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As filed with the Securities and Exchange Commission on October 28, 1999
Registration No. 333-85057
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
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.
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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: [ ]
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.
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SUBJECT TO COMPLETION DATED OCTOBER 28, 1999
PROSPECTUS
2,600,000 Shares
HARKEN ENERGY CORPORATION
Common Stock
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International Rochester Energy Corp. is offering for sale 2,600,000
shares of common stock of Harken Energy Corporation. Rochester'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 2,600,000 shares of common
stock.
The common stock is traded on the American Stock Exchange, under the
symbol "HEC." On October 26, 1999, the closing sales price of the common stock
was $1.125 per share.
Rochester will receive the purchase price of the shares of common stock
sold less any commissions and underwriters' discounts. Rochester 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.
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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.
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The date of this prospectus is October __, 1999.
The information in this prospectus is not complete and may be changed.
Rochester 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 Rochester are soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
The Company ........................................................... 4
Risk Factors .......................................................... 4
Safe Harbor for Forward-Looking Statements ............................ 10
Where You Can Get More Information .................................... 10
Use of Proceeds ....................................................... 11
Information About Rochester ........................................... 12
Plan of Distribution .................................................. 13
Legal Matters ......................................................... 14
Experts ............................................................... 14
</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 ROCHESTER 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 each of the last five years, including a
loss of $55.8 million for the year ended 1998. Harken has reported cumulative
losses of $66.5 million over the last five years. Harken has also reported a
loss of $4.4 million for the six months ended June 30, 1999. 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
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surrender a significant portion of the acreage relating to the Alcaravan,
Bocachico and Cambulos Contracts. 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, as
amended, 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. Harken may also be required to issue a potentially unlimited
number of shares of its common stock pursuant to three separate Development
Finance Agreements with institutional investors. 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 A POTENTIALLY
UNLIMITED NUMBER OF 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 a potentially unlimited number of 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 $1.125
per share, if the institutional investors elected to convert the net profits
interest into shares of common stock, Harken would be required to issue
approximately 18,936,119 shares of common stock. The institutional investors
will be entitled to receive more shares of Harken common stock as the market
price
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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.
In April and May, 1999, certain institutional investors converted their
net profits interest into approximately 8.9 million shares 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 Forms 10-K, as amended.
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, 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.
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If oil and gas prices decrease 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
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, as amended, 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, as amended, 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
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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 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
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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
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 Forms 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 held
on June 22, 1999;
(4) Amendment No. 1 to Annual Report on Form 10-K for the year ended
December 31, 1998;
(5) Amendment No. 1 to Form 10-Q for the quarter ended March 31, 1999;
(6) Quarterly Report on Form 10Q for the quarter ended June 30, 1999;
(7) Form 8-Ks, filed with the Commission on September 3, 1999 and October
15, 1999; and
(8) 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.
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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 Rochester
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 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, 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 Rochester.
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INFORMATION ABOUT ROCHESTER
This prospectus covers the offer and sale of 2,600,000 shares of common
stock by International Rochester Energy Corp., an Alberta, Canada corporation,
whose common stock is traded on the Toronto Stock Exchange. Harken issued such
shares to Rochester as a result of a transaction that was consummated on July
13, 1999.
Rochester and Harken initially entered into an agreement in September
1996. Rochester paid 1/3 of the cost of the initial well on the Palo Blanco
prospect located on Harken's Alcaravan acreage in Colombia, plus certain others
fees, and received a 25% beneficial interest in the Palo Blanco prospect, plus
rights to participate in other prospects on the Alcaravan Contract and Miradores
Contract acreage. The initial well on the Palo Blanco prospect, the Estero #1,
was successful. In order to develop the Palo Blanco field, Harken drilled a
second well, the Estero #3, and has constructed a 2.3 mile flowline connector to
connect the Palo Blanco field to the existing crude oil pipeline.
The costs to develop the Palo Blanco field have been substantial, and
Rochester's portion of such costs exceeded their cash resources. Harken offered
to purchase or reacquire Rochester's 25% beneficial interest for shares of
Harken's common stock. The number of shares of common stock to be issued to
Rochester was the subject of arms length negotiation between Harken and
Rochester. In making its offer to Rochester, Harken based its offer on the
amount of outstanding debt of Rochester to Harken, the amount of proved reserves
that had been attributed to the Palo Blanco field, and the market price of the
common stock at such time.
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 Rochester, 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 Rochester, or their
transferees or assigns, against liabilities under the Securities Act, or to
contribute to payments Rochester may be required to make.
Other than the interest Rochester held in the Alcaravan and Miradores
Contracts, Rochester 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 Rochester, the number of shares of
common stock which may be offered for sale by Rochester, and the number of
shares of common stock Rochester will own if all of the shares of common stock
held by Rochester are sold. Any or all of the shares listed below may be offered
for sale by Rochester from time to time.
<TABLE>
<CAPTION>
Percent of
Shares Owned Shares Owned Common Stock
Prior to the Shares After the Owned After the
Selling Stockholder Offering Offered Hereby Offering(1) Offering(1)
- -------------------------------------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
International Rochester Energy Corp. 2,600,000 2,600,000 -0- -0-
</TABLE>
- -------------------
(1) Assumes no other disposition or acquisition of common stock and all shares
of common stock are sold.
12
<PAGE> 13
PLAN OF DISTRIBUTION
Harken will not receive any proceeds from the sale of common stock owned
by Rochester. It is anticipated that Rochester 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 Rochester. 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 Rochester or the
purchasers of the 2,600,000 shares of common stock offered in this prospectus
for whom they may act as agent.
The net proceeds to Rochester 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. Rochester 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 Rochester will be sold in one
or more transactions, which may include block 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 or any combination thereof. The sale price
to the public may be the market price prevailing at the time of sale, or a
different price negotiated by Rochester. The shares of common stock may also be
sold pursuant to Rule 144. Rochester 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.
Rochester, alternatively, may sell all or any part of the 2,600,000
shares of common stock offered in this prospectus through an underwriter.
Rochester have not entered into any agreement with a prospective underwriter and
there is no assurance that any such agreement will be entered into. If Rochester
enter into such an agreement, the relevant details will be set forth in a
supplement or revisions to this prospectus.
Rochester and any other 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 Rochester or any other such person. This may affect the marketability of the
shares of common stock.
13
<PAGE> 14
LEGAL MATTERS
The validity of the shares of common stock will be passed upon for Harken
Energy Corporation by Karen S. Bustamante, 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 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.
Certain of Harken's oil and gas reserves in Colombia have been reviewed
by its independent reserve engineers, Gaffney, Cline & Associates, Inc., as
stated in their report thereon. Harken's disclosures of its oil and gas reserves
in Colombia, included in its Form 10-K for the period ending December 31, 1998,
as amended, have been presented in reliance upon the authority of such firm as
experts in petroleum engineering.
Certain aspects and assumptions used in calculating Harken's oil and gas
reserves in the Alcaravan Association Contract area in Colombia have been
reviewed by Ryder Scott Company as stated in their report thereon. Harken's
disclosures of its oil and gas reserves in the Alcaravan Association Contract
area of Colombia, included in its Form 10-K for the period ending December 31,
1998, as amended, have been presented in reliance upon the authority of such
firm as experts in petroleum engineering.
14
<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 $ 1355.25
Printing and Engraving Expenses 2,000.00
Accounting Fees and Expenses 2,000.00
Blue Sky Fees and Expenses 1,000.00
Miscellaneous 644.75
----------
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
*23.1 - Consent of Arthur Andersen LLP.
*23.2 - Consent of Gaffney, Cline & Associates, Inc.
*23.3 - Consent of Ryder Scott Company.
*23.4 - Consent of Karen S. Bustamante (included in opinion filed as
Exhibit 5.1).
+24.1 - Powers of Attorney.
- ----------------------
* Filed herewith.
+ Previously filed.
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;
II-2
<PAGE> 17
(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;
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 October 28th, 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 October 28, 1999
- --------------------------- Executive Officer (Principal
Mikel D. Faulkner Executive Officer)
* President, Chief Financial Officer and October 28, 1999
- --------------------------- Director (Principal Accounting Officer
Bruce N. Huff and Principal Financial Officer)
* Executive Vice President, Chief October 28, 1999
- --------------------------- Operating Officer and Director
Stephen C. voss
* Director October 28, 1999
- ---------------------------
Gary R. Petersen
* Director October 28, 1999
- ---------------------------
Richard H. Schroeder
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C>
* Director October 28, 1999
- ----------------------------
Michael M. Ameen
- ----------------------------
Michael R. Eisenson Director October 28, 1999
* Director October 28, 1999
- ----------------------------
Hobart A. Smith
* Director October 28, 1999
- ----------------------------
Donald W. Raymond
* Director October 28, 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>
Sequentially
Exhibit No. Exhibit Numbered Page
- ------------------- ---------------------------------------------------------------- --------------------
<S> <C> <C>
4.1 Form of certificate representing shares of Harken
common stock, par value $.01 per share (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
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Gaffney, Cline & Associates, Inc.
*23.3 Consent of Ryder Scott Company
*23.4 Consent of Karen S. Bustamante. (included in opinion filed as
Exhibit 5.1).
+24.1 Powers of Attorney.
* Filed herewith.
+ Previously filed.
</TABLE>
<PAGE> 1
Exhibit 5.1
October 28, 1999
Harken Energy Corporation
16285 Park Ten Place
Suite 600
Texas, 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 2,600,000 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.
<PAGE> 2
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 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
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 of our report dated
February 19, 1999, included in Harken Energy Corporation's Form 10-K for the
year ended December 31, 1998, and to all references to our firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
October 28, 1999
<PAGE> 1
EXHIBIT 23.2
[GAFFNEY, CLINE & ASSOCIATES, INC. LETTERHEAD]
GHJ/jk/C368.00/2097 October 28, 1999
Ms. Karen Bustamante
Harken Energy Corporation
16285 Park Ten Place, Suite 600
Houston, Texas 77084
RE: CONSENT OF INDEPENDENT RESERVE ENGINEERS
Dear Ms. Bustamante:
As Harken Energy Corporation's (Harken's) independent reserve engineers,
Gaffney, Cline & Associates, Inc. (GCA) consents to the reference to GCA's
reserve report dated December 31, 1998, as included in Harken's registration
statement Amendment No. 1 to Form S-3.
Very truly yours,
GAFFNEY, CLINE & ASSOCIATES, INC.
/s/ GLENN H. JONES
Glenn H. Jones
CEO
North American Region
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PETROLEUM
ENGINEERS AND GEOLOGISTS
As independent petroleum consultants, Ryder Scott Company, L.P. consents to the
incorporation by reference of our firm's name on this Form S-3 registration
statement for the sale of Harken Energy Corporation common stock.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
October 21, 1999
