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As filed with the Securities and Exchange Commission on May 25, 1999
Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 95-2841597
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
HARKEN ENERGY CORPORATION
16285 PARK TEN PLACE, SUITE 600
HOUSTON, TEXAS 77084
(281) 717-1300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------------
KAREN S. BUSTAMANTE
SENIOR COUNSEL
HARKEN ENERGY CORPORATION
16285 PARK TEN PLACE, SUITE 600
HOUSTON, TEXAS 77084
(281) 717-1300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
----------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:[ ]
---------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering:[ ]
---------------------
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SHARES TO BE AGGREGATE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PRICE PER SECURITY (1) PRICE (1) FEE (1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share 1,316,829 $2.0625 $2,715,959.80 $755.00
- -----------------------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights 1,316,829 Not Applicable Not Applicable -- (2)
=============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low sales
prices of the common stock as reported by the American Stock Exchange on
May 18, 1999.
(2) In accordance with Rule 457(g), no additional registration fee is required
in respect of the Preferred Stock Purchase Rights.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
SUBJECT TO COMPLETION DATED MAY 25, 1999
PROSPECTUS
1,316,829 Shares
HARKEN ENERGY CORPORATION
Common Stock
------------
Crescent International Ltd. is offering for sale 1,316,829 shares of
common stock of Harken Energy Corporation. Crescent International's shares of
common stock being offered for sale include preferred stock purchase rights
attached to the common stock under Harken's Stockholder Rights Plan. Harken will
not receive any of the proceeds from the sale of the Crescent International
shares of common stock.
The common stock is traded on the American Stock Exchange, under the
symbol "HEC." On May 18, 1999, the closing sales price of the common stock was
$2.125 per share.
Crescent International will receive the purchase price of the shares of
common stock sold less any commissions and underwriters' discounts. Crescent
International will be responsible for any commissions or underwriters'
discounts.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER
THE HEADING "RISK FACTORS" BEGINNING ON PAGE 3 PRIOR TO INVESTING IN THE COMMON
STOCK.
------------
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.
------------
The date of this prospectus is May 25, 1999.
The information in this prospectus is not complete and may be changed.
Crescent International may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and neither we nor Crescent
International are soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
The Company..................................................................... 3
Risk Factors.................................................................... 3
Where You Can Get More Information.............................................. 9
Use of Proceeds................................................................. 10
Information About Crescent International........................................ 11
Plan of Distribution............................................................ 12
Legal Matters................................................................... 12
Experts......................................................................... 12
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS PROSPECTUS AND THE
ADDITIONAL INFORMATION DESCRIBED UNDER THE HEADING "WHERE YOU CAN GET MORE
INFORMATION." WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH
DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT
INFORMATION, YOU SHOULD NOT RELY ON IT. NEITHER WE NOR CRESCENT INTERNATIONAL
ARE MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS AND THE ADDITIONAL INFORMATION DESCRIBED UNDER THE HEADING "WHERE YOU
CAN GET MORE INFORMATION" WAS ACCURATE ON THE DATE ON THE FRONT COVER OF THE
PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
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THE COMPANY
Harken explores for, develops and produces oil and gas both domestically
and internationally. Harken's domestic operations are primarily located in the
Four Corners Area of Utah, Arizona and New Mexico, the Gulf Coast of Texas, the
Texas Panhandle, the Magnolia region of Arkansas, the Carlsbad region of New
Mexico and St. Martin and LaFourche Parishes in Louisiana. Harken's
international operations are primarily concentrated in the Republic of Colombia
and the Republic of Costa Rica.
Harken was incorporated in 1973 in the State of California and
reincorporated in 1979 in the State of Delaware. Harken's principal offices are
located at 16285 Park Ten Place, Suite 600, Houston Texas 77084 and its
telephone number is (281) 717-1300.
RISK FACTORS
Prior to making an investment decision, prospective investors should
consider carefully all of the information in this prospectus and should evaluate
the following risk factors.
THE TRADING PRICE OF HARKEN COMMON STOCK MAY BE SIGNIFICANTLY AFFECTED BY THE
RESULTS OF DRILLING ACTIVITY IN COLOMBIA AND COSTA RICA
Harken believes that the price of the common stock may fluctuate
significantly based upon the success or failure of each well that Harken drills
in Colombia and Costa Rica. Based in part on the results of such drilling
activity and on the significant decline in the market price of crude oil, the
market price of Harken's common stock declined significantly in 1998. During
this period, Harken's common stock ranged from a high of $7.38 per share to a
low of $1.56 per share.
HARKEN HAS A HISTORY OF LOSSES AND MAY SUFFER LOSSES IN THE FUTURE
Harken has reported losses in four out of the last five years, including
a loss of $52.456 million for the year ended 1998. Harken has reported
cumulative losses of $62.7 million over the last five years. Harken's ability to
generate net income is strongly affected by the market price of crude oil and
natural gas. If the market price of crude oil and natural gas remains low or
declines, Harken may report additional losses in the future.
HARKEN'S FAILURE TO COMPLY WITH THE TERMS OF ITS COLOMBIAN ASSOCIATION CONTRACTS
MAY RESULT IN THE TERMINATION OF OR LOSS OF RIGHTS UNDER THESE CONTRACTS, WHICH
WOULD NEGATIVELY AFFECT HARKEN'S BUSINESS AND STOCK PRICE
The terms of Harken's Colombian Association Contracts require Harken to
drill a number of wells during 1999. Harken does not currently plan to drill
enough wells in 1999 to satisfy all of its current contractual obligations.
Harken is currently negotiating with Ecopetrol, the Colombian state-owned oil
company, to modify some of its drilling obligations.
If Ecopetrol does not agree to modify the work obligations, and unless
Harken receives an extension of the existing deadlines, Harken will not be in
compliance with the terms of the Association Contracts. If Harken does not
comply with the terms of the Association Contracts, Ecopetrol could terminate
one or more Association Contracts. If Ecopetrol were to terminate one of
Harken's Association Contracts, Harken would lose all of the reserves associated
with the Association Contract and all of its investment in that Association
Contract. If Harken is able to negotiate a modification of the work obligations,
Harken may be required to surrender a significant portion of the acreage
relating to the Alcaravan, Bocachico and Cambulos Contracts.
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If these negotiations are not successful, and unless Harken receives an
extension of the existing deadlines, Harken's business, financial condition and
results of operations, as well as its stock price, may be adversely affected.
For more information on the specific contract terms and obligations, see the
"International Exploration and Development Operations - Colombia" section of
Harken's Annual Report on Form 10-K, which is incorporated by reference in this
prospectus.
HARKEN MAY BE UNABLE TO OBTAIN ADDITIONAL FINANCING FOR ITS INTERNATIONAL
ACTIVITIES, WHICH COULD RESTRICT ITS OPERATIONS
Harken anticipates that full development of its existing and future oil
and gas discoveries in Colombia and Costa Rica will take several years and may
require extensive production and transportation facilities requiring significant
additional capital expenditures. If Harken is unable to timely obtain adequate
funds to finance these investments, it could limit or substantially delay
Harken's ability to develop its oil and gas reserves. In such a case, Harken's
business and results of operations could suffer.
Harken cannot predict the ultimate amount of expenditures for its
international operations. Harken anticipates that amounts required to fund its
international activities, will be funded from its existing cash balances, asset
sales, stock issuances, production payments, operating cash flows and
potentially from industry partners. Harken can not assure you that it will have
adequate funds available to it to fund its international activities.
HARKEN MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK WHICH MAY DILUTE THE VALUE OF
HARKEN COMMON STOCK TO CURRENT STOCKHOLDERS AND MAY ADVERSELY AFFECT THE MARKET
PRICE OF HARKEN'S COMMON STOCK
Harken may be required to issue up to approximately 26 million shares of
common stock as a result of its outstanding warrants, stock options, and
convertible notes. If Harken issues additional shares, it could result in
significant dilution in your ownership position in Harken. In addition, the
issuance of a significant number of additional shares of common stock could have
an adverse effect on the market price of the common stock.
HARKEN'S DEVELOPMENT FINANCE AGREEMENTS MAY REQUIRE IT TO ISSUE ADDITIONAL
SHARES OF ITS COMMON STOCK, WHICH MAY DILUTE THE VALUE OF HARKEN COMMON STOCK TO
CURRENT STOCKHOLDERS AND MAY ADVERSELY AFFECT THE MARKET PRICE OF ITS COMMON
STOCK
Harken has entered into three separate Development Finance Agreements
with institutional investors. These Development Finance Agreements may require
Harken to issue additional shares, which could result in significant dilution in
your ownership position in Harken and may adversely affect the market price of
Harken common stock.
The institutional investors provided funds to Harken to finance the
drilling of three prospects in Colombia, in exchange for a net profits interest
in the prospects. Harken and the institutional investors each have the right to
convert the net profits interest into shares of Harken common stock. The number
of shares of common stock which may be issued upon conversion of the net profits
interest is based upon the market price of the common stock at the time of
conversion. Based upon the current market price of Harken common stock of
$2.0625, if the institutional investors elected to convert the net profits
interest into shares of common stock, Harken would be required to issue
approximately 9.7 million shares of common stock. The institutional investors
will be entitled to receive more shares of Harken common stock as the market
price of Harken common stock falls. There is no ceiling on the number of common
shares the institutional investors can receive upon conversion of their net
profits interest.
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<PAGE> 6
In April and May, 1999, certain institutional investors converted their
net profits interest into approximately 8.9 million shares (including the shares
currently being registered under this Registration Statement) of Harken common
stock. The issuance of these shares will dilute your ownership position in
Harken and may adversely affect the market price of Harken common stock. You can
find additional details regarding the Development Finance Agreements in Harken's
Annual Report on Form 10-K.
HARKEN'S OPERATIONS IN COLOMBIA, COSTA RICA AND OTHER FOREIGN COUNTRIES WILL BE
SUBJECT TO POLITICAL, ECONOMIC AND OTHER UNCERTAINTIES
Harken conducts significant operations in Colombia and Costa Rica, and
will conduct operations in other foreign countries. At December 31, 1998,
approximately 83% of Harken's proved reserves were related to Harken's Colombian
operations. In addition, Harken anticipates focusing substantially all of its
exploratory efforts in the next several years in Colombia and Costa Rica. Harken
may also operate in other countries in the future. Operations in foreign
countries, particularly in the oil and gas business, are subject to political,
economic and other uncertainties, including:
o the risk of war, revolution, border disputes, expropriation,
renegotiation or modification of existing contracts, import,
export and transportation regulations and tariffs;
o taxation policies, including royalty and tax increases and
retroactive tax claims;
o exchange controls, currency fluctuations and other uncertainties
arising out of foreign government sovereignty over Harken's
international operations;
o laws and policies of the United States affecting foreign trade,
taxation and investment; and
o the possibility of having to be subject to the exclusive
jurisdiction of foreign courts in connection with legal disputes
and the possible inability to subject foreign persons to the
jurisdiction of courts in the United States.
Central and South America and other regions of the world have a history
of political and economic instability. This instability could result in new
governments or the adoption of new policies that might assume a substantially
more hostile attitude toward foreign investment. In an extreme case, such a
change could result in termination of contract rights and expropriation of
foreign-owned assets. These uncertainties could adversely affect Harken's
interests.
IF OIL AND GAS PRICES DECREASE FURTHER, HARKEN MAY BE REQUIRED TO TAKE
ADDITIONAL WRITEDOWNS
Harken must periodically review the carrying value of its oil and gas
properties under applicable accounting rules. These rules require a writedown of
the carrying value of oil and gas properties if the carrying value exceeds the
applicable estimated future net revenues.
As a result of the sharp decline in world-wide oil prices experienced
during 1998, at September 30, 1998, Harken recognized a non-cash charge in the
amount of approximately $27 million. Additionally, at December 31, 1998, Harken
recognized an additional non-cash charge in the amount of approximately $23
million.
If oil and gas prices decrease further from price levels at December 31,
1998, Harken could be required to take an additional non-cash charge to earnings
related to the carrying value of its oil and gas properties. Whether Harken will
be required to take such a charge will depend on the prices for oil and gas at
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the end of any quarter and the effect of reserve additions or revisions and
capital expenditures during such quarter.
IF ESTIMATES OF HARKEN'S OIL AND GAS RESERVE INFORMATION ARE INACCURATE,
HARKEN'S FINANCIAL CONDITION MAY SUFFER
Harken's proved oil and gas reserve information described in our Annual
Report on Form 10-K is based upon criteria mandated by the SEC and represents
only estimates. Harken's actual production, revenues and expenditures with
respect to such oil and gas reserves will likely be different from estimates and
the differences may be material. If estimates of oil and gas reserves are
greater than actual amounts, or if actual production costs and expenditures are
greater than estimates, Harken's business, financial condition, and results of
operations may be negatively affected.
Petroleum engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact manner.
Estimates of economically recoverable oil and gas reserves and of future net
cash flows necessarily depend upon a number of variable factors and assumptions.
Because all reserve estimates are to some degree subjective, each of the
following items may differ materially from those assumed in estimating reserves:
o the quantities of oil and gas that are ultimately recovered;
o the production and operating costs incurred;
o the amount and timing of future development expenditures; and
o future oil and gas sales prices.
Furthermore, different reserve engineers may make different estimates of
reserves and cash flows based on the same available data.
The estimated discounted future net cash flows described in our Annual
Report on Form 10-K should not be considered as the current market value of the
estimated oil and gas reserves attributable to Harken's properties from proved
reserves because such estimates are based on prices and costs as of the date of
the estimate, while actual future prices and costs may be materially higher or
lower.
IF THE UNITED STATES IMPOSES ECONOMIC OR TRADE SANCTIONS ON COLOMBIA, HARKEN'S
OPERATIONS IN COLOMBIA MAY BE ADVERSELY AFFECTED
The United States has imposed economic and trade sanction on Colombia in
the past, and may impose sanctions on Colombia in the future. The President of
the United States is required to determine whether foreign countries have
cooperated with the United States to prevent drug trafficking. In 1995, 1996 and
1997, the President determined that Colombia had not taken sufficient steps to
prevent drug trafficking. As a result, the United States imposed economic
sanctions on Colombia, including withholding bilateral economic assistance,
blocking Export-Import Bank and Overseas Private Investment Corporation loans
and political risk insurance, and voting against multilateral assistance to
Colombia in the World Bank and the InterAmerican Development Bank. In 1998, the
President determined that Colombia had taken sufficient steps to prevent drug
trafficking and the economic sanctions were lifted.
If the United States were to impose sanctions on Colombia, it could
affect Harken's ability to obtain the
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financing it needs in order to develop its Colombian properties. The imposition
of sanctions on Colombia could also cause Colombia to retaliate against Harken
by nationalizing Harken's Colombian assets. Accordingly, imposition of the
foregoing economic and trade sanctions on Colombia could materially affect the
performance of Harken's common stock and its long-term financial results. We can
not assure you the United States will not impose sanctions on Colombia in the
future.
HARKEN COULD SUFFER LOSSES FROM EXCHANGE RATE FLUCTUATIONS
Beginning with the fourth quarter of 1998, Harken began accounting for
its Colombian operations using the U.S. dollar as its functional currency. The
costs associated with Harken's exploration efforts in Colombia have typically
been denominated in U.S. dollars. Harken expects that a substantial portion of
its Colombian revenues in 1999 will be denominated in Colombian pesos and a
substantial portion of Harken's future Colombian revenues may be denominated in
Colombian pesos. To the extent that the amount of Harken's revenues denominated
in Colombian pesos is greater than the amount of costs denominated in Colombian
pesos, Harken could suffer a loss if the value of the Colombian peso were to
drop relative to the value of the U.S. dollar, which could have a material
adverse effect on Harken's results of operations.
HARKEN'S OIL AND GAS OPERATIONS IN LESS DEVELOPED OIL AND GAS INDUSTRIES SUCH AS
COLOMBIA AND COSTA RICA INVOLVE SUBSTANTIAL COSTS AND ARE SUBJECT TO VARIOUS
ECONOMIC RISKS
The oil and gas industries in Colombia and Costa Rica are not as
developed as the oil and gas industry in the U.S. As a result, Harken's drilling
and development operations may take longer to complete and may cost more than
similar operations in the U.S.
Harken's oil and gas operations will be subject to the economic risks
typically associated with exploration, development and production activities,
including the necessity of significant expenditures to locate and acquire
producing properties and to drill exploratory wells. In conducting exploration
and development activities, the presence of unanticipated pressure or
irregularities in formations, miscalculations or accidents may cause Harken's
exploration, development and production activities to be unsuccessful. This
could result in a total loss of Harken's investment. In addition, the cost and
timing of drilling, completing and operating wells is often uncertain.
DRILLING OIL AND GAS WELLS IN COLOMBIA AND COSTA RICA COULD BE HINDERED BY
HURRICANES AND OTHER OPERATING RISKS
Harken's operations in Colombia and Costa Rica are subject to risks from
hurricanes. Damage caused by hurricanes or other operating hazards could result
in substantial losses to Harken. The occurrence of such an event that is not
fully covered by insurance could have a material adverse effect on the financial
position and results of operations of Harken.
HARKEN MAY ISSUE SHARES OF PREFERRED STOCK WITH GREATER RIGHTS THAN ITS COMMON
STOCK
Harken is permitted under its charter to issue up to ten million shares
of preferred stock. Harken can issue shares of its preferred stock in one or
more series and can set the terms of the preferred stock without seeking any
further approval from you. Any preferred stock that is issued by Harken may rank
ahead of its common stock in terms of dividend priority, liquidation premiums
and may have greater voting rights than its common stock. Harken does not
currently have any shares of preferred stock outstanding.
FUTURE ACQUISITIONS MAY DILUTE YOUR PERCENTAGE OWNERSHIP IN HARKEN OR REQUIRE
SUBSTANTIAL EXPENDITURES
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Harken's strategic plan includes the acquisition of additional reserves,
including through business combination transactions. Harken may not be able to
consummate future acquisitions on favorable terms. Additionally, future
acquisitions may not achieve favorable financial results.
Future acquisitions may involve the issuance of shares of Harken common
stock, which could have a dilutive effect on the current stockholders of Harken.
Furthermore, acquisitions may require substantial financial expenditures that
will need to be financed through cash flow from operations or future debt and
equity offerings by Harken. Harken may not be able to acquire companies or oil
and gas properties using its equity as currency. In the case of cash
acquisitions, Harken may not be able to generate sufficient cash flow from
operations or obtain debt or equity financing sufficient to fund future
acquisitions of reserves.
HARKEN FACES STRONG COMPETITION FROM LARGER OIL AND GAS COMPANIES
The exploration and production business is highly competitive. Many of
Harken's competitors have substantially larger financial resources, staffs and
facilities than Harken. Harken's competitors in Colombia and Costa Rica include
such major oil and gas companies as Amoco BP, Exxon, Mobil, Texaco, Conoco,
Shell and Arco. These major oil and gas companies are often better positioned to
obtain the rights to exploratory acreage that Harken competes for.
GOVERNMENT AGENCIES IN COLOMBIA AND COSTA RICA CAN INCREASE HARKEN'S COSTS AND
CAN TERMINATE OR SUSPEND OPERATIONS
In Costa Rica and Colombia, the laws governing the oil and gas industry
require Harken to obtain an environmental permit or approval prior to conducting
seismic operations, drilling a well or constructing a pipeline. The process of
obtaining an environmental permit has delayed Harken's operations in the past,
and could do so again in the future. Compliance with these laws and regulations
may increase Harken's costs of operations, as well as further restricting its
activities.
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SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
We believe that certain statements contained or incorporated by reference
in this prospectus are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and are considered prospective.
The following statements are or may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995:
o statements before, after or including the words "may," "will,"
"could," "should," "believe," "expect," "future," "potential,"
"anticipate," "intend," "plan," "estimate" or "continue" or the
negative or other variations of these words; and
o other statements about matters that are not historical facts.
We may be unable to achieve the future results covered by the
forward-looking statements. The statements are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from the
future results that the statements express or imply. See "Risk Factors." Please
do not put undue reliance on these forward-looking statements, which speak only
as of the date of this prospectus.
WHERE YOU CAN GET MORE INFORMATION
Harken files reports, proxy statements, and other information with the
Securities and Exchange Commission. Such reports, proxy statements and other
information concerning Harken can be read and copied at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The SEC maintains an Internet site at http://www.sec.gov that contains reports,
proxy statements and other information regarding issuers that file information
electronically, including Harken. Harken's common stock is listed on the
American Stock Exchange. These reports, proxy statements and other information
can also be read and copied at the offices of the American Stock Exchange at 86
Trinity Place, New York, New York 10006.
The SEC allows Harken to "incorporate by reference" the information it
files with the SEC. This permits Harken to disclose important information to you
by referencing these filed documents. Any information referenced this way is
considered part of this prospectus, and any information filed with the SEC after
the date on the cover of this prospectus will automatically be deemed to update
and supercede this information. Harken incorporates by reference the following
documents which have been filed with the SEC:
(1) Annual Report on Form 10-K for the year ended December 31, 1998;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31,
1999;
(3) Proxy Statement for the Annual Meeting of Stockholders of Harken
to be held on June 22, 1999; and
(4) The description of the common stock contained in Harken's
Registration Statement on Form 8-A, as amended, including all
amendments and reports filed for the purpose of updating such
description; and the description of Harken's Preferred Stock
Purchase Rights as contained in Harken's Registration Statement
on Form 8-A, filed with the Commission on April 7, 1998,
including all amendments and reports filed for the purpose of
updating such description.
Harken also incorporates by reference any future filings made with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until Crescent
International sells all of the shares of common stock.
This prospectus is part of a registration statement filed with the SEC.
This prospectus does not contain
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all the information contained in the registration statement. The full
registration statement can be obtained from the SEC. This prospectus contains a
general description of Harken and the securities being offered for sale. You
should read this prospectus together with the additional information
incorporated by reference.
You can request a copy of any document incorporated by reference in this
prospectus in writing or by phone. Requests for copies should be directed to
Karen S. Bustamante, Esq. Harken Energy Corporation, 16285 Park Ten Place, Suite
600, Houston, Texas 77084 (Telephone: (281) 717-1300). Copies of any document
incorporated by reference, other than exhibits to such documents, unless such
documents are specifically incorporated by reference into the documents that
this prospectus incorporates, will be provided at no cost to you.
USE OF PROCEEDS
Harken will not receive any part of the proceeds from the sale of shares
of common stock by Crescent International.
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INFORMATION ABOUT CRESCENT INTERNATIONAL
This prospectus covers the offer and sale of 1,316,829 shares of common
stock by Crescent International. The 1,316,829 shares of common stock were
issued to Crescent International when Crescent International converted a net
profits interest it held in three of Harken's Colombian prospects. In March
1998, Harken and Crescent International entered into a Development Finance
Agreement. Under the Development Finance Agreement, Crescent International
initially provided $3 million to Harken in exchange for the net profits
interest. The Development Finance Agreement gave Crescent International the
right to convert the net profits interest into shares of Harken common stock. In
April 1999, Crescent International elected to convert the net profits interest
into 1,316,829 shares of Harken common stock.
Harken has agreed to file a "shelf" registration statement with the SEC
pursuant to Rule 415 under the Securities Act covering the sale of shares of
common stock held by Crescent International, and to use its reasonable best
efforts to maintain the effectiveness of any such registration statement for no
less than one year from the date of effectiveness of such registration
statement. In addition, Harken has agreed to bear certain expenses of
registration of the shares of common stock under the federal and state
securities laws (currently estimated to be $7,000). Harken has also agreed to
indemnify Crescent International, or their transferees or assigns, against
liabilities under the Securities Act, or to contribute to payments Crescent
International may be required to make.
Other that the net profits interest Crescent International held, Crescent
International has not had any position, office or other material relationship
with Harken in the last three years. The chart below describes the number of
shares of common stock owned by Crescent International, the number of shares of
common stock which may be offered for sale by Crescent International, and the
number of shares of common stock Crescent International will own if all of the
shares of common stock held by Crescent International are sold. Any or all of
the shares listed below may be offered for sale by Crescent International from
time to time.
<TABLE>
<CAPTION>
Percent of
Common
Shares Shares Stock
Owned Prior Shares Owned Owned After
to the Offered After the the
Selling Stockholder Offering Hereby Offering(1) Offering(1)
- ---------------------------------------- ---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Crescent International S.A. 1,316,829 1,316,829 -0- -0-
</TABLE>
- -------------------
(1) Assumes no other disposition or acquisition of common stock and all shares
of common stock are sold.
11
<PAGE> 13
PLAN OF DISTRIBUTION
Harken will not receive any proceeds from the sale of common stock owned
by Crescent International. It is anticipated that Crescent International will
offer the shares of common stock for sale from time to time, directly or through
broker-dealers or underwriters who may act solely as agents or may acquire the
shares of common stock as principals, in all cases as designated by Crescent
International. Such underwriters or broker-dealers acting either as principal or
as agent, may receive compensation in the form of usual and customary or
specifically negotiated underwriting discounts, concessions or commissions from
Crescent International or the purchasers of the 1,316,829 shares of common stock
offered in this prospectus for whom they may act as agent.
The net proceeds to Crescent International from the sale of common stock
will be the purchase price of the common stock sold less the aggregate agents'
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne by Harken. Crescent International and any dealers or
agents that participate in the distribution of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act.
At any time a particular offer of common stock is made, and if required
by SEC rules and regulations, the specific shares of common stock to be sold,
the purchase price, public offering price, the names of any such agent, dealer
or underwriter and any commission or discount with will be described in an
accompanying prospectus supplement. The prospectus supplement may be in the form
of a post-effective amendment to the Registration Statement of which this
prospectus is a part, and will be filed with the SEC.
The shares of common stock being offered by Crescent International, will
be sold in one or more transactions on the American Stock Exchange or on any
other market on which the common stock may be trading, in privately-negotiated
transactions, through the writing of options on the shares of common stock,
short sales. The sale price to the public may be the market price prevailing at
the time of sale, or a different price negotiated by Crescent International. The
shares of common stock may also be sold pursuant to Rule 144. Crescent
International shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares of common stock if they deem the
purchase price to be unsatisfactory.
Crescent International, alternatively, may sell all or any part of the
1,316,829 shares of common stock offered in this prospectus through an
underwriter. Crescent International has not entered into any agreement with a
prospective underwriter and there is no assurance that any such agreement will
be entered into. If Crescent International enters into such an agreement, the
relevant details will be set forth in a supplement or revisions to this
prospectus.
Crescent International and any others persons participating in the sale
or distribution of the shares of common stock will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
passed by the SEC, may limit the timing of purchases and sales of any of the
shares of common stock by Crescent International or any other such person. This
may affect the marketability of the shares of common stock.
LEGAL MATTERS
The validity of the shares of common stock will be passed upon for Harken
by Karen S. Bustamante, Esq., Senior Counsel of Harken.
EXPERTS
Arthur Andersen LLP has audited Harken's financial statements. Arthur
Andersen LLP are independent public accountants. Harken's financial statements,
and Arthur Andersen LLP's report on the
12
<PAGE> 14
financial statements are included in Harken's Annual Report on Form 10-K for the
year ended December 31, 1998, and have been incorporated by reference in this
prospectus.
13
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by Harken in connection with the offering
described in this Registration Statement are estimated as follows:
<TABLE>
<S> <C>
Commission Registration Fee................ $ 755.00
Printing and Engraving Expenses............ $2,000.00
Accounting Fees and Expenses............... $2,000.00
Blue Sky Fees and Expenses................. $1,000.00
Miscellaneous.............................. $1,245.00
---------
Total.......................... $7,000.00
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of Delaware
("Delaware Law"), a Delaware corporation may indemnify its directors, officers,
employees and agents against expenses (including attorneys fees), judgments,
fines and settlements in nonderivative suits, actually and reasonably incurred
by them in connection with the defense of any action, suit or proceeding in
which they or any of them were or are made parties or are threatened to be made
parties by reason of their serving or having served in such capacity. Delaware
law, however provides that such person must have acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and in the case of a criminal action, such person must have had
no reasonable cause to believe his or her conduct was unlawful. Section 145
further provides that in connection with the defense or settlement of any action
by or in the right of the corporation, a Delaware corporation may indemnify its
directors and officers against expenses actually and reasonably incurred by them
if, in connection with the matters in issue, they acted in good faith, in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification may be made with respect to any
claim, issue or matter as to which such person has been adjudged liable for
negligence or misconduct unless the Court of Chancery or the court in which such
action or suit is brought approves such indemnification. Section 145 further
permits a Delaware corporation to grant its directors and officers additional
rights of indemnification through bylaw provisions and otherwise, and to
purchase indemnity insurance on behalf of its directors and officers.
Indemnification is mandatory to the extent a claim, issue or matter has been
successfully defended.
Article Ten of Harken's Certificate of Incorporation and Article VII of
Harken's bylaws provide, in general, that Harken shall indemnify its directors
and officers under certain of the circumstances defined in Section 145. Harken
has entered into agreements with each member of its Board of Directors pursuant
to which it will advance to each director costs of litigation in accordance with
the indemnification provisions of Harken's Certificate of Incorporation and
bylaws.
II-1
<PAGE> 16
ITEM 16. EXHIBITS.
4.1 - Form of certificate representing shares of common
stock (filed as Exhibit 1 to Harken's Registration
Statement on Form 8-A, File No. 0-9207, and
incorporated by reference herein).
4.2 - Rights Plan dated as of April 6, 1998, by and between
Harken Energy Corporation and ChaseMellon Shareholder
Services L.L.C. (filed as Exhibit 4 to Harken's Current
Report on Form 8-K dated April 7, 1998, file No.
0-9207, and incorporated by reference herein).
4.3 - Certificate of Designations of Series E Junior
Participating Preferred Stock (filed as Exhibit B to
Exhibit 4 to Harken's Current Report on Form 8-K dated
April 7, 1998, file No. 0-9207, and incorporated by
reference herein).
*5.1 - Opinion of Karen S. Bustamante, Esq.
23.1 - Consent of Arthur Andersen LLP (to be filed by
amendment).
*23.2 - Consent of Karen S. Bustamante, Esq. (included in
opinion filed as Exhibit 5.1).
*24.1 - Powers of Attorney.
- --------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereto) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
II-2
<PAGE> 17
provided, however, that paragraphs (i) and (ii) above do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on May 19, 1999.
HARKEN ENERGY CORPORATION
*
--------------------------------------------------
Mikel D. Faulkner, Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------- ----------------------------------------- -------------
<S> <C> <C>
* Chairman of the Board and Chief May 25, 1999
- ----------------------------------- Executive Officer (Principal
Mikel D. Faulkner Executive Officer)
* Vice Chairman and Director May 25, 1999
- -----------------------------------
Richard H. Schroeder
* President, Chief Financial Officer May 25, 1999
- ----------------------------------- and Director (Principal Accounting
Bruce N. Huff Officer and Principal Financial
Officer)
* Executive Vice President, Chief May 25, 1999
- ----------------------------------- Operating Officer and Director
Stephen C. Voss
* Director May 25, 1999
- ----------------------------------
Gary R. Petersen
</TABLE>
II-4
<PAGE> 19
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------- ----------------------------------------- -------------
<S> <C> <C>
* Director May 25, 1999
- ----------------------------------
Michael M. Ameen, Jr.
Director May 25, 1999
Michael R. Eisenson
* Director May 25, 1999
- ----------------------------------
Hobart A. Smith
* Director May 25, 1999
- ----------------------------------
Donald W. Raymond
Director May 25, 1999
Gary B. Wood
</TABLE>
*Karen S. Bustamante, by signing her name hereto, does hereby sign this
Registration Statement on behalf of Harken Energy Corporation and each of the
above-named officers and directors of such Company pursuant to powers of
attorney, executed on behalf of Harken and each officer and director.
/s/ Karen S. Bustamante
- ----------------------------------
Karen S. Bustamante
Attorney-in-Fact
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ------------------ ------------------------------------------------------
<S> <C>
4.1 Form of certificate representing shares of common
stock (filed as Exhibit 1 to Harken's Registration
Statement on Form 8-A, File No. 0-9207, and
incorporated by reference herein).
4.2 Rights Plan dated as of April 6, 1998, by and between
Harken Energy Corporation and ChaseMellon Shareholder
Services L.L.C. (filed as Exhibit 4 to Harken's Current
Report on Form 8-K dated April 7, 1998, file No.
0-9207, and incorporated by reference herein).
4.3 Certificate of Designations of Series E Junior
Participating Preferred Stock (filed as Exhibit B to
Exhibit 4 to Harken's Current Report on Form 8-K dated
April 7, 1998, file No. 0-9207, and incorporated by
reference herein).
*5.1 Opinion of Karen S. Bustamante, Esq.
23.1 Consent of Arthur Andersen LLP (to be filed by amendment).
*23.2 Consent of Karen S. Bustamante, Esq. (included in
opinion filed as Exhibit 5.1).
*24.1 Powers of Attorney.
</TABLE>
<PAGE> 1
Exhibit 5.1
May 25, 1999
Harken Energy Corporation
16285 Park Ten Place
Suite 600
Houston, TX 77084
Re: Registration Statement on Form S-3
Gentlemen:
I have acted as counsel to Harken Energy Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offer and sale of an
aggregate of 1,316,829 shares (the "Shares") of common stock, $.01 par value per
share, of the Company ("common stock") pursuant to a Registration Statement on
Form S-3 of the Company (the "Registration Statement") to which this opinion
letter is an exhibit.
In reaching the opinion set forth herein, I have reviewed (a) the
Registration Statement, (b) the Certificate of Incorporation of the Company, as
amended, (c) the Bylaws of the Company, (d) records of proceedings of the Board
of Directors and the stockholders of the Company and (e) except as set forth
below, such other agreements, certificates of public officials and officers of
the Company, records, documents and matters of law that I deemed relevant.
Based on and subject to the foregoing and subject further to the
assumptions, exceptions and qualifications hereinafter stated, I am of the
opinion that, subject to compliance with federal and state securities laws (as
to which I express no opinion), the Shares have been duly authorized and validly
issued and are fully paid and nonassessable.
The opinion expressed above is subject in all respects to the following
assumptions, exceptions and qualifications:
a. I have assumed that (i) all signatures on all documents examined
by me are genuine, (ii) all documents submitted to me as originals
are accurate and complete, (iii) all documents submitted to me as
copies are true and correct copies of the originals thereof, (iv)
all information submitted to me is accurate and complete as of the
date hereof, and (v) all persons executing and delivering
documents reviewed by me were competent to execute and to deliver
such documents.
b. I have assumed that there are no agreements, indentures,
mortgages, deeds of trust or instruments that affect the ability
of the Company to issue the Shares.
The opinions expressed above are limited to the laws of the State of
Texas, the General Corporation Law of the State of Delaware and the federal laws
of the United States of America.
This opinion letter may be filed as an exhibit to the Registration
Statement. In giving this consent, I do not thereby admit that I come into the
category of persons whose consent is required under Section 7 of the
<PAGE> 2
Act or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
I disclaim any duty to advise you regarding any changes in, or to
otherwise communicate with you with respect to, the matters addressed herein.
Very truly yours,
/s/ Karen S. Bustamante
Karen S. Bustamante, Esq.
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Mikel D. Faulkner, Bruce N. Huff, Larry E. Cummings and Karen S.
Bustamante or any of them (with full power of each of them to act alone), his
true and lawful attorney-in-fact and agent, with full power of substitution, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file a Registration Statement on Form S-3 under
the Securities Act of 1933, as amended, and any or all amendments (including
without limitation, post-effective amendments and any amendment or amendments
increasing the amount of securities for which registration is being sought),
with all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission and/or any regulatory
authority relating to the registration of 1,316,829 shares of Common Stock,
$0.01 par value, of Harken Energy Corporation and such additional shares of
Common Stock as the holders of "piggy-back" registration rights may request to
be included in such registration statement, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises in order to effectuate the same, as fully and to all intents and
purposes as he himself might or could do if personally present, hereby ratifying
and confirming all that the said attorneys-in-fact and agents, or any of them,
or their substitute or substitutes, may lawfully do or cause to be done.
IN WITNESS WHEREOF, this Power of Attorney has been signed by the following
persons in the capacities indicated as of the 20th day of May, 1999.
NAME CAPACITIES
/s/ Mikel D. Faulkner Chairman of the Board, Director and
--------------------------- Chief Executive Officer
Mikel D. Faulkner (Principal Executive Officer)
/s/ Bruce N. Huff President, Chief Financial Officer and
--------------------------- Director (Principal Accounting Officer and
Bruce N. Huff Principal Financial Officer)
/s/ Richard H. Schroeder Vice Chairman and Director
---------------------------
Richard H. Schroeder
<PAGE> 2
POWER OF ATTORNEY
May 20, 1999
Page 2
NAME CAPACITIES
/s/ Stephen C. Voss Executive Vice President, Chief Operating
--------------------------- Officer and Director
Stephen C. Voss
/s/ Gary R. Petersen Director
---------------------------
Gary R. Petersen
/s/ Michael M. Ameen, Jr. Director
---------------------------
Michael M. Ameen, Jr.
Director
---------------------------
Michael R. Eisenson
/s/ Hobart A. Smith Director
---------------------------
Hobart A. Smith
/s/ Donald W. Raymond Director
---------------------------
Donald W. Raymond
Director
---------------------------
Gary B. Wood
