U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the Quarterly Period Ended September 30, 1997
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from __________ to _________
Commission file number 0-10006
AMERICAN RIVERS OIL COMPANY
---------------------------
(Exact name of small business issuer as specified in its charter)
Wyoming 84-0839926
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 East Ninth Avenue, Suite 106, Denver, CO 80203
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(303) 832-1117
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding as of November 10, 1997 of the issuer's $.01
par value Common Stock and $.01 par value Class B Common Stock were 3,615,770
and 7,267,820, respectively.
Transitional Small Business Disclosure Format
(Check one):
Yes No X
--- ---
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
ASSETS
Current Assets:
Cash $ 272
Oil and gas sales receivable 103,905
Prepaid expenses and other 8,648
-----------
Total current assets 112,825
Oil and Gas Properties, at cost, using successful efforts method:
Proved properties 1,962,984
Less accumulated depreciation, depletion and amortization (270,577)
-----------
Net oil and gas properties 1,692,407
Other Assets 1,465
------------
$ 1,806,697
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable, bank $ 767,475
Payable to Class B stockholder 81,768
Current maturities of long-term debt 6,500
Accounts payable and accrued expenses 177,583
-----------
Total current liabilities 1,033,326
Long-Term Debt, less current maturities 82,279
Stockholders' Equity:
Preferred stock, $.50 par value; 5,000,000 shares
authorized; no shares issued --
Common stock, $.01 par value; 20,000,000 shares
authorized; 4,713,004 issued 47,130
Class B common stock, $.01 par value; 8,000,000 shares
authorized; 7,267,820 issued and outstanding 72,678
Additional paid-in capital 6,193,893
Accumulated deficit (3,892,867)
Less treasury stock, at cost, 1,097,234 of common shares (1,729,742)
-----------
Total stockholders' equity 691,092
-----------
$ 1,806,697
===========
See accompanying notes to these consolidated financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
REVENUE:
<S> <C> <C> <C> <C>
Oil and gas sales $ 160,735 $ 153,048 $ 347,822 $ 319,566
Operator fees 1,000 1,500 2,500 3,000
----------- ----------- ----------- -----------
Total revenue 161,735 154,548 350,322 322,566
EXPENSES:
Oil and gas production costs 105,696 105,692 216,269 178,656
Exploration costs 1,000 -- 4,127 --
General and administrative 98,211 116,388 242,924 244,451
Depreciation, depletion and amortization 38,000 27,000 62,000 61,000
Provision for impairment of oil and gas
properties 2,275,440 -- 2,275,440 --
----------- ----------- ----------- -----------
Total expenses 2,518,347 249,080 2,800,760 484,107
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (2,356,612) (94,532) (2,450,438) (161,541)
OTHER EXPENSES:
Equity in loss of Bishop Capital Corporation -- 124,258 95,263 233,427
Interest expense 23,447 17,871 47,962 27,045
----------- ----------- ----------- -----------
23,447 142,129 143,225 260,472
LOSS BEFORE INCOME TAXES (2,380,059) (236,661) (2,593,663) (422,013)
DEFERRED INCOME TAX BENEFIT 188,100 88,000 232,000 156,000
----------- ----------- ----------- -----------
NET LOSS $(2,191,959) $ (148,661) $(2,361,663 $ (266,013)
=========== =========== =========== ===========
NET LOSS PER SHARE:
Common stock $ (.20) $ (.03) $ (.23) $ (.06)
=========== =========== =========== ===========
Class B common stock $ (.20) $ (.01) $ (.21) $ (.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Common stock 3,615,770 2,890,765 3,615,245 2,871,374
=========== =========== =========== ===========
Class B Common stock 7,267,820 7,267,820 7,267,820 7,267,820
=========== =========== =========== ===========
See accompanying notes to these consolidated financial statements.
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30,
----------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(2,361,663) $ (266,013)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation, depletion and amortization 62,000 61,000
Provision for impairment of oil and gas properties 2,275,440 --
Equity in loss of Bishop Capital Corporation 95,263 233,427
Deferred income tax benefit (232,000) (156,000)
Issuance of treasury shares for services 5,000 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Oil and gas sales receivable 10,259 (32,819)
Other assets 12,051 (13,692)
Increase (decrease) in:
Payable to Class B shareholder 28,268 6,236
Payable to Bishop Capital Corporation -- (4,509)
Accounts payable and accrued expenses 60,888 (53,323)
----------- -----------
Net cash used in operating activities (44,494) (225,693)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition and development costs for oil and gas properties (148,347) (26,494)
Proceeds from sale of oil and gas properties 18,148 28,055
----------- -----------
Net cash provided by (used in) investing activities (130,199) 1,561
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 53,500 242,124
Principal payments on borrowings (8,002) (17,522)
Proceeds from private placement of common stock -- 75,000
Private placement offering costs (6,800) (5,000)
----------- -----------
Net cash provided by financing activities 38,698 294,602
----------- -----------
Increase (decrease) in cash (135,995) 70,470
Cash, beginning of period 136,267 275
----------- -----------
Cash, end of period $ 272 $ 70,745
=========== ===========
-4-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Six Months Ended
September 30,
--------------------------------
1997 1996
---------- ----------
Supplemental Information:
<S> <C> <C>
Cash paid for interest $ 47,598 $ 19,501
========== ==========
Supplemental Disclosure of Noncash Investing and Financing
Activities:
Debt incurred for acquisition of oil and gas properties $ 12,425 $ 578,700
Spin-off of Bishop Capital Corporation to Common
stockholders 1,595,190 --
Exchange of receivable for interest in
oil and gas property 22,500 --
See accompanying notes to these consolidated financial statements.
-5-
</TABLE>
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, all adjustments, consisting of normal
recurring accruals, have been made which are necessary for a fair
presentation of the financial position of the Company at September 30, 1997
and the results of operations and cash flows for the three and six month
periods ended September 30, 1997 and 1996. Quarterly results are not
necessarily indicative of expected annual results because of the impact of
fluctuations in prices received for oil and natural gas and other factors.
For a more complete understanding of the Company's operations and financial
position, reference is made to the consolidated financial statements of the
Company, and related notes thereto, filed with the Company's annual report
on Form 10-KSB for the year ended March 31, 1997, previously filed with the
Securities and Exchange Commission.
Certain reclassifications have been made to the 1996 financial statements
to conform to the presentation in 1997. The reclassifications had no effect
on the 1996 net loss.
2. Spin-off of Bishop Capital Corporation
In November 1996, the Company's Board of Directors agreed to a pro rata
distribution of the outstanding common stock of Bishop Capital Corporation
("Bishop"). The Company's common stockholders of record on November 18,
1996 were entitled to the distribution of Bishop's shares which occurred on
June 20, 1997. The Class B common stockholders did not participate in the
distribution. Accordingly, the consolidated statements of operations for
the six months ended September 30, 1997 only include the Company's equity
in the loss of Bishop for the period from April 1, 1997 through June 20,
1997.
3. Note Payable
The Company has a line-of-credit with a bank which provides for interest at
the prime rate plus 1% (9.5% at September 30, 1997). Borrowings under the
line-of-credit are collateralized by producing oil and gas properties. The
Company is negotiating with the bank to extend the maturity date of the
line-of-credit which was due and payable on September 13, 1997. Subsequent
to September 30, 1997, the Company made a $250,000 principal payment on the
line-of-credit.
4. Net Loss Per Share
The computation of net loss per share is based on the rights of each class
of common stock. The Class B common stock was not entitled to participate
in any distribution of Bishop's shares which occurred on June 20, 1997.
Accordingly, the common shares were allocated 100% of Bishop's loss through
June 20, 1997 and a pro rata percentage of the remaining
-6-
<PAGE>
AMERICAN RIVERS OIL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
consolidated loss based on the ratio of common shares outstanding to total
common and Class B shares outstanding. The Class B common shares were
allocated the remaining pro rata percentage of the loss.
5. Payable to Class B Stockholder
The payable to Class B stockholder includes borrowings since April 1, 1997,
of $53,500 of which $33,500 was repaid subsequent to September 30, 1997.
The Company also entered into two transactions to purchase additional
interests in oil and gas properties owned by the Class B stockholder in
exchange for cash of $26,500, an exchange of a $22,500 receivable due from
the Class B stockholder and a $25,000 non-interest bearing note for
equipment payable upon sale of the property or abandonment of the lease.
The note was recorded at the present value of $12,425 based on a discount
factor of 15% over the expected life of the well.
6. Impairment of Oil and Gas Properties
The Company's proved oil and gas reserve estimates were re-evaluated as of
September 30, 1997 using updated well and reservoir engineering data. Based
on this information and other factors, the Company's estimated proved
reserves on a BOE (barrel of oil equivalent) basis decreased from 2,119,000
BOE at March 31, 1997 to 429,000 BOE at September 30, 1997 (after giving
effect to the sale of the Lake Hatch oil and gas property discussed in Note
7). As a result of the re-evaluation of the proved reserves and other
factors, an impairment loss of $2,275,440 was recorded to reflect the fair
value of the oil and gas properties at September 30, 1997.
7. Subsequent Event
Subsequent to September 30, 1997, the Company sold its Lake Hatch oil and
gas property for net proceeds of $418,000 of which $250,000 was used for
principal reduction on the bank line-of-credit. The Company realized a net
gain of approximately $87,000 on the sale.
-7-
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements and notes thereto.
Forward-Looking Statements
- --------------------------
The Company believes that this report contains certain forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements containing the words "believes,"
"anticipates," "estimates," "expects," "may" and words of similar import, or
statements of management's opinion. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
Results of Operations
- ---------------------
Three Months Ended September 30, 1997 Compared to 1996
------------------------------------------------------
The Company's oil and gas sales revenue increased by $8,000 or 5% in the quarter
ended September 30, 1997 compared to the corresponding quarter in 1996. The
production volume for oil increased 29% while the natural gas production volume
decreased 2% in the current quarter compared to the corresponding quarter in
1996. The average sales price of oil decreased 13% and the average sales price
of natural gas was comparable for the quarter ended September 30, 1997 compared
to the corresponding quarter in 1996.
The production volumes and average sales prices during the periods were as
follows:
Three Months Ended
September 30,
------------------
1997 1996
------ ------
Oil production (barrels) 5,015 3,893
Average sales price per barrel $17.56 $20.27
Natural gas production (mcf) 47,958 48,830
Average sales price per mcf $ 1.52 $ 1.52
-8-
<PAGE>
Oil and gas production costs were comparable in the quarter ended September 30,
1997 compared to the corresponding quarter in 1996. On a BOE basis (BOE means
barrel of oil equivalent, using a conversion ratio of six mcf of natural gas to
one barrel of oil), production costs per BOE were $8.13 compared to $8.78 for
the comparable quarter of 1996. The 7% BOE decrease in the current quarter is
due to fixed components of oil and gas production expense being allocated over a
larger production base.
General and administrative expenses decreased by $18,000 or 16% for the quarter
ended September 30, 1997 compared to the corresponding quarter in 1996 and is
due primarily to decreases in consulting and accounting fees.
Depreciation, depletion and amortization expense increased by $11,000 or 41% in
the current quarter compared to the corresponding quarter in 1996 due to
increased production volume combined with the write-down of the amortizable cost
base and a decrease in the estimated proved reserves.
The provision for impairment of oil and gas properties of $2,275,440 in the
current quarter resulted from management analyzing and evaluating the loss of
proved undeveloped reserves resulting from the unsuccessful drilling of the
Sparkle #2 development well and re-engineering the producing properties with
current operating data.
Since the distribution of Bishop Capital Corporation shares related to the
spin-off was completed in June 1997, the operations of Bishop subsequent to the
distribution date are no longer included in the Company's consolidated statement
of operations.
Interest expense increased by $6,000 or 31% for the current quarter of 1997 over
the corresponding quarter of 1996 due to a higher average amount of debt
outstanding.
Six Months Ended September 30, 1997 Compared to 1996
----------------------------------------------------
The Company's oil and gas sales revenue increased by $28,000 or 9% for the six
months ended September 30, 1997 compared to the corresponding period in 1996.
Production volumes for oil and natural gas increased 25% and 7% respectively in
the current period compared to the corresponding period in 1996. The average
sales price of oil decreased 12% and the average sales price of natural gas
increased by 1% in the six month period ended September 30, 1997 compared to the
corresponding period in 1996.
-9-
<PAGE>
The production volumes and average sales prices during the periods were as
follows:
Six Months Ended
September 30,
--------------------
1997 1996
------- -------
Oil production (barrels) 10,427 8,312
Average sales price per barrel $17.97 $20.41
Natural gas production (mcf) 100,115 93,936
Average sales price per mcf $ 1.60 $ 1.59
Oil and gas production costs increased $38,000 or 21% in the six months ended
September 30, 1997 compared to the corresponding period in 1996 due to increased
production as well as $5,000 for repairs on the Ohio River #1 gas stripping
plant and $5,700 on the reworking of the Lake Hatch salt water disposal well.
Production costs per BOE for the six months ended September 30, 1997 were $7.98
(including $.39 per BOE for the Ohio River #1 and Lake Hatch repair costs)
compared to $7.38 for the comparable period in 1996.
General and administrative expenses remained comparable between the six months
ended September 30, 1997 and the corresponding period in 1996.
Depreciation, depletion and amortization expense in the current six month period
was comparable to the 1996 period.
The provision for impairment of oil and gas properties of $2,275,440 in the
current six month period resulted from management analyzing and evaluating the
loss of proved undeveloped reserves resulting from the unsuccessful drilling of
the Sparkle #2 development well and re-engineering of producing properties with
current operating data.
The equity in loss of Bishop decreased by $138,000 or 59% in the current six
month period compared to the corresponding period in 1996 due to the
distribution in June 1997 of Bishop's shares related to the spin-off.
Interest expense increased by $21,000 or 77% for the six months ended September
30, 1997 over the corresponding period in 1996 due to a higher average amount of
debt outstanding.
FINANCIAL CONDITION
At September 30, 1997, the Company had a working capital deficit of $921,000.
As a result of the Lake Hatch property sale in October 1997 in which a net gain
of approximately $87,000 was realized, the Company's future net cash flow from
oil and gas operations will decrease approximately $3,800 per month. The Company
also made a $250,000 principal reduction on the bank line of credit from the net
proceeds of $418,000 received from the sale.
-10-
<PAGE>
The following summary table reflects the Company's cash flows for the six months
ended September 30, 1997 and 1996:
Six Months Ended
September 30,
---------------------
1997 1996
---- ----
Net cash used in operating activities $ (44,000) $(226,000)
Net cash provided by (used in) investing activities (130,000) 2,000
Net cash provided by financing activities 39,000 295,000
Net cash used in operating activities decreased to $44,000 for the six months
ended September 30, 1997 compared to $226,000 for the six months ended September
30, 1996 due primarily to an increase in accounts payable in the 1997 period as
compared to a decrease in accounts payable during the 1996 period.
Net cash used in investing activities of $130,000 for the six months ended
September 30, 1997 resulted from the unsuccessful drilling of the Sparkle #2
development well for $110,000 and the acquisition of additional working
interests in the Ohio River #1 and Sparkle #1 from a major Class B stockholder
offset by sales of DJ Basin wells to unrelated third parties. Net cash provided
by investing activities of $2,000 for the six months ended September 30, 1996
resulted from sales of DJ Basin wells to unrelated third parties offset by
capital expenditures on the Ohio River #1 and DJ Basin wells.
Net cash provided by financing activities of $39,000 for the six months ended
September 30, 1997 resulted from borrowings of $53,500 from a major Class B
shareholder offset by principal payments on borrowings of $8,000 and Nasdaq
listing fees of $7,000 for the issuance of additional shares relating to the
private placement. Net cash provided by financing activities of $295,000 for the
six months ended September 30, 1996 resulted from borrowings of $125,000 from a
bank, $100,000 from Bishop Capital Corporation and $17,000 from a major Class B
stockholder offset by principal payments on borrowings of $17,500. In addition,
the Company received net proceeds of $70,000 from the private placement of
common stock.
General
Based upon the poor results of the drilling of the Company's River Prospects,
the Board has decided to shift the emphasis of the Company from drilling its
River Prospects to the acquisition of producing assets with a view to growing
the Company based on less risky operations. To accomplish its goal, the Company
hired a new President, Mr. Rick Westerberg, a Petroleum Engineer graduate from
the Colorado School of Mines with substantial oil and gas property acquisition
experience effective October 1, 1997. Karlton Terry, the former President,
resigned from that post and will continue as Chairman of the Company. In
connection with the hiring of the new President, Karlton Terry and Jubal Terry
have agreed to certain salary reductions effective January 1, 1998 as well as
elimination of certain other Company paid benefits.
A comprehensive review of the Company reserves was conducted by management as a
result of unsuccessful drilling results (i.e. Sparkle #2 well) and the last six
months operating history on the Company's producing properties. The results of
the updated reserve evaluation are as follows:
-11-
<PAGE>
<TABLE>
<CAPTION>
Proved Developed Proved Undeveloped
Reserves As Of Reserves As Of
------------------------------------ ------------------------------------
3/31/97 9/30/97 Reduction 3/31/97 9/30/97 Reduction
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gas (mcf) 3,250,000 1,452,000 (1,798,000) 1,293,000 386,000 (907,000)
Oil (bbls) 368,000 115,000 (253,000) 993,000 7,000 (986,000)
BOE basis 910,000 357,000 (553,000) 1,209,000 72,000 (1,137,000)
</TABLE>
On a BOE equivalent basis, there was a 56% reduction (net of 5% from current six
months production) in proved developed reserves of which 22% was attributable to
the sale of the Lake Hatch property in October 1997, 21% from the loss of the
Bayou Chauvin lease and 13% from re-engineering the properties with six months
of additional production history (i.e., expenses and production decline rate
data).
On a BOE equivalent basis, there was a 94% reduction in proved and undeveloped
reserves of which 82% was attributed to the unsuccessful Sparkle #2 development
well on the Diamond Island River Prospect under the Ohio River in Henderson
County, Kentucky. The remaining 12% reduction was attributed to re-engineering
the projected total recoverable reserves of the undrilled acreage on the
Sistersville Prospect in West Virginia.
As a result of the re-evaluation of the proved reserves and other factors,
management reviewed the recoverability of the carrying amount of the properties
and recorded an impairment loss of $2,275,440 to reflect the fair value of the
oil and gas properties at September 30, 1997.
Although some viable River Lease prospects remain, management believes a shift
to a strategy focusing on acquisitions will create value and enhance the
liquidity of the Company's common stock. Accordingly, management is reviewing
and identifying quality producing oil and gas properties for potential
acquisition and examining alternative sources of long-term capital.
Many of the factors which may affect the Company's future operating performance
and long-term liquidity are beyond the Company's control, including, but not
limited to, oil and natural gas prices, the availability and attractiveness of
properties for acquisition, the adequacy and attractiveness of financing and
operational results. The Company is examining alternative sources of long-term
capital, including bank borrowings, the issuance of debt instruments and the
sale of equity securities of the Company. Availability of these sources of
capital and, therefore, the Company's ability to execute its operating strategy
will depend upon a number of factors, some of which are beyond the control of
the Company.
-12-
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Default Upon Senior Securities
------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
Exhibit 10.12. Employment Agreement dated October 1, 1997,
between the Registrant and Richard E. Westerberg.
Exhibit 10.13. Purchase and Sale Agreement dated September 1, 1997
between the Registrant and Karlton Terry Oil Company.
Exhibit 10.14. Purchase and Sale Agreement dated September 1, 1997
between the Registrant and Karlton Terry Oil Company.
Exhibit 27. Financial Data Schedule (submitted only in
electronic format)
b. Reports on Form 8-K
None
-13-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN RIVERS OIL COMPANY
(Registrant)
Date: November 10, 1997 By: /s/ Richard E. Westerberg
---------------------------------------
Richard E. Westerberg
President
(Principal Executive Officer)
Date: November 10, 1997 By: /s/ Jubal Terry
---------------------------------------
Jubal Terry
Vice President and Acting
Chief Financial Officer
(Principal Financial Officer)
-14-
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into and made effective as of October 1, 1997, by
and between American Rivers Oil Company (AROC). a Wyoming corporation
("Employer"), and Richard E. Westerberg ("Employee").
R E C I T A L S
WHEREAS, Employer is desirous of hiring Employee as one of it's key employees;
and
WHEREAS, Employee is willing to accept employment as an employee of Employer in
Denver, Colorado; and
WHEREAS, the parties hereto desire to delineate the responsibilities of Employee
and the expectations and obligations of Employer;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
AGREEMENT
1. Employment. Employer hereby employs Employee, and Employee hereby
accepts employment with Employer, upon the terms and conditions set forth in
this Agreement.
2. Term of Employment. The employment of Employee shall commence on October
1, 1997 and shall continue for a period of 15 months unless sooner terminated
pursuant to the provisions hereof:
3. Duties.
3.1. Basic Duties of Employee. Subject to the direction of the Board
of Directors of Employer, Employee shall serve as President of Employer and
shall fulfill all duties and obligations accruing to such office. In addition
Employee will be asked to serve as a director of the company.
3.2. Time Devoted to Employment. Employee shall devote substantially
all of his professional time to the business of the Employer during the term of
this agreement, however, Employer understands Employee will be granted
reasonable and nonrestrictive time, necessary to fulfill any personal
obligations he may need to address.
3.3 Place of Performance of Duties. The services of Employee shall be
performed at Employer's place of business and at such other locations as
required to fulfill Employee's duties.
1
Initials /s/ RW KT
---- ----
<PAGE>
4. Compensation.
4.1 Basic Salary. As compensation for services rendered pursuant to
this Agreement, Employer shall pay Employee $4167 per month starting in January
of 1998 and continuing for 12 consecutive months. Payment shall be made in
accordance with Employer's payroll practices for all other employees. Employer
agrees it will manage its budget in order to fulfill this obligation.
4.2 Employee Contribution of Time. Employee agrees to forego
compensation for the first 3 months of his employment with Employer in an effort
to help the company lower it's overhead in the short term. This contribution is
offered by the Employee in an effort to help grow the company.
4.3 Expense Reimbursements. Subject to such policies and procedures as
may be adopted by Employer, Employee shall be entitled to reimbursement for
travel, entertainment and other expenses actually incurred on behalf of Employer
to the extent such expenses are incurred in connection with direct activities of
Employer.
4.4 Fringe benefits. Employee shall be entitled to 3 weeks vacation
and absences for illness according to Employer polices. Employee shall have the
right to participate in Employer's medical plan, insurance plans, and 401k plan
at Employee's sole expense, unless the Employer decides to offer this benefit as
further compensation (whether such plans exist at time of employment or are
created later), which can be done at any time during the Employees term of
employment.
4.5 Incentive Bonus. Employer may pay to Employee an incentive bonus
to be determined in good faith by members of the Board of Directors of the
Company, which may be determined by such factors as performance of Employee and
or profitability of Employer.
4.6 Stock Option Plan or Other Plans of Employer. Employee shall be
permitted to participate in any Stock Option Plan or other Plans not related to
the grant of options to purchase stock of Employer that are provided by Employer
to officers of Employer as such Plans are implemented and revised from
time-to-time by the Board of Directors.
5. Termination of Employment.
5.1 By Notice. This Agreement, and the employment of Employee
hereunder. may be terminated by Employee or Employer upon 30 days written notice
of termination; provided, however. in the event Employer shall terminate this
Agreement for any reason other than the occurrence of any events set forth in
Section 5.9, Employer shall] immediately pay all the compensation provided in
Paragraph 5.3 below.
Initials /s/ RW KT
---- ----
2
<PAGE>
5.2. Other Termination. This Agreement, and the employment of Employee
hereunder, shall terminate within 30 days of the occurrence of any of the
following events:
(1) The death of Employee or the loss of legal capacity.
(2) The failure of the Employee to devote a reasonable and
substantial portion of his professional time to Employee's duties
or the willful and habitual neglect of duties.
(3) The willful engaging by Employee in an act of dishonesty
constituting a crime under the laws of the State of Colorado.
(4) The continued incapacity in excess of 90 days on the part of the
Employee to perform his duties, unless waived by the Employer.
(5) By mutual written agreement of Employee and Employer.
(6) Upon the expiration of the term of this Agreement.
(7) Employee's voluntary termination of his employment with Employer.
5.3. Effect of Termination on Compensation. In the event of the
termination of Employee's employment pursuant to this Agreement prior to the
completion of the term of employment specified herein, Employee shall
immediately be entitled to receive the compensation earned by him (including
bonuses) prior to the date of such termination as provided in this Agreement. In
the event of the termination of Employee's employment for any cause other than a
cause enumerated in Paragraph 5.9, Employer shall pay Employee the balance of
the unpaid base salary which would otherwise be payable to Employee during the
remainder of the term of this Agreement. Employee shall be entitled to no
further compensation, in the nature of severance pay or otherwise upon the
termination of his employment pursuant to this Agreement, unless the Board of
Directors of the company decide such additional compensation is warranted.
5.4 Remedies. No termination of the employment of Employee pursuant to
the terms of this Agreement shall prejudice any other remedy to which any party
to this Agreement may be entitled either at law, in equity, or under this
Agreement.
6. Property Rights and Obligations of Employee.
6.1. Trading in Public Stock. Employee agrees he will not personally
trade in AROC Common stock via any transaction other than a transaction with
AROC, Karlton Terry Oil Company (KTOC) or it's affiliates, which is board
approved.
Initials /s/ RW KT
---- ----
3
<PAGE>
6.2 Trade Secrets. Employee agrees to keep all confidential
discussions with regard to Employer, it's corporate strategies, acquisition and
drilling prospects and any and all information related thereto so long as such
information has not previously been publicly released by duly authorized
representatives of Employer or otherwise lawfully entered the public domain.
6.3. Property of Employer. Employee agrees that all documents,
reports, files, analyses, maps. proposals, computer software or hardware.
seismic data and similar materials that are made bv him or come into his
possession by reason of his employment with Employer are the property of
Employer and shall not be used by him in any way, except with written consent of
Employer.
7. Indemnification. Employer shall indemnify and hold harmless Employee to
the full extent permitted by Wyoming law, the Articles of Incorporation and the
By-laws of Employer and any other applicable statue, rule, code or common law
principle from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities damages, recoveries and deficiencies (including all
attorney's fees) arising, resulting from or relating to the performance by
Employee of his obligations to Employer hereunder. Employee is given Board
approval to acquire Directors and Officers Liability Insurance on behalf of the
company and it's officers and directors, with an annual premium amount not to
exceed $5000 per year.
8. General Provisions.
8.1. Notices. Any notices or other communications required or
permitted to be given hereunder shall be given sufficiently only if in writing
and served personally or sent by certified mail, postage prepaid and return
receipt requested, addressed as follows:
If to Employe: American Rivers Oil Company - 700 East 9th Avenue
- Suite 106 - Denver Colorado 80203.
If to Employee: Mr. Richard E. Westerberg - 9533 E. Maplewood Circle,
Englewood, Colorado 80111.
Either party may change his/its address for purposes of this Agreement by
giving written notice of such change.
8.2. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
8.3. Entire Agreement: Modification and Waiver. This Agreement
supersedes any and all other agreements, whether oral or written, between the
parties hereto with respect to employment. Any modification of this Agreement
shall be effective only if it is in writing and signed by both parties. No
waiver of any of the provisions of this Agreement shall be deemed, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by both parties making the waiver.
Initials /s/ RW KT
---- ----
4
<PAGE>
8.4. Assignment. Because of the personal nature of the services to be
rendered hereunder, this Agreement may not be assigned in whole or in part by
Employee without the prior written consent of Employer. However, subject to the
foregoing limitation, this Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective heirs, legatees, executors,
administrators, legal representatives, successors, and assigns.
8.5. Severability. If for any reason whatsoever, any one or more of
the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable, or invalid as applied to any particular case or in all cases,
such circumstances shall not have the effect of rendering any such provision
inoperative, unenforceable, or invalid in any other case or of rendering any of
the other provisions of this Agreement inoperative, unenforceable, or invalid.
8.6. Corporate Authority. Employers represents and warrants as of the
date hereof that Employer's execution and delivery of this Agreement to Employee
and the carrying out of the provisions hereof have been duly authorized by
Employer's Board of directors and further represents and warrants that neither
the execution and delivery of this Agreement, nor the compliance with the terms
and provisions thereof by Employer will result in the breach of any state
regulation, administrative or court order, nor will such compliance conflict
with, or result in the breach of, any of the terms or conditions of Employer's
Articles of Incorporation or Bylaws, as amended. or any agreement or other
instrument to which Employer is a party, or by which Employer is or may be
bound, or constitute an event of default thereunder, or with the lapse of time
or the giving of notice or both constitute an event of default thereunder.
8.7. Attorneys' Fees. In any action at law or in equity to enforce or
construe any provisions or rights under this Agreement, the unsuccessful party
or parties to such litigation, as determined by the courts pursuant to a final
judgment or decree, shall pay the successful party or parties all costs,
expenses, and reasonable attorneys' fees incurred by such successful party or
parties (including, without limitation, such costs, expenses, and fees on any
appeals), and if such successful party or parties shall recover judgment in any
such action or proceedings, such costs, expenses, and attorneys' fees shall be
included as part of such judgment.
8.8. Counterpart. The Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.9. Headings and Captions Headings and captions are included for
purposes of convenience only and are not a part hereof.
Initials /s/ RW KT
---- ----
5
<PAGE>
8.10. Consultation with Council. Employee acknowledges that he has had
the opportunity to consult with counsel independent of Employer regarding the
entering into of this Agreement and has done so to the extent he sees fit.
Employer acknowledges that this Agreement has been reviewed by Corporate
Counsel.
IN WITNESS, WHEREOF. the parties hereto have executed this Agreement effective
as of the day and year first written above at Denver, Colorado.
"EMPLOYER"
American Rivers Oil Company
By: /s/ KARLTON TERRY
-----------------------------------
Karlton Terry, President
"EMPLOYEE"
By: /s/ RICHARD E. WESTERBERG
------------------------------------
Richard E. Westerberg
Initials /s/ RW KT
---- ----
6
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is entered into as of September 1, 1997 to be effective as of
September 1, 1997, by and between American Rivers Oil Company (AROC), a Wyoming
corporation, and Karlton Terry Oil Company (KTOC), a Colorado corporation.
RECITALS
WHEREAS, AROC desires to purchase KTOC's interest in the Smith Mills North
field, and:
WHEREAS, KTOC desires to sell its interest in Smith Mills North field in order
to reduce its debt to AROC.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
AGREEMENT
1. AROC is acquinng all of KTOC's right, title! and interest, an undivided
17.50% Working Interest, under those certain oil and gas leases and the property
described in Exhibit "A", attached hereto and incorporated herein by this
reference, hereinafter referred to as the "Property."
2. The Assignment of Oil and Gas Lease from KTOC to AROC shall be in a form
and content as attached hereto as Exhibit "B" and shall be made without warranty
whatsoever expressed, statutory or implied as to description, title, condition,
quality, htness for purpose. merchantability, or otherwise, except as to any
claims which may be by, through or under KTOC. KTOC shall take such action and
shall execute and deliver such deeds, conveyances, bills of sale, assignments,
documents and instruments as may be necessarily or reasonably requested by AROC,
whether prior or subsequent to Closing, in order to perfect and complete the
purchase and sale of the Property as contemplated hereby. If any Property
offered hereunder is known to be erroneously described, the description will be
corrected on proof of the proper description.
3. The total consideration to be paid by AROC to KTOC for the purchase and
sale of the Property shall be the amount of $22,500 . KTOC acknowledges and
agrees that it currently owes AROC this amount for past well charges. AROC
agrees to forego payment of these past due invoices as payment of the $22,500
due under this agreement.
<PAGE>
4. Examination and approval by AROC of all titles, abstracts, or notes to
the Property and inspection of and a complete inventory of all physical assets
contemplated to be transferred. as well as access to all data on file regarding
the Property have been completed by AROC as of the date of this agreement.
5. The purchase and sale of the Property shall be effective as of 7:00 a.m.
September 1, 1997 ("Effective Date").
6. The consummation of the transaction and closing, subject to all of the
conditions mentioned herein, shall be held on Oct. 1, 1997 and at a time
mutually agreeable to the parties in the office of AROC
7. AROC shall indemnify KTOC against any and all losses, claims, suits,
liabilities and expenses arising with respect to the Property after Effective
Date, and KTOC shall indemnify AROC against any and all losses, claims, suits,
liabilities and expenses arising with respect to the Property prior to the
Effective Date.
8. AROC agrees to comply with all lease provisions, laws and regulations
governing the operation of such wells, inciading those lease provisions, laws,
and regulations governing plugging and abandoning of wells and restoration of
lease and to indemnify KTOC against any loss or damage associated with a
violation of such lease provision, laws, or regulations, which occurs after the
Date of Sale.
9. Taxes for 1997, and all prior year's production taxes, personal property
taxes, severance taxes and all other taxes attributable to the Property or
production therefrom ("Taxes") will be paid by AROC.
10. General Provisions.
10.1 Notices. Any notices or other communications required or permitted to
be given hereunder shall be given sufficiently only if in writing and served
personally or sent by certified mail, postage prepaid and retum receipt
requested, addressed as follows:
If to AROC: American Rivers Oil Company - 700 East 9th Avenue -
Suite 106 - Denver, Colorado 80203.
If to KTOC: Kariton Terry - 700 East 9th Avenue - Suite 106 -
Denver, Colorado 80203.
Either party may changes his/its address for purposes of this Agreement by
giving wntten notice of such change.
10.2 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
10.3 Entire Aareement; Modification and Waiver. This Agreement supersedes
any and all other agreements, whether oral or written, between the parties
hereto with respect to this purchase and sale. Any modification of this
Agreement shall be effective only if it is in writing and signed by both
<PAGE>
parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar nor
shall any waiver constitute a continuing waiver No waiver shall be binding
unless executed in writing by both parties making the waiver.
10.4 Severability. If for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable, or invalid as applied to any particular case or in all cases,
such circumstances shall not have the effect of rendering any such provision
inoperative, unenforceable, or invalid in any other case or of rendering any of
the other provisions of this Agreement inoperative, unenforceable, or invalid.
10 5 Corporate authority. KTOC represents and warrants as of the date
hereof that KTOC's execution and delivery of this Agreement to AROC and the
carrying out of the provisions hereof have been duly authorized by KTOC's Board
of Directors and further represents and warrants that neither the execution and
delivery of this Agreement, nor the compliance with the terms and provisions
thereof by KTOC wiii result in the breach of any state regulation,
administrative or court order, nor will such compliance conflict with, or result
in the breach of, any of the terms or conditions of KTOC's Articles of
Incorporation or Bylaws, as amended, or any agreement or other instrument to
which KTOC is a party, or by which KTOC is or may be bound, or constitute an
event of default thereunder, or with the lapse of time or the giving of notice
or both constitute an event of default thereunder.
10.6 Attomey's Fees. In any action at law or in equity to enforce or
construe any provisions or rights under this Agreement, the unsuccessful party
or parties to such litigation, as determined by the courts pursuant to a final
judgment or decree, shall pay the successful party or parties all costs,
expenses, and reasonable attomeys' fees incurred by such successful party or
parties (including, without limitation, such costs, expenses, and fees on any
appeals), and if such successful party or parties shall recover judgment in any
such action or proceedings, such costs, expenses, and attorneys' fees shall be
included as part of such judgment.
10.7 CounterParts. The Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS HEREOF, this Agreement is executed and made effective as of the date
herein stated, and may be executed in counterpart.
ATTEST: KARLTON TERRY OIL COMPANY
/s/ Pam Holley /s/ Karlton Terry
- ----------------------------- -------------------------------------
Karlton Terry, President
ATTEST: AMERICAN RIVERS OIL COMPANY
/s/ Pam Holley /s/ Richard E. Westerberg
- ----------------------------- -------------------------------------
Richard E. Westerberg, President
<PAGE>
EXHIBIT A
SMITH MILLS NORTH FIELD
The Property shall further include all wells (producing, non-producing,
injection and disposal wells), all of the personal property, fixtures,
equipment, casing and tubing, compressors, pipelines, meters, production,
gathering, treating, processing, compression, dehydration, salt water disposal
wells and facilities, and pipeline equipment and facilities, gathering systems,
drip facilities, tanks, machinery, equipment, tools, dies, vessels, and other
facilities; and all contracts, commitments, agreements, farmouts, operating
agreements, joint operating agreements, division orders, production sales
contracts, gas processing contracts, surface leases, easements, rights-of-way,
and any and all other real and personal property or fixtures relating to, used,
useful, or held for use, whether on or off the premises, in connection with the
Property, and the oil and gas well.
Known as the Sparkle #1 Unit
Working Interest 17.50%
Net Revenue Interest 14.40596%
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is entered into as of September 1, 1997 to be effective as of
September 1, 1997, by and between American Rivers Oil Company (AROC), a Wyoming
corporation, and Kariton Terry Oil Company (KTOC), a Colorado corporation.
RECITALS
WHEREAS, AROC desires to purchase KTOC's interest in the Sistersville Lease more
fully described on Exhibit A, and;
WHEREAS, KTOC desires to sell its interest in the Sistersville Lease to AROC.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
AGREEMENT
1. AROC is acquiring all of KTOC's right, title, and interest, an undivided
50% Working Interest, under those certain oil and gas leases and the property
described in Exhibit "A", attached hereto and incorporated herein by this
reference, hereinafter referred to as the "Property."
2. The Assignment of Oil and Gas Lease from KTOC to AROC shall be in a form
and content as attached hereto as Exhibit "B" and shall be made without warranty
whatsoever expressed, statutory or implied as to description, title, condition,
quality, fitness for purpose, merchantability, or otherwise, except as to any
claims which may be by, through or under KTOC. KTOC shall take such action and
shall execute and deliver such deeds, conveyances, bills of sale, assignments,
documents and instruments as may be necessarily or reasonably requested by AROC,
whether prior or subsequent to Closing, in order to perfect and complete the
purchase and sale of the Property as contemplated hereby If any Property offered
hereunder is known to be erroneously described, the description will be
corrected on proof of the proper description.
3 The total consideration to be paid by AROC to KTOC for the purchase and
sale of the Property shall be as follows: 1) $26,500 cash due and payable within
90 days of closing for proven producing reserves; 2) A note from AROC to KTOC
for $25,000 for equipment that carries no interest rate, and is due and payable
upon sale of the property or abandonment of the lease; and 3) Two notes for
$20,000 each from AROC to KTOC that are contingent upon the drilling of the 2
proven undeveloped drillsites If the drillsites are drilled and completed, and
if a well is capable of producing at least 200 MCFPD during on days of the first
month subsequent to completion, then AROC will owe KTOC $20,000 per successful
drillsite. The $20,000 notes will become effective in the month AROC first
receives revenues from the drillsites. The notes will be amortized over 36
months equalling payments of $556 per month each (principal and interest).
<PAGE>
4. Examination and approval by AROC of all titles, abstracts, or notes to
the Property and inspection of and a complete inventory of all physical assets
contemplated to be transferred, as well as access to all data on file regarding
the Property have been completed by AROC as of the date of this agreement.
5. The purchase and sale of the Property shall be effective as of 7:00 a.m.
September 1, 1997 ("Effective Date").
6. The consummation of the transaction and closing, subject to all of the
conditions mentioned herein, shall be held on Oct. 1, 1997 and at a time
mutually agreeable to the parties in the office of AROC.
7. AROC shali indemnify KTOC against any and all losses, claims, suits,
liabilities and expenses arising with respect to the Property after Effective
Date, and KTOC shall indemnify AROC against any and all losses, claims, suits,
liabilities and expenses arising with respect to the Property prior to the
Effective Date.
8. AROC agrees to comply with all lease provisions, laws and regulations
goveming the operation of such wells, including those lease provisions, laws,
and regulations goveming plugging and abandoning of wells and restoration of
lease and to indemnify KTOC against any loss or damage associated with a
violation of such lease provision, laws, or regulations, which occurs after the
Date of Sale.
9. Taxes for 1997, and all prior year's production taxes, personal property
taxes, severance taxes and all other taxes attributable to the Property or
production therefrom ("Taxes") will be paid by AROC.
10. General Provisions.
10.1 Notices. Any notices or other communications required or permitted to
be given hereunder shall be given sufficiently only if in writing and served
personally or sent by certified mail, postage prepaid and retum receipt
requested, addressed as follows:
If to AROC: American Rivers Oil Company - 700 East 9th Avenue -
Suite 106 - Denver, Colorado 80203.
If to KTOC: Kariton Terry - 700 East 9th Avenue - Suite 106 -
Denver, Colorado 80203.
Either party may changes his/its address for purposes of this Agreement by
giving written notice of such change.
10.2 Choice of Law. This Agreement shall be govemed by and construed in
accordance with the laws of the State of Colorado.
<PAGE>
10.3 Entire Aureement; Modification and Waiver. This Agreement supersedes
any and all other agreements, whether oral or written, between the parties
hereto with respect to this purchase and sale. Any modification of this
Agreement shall be effective only if it is in writing and signed by both
parties. No waiver of any of the provisions of this Agreement shall be deemed7
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by both parties making the waiver.
10.4 Severability. If for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable, or invalid as applied to any particular case or in all cases,
such circumstances shall not have the effect of rendering any such provision
inoperative, unenforceable, or invalid in any other case or of rendering any of
the other provisions of this Agreement inoperative, unenforceable, or invalid.
10.5 corporate authority. KTOC represents and warrants as of the date
hereof that KTOC's execution and delivery of this Agreement to AROC and the
carrying out of the provisions hereof have been duly authorized by KTOC's Board
of Directors and further represents and warrants that neither the execution and
delivery of this Agreement, nor the compliance with the terms and provisions
thereof by KTOC will result in the breach of any state regulation,
administrative or court order, nor will such compliance conflict with, or result
in the breach of, any of the terms or conditions of KTOC's Articles of
Incorporation or Bylaws, as amended, or any agreement or other instrument to
which KTOC is a party, or by which KTOC is or may be bound, or constitute an
event of default thereunder, or with the lapse of time or the giving of notice
or both constitute an event of default thereunder.
10.6 Attornev's Fees. In any action at law or in equity to enforce or
construe any provisions or rights under this Agreement, the unsuccessful party
or parties to such litigation, as determined by the courts pursuant to a final
judgment or decree, shall pay the successful party or parties all costs,
expenses, and reasonable attomeys' fees incurred by such successful party or
parties (including, without limitation, such costs, expenses, and fees on any
appeals), and if such successful party or parties shall recover judgment in any
such action or proceedings, such costs, expenses, and attomeys' fees shall be
included as part of such judgment.
10.7 counterparts The Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS HEREOF, this Agreement is executed and made effective as of the
date herein stated, and may be executed in counterpart.
<PAGE>
ATTEST: KARLTON TERRY OIL COMPANY
/s/ Pam Holley /s/ Karlton Terry
- ---------------------------- --------------------------------------
Karlton Terry, President
ATTEST: AMERICAN RIVERS OIL COMPANY
/s/ Pam Holley /s/ Richard E. Westerberg
- ---------------------------- --------------------------------------
Richard E. Westerberg
<PAGE>
EXHIBIT A
SISTERSVILLE LEASE
That particular segment of the Ohio River bed running from Mile Point 133
to Mile Point 144, encompassing approximately 1,690 acres excluding, however,
all islands located in Wetzel and Tyler Counties, West Virginia, all as shown on
the attached location maps which are made a part hereof and hereinafter known
and referred to as the demised premises map exhibit. It is understood, however,
that the acreage figure and the location map are approximate.
KTOC's right, title and interest in, under or derived from any and all
presently existing contracts affecting the above-described lease, including
agreements for the sale or purchase of oil, gas and associated hydrocarbons,
processing agreements, and all other contracts and agreements arising out of,
connected with, or attributable to the production from said lease.
KTOC's rights, title and interest in and to all personal property,
equipment, fixtures, improvements, easements, permits, licenses, surface rights,
whether situated upon or used or useful in connection with the lease, for the
production, treating, storing, transporting, or marketing of oil, gas and other
hydrocarbons including the wells and facilities located on the iease, effective
upon receipt of any necessary concurrence or approval by a third party, or are
otherwise required by the interest assigned. All of said properties are intended
to be, and are hereby sold on an "as is" basis. Assignor makes no warranty,
express or implied as to the merchantability or fitness for use of such personal
property.
SOURCE OF TITLE:
Being a portion of the same property transferred and conveyed to KARLTON
TERRY OIL COMPANY by STATE OF WEST VIRGINIA by Oil and Gas Lease dated the 17th
day of July 1991, and recorded in Oil and Gas Book 74A at pages 62 through 77 in
the Office of the Clerk of the County Commission of Wetzel County and recorded
in Oil and Gas Book 291 at page 482 in the Offfice of the Clerk of the Tyler
County Commission.
The Property shall further include all wells (producing, non-producing,
injection and disposal wells), all of the personal property, fixtures,
equipment, casing and tubing, compressors, pipelines, meters, production,
gathering, treating, processing, compression, dehydration, salt water disposal
wells and facilities, and pipeline equipment and facilities, gathering systems,
drip facilities, tanks, machinery, equipment, tools, dies, vessels, and other
facilities; and all contracts, commitments, agreements, farmouts, operating
agreements, joint operating agreements, division orders, production sales
contracts, gas processing contracts, surface leases, easements, rights-of-way,
and any and all other real and personal property or fixtures relating to, used,
useful, or held for use, whether on or off the premises, in connection with the
Property, and the oil and gas well.
Known as the Ohio River #1 Unit
Working Interest 50% Net Revenue Interest 40%
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 FDS for 2nd Quarter 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 272
<SECURITIES> 0
<RECEIVABLES> 103,905
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112,825
<PP&E> 1,962,984
<DEPRECIATION> 270,577
<TOTAL-ASSETS> 1,806,697
<CURRENT-LIABILITIES> 1,033,326
<BONDS> 0
0
0
<COMMON> 119,808
<OTHER-SE> 571,284
<TOTAL-LIABILITY-AND-EQUITY> 1,806,697
<SALES> 347,822
<TOTAL-REVENUES> 350,322
<CGS> 216,269
<TOTAL-COSTS> 2,800,760
<OTHER-EXPENSES> 95,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,962
<INCOME-PRETAX> (2,593,663)
<INCOME-TAX> 232,000
<INCOME-CONTINUING> (2,361,663)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,361,663)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
