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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT ON FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 27, 1998
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 File Number) (I.R.S. Employer
of incorporation) Identification No.)
1400 Broadfield Blvd., Suite 100, Houston, Texas 77084-5163
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 281-492-6992
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
The Registrant announced on January 27, 1998 that it has entered into a
letter of intent with CanArgo Energy Inc. ("CanArgo") under which a business
combination involving the two companies would be effected. Execution of a
definitive agreement governing the business combination of Registrant and
CanArgo is subject to satisfactory completion of the due diligence examinations
of the parties and final approvals by the Boards of Directors of Registrant and
CanArgo.
The Registrant issued a press release on January 27, 1998 regarding the
proposed business combination. That press release is an exhibit to this
Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
99(1) Press Release dated January 27, 1998 announcing execution of
letter of intent
SIGNATURES
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: January 27, 1998 By: /s/ SUSAN E. PALMER
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Susan E. Palmer
Corporate Secretary
2
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EXHIBIT INDEX
FILED WITH
EXHIBIT THIS
NUMBER EXHIBIT REPORT
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99(1) Press Release dated January 27, 1998 announcing
execution of letter of intent X
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EXHIBIT 99(1)
FOUNTAIN OIL ANNOUNCES LETTER OF INTENT WITH CANARGO ENERGY INC.
Houston, Texas--Oslo, Norway--January 27, 1998--Fountain Oil Incorporated
("Fountain") announced today that a letter of intent has been executed with
CanArgo Energy Inc. ("CanArgo") under which a business combination would be
effected on approximately a 50/50 basis taking into account anticipated
dilution. To implement the business combination, CanArgo would prepare and
submit for CanArgo shareholder approval a Plan of Arrangement under which
CanArgo would become a wholly owned subsidiary of Fountain and CanArgo
shareholders would receive the right to 1.6 shares of Fountain Common Stock for
each share of CanArgo Common Stock held. It is proposed that the combined
company be renamed CanArgo Energy Corporation and that Fountain's listings on
the Nasdaq National Market System and the Oslo Stock Exchange be maintained.
Execution of a definitive agreement governing the business combination of
Fountain and CanArgo is subject to satisfactory completion of the due diligence
examinations of the parties and final approvals by the Boards of Directors of
Fountain and CanArgo. The Boards of Directors are expected to meet to consider a
definitive agreement during the first week of February 1998. Consummation of any
definitive agreement is expected to be subject to satisfaction of various
conditions, including approval by the shareholders of both companies.
CanArgo is a Canadian public company quoted on the Canadian CDN (Toronto). The
closing price for a share of CanArgo common stock on January 26, 1998 was
CDN$ 2.30 (US$1.59), providing a market capitalization of US$19.2 million for
CanArgo based on the 12,074,988 presently outstanding common shares. The
principal asset of CanArgo is a 55.9% interest in Ninotsminda Oil Company
Limited, which holds a production sharing agreement for the Ninotsminda field,
the West Rustavi field and the Manavi prospect, all located in the independent
Republic of Georgia. The Ninotsminda field is located 40 km east of Tblisi,
consists of 26,800 acres and is currently producing approximately 2,000 barrels
of oil per day plus associated gas from seven wells. West Rustavi is about to
commence test production, and additional seismic data will be collected to
assess the Manavi prospect. The oil is sold on the international market based on
a Brent market price.
In August 1997, CanArgo announced a mandate letter for Ninotsminda Oil Company
Limited with International Finance Corporation (IFC) for a possible debt and
equity financing. The financing is contingent upon the satisfactory technical,
economic, commercial and environmental appraisal by IFC. IFC has visited the
field twice.
Fountain Oil has been developing oil and gas projects in Eastern Europe. It also
owns a patented technology for electrically enhanced oil recovery used to
increase the production of heavy oil. 22,447,489 shares of Fountain's common
stock are outstanding.
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The managements of CanArgo and Fountain have reached a preliminary understanding
regarding the business plan for the combined entity. Initial emphasis would be
placed on further development of CanArgo's Ninotsminda and West Rustavi projects
in the Republic of Georgia. The combined company would also pursue Fountain's
Stynawske project in Ukraine and the Gorisht-Kocul project in Albania together
with further exploration in Georgia. The remaining Fountain Oil projects are
still being evaluated, but in the absence of firm plans to develop these
projects, Fountain has written-down the carrying value of these projects and
related assets effective December 31, 1997 to net realizable value. The
aggregate write-down is approximately US$20,000,000.
Under the preliminary business plan, the Board & senior management of the
combined company would consist of David Robson, Chairman & Chief Executive
Officer, Michael Binnion, Vice Chairman and Chief Financial Officer, John
McLeod, President and Director, Einar H. Bandlien, Executive Vice President -
Business Development, Russel Hammond, Director, Robert Halpin, Director, Peder
Paus, Director and Nils N. Trulsvik, Director. The head office of the combined
company would be located in Calgary, Canada.
Commenting on the proposed combination, David Robson, Chairman designate of the
proposed CanArgo/Fountain said, "The combined Company will seek to become one of
the most profitable and successful independent companies in the oil, gas and
energy sector in Eastern Europe, with its focus on the Caucasus and Black Sea
area. The Company aims to achieve this by consolidating its current portfolio,
focusing on cash flow and reducing costs whilst seeking and developing
opportunities which promise good future potential."
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FOR FURTHER INFORMATION:
AT FOUNTAIN AT THE FINANCIAL RELATIONS BOARD, US
Contact in US:
Susan E. Palmer,
Corporate Secretary
+1 281 492 6992 General Info: Paul Henning 212-661-8030
Analyst Info: Beth Lewis 617-342-7372
Media Info: Jerry Miller 212-661-8030
Contact In Europe:
Rune Falstad, VP Finance
+47 66 78 69 00
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This news release shall not constitute an offer to sell or a solicitation of an
offer to buy the securities referred to herein, nor shall there be any sale of
the securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of such jurisdiction. This news release shall not constitute a solicitation
of proxies with respect to any securities.
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To receive Fountain Oil's latest news release and other corporate documents via
FAX--no cost--please dial +1 800 PRO INFO. Enter Fountain Oil's ticker GUSH.
The matters discussed in this press release include forward looking statements,
which 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. Such risks, uncertainties and other factors include
the need for additional approvals and the effect of actions of third parties,
including co-ventures, contractors and governmental officials, on the timing and
occurrence of anticipated events. For more complete discussion of such risks,
uncertainties and other factors, see Fountain Oil's Report on Form 10-K for the
period ended December 31, 1996 and Quarterly Report on Form 10-Q for the nine
month period ended September 30, 1997 filed with the Securities and Exchange
Commission.
