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 June 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 August 8, 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
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<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
ASSETS
------
Current Assets:
Cash $ 39,746
Oil and gas sales receivable 110,862
Receivable from Class B stockholder 19,656
Prepaid expenses and other 7,148
-----------
Total current assets 177,412
Oil and Gas Properties, at cost, using successful efforts method:
Proved properties 4,075,955
Less accumulated depreciation, depletion and amortization (232,401)
-----------
Net oil and gas properties 3,843,554
Other Assets 5,187
-----------
$ 4,026,153
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Note payable, bank $ 774,852
Current maturities of long-term debt 6,500
Accounts payable and accrued expenses 96,692
-----------
Total current liabilities 878,044
Long-Term Debt, less current maturities 70,158
Deferred Income Taxes 188,100
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 shares 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 6,200,693
Accumulated deficit (1,700,908)
Less treasury stock, at cost,
1,097,234 of common shares (1,729,742)
-----------
Total stockholders' equity 2,889,851
-----------
$ 4,026,153
===========
See accompanying notes to these consolidated financial statements.
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<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended June 30,
--------------------------
1997 1996
----------- -----------
REVENUE:
Oil and gas sales $ 187,087 $ 166,518
Operator fees 1,500 1,500
----------- -----------
Total revenue 188,587 168,018
EXPENSES:
Oil and gas production costs 110,573 72,964
Exploration costs 3,127 --
General and administrative 144,713 128,063
Depreciation, depletion and amortization 24,000 34,000
----------- -----------
Total expenses 282,413 235,027
----------- -----------
LOSS FROM OPERATIONS (93,826) (67,009)
OTHER INCOME (EXPENSE):
Equity in loss of Bishop
Capital Corporation (95,263) (109,169)
Interest expense (24,515) (9,174)
----------- -----------
LOSS BEFORE INCOME TAXES (213,604) (185,352)
DEFERRED INCOME TAX BENEFIT 43,900 68,000
----------- -----------
NET LOSS $ (169,704) $ (117,352)
=========== ===========
NET LOSS PER SHARE:
Common stock $ (.03) $ (.03)
=========== ===========
Class B Common stock $ (.01) $ (.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Common stock 3,614,715 2,851,770
=========== ===========
Class B Common stock 7,267,820 7,267,820
=========== ===========
See accompanying notes to these consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
----------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (169,704) $ (117,352)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation, depletion and amortization 24,000 34,000
Equity in loss of Bishop Capital Corporation 95,263 109,169
Deferred income tax benefit (43,900) (68,000)
Issuance of treasury shares for services 5,000 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Oil and gas sales receivable 3,302 (46,496)
Receivable from Class B shareholder (9,667) 4,000
Prepaid expenses and other 9,653 5,643
Increase (decrease) in:
Payable to Bishop Capital Corporation -- (12,945)
Accounts payable and accrued expenses (20,003) (15,788)
----------- -----------
Net cash used in operating activities (106,056) (107,769)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition and development costs for oil and gas properties (8,292) (24,551)
Proceeds from sale of oil and gas properties 18,148 8,000
----------- -----------
Net cash provided by (used in) investing activities 9,856 (16,551)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings -- 147,000
Principal payments on borrowings (321) (17,522)
----------- -----------
Net cash provided by (used in) financing activities (321) 129,478
----------- -----------
Increase (decrease) in Cash (96,521) 5,158
Cash, beginning of period 136,267 275
----------- -----------
Cash, end of period $ 39,746 $ 5,433
=========== ===========
Supplemental Cash Flow Information:
Cash paid for interest $ 12,921 $ 6,862
=========== ===========
Supplemental Disclosure of Noncash Investing and Financing
Activities:
Debt incurred for acquisition of oil and gas properties $ -- $ 400,000
Spin-off of Bishop Capital Corporation to Common shareholders 1,595,190 --
See accompanying notes to these consolidated financial statements.
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</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 June 30, 1997 and
the results of operations and cash flows for the three month periods ended
June 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 U. S.
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. The distribution decreased stockholders' equity at June 30,
1997 by $1,595,190.
3. Notes Payable
The Company has a line-of-credit with a bank which provides for interest at
the prime rate plus 1% (9.5% at June 30, 1997). Borrowings under the
line-of-credit are collateralized by producing oil and gas properties. The
maximum commitment amount under the line-of-credit decreases monthly from
$824,000 at June 30, 1997 to $767,000 at maturity in September 1997.
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 shares or assets of Bishop. Accordingly, the common
shares were allocated 100% of Bishop's loss and a pro rata percentage of
the remaining 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-
<PAGE>
AMERICAN RIVERS OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Option to Purchase
In June 1997, the Company entered into an Option to Purchase ("Option")
Creston Explorations' shares in Opon Development Company for approximately
$8.5 million in cash and stock. Opon Development Company owns a working
interest in the Opon gas field in Colombia South America operated by Amoco
Colombia Petroleum Corporation. The Company may exercise the Option at any
time prior to its expiration date in September 1997.
-6-
<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 the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
Results of Operations
- ---------------------
The Company's net loss was $169,700 for the three months ended June 30, 1997
compared to a net loss of $117,400 for the comparable period in 1996. The
Company's 12% increase in oil and gas revenues in the current quarter was offset
by increases in oil and gas production costs, general and administrative
expenses and interest expense.
The Company's oil and gas sales revenue increased by $20,600 or 12% in the
quarter ended June 30, 1997 compared to the corresponding quarter in 1996.
Production volumes for oil and natural gas also increased 22% and 16%,
respectively, in the current quarter compared to the corresponding quarter in
1996. The increase in oil production is attributable to the Sparkle #1 well
which was previously shut-in for completion of water disposal facilities. The
increase in gas production is attributable to the Denver-Julesburg Basin
properties. The average sales price of oil decreased 11% and the average sales
price of natural gas increased less than 1% in the quarter ended June 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
June 30,
---------------------
1997 1996
-------- --------
Oil production (barrels) 5,411 4,419
Average sales price per barrel $ 18.35 $ 20.63
Natural gas production (mcf) 52,157 45,106
Average sales price per mcf $ 1.68 $ 1.67
-7-
<PAGE>
Expenses
- --------
Oil and gas production costs increased $39,400 in the quarter ended June 30,
1997 compared to the corresponding quarter in 1996 due to increased production.
The increase included $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. 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 for the
quarter ended June 30, 1997 were $7.84 (including $.76 per BOE for the Ohio
River #1 and Lake Hatch repair costs) compared to $6.11 for the comparable
quarter of 1996.
Exploration costs of $3,100 in the quarter ended June 30, 1997 relate to
additional dry hole costs from the drilling of an unsuccessful Lake Hatch
exploratory well in the prior year.
General and administrative expenses increased by $16,700 or 13% in the current
quarter of 1997 compared to the corresponding quarter in 1996. The increase is
primarily due to legal expenses associated with the Opon Development Company
merger negotiations which Opon decided not to pursue.
Depreciation, depletion and amortization expense decreased by $10,000 or 30% in
the current quarter compared to the corresponding quarter in 1996. While there
was an 18% increase in total production for the quarter ended June 30, 1997 over
the comparable quarter in 1996, the decrease in depreciation, depletion and
amortization is due primarily to a 13% increase in estimated proved reserves.
The equity in loss of Bishop for the three months ended June 30, 1997 represents
the Company's equity in the operations of Bishop through the date of the
distribution of Bishop's shares related to the spin-off. The operations of
Bishop subsequent to the distribution date will no longer be included in the
Company's consolidated statement of operations.
Interest expense increased by $15,300 for the current quarter of 1997 over the
corresponding quarter of 1996 due to a higher average amount of debt
outstanding.
Financial Condition
- -------------------
At June 30, 1997, the Company had a working capital deficit of $700,600.
The following summary table reflects the Company's cash flows for the three
months ended June 30, 1997 and 1996:
Three Months Ended
June 30,
----------------------------
1997 1996
---------- ----------
Net cash used in operating
activities $ (106,100) $ (107,800)
Net cash provided by (used in)
investing activities 9,900 (16,600)
Net cash provided by (used in)
financing activities (300) 129,500
The Company's net cash used in operating activities of $106,100 for the quarter
ended June 30, 1997 was comparable to the corresponding quarter in 1996.
-8-
<PAGE>
Net cash provided by investing activities of $9,900 for the quarter ended June
30, 1997 resulted from the sale of several Denver-Julesburg Basin ("DJ Basin")
wells with declining production offset by capital expenditures on the Ohio River
#1 and Sparkle #1 wells. Net cash used in investing activities of $16,600 for
the quarter ended June 30, 1996 resulted from capital expenditures on the Ohio
River #1 and DJ Basin wells offset by the sale of several DJ Basin wells.
Net cash used in financing activities for the quarter ended June 30, 1997 is due
to principal payments on the Sparkle #1 production payment obligation. Net cash
provided by financing activities of $129,500 for the comparable quarter in 1996
resulted from borrowings of $30,000 from a bank, $100,000 from Bishop Capital
Corporation and $17,000 from a major Class B Common shareholder offset by
principal payments on borrowings of $17,500.
Approximately 65% of the Company's oil and gas reserves are Proved Undeveloped
Reserves and the estimated expenditures to develop these properties amount to
$1,382,000. Successful development and production of such reserves cannot be
assured. Additional drilling will be necessary in future years both to maintain
production levels and to define the extent and recoverability of existing
reserves. There is no assurance that present oil and gas wells of the Company
will continue to produce at current or anticipated rates of production, that
development drilling will be successful, that production of oil and gas will
commence when expected, or that there will be favorable markets for oil and gas
which may be produced in the future.
General
- -------
One of management's priorities this year is increasing the size of the Company's
operations by purchasing additional Denver-Julesburg Basin producing wells,
expanding production on existing leases and reviewing possibilities for a
significant transaction which may involve a merger or acquisition of assets.
Management also considers the continued development of drilling prospects on its
inventory of River Leases to be an essential part of the Company's over-all
development plans. The Company has staked a location to drill an offset to the
Sparkle #1 river well and anticipates drilling to commence in the next quarter.
The Company has entered into an Option to Purchase Creston Explorations'
approximately 22% equity interest in Opon Development Company for approximately
$8.5 million in cash and stock. Creston Explorations is owned by a relative of
Karlton Terry, the Company's President. Management believes that this potential
acquisition would be a valuable addition to the Company's operations as well as
increasing the Company's equity capitalization. The Company has engaged
Rothschild Natural Resources as Financial Advisor to assist in this potential
acquisition. The Company is seeking debt or equity financing in order to
exercise such option. There can be no assurances, however, that any such
financing can be obtained on favorable terms or that the Company will otherwise
determine to exercise such option. Management believes that this potential
acquisition would increase the Company's profile in the equity markets which, in
turn, would help to enhance the liquidity of the Company's Common Stock.
-9-
<PAGE>
The Company is seeking to engage a qualified executive with petroleum
engineering experience to serve as President of the Company. Discussions are
currently underway with a candidate experienced in running an oil company based
in Denver, Colorado, with assets over $100 million, but no agreement has been
reached. Although the success of such search efforts cannot be certain, the
Company intends to hire a new President in the near future. In that case,
Karlton Terry would continue to serve as Chief Executive Officer, but would not
continue to manage the Company's day-to-day operations. The Company does not
intend for the hiring of a new President to significantly change the Company's
current general and administrative expenses. Accordingly, in connection with the
hiring of a new President and subject to appropriate terms, Karlton Terry and
Jubal Terry have indicated that they will agree to certain salary reductions.
-10-
<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
10.12 Option to Purchase between the Registrant and
Creston Explorations, dated June 15, 1997.
27 Financial Data Schedule (submitted only in electronic
format)
b. Reports on Form 8-K
None
-11-
<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: August 8, 1997 By: /s/ Karlton Terry
-------------------------------
Karlton Terry
President
(Principal Executive Officer)
Date: August 8, 1997 By: /s/ Jubal Terry
-------------------------------
Jubal Terry
Vice President and Acting
Chief Financial Officer
(Principal Financial Officer)
-12-
Exhibit 10.12
OPTION TO PURCHASE
THIS OPTION TO PURCHASE (this "Agreement"), dated effective as of June 15,
1997, is between American Rivers Oil Company ("AROC"), a Wyoming corporation,
and Creston Explorations ("Creston"), a Cayman Islands corporation.
Recitals
--------
A. Opon Development Company ("Opon") has entered into a $12,5 million
borrowing base revolving credit facility from N.M. Rothschild & Sons, Ltd.
("Rothschild") through Rothschild Denver, Inc. (the "Rothschild Credit Line"),
which credit facility required a pledge of all of the outstanding capital stock
of Opon (the "Opon Stock").
B. Creston is the owner of 21.950885 shares of Opon Stock (being 21.950885%
of the outstanding equity of Opon), and has benefited as a result of the
Rothschild Credit Line. Creston's Opon Stock is currently pledged (the "Stock
Pledge") to Rothschild as partial security for the Rothschild Credit Line.
C. AROC desires to obtain an option from Creston, and Creston desires to
grant an option to AROC to purchase Creston's Opon Stock, subject to the terms
of (i) the Stock Pledge, (ii) the revolving credit agreement and all related
documents between Opon and Rothschild, and (iii) that certain Shareholder
Agreement (the "Shareholder Agreement") dated June 14, 1996 among Opon. Creston
and Chase Opon, Ltd. (collectively the "Prior Documents").
IN CONSIDERATION of he foregoing, the mutual agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, AROC and Creston agree as follows:
ARTICLE I: OPTION
------
1.01 Grant of Option. Creston hereby grants to AROC an irrevocable and
exclusive option (the "Option") to purchase the Opon Stock on the terms and
conditions set forth below. AROC's services in connection with the Rothschild
Credit Line shall serve as consideration for Creston's granting of the Option.
1.02 Term of Option. The term of the Option shall be until 5:00 p.m.
September 15, 1997 (the "Expiration Date").
1
<PAGE>
1.03 Exercise of Option. AROC may elect to exercise the Option at any time
prior to the Expiration Date by executing and delivering to Creston written
notice of such election and payment of the Exercise Price (as defined below).
There shall be no penalty for early exercise of the Option. Upon exercise of the
Option, the parties shall have 30 days in which to close (the "Closing") the
purchase of the Opon Stock by AROC.
1.04 Exercise Price. The exercise price for the Opon Stock (the "Exercise
Price") shall be $5,000,000 cash and $3,500,000 in AROC common stock or another
publicly traded equity security, with the number of shares to be determined by
the average closing price of such security for the five business days prior to
the day before Closing.
1.05 Adjustment to Purchase Price. The parties hereto acknowledge and agree
that the Exercise Price payable by AROC is based on the Creston's percentage
ownership of Opon as of the date of this Agreement. If, prior to the date upon
which AROC delivers the Exercise Price, Opon issues additional capital stock or
grants options or warrants which permit the holder thereof to purchase addition
capital stock, the parties shall adjust the Exercise Price to reflect the
corresponding decrease in Creston's percentage ownership of Opon.
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF CRESTON
-----------------------------------------
Creston represents and warrants to AROC that as of the date hereof:
(a) Creston has received no notice of, and has no other knowledge of, any
litigation, claim or proceeding, pending or currently threatened, which affects
the Opon Stock;
(b) Except with respect to consents required under the Prior Documents,
Creston has taken all action necessary for (i) the authorization, execution,
delivery, and performance of all its obligations under this Agreement and the
consummation of the transactions contemplated herein, and (ii) the
authorization, execution, and delivery of the Opon Stock being sold upon
exercise of the Option. This Agreement constitutes a valid and binding
obligation of Creston, enforceable against Creston in accordance with its terms,
subject to obtaining the consent of Rothschild and to applicable bankruptcy,
insolvency, reorganization, and moratorium laws and other laws of general
application affecting enforcement of creditors' rights generally and to general
equitable principles.
(c) Creston holds the Opon Stock free and clear of any mortgage, lien,
security interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interests other than
those contained in the Prior Documents.
2
<PAGE>
(d) Except with respect to consent required under the Prior Documents,
Creston has obtained all consents, approvals, or authorizations of, or
registrations, qualifications, designations, declarations' or filings with any
federal or state governmental authority, and all consents, approvals or
authorizations of any third party, required in connection with the execution of
this Agreement and the transactions contemplated hereby.
(e) Assuming that the consents under the Prior Documents are obtained, the
execution and delivery of this Agreement and the performance or all of the
obligations of Creston hereunder will not result in a breach of or constitute a
default under any agreement entered into by Creston or under any covenant or
restriction affecting Creston's Opon Stock.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF AROC
--------------------------------------
AROC represents and warrants to Creston that as of the date hereof:
(a) AROC is a corporation that is duly organized, validly existing, and in
good standing under the laws of the State of Wyoming, has all necessary
corporate power and authority to own properties owned by it and carry on its
business as now owned and operated by it, and is duly qualified to do business
as a foreign corporation and is in good standing in all jurisdictions in which
failure to so qualify would have a materially adverse effect upon its operations
or financial condition.
(b) All corporate action on the part of the Company necessary for (i) the
authorization, execution, delivery, and performance of all the obligations of
the Company under this Agreement and the consummation of the transactions
contemplated herein, and (ii) the authorization, issuance, execution, and
delivery of the AROC Common Stock being delivered by AROC hereunder has been
duly and validly completed. This Agreement constitutes a valid and binding
obligation of AROC enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, and moratorium laws and other
laws of general application affecting enforcement of creditors' rights generally
and to general equitable principles.
(c) The AROC Common Stock, when delivered by AROC in accordance with the
terms of this Agreement, shall be duly and validly issued, fully paid, and
non-assessable and will be free of any liens or encumbrances.
3
<PAGE>
ARTICLE IV: COVENANTS OF AROC RELATING TO INSPECTION
----------------------------------------
AROC shall permit Creston at Creston's expense to visit and inspect its
financial and accounting records, and corporate books and documents relating to
the AROC Common Stock at such reasonable times as may be requested by Creston.
At AROC's request, Creston shall enter into AROC's standard-form confidentiality
agreements in order to maintain the confidentiality of any confidential
information may be acquired in the course of any such inspection.
ARTICLE V: COVENANTS OF CRESTON
--------------------
5.1 Inspection. Creston shall permit AROC at AROC's expense to visit and
inspect its financial and accounting records, and corporate books and documents
relating to the Opon Stock at such reasonable times as may be requested by AROC.
At Creston's request, AROC shall enter into Creston's standard-form
confidentiality agreements in order to maintain the confidentially of any
confidential information may be acquired in the course of any such inspection.
5.2 Information. From the date hereof through Closing, Creston shall give
prompt notice to AROC of the occurrence, or failure to occur, of any event which
occurrence or failure would likely cause a material change in the business,
financial position, assets or affairs of Opon, including without limitation, the
sale or further encumbrance by Opon of any assets of Opon.
5.3 No Encumbrances on or Changes in Opon Stock. From the date hereof
through Closing, Creston shall not individually or as a voting shareholder of
Opon (i) take any action which will create an additional encumbrance on its Opon
Stock, (ii) pledge or sell any of its Opon Stock other than pursuant to this
Agreement and the Prior Documents, or (iii) vote its Opon Stock in any manner
the effect of which will have a material change in the rights, preferences,
designations, amount or value of its Opon Stock, without the prior written
consent of AROC.
ARTICLE VI: SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
No representations or warranties whatever are made by any party to this
Agreement except as specifically set forth in this Agreement or in an instrument
delivered pursuant to this Agreement. The representations and warranties made by
the parties to this Agreement and the covenants and agreements to be performed
4
<PAGE>
or complied with by the respective parties under this Agreement before the
Closing shall be deemed to be continuing and shall survive the Closing for a
period of one year from the Closing but shall terminate on the Expiration Date
unless the Option has been timely exercised. Nothing in this paragraph shall
affect the obligations of the parties with respect to covenants and agreements
contained in this Agreement that are permitted or required to be performed in
whole or in part after the Closing and such obligations, covenants and
agreements shall survive Closing.
ARTICLE VII: MISCELLANEOUS
-------------
7.01 Effect of Headings. The subject headings of paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
7.02 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior and contemporaneous
agreements, representations and understandings of the parties regarding the
subject matter of this Agreement. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
hereto.
7.03 Counterparts. This Agreement may be executed 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.
7.04 Assignment. This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective successors and assigns.
Neither party may assign this Agreement or any of its rights or obligations
under this Agreement without the prior written consent of the other party
hereto.
7.05 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given on the date of
service, if served personally on the party to whom notice is given, or on the
third day after mailing, if mailed to the party to whom notice is to be given by
first class mail, registered or certified, postage prepaid and properly
addressed as follows:
To Creston at:
Creston Explorations
3000 Youngfield, Suite #338,
Lakewood, Colorado 80215
Attn: Orlyn Terry
5
<PAGE>
with copy to:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
To AROC at:
American Rivers Oil Company
700 East Ninth Avenue, Suite 106
Denver, Colorado 80203
Attn: Karlton Terry
with copy to:
Holme Roberts & Owen LLP
1401 Pearl Street, Suite 400
Boulder, Colorado 80302
Attention: William R. Roberts, Esq.
Any party may change its address for the giving of notice by giving notice in
the manner provided hereunder.
7.06 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
7.07 Expenses. Each party shall bear its own costs, including attorneys'
fees, incurred in connection with this Agreement and the transactions
contemplated hereby.
7.08 Further Assurances. After the Closing, each party shall execute and
deliver all additional instruments and documents and take all other action as
necessary to effectively carry out the sale of the Property and the other
agreements and transactions contemplated hereby.
7.9 Time of the Essence: Default. With regard to all of the provisions
contained in this Agreement, time is of the essence. If any of the conditions in
this Agreement are not timely met by AROC or Creston (including but not limited
to tendering funds and signing of closing documents on or before the Closing),
then AROC or Creston, as the case may be, shall be deemed to be in default
hereunder, and the non-defaulting party may exercise its rights under law or
equity, including the right to specific performance.
6
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it as
of the day and year first above written.
CRESTON:
--------
CRESTON EXPLORATIONS, a Cayman Islands
corporation
By: /s/ ORLYN TERRY
----------------------------------
Name: Orlyn Terry
Title: President
AROC:
-----
AMERICAN RIVERS OIL COMPANY, a Wyoming
corporation
By: /s/ KARLTON TERRY
-----------------------------------
Karlton Terry, President
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 FDS for 1st quarter 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 39,746
<SECURITIES> 0
<RECEIVABLES> 130,518
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 177,412
<PP&E> 4,075,955
<DEPRECIATION> 232,401
<TOTAL-ASSETS> 4,026,153
<CURRENT-LIABILITIES> 878,044
<BONDS> 0
0
0
<COMMON> 119,808
<OTHER-SE> 2,770,043
<TOTAL-LIABILITY-AND-EQUITY> 4,026,153
<SALES> 187,087
<TOTAL-REVENUES> 188,587
<CGS> 110,573
<TOTAL-COSTS> 282,413
<OTHER-EXPENSES> 95,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,515
<INCOME-PRETAX> (213,604)
<INCOME-TAX> 43,900
<INCOME-CONTINUING> (169,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (169,704)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
