<PAGE>
As filed with the Securities and Exchange Commission on May 23, 1996
Registration No. 33-
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
SHEFFIELD EXPLORATION COMPANY, INC.
(Exact name of registrant as specified in its charter)
_________________________
DELAWARE 06-1052062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1801 BROADWAY, SUITE 600
DENVER, COLORADO 80202
(303) 296-1908
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
AMENDED AND RESTATED 1990 STOCK OPTION PLAN,
KEY EMPLOYEE BONUS AGREEMENTS,
SPECIAL PURCHASE WARRANT, 401(K) PLAN
(Full titles of plans)
_________________________
DAVID L. MILANESI WITH A COPY TO:
VICE PRESIDENT, TREASURER AND SECRETARY LESTER R. WOODWARD, ESQ.
1801 BROADWAY, SUITE 600 DAVIS, GRAHAM & STUBBS LLP
DENVER, COLORADO 80202 370 17TH STREET, SUITE 4700
(303)296-1908 DENVER, COLORADO 80202
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered per share<F1> offering price<F1> registration fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.01 par value). . . . 471,167 shares $3.86 $1,819,418 $627.39
=============================================================================================================================
<FN>
<F1> Estimated solely for the purposes of calculating the amount of the registration fee pursuant to Rule 457(c). The
price per share and aggregate offering price are based upon (a) the actual exercise price for shares to be issued
pursuant to options previously granted under the Company's Amended and Restated 1990 Stock Option Plan; and (b) the
closing sale price of the Company's Common Stock on May 20, 1996 as reported by the American Stock Exchange Emerging
Company Marketplace for shares of Common Stock previously issued as restricted stock awards under the Key Employee
Bonus Agreements, for shares issued for the Company's 401(k) Plan, for shares subject to options that may be granted
under the Amended and Restated 1990 Stock Option Plan and for shares issued under the Special Purchase Warrant.
</TABLE>
<PAGE>
REOFFER PROSPECTUS
SHEFFIELD EXPLORATION COMPANY, INC.
331,108 SHARES
COMMON STOCK
($.01 PAR VALUE)
_______________________________________________
This Prospectus relates to the offer and sale by
certain stockholders (the "Selling Stockholders") for their respective
accounts of shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Sheffield Exploration Company, Inc. (the
"Company") (1) which are issuable or have been issued upon exercise of
stock options granted by the Company pursuant to the Company's Amended
and Restated 1990 Stock Option Plan (the "Plan"); (2) which have been
issued by the Company in the form of restricted stock awards pursuant
to key employee bonus agreements ("Bonus Agreements"); and (3) which
have been issued by the Company upon exercise of a Special Purchase
Warrant. As of the date hereof, stock options for a total of
41,442 shares of Common Stock granted to the Selling Stockholders
pursuant to the Plan have been exercised and 193,000 options remain
outstanding, all of which have vested as of the date hereof. As of
the date hereof, 53,333 shares of Common Stock have been issued to
certain of the Selling Stockholders as restricted stock awards under
the Bonus Agreements, and 43,333 shares of Common Stock have been
issued to a Selling Stockholder pursuant to the Special Purchase
Warrant. All of such shares are offered hereby.
The Company will not receive any of the proceeds from
sales of Common Stock by the Selling Stockholders.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE PURCHASERS SHOULD CAREFULLY REVIEW THE MATTERS SET
FORTH IN "RISK FACTORS."
_________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________________
The date of this Prospectus is May 23, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). These reports, proxy statements and other information
filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's
regional offices at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621-2511 and 75 Park Place,
Room 1228, New York, New York 10007. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
A registration statement on Form S-8 with respect to the Common
Stock offered by this Prospectus (the "Registration Statement") has
been filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all
of the information contained in such Registration Statement, certain
portions of which have been omitted pursuant to the rules and
regulations of the Commission. Accordingly, additional information
concerning the Company and such securities can be found in the
Registration Statement, including various exhibits and schedules
thereto, which may be inspected at the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is listed on the American Stock
Exchange Emerging Company Marketplace under the symbol "SHE" These
reports, proxy statements and other information filed by the Company
may also be inspected at such Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed or to be filed with the Commission
by the Company under the Exchange Act are herein incorporated by
reference:
(a) The Company's Annual Report on Form 10-K for the year ended
June 30, 1995, filed with the Commission pursuant to the Exchange Act
on October 3, 1995.
(b) Amendment No. 1 to the Company's Annual Report on
Form 10-K/A for the year ended June 30, 1995, as filed with the
Commission on December 11, 1995.
(c) The Company's Current Report on Form 8-K, as filed with the
Commission on October 12, 1995.
(d) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, as filed with the Commission on November 13,
1995.
(e) The Company's Current Report on Form 8-K, as filed with the
Commission on February 7, 1996.
(f) The Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995, as filed with the Commission on February 14,
1996.
-2-<PAGE>
(g) Amendment to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1995, as filed with the Commission on
February 14, 1996.
(h) Amendment No. 1 to the Company's Registration Statement on
Form S-4, as filed with the Commission on May 10, 1996.
(i) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, as filed with the Commission on May 15, 1996.
(j) The description of the Company's Common Stock contained in
the Company's Registration Statement on Form S-1 (No. 33-16265), filed
with the Commission pursuant to the Exchange Act on October 9, 1987.
(k) All other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the
offering of Common Stock.
Any statement contained in a document incorporated, or deemed to
be incorporated, by reference herein or contained in this Prospectus
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a Prospectus is
delivered, upon written or oral request of such person, a copy of any
and all of the documents that have been incorporated by reference in
this Prospectus (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically
incorporated by reference into such documents). Such request may be
directed to the Company, 1801 Broadway, Suite 600, Denver, Colorado
80202, Attention: J. Samuel Butler, President, telephone
(303) 296-1908.
________________________________
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-3-<PAGE>
THE COMPANY
The Company engages in the acquisition, exploration, development,
production and sale of crude oil and natural gas and in the gathering
and processing of "wet" natural gas into residue ("dry") natural gas
and natural gas liquids. Through the fiscal year ended June 30, 1995,
natural gas gathering, storing and processing activities were located
in North Dakota, Kansas and Oklahoma, but the Company recently sold
its holdings in Kansas and Oklahoma, leaving North Dakota as the sole
site for the Company's current natural gas processing and gathering
activities. The Company's development drilling activities have been
conducted in the Berry Cox Field and the Laredo Field in south Texas
and more recently in the Pinedale Field in Wyoming. The Company also
engages in well recompletion work in the Williston Basin (Montana and
North Dakota).
On February 6, 1996, the Company executed an agreement with
TransMontaigne Oil Company ("TransMontaigne"), a privately-held,
Denver-based holding company, to merge TransMontaigne into Sheffield
(the "Merger"), subject to stockholder approval. Sheffield will be
the surviving corporation and its name will be changed to
TransMontaigne Oil Company. The current stockholders of
TransMontaigne will own 93% of the surviving corporation. The board
of directors of the surviving entity will consist of the members of
the current TransMontaigne board, as well as Edwin H. Morgens,
chairman of Sheffield. The current officers of TransMontaigne will
serve as officers after the Merger.
On May 10, 1996, a Form S-4 Registration Statement registering
the shares to be issued in connection with the proposed Merger became
effective with the Securities and Exchange Commission. A proxy
statement/prospectus was mailed to all of the Company's stockholders
regarding a special stockholders' meeting to be held on June 3, 1996
for the purpose of voting on the Merger.
The Company's principal offices are located at 1801 Broadway,
Suite 600, Denver, Colorado 80202. The Company's telephone number is
(303) 296-1908.
The Company's Common Stock is listed on the American Stock
Exchange, Emerging Company Marketplace under the symbol "SHE". On
May 20, 1996, the closing sale price of the Common Stock was $5.50 per
share.
-4-<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating the
Company and its business before purchasing shares of the Common Stock
offered hereby.
As stated above, the Company has agreed to the Merger of
TransMontaigne into the Company, subject to approval by the
stockholders at a meeting to be held on June 3, 1996. The following
factors relating to TransMontaigne and the post-merger company should
be considered in evaluating a possible investment in the stock of the
Company after the proposed Merger is consummated.
Price Volatility. TransMontaigne's wholly-owned subsidiary,
Continental Ozark, Inc. ("COZ"), is engaged in a products supply and
distribution business involving the bulk purchase and sale of refined
petroleum products and the wholesale marketing of products at terminal
truck loading rack locations. This business is characterized by thin
margins. In recent years, prices of refined products have fluctuated
significantly and COZ has experienced losses resulting from its
purchase of inventory during periods of higher prices and its sale of
portions of that inventory at lower prices. Prices of refined
petroleum products depend upon numerous factors beyond COZ's control,
including the supply of and demand for gasoline and other refined
products, which are affected by, among other things, changes in
domestic and foreign economies, political affairs, production levels,
the availability of imports, the marketing of gasoline and other
refined products by competitors, the marketing of competitive fuels,
the impact of energy conservation efforts and the extent of government
regulation. The prices which COZ receives for products are also
affected by regional factors, such as local market conditions,
transportation costs and the operations of companies providing
competing services.
Price Risk Management. COZ attempts to minimize its exposure to
the risk of price volatility related to the purchase and sale of
refined products by selectively hedging through the purchase and sale
of futures and options contracts that are intended to offset the
effects of price fluctuations. COZ faces some risks that cannot be
effectively hedged, including price risks on products for which
futures contracts are not traded on the New York Mercantile Exchange
(the "NYMEX"), such as mid-continent gasoline (as opposed to New York
Harbor reformulated unleaded gasoline, which is traded on the NYMEX)
and basis risks (the risk that price differentials between delivery
points, delivery periods or types of products will change). COZ
experiences basis risk in its mid-continent operations because of the
differences between mid-continent spot prices and NYMEX futures
contract prices. COZ generally does not hedge the price risk on
certain portions of its inventory, consisting of pipeline fill, tank
bottoms and a minimum product supply required to satisfy exchange
obligations; this product is not held for sale because it is required
in order to maintain a "wet system" (a pipeline must be full of
product, or "wet," at all times in order to accept product volume at
one end and deliver the same volume at the other end, and minimum
storage tank bottoms of approximately two feet of products are
required in order to assure that no vapor enters the piping system).
COZ, however, could be required to recognize a financial statement
loss on a portion of its inventory arising from market price
fluctuations in order to reflect lower of cost or market adjustments.
COZ is also exposed to credit risks in the event the other party to a
futures contract is unable to perform
-5-<PAGE>
its contractual obligations. There can be no assurance that hedging
will be effective in limiting any adverse effects of refined products
price fluctuations on COZ's operations or its overall profitability.
Competition. COZ competes with major and independent petroleum
companies, national, regional and local pipeline and terminaling
companies and other product suppliers and exchangers, many of which
have larger facilities systems, control substantially greater supplies
of product and have significantly greater financial resources than
COZ.
Effect of Reduced Demand on Pipeline Shipments and Terminal
Volume. COZ's pipeline and terminals business depends in large part
on the level of demand for refined petroleum products in the markets
served. The demand for products by the shippers, including COZ,
fluctuates and can be adversely affected by numerous factors,
including weather conditions; local and regional economic
considerations; automobile, commercial and agricultural usage; product
availability and prices; seasonality; and alternative sources of
supply. The possible impact of future fuel conservation programs and
related governmental regulations, technological advances in fuel
economy and alternative sources of energy generation could also
adversely affect the demand for products and reduce COZ's revenue
generated from pipeline tariffs and terminaling fees.
Dependence on Crude Oil Supplies. Refineries that produce the
refined petroleum products transported through COZ's pipeline systems
and handled at COZ's terminals are dependent on adequate supplies of
suitable grades of crude oil. A material decline in crude oil
supplies could adversely affect COZ's tariff revenues from pipeline
shipments of refined petroleum products, terminaling and storage fees
and margins from bulk and truck loading rack product sales.
COZ's Operations are Subject to Certain Operational Hazards and
Unforeseen Interruptions. COZ's operations are subject to the
customary hazards of the products transportation business, as well as
those associated with terminal and storage facilities, including
leaks, spills, fires and injury to personnel. Operations also could
be interrupted by natural disasters, adverse weather or other events
beyond COZ's control. Furthermore, COZ transports volatile petroleum
products such as gasoline, diesel oil and jet fuel in areas of high
population density. COZ carries insurance for some, but not all,
accidents and disruptions, and there can be no assurance that coverage
will be adequate to cover all losses.
Seasonal Variation in Product Demand. The mix of refined
petroleum products delivered varies seasonally, with gasoline demand
peaking in early summer and diesel fuel demand peaking in the fall.
This can cause fluctuations in revenues, as can variations in weather
patterns from year to year.
Environmental, Safety and Other Regulatory Matters. The business
of COZ is subject to the jurisdiction of governmental agencies with
respect to environmental, safety and other regulatory matters. COZ
could be adversely affected by environmental costs and liabilities
that may be incurred. Future environmental regulations might
adversely impact COZ's products and activities. Risks of substantial
costs and liabilities are inherent in pipeline, terminaling and
-6-<PAGE>
storage operations, and there can be no assurance that substantial
costs and liabilities will not be incurred. COZ currently owns, and
has in the past owned, properties that have been used for terminaling
or storage of petroleum products. Hydrocarbons or other solid wastes
may have been previously disposed of or released on or under some of
the properties owned by COZ. It is possible that developments, such
as increasingly strict environmental laws, regulations and enforcement
policies thereunder, and claims for damages to property or persons
resulting from the operations of COZ or previous owners or operators,
could result in substantial costs and liabilities to COZ. Federal and
state agencies also could change the tariffs that pipelines may charge
or may impose additional safety requirements, any of which could
affect profitability.
The following factors relating to the terms of the proposed
Merger, the outlook for the Company if the proposed Merger is not
consummated, and other risks that presently affect the Company and
which will continue to affect the Company in the event that the
proposed Merger is not consummated should be considered in evaluating
a possible investment in the stock of the Company prior to
consummation of the Merger or in the event that the Merger is
abandoned.
Determination of Number of Shares to be received in the Proposed
Merger. The number of shares of common stock to be received by the
Company's stockholders in the proposed merger between the Company and
TransMontaigne Oil Company was determined by negotiations between
TransMontaigne and the Company, and was based upon a number of
factors. The number of shares to be received does not necessarily
reflect the relative stock values, asset values, cash flow per share,
earnings per share or other attributes of either TransMontaigne or
Sheffield. The Merger Agreement does not provide for any adjustment
in the numbers of shares to be received in the event that either the
TransMontaigne common stock or the Sheffield common stock should
increase or decrease in value.
Outlook for Sheffield if the Proposed Merger is Not Consummated.
If the Merger is not consummated, the Company may face an uncertain
future. Its resources are limited as compared with most other
companies in the industry, which necessarily restricts it
opportunities to participate in most exploration and production
ventures. The relatively high overhead expenses of Sheffield as a
percentage of revenue or cash flow also adversely affect Sheffield's
ability to operate profitably. If the Company's business is not
combined with a larger entity in order to facilitate the Company's
participation in oil and gas exploration and development activities,
or if the Company is not able to invest its cash resources in highly
successful ventures, the outlook for an increase in the Company's
market price was not favorable.
Conditions in Oil and Gas Industry Affecting Sheffield.
Sheffield's revenues, profitability and future rate of growth, if any,
are dependent upon prevailing prices for oil and natural gas and the
ability of Sheffield to acquire proved reserves. Historically, the
prices for oil and natural gas have been quite volatile. Sheffield is
impacted materially by natural gas prices because approximately one-
third of its production is natural gas. In both south Texas and North
Dakota, Sheffield's natural gas is sold on the open market. The
parties operating the properties which produce the gas actively seek
the highest price available on a short-term basis. Likewise,
Sheffield's oil and natural gas liquids are not sold pursuant to any
long-term fixed price contracts. The price received for oil
correlates with the price established on the world market while the
liquids price, though somewhat related to the price of oil, is also
affected by seasonal
-7-<PAGE>
and local market conditions. Prices may also be affected by actions
of state and local agencies, the United States and foreign governments
and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate future
prices of oil and natural gas. Any substantial or extended decline in
the price of oil or natural gas would have a material adverse effect
on Sheffield's financial condition and results of operations.
The marketability of Sheffield's production depends in part upon
the availability, proximity and capacity of gas gathering systems,
pipelines and processing facilities. U.S. federal and state
regulation and Canadian regulation of oil and gas production and
transportation, general economic conditions, and changes in supply and
demand all could adversely affect Sheffield's ability to produce and
market its oil and natural gas. The availability of markets is beyond
the control of Sheffield and thus represents a significant risk.
Funding Future Operations of Sheffield. Revenue from operations
has varied dramatically each year depending upon factors such as
natural gas price fluctuations, which are difficult to predict. The
Company's strategy of acquiring and developing oil and gas properties
is dependent upon its ability to obtain financing for such
acquisitions and development projects. Although the Company has funds
available from the proceeds of its recent gas gathering and processing
asset sale, it anticipates funding its development activities
primarily from cash flow as well as from its credit agreement with
Norwest Bank Denver (the "Bank"), which provides the Company with
borrowing capacity tied to the Bank's determination of the loan
collateral value. The credit available under this agreement adjusts
to reflect the Company's then current proved developed reserves and
the economic valuation thereof. There can be no assurance that the
credit available under this facility will not decrease to an extent
that could significantly impair the Company's ability to fund its
development drilling opportunities, to adequately exploit gas
gathering projects or to make acquisitions similar to those made in
recent years.
Asset Impairments. Sheffield accounts for its oil and gas
operations using the successful efforts method of accounting. Under
this method, all costs associated with property acquisition,
successful exploratory wells and all development wells are
capitalized. Unproved properties are assessed periodically to
determine whether impairment has occurred. During fiscal 1995,
Sheffield adopted Statement of Financial Accounting Standard No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of ("SFAS 121). SFAS 121 calls for a review of
assets for possible impairment whenever events or changed
circumstances indicate that the net book value (carrying amount) of an
asset may not be recoverable. If the carrying amount of the asset is
greater than the future undiscounted cash flow it is projected to
generate, the asset is written down to its estimated fair market
value. Since an undiscounted cash flow analysis is used in
determining whether or not to impair an asset, changes in product
prices as well as changes in projections of product volumes can and
have resulted in Sheffield writing down the carrying value of its
properties. Sheffield recognized asset impairment of approximately
$1.1 million during its fiscal year ended June 30, 1995, and
additional impairment of $355,000 in the fiscal quarter ended March
31, 1996. Sheffield may experience additional writedowns in the
future.
General Risks of Oil and Gas Operations. The oil and gas
business involves a variety of risks, including, but not limited to,
the risks of operating hazards such as fires, explosions,
-8-<PAGE>
cratering, blow-outs, adverse weather conditions, pollution and
environmental risks, encountering formations with abnormal pressures,
and, in horizontal wellbores, the increased risk of mechanical failure
and collapsed holes, the occurrence of any of which could result in
substantial losses to Sheffield. These risks could result in
substantial losses to Sheffield due to personal injury, severe damage
or destruction of property and equipment, environmental clean-up
costs, regulatory investigation and penalties and the suspension of
operations. Gas gathering systems and processing plants are subject
to many of the same hazards. Although Sheffield maintains liability
insurance, it may not cover damages due to fires, blow-outs and
explosions, exploration and production risks, or environmental causes.
Moreover, insurance covering exploration and production risks and
environmental damage claims may be difficult or impossible to obtain
and, when available, may be prohibitively expensive. The occurrence
of a significant event that is not fully insured, however, could have
a material adverse effect on Sheffield's financial condition and
results of operations.
Drilling Risks. Drilling involves numerous risks, including the
risk that no commercially productive oil or gas reservoirs will be
encountered. The cost of drilling and completing wells is often
unpredictable, and drilling operations may be curtailed, delayed or
cancelled as a result of a variety of factors, including unexpected
drilling conditions, pressure or irregularities in formations,
equipment failures or accidents, weather conditions and shortages or
delays in delivery of equipment. Accordingly, there can be no
assurance as to the success of Sheffield's future drilling activities.
Gas Marketing. Sheffield's operations include the marketing of
its own gas production, the handling of transportation and operations
of some gas owned by third parties, and spot purchasing and selling of
natural gas. The profitability of such natural gas marketing
operations will depend in large part on the ability of Sheffield to
assess and respond to changing market conditions in negotiating
natural gas purchase and sale agreements. The inability of Sheffield
to respond appropriately to changing market conditions could adversely
affect Sheffield's results of operations.
Gas Processing. Sheffield's operations include processing of
natural gas to extract various natural gas liquids. Its processing
operations primarily consist of an interest in a gas processing plant
located in Lignite, North Dakota. In order to obtain from natural gas
suppliers volumes of committed natural gas reserves to maintain
natural gas throughput at optimal levels, the plant must periodically
contract to process additional natural gas volumes provided from new
or existing sources.
Competition. Sheffield operates in a highly competitive
environment. Sheffield competes with major and independent oil and
gas companies for the acquisition of desirable oil and gas properties,
as well as the equipment and labor required to develop and operate
such properties. Sheffield also competes with major and independent
oil and gas companies in the marketing and sale of oil and natural gas
to marketers and end-users. Most of these competitors have financial
and other resources substantially greater than those of Sheffield,
which may adversely affect Sheffield's ability to compete with those
companies.
-9-<PAGE>
Replacement of Reserves. In general, the volume of production
from oil and gas properties declines as reserves are depleted. Except
to the extent Sheffield acquires properties containing proved reserves
or conducts successful development and exploration activities, or
both, the proved reserves of Sheffield will decline as reserves are
produced. Sheffield's future natural gas and oil production is,
therefore, highly dependent upon its level of success in finding or
acquiring additional reserves. The business of exploring for,
developing or acquiring reserves is capital intensive. To the extent
cash flow from operations is reduced and external sources of capital
become limited or unavailable, Sheffield's ability to make the
necessary capital investment to maintain or expand its asset base of
oil and gas reserves would be impaired. In addition, there can be no
assurance that Sheffield's future development, acquisition and
exploration activities will result in additional proved reserves or
that Sheffield will be able to drill productive wells at acceptable
costs.
Acquisition Risks. Sheffield's growth has been attributable, in
large part, to acquisitions of gas gathering and processing assets.
Sheffield's opportunistic approach to its investment strategy requires
it to identify investments in which it can achieve a competitive edge
over other potential investors through its ability to evaluate and
finance projects more quickly than its competitors. These assets have
provided Sheffield with relatively stable cash flows, thus
facilitating Sheffield's continued investments in
exploration/exploitation projects. In the past several years,
however, competition to purchase gas gathering and processing assets
has been strong, which is reflected in the offering prices of various
properties, and in the price received by Sheffield for its gas
gathering and processing assets in Kansas and Oklahoma. Accordingly,
Sheffield's ability to acquire such assets in the future remains
uncertain.
Reliance on Reserve Estimates. Information relating to
Sheffield's estimates of proved reserves of oil and natural gas is
based upon engineering estimates. Petroleum engineering is not an
exact science. Estimates of commercially recoverable oil and gas
reserves and of the future net cash flows therefrom are based upon a
number of variable factors and assumptions, such as historical
production from the subject properties, comparison with other
producing properties, the assumed effects of regulation by
governmental agencies and assumptions concerning future oil and gas
prices and future operating costs, severance and excise taxes,
abandonment costs, development costs and workover and remedial costs,
all of which may in fact vary considerably from actual results. For
these reasons, estimates of the commercially recoverable reserves of
oil and natural gas attributable to any particular property or group
of properties, the classification, cost and risk of recovering such
reserves and estimates of the future net cash flows expected
therefrom, prepared by different engineers or by the same engineers at
different times, may vary substantially. Sheffield therefore
emphasizes that the actual production, revenues, severance and excise
taxes, development expenditures, workover and remedial expenditures,
abandonment expenditures and operating expenditures with respect to
its reserves will likely vary from such estimates, and such variances
may be material.
In addition, actual future net cash flows will be affected by
factors such as price, actual production, supply and demand for oil
and natural gas, curtailments or increases in consumption by natural
gas purchasers, changes in governmental regulations or taxation and
the impact of inflation on costs. The timing of actual future net
revenue from proved reserves, and thus their actual present value, can
be affected by the timing of the incurrence of expenditures in
-10-<PAGE>
connection with development of oil and gas properties. The 10%
discount factor, which is required by the SEC to be used to calculate
present value for reporting purposes, is not necessarily the most
appropriate discount factor based on interest rates in effect from
time to time and risks associated with the oil and gas industry.
Discounted present value, no matter what discount rate is used, is
materially affected by assumptions as to the amount and timing of
future production, which may and often do prove to be inaccurate.
Government Regulation. Various aspects of Sheffield's business
is regulated by certain local, state and federal laws and regulations
relating to the exploration for, and the development, production,
marketing, pricing, transportation and storage of, natural gas and
crude oil, as well as environmental and safety matters. In the past,
the Federal government has regulated the prices at which oil and
natural gas could be sold. While sales by producers of natural gas,
and all sales of crude oil, condensate and natural gas liquids can
currently be made at uncontrolled market prices, Congress could
reenact price controls in the future. Therefore, no assurance exists
that present or future regulations will not adversely affect the
operations of the Company.
Environmental Risks. The production, handling, transportation
and disposal of oil and gas and by-products are subject to regulation
under extensive federal, state and local environmental laws. In most
instances, the applicable regulatory requirements relate to water and
air pollution control and solid waste management measures, or to
restrictions on operations in environmentally sensitive areas.
Although management is of the opinion that Company operations (and
properties in which the Company has nonoperating interests) are in
general compliance with applicable environmental regulations, risks of
substantial costs and liabilities are inherent in oil and gas
operations and there can be no assurance that significant costs and
liabilities will not be incurred. Moreover, it is possible that other
developments, such as increasingly strict environmental laws, and
claims for damages to property or persons, could result in unforeseen
costs and liabilities to the Company. From time to time, legislation
has been introduced in Congress which would reclassify oil and gas
production wastes as "hazardous waste." If such legislation were to
pass, it could have a significant adverse impact on the operating
costs of Sheffield, as well as the oil and gas industry in general.
Title to Properties. Title matters relating to oil and gas
properties are often subject to some doubt. The decision of whether
or not to expend funds for additional title work is made by management
on a case-by-case basis. In some cases, title may be found to be
defective and the cost to cure title may be prohibitive.
Shares Eligible for Future Sale. Future sales of substantial
amounts of Common Stock in the public market following this Offering
could adversely affect the market price for the Common Stock. If the
Company's principal stockholder were to sell a significant number of
his shares, the prevailing market price of the Common Stock could be
adversely affected.
-11-<PAGE>
SELLING STOCKHOLDERS
The following table shows the names of the Selling Stockholders,
the number of securities owned beneficially by each of them, or their
nominees, as of May 20, 1996, and the number of shares which may be
offered pursuant to this Prospectus (such offered shares shall be
referred to herein as the "Stockholder Securities"). This information
is based upon information provided by the Selling Stockholders or
their representatives. Because the Selling Stockholders may offer
all, some or none of the Stockholder Securities which they hold, no
definitive estimate can be given as to the number of Stockholder
Securities that will be held by the Selling Stockholders upon
termination of such offering. In the future, additional stock options
or restricted stock awards may be granted under the Company's employee
benefit plans to the following persons or to other affiliates of the
Company and this Prospectus may be used in connection with the resale
of such restricted stock or shares underlying such stock options.
Shares held by Selling Stockholders may be sold either pursuant to the
Registration Statement of which this Prospectus is a part or pursuant
to Rule 144 under the Securities Act. In addition to the Selling
Stockholders named below, certain unnamed non-affiliates may use this
Prospectus for reoffer and resales of up to 1,000 shares each, issued
under the Company's Amended and Restated 1990 Stock Option Plan.
<TABLE>
<CAPTION>
Shares or
Shares Subject to
Options Beneficially
Shares Beneficially Owned After Sales
Owned or Subject to Shares Under this Prospectus<F2>
Options Before Sales Offered for Selling -------------------------
Selling Stockholder Under this Prospectus Stockholder's Account<F1> Number Percentage
- ------------------- --------------------- ------------------------- ------ ----------
<S> <C> <C> <C> <C>
J. Samuel Butler<F3> 307,345 176,666 130,679 3.6%
McLain Forman<F4> 16,000 16,000 -0- -0-
Randall E. King<F5> 49,415 15,909 33,506 /**/
David Melman<F6> 24,094 16,000 8,094 /**/
David L. Milanesi<F7> 57,000 57,000 -0- -0-
Jerry D. Smothermon<F8> 45,000 45,000 -0- -0-
_______________________
<FN>
/**/ Less than one percent (1%) of the 3,556,871 shares of Common Stock which would be outstanding assuming all
stock options are exercised.
<F1> Figures in this column consist of shares, options and warrants to purchase shares, as noted, issued pursuant
to employee benefit plans, as that term is defined under Rule 405 of the Securities Act.
<F2> Figures in this column assume the sale by the Selling Stockholders of all of their Stockholder Securities.
<F3> President, Chief Executive Officer and Director of the Company. Includes 170,844 shares owned by Mr. Butler
(of which 33,333 shares were issued pursuant to a Bonus Agreement and 43,333 shares were issued pursuant to
a Special Purchase Warrant), stock options for 100,000 shares presently exercisable at $1.50 per share,
12,000 shares held in trust for Mr. Butler's grandchildren for which Mr. Butler serves as trustee, and
24,501 shares held in the Company's 401(k) trust for which Mr. Butler serves as trustee. Mr. Butler, in his
capacity as trustee of his grandchildrens' trusts and the 401(k) trust, has voting and/or investment power
with respect to the shares held in such capacity and may be deemed to be the beneficial owner of such shares
but disclaims beneficial ownership of such shares.
-12-<PAGE>
<F4> Director of the Company. Includes 2,000 shares owned by Mr. Forman which were issued pursuant to option
exercises, and stock options for 14,000 shares presently exercisable at $1.50 per share.
<F5> Director of the Company. Includes 33,506 shares owned by Mr. King and 15,909 shares owned by Mr. King
pursuant to option exercises.
<F6> Director of the Company. Includes 10,094 shares owned by Mr. Melman (of which 2,000 shares were issued
pursuant to option exercises) and stock options for 14,000 shares presently exercisable at $1.50 per share.
<F7> Vice President, Secretary, Treasurer and Chief Financial Officer of the Company. Includes 27,000 shares
owned by Mr. Milanesi (of which 10,000 shares were issued pursuant to a Bonus Agreement and 10,000 shares
were issued pursuant to option exercises) and stock options for 30,000 shares presently exercisable at $1.50
per share.
<F8> Vice President - Operations of the Company. Includes 10,000 shares owned by Mr. Smothermon which were
issued pursuant to a Bonus Agreement, and stock options for 35,000 shares presently exercisable at $1.50 per
share.
</TABLE>
-13-<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock covered by this Prospectus may be
offered or sold from time to time by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest. Such
sales may be made on the American Stock Exchange Emerging Company
Marketplace, in block trades, pursuant to purchases by a broker or a
dealer as principal, in private transactions or otherwise, at prices
then prevailing in the market or at negotiated prices. The Company
will not receive any of the proceeds from sales by Selling
Stockholders.
Any broker or dealer involved in the offer or sale of the shares
included herein may receive brokerage commissions or discounts. To
the knowledge of the Company, there is currently no agreement with any
broker or dealer respecting such transactions. Upon sale of such
shares, any or all of the Selling Stockholders or anyone effecting
sales on behalf of the Selling Stockholders may be deemed an
underwriter, as that term is defined in the Securities Act. None of
the Selling Stockholders believes he is an underwriter within the
meaning of the Securities Act. All expenses of the registration of
the Common Stock covered by this Prospectus are to be borne by the
Company.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock
described herein will be passed upon for the Company by Davis,
Graham & Stubbs LLP, Denver, Colorado.
EXPERTS
The consolidated financial statements and financial statement
schedule of Sheffield Exploration Company, Inc. as of June 30, 1995
and 1994 and for each of the three years in the period ended June 30,
1995, included in Sheffield's Annual Report on Form 10-K for the year
ended June 30, 1995, incorporated by reference in this prospectus and
elsewhere in the registration statement, have been incorporated herein
in reliance on the reports, which include an explanatory paragraph
with respect to the adoption of SFAS No. 109, "Accounting for Income
Taxes" in 1993 and SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" in
1995, of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed or to be filed by Sheffield
Exploration Company, Inc. (the "Company") with the Securities and
Exchange Commission (the "Commission") are hereby incorporated or
deemed to be incorporated in this Registration Statement by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
June 30, 1995, as filed with the Commission on October 3, 1995.
(b) Amendment No. 1 to the Company's Annual Report on Form 10-
K/A for the year ended June 30, 1995, as filed with the Commission on
December 11, 1995.
(c) The Company's Current Report on Form 8-K, as filed with the
Commission on October 12, 1995.
(d) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, as filed with the Commission on November 13,
1995.
(e) The Company's Current Report on Form 8-K, as filed with the
Commission on February 7, 1996.
(f) The Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995, as filed with the Commission on February 14,
1996.
(g) Amendment to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1995, as filed with the Commission on
February 14, 1996.
(h) Amendment No. 1 to the Company's Registration Statement on
Form S-4, as filed with the Commission on May 10, 1996.
(i) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, as filed with the Commission on May 15, 1996.
(j) The description of the Company's Common Stock contained in
the Company's Registration Statement on Form S-1 (No. 33-16265), filed
with the Commission pursuant to the Exchange Act on October 9, 1987.
All documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of
this Registration Statement and prior to the filing of a post-
effective amendment to this Registration Statement indicating that all
securities offered under the Registration Statement have been sold, or
deregistering all securities then remaining unsold, shall
II-1<PAGE>
be deemed to be incorporated in this Registration Statement by
reference and to be a part hereof from the date of filing such
documents.
6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws and Restated Certificate of Incorporation
provide that the Company shall, to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as amended from time
to time, indemnify all directors and officers of the Company. Section
145 of the Delaware General Corporation Law provides in part that a
corporation shall have the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (other than an action by or in
the right of the corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director,
officer, partner or trustee of, or in any similar managerial or
fiduciary position of, or as an employee or agent of another
corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests
of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred
in defense or settlement of any threatened, pending or completed
action or suit by or in the right of the corporation, if such person
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized
in each specific case upon a determination by the stockholders or
disinterested directors that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Additionally, the Company's Restated Certificate of Incorporation
contains a provision eliminating the personal liability of directors
to the Company or its stockholders for monetary damages arising out of
a breach of fiduciary duty. Under Delaware law, this provision
eliminates the liability of a director for breach of fiduciary duty
but does not eliminate the personal liability of any director (i) for
a breach of the duty of loyalty to the Company or to its stockholders;
(ii) for acts or omissions by the director not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii)
for liability arising under Section 174 of the General Corporation Law
(relating to the declaration of dividends and the purchase or
redemption of shares in violation of the General Corporation Law); or
(iv) for any transaction from which the director derived an improper
personal benefit.
7. EXEMPTION FROM REGISTRATION CLAIMED.
All restricted securities to be reoffered or resold pursuant to
this Registration Statement were issued in transactions completed
without registration in reliance upon the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, for
transactions not involving a public offering.
II-2<PAGE>
8. EXHIBITS.
4.1 Restated Certificate of Incorporation of the Company.(1)
4.2 Bylaws of the Company.(2)
4.3 Amended and Restated 1990 Employee Stock Option Plan.(3)
4.4 Special Purchase Warrant issued in September 1990 from the
Company to J. Samuel Butler.
4.5 Stock bonus issuance notice from the Company to J. Samuel
Butler, dated December 8, 1994.
4.6 Stock bonus issuance notice from the Company to David L.
Milanesi, dated December 8, 1994.
4.7 Stock bonus issuance notice from the Company to Jerry D.
Smothermon, dated December 8, 1994.
5.1 Opinion and Consent of Davis, Graham & Stubbs LLP.
24.1 Consent of Counsel. See Exhibit 5.1
24.2 Consent of Coopers & Lybrand L.L.P.
25.1 Power of Attorney. See p. II-5.
____________________
(1) Filed previously as an Exhibit to Amendment No. 1 to the
Company's Annual Report on Form 10-K/A (No. 0-13201) dated
December 11, 1995, and incorporated herein by reference.
(2) Filed previously as an Exhibit to the Company's Registration
Statement on Form S-4 (No. 0-13201) dated January 22, 1991, and
incorporated herein by reference.
(3) Filed previously as an Exhibit to the Company's Annual Report on
Form 10-K (No. 0-13201), dated September 27, 1994.
9. UNDERTAKINGS.
A. 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 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; (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
the initial bona fide offering thereof; and (3) to remove from
registration by means of a post-effective amendment any of the
securities which remain unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Company's annual report pursuant to Section
13(a) or 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
II-3<PAGE>
Statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-4<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State
of Colorado, on the 23rd day of May, 1996.
SHEFFIELD EXPLORATION COMPANY, INC.
By: J. Samuel Butler
-------------------------------------
J. Samuel Butler
President and Chief Executive Officer
Each person whose signature appears below does hereby make,
constitute and appoint J. Samuel Butler as such person's true and
lawful attorney-in-fact and agent, with full power of substitution,
resubstitution and revocation to execute, deliver and file with the
Securities and Exchange Commission, for and on such person's behalf,
and in any and all capacities, this Registration Statement on Form
S-8, and any and all amendments (including post-effective amendments)
thereto, with all exhibits thereto and other documents in connection
therewith, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite
and necessary to be done as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or such person's substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on May 23, 1996.
Edwin H. Morgens David A. Melman
- ------------------------------------ --------------------------------
Edwin H. Morgens, Chairman David A. Melman, Director
J. Samuel Butler McLain J. Forman
J. Samuel Butler, President, McLain J. Forman, Director
Director and Chief Executive Officer
David L. Milanesi Randall E. King
- ------------------------------------ --------------------------------
David L. Milanesi, Treasurer Randall E. King, Director
(Chief Financial and Accounting
Officer)
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- ------- ----------- ----------
4.4 Special Purchase Warrant issued in September 1990
from the Company to J. Samuel Butler.
4.5 Stock bonus issuance notice from the Company to J.
Samuel Butler, dated December 8, 1994.
4.6 Stock bonus issuance notice from the Company to
David L. Milanesi, dated December 8, 1994.
4.7 Stock bonus issuance notice from the Company to
Jerry D. Smothermon, dated December 8, 1994.
5.1 Opinion and Consent of Davis, Graham & Stubbs LLP.
24.1 Consent of Counsel. See Exhibit 5.1
24.2 Consent of Coopers & Lybrand L.L.P.
25.1 Power of Attorney. See p. II-5.
II-6
SPECIAL PURCHASE WARRANT CERTIFICATE
216,667 Warrants to Purchase a
Corresponding Number of Preferred B
Shares ("Preferred B Shares" or
"Shares")
SHEFFIELD EXPLORATION COMPANY, INC. ("Company")
Incorporated Under the Laws of the State of Delaware
Void After 5:00 P.M. Mountain Standard Time On
September 14, 1995.
THIS CERTIFIES that for value received, J. Samuel Butler
("Holder") is entitled to purchase 216,667 Preferred B Shares of the
Company on or before September 15, 1995 upon presentation of this
Warrant and payment of the full purchase price of the Shares so
subscribed for at the rate of $0.30 per share at the office of the
Company in Denver, Colorado.
In the event that the number of Warrants so exercised is less
than the total number of Warrants represented hereby, there will be
issued to the person so exercising the Warrants a new Warrant
Certificate representing the number of Warrants not exercised, which
Warrants will be exercisable during the period described above.
On the reverse side of this Warrant Certificate there are set
forth additional terms, conditions, rights, limitations and other
provisions stated therein which constitute a part of this Warrant
Certificate and are hereby incorporated by reference and made a part
hereof as fully as if set forth at length herein, and this Warrant
Certificate, the Warrants represented hereby and all of the rights of
the Holder hereof with respect thereto are subject to all of such
terms, conditions, rights, limitations and other provisions. The
Holder and each successive Holder of this Warrant Certificate, by the
acceptance of the same, consents to and agrees to be bound by all of
said, terms, conditions, rights, limitations and other provisions.
The number of Shares issuable upon exercise of the Warrants
represented by this Warrant Certificate is subject to adjustment as
provided on the reverse side hereof. In the event of any such
adjustment, no fractional Shares will be issued upon exercise of
Warrants, but in lieu thereof, the Company shall pay cash as set forth
on the reverse side hereof.
The Holder of this Warrant Certificate, as such, has no rights as
a Shareholder of the Company.
ATTEST: SHEFFIELD EXPLORATION COMPANY, INC.
/s/ Catherine A. Hall By /s/ David L. Milanesi
- ---------------------------- -------------------------------------
Secretary Vice President
<PAGE>
(REVERSE SIDE)
STATEMENT OF ADDITIONAL TERMS, CONDITIONS, RIGHTS,
LIMITATIONS AND PROVISIONS WITH RESPECT TO THE
WARRANTS AND THE HOLDER THEREOF.
1. Exercise of Warrants. The Warrants granted hereunder shall
--------------------
be divided into three equal parts, as follows: (i) 72,223 Shares may
be purchased on or after September 13, 1991; (ii) 72,222 Shares may be
purchased on or after September 13, 1992; and (iii) 72,222 Shares may
be purchased on or after September 13, 1993. Each Warrant may be
exercised from time to time as to any part of or all of the Stock to
which the Holder is entitled beginning on the date of this Warrant
Certificate and ending on the close of business on September 14, 1995;
provided, however, that each Warrant shall not be exercised (a) as to
less than 100 Shares at any one time (or for less than the number of
remaining Shares then purchasable under this Warrant Certificate, if
less than 100 Shares), and (b) unless the Holder shall have been in
the continuous employ of the Company or its subsidiaries from the date
of this Warrant Certificate to the date of the exercise.
Notwithstanding the foregoing, no Shares shall be purchasable under
this Warrant unless the Shares have been registered or qualified or
are exempt from registration or qualification under applicable Federal
and state securities laws, as determined by the Company's counsel.
Warrants not exercised on or before the date of expiration (the
"Expiration Date") shall cease to be exercisable.
Subject to the provisions of this Warrant Certificate the
Holder of each Warrant shall have the right to purchase from the
Company (and the Company shall issue and sell to such Holder of a
Warrant) one fully paid and nonassessable Share at a price of $0.30
per Share (the "Exercise Price") upon delivery to the Company, at its
office, a written Notice of exercise, and upon payment of the Exercise
Price. Payment of the Exercise Price shall be (i) in cash, by
certified or cashier's bank check payable to the order of the Company,
or (ii) by delivering to the Corporation of shares of its Common Stock
with a fair market value (as determined by the Board) equal to the
purchase price of Stock issuable upon exercise of such Warrant, or
(iii) a combination of Common stock and cash, or (iv) such other
lawful consideration as may be accepted by the Corporation.
Subject to Paragraph 5, upon such notice and payment of the
Exercise Price, the Company shall cause to be issued and delivered to
or upon the written order of the Holder and in such name or names as
such Holder may designate a certificate for the Share or Shares
issuable upon the exercise of the number of Warrants exercised. Such
Certificate shall be deemed to have been issued and any person so
designated to be
<PAGE>
named therein shall be deemed to have become the Holder of record of
such Share or Shares as of the date such notice has been delivered and
the Exercise Price has been paid.
2. Termination of Employment. In the event that the employment
-------------------------
of Holder shall be terminated (otherwise than by reason of death), the
Warrant shall be exercisable (to the extent that Holder shall have
been entitled to do so at the termination of his employment) at any
time prior to the expiration of the period of three months after such
termination, but not more than five years after the date of which the
Warrant shall have been granted. Nothing in this Special Purchase
Warrant Certificate shall confer upon Holder any right to be continued
in the employ of the Corporation or its subsidiaries or interfere in
any way with the right of the Corporation or any such subsidiary to
terminate or otherwise modify the terms of Holder's employment;
provided, however, that a change in Holder's duties or position shall
not affect Holder's Warrant so long as Holder is still an employee of
the Corporation or subsidiaries.
3. Death of Holder. In the event of the death of Holder, any
---------------
unexercised portion of the Warrant shall be exercisable (to the extent
that Holder shall have been entitled to do so at the time of his
death) at any time prior to the expiration of the period of three
months after his death but not more than five years after the date on
which the Warrant shall have been granted and only by such person or
persons to whom Holder's rights shall pass under Holder's will or by
the law of descent and distribution.
4. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Shares upon the
exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of
any transfer involved in the issue of any Warrants or any certificate
for Shares in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificates unless and
until the person requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
5. Reservation of Shares. The Company will at all times
---------------------
reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Preferred B Shares or its
authorized and issued Preferred B Shares held in its treasury, for the
purpose of enabling it to satisfy any obligation to issue Shares upon
exercise of Warrants, the full number of Shares deliverable upon the
exercise of all outstanding Warrants.
2<PAGE>
Before taking any action which would cause an adjustment
pursuant to Paragraph 5 reducing the Exercise Price below the then par
value (if any) of the Shares of Preferred B Shares issuable upon
exercise of the Warrants, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel
employed by the Company), be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Shares at the
Exercise Price as so adjusted.
The Company covenants that all Shares will upon issue be
fully paid and nonassessable and free from all taxes, liens, charges
and security interests with respect to the issue thereof.
6. Obtaining of Governmental Approvals. The Company will use
-----------------------------------
its best efforts to take from time to time all action which may be
necessary to obtain and keep effective any and all permits, consents
and approvals of governmental agencies and authorities and securities
acts filings under Federal and state laws, which may be or become
requisite in connection with the issuance, sale, transfer and delivery
of the Warrants, the exercise of the Warrants and the issuance, sale,
transfer and delivery of the Shares; provided, however, that the
Company has no obligation to register the Warrants or the Shares
received upon exercise thereof under applicable Federal and state
securities laws.
7. Adjustments Upon Changes in Capitalization. In the event of
------------------------------------------
changes in the outstanding Stock of the Corporation by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations or
liquidations, the number and class of shares available under the Plan
and the maximum number of shares as to which Warrants may be granted
to a Participant shall be correspondingly adjusted.
8. Termination Transactions. The Warrant shall terminate upon
------------------------
dissolution or liquidation of the Company, or upon a reorganization,
merger, or consolidation of the Company with one or more companies
where the Company is not the surviving corporation, or upon a sale of
substantially all the property or more than 80% of the then
outstanding stock of the company to another corporation where there
has been no provision made in writing in connection with such
transaction for the assumption of this Warrant or the substitution for
such Warrant or a new Warrant covering the stock of the successor
corporation.
In the event of an assumption agreement, this Warrant shall
continue with appropriate adjustments as to the number and kind of
shares and prices. If, however, this Warrant terminates as a result
of such events, Holder shall have the right to exercise this Warrant
to the full extent not theretofore exercised, including any portions
of this
3<PAGE>
Warrant which would not otherwise have become exercisable at the day
immediately prior to the consummation of the terminating transaction.
9. Expiration of Warrants at Expiration Date. On the
-----------------------------------------
Expiration Date, unexercised Warrants shall expire and thereafter all
rights of the Holder thereof under this Warrant Certificate shall
cease.
10. Notices to Company. Any notice or demand authorized by this
------------------
Warrant Certificate to be given or made by the registered Holder of
this Warrant to or on the Company shall be sufficiently given or made
if sent by mail, first-class or registered, postage prepaid, addressed
(until another address is filed in writing by the Company with such
registered Holder) to the Company as follows:
Sheffield Exploration Company, Inc.
1801 Broadway, Suite 600
Denver, Colorado 80202
Attention: David L. Milanesi
Any notice pursuant to this Warrant Certificate to be given
by the Company to the registered Holder of this Warrant shall be in
writing and shall be sufficiently given if sent by first-class mail,
postage prepaid, or delivered to such Holder at his address on the
books of the Company.
11. Supplements and Amendments. The Company may from time to
--------------------------
time supplement or amend this Warrant Certificate without the approval
of the Holder of the Warrant in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any
other provisions in regard to matters or questions arising hereunder
which the Company may deem necessary or desirable and which shall not
adversely affect the interest of the Holder of the Warrant.
12. Successors. All the covenants and provisions of this
----------
Warrant Certificate by or for the benefit of the parties hereto shall
bind and inure to the benefit of their respective successors and
assigns. hereunder.
13. Termination. This Warrant Certificate shall terminate at
-----------
the close of business on the Expiration Date. Notwithstanding the
foregoing, this Warrant Certificate will terminate on any earlier date
when the Warrant has been exercised.
4<PAGE>
14. Governing Law. This Warrant Certificate shall be deemed to
-------------
be a contract made under the laws of the State of Colorado and for all
purposes shall be construed in accordance with the laws of said State.
15. Benefits of this Warrant Certificate. Nothing in this
------------------------------------
Warrant Certificate shall be construed to give to any person or
corporation other than the Company and the Holder of the Warrant any
legal or equitable right, remedy or claim under this Warrant
Certificate; but this Warrant Certificate shall be for the sole and
exclusive benefit of the Company and the Holder of the Warrant.
THE COMPANY AND THE HOLDER have caused this Warrant Certificate
to be duly executed, as of the day and year first above written.
SHEFFIELD EXPLORATION COMPANY, INC.
By: s/ David L. Milanesi
------------------------------------
David L. Milanesi, Vice President
/s/ J. Samuel Butler
----------------------------------------
J. Samuel Butler
5
LETTERHEAD OF SHEFFIELD EXPLORATION COMPANY, INC. APPEARS HERE]
December 28, 1995
J. Samuel Butler
Sheffield Exploration Company, Inc.
1801 Broadway, Suite #600
Denver, CO 80202
Dear Sam:
Sheffield Exploration Company, Inc. is pleased to inform you that, in
recognition of your services to the Company during 1995, the Board of
Directors has authorized the payment to you of a bonus consisting of
33,333 shares of common stock.
The shares will be issued to you in January, 1996.
Very truly yours,
SHEFFIELD EXPLORATION COMPANY, INC.
/s/ Edwin Morgens
Edwin H. Morgens
Chairman
LETTERHEAD OF SHEFFIELD EXPLORATION COMPANY, INC. APPEARS HERE]
December 12, 1995
David L. Milanesi
Sheffield Exploration Company, Inc.
1801 Broadway, Suite #600
Denver, CO 80202
Dear David:
Sheffield Exploration Company, Inc. is pleased to inform you that, in
recognition of your services to the Company during 1994, the Board of
Directors has authorized the payment to you of a bonus consisting of
10,000 shares of common stock.
The shares will be issued to you in January, 1995.
Very truly yours,
SHEFFIELD EXPLORATION COMPANY, INC.
/s/ J. Samuel Butler
J. Samuel Butler
President and Chief Executive Officer
JSB:mh
[LETTERHEAD OF SHEFFIELD EXPLORATION COMPANY, INC. APPEARS HERE]
December 12, 1995
Jerry D. Smothermon
Sheffield Exploration Company, Inc.
1801 Broadway, Suite #600
Denver, CO 80202
Dear Jerry:
Sheffield Exploration Company, Inc. is pleased to inform you that, in
recognition of your services to the Company during 1994, the Board of
Directors has authorized the payment to you of a bonus consisting of
10,000 shares of common stock.
The shares will be issued to you in January, 1995.
Very truly yours,
SHEFFIELD EXPLORATION COMPANY, INC.
/s/ J. Samuel Butler
J. Samuel Butler
President and Chief Executive Officer
JSB:mh
[LETTERHEAD OF DAVIS, GRAHAM & STUBBS LLP APPEARS HERE]
Sheffield Exploration Company, Inc.
1801 Broadway, Suite 600
Denver, CO 80202
Re: Sale of Shares of Common Stock Pursuant to
Registration Statement on Form S-8
Gentlemen:
We have acted as counsel to Sheffield Exploration Company, Inc.
(the "Company") in connection with the registration by the Company of
471,167 shares of common stock, $.01 par value per share (the
"Shares") described in the Registration Statement on Form S-8 of the
Company, being filed with the Securities and Exchange Commission
concurrently herewith. In such connection we have examined certain
corporate records and proceedings of the Company including actions
taken by the Company's Board of Directors in respect of the
authorization and issuance of the Shares, and such other matters as we
deemed appropriate.
Based upon the foregoing, we are of the opinion that the Shares
have been duly authorized and, when issued and sold as contemplated by
the Registration Statement and in accordance with the employee benefit
plans covered thereby, will be legally issued, fully paid and non-
assessable shares of capital stock of the Company.
We hereby consent to be named in the Registration Statement and
in the Prospectus constituting a part thereof, as amended from time to
time, as the attorneys who will pass upon legal matters in connection
with the issuance of the Shares, and to the filing of this Opinion as
an Exhibit to the aforesaid Registration Statement. In giving this
consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules of the Securities and Exchange Commission.
Very truly yours,
DAVIS, GRAHAM & STUBBS LLP
[LETTERHEAD OF COOPERS AND LYBRAND APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-8 of our reports dated October 2, 1995, on our
audits of the consolidated financial statements and financial
statement schedule of Sheffield Exploration Company, Inc. and
Subsidiaries as of June 30, 1995 and 1994 and for each of the three
years in the period then ended. We also consent to the reference to
our firm under the caption "Experts."
Denver, Colorado
May 23, 1996
