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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 5, 1996
FOUNTAIN OIL INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 0-9147 91-0881481
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1400 Broadfield Blvd., Suite 200, Houston, Texas 77084-5163
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 713-492-6992
(Former name or former address, if changed since last report)
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5. OTHER EVENTS
On June 5, 1996, Registrant issued and sold 5,000,000 shares of its
Common Stock, par value $.10 per share in a private placement (the "Placement")
to institutional and other qualified investors in Norway and other European
countries. Registrant received gross proceeds of $22,500,000 and net proceeds
of approximately $21,000,000, after commissions and other expenses. Registrant
expects to utilize most of the net proceeds in connection with its activities in
oil and gas projects involving the Maykop Field in the Republic of Adygea,
Russian Federation, the Lelyaki Field in the Eastern Ukraine, the Boryslaw
(Stynawske) Field in Western Ukraine and the Gorisht-Kocul Field in Albania.
The shares were offered and issued to non-U.S. persons without registration
under the Securities Act of 1933, as amended, and may not be offered or sold in
the United States or to, or for the account or benefit of, U.S. persons absent
registration or an applicable exemption from the registration requirements under
that Act.
In accordance with the rules of the Oslo Stock Exchange, Registrant
filed with that Exchange a Prospectus with respect to the Placement which
contained, among other things, the following forward looking statements, after
noting that "due to the multitude of factors which can affect the field
development, it is not possible to predict payback on investment and first
production times with certainty":
The Company's best estimates are to commence production on the
Maykop field in November-December 1996 and an investment payback time of 26
months.
The Company's best estimates are to commence production on the
Lelyaki field in September-October 1996 and an investment payback time of
19 months.
The Company's best estimates are to commence production on the
Stynawske field (Boryslaw) in Western Ukraine in the Summer of 1997 and an
investment payback time of 3.5 years.
The Company's best estimates are to commence production on the
Gorisht-Kocul field in October-November 1996 and an investment payback time
of 4.5 years.
The Prospectus also noted that "these estimates are given as a general
approximation only and not for the reliance of investors or other persons."
The forward looking statements contained in this Item 5 are subject to
various risks, uncertainties and other factors that could cause actual results
to differ materially from the results anticipated in such forward looking
statements. Included among the important risks, uncertainties and other factors
are those hereinafter discussed.
The progress of the four projects discussed is not within the
unilateral control of the Company. Joint venture, acquisition, financing,
production sales and other agreements and arrangements remain to be negotiated
in conjunction with the projects with independent third parties and, in some
cases, must be approved by governmental agencies. Such third parties generally
have interests that do not coincide with those of the Company and may conflict
with the Company's interests. Unless the Company and such third parties are able
to compromise their respective objectives in a mutually acceptable manner,
agreements and arrangements will not
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be consummated. Operating entities in various foreign jurisdictions must be
registered by governmental agencies, and production licenses for development of
oil and gas fields in various foreign jurisdictions and other approvals must be
granted by governmental agencies. These governmental agencies generally have
broad discretion in determining whether to take or approve various actions and
matters. In addition, the policies and practices of governmental agencies may be
affected or altered by political, economic and other events occurring either
within their own countries or in a broader international context. It is
anticipated that the Company will not have a majority of the equity in the
entity that would be the licensed developer of any of the foregoing projects,
even though the Company may be the designated operator of the oil or gas field.
Thus, the concurrence of co-venturers may be required for various actions which
could affect the progress of the projects. Other parties influencing the timing
of events may have priorities that differ from those of the Company, even if
they generally share the Company's objectives. As a result of all of the
foregoing, among other matters, the forward looking statements regarding the
occurrence and timing of future events may well anticipate results that will not
be realized.
Some or all of the projects discussed above will require additional
financing. The availability of equity financing to the Company and debt
financing to the Company or individual projects is affected by, among other
things, world economic conditions, international relations, the stability and
policies of various governments, fluctuations in the price of oil and gas, the
outlook for the oil and gas industry and the competition for funds. Rising
interest rates might affect the feasibility of debt financing that is offered.
Potential investors and lenders will be influenced by their evaluations of the
Company and its projects in comparison with alternative investment
opportunities.
The development of oil and gas properties is subject to substantial
risks. Expectations regarding reserves, even if estimated by independent
petroleum engineers, may prove to be unrealized. Reserves, even if present, may
not be recoverable in the amount and at the rate anticipated and may not be
recoverable in commercial quantities or on an economically feasible basis. The
reserves in the projects discussed have been subject to improper reserve
management procedures in the past which could adversely effect the rate and
amount of recoverability. World and local prices for oil and gas can fluctuate
significantly, and a reduction in the revenue realizable from the sale of
production can affect the economic feasibility of an oil and gas project. The
host countries for the projects being discussed are shifting from being
centrally planned economies to market driven economies and the rate at which
this change occurs, if at all, could affect, among other things, the amount
received for oil and gas production from these projects. World and local
political, economic and other conditions could affect the Company's ability to
proceed with or effectively to operate projects in the relevant host countries.
Demands by or expectations of governments, co-venturers, customers and
others may affect the Company's strategy on various projects. Failure to meet
such demands or expectations could adversely affect the relevant projects or the
Company's participation in such projects or its ability to obtain or maintain
necessary licenses and other approvals.
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SIGNATURES
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Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FOUNTAIN OIL INCORPORATED
Date: June 10, 1996 By: /s/ Gary J. Plisga
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Gary J. Plisga
Executive Vice President
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