<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-10337
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OKLAHOMA ENERGY CORPORATION
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(Exact name of registrant as specified in its charter)
Oklahoma 73-1129531
- ------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 West Main Street, Cyril, OK 73029-0579
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (580) 464-3759
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common, $0.10 Par Value Electronic Bulletin Board
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Total issuer's revenues for 1998 were 0.
The aggregate market value of the shares of common stock held by non-affiliates
of the registrant, based upon the average bid and asked price of such stock, as
of December 31, 1998, was $.05 per Share $2,337,246.
State number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Common 46,744,911
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit Index.
Transitional Small Business Disclosure Format (Check one): Yes No X
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<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Oklahoma Energy Corporation formerly, Cayman Resources Corporation
(hereinafter referred to as "the Company") was incorporated on September 4,
1981 under the laws of the State of Oklahoma. The Company was formed to
facilitate the tax free exchange and merger of 100% of the stock of its
predecessor, Cayman Corporation, with certain limited partnership oil and gas
interests sponsored by Cayman Corporation as general partner.
The Company has one active subsidiary, Cyril Petrochemical Corporation
(CPC). The stock of CPC is pledged to the Oklahoma Industrial Finance Authority
(OIFA) as collateral for a loan to the Company. This loan is in default and the
prospect for foreclosure by the OIFA is likely. If this occurred the Company
could lose all its interest in CPC and the Cyril Refinery.
In the recent past, the Company's principal business have been (1) the
refinery of crude oil into diesel fuel, kerosene, paint thinners and lacquers,
and specialty industrial solvents at its refinery in Cyril, Oklahoma (Cyril
Refinery); and (2) production of and exploration for crude oil and natural gas;
and (3) contract operations of producing oil and natural gas properties.
However, the Company no longer operates the Cyril refinery and the Company has
sold all its oil and gas properties and well operations.
The Company has no material patents, licenses, franchises or
concessions which are considered significant to its operations.
The Company has not been a party to any bankruptcy, receivership,
reorganization adjustment or similar proceeding.
The Company has no present business activity.
Since the refinery operations began in January of 1994, and through
April of 1995, the Cyril Refinery acquired approximately 803,388 barrels of
crude oil. The Company acquires such crude oil feed stock by the barrel at the
daily average West Texas Intermediate (WTI) crude oil posted price plus
transportation and handling costs which varies depending on the distance that
particular crude oil barrel is transported to the plant. The daily average WTI
is calculated on a monthly basis.
COMPETITION
If the Company is able to refinance the Cyril Refinery, such operation
would be in direct competition with many other refiners. Many of the refineries
with which the Company will compete have vast resources from which to draw and
are able to offer for sale many products which can not be offered by the
Company. Also, the refining companies with which the Company will compete can
offer their products at prices which may be below the Company's cost of
producing the same products. The Company must deal with this competition by
strictly defining its specialty markets. To establish this market, the Company
must offer a quality product at a competitive price with special services such
as custom blending.
In addition to the market competition for the sale of its products, the
Company would compete with much larger refineries to acquire the high quality,
low sulphur crude oil necessary to supply the special needs of the Cyril
Refinery.
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RISK FACTORS
The Company's operation of the Cyril Refinery is inherently dangerous.
The refinery process calls for heating large volumes of crude oil and natural
gas condensate in order to separate each barrel into various other products,
many of which are highly volatile. Even though the Company maintains a fire
water system, there is always some danger of explosions and fire. Also, the
operations of the Cyril Refinery equipment can be extremely dangerous. Although
considerable effort is taken to follow all safety procedures, because of the
size and complexity of the refinery equipment, accidents may occur.
In addition to the physical inherent risks of operating refinery
equipment and the handling of crude oil, natural gas, natural gas condensate,
and other potentially explosive materials, the Company's refinery operation is
subject to substantial economic risks. Production and sale of hydrocarbon
solvents, diesel, and other products that will be produced by the Company's
refinery operation is a very competitive business. There is no certainty that
the Company can establish a market for its products. There is no assurance that
the Company will be able to operate the Cyril Refinery in a profitable manner.
Because of the substantial capital investment made by the Company in the
renovation and start up of the Cyril Refinery, the future of the Company is
dependent upon its ability to refinance and operate the Cyril Refinery
successfully.
ENVIRONMENTAL RISK
In 1987 the Cyril Refinery site was placed on the Environmental
Protection Agency's (EPA) National Priority List. A remedial study was
completed by the EPA in 1991 and it was determined that there were certain
hazardous substances present at the old refinery site, some of which could be
found on CPC's property. Although the EPA found levels of contamination which
did not pose an immediate hazard to human life, over the next five years CPC
will be required to conduct limited remediation of hydrocarbons and other
contaminants contained within the boundaries of the CPC property. The Company
will be required to conduct this soil remediation in conjunction with the
bioremediation plan now being formulated by the EPA for the adjacent property
under the EPA's control. Bioremediation is accomplished by introducing living
organisms into the soil through an irrigation system. When combined with water,
heat and oxygen, these organisms naturally consume the hydrocarbons contained
in the soil, converting it into harmless gases which dissipate into the
atmosphere.
Officers of the Company
The Officers of the Company are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Position with Company Since
---- --- --------------------- -----
<S> <C> <C> <C>
Arthur E. Juhl 56 President and CEO 1998
</TABLE>
Employees
The Company has only one employee, its President.
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ITEM 2. PROPERTIES
The Company's properties consist of 104 acres located in Cyril,
Oklahoma on which is located an oil refinery capable of producing up to 5,000
barrels of oil per day. The refinery includes tanks to store crude oil and
related products, an office building, a lunch and changing facility, a test lab
and computer facility, a warehouse and shop and a truck loading facility.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in numerous lawsuits that could
materially affect its ability to operate. Also the Company has numerous
judgments in favor of creditors. Most suites have arisen because of the
Company's inability to timely pay all its obligations. The litigation can only
be satisfied if the Company is successful in securing new working capital as
planned.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not submitted any matters to the shareholders for a
vote during this reporting period.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded over-the-counter on the
Electronic Bulletin Board under the symbol "OKOK". During the last twelve
months, the bid price of the Company's stock has ranged in price from $0.03 to
$0.20 per share on a post reverse stock split basis. The Company has six market
makers as of December 31, 1998.
The transfer agent for the Company's stock is Chase Mellon Shareholder
Services, 450 West 33rd Street, 15th Floor, New York, NY 10001-2697. On
December 31, 1998, the outstanding shares of the Company's Common Stock totaled
46,744,911 shares and were held by approximately 2,250 shareholders of record.
The Company has never declared or paid any cash dividends and has no present
intention of paying cash dividends to common shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Presently, the Company has no liquidity or working capital. The
Company lacks necessary capital to meet its obligations. The Company has not
been able to meet its current obligations.
Results of Operations - Operating Revenues
The Company had no revenues in 1998.
Operating Costs and Expenses
Operating expenses remained the same as a result of the shut down of
the Company's Cyril Refinery operations.
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SIGNIFICANT EVENTS
Reactivation of Cyril Refinery
In January of 1994, the Company began its Cyril Refinery operations.
The Company shut down refinery operations in April of 1995. During the sixteen
months of operations, the Company experienced substantial mechanical problems
and was unable to meet product specifications demanded by its customers. As a
result, the Company realized significant losses from its operation of the Cyril
Refinery which caused the loss of its crude oil credit lines and the ultimate
shut down of refinery operations.
Although the Company is now pursuing financing which will enable it to
renew its financing arrangements and allow it to start up operations of the
Cyril Refinery again, there is absolutely no assurance that the Company will be
successful.
Sale of Company's Oil and Gas Assets to Satisfy Working Capital Debt
Effective January 1, 1995, the Company assigned substantially all its
oil and gas production to the Cayman Lenders Limited Liability Corporation in
exchange for a release of indebtedness and in lieu of foreclosure on the
$1,600,000 in debt loaned to it by a group of individuals known as the Capital
Investors. Such funds were borrowed by the Company in 1993 to finance the
renovation of the Cyril Refinery.
Cyril Refinery Vendor Payables
The Company and its subsidiary have a substantial amount of past-due
vendor payables for which it has no source of payment. The Company is currently
developing a plan to offer such vendors a settlement plan to be financed with
new investing funding. The Company has not yet secured such new financing and
can in no way be assured of securing such financing.
Oklahoma Industrial Finance Authority $750,000 Loan
On November 10, 1993, the Company secured a $750,000 loan from the
Oklahoma Industrial Finance Authority (OIFA), which funds were used to satisfy
a portion of the Company's start-up working capital needs. The OIFA loan was
for one year and is now in default with interest accruing at eight percent
(8%). The OIFA may decide to foreclose at any time.
<PAGE> 7
Environmental Considerations
In 1988, the Cyril Refinery property formerly owned by Oklahoma, was
placed on the National Priority List (NPL). This action was taken by the EPA in
accordance with the Comprehensive Environmental Response Compensation Liability
Act of 1980 (CERCLA), as amended by the Superfund and Reauthorization Act of
1986 (SARA). In 1991, the EPA concluded a Remedial Investigation/Feasibility
Study (RIFS) of the Cyril Refinery site. The RIFS identified certain areas
where contamination and hazardous chemicals exist. The RIFS conclusion was that
the contaminants found at the ORC site did not pose an immediate hazard of
significant risk to human health at off-site testing locations used by the
study. It was therefore determined that the contaminants contained within the
ORC site could be remediated over a period of time. In 1991, the EPA issued a
Proposed Plan of Action (PPA) which outlined several alternative actions which
could be taken to either contain, remediate or remove the identified
contaminated material. Following public hearings, the EPA issued its Record of
Decision (ROD) which together with the PPA outlines in general the EPA's plan
to clean up the entire ORC site.
In April 1997, the Oklahoma Department of Environmental Quality (ODEQ)
filed an announcement of changes to the CRC site remediation plan which greatly
reduced the scope and cost of the "clean-up" work. They announced that rather
than building a bioremediation plant, they plan to isolate the remaining soil
into one location on the ORC property (not on the Company's property) where
they will "encapsulate" the material with concrete. The ODEQ and EPA have
informed the Company that they will transport approximately 1,500 cubic yards
of soil from the Company's property to the EPA/ODEQ-controlled property to be
encapsulated.
The Company is aware of the need to cooperate with State and Federal
agencies to provide a plan and implement that plan to clean up any and all
identifiable hazards on its property. In January 1992, the Company executed a
Consent Agreement and Final Order with the Oklahoma State Department of Health.
All of the work required by such Consent to Order has now been completed by the
Company. In addition to the requirements made of the Company in accordance with
the Consent Order, the Company plans to continue to cooperate with the Oklahoma
State Department of Health (OSDH) and the EPA to complete the remediation of
all hazardous areas located on the CPC property. The Company has developed a
plan to achieve this goal and believes that those plans are feasible.
Management estimates, based upon review and evaluation of the above studies,
that the cost to transport the remaining soil to the EPA encapsulation site is
approximately $100,000. This will substantially complete the Company's
requirement under the Consent Order Dated January 1, 1992.
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Common Stock Issued
On March 7, 1997 the Company sold 15,200,000 shares of its common
stock, par value $.10, in a transaction outside the United States without
registration under the Securities and Exchange Act (the Act) of 1933. Such sale
was offered and accepted by a Canadian company (Purchaser), not a U.S. Person
as defined in Regulation S of the Act. The Company's common stock was issued in
consideration for the assignment of certain contract leasehold rights held by
the Purchaser to drill for oil and natural gas in Cameron Parish, South
Louisiana. These leases are not currently producing. The Company plans to
develop the leasehold over the next twelve months, which will require a
significant amount of capital. At this time, the Company does not have the
capital to develop these leases, but hopes to secure such financing. Because of
the Company's present poor financial condition, there is no assurance that it
will be able to secure the financing necessary to develop its Louisiana
leasehold rights. In 1998 because of the lack of financing the Company was
unable to develop the Louisiana leasehold rights.
On November 11, 1997, the Company sold 5,000,000 shares of its common
stock, par value $.10, in a transaction outside the United States without
registration under the Securities and Exchange Act (the Act) of 1933. Such sale
was offered and accepted by a Panamanian company (Purchaser), not a U.S. Person
as defined in Regulation S of the Act. The Company's common stock was issued in
consideration for the cancellation of Company debt incurred over the year for
the cash to maintain the Cyril Refinery and other general and administrative
costs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 are included elsewhere in
this report (see Part IV, Item 14).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH THE INDEPENDENT ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In March 1999, the Company engaged Turner, Stone & Company, L.L.P. to
complete an independent audit. There were no disagreements with the Company's
former auditors over any auditing, accounting or disclosure matters.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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OFFICERS
The following persons are the executive officers of the Company
and serve at the pleasure of the Board of Directors:
<TABLE>
<CAPTION>
Name Age Since Position with Company
- ---- --- ----- ---------------------
<S> <C> <C> <C>
Arthur E. Juhl 56 1998 President and CEO of
Oklahoma Energy Corporation,
President of Cyril
Petrochemical Corporation.
James Fuller 57 1998 Director
Fred S. Konigsberg 48 1998 Director
Don Mac Phail III 51 1998 Director
</TABLE>
Arthur E. Juhl
Mr. Juhl became President of the Company in July of 1998. Prior, he
was an officer and consultant to various corporations in "turn around"
situations. He has a degree in Mechanical Engineering and has attended law
school, as well as doing extensive studies in business and finance. He is well
acquainted with refinery operations and product marketing.
James Fuller
Mr. Fuller is President of North Coast Securities, a San Francisco
brokerage company. Mr. Fuller was a former Vice President of the New York Stock
Exchange and has been in the securities field for a number of years.
Fred S. Konigsberg
Mr. Konigsberg is a corporate attorney with extensive experience in
the securities field. He has represented many different corporations over the
years. His practice is both located in San Francisco and in the Los Angeles
area.
Don Mac Phail III
Mr. Mac Phail is President of Mac Phail Investment Group, a Boston
Massachusetts company that deals in stock and bonds and offers financial
planning. Mr. Mac Phail has been in the securities business for over thirty
years on the east coast.
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ITEM 11. EXECUTIVE COMPENSATION
CASH COMPENSATION
<TABLE>
<CAPTION>
Name of Capacity
Individual or in which
Number of Remuneration Cash Other
Persons in Group Received Compensation Remuneration
- ---------------- -------- ------------ ------------
<S> <C> <C> <C>
Arthur E. Juhl President $ 0 $ 51,000($15,000 paid
Oklahoma Energy in common
Corporation stock; $36,000
accrued)
</TABLE>
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
MANAGEMENT
Certain Beneficial Owners. The following table sets forth persons known to the
Company who own directly or beneficially more than five percent (5%) of the
voting common shares of the Company, both the Common Stock and the Common Stock
equivalent of all the preferred, as one sole class of stock being all the
authorized and issued stock of the Company. The total number of voting shares
of the Company's Common Stock at December 31, 1998 is 46,744,911 shares. (See
Notes to Item 11.)
<TABLE>
<CAPTION>
NUMBER OF VOTING
SHARES BENEFICIALLY PERCENTAGE OF TOTAL
HELD BY 5% OWNERS VOTING SHARES
----------------- -------------
<S> <C> <C>
Eileen Shaw 7,213,000 15.4%
</TABLE>
Ownership of Directors and Management. The following table sets forth the
ownership of all voting shares of the Company; both the Common Stock and the
Common Stock equivalent of the Preferred Stock, held by each of the officers
and directors of the Company as of August 15, 1994. (See Notes to Item 11.)
<TABLE>
<CAPTION>
NUMBER OF VOTING
SHARES BENEFICIALLY
OWNED BY PERCENTAGE OF TOTAL
OFFICERS & DIRECTORS VOTING SHARES
-------------------- -------------
<S> <C> <C>
Arthur E. Juhl 355,000 .8%
James Fuller 110,000 .2%
Don Mac Phail III 100,000 .2%
Fred S. Konigsberg -- --
Total beneficial ownership of
Officers & Directors 565,000 1.2%
</TABLE>
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NOTES TO ITEM 12 - SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(1) The nature of ownership of the shares described in the above table is
direct.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8K
(1) Financial Statements and Financial Statements Schedules. A list of
financial statements and financial statement schedules is contained in
"Index to Consolidated Financial Statements and Schedules" on page F-1
hereof.
(2) Reports on Form 8-K. Report filed July 2, 1998 - Change in Control of
Registrant.
Report filed December 11, 1998 - Change of Directors.
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
OKLAHOMA ENERGY CORPORATION
Formerly CAYMAN RESOURCES
CORPORATION
(Registrant)
Dated: March 18, 1999 By: /s/ Arthur E. Juhl
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Arthur E. Juhl, President and
Chief Executive Officer
