KESTREL ENERGY, INC.
1,880,000 SHARES
COMMON STOCK
--------------------
This prospectus relates to 1,880,000 shares of common stock of
Kestrel Energy, Inc. that may be sold from time to time by the selling
shareholders named in this prospectus.
We will not receive any proceeds from the sales by the selling
shareholders.
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "KEST." On October 4, 1999, the last reported sale price of the
common stock was $2.375 per share.
INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
KESTREL ENERGY, INC.
999 18th Street, Suite 2490
Denver, Colorado 80202
(303) 295-0344
The date of this Prospectus is October 5, 1999.
[INSIDE FRONT COVER]
Table of Contents
Risk Factors 3
Forward-Looking Statements 6
Where You Can Find More Information 6
Our Business 7
Use of Proceeds 8
Selling Shareholders 8
Sale of Shares 9
Experts 10
Legal Matters 10
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different
from that contained in this prospectus. The selling shareholders are
offering to sell, and seeking offers to buy, shares of common stock only
in jurisdictions where offers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of
any sale of common stock.
Risk Factors
We must continue to expand our operations
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Our long term success is ultimately dependent on our ability to
expand our revenue base through the acquisition of producing properties
and, to a much greater extent, by successful results in our exploration
efforts. We have recently made significant investments in exploration
properties in the Green River Basin in Wyoming and with a co-venturer in
the San Joaquin Basin in California. There is no assurance that these
acquisitions or other acquisitions will be as successful as projected.
Although our international exploration program has been relatively low
risk for us because of the smaller investments we have made in those high
risk drilling programs, any increases in those or other investments
internationally are still subject to failure and the loss of our
investments.
Prices of oil and natural gas fluctuate widely based on market conditions
and any decline will adversely affect our financial condition
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Our revenues, operating results, cash flow and future rate of growth
are very dependent upon prevailing prices for oil and gas. For the fiscal
year ended June 30, 1998, approximately 74% of our revenue was from the
sale of oil and gas. Historically, oil and gas prices and markets have
been volatile and not predictable, and they are likely to continue to be
volatile in the future. Prices for oil and gas are subject to wide
fluctuations in response to relatively minor changes in the supply of and
demand for oil and gas, market uncertainty and a variety of additional
factors that are beyond our control, including:
o political conditions in the Middle East
o the supply and price of foreign oil and gas
o the level of consumer product demand
o the price and availability of alternative fuels
o the effect of federal and state regulation of production
and transportation
o the proximity of our natural gas to pipelines and their
capacity
We must replace the reserves we produce
- ---------------------------------------
A substantial portion of our oil and gas properties are proved
undeveloped reserves and probable reserves. Successful development and
production of those reserves cannot be assured. Additional drilling will
be necessary in future years both to maintain production levels and to
define the extent and recoverability of existing reserves. There is no
assurance that our present oil and gas wells will continue to produce at
current or anticipated rates of production, that development drilling will
be successful, that production of oil and gas will commence when expected,
that there will be favorable markets for oil and gas which may be produced
in the future or that production rates achieved in early periods can be
maintained.
There are many risks in drilling oil and gas wells
- --------------------------------------------------
The cost of drilling, completing and operating wells is often
uncertain. Moreover, drilling may be curtailed, delayed or canceled as a
result of many factors, including title problems, weather conditions,
shortages of or delays in delivery of equipment, as well as the financial
instability of well operators, major working interest owners and well
servicing companies. Our gas wells may be shut-in for lack of a market
until a gas pipeline or gathering system with available capacity is
extended into our area. Our oil wells may have production curtailed until
production facilities and delivery arrangements are acquired or developed
for them.
We face intense competition
- ---------------------------
The oil and natural gas industry is highly competitive. We compete
with others for property acquisitions and for opportunities to explore or
to develop and produce oil and natural gas. We have formed acquisition
joint ventures with several other companies, including Victoria Petroleum
N.L. and other affiliates, which have allowed us more access to
acquisition candidates and to share the evaluation costs with them. We
face strong competition from many companies and individuals with greater
capital, financial resources and larger technical staffs. We also face
strong competition in procuring services from a limited pool of laborers,
drilling service contractors and equipment vendors.
The amount of insurance we carry may not be sufficient to protect us
- --------------------------------------------------------------------
We, our partners, co-venturers and well operators maintain general
liability insurance but it may not cover all future claims. If a large
claim is successfully asserted against us, we might not be covered by
insurance, or it might be covered but cause us to pay much higher
insurance premiums or a large deductible or co-payment. Furthermore,
regardless of the outcome, litigation involving our operations, or even
insurance companies disputing coverage could divert management's
attentions and energies away from operations. The nature of the oil and
gas business involves a variety of operating hazards such as fires,
explosions, cratering, blow-outs, adverse weather conditions, pollution
and environmental risks, encountering formations with abnormal pressures,
and, in horizontal wellbores, the increased risk of mechanical failure and
collapsed holes, the occurrence of any of which could result in
substantial losses to us.
Our success may be dependent on our ability to retain Tim Hoops, Rick
Vine, John Kopcheff, Bob Pett and Ira Pasternack as key personnel
- ---------------------------------------------------------------------
We believe that the oil and gas exploration and development and
related management experience of our key personnel is important to our
success. The active participation in Kestrel of Timothy L. Hoops, our
president, Richard L. Vine, vice president of Engineering, John T.
Kopcheff, vice president of International, Robert J. Pett, our chairman,
and Ira Pasternack, vice president of Exploration, is a necessity for our
continued operations. We do not have any employment contracts with these
individuals and we do not have key person life insurance on their lives.
We compete with bigger and better financed oil and gas exploration
companies for these individuals. Our future success may depend on whether
we can attract, retain and motivate highly qualified personnel. We can't
assure you that we will be able to do so.
Our reserves are uncertain
- --------------------------
Estimating our proved reserves involves many uncertainties, including
factors beyond our control. Our annual report on Form 10-K for fiscal
year 1998 contained estimates of our oil and natural gas reserves and the
future cash flow to be realized from those reserves for fiscal years 1998,
1997 and 1996, as prepared by independent petroleum engineers. There are
uncertainties inherent in estimating quantities of proved oil and natural
gas reserves since petroleum engineering is not an exact science.
Estimates of commercially recoverable oil and gas reserves and of the
future net cash flows from them are based upon a number of variable
factors and assumptions including:
o historical production from the properties compared with
production from other producing properties
o the effects of regulation by governmental agencies
o future oil and gas prices
o future operating costs, severance and excise taxes,
abandonment costs, development costs and workover and remedial
costs
Governmental regulation, environmental risks and taxes could adversely
affect our oil and gas operations in the United States
- ----------------------------------------------------------------------
Our oil and natural gas operations in the United States are subject
to regulation by federal and state government, including environmental
laws. To date, we have not had to expend significant resources in order
to satisfy environmental laws and regulations presently in effect.
However, compliance costs under any new laws and regulations that might be
enacted could adversely affect our business and increase the costs of
planning, designing, drilling, installing, operating and abandoning our
oil and gas wells and other facilities. Additional matters that are, or
have been from time to time, subject to governmental regulation include
land tenure, royalties, production rates, spacing, completion procedures,
water injections, utilization, the maximum price at which products could
be sold, energy taxes and the discharge of materials into the environment.
Our operations in foreign countries are at risk because of their
governmental regulations and taxes
- ----------------------------------------------------------------
Our proposed operations in other countries may involve comparable or
even greater risks from governmental regulations and taxes, including the
risk of partial or complete forfeiture of our interests to a foreign
government as the result of a new government's policies. We do not
believe that there is a material risk of an outright government seizure of
our interests in any of the foreign countries in which we currently
propose doing business but government participation in a successful
exploration effort is possible in some cases.
The sale of the shares by the selling shareholders could have an adverse
impact on our stock
- ------------------------------------------------------------------------
Our stock is traded on the Nasdaq SmallCap Market and there has
historically been a relatively low volume of trading in the shares.
Consequently, the price at which the shares trade may be highly volatile.
The selling shareholders are not restricted as to the price or prices at
which they may sell their shares. Sales of their shares at less than the
market prices may depress the market price of our stock. Moreover, the
selling shareholders are not restricted as to the number of shares which
may be sold at any one time, and it is possible that a significant number
of shares could be sold at the same time which may depress the market
price of our stock. The shares being offered hereby represent
approximately 29.7% of our current outstanding shares. In addition,
although our stock is currently traded on the Nasdaq SmallCap Market,
there is no assurance that it will remain eligible to be included on
Nasdaq.
Forward-Looking Statements
This prospectus contains forward-looking statements. We use words
such as "anticipate", "believe", "expect", "future", "may", "will",
"should", "plan", "intend", and similar expressions to identify forward-
looking statements. These statements are based on our beliefs and the
assurances we made using information currently available to us. Because
these statements reflect our current views concerning future events, these
statements involve risks, uncertainties and assumptions. Our actual
results could differ materially from the results discussed in the forward-
looking statements. Some, but not all, of the factors that may cause
these differences include those discussed in the risk factors in this
prospectus. You should not place undue reliance on these forward-looking
statements. You should also remember that these statements are made only
as of the date of this prospectus and future events may cause them to be
less likely to prove to be true.
Where You Can Find More Information
We file annual, quarterly, special reports, proxy statements, and
other information with the Securities and Exchange Commission. You can
read and copy any document filed by us at the SEC's Public Reference Room,
450 Fifth Street N.W., Washington, D.C. 20549. You may request copies of
these documents, upon payment of a duplicating fee, by writing the SEC at
the address in the previous sentence. Please call the SEC at 1-800-SEC-
0330 for further information on the operation of its Public Reference
Room. Our SEC filings are also available on the SEC's website at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" information from
other documents that we file with it, which means that we can disclose
important information by referring you to those documents. The
information incorporated by reference is an important part of this
prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by
reference the following documents:
o our Annual Report on Form 10-K for the year ended June 30, 1999;
o the description of our securities contained in our registration
statement on Form 8-A, File No. 0-9261, filed on May 2, 1980 pursuant
to Section 12(g) of the Securities Exchange Act of 1934, and as
amended by our Form S-3, File No. 33-89716, declared effective on May
12, 1995; and
o all documents and reports subsequently filed with the Commission by
us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this prospectus and prior to the termination of
this offering of common stock.
You may request a copy of any of these documents, except exhibits to
the documents, unless they are specifically incorporated by reference, at
no cost by writing or telephoning us at the following address:
Kristina Miller
Kestrel Energy, Inc.
999 18th Street, Suite 2490
Denver, Colorado 80202
(303)295-0344
You should rely only on the information contained in this documents
or that we have referred you to. We have not authorized anyone else to
provide you with different information.
Our Business
Our principal business is exploration for oil and gas reserves in the
United States and in Australia and surrounding areas. In addition, we own
working interests, which are expense bearing interests, in proved
developed producing and proved undeveloped oil and gas leases that are not
operated by us, in several areas in the United States. We also own some
royalty interests, which are expense-free interests in properties which
are operated by others, in oil and gas leases across the country. Proved
developed reserves are oil and gas reserves which can be expected to be
recovered through existing wells with existing equipment and operating
methods. Proved undeveloped reserves are oil and gas reserves which can
be expected to be recovered from new wells on undrilled acreage or from
existing wells where a relatively major expenditure is required for
recompletion. Normally we use existing working capital and cash flow for
the development of our exploration and development properties. However,
we have in the past obtained debt and equity financing to fund our
development efforts and expect to do so again in the future.
We presently own oil and gas interests in the states of California,
Colorado, Louisiana, New Mexico, Oklahoma, South Dakota, Texas and
Wyoming, as well as in Papua New Guinea and Australia.
We were incorporated in Colorado on November 1, 1978 as Tanner Pruitt
Exploration, Inc. In March 1995 we changed our name to Kestrel Energy,
Inc. Our offices are located at 999 18th Street, Suite 2490, Denver,
Colorado 80202, and our telephone number is (303) 295-0344.
Use of Proceeds
We will not receive any proceeds from the sale of the common stock
offered by the selling shareholders.
Selling Shareholders
The selling shareholders who are offering our common stock in this
prospectus purchased their shares in our recent Regulation S offering in
Canada, Europe and Australia and elsewhere. We agreed to file this
registration statement for the resale of those shares as soon as
practicable after that offering closed. We also agreed to bear all out-of-
pocket expenses of this offering, other than underwriting discounts and
selling commissions. The selling shareholders may sell none, some, or all
of the common stock offered by them as listed below. None of the selling
shareholders has had any position, office or other material relationship
within the past three years with us or any of our affiliates.
The following table shows for each selling shareholder:
o the number of shares of common stock owned prior to this
offering
o the number of shares offered in this prospectus
o the number of shares owned after this offering if all of their
offered shares are sold and
o the percentage owned after this offering if all of their offered
shares are sold.
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Name of Selling Shareholder Owned Prior to Offering Being Offered
--------------------------- ---------------------- --------------
<S> <C> <C>
Samson Exploration NL 1,117,000 600,000
Hare & Co. 725,000 600,000
James Capel Investment Mgmt 248,000 248,000
Exchange Nominees Pty Ltd 52,800 52,800
NT Maclachian 50,000 50,000
Shertim Investments Pty Ltd 44,420 44,420
Exchange Nominees Pty Ltd 41,280 41,280
Macdougall, Macdougall & Maclier Inc. 40,000 40,000
Douglas Financial Consultants 30,000 30,000
Falcon Resources Pty Ltd 41,000 26,000
Albatross Investment Services Ltd. 24,000 24,000
Shertim Pty Ltd. 20,420 20,420
William John Evans 20,000 20,000
Nieuport Pty Ltd 60,000 20,000
Advena Nominees Pty Ltd 15,000 10,000
Thomas Phillips John Conn 10,000 10,000
Ray Barnes 20,000 10,000
Narrow Lane Pty Ltd 10,000 10,000
Montogomery Burns Pty Ltd 8,000 8,000
Suzan Debra Wagner 5,000 5,000
James Capel Investment Management 5,000 5,000
Graceview Pty Ltd 5,000 5,000
Graceview Pty Ltd Superannuation A/C 5,000 5,000
Exchange Nominees Pty Ltd 4,000 4,000
David Jones-Prichard 4,000 4,000
Nightingale Development Capital 4,000 4,000
M.J.H. Nightingale & Co. Ltd 4,000 4,000
Betsy Ann Carulli 2,500 2,500
Rosanna Chang 2,000 2,000
*Less than 1%
</TABLE>
<TABLE>
<CAPTION>
Shares to be Beneficially Owned
on Completion of the Offering
-------------------------------
Name of Selling Shareholder Number % of Class
--------------------------- ------- ----------
<S> <C> <C>
Samson Exploration NL 507,000 8.0%
Hare & Co. 125,000 2.0%
James Capel Investment Mgmt 0 0
Exchange Nominees Pty Ltd 0 0
NT Maclachian 0 0
Shertim Investments Pty Ltd 0 0
Exchange Nominees Pty Ltd 0 0
Macdougall, Macdougall & Maclier Inc. 0 0
Douglas Financial Consultants 0 0
Falcon Resources Pty Ltd 15,000 *
Albatross Investment Services Ltd. 0 0
Shertim Pty Ltd. 0 0
William John Evans 0 0
Nieuport Pty Ltd 40,000 *
Advena Nominees Pty Ltd 5,000 *
Thomas Phillips John Conn 0 0
Ray Barnes 10,000 *
Narrow Lane Pty Ltd 0 0
Montogomery Burns Pty Ltd 0 0
Suzan Debra Wagner 0 0
James Capel Investment Management 0 0
Graceview Pty Ltd 0 0
Graceview Pty Ltd Superannuation A/C 0 0
Exchange Nominees Pty Ltd 0 0
David Jones-Prichard 0 0
Nightingale Development Capital 0 0
M.J.H. Nightingale & Co. Ltd 0 0
Betsy Ann Carulli 0 0
Rosanna Chang 0 0
*Less than 1%
</TABLE>
Sale of Shares
The selling shareholders may offer and sell their shares of common
stock offered under this prospectus from time to time in ordinary
brokerage transactions on the Nasdaq SmallCap Market or another securities
market or exchange or otherwise. Sales may be made at market prices
prevailing at the time of sale, at prices related to market prices or at
negotiated prices. We expect that broker-dealers executing orders may
receive commissions, discounts or concessions from the selling
shareholders and the proceeds to the selling shareholders will be net of
these commissions, discounts or concessions.
The selling shareholders and any broker-dealer acting in connection
with the sale of the shares offered in this prospectus may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and any
discounts, concession or commissions received by them may be deemed to be
underwriting commissions or discounts under the Securities Act. We have
advised the selling shareholders that they and any broker-dealers or
others who may be deemed to be statutory underwriters will be subject to
the prospectus delivery requirements under the Securities Act. We have
also advised the selling shareholders that, in the event of a
"distribution" of the shares, the selling shareholders, any "affiliated
purchasers," and any broker-dealer or other person who participates in
such distribution may be subject to Rule 10b-6 under the Exchange Act
until his or its participation in that distribution is completed. A
"distribution" is defined in Rule 10b-6(c)(5) as an offering of securities
"that is distinguished from ordinary trading transactions by the magnitude
of the offering and the presence of special selling efforts and selling
methods." Rule 10b-6 makes it unlawful for any person who is
participating in a distribution to bid for or purchase stock of the same
class as is the subject of the distribution. We have also advised the
selling shareholders that Rule 10b-7 under the Exchange Act prohibits any
"stabilizing bid" or "stabilizing purchase" for the purposes of pegging,
fixing or stabilizing the price of our stock in connection with this
offering.
Any of the shares covered by this prospectus which qualify for sale
under Rule 144 of the Securities Act may be sold under that rule rather
than pursuant to this prospectus.
To comply with some states' securities laws, if applicable, the
shares may be offered or sold by the selling shareholders in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the shares may not be offered or sold by the
selling shareholders unless they have been registered or qualified for
sale in such states or an exemption from registration or qualification is
available and is complied with.
Experts
The consolidated financial statements of Kestrel Energy, Inc. as of
June 30, 1999 and 1998, and for each of the years in the three-year period
ended June 30, 1999, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
Legal Matters
The validity of the common stock offered by this prospectus will be
passed upon for us by Gorsuch Kirgis LLP, Denver, Colorado.
