
developed. These projections will be utilized to assist in
identifying a potential range of scenarios for developing these
leases. These scenarios will then be compared to the projected
infrastructural, environmental and socioeconomic baselines between
1995 and 2015.
No specific decisions regarding levels of offshore oil
and gas development or individual projects will occur in connection
with the COOGER study. Information presented in the study is
intended to be utilized as a reference document to provide the
public, decision makers and industry with a broad overview of
cumulative industry activities and key issues associated with a
range of development scenarios. The exact effects of each of the
scenarios are not yet capable of analysis because the study has not
yet been completed. However, the Company has evaluated its
position with regard to the scenarios currently being studied with
respect to properties and the results of such evaluation are set
forth in the Company's Form 10-KSB for the year ended June 30,
1998.
Current Status. On November 5, 1996, the MMS directed a
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 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
superceded 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 all 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 eventual
development. By May 15, 1999, each operator will 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 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
24, 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.
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.
Form 8-K.
November 23, 1998; Item 2 and 7.
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)
s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
Chairman\C.E.O.
s/Kevin K. Nanke
Kevin K. Nanke
Controller and Principal Accounting
Officer
Date: February 10, 1999
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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