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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
FEBRUARY 12, 1999
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
VENUS EXPLORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE 0-14334 13-3299127
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER
IDENTIFICATION NO.)
1250 NE LOOP 410
SUITE 1000
SAN ANTONIO, TEXAS 78209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (210) 930-4900
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 12, 1999, Venus Exploration, Inc., completed the sale of its
interest in the H.E. White Unit in Freestone County, Texas. The buyers were
Petroleum Development Corporation and Warren Resources, Inc. The properties
included interests in 3 existing wells; a fourth well in the unit has been
proposed. The average daily production from these properties was 270 Mcf during
the fourth quarter of 1998. The purchase price was $1,150,000. The purchase
price was based on arm's length negotiation among the parties taking into
account a number of considerations, including location of the properties, prices
being paid for production from those wells, production rates and production
costs. Out of the proceeds, $650,000 was applied to reduce the Company's
outstanding bank debt.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information.
As permitted by Form 8-K, the required pro forma financial
information regarding the disposition of the H.E. White Unit
assets will be filed by amendment to this Form 8-K no later
than April 30, 1999.
(c) Exhibits.
2.1 Letter Agreement dated February 4, 1999, between
Venus Exploration, Inc. and Petroleum Development
Corporation.
2.2 Amendment to Letter Agreement dated February 11,
1999, between Venus Exploration, Inc., and Petroleum
Development Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
VENUS EXPLORATION, INC.
By: /s/ Patrick A. Garcia
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Name: Patrick A. Garcia
Title: Chief Financial Officer
Dated: February 26, 1999
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EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
2.1 Letter Agreement dated February 4, 1999, between Venus Exploration, Inc.
and Petroleum Development Corporation.
2.2 Amendment to Letter Agreement dated February 11, 1999, between Venus
Exploration, Inc., and Petroleum Development Corporation.
</TABLE>
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EXHIBIT 2.1
February 4, 1999
PETROLEUM DEVELOPMENT CORPORATION
9720-B Candelaria N.E.
Albuquerque, NM 87112
ATTENTION: MR. JIM C. JOHNSON, JR.
RE: PURCHASE PROPOSAL
H.E. WHITE UNIT
FREESTONE COUNTY, TEXAS
Dear Jim:
In response to our phone conversation about the sale of 100% of our
working interest in the H.E. White Unit in Freestone County, Texas, Venus hereby
makes the following counterproposal subject to the following terms and
conditions:
1. Price: Venus hereby agrees to sell its working interest in the H.E.
White Unit for $1,150,000.
2. Payment for Wells: It is recognized that there are 3 wells drilled
and completed on the referenced unit and it is understood and agreed
that Venus will be responsible for all payments on the #1 and #2 wells
through completion and operations through December 31, 1998. As to the
H.E. White #3 well and future wells, PEDCO shall be responsible for the
drilling, completing and operating expense for said wells and shall be
responsible for all operating costs on all wells after December 31,
1998.
3. Effective Date: The effective date of the purchase shall be midnight
(12:00 p.m.) December 31, 1998. In the event Venus receives any income
attributable to the interest herein conveyed for production of oil
and/or gas which was produced after the effective date hereof, Venus
shall immediately pay PEDCO such sums of money. In the event Venus has
paid operating or other costs and charges attributable to the interest
herein conveyed after the effective date hereof and prior to closing,
Venus shall immediately furnish PEDCO evidence of the same and PEDCO
shall immediately reimburse Venus such sums of money. At the time of
closing, all operating expenses and other costs shall be paid in full
by Venus as of that effective date. All operating and other costs and
charges
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after the effective date shall become PEDCO's responsibility. Taxes and
other charges will be prorated as to the effective date.
4. Closing: The closing contemplated by this offer shall take place in
Venus' offices in San Antonio, or some other mutually acceptable
location on or before February 12, 1999. At closing, PEDCO will pay to
Venus, by check, the purchase price specified in paragraph 1 above. At
closing, Venus shall execute and deliver to PEDCO the necessary
instruments to convey in a mutually satisfactory form, with no warranty
of title, except, by, through and under Venus, covering 100% of Venus'
interest in the properties, equipment and oil, gas and other mineral
leases described in that certain Declaration of Gas Unit, which is
recorded in Volume 607, Page 506 of the Deed Records of Freestone
County, Texas.
5. Warranty: The subject property will be, at the time of conveyance to
PEDCO, free and clear of all liens, charges and encumbrances created by
Venus. The Assignment and Bill of Sale or other instrument of
conveyance shall be without warranty of title, except by, through and
under Venus, but not otherwise. Prior to closing, PEDCO shall have the
opportunity to accept or reject title to the properties, equipment and
oil, gas and mineral leases described in that certain Declaration of
Gas Unit, which is recorded in Volume 607, Page 506 of the Deed Records
of Freestone County, Texas. All personal property and equipment shall
be sold as is and where is, with all faults and without any warranties
whatsoever, either express or implied.
6. Interest Delivered: Venus believes that it owns a 25% working
interest and an 18.51% net revenue interest before payout and a
21.1804% working interest and a 16.51% net revenue interest after
payout of the wells drilled on the H.E. White Unit (assuming back-in
elections are made). There are currently three farmout agreements
covering four tracts within the unit that have a large override that
may be converted to a working interest at payout. These working
interest and net revenue interest numbers are based off the enclosed
schedule that was generated from the division order covering the H.E.
White #1 well, and at this time there is a new division order title
opinion being prepared by Anadarko covering this tract that will
document the working interest and net revenue interest covering this
tract. Venus does not warrant the working interest or net revenue
interest set forth above, therefore, PEDCO agrees to check the records
thoroughly and make its own determination as to the interest that Venus
owns.
In addition, in an Anadarko Title Opinion dated June 10, 1998, an
overriding royalty interest of .24% has been deducted from the Venus
net revenue interest. This overriding royalty interest was assigned out
to employees of the company we acquired. We feel that this overriding
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royalty has reverted back to Venus, but because record title is not
clear on the ownership of this interest, we have deducted it from the
net revenue interest stated above. The parties hereto agree that Venus
will keep this overriding royalty interest and it will not be
considered part of this transaction.
7. Entire Agreement: This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements,
negotiations and understandings. Any amendment to this Purchase
Proposal shall be done only by written instrument executed by both
PEDCO and Venus. This agreement is binding upon and shall inure to the
benefit of the parties hereto, their respective heirs, successors and
assigns.
If you concur with the terms and conditions set forth above, please
indicate your acceptance by executing in the space provided below and returning
one signed copy to the undersigned by 5:00 p.m. CST, February 4, 1999. At
5:00 p.m. CST, February 4, 1999, this proposal shall automatically terminate and
become null and void.
Very truly yours,
/s/ JOHN Y. AMES
John Y. Ames
President and Chief Operating Officer
ACCEPTED and AGREED TO this
_____ day of ______________, 1999.
PETROLEUM DEVELOPMENT CORPORATION
By: /s/ JIM C. JOHNSON JR.
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Printed Name: JIM C. JOHNSON JR.
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JYA/dak
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EXHIBIT 2.2
February 11, 1999
PETROLEUM DEVELOPMENT CORPORATION
9720-B CANDELARIA N.E.
ALBUQUERQUE, NM. 87112
ATTN: MR. JIM C. JOHNSON, JR.
RE: Amendment to Letter Agreement
Dated February 4, 1999
H. E. White Unit
Freestone County, Texas
Dear Jim,
This letter, when countersigned by you, shall serve to evidence our
agreement to amend the above captioned Letter Agreement dated February 4, 1999
covering the Venus Working Interest in the H. E. White Unit, Freestone County,
Texas (Letter Agreement) as follows:
A. The second sentence of provision 4. Closing of the Letter
Agreement is hereby deleted in its entirety and the following
sentence is hereby inserted in lieu thereof:
"At the closing PEDCO will pay by wire transfer, cashier's
check or other good funds the purchase price specified in
paragraph 1 above to Ellis G. Vickers, attorney, as escrow
agent or such other escrow agent, party or parties, as may be
designated jointly by Venus and PEDCO."
B. The following language is hereby added to the end of Provision 4,
Closing of the Letter Agreement:
"It is understood that Venus' interest is currently subject to
a lien in favor of its lender, Wells Fargo Bank, and Venus
shall provide the recordable instrument(s) necessary to effect
a release of said lien. Upon receipt of the assignment and
release of lien by the escrow agent, PEDCO shall authorize and
direct the escrow agent to release by bank cashier's check or
wire transfer to Wells Fargo Bank, for the account of Venus,
$650,000.00 out of the sales proceeds as is required by said
bank for executing the subject release. In addition, PEDCO and
Venus shall authorize and direct the escrow agent to remit
payment by cashier's check to the operator of the H. E. White
Unit #2 well the sum of $175,609.13 for all costs, expenses
and joint interest billings currently owed by
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Venus for its interest in said well, up through December 31,
1998. It is understood and agreed that Venus shall remain
responsible for all costs and expenses attributable to said H.
E. White #2 well up through December 31, 1998 even though the
same may be reflected on or included in a statement, invoice
or billing dated and/or received thereafter. It is understood
and agreed by Venus and PEDCO that Venus shall be entitled to
receive all proceeds attributable to its interest in
production from said H. E. White #2 well up through December
31, 1998. Lastly, PEDCO and Venus shall authorize and direct
the escrow agent to hold in escrow the sum of $100,000.00
until such time as the title discrepancy on approximately 2.5%
of the total working interest out of Venus' 25% of the total
working interest is resolved to the joint satisfaction of
PEDCO and Venus. PEDCO shall authorize and direct the escrow
agent to disburse the remaining balance of the purchase price
to Venus, as Venus may direct. If the subject title
discrepancy on the approximate 2.5% of the total working
interest is resolved to the mutual satisfaction of Venus and
PEDCO within 90 days after Closing, then PEDCO shall authorize
and direct the escrow agent to pay the escrowed $100,000.00
plus any accrued interest to Venus. If Venus and PEDCO are
unable to jointly agree within 90 days following closing that
the title discrepancy on said approximately 2.5% of the total
working interest has been resolved, then the disputed interest
will automatically revert to Venus and the escrowed
$100,000.00 plus any accrued interest shall be paid by the
escrow agent to PEDCO. Venus and PEDCO agree to execute and
deliver such instruments in recordable form as may be
necessary or useful in documenting said automatic reversion to
Venus, including without limitation a reassignment of such
interest to Venus effective as of December 31, 1998."
C. The last sentence of the second paragraph of provision 6. Interest
Delivered of the Letter Agreement is hereby deleted and the
following language is inserted in lieu thereof:
"The parties hereto agree that PEDCO shall receive the
reversionary rights, if any exist, to said overriding royalty
interest, however, no deductions or adjustments shall be made
to the purchase price regardless of the actual ownership of
said interest and it is understood and agreed by PEDCO that
Venus makes no warranties, either expressed or implied, as to
said overriding royalty interest. In addition, said overriding
royalty interest shall not be subject to any title objections
by PEDCO."
D. The following new and additional provision 8 shall be added to the
Letter Agreement:
"8. Affiliates/Related Parties. The parties hereby agree that
the assignment or conveyance from Venus provided herein shall
be to and in favor of Warren Resources, Inc. a New York
Corporation, which is an affiliate of and related party to
PEDCO."
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If the above amendments to our Letter Agreement are acceptable to you,
please evidence your agreement to and acceptance of same by dating and signing
the enclosed copy and returning it to this office by facsimile transmission to
210-930-4901 and mailing the original to the letterhead address.
Very truly yours,
/s/ JOHN Y. AMES
John Y. Ames
President and COO
AGREED TO AND ACCEPTED this ________ day of February, 1999.
PETROLEUM DEVELOPMENT CORPORATION (PEDCO)
BY: /s/ JIM C. JOHNSON, JR.
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Jim C. Johnson, Jr., President
