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) October 8, 1998
SABA PETROLEUM COMPANY
(Exact name of registrant as specified in charter)
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Delaware 1-12322 47-0617589
(State or (Commission (IRS Employer
other jurisdiction File Number) Identification No.)
of incorporation)
3201 Airpark Drive Suite 201, Santa Maria, CA 93455
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 347-8700
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(Former name or former address, if changed since last report) Not Applicable
Item 1 Changes in Control of Registrant
Not Applicable
Item 2 Acquisition or Disposition of Assets
Not Applicable
Item 3 Bankruptcy or Receivership
Not Applicable
Item 4 Changes in Registrant's Certifying Accountant
Not Applicable
Item No. 5. Other Material Events.
Extended Closing of Common Stock Purchase Agreement.
The Common Stock Purchase Agreement dated October 8, 1998 between
Horizontal Ventures, Inc., a company whose shares are listed on the NASDAQ,
("HVNV") and the Company provided for a final closing date of 10:00 a.m. on
December 4, 1998. By an Agreement To Amend The Common Stock Purchase Agreement
effective December 3, 1998, HVNV and the Company agreed to extend the final
closing date to 10:00 a.m. on or before January 31, 1999.
Under the terms of the Common Stock Purchase Agreement HVNV agreed to
purchase and the Company agreed to sell an aggregate of 2.5 million shares of
the Common Stock of the Company at a price of $3 per share resulting in an
aggregate price of $7.5 million. On November 6, 1998, HVNV purchased 333,333
shares of the Common Stock at a price of $3 per share. Proceeds of the interim
sale of the Common Stock for $1.0 million were applied towards working capital.
Proposed Merger
On December 7, 1998, HVNV and the Company disclosed that the Board of
Directors of the Company approved HVNV's proposal to merge with the Company. A
majority of the Company's disinterested Board members voted in favor of the
proposed merger. The Company's Board of Directors plans to call a special
meeting of the Company's stockholders to vote upon the acquisition by HVNV of
100% of the issued and outstanding Common Stock of the Company not otherwise
owned by HVNV.
Under the proposed merger, the Company's stockholders will receive one
share of HVNV common stock for each 6 shares of the Company's Common Stock
outstanding. That exchange ratio is based upon (i) a total of 11,385,726 shares
of the Company's Common Stock outstanding (11,052,393 shares outstanding as of
December 2, 1998 plus 333,333 shares issued to HVNV on December 7, 1998), (ii) a
price of $2.02 for the Company's Common Stock based on a 55 percent premium over
the average closing price of the Company's Common Stock from November 2, 1998
through December 2, 1998, and (iii) the average closing price of HVNV's common
stock of $12.14 during the same period. As part of this plan, HVNV has
determined not to take control of the Company's Board of Directors prior to
shareholder approval of the Plan of Merger.
HVNV and the Company are expected to file a joint Proxy and Registration
Statement by December 31, 1998 and call a special stockholders meeting.
Chapter 11 Bankruptcy of Sabacol, Inc.
On December 11, 1998, Sabacol, Inc., a wholly-owned subsidiary of the
Company ("Sabacol"), filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code in the U.S. Bankruptcy Court, Central District of
California, Northern Division (BK Case No. ND 98-15858-RR). Sabacol's assets,
located solely in Colombia, consist of a 50% interest in a 118-mile pipeline and
varying interests in heavy oil producing properties. Sabacol's interest in the
pipeline was collateralized to secure the payment of a promissory note payable
from the Company in the approximate amount of $4.2 million which was all due and
payable by December 14, 1998 to Omimex Resources, Inc.
At the time of filing, Sabacol had a net book value of approximately
$5.3 million with liabilities of $4.6 million. For the nine months ended
September 30, 1998, the average daily production of Sabacol's interest in the
Colombian properties was 2300 Bopd and gross revenues were approximately $5.9
million with a negative cash flow. Sabacol had filed the bankruptcy petition to
protect its asset base and to provide adequate time to develop a re-organization
plan. Sabacol intends to file a reorganization plan that may include the
disposition of its Colombian assets. A new management team has been appointed
for Sabacol to protect its assets and develop an effective re-organization plan.
There is no assurance, however, that a reorganization plan beneficial to Sabacol
will be consummated. The filing is not expected to have any material adverse
effect on the Company and does not change any terms of the proposed merger with
HVNV.
Non-Payments
The promissory note in the approximate amount of $4.2 million was not
paid by the Company to Omimex Resources, Inc. by December 14, 1998. Also, the
Company has deferred the semi-annual interest payment of $162,000 due on
December 15, 1998 on the Debentures. The Company intends to make the interest
payment within the thirty day cure period provided by the Debentures and avoid
default.
Item No. 6. Resignation of Registrant's Directors
Not Applicable
Item No. 7. Financial Statements and Exhibits
Exhibits to 8-K
10.1 Agreement to Amend Common Stock Purchase Agreement dated effective December
3, 1998 between Saba Petroleum Company and Horizontal Ventures, Inc.
10.2 December 7, 1998 Press Release announcing the agreement of Saba Petroleum
Company and Horizontal Ventures, Inc. to merge.
10.3 December 15, 1998 Press Release announcing Sabacol, Inc.'s Filing under
Chapter 11 to protect Colombian assets.
10.4 December 15, 1998 Press Release explaining the Company's current status.
Item No. 8. Changes in Fiscal Year
Not Applicable
Item No. 9. Sales of Equity Securities Pursuant to Regulation S
Not Applicable
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SIGNATURES
Pursuant to the requirements 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.
SABA PETROLEUM COMPANY
Date: December 18, 1998
By:/s/ William N. Hagler
William N. Hagler,
Chairman, Management Committee
Date: December 18, 1998
By: /s/ Imran Jattala
Imran Jattala,
Executive Vice President and Chief Operating Officer
EXHIBIT 10.1
AGREEMENT TO AMEND
COMMON STOCK PURCHASE AGREEMENT
This Agreement effective this 3rd day of December, 1998, by and between
Horizontal Ventures, Inc., a Colorado corporation ("HVI"), and Saba Petroleum
Company, a Delaware corporation ("Saba"), is intended to act as an amendment to
the Common Stock Purchase Agreement dated the 8th day of October, 1998 between
HVI and Saba.
WHEREAS, the parties to this Agreement acknowledge that a as result of
continued due diligence required relating to HVI's interest in acquiring a
controlling interest in Saba, certain modifications to the Common Stock Purchase
Agreement are required; and
WHEREAS, the parties acknowledge that the continuation of HVI's efforts
towards its goal of acquiring control of Saba is in the best interest of both
corporations.
NOW, THEREOFRE, in consideration of mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. Extension of Closing. The final closing date initially scheduled
for 10:00 a.m. on December 4, 1998 as set forth in Section 2.1 of
the Common Stock Purchase Agreement shall be extended to 10:00
a.m. on or before January 31, 1999.
HORIZONTAL VENTURES, INC.
a Colorado corporation
By: /S/ Randeep S. Grewal
Randeep S. Grewal, Chairman
and Chief Executive Officer
SABA PETROLEUM COMPANY
a Delaware corporation
By: /S/ William N. Hagler
William N. Hagler, Chairman
of the Management Committee
EXHIBIT 10.2
NEWS- For Release December 7, 1998, 8:45 a.m. Eastern
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Horizontal Ventures, Inc. Saba Petroleum Company
630 Fifth Avenue, Suite 1501 3201 Airpark Drive, Suite 201
New York, NY 10111 Santa Maria, CA 93455
(Nasdaq:HVNV) (AMEX:SAB)
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FOR FURTHER INFORMATION CONTACT:
Peter A. Zambelli Sultan Mahmud
Investor Relations Investor Relations
(212) 218-4680 (805) 347-8700
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HORIZONTAL VENTURES, INC. AND SABA PETROLEUM COMPANY
AGREE TO MERGE
Horizontal Ventures, Inc. (Nasdaq:HVNV) disclosed today that at a special
meeting of the Board of Directors of Saba Petroleum Company (AMEX:SAB),
Horizontal Ventures' proposal to merge and call a special shareholders' meeting
to vote upon the acquisition by HVNV of 100% of the issued and outstanding
Common Stock of Saba Petroleum Company was approved. Under the approved
proposal, Saba shareholders will receive 1 share of HVNV Common Stock for each 6
shares of Saba outstanding on the date of the merger based on a total of
11,385,726 shares (11,052,393 outstanding and 333,333 authorized to be issued).
The conversion ratio was priced on a 55% premium ($2.02 per share) for the Saba
stock based upon a 31 calendar day average closing price compared to the average
HVNV price for the same period with no premium($12.14 per share). The Companies
are expected to file a joint Proxy and Registration Statement by December 10,
1998 and call a special shareholders meeting.
Additionally, Saba extended until January 31, 1999, the closing of the HVNV
private placement in the amount of $6.5 million.
Randeep Grewal, Chairman and CEO of Horizontal Ventures said, "Our current
controlling equity stake in Saba Petroleum Company precipitated this proposal in
consolidating the resources and expertise of the two companies to focus on a
collective business strategy. The combined entity will capitalize on the
synergistic assets of both HVNV and Saba. The merged Company intends to divest
certain non-core assets to satisfy the outstanding liabilities."
"The merged Company will focus on applying our proprietary horizontal drilling
technology on its reserves in California, increasing the production,
transferring the production into the wholly owned asphalt refinery and
efficiently placing the asphalt into the lucrative and stable asphalt market.
Such a strategy provides a firm hedge to oil price fluctuations and thus the
current oil price has little relevance to the merged Company's business
strategy."
The merged company is expected to have a low debt structure and high degree of
liquidity, and to be listed on the Nasdaq NMS market.
Note: This release includes certain statements that may be deemed to be "forward
looking statements" which are subject to risks and uncertainties that could
cause actual results to differ materially from those projected or forecasted.
Such risks and uncertainties include, but are not limited to, the ability to
raise required capital, conclude its transaction with Saba, development and
exploration, drilling of wells, reserve estimates, future production of oil and
gas, business strategies, expansion and growth of Horizontal Ventures operations
and other such matters, including those discussed in the Company's filing with
the Securities and Exchange Commission.
Except for historical information contained herein, the statements in this
Release are forward-looking statements that are made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. These risks and uncertainties include, among
other things, volatility of oil prices, product demand, market competition,
risks inherent in the Company's international operations, imprecision of reserve
estimates, the availability of additional oil and gas assets for acquisition on
commercially reasonable terms, and the Company's ability to replace and exploit
its existing oil and gas reserves. These and other risks are described in the
Company's Annual Report on Form 10-K and in the Company's other filings with the
Securities and Exchange Commission.
EXHIBIT 10.3
News Release
For Release
December 15, 1998
8:45 a.m. EASTERN
For more information, please contact: Sultan Mahmud (805) 347-8700 ext. 205
Sabacol Files To Protect Colombian Assets
SANTA MARIA, CALIFORNIA: December 15, 1998: Saba Petroleum Company (AMEX:SAB)
announced today that its wholly-owned subsidiary, Sabacol, Inc. ("Sabacol"), has
filed for the protection of its assets under Chapter Eleven of the U.S.
Bankruptcy Code.
Sabacol's assets, located solely in Colombia, consist of a 50% interest in a 118
mile pipeline and varying interests in heavy oil producing properties. Sabacol
has undertaken this action to protect its asset base and to provide adequate
time to develop a re-organization plan for the benefit of its creditors and
shareholder. At the time of filing, Sabacol had reported that it had current
liabilities of $4.6 million. Due to a 41% decline in oil prices since December
31, 1997, fully burdened costs are expected to exceed revenues. Under present
operating procedures and conditions, the producing properties are uneconomic.
Sabacol is not the operator of the properties and has notified the operator of
its intent to audit all relevant operating documents and all financial
transactions for 1996, 1997 and 1998. Any potential future action would be based
on results of the audit. Furthermore, a new management team has been appointed
for Sabacol to protect its assets and develop an effective re-organization plan.
Saba's Management Committee stated, "Since inheriting the daily management of
the Company, various corrective measures are being taken to provide active
direction throughout the Company. The current debt-load and declining oil prices
require a proactive plan to preserve all of the Company's assets. In addition,
the Committee is aggressively working toward the consummation of the planned
merger with Horizontal Ventures, Inc. ("HVNV") in order to implement the new
business plan of the combined companies."
Under the planned strategy, with a low-debt structure and high degree of
liquidity, the combined company will focus on applying HVNV's proprietary
horizontal drilling technology to the enhancement of its reserves in California,
increasing its production, processing its oil at its wholly-owned asphalt
refinery and efficiently placing the asphalt into the stable asphalt market.
This strategy is expected to provide a firm hedge to oil price fluctuations and
thus the current oil price will have little relevance to the merged company's
business results.
A telephone press conference to discuss this press release has been scheduled a
for 1:30 p.m. (Pacific Standard Time) Wednesday, December 16, 1998, hosted by
Saba's Management Committee. Callers may participate by dialing (913) 981-5508,
confirmation number 593799, five to ten minutes before the teleconference is
scheduled to begin in your time zone.
Saba Petroleum Company is an independent energy company with oil and gas
production and development activities in North America and Colombia. In the
United States, the Company's primary areas of activity are California, Louisiana
and New Mexico. The Company also has large land positions and exploration
options on exploratory projects in the U.S.A., Indonesia and the United Kingdom.
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Safe Harbor for Forward Looking Statements
Except for historical information contained herein, the statements in this
Release are forward-looking statements that are made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. These risks and uncertainties include, among
other things, volatility of oil prices, product demand, market competition,
risks inherent in the Company's international operations, imprecision of reserve
estimates, the availability of additional oil and gas assets for acquisition on
commercially reasonable terms, and the Company's ability to replace and exploit
its existing oil and gas reserves. These and other risks are described in the
Company's Annual Report on Form 10-K and in the Company's other filings with the
Securities and Exchange Commission.
EXHIBIT 10.4
News Release
For Immediate Release
December 15, 1998
For more information, please contact: Sultan Mahmud (805) 347-8700 ext. 205
SABA EXPLAINS CURRENT STATUS
SANTA MARIA, CALIFORNIA: December 15, 1998: Saba Petroleum Company (AMEX:SAB)
disclosed further information today following the announcement of the filing by
its wholly-owned subsidiary, Sabacol, Inc. ("Sabacol"), for the protection of
its assets under Chapter 11 of the U.S. Bankruptcy Code.
At the time of filing, Sabacol had a net book value of approximately $5.3
million with liabilities of $4.6 million. For the nine months ended September
30, 1998, the average daily production of Sabacol's interest in the Colombian
properties was 2300 Bopd and gross revenues were approximately $5.9 million with
a negative cash flow.
Sabacol intends to expeditiously file a reorganization plan that may include the
disposition of its Colombian assets. There is no assurance, however, of
consummating the plan.
The filing is not expected to have any material adverse effect on the Company.
Furthermore, the filing does not change any terms of the proposed merger with
Horizontal Ventures, Inc. (NASDAQ:HVNV) previously announced by the Company on
December 7, 1998 and which is expected to close within the first quarter of
1999. The Company expects that the related registration statement and proxy
documents will be filed with the Securities and Exchange Commission prior to
year end.
The Company has deferred the semi-annual interest payment of $162,000 due today
on its 9% Convertible Senior Subordinated Debentures ($3,575,000 principal
amount outstanding), but this action does not constitute a default under the
terms of the indenture. The Company intends to make the interest payment within
the next thirty days prior to the event of default.
Saba Petroleum Company is an independent energy company with oil and gas
production and development activities in North America and Colombia. In the
United States, the Company's primary areas of activity are California, Louisiana
and New Mexico. The Company also has large land positions and exploration
options on exploratory projects in the U.S.A., Indonesia and the United Kingdom.
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Safe Harbor for Forward Looking Statements
Except for historical information contained herein, the statements in this
Release are forward-looking statements that are made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. These risks and uncertainties include, among
other things, volatility of oil prices, product demand, market competition,
risks inherent in the Company's international operations, imprecision of reserve
estimates, the availability of additional oil and gas assets for acquisition on
commercially reasonable terms, and the Company's ability to replace and exploit
its existing oil and gas reserves. These and other risks are described in the
Company's Annual Report on Form 10-K and in the Company's other filings with the
Securities and Exchange Commission.
