As filed with the Securities and Exchange Commission on January 28, 1997
REGISTRATION STATEMENT NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------
FORTUNE PETROLEUM CORPORATION
(Exact Name of Registrant as specified in its charter)
DELAWARE 95-4114732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 WEST GREENS ROAD, SUITE 720 HOUSTON, TEXAS 77067 (281) 872 1170
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
DEAN W. DRULIAS, ESQ.
FORTUNE PETROLEUM CORPORATION
515 WEST GREENS ROAD, SUITE 720
HOUSTON, TEXAS 77067
(281) 872-1170
(Name, address - including zip code, and
telephone number, including area code, of
agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================
PROPOSED
MAXIMUM
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE TO BE OFFERING PRICE(1) OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE PRICE FEE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 618,000 $ 2.8125(2) $1,738,125 $599
$.01 par value shares
========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee.
(2) Pursuant to Rule 457(e) of the General Rules and Regulations under the
Securities Act of 1933, as amended, the proposed maximum offering price
per share is based upon the average of the high and low price quoted on
the American Stock Exchange as of January 27, 1997.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
This Registration Statement is comprised of 24 pages. The Exhibit Index
appears on Page 15.
================================================================================
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN FORM S-3 LOCATION IN PROSPECTUS
- ---------------- ----------------------
<S> <C> <C>
ITEM 1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Cover Page, Cross-Reference
Sheet, Outside Front Cover
of Prospectus
ITEM 2. Inside Front and Outside Back Cover Pages of
Prospectus .................................... Inside Front and Outside Back
Cover Pages of Prospectus
ITEM 3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges .................. Prospectus Summary, Cover
Page, Risk Factors,
Selected Financial Data
ITEM 4. Use of Proceeds................................. Use of Proceeds
ITEM 5. Determination of Offering Price................. Not Applicable
ITEM 6. Dilution........................................ Not Applicable
ITEM 7. Selling Security Holders........................ Plan of Distribution
ITEM 8. Plan of Distribution............................ Plan of Distribution
ITEM 9. Description of Securities to be Registered...... Incorporation of
Information by Reference
ITEM 10. Interests of Named Experts and Counsel.......... Experts
ITEM 11. Material Changes................................ The Company, Recent
Developments, Business
and Properties
ITEM 12. Incorporation of Certain Information
by Reference .................................. Incorporation of
Information by Reference
ITEM 13. Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities................................ Plan of Distribution
</TABLE>
ii
<PAGE>
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
618,000 S H A R E S
FORTUNE PETROLEUM CORPORATION
(COMMON STOCK - $.01 PAR VALUE)
------------------------------
The shares of the Common Stock, $.01 par value (the "Common Stock") covered
by this prospectus may be offered from time to time by certain shareholders (the
"Selling Shareholders") of Fortune Petroleum Corporation ("Fortune" or the
"Company"). The Company will not receive any proceeds from the sale of shares by
the Selling Shareholders.
The Selling Shareholders include persons or entities who acquired shares of
Common Stock in a private placement pursuant to Regulation D in December 1996.
(SEE "PLAN OF DISTRIBUTION.")
The expenses incurred in registering the Shares, including legal and
accounting fees, will be paid by the Company. To the knowledge of the Company,
the Selling Shareholders have made no arrangement with any brokerage firm for
the sale of the Shares. The Selling Shareholders may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Act"). Any commissions received by a broker or dealer in connection with resale
of the Shares may be deemed to be underwriting commissions or discounts under
the Act. The Common Stock is listed on the American Stock Exchange. On January
27, 1997, the closing price of the Common Stock on such Exchange was $2.75.
The shares of Common Stock have not been registered for sale under the
securities laws of any state or other jurisdiction as of the date of this
Prospectus. Brokers or dealers effecting transactions in the Common Stock should
confirm the registration of the Common Stock under the securities laws of states
in which such transactions occur or the existence of an exemption from such
registration, or should cause such registration to occur in connection with any
offer or sale of the Common Stock.
Investment in the Common Stock entails certain risks. (SEE "RISK FACTORS")
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE TO PUBLIC UNDERWRITING DISCO PROCEEDS TO COMPANY (1)
--------------- ------------------ -----------------------
Per Share N/A N/A $ N/A
Total $ N/A N/A $ N/A
- --------------------------------------------------------------------------------
(1) None. All proceeds will be received by the Selling Shareholders, who will
bear all commissions payable to brokers or dealers in connection with the
sale of shares. The Company will bear all costs of the offering estimated
at $ 4,500.
------------------------------
The date of this Prospectus is JANUARY____, 1997
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements filed
by the Company with the Commission pursuant to the informational requirements of
the Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission, at Room 1024, Judiciary Plaza Building, 450 Fifth
Street, N.W. Washington, D.C. 20549, and the Regional offices of the Commission:
Seven World Trade Center, Suite 1300, New York, New York 10048, and Kluczynski
Federal Building, 230 South Dearborn Street, Room 3190, Chicago, Illinois 60604.
Copies of such material may be obtained at prescribed rates from the Public
Reference Section of the Commission at Room 1025, Judiciary Plaza Building, 450
Fifth St., N.W. Washington, D.C. 20549. In addition, reports and other
information concerning the Company can be inspected at the offices of the
American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006-1881,
on which the Common Stock is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), with respect to the Common Stock offered hereby. This Prospectus,
filed as part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and to the exhibits and schedules thereto, which may
be inspected at the Commission's offices without charge or copies of which may
be obtained from the Commission upon payment of the prescribed fees. Statements
made in the Prospectus as to the contents of any contract, agreement or document
referred to are not necessarily complete, and in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, and each such statement is qualified in its entirety by
such reference.
INCORPORATION OF INFORMATION BY REFERENCE
There is hereby incorporated by reference in this Prospectus and made a part
hereof (1) the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995, (2) the Quarterly Reports on Form 10-QSB for the periods
ending March 31, 1996, June 30, 1996, and September 30, 1996, and (3) Current
Reports on Form 8-K/A filed on January 5, 1996 and May 20, 1996, and Form 8-K
filed on February 23, 1996, March 8, 1996, April 29, 1996, and January 27, 1997.
There is also hereby incorporated by reference in this Prospectus and made a
part hereof the Company's Registration Statement on Form 8-A filed on September
13, 1993, which describes the Common Stock.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or to be incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein modifies, supersedes or replaces such statement. Any statements
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
No person is authorized to give any information or make any representations
other than those contained in the Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the registered shares
to which it relates or an offer to sell or a solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
2
<PAGE>
THE COMPANY
Fortune Petroleum Corporation ("Fortune" or the "Company") is an independent
public oil and natural gas company whose primary focus is on exploration for and
development of domestic oil and natural gas properties. The Company's principal
properties are located onshore and offshore Louisiana, and in the Texas and
Louisiana Gulf Coast.
During 1995, the Company implemented a program of exploration for
significant oil and natural gas reserves using state-of-the-art three
dimensional ("3D") seismic and computer-aided exploration ("CAEX") technology.
The Company believes that the use of 3D seismic and CAEX technology provides
more accurate and comprehensive geological data for evaluation of drilling
prospects than traditional two dimensional ("2D") seismic and evaluation
methods. In furtherance of this exploration program, in February 1995, Fortune
formed a strategic partnership with Zydeco Energy, Inc., (the "Zydeco 3D
Venture") and has since acquired an interest in over 20 exploration projects
(the "Zydeco Projects") in the shallow Gulf Coast waters of Louisiana. Since
late 1995, the Company has also acquired interests in additional prospects in
the Louisiana Gulf Coast and is continually evaluating other 3D and 2D
exploration projects with other industry partners.
At the same time, the Company seeks to take advantage of attractive
acquisition targets which will enable it to acquire reserves at an attractive
price. In furtherance of that objective, on December 11, 1995, the Company
purchased an interest in a producing oil and gas property located in the Gulf of
Mexico offshore Louisiana for cash.
The Company's principal executive offices are currently located at 515 West
Greens Road, Suite 720, Houston, Texas 77067 and its telephone number at that
address is (281) 872-1170.
BUSINESS STRATEGY
The Company has sought to add reserves in the most cost efficient and
effective manner. The Company previously focused its efforts on the acquisition
of producing properties in an effort to take advantage of what it believed to be
competitive prices for proved reserves with development potential in relation to
the cost of reserves discovered through exploration activities. In mid-1994, the
Company made a strategic decision to shift its emphasis away from the
acquisition of producing properties to exploration for oil and natural gas
reserves. This decision was prompted by increasing price competition for
attractive producing properties (caused by larger and better capitalized
companies moving into the acquisition market) and a general tightening in
available financing for acquisitions.
The Company's decision to shift its emphasis to exploration was further
influenced by several factors which Fortune believes create new opportunities
for exploration. These factors include increased availability of 3D seismic and
CAEX technology at competitive prices and the reallocation of exploration
budgets by major oil companies from domestic activity to international
exploration. This move by the major oil companies resulted in increased access
to geological and geophysical information relating to potential prospects, new
opportunities to enter into farmout agreements with respect to prospects held by
the major oil companies and less demand and price competition for domestic
acreage. To help facilitate its exploration strategy and focus its efforts, the
Company sold all of its California producing properties and used the proceeds
from such sale to retire debt. The Company relocated its headquarters to
Houston, Texas in February 1996.
The Company would expect to continue to review acquisition opportunities
which may be presented to it and to conclude acquisitions which further its
business objectives. Of course, no assurance can be given that any such
opportunities will present themselves or that the Company will be able to
conclude any transactions if they arise.
3
<PAGE>
RISK FACTORS
Investors should consider the following risk factors, among others, in
connection with an investment in the Common Stock:
RISKS ASSOCIATED WITH THE COMPANY
RECENT CHANGE IN BUSINESS STRATEGY. Fortune has recently changed its business
strategy from the acquisition of producing oil and gas properties with
anticipated development potential to a strategy which primarily stresses
exploratory drilling for oil and natural gas. Such a change means that the
Company will no longer be assured of acquiring producing oil and gas wells when
it expends funds for the acquisition of an interest in property. It also means
that when the Company expends funds to drill a well, the risk that the Company
will drill a dry hole and thus be unsuccessful in finding any oil and gas is
substantially increased. In such event, the Company would receive no return on
its investment. Were such a strategy to be pursued long enough, without success,
it could require the Company ultimately to suspend operations. Further, since
the Company does not have its own internal exploration staff, it is dependent on
outside consultants to find and evaluate exploration projects for it. As a
result, the Company must acquire its interests in projects from third parties,
often on a promoted basis (which means that the Company must pay a larger share
of the costs of exploration than its revenue share in the project).
WORKING CAPITAL; NEED FOR ADDITIONAL FINANCING. At September 30, 1996, the
Company had a working capital surplus of $176,000. However, the working capital
needs of the Company have increased since its inception. To date, the Company
has satisfied substantially all of its working capital needs through oil and gas
revenues, the public and private sale of common stock and debentures, the
Company's credit facility with Bank One, Texas (the "Credit Facility") and other
borrowings. The Company currently has sufficient capital or cash flow to meet
all of its projected capital needs for the near-term. However, if Zydeco were to
propose an accelerated drilling schedule under the Zydeco 3D Venture, Fortune
may not have sufficient capital or cash flow to participate. Further, Fortune
may not have sufficient capital to pursue other attractive projects not
currently contemplated which might be presented to it. All of the Company's
producing oil and gas properties are pledged to secure the Credit Facility. At
December 31, 1996, the total amount owed in the Credit Facility was $1,250,000,
and, due to past breaches of the cash-flow covenant, the Company does not have
any additional borrowing capacity under the Credit Facility at the date hereof.
NET LOSSES INCURRED BY COMPANY. During its last three fiscal years, the Company
has incurred net losses. The losses equaled $3,654,000, $2,943,000 and
$6,214,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
The Company incurred a net loss of $2,180,000 for the nine months ended
September 30, 1996, expects to incur a loss for the fourth quarter of 1996 and
for the year, and may continue to incur losses in the future. In addition, the
Company expects to incur a non-cash expense of approximately $896,000 in
connection with the Debentureholders' acceptance of the Company's pending
equity-exchange offer. No assurance can be given that the Company will be able
to meet its working capital needs out of its cash flow from operations. There
can be no assurance that Fortune can attain a sufficient level of revenues to
fund such requirements or that unbudgeted costs will not be incurred. Future
events, including the problems, delays, expenses and difficulties frequently
encountered by similarly situated companies, as well as changes in economic,
regulatory and competitive conditions, may lead to cost increases that could
make the Company's cash flow from operations insufficient to fund capital
requirements for the next 12 months. The Company may require additional outside
financing for the foreseeable future to fund capital expenditures deemed
desirable by management. No assurance can be given that any such financing will
be available on terms acceptable to the Company, if at all. Additional
financings may result in dilution for then current stockholders.
LIMITED SHORT-TERM IMPACT OF ZYDECO 3D VENTURE. The first well drilled on one of
the Zydeco Projects (the Aurora prospect) was plugged and abandoned in January
1996 after the Company determined that the costs of completion made the well
uneconomic. The Company retained a 100%
4
<PAGE>
working interest after Zydeco elected not to participate in the well. The dry
hole cost to Fortune of drilling and plugging and abandoning the well was
approximately $832,000. It is anticipated that other wells may be drilled on one
or more of the Zydeco projects in the future, though no assurance can be given
that any wells will be drilled. Even if such wells are drilled and are
successful, it is extremely unlikely that Fortune would receive any revenues
from wells drilled on any of these projects until several months after
completion. Therefore, investors should be aware that the Zydeco 3D Venture did
not have any impact on the Company's revenues or cash flow from operations
during 1996, and any impact during 1997 is doubtful. No assurance can be given
that Fortune will ever receive any revenues from any of the Zydeco projects.
NEED TO REPLACE RESERVES. Producing oil and gas reservoirs are, in general,
characterized by declining production rates. This decline rate depends on
reservoir characteristics, and varies from the steep decline rate characteristic
of the prolific reservoirs in the Gulf of Mexico to the relatively slow decline
rate characteristic of the long-lived (but less prolific) fields on the
California properties which the Company previously owned. The Company's future
oil and natural gas reserves and production, and thus cash flow and income, are
highly dependent on the Company's ability in finding or acquiring additional
reserves. Without adding new reserves in the future, the Company's oil and gas
reserves and production will decline over the long term. There can be no
assurance that the Company will be able to find and develop or acquire
additional reserves. In addition, approximately one-half of the Company's oil
and gas production revenue is currently derived from the So. Timbalier Block 76
well. Because of this concentration, any prolonged shut-down of the well could
result in material adverse consequences to the Company. (SEE "RISKS ASSOCIATED
WITH THE OIL AND GAS INDUSTRY - OPERATING HAZARDS".)
INTENTION TO FARMOUT PROPERTIES. The Company generally does not intend to retain
a full 50% working interest in any of the Zydeco Projects until it has adequate
capital to place at risk. There can be no assurance that the Company will be
able to farmout any portion of its interest in any of the Zydeco Projects. If
the Company is unable to farmout a portion of its interest, it must either
retain its 50% working interest, elect to not participate in the well or
exercise its "put" rights to Zydeco if Zydeco is participating in the well.
Further, Fortune may not be the operator of any of such projects and will thus
be dependent on other oil and gas companies to conduct operations in a prudent
and competent manner. In such a situation, Fortune will have little or no
control over the way in which operations are conducted. If the entity selected
to act as operator proves incompetent, Fortune could be forced to incur
additional costs to conduct remedial procedures and could lose its investment in
a property altogether.
PROPERTIES PLEDGED TO SECURE DEBT. All of the Company's producing properties are
pledged to secure the Credit Facility. A failure to pay the principal or
interest or breaches of financial covenants under the Credit Facility could
cause the Company to lose all or part of its interest in its principal producing
properties currently pledged to secure the Credit Facility. The entire principal
balance of the Credit Facility is due October 1, 1997, and the Company does not
currently have the financial resources necessary to repay the Credit Facility in
full without significantly curtailing its operations. The Company has obtained
extensions of the Credit Facility due date in the past. While management intends
to continue to seek extensions of the payment date for the principal balance of
the Credit Facility, no assurance can be given that Fortune will be able to
obtain any further relief from Bank One in the future. It is, therefore,
possible that Fortune's operating activities could be significantly curtailed
or, in the event that Fortune's financial position weakens significantly, that
substantially all of Fortune's productive properties could be seized by the Bank
through a foreclosure. (SEE "RISK FACTORS - WORKING CAPITAL; NEED FOR ADDITIONAL
FINANCING" FOR DISCUSSION OF NONCOMPLIANCE WITH THE CREDIT FACILITY CASH FLOW
COVENANT.)
FINANCIAL IMPAIRMENTS. The Company uses the successful efforts method of
accounting. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). SFAS 121 is effective for fiscal years beginning after December
15, 1995. The Company adopted SFAS 121 in the fourth quarter of 1995 and, as a
result, recorded a $2,530,000 impairment charge against 1995 operations. Due to
the uncertainty inherent in oil and
5
<PAGE>
gas prices, costs, and reserves, the Company may continue to experience
impairment losses in the future.
DEPENDENCE ON KEY OFFICER. To a large extent, the Company depends on the
abilities and continued participation of its key employee, Tyrone J. Fairbanks,
President and Chief Executive Officer. The loss of Mr. Fairbanks could have a
material adverse effect on the Company. In an effort to reduce the risk, the
Company has entered into an employment agreement with Mr. Fairbanks which
expires December 31, 1997. The Company has obtained $500,000 of key-man life
insurance on the life of Mr. Fairbanks.
RISKS ASSOCIATED WITH OIL AND GAS INDUSTRY
RISKS RELATED TO CURRENT OIL AND GAS MARKETS. There is substantial uncertainty
as to the prices at which oil and gas produced by the Company may be sold, and
it is possible that if product prices decline to a low enough level, the cost of
operating some or all of the Company's properties may not be economical. The
availability of a ready market for oil and gas and the prices obtained for such
oil and gas depend upon numerous factors beyond the control of the Company,
including competition from other oil and gas suppliers, and national and
international economic and political developments. The Company is not subject to
any natural gas price controls.
UNCERTAINTY OF ESTIMATES OF PROVED RESERVES AND FUTURE NET REVENUES. There are
numerous uncertainties inherent in estimating quantities of proved reserves and
in projecting future rates of production and timing of development expenditures,
including many factors beyond the control of the producer. The reserve data set
forth in this Prospectus represent only estimates. Estimating quantities of
proved reserves is inherently imprecise. Such estimates are based upon certain
assumptions about future production levels, future natural gas and crude oil
prices, and future operating costs made using currently available geologic
engineering and economic data, some or all of which may prove to be incorrect
over time. As a result of changes in these assumptions that may occur in the
future, and based upon further production history, results of future exploration
and development, future gas and oil prices and other factors, the quantity of
proved reserves may be subject to upward or downward adjustment. In addition,
the estimates of future net revenues from proved reserves of the Company and the
present value thereof are based on certain assumptions about future production
levels, prices, and costs that may not prove to be correct over time. The rate
of production from oil and gas properties declines as reserves are depleted.
Except to the extent the Company acquires additional properties containing
proved reserves, conducts successful exploration and development activities or,
through engineering studies, identifies additional behind-pipe zones or
secondary recovery reserves, the proved reserves of the Company will decline as
reserves are produced. Future oil and gas production is, therefore, highly
dependent upon the Company's level of success in acquiring or finding additional
reserves.
VOLATILITY OF OIL AND GAS PRICES. Oil and gas prices have been and may be
expected to continue to be quite volatile. This volatility depends on numerous
factors, including steps taken by OPEC, tensions in the Middle East and weather
conditions. The average gas prices received by the Company were $2.28, $2.09 and
$1.77 per Mcf in 1993, 1994 and 1995, respectively. The average oil prices
received by the Company were $14.33, $14.14 and $14.66 per Bbl in 1993, 1994 and
1995, respectively. At January 22, 1997, the Company was receiving an average of
$4.05 per Mcf for its gas production and $22.80 per Bbl for its oil production.
DRILLING RISKS. Drilling for oil and natural gas involves numerous risks,
including the risk that no commercially productive hydrocarbon reservoirs will
be encountered. The cost of drilling, completing and operating wells is often
uncertain and drilling operations may be curtailed, delayed or canceled as a
result of a variety of factors, including unexpected drilling conditions,
equipment failures or accidents and adverse weather conditions. The Company's
future drilling activities may not be successful and if unsuccessful, such
failure will have an adverse effect on the Company's future results of
operations and financial condition.
6
<PAGE>
OPERATING HAZARDS. The Company's operations are subject to all of the risks
normally incident to the operation and development of oil and gas properties and
the drilling of oil and gas wells, including encountering unexpected formations
or pressures, corrosive or hazardous substances, mechanical failure of
equipment, blowouts, cratering and fires, which could result in damage or injury
to, or destruction of, formations, producing facilities or other property or
could result in personal injuries, loss of life or pollution of the environment.
Any such event could result in substantial loss to the Company which could have
a material adverse effect on the Company's financial condition, such as the
mechanical failure of downhole equipment at the Company's South Timbalier Block
76 well last spring. As a result of this equipment failure, the well was shut in
from April 29, 1996 to July 6, 1996; the remedial workover cost the Company
approximately $270,000. In addition, because of the Company's strategy of
acquiring interests in underdeveloped oil and gas fields that have been operated
by others for many years, the Company may be liable for any damage or pollution
caused by any prior operations on such oil and gas fields. Although such
operational risks and hazards may to some extent be minimized, no combination of
experience, knowledge and scientific evaluation can eliminate the risk of
investment or assure a profit to any company engaged in oil and gas operations.
UNINSURED RISKS. Under the terms of operating agreements entered into with the
operator of wells in which the Company has an interest, it is anticipated that
the operators will carry insurance against certain risks of oil and gas
operations. The Company would normally be required to pay its proportionate
share of the premiums for such insurance and be named as an additional insured
under the policy. However, the Company may not be fully insured against all
risks, either because such insurance is not available or because of high premium
costs.
WEATHER HAZARDS. Weather conditions, including severe rains and winter
conditions, have adversely impacted the Company's oil and gas operations. For
example, severe winter conditions on the San Juan Basin, New Mexico property
have, in the past, caused curtailment of operations, including attempts to
complete wells which have been drilled. The inability to produce existing wells
and to complete wells which may yield commercial quantities of oil or gas has an
adverse impact on the Company's cash flow and financial condition. Weather
conditions in the future, including hurricanes in the Gulf of Mexico, could
interrupt or prevent production and drilling operations in the Gulf of Mexico
and the coastal counties and parishes of the Gulf Coast and could result in
damaged equipment or facilities.
ENVIRONMENTAL HAZARDS. Oil and gas operations present risks of environmental
contamination from drilling operations and leakage from oil field storage or
transportation facilities. The Company has never experienced a significant
environmental mishap, but spills of oil could occur which could create material
liability to the Company for clean-up expenses. Environmental contamination has
occurred on the San Juan Basin, New Mexico property prior to the Company's
acquisition of its interest but was cleaned up at no cost to the Company.
Although there can be no assurance of any third party recovery in the event of a
material liability, the Company generally seeks an indemnity from the Seller
against claims for environmental hazards on properties acquired through its
acquisition program. In addition, the Company carries $2,000,000 of
environmental insurance with a $10,000 deductible to cover potential liability
for onshore environmental hazards, and $1,000,000 coverage with a $25,000
deductible for offshore hazards.
COMPETITION. The oil and gas exploration, production and acquisition business is
highly competitive. A large number of companies and individuals engage in
acquiring properties or drilling for oil and gas, and there is a high degree of
competition for desirable oil and gas properties. There is also competition
between the oil and gas industries and other industries in supplying the energy
and fuel requirements of industrial, commercial, residential and other
consumers. Many of the Company's competitors have greater financial and other
resources than does the Company, and no assurance can be given that the Company
will be able to compete successfully in acquiring desirable properties.
GOVERNMENT REGULATION. The Company's business is regulated by certain federal,
state and local laws and regulations relating to the development, production,
marketing and transmission of oil and
7
<PAGE>
gas, as well as environmental and safety matters. There is no assurance that
laws and regulations enacted in the future will not adversely affect the
Company's exploration for, or the production and marketing of, oil and gas. From
time to time, proposals are introduced in Congress or by the Administration
which could affect the Company's oil and gas operations.
SHORTAGES OF SUPPLIES AND EQUIPMENT. The Company's ability to conduct its
operations in a timely and cost effective manner is subject to the availability
of oil and gas field supplies, equipment and service crews. The industry is
currently experiencing a shortage of certain types of drilling rigs and work
boats in the Gulf of Mexico. This shortage could result in delays in the
Company's operations as well as higher operating and capital costs. Shortages of
other drilling equipment, tubular goods, drilling service crews and seismic
crews could occur from time to time further hindering the Company's ability to
conduct its operations as planned.
RISKS ASSOCIATED WITH INVESTMENT IN THE COMMON STOCK
NO PROCEEDS TO FORTUNE. Fortune will not receive any proceeds from this
offering. Nevertheless, the Company will be required to pay all expenses of the
offering estimated to be less than $4,500.
MARKET PRICE VOLATILITY. The market price of the Common Stock and the Company's
warrants may be subject to significant fluctuations in response to drilling
results and the financial results of operations. Developments affecting the oil
and gas industry generally, including national and international economic
conditions and government regulation, could also have a significant impact on
the market price of the Common Stock and warrants. In addition, the stock market
in recent years has experienced significant price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
companies, and the price of the Common Stock and warrants could be affected by
such fluctuations.
SECURITIES MARKET FACTORS. The markets for equity securities have been volatile
and the price of the Company's Common Stock has in the past been, and could in
the future be, subject to wide fluctuations in response to quarter to quarter
variations in operating results, news announcements, trading volume, general
market trends and other factors. There can be no assurance that the Common Stock
sold in this offering will trade in the future at market prices in excess of the
purchase prices.
ABSENCE OF DIVIDENDS. The Company has not paid dividends since its inception,
and it does not anticipate paying dividends on its Common Stock in the
foreseeable future. Under the Credit Facility, the Company may not pay dividends
on its capital stock without the prior written consent of the bank. In addition,
the indenture under which the Company's outstanding debentures were issued
restricts the payment of dividends.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of the Common
Stock in the public market could adversely affect the market price of the
Company's Common Stock. At December 31, 1996, the Company had outstanding
options and warrants to purchase an aggregate of 6,754,988 shares of Common
Stock which are currently exercisable. At that date, there were 11,868,161
shares of Common Stock outstanding, of which 10,668,560 shares are freely
tradable and 1,199,601 shares are restricted from sale under Rule 144 adopted by
the Commission under the Act. The Company has also filed a registration
statement under the Securities Act of 1933 for the issuance of up to an
additional 1,041,900 shares of Common Stock upon the proposed conversion of the
Company's outstanding Debentures and upon exercise of warrants to be issued in
connection with such conversion.
In connection with the Company's acquisition of its interest in the Zydeco 3D
Venture, Fortune issued 1,200,000 shares of Common Stock and 1,200,000 five year
stock purchase warrants exercisable at $4.75 per share. Pursuant to court order,
Fortune has placed in escrow 400,000
8
<PAGE>
shares of Common Stock and 400,000 warrants due to the stockholders of LEX until
a dispute which has arisen among them is resolved. Even if such dispute is
resolved, 400,000 shares and warrants will remain in escrow pending the
satisfaction of certain conditions. Financing of subsequent contributions to the
Zydeco 3D Venture and funding of the Company's share of drilling costs on the
Zydeco Projects could require the issuance of additional securities.
"RESET" SHARES. In connection with the acquisition of the South Timbalier Block
76, the Company issued shares in a Regulation S offering. The shares were sold
subject to "reset" provisions which required the Company to issue additional
shares if the market price of the Common Stock declined during certain
recalculation periods. The price did decline in the first quarter of 1996, and
the purchasers have demanded the issuance of an additional 1,266,000 shares. The
Company has declined to issue such shares pending completion of an investigation
into whether the price decline was a result of market manipulation. Certain
purchasers have filed suit to compel the issuance of such shares.
ANTI-TAKEOVER PROVISIONS. Section 203 of the Delaware General Corporation Law
could have the effect of delaying, deferring or preventing a change of control
of the Company. Section 203 prevents an "interested stockholder" (generally, any
person owning 15% or more of a corporation's outstanding voting stock) from
engaging in a "business combination" (as defined) for three years following the
date such person became an interested stockholder unless certain exceptions are
met. In addition, the Company has a substantial amount of authorized but
unissued Common Stock and preferred stock. The Commission has indicated that the
use of authorized but unissued shares of voting stock, including both common
stock and preferred stock the terms of which may be established by the board of
directors, could have an anti-takeover effect.
USE OF PROCEEDS
The shares which are the subject of this Prospectus may be offered and sold
from time to time by the Selling Shareholders. The Company will not receive any
of the proceeds of such sales. The Company agreed to bear all expenses of
registering such shares, including accounting and printing costs estimated at
$4,500.
9
<PAGE>
PLAN OF DISTRIBUTION
Selling shareholders may offer and sell shares pursuant to this Prospectus
from time to time on the American Stock Exchange or through individually
negotiated transactions or in other ways. The Company is not aware of any
agreements which may have been entered into by any Selling Shareholder with
brokers, dealers or third parties for the offer or sale of any shares. The
Company will not be a party to any such agreements nor will it participate in
the negotiation or consummation of any such agreements or the offer and sale of
any of the shares covered by this Prospectus.
The Selling Shareholders include persons or entities who acquired shares of
Common Stock in a private placement of the Common Stock under Regulation D in
December 1996.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
The table below sets forth data on the number of shares (including shares
issuable upon exercise of options, warrants or convertible securities) held by
each of the Selling Shareholders as of December 31, 1996:
SECURITIES SECURITIES PERCENTAGE
OWNED BEFORE IN OF CLASS
NAME POSITION OFFERING OFFERING OWNED(1)
---- -------- ------------ ---------- ----------
Fechtor, Detwiler & Co., Inc.,
TTEE F/B/O
Robert R. Detwiler, IRA Shareholder 4,500 4,500 *
Robert R. Detwiler Shareholder 18,000 18,000 *
Betsey L. Detwiler Shareholder 15,000 15,000 *
M & C Partners, III Shareholder 97,500 97,500 *
Robert Chestman Shareholder 15,000 15,000 *
F. Paul Mulligan, IRA Shareholder 37,500 37,500 *
Rolf W. Wagner Shareholder 18,000 18,000 *
Richard E. Carter Shareholder 37,500 37,500 *
AIM Overseas, LTD. Shareholder 375,000 375,000 3.1%
- -----------------
(1) Asterisk indicates less than 1%.
EXPERTS
The financial statements of the Company as of December 31, 1994 and 1995 and
for each of the years in the three year period ended December 31, 1995, and the
statements of revenues and direct operating expenses of the oil and gas property
interests acquired from PetroFina S.A. for each of the years in the three year
period ended December 31, 1994 have been incorporated herein by reference and in
the Registration Statement in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated herein by reference
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1995 financial
statements of the Company refers to the adoption of the provisions of statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of," as of December 31,
1995.
The information incorporated herein with respect to net proved oil and gas
reserves of the Company at December 31, 1993, 1994 and 1995, was estimated by
Huddleston & Co., Inc., independent petroleum engineers, and at December 31,
1993 and 1994 was estimated by Sherwin D. Yoelin, petroleum engineer, and is
included herein on the authority of such engineers as experts in petroleum
engineering.
10
<PAGE>
============================================
TABLE OF CONTENTS
PAGE
----
Cover Page 1
Additional Information 2
Incorporation of Information
by Reference 2
The Company 3
Risk Factors 4
Use of Proceeds 9
Plan of Distribution 10
Experts 10
============================================
618,000 SHARES
COMMON STOCK
($.01 PAR VALUE)
FORTUNE PETROLEUM
CORPORATION
------------
P R O S P E C T U S
------------
JANUARY ____, 1997
============================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant estimates that expenses in connection with the offering
described in the Registration Statement will be as follows:
Securities and Exchange Commission Registration Fee.. $ 599
Accountants' Fees and Expenses....................... $ 2,500
Printing and Miscellaneous........................... $ 901
Stock Transfer Agent Charges......................... $ 500
TOTAL.......................................... $ 4,500
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits the
indemnification of officers, directors, employees and agents of Delaware
corporations. The Certificate of Incorporation and Bylaws of the Company provide
that the corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware as it may be amended from
time to time, indemnify and hold harmless each person who was or is a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
whom he or she is a legal representative, is or was a director or officer of the
Company or is or was serving at the request of the Company as director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action or inaction in an
official capacity or in any other capacity while serving as a director, officer,
employee or agent, against all costs, charges, expenses, liabilities and losses
(including attorney's fees, judgments, fines, excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith, and such indemnification shall continue as
to person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of his or her heirs, executors and administrators.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NUMBER DESCRIPTION
------ -----------
5 -- Opinion of Dean W. Drulias, Esq.
regarding legality of securities (filed herewith)
15.1 -- Consents of KPMG Peat Marwick LLP (filed herewith).
& 15.2
II-1
<PAGE>
23.1 -- Consent of Huddleston (filed herewith).
23.2 -- Consent of Sherwin Yoelin (filed herewith).
24 -- Power of Attorney (included in the signature page of this
Registration Statement)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made, a
post effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement:
Provided however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4)(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
of controlling person of the registrant in the successful defense of
any action, suit of proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(this space left blank intentionally)
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on January 27, 1997.
FORTUNE PETROLEUM CORPORATION
By: /s/ TYRONE J. FAIRBANKS
Tyrone J. Fairbanks
President and Chief Executive Officer
By: /s/ J. MICHAEL URBAN
J. Michael Urban
Vice President and Chief Financial and
Accounting Officer
Each person whose signature appears below constitutes and appoints Tyrone J.
Fairbanks and Dean W. Drulias, and each of them, as his true and lawful
attorneys-in-fact with full power of substitution and resubstitution, for him
and his name, place and stead, in any and all capacities, to sign any or all
amendments (including post effective amendments) to this Registration Statement,
and to file the same, with all exhibits hereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the foregoing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacities
and on the dates stated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ TYRONE J. FAIRBANKS President, Chief January 27, 1997
Tyrone J. Fairbanks Executive Officer
/s/ DEAN W. DRULIAS Director January 27, 1997
Dean W. Drulias
/s/ GRAHAM S. FOLSOM Director January 27, 1997
Graham S. Folsom
/s/ WILLIAM T. WALKER, JR. Director January 27, 1997
William T. Walker, Jr.
/s/ BARRY FEINER Director January 27, 1997
Barry Feiner
/s/ GARY GELMAN Director January 27, 1997
Gary Gelman
II-4
EXHIBIT 5
January 28, 1997
FORTUNE PETROLEUM CORPORATION
515 West Greens Road
Suite 720
Houston, Texas 77067
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
The undersigned, an officer, director, and shareholder of registrant (the
"Company"), has examined the Registration Statement on Form S-3 (the
"Registration Statement") which the company has filed with the Securities and
Exchange commission in connection with the registration under the Securities Act
of 1933, as amended (the "Act"), of an aggregate of 618,000 shares of Common
Stock, $.01 par value ("Common Stock").
In rendering this opinion, I have examined the Company's Certificate of
Incorporation, as amended, the Company's By-Laws, as amended, the minutes of the
proceedings of the Company's board of directors at which resolutions pertaining
to the Common Stock were adopted, the form of warrant certificate to be issued
as part of this transaction, and such other materials as deemed relevant.
Based on the foregoing and in reliance thereon, I am of the opinion that the
Common Stock, as issued, is legally and validly issued, fully paid and
nonassessable.
I hereby consent to the references to, and the inclusion of, this opinion in
the Registration Statement and any amendments thereto.
Respectfully,
/s/ DEAN W. DRULIAS
General Counsel
EXHIBIT 15.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Fortune Petroleum Corporation:
We consent to the use of our report on the financial statements of the
Company incorporated herein by reference and to the reference to our firm under
the heading "Experts" in the Prospectus.
Our report dated March 15, 1996 refers to the adoption of the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" as of
December 31, 1995.
KPMG Peat Marwick LLP
Houston, Texas
January 23, 1997
EXHIBIT 15.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Fortune Petroleum Corporation:
We consent to the incorporation by reference herein of our report dated December
20, 1995, with respect to the statements of revenues and direct operating
expenses of the oil and gas property interests acquired from PetroFina S.A. for
each of the years in the three-year period ended December 31, 1994.
KPMG Peat Marwick LLP
Houston, Texas
January 23, 1997
EXHIBIT 23.1
HUDDLESTON & CO., INC.
PETROLEUM AND GEOLOGICAL ENGINEERS
1111 FANNIN-SUITE 1700
HOUSTON, TEXAS 77002
-----
(713) 658-0248
CONSENT OF INDEPENDENT PETROLEUM ENGINEER
January 23, 1997
Fortune Petroleum Corporation
One Commerce Green
515 W. Greens Road, Suite 720
Houston, Texas 77067
Dear Sirs:
We hereby consent to the filing of this consent as an exhibit to the
Registration Statement on Form S-3 of Fortune Petroleum Corporation to be filed
with the Securities and Exchange Commission on or about January 24, 1997, to the
use of our name therein, and to the inclusions of or reference to our reports of
estimated future reserves and revenues effective December 31, 1993, December 31,
1994 and December 31, 1995.
HUDDLESTON & CO., INC.
/s/ PETER D. HUDDLESTON
Peter D. Huddleston, P.E.
EXHIBIT 23.2
SHERWIN D. YOELIN, PETROLEUM ENGINEER INC.
1439 BONNIE JEAN ROAD
LA HABRA HEIGHTS, CALIFORNIA 90631
310/697-3700
January 23, 1997
Fortune Petroleum Corporation
One Commerce Green
515 W. Greens Road, Suite 720
Houston, Texas 77067
Re: Consent of Independent Petroleum Engineer
Gentlemen:
I hereby consent to the incorporation of my January 1, 1994 and January 1, 1995,
Annual Reserve Reports of the oil and gas reserves of Fortune Petroleum
Corporation dated February 15, 1994, and February 27, 1995, respectively, in the
Prospectus constituting part of the Registration Statement on SEC Form S-3 to be
filed on or about January 24, 1997.
Respectfully,
/s/ SHERWIN D. YOELIN
Sherwin D. Yoelin
Registered Petroleum Engineer
State of California
Certificate No. P 1241
