SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 20, 1998
PEASE OIL AND GAS COMPANY
(Exact name of registrant as specified in its charter)
Nevada 0-6580 84-0285520
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
751 Horizon Court, Suite 203, Grand Junction Colorado 81506-8718
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (970) 245-5917
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Item 5. OTHER MATERIAL EVENTS.
On May 20, 1998, the Registrant entered into an agreement with National
Energy Group, Inc. ("NEGX") pursuant to which, for a purchase price of $750,000
for NEGX, the Prospect Participation Letter Agreement ("Participation
Agreement") dated February 4, 1997, as amended, was terminated effective as of
April 30, 1998 and the Registrant reconveyed to NEGX its interest in the oil and
gas prospects described in the Participation Agreement, other than the
Registrant's interest in the East Bayou Sorrel prospect, including two producing
wells. In addition, Registrant reconveyed to NEGX all of Registrant's interest
to seismic and other data described in the Seismic Survey Participating
Agreement dated January 16, 1998, except for data generated in the East Bayou
Sorrel prospect. Finally, Registrant agreed not to elect to invoke its right to
become a "nonconsenting party" (as defined in the applicable operating
agreement) as to the next unit well proposed by NEGX as operator in the East
Bayou Sorrel prospect. Subsequent to the agreement, Registrant has no ongoing
obligation to join in oil or natural gas exploration activities with NEGX. Also,
Registrant shall no longer have a right to join in exploration projects
generated by third parties in which NEGX becomes a participate. Registrant has
retained its interest in the Schwing No. 1 and Schwing No. 2 producing wells and
surrounding acreage in the East Bayou Sorrel prospect.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Registrant is a Small Business Issuer. Under Item 310(c)(3)(i)
of Regulation S-B, financial statements relating to the assets acquired
are not required.
(b) Pro forma financial information.
Registrant is a Small Business Issuer. Under Item 310(d) of
Regulation S-B, pro forma information relating to the acquisition of
the assets is not required.
(c) Exhibits.
Exhibit 10.1 Letter Agreement with National Energy Group,
Inc. dated May 20, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 15, 1998
PEASE OIL AND GAS COMPANY
By /s/ Willard H. Pease, Jr.
Willard H. Pease, Jr., President
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May 20, 1998
VIA FACSIMILE
Mr. Willard Pease, Jr.
President
Pease Oil & Gas Company
751 Horizon Court, Suite 203
Grand Junction, CO 81506-8758
Re: - Letter Agreement
- Termination of Letter Agreements Dated
February 4,1997 and January 16, 1998
Dear Mr. Pease:
Pursuant to our telephone conversation today, this correspondence shall
act to express the mutual understanding and intent of Pease Oil & Gas Company
("Pease") and National Energy Group, Inc. ("NEG") with respect to (i) the
purchase and sale of 100% of Pease's right, title and interest in and to certain
Prospects as more particularly described on Exhibit "A", attached hereto, and
any data, including seismic data relating thereto (the "Assets"), (ii)
termination of that certain Prospect Participation Letter Agreement by and
between Pease and NEG dated February 4, 1997, as amended (the "Prospect
Participation Agreement"), (iii) the amendment of that certain 3D Seismic Survey
Participation Agreement dated January 16, 1998 (the "Seismic Participation
Agreement") and (iv) an alternate unit well to be proposed by NEG within the
existing unit of the Schwing No. 1 and/or Schwing No. 2 well located in the East
Bayou Sorrel Prospect.
1. Purchase and Sale of the Assets; Termination of
the Prospect Participation and Amendment
of the Seismic Participation Agreements
(a) As of the Effective Date (hereinafter defined), the
Prospect Participation Agreement shall terminate and Pease shall sell,
transfer, convey and assign to NEG as may be necessary all of Pease's
right, title and interest in and to those certain Prospects described
on Exhibit "A" and any data, including any seismic data, in the
possession or within the control of Pease related thereto. With the
termination of the Prospect Agreement, all obligations and/or
liabilities related thereto as between the parties shall be
extinguished and of no further effect, except as provided in Paragraph
5 hereof.
(b) As of the Effective Date, the Seismic Participation
Agreement shall be amended to delete the Assets and to limit the terms
thereof to apply solely to Pease's interest in the East Bayou Sorrel
Prospect, more particularly described in that certain Operating
Agreement among W&T Offshore, Inc., NEG, Pease, et al. dated December
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15, 1995 (the "JOA") incorporated herein by reference herein; provided
that nothing contained herein shall act to terminate Pease's continued
participation within the East Bayou Sorrel Prospect.
2. Non-Consent Waiver.
Pease specifically agrees that with respect to Article VI B. of the
JOA, Subsequent Operations, Pease shall not elect to invoke its right to become
a Non-Consenting Party (as defined therein) as to the next alternate unit well
proposed by NEG within the existing well units of the Schwing No. 1 well or
Schwing No. 2 well located in the Contract Area described in the JOA.
3. Purchase Price; Effective Date.
Each of Pease and NEG, respectively, agree to the sale and purchase of
the Assets at a purchase price equal to $750,000.00 less any and all outstanding
obligations owed by Pease to NEG as of April 30, 1998 (the "Effective Date"),
including but not limited to, obligations pursuant to the Prospect Participation
Agreement and/or the Seismic Participation Agreement (the "Purchase Price"). NEG
agrees to credit Pease for 100% of actual costs relating to the Assets purchased
and sold hereunder which have been paid by Pease to NEG from and after the
Effective Date, and an accounting summary of all obligations owed by Pease
and/or credits to Pease as described herein shall be delivered by NEG at the
Closing (hereinafter defined).
4. The Closing.
The closing shall occur at a mutually agreeable time prior to 12:00
P.M. CDT on or before May 29, 1998 (the "Closing"). At the Closing, any amount
owed by NEG to Pease (or Pease to NEG as the case may be) as provided herein
shall be payable in immediately available funds by wire transfer.
5. The Closing Statement; The Post-Closing Adjustment Statement.
(a) NEG estimates the net obligation of Pease due NEG
hereunder is approximately $700,000.00, and NEG agrees to provide Pease
a Closing Statement detailing such amounts owed on or before the close
of business on Thursday, May 21, 1998.
(b) Within sixty (60) days following the Closing, NEG shall
provide Pease with a Post-Closing Adjustment Statement which shall
account for all obligations and/or credits attributable to Pease's
interest in the Assets which were outstanding as of the Effective Date,
but not paid or credited at the Closing. The Post-Closing Adjustment
Statement shall be conclusively deemed to be accurate and shall be
binding upon the parties hereto with respect to the Assets unless
written notice to the contrary is delivered to NEG within three (3)
days following receipt by Pease of the Post-Closing Adjustment
Statement; provided that nothing contained in the Closing Statement or
Post-Closing Adjustment Statement shall act to supersede or limit
Pease's right to accounting or audit procedures contained in (i) the
JOA pertaining to the East Bayou Sorrel Prospect or (ii) any other
Operating Agreement between NEG and Pease pertaining to any wells
drilled prior to the Effective Date on any of the Prospects described
as Assets herein.
(c) Within five (5) days following the parties' reconciliation
of the Post-Closing Adjustment Statement, the party owing any balance
pursuant thereto shall make payment thereof in immediately available
funds by wire transfer.
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6. Relationship Following Closing; Non-Compete.
Pease and NEG, for themselves and on behalf of their successors and
assigns, agree to use their best efforts and cooperate with the other to
consummate the transactions contemplated herein that each may attain the
benefits of its bargain with the other. Accordingly, it is acknowledged and
agreed that, although not foreseen or contemplated as of the date hereof, either
or both at the reasonable request of the other shall do, execute, acknowledge
and deliver or cause to be delivered or done any such further acts, deeds,
assignment, transfers, conveyances, powers of attorney, and assurance as may be
necessary to carry out the terms and intent of this Letter Agreement (including
cooperation in any litigation with respect to the Assets brought by any party
not a party to this Letter Agreement). Pease further agrees that in order for
NEG to obtain the benefits provided in this Letter Agreement, it will not
directly or indirectly, for itself or on behalf of any third party, for a period
of three (3) years following the Closing acquire any interest in lands, leases
or seismic data related to the Prospects on Exhibit "A" without the express
written consent of NEG; provided that Pease's continued participation in the
East Bayou Sorrel Prospect shall not be deemed to be a violation of this
"non-compete" provision.
7. Confidentiality.
Pease acknowledges and agrees that as a party to the JOA it has been
afforded access to and is in possession of certain non-public confidential
information concerning the Assets (the "Confidential Information") and the
dissemination of which to unauthorized parties could result in irreparable harm
to NEG. Therefore, Pease agrees that such Confidential Information shall not be
disclosed to any third party without the express written consent of NEG;
provided that this provision shall become inoperative as to any such portion of
the Confidential Information which (a) becomes generally available to the public
other than as a result of a disclosure by Pease or its representatives; (b) was
available on a non-confidential basis prior to its disclosure; (c) become
available on a non-confidential basis from a source other than NEG when Pease
reasonably believes such source is entitled to make the disclosure; (d) is
developed by or for Pease independent of Confidential Information made available
by NEG; (e) is subject to disclosure pursuant to the rules promulgated by the
Securities and Exchange Commission of the United States, the respective stock
exchanges upon which the parties are listed or other regulatory agency having
lawful jurisdiction, or (f) in the written opinion of counsel is required to be
disclosed. Except as provided for above, the obligation under this Letter
Agreement to preserve the confidentiality of the Confidential Information shall
terminate three (3) years following the Closing. Pease further agrees to return
to NEG at the Closing all Confidential Information pertaining to the Prospect
Participation Agreement and the Seismic Participation Agreement which Pease, its
employees, representatives and/or consultants have in their possession,
including any copies, notes, summaries, analyses or other material derived from
the Confidential Information.
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8. Miscellaneous.
(a) This Letter Agreement, including the attached Exhibits,
contains the entire understanding of the parties hereto and supersedes
all prior agreements between the parties with respect to, and only with
respect to, the subject matter hereof. This Letter Agreement may be
amended or modified only by a written instrument duly executed by Pease
and NEG. THE VALIDITY AND CONSTRUCTION OF THIS LETTER AGREEMENT SHALL
BE GOVERNED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS.
(b) In the event of a dispute between the parties to this
Letter Agreement, the parties agree not to file any action or petition
in any court of law or equity for any relief, but to participate in
good faith in a minimum of four (4) hours of mediation in Dallas, Texas
with an attorney-mediator who has a minimum of ten (10) years of
experience in the oil and gas industry and who is trained and certified
by the American Arbitration Association, the United States Arbitration
and Mediation Service, or any comparable organization, and to abide by
the mediation procedures and decision of such organization. The parties
agree to equally bear the costs of the mediation and to proceed as
expeditiously as allowed by the rules of such organization chosen to
provide mediation services. In the event the parties cannot resolve
their dispute through mediation as described herein, the parties agree
to participate in binding arbitration and to proceed as expeditiously
as allowed pursuant to the rules of the American Arbitration
Association or mutually agreeable similar organization with an
arbitrator or arbitrators having a minimum of ten (10) years experience
in the oil and gas industry. Such arbitration shall be held in Dallas,
Texas, shall be binding and nonappealable and a judgment on the award
to the prevailing party (inclusive of reasonable attorney's fees and
costs) may be entered in any court having competent jurisdiction.
If this correspondence expresses our mutual understanding and
agreement, please execute and return by facsimile one copy of this Letter
Agreement to the undersigned not later than 5:00 p.m., CDT, Thursday, May 21,
1998, at which time this offer by NEG shall expire if not executed and delivered
to NEG by Pease.
Very truly yours,
National Energy Group, Inc.
By:_______________________________
Chuck L. Elsey
Executive Vice President and
Chief Operating Officer
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Accepted and Agreed
this ____ day of May, 1998
Pease Oil & Gas Company
By: _____________________________
Willard Pease, Jr.
President
PDD:mjg
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EXHIBIT A attached to and made
a part of that certain LETTER AGREEMENT
by and between National Energy Group, Inc.
and Pease Oil and Gas Company
dated May 20, 1998.
PROSPECTS
Prospect Name Pease Participation Interest
Northwest Bayou Sorrel / Louisiana 3/16
Berry Bayou / Louisiana 3/16
Southeast Gueydan / Louisiana 1/8
West Grand Bayou / Louisiana 1/8
Tiger Bayou / Louisiana 1/8
South Tiger Bayou / Louisiana 1/8
Knowles / Texas 1/8
Robertsdale / Alabama 1/8
Mushroom / Texas 1/8
Nueces Offshore
(Mustang Island Exploration) / Texas 1/8
Apple Springs / Texas 1/8
Panaco Agreement "deep rights" / Louisiana 14.0625%
