U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[ x ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-14731
HALLADOR PETROLEUM COMPANY
(Name of small business issuer in its charter)
COLORADO 84-1014610
(State of incorporation) (IRS Employer Identification No.)
1660 Lincoln Street, Suite 2700, Denver, Colorado 80264-2701
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 303.839.5504 Fax: 303.832.3013
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: Common
Stock, $.01 par value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to the filing requirements for the past
90 days. Yes x No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [x]
State issuer's revenues for its most recent fiscal year: $4,400,000
As of March 26, 1999, approximately 7,093,150 shares of the registrant's
common stock were outstanding and the aggregate market value of such
common stock held by non-affiliates was approximately $292,000 based on
the closing price of $.75.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business
- -------------------------------
Hallador Petroleum Company, a Colorado corporation, was organized by its
predecessor in 1949.
On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership. Hallador Petroleum Company is the general
partner and received a 70% interest in the partnership in return for
contributing its net assets and Yorktown represents the limited partners
and received a 30% interest for its $5,025,000 cash contribution.
Hallador Petroleum Company, being the general partner, consolidates the
activity of the partnership and presents the 30% limited partners'
interest as a minority interest.
Hallador Petroleum Company and its principal operating subsidiaries,
Hallador Production Company and Hallador Petroleum, LLP (collectively
referred to as the "Company"), are engaged in the exploration, development
and production of oil and natural gas. The principal and administrative
offices of the Company are located at 1660 Lincoln Street, Suite 2700,
Denver, Colorado 80264, phone 303.839.5504, fax 303.832.3013. The
Company's field office is located in New Cuyama, California.
Over 84% of the Company's oil and gas revenue is attributable to the South
Cuyama field (the "Field") located in Santa Barbara County, California,
approximately 75 miles southwest from Bakersfield, California. The
Company owns 92% of Santa Barbara Partners (SBP), an Oklahoma general
partnership, which has an 84% working interest (69% net revenue interest)
in the Field. The Field's oil reserves consist of light oil at 31 degree
gravity.
The Company operates oil and natural gas properties for its own account
and for the account of others. The Company also reviews and evaluates
producing oil and natural gas properties, companies, or other entities,
which meet certain guidelines for acquisition purposes. In addition, the
Company engages in the trading and acquisition of non-producing oil and
gas mineral leases and fee-simple minerals.
Markets
- -------
The Company's products are sold to various purchasers in the geographic
area of the properties. Natural gas, after processing, is distributed
through pipelines. Oil and natural gas liquids (NGLs) are distributed
through pipelines or hauled by trucks. The principal uses for oil and
natural gas are heating, manufacturing, power, and transportation.
As of March 26, 1999, the Company was receiving $12.70 per barrel for its
California oil production which is approximately $1 more than the average
price received during 1998 and about $5 below the average price received
during 1997. On January 1, 1999, the Company began selling its oil to
EOTT Energy Corp. (an affiliate of Enron Corp.) under a six-month
evergreen contract, which includes a $.05 per barrel premium.
<PAGE>
The Field's natural gas is sold to Aera Energy, L.L.C., a joint venture
between ARCO and Shell, pursuant to a "spot market" contract, which runs
through October 31, 1999. The average price per MCF received in the Field
during 1998 was $2.12; the year-end price was $2.23 and the March 26, 1999
estimated price was $1.87.
NGLs are sold to EOTT pursuant to a "spot market" contract, which can be
canceled by either party with 60 days notice. The average price per
barrel received in the Field during 1998 was $10.19; the year-end price
was $10.68 and the March 26, 1999 estimated price was $10.50.
Competition
- -----------
The oil and gas industry is highly competitive. The Company encounters
competition from major and independent oil companies in acquiring
economically desirable producing properties, drilling prospects, and even
the equipment and labor needed to drill, operate and maintain its
properties. Competition is intense with respect to the acquisition of
producing and partially developed properties. The Company competes with
companies having financial resources and technical staffs significantly
larger than its own. The Company does not own any refining or retail
outlets and has minimal control over the prices of its products.
Generally, higher costs, fees and taxes assessed at the producer level
cannot be passed on to the Company's customers.
The Company also faces competition from imported products as well as
alternative sources of energy such as coal, nuclear, hydro-electric power,
and a growing trend toward solar. The Company could incur delays or
curtailments of the purchase of its available production. It may also
encounter increasing costs of production and transportation while sales
prices remain stable or decline. Any of these competitive factors could
have an adverse affect on the operating results of the Company.
Environmental and Other Regulations
- -----------------------------------
The operations of the Company are affected in varying degrees by federal,
state, regional and local laws and regulations, including, but not limited
to, laws governing allowable rates of production, well spacing, air
emissions, water discharges, endangered species, marketing, prices and
taxes. The Company is further affected by changes in such laws and by
constantly changing administrative regulations.
Most natural gas pricing is presently deregulated and the remaining
regulation has no material impact on prices received by the Company. It
is not possible to predict the long-term impact of future natural gas
price regulation or deregulation.
The Company, as an owner and operator of oil and natural gas properties,
is subject to various federal, state, regional and local laws and
regulations relating to discharge of materials into, and protection of,
the environment. These laws and regulations may, among other things,
impose liability on the owner or the lessee for the cost of pollution
clean-up resulting from operations, subject the owner or lessee to
liability for pollution damages, require suspension or cessation of
operations in affected areas or impose restrictions on injection into
subsurface aquifers that may contaminate groundwater. Such regulation has
increased the resources required in, and costs associated with, planning,
designing, drilling, installing, operating and abandoning the Company's
oil and natural gas wells and other facilities. The Company spends a
significant amount of technical and managerial time to comply with
environmental regulations and permitting requirements.
The Company has made and will continue to make expenditures to comply with
these requirements, which it believes are necessary business costs.
Although environmental requirements do have a substantial impact upon the
energy industry, generally these requirements do not appear to affect the
Company any differently or to any greater or lesser extent than other
companies in California.
Although it is not fully insured against all environmental and other
risks, the Company maintains insurance coverage, which it believes, is
customary in the industry. The Company is not aware of any environmental
claims, which could have a material impact upon the Company's financial
condition. Compliance with federal, state, regional and local provisions
relating to protection of the environment have an impact on the Company.
During 1998, the aggregate amount incurred by the Company to comply with
these recurring environmental regulations was approximately $107,000. The
Company estimates that such expenditures for 1999 and for each year
thereafter in the foreseeable future will be approximately $70,000. The
Company will continue to use its best efforts to comply with all
applicable environmental laws and regulations. See Item 6 - Management's
Discussion and Analysis (MD&A) for a discussion regarding idle wells in
the Field.
To the extent these environmental expenditures reduce funds available for
increasing the Company's reserves of oil and natural gas, future
operations could be adversely impacted. Despite the fact that all the
Company's competitors have to comply with similar regulations, many are
much larger and have greater resources with which to deal with these
regulations.
Other
- -----
There are no significant patents, trademarks, licenses, franchises, or
concessions held by the Company.
The oil business is not generally seasonal in nature; although unusual
weather extremes for extended periods may increase or decrease demand.
Natural gas prices tend to increase in the fall and winter months and to
decrease in the spring and summer.
<PAGE>
The Company has 21 employees; six are located at its executive office in
Denver and 15 are located at the Field in New Cuyama, California. In
March 1998 the Company hired a geologist. The Company also engages
consulting petroleum engineers, environmental professionals, geologists,
geophysicists, landmen and attorneys on a fee basis.
ITEM 2. DESCRIPTION OF PROPERTY
Location and General Character
- ------------------------------
The Company's principal producing areas are in Santa Barbara County,
California, the Sacramento Basin of Northern California (Sac Basin), and
the San Juan Basin in New Mexico. Revenue from the Field accounted for
84% of 1998 oil and gas revenue, the Sac Basin accounted for 12%, and San
Juan accounted for 4%.
The Company holds its working interests in oil and natural gas properties
either through recordable assignments, leases, or contractual arrangements
such as operating agreements. Consistent with industry practices, the
Company does not make a detailed examination of title when it acquires
undeveloped acreage. Title to such properties is examined by legal
counsel prior to commencement of drilling operations. This method of
title examination is consistent with industry practices. The Company
believes that it holds satisfactory title to its properties.
In the acquisition and operation of oil and natural gas properties,
burdens such as royalty, overriding royalty, liens incident to operating
agreements, liens by taxing authorities, as well as other burdens and
minor encumbrances are customarily created. The Company believes that no
such burdens materially affect the value or use of its properties.
Proved Oil and Gas Reserves
- ---------------------------
Information concerning estimates of the Company's reserves is set forth in
Note 7 to the financial statements. The Company's 1998 reserve estimates
were prepared by a consulting petroleum engineer who is also an affiliate.
All of the Company's oil and gas reserves are located onshore.
The South Cuyama Field
- ----------------------
Discovered in 1949 in the Cuyama Valley, Santa Barbara County, California,
the Field became the largest oil field found to date in the valley and is
located approximately 75 miles southwest from Bakersfield. By 1951, the
Field contained 200 wells producing approximately 40,000 barrels of oil
per day.
Since inception, the Field is estimated to have produced and sold over 220
million barrels of crude oil. Current oil production to the 100%
approximates 695 barrels per day. Currently, there are 61 producing
wells. The wells produce from a depth range of 3,900 to 4,600 feet.
Field Oil Prices at Historical Lows
- -----------------------------------
See Item 6 - MD&A.
<PAGE>
Sales and Price Data for all Properties
- ---------------------------------------
See Item 6 - MD&A.
Producing Wells
- ---------------
As of December 31, 1998, the Company had a working interest in 56 gross
(43 net) oil wells and 26 gross (6 net) gas wells.
Leasehold Interests
- -------------------
The following table sets forth the gross and net acres of undeveloped oil
and gas leases and lease options held by the Company as of March 26, 1999:
<TABLE>
<CAPTION>
State Gross Net
------------------------ -------- ---------
<S> <C> <C>
South Cuyama, California 3,224 3,224
Sac Basin, California 1,842 553
North Dakota 31,088 7,726
Texas 5,313 1,004
Utah 8,848 8,528
Wyoming 72,585 61,485
------- ------
Total 122,900 82,520
======= ======
</TABLE>
The Company has an interest in 2,504 gross (2,001 net) developed acres in
the Field.
Drilling Activity
- -----------------
During 1998, the Company's drilling activity consisted of two wells
drilled in the Sac Basin, one in the Montana portion of the Big Horn Basin
and one in Lavaca County, Texas, on the Gulf Coast. Of the two Sac Basin
wells where the Company holds a 30% working interest, one was completed as
a gas producer and the other was dry. The Company held a 7.5% working
interest in the well in the Montana portion of the Big Horn Basin. It was
abandoned after producing uneconomical amounts of oil. The Lavaca County
well was completed as a marginally economic gas well; however, it was
subsequently abandoned after six months of production. The Company held a
15% working interest in that well.
ITEM 3. LEGAL PROCEEDINGS: None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the OTC Bulletin Board under the
symbol "HPCO." The following table sets forth the high and low closing
price for the periods indicated:
<TABLE>
<CAPTION>
High Low
---- ----
<S> <C> <C>
1999
First quarter (through March 26, 1999) $ .75 $ .75
1998
First quarter 1.75 1.37
Second quarter 1.31 1.25
Third quarter 1.00 .88
Fourth quarter 1.19 .75
1997
First quarter 2.25 1.37
Second quarter 1.75 1.75
Third quarter 4.50 1.75
Fourth quarter 1.75 1.50
</TABLE>
The quotations reflect inter-dealer prices, without retail mark-up,
markdowns, or commissions and may not represent actual transactions.
During the last two years no dividends have been paid. The Company's
Board of Directors has no present intention to pay any dividends in the
foreseeable future.
As of March 26, 1999 there were 452 holders of record of the Company's
common stock and the closing price was $.75.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
- --------
Our consolidated financial statements and the notes thereto contain
detailed information that should be referred to in conjunction with this
discussion. Operations are attributable to the South Cuyama field, the
Sac Basin and various lease plays in the Rocky Mountain region. To a
large degree, our value depends on the estimated future cash flows from
the Field. We intend to maximize cash flow by continuing to increase oil
production and keeping operating expenses low. Future operations will
also be affected by the results of the prospect development and
exploration activity discussed below.
On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership. We are the general partner and received a
70% interest in the partnership in return for contributing our net assets,
and Yorktown represents the limited partners and received a 30% interest
for its $5,025,000 cash contribution. Being the general partner, we
consolidate the activity of the partnership and present the 30% limited
partners' interest as a minority interest
Our profitability in any particular accounting period will be directly
related to: (i) prices, (ii) production, (iii) lifting costs, and (iv)
exploration activities. Accordingly, operating results will fluctuate
from period to period based on these factors, among others.
Prospect Development and Exploration Activity
- ---------------------------------------------
During 1998 and 1997, we began purchasing unproved acreage. In March 1998,
we hired a full-time geologist with over 15 years of experience in the
Rocky Mountain region. Substantially all of these leases have been
purchased based on geological leads generated by our geologist and other
consulting geologists and geophysicists. These activities, most of which
represent high-risk, high-reward investments, may or may not prove
successful.
The Merlin Prospect of the Sac Basin - Northern California
----------------------------------------------------------
There are two producing gas wells in this field. Combined production is
about 1.38 mmcfpd. There are additional reserves behind pipe that are
scheduled for perforation which, should increase the production to about 3
mmcfpd. Two wildcats are planned for drilling in April 1999. If one of
the two is successful, then two more locations are planned for drilling.
Big Horn Basin - Wyoming
------------------------
In January 1998, we sold a half interest in four of the nine prospects we
are developing for $597,000 to MCNIC Oil and Gas Corporation, a large
public utility headquartered in Detroit, Michigan resulting in a gain of
$320,000. During the third quarter, seismic operations were completed on
five prospect areas where we have working interests ranging from 50% to
100%. We incurred $154,000 in seismic cost ($94,000 net to us), and plan
to drill a horizontal well when oil prices improve. We will be the
operator, and the well is estimated to cost $500,000 ($250,000 net to us.)
<PAGE>
South Texas
-----------
On May 4, 1998, we entered into a joint venture with Indexgeo & Associates
of Houston, Texas to acquire seismic options in Colorado County, Texas (75
miles west of Houston.) The cost for the seismic options to our 90% JV
interest was $166,000. The seismic options consisting of approximately
5,000 acres have been turned to third parties such that we have been
reimbursed $166,000 and will be carried for 19% through the 3-D seismic
and processing. Processing will be complete in mid-April, and if Yeguea
and Wilcox prospects are identified, we will pay our 19% share of drilling
and completing each prospect.
Paradox Basin - Utah
--------------------
During June 1998, approximately 6,000 acres were leased in the Paradox
Basin, Utah (within 25 miles of the Four Corners) within the Rapids
Prospect area. Geologic and geophysical studies are underway in support
of a future 3-D seismic survey. We invested $200,000 in this area. Due
to low oil prices, we impaired half of this investment in the
fourth quarter.
Catalytic Solutions Investment
- -----------------------------
We invested $70,000 to acquire a 1.3% ownership position in Catalytic
Solutions, Inc. (CSI) located in Oxnard, California (a Los Angeles suburb)
with an option to acquire an additional 5.239% for $208,000 over the next
two years. CSI is a development-stage private company that manufactures
catalytic converters that reduce toxic emissions from internal combustion
engines. We use CSI's products in the Field. CSI is in the process of
closing a private placement that will raise approximately $1,800,000 for
manufacturing and marketing their product.
Available-For-Sale Securities
- -----------------------------
During the second quarter of 1998, we decided to make several investments
in certain publicly traded drilling and service companies. The table
below shows the positions at December 31, 1998 and March 26, 1999.
Trading profits of $90,000 were recognized during 1998. During the fourth
quarter, we recognized an impairment of $400,000 for the R&B Falcon
investment and an impairment of $100,000 for the Rowan investment. An
additional charge to equity of $305,000 was also recorded as a temporary
decline. Trading profits during the first quarter of 1999 through March
26 were $75,000.
<TABLE>
<CAPTION>
December 31, 1998
Shares Cost Market Value
------- -------- -----------
<S> <C> <C> <C>
R&B Falcon Corporation (FLC-NYSE) 44,000 $ 757,000 $ 333,000
Rowan Companies Inc. (RDC-NYSE) 38,000 645,000 375,000
Pool Energy Services Company (PESC-NASDAQ) 23,000 267,000 249,000
Ensco International Inc. (ESV-NYSE) 25,000 360,000 267,000
--------- --------
$2,029,000 $1,224,000
========= =========
</TABLE>
<TABLE>
<CAPTION>
March 26, 1999
Shares Cost Market Value
------ -------- ------------
<S> <C> <C> <C>
R&B Falcon Corporation (FLC-NYSE) 44,000 $ 757,000 $ 358,000
Rowan Companies Inc. (RDC-NYSE) 29,000 550,000 379,000
Pool Energy Services Company (PESC-NASDAQ) 15,000 186,000 235,000
Ensco International Inc. (ESV-NYSE) 19,000 301,000 265,000
--------- --------
$1,794,000 $1,237,000
========= =========
</TABLE>
Environmental and Regulation
- ----------------------------
We are directly affected by changing environmental rules and regulations.
Although we believe our operations and facilities are in compliance with
applicable environmental regulations, risk of substantial cost and
liabilities resulting from an unintentional breach of environmental
regulations are inherent to oil and gas operations. It is possible that
other developments, such as increasingly strict environmental laws,
regulations, and enforcement policies or claims for damages could result
in significant costs and liability in the future.
The California legislature passed a bill, which will increase our
operator's bond from $100,000 to $250,000 to be phased in over a five-year
period. In addition, an idle well bill was passed to insure that funds
will be available to properly plug and abandon (P&A) California wells upon
their depletion. There are 175 idle wells in the Field. During May 1999,
we plan to submit to the California Department of Oil and Gas (DOG) a plan
regarding the future plan for idle wells. If the plan is not accepted by
the DOG, we will be required to pay a $500 annual fee for each idle well
until such well is P&A. Such fees, if any, would be placed in escrow for
our benefit and maintained by the State of California.
We implemented our electrification program for the Field and are 60%
complete. Until oil prices increase on a sustained level no further
electrification is planned for the Field.
Liquidity and Capital Resources
- -------------------------------
Cash, short-term investments and cash to be provided from operations are
expected to enable us to meet our obligations as they become due during
the next several years.
The Field, our principal asset, is pledged to U. S. Bank under a
$3,000,000 revolving line of credit executed on March 10, 1999. The
proceeds were used to payoff Trust Company of the West. The principal is
due on March 31, 2002. On March 15, 1999, at our discretion, we paid down
$2,000,000 on the revolver.
Pro Forma Oil and Gas Reserves
- -------------------------------
See Note 7 for our estimate of future oil and gas revenue based on
escalated oil prices and higher production levels than currently being
received.
Results of Operations
- ---------------------
1998 vs. 1997
-------------
<TABLE>
<CAPTION>
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <S> <C> <C>
Production: Average Sales Price:
Oil (MBBLs) 223 222 Oil (per BBL) $11.56 $17.80
Gas (MMCF) 300 138 Gas (per MCF) 2.11 2.69
NGLs (MBBLs) 27 30 NGLs (per BBL) 10.42 13.93
</TABLE>
Significantly lower oil prices caused the reduction in oil revenues. Gas
production more than doubled due to the two new gas wells in the Merlin
prospect. Oil production remained about the same during the two years.
On April 9, 1998, we restructured the debt with Trust Company of the West
resulting in the relinquishment of their 18% net profits interest (NPI) in
the Field. During 1998, due to historically low oil prices, several of
the Field's wells were shut-in. Production would have declined compared to
last year if not for the higher net revenue interest because of the
relinquishment of the 18% NPI.
During the fourth quarter 1998, Santa Barbara County contracted with us to
use certain roads in the South Cuyama field. The work was completed
during October and in January 1999, we were paid $166,000.
Hedging Activities
- ------------------
We have never entered into such transactions and at this time do not
expect to.
Y2K
- ----
During 1997, we installed a new accounting system that after a minor
upgrade will be Y2K compliant. The computer system used in the Field has
been tested and is Y2K compliant. We do not anticipate any Y2K problems
with any of our significant customers or suppliers.
New Accounting Pronouncements
- -----------------------------
None of the new accounting pronouncements that have been released will
affect our 1999 financial reporting.
1999 Outlook
- ------------
During January 1999, we earned over $300,000 in non-recurring fees for
allowing a third party to dispose water in the Field's disposal system
from a blowout gas well 80 miles away. Associated expenses were
approximately $40,000.
If the low oil price environment continues, we will have a loss for the
year. Pursuant to FAS 121, Impairment of Long-lived Assets, we
periodically assess the recoverability of our investments in oil and gas
properties. We believe that the low oil price environment will not
continue in the near term and that we will ultimately recover our
investment in the South Cuyama field from future cash flows. If we change
our assumptions regarding future oil prices then an impairment charge
could occur. See Note 7 for our assumptions.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Report of Independent Public Accountants
To Hallador Petroleum Company:
We have audited the accompanying consolidated balance sheet of Hallador
Petroleum Company as of December 31, 1998 and the related consolidated
statements of operations, cash flows and changes in stockholders' equity
for each of the two years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hallador
Petroleum Company as of December 31, 1998 and the consolidated results of
its operations and its cash flows for each of the two years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/S/ARTHUR ANDERSEN LLP
Denver, Colorado
March 19, 1999
<PAGE>
HALLADOR PETROLEUM COMPANY
CONSOLIDATED BALANCE SHEET
December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,073
Marketable securities 1,224
Accounts receivable-
Oil and gas sales 226
Well operations 234
Right-of-way rental 166
Prospect sale 167
------
Total current assets 5,090
------
Oil and gas properties (successful efforts), at cost:
Unproved properties 264
Proved properties 18,878
Less - accumulated depreciation,
depletion, amortization and impairment (13,508)
------
5,634
------
Oil and gas operator bonds 155
Investment in Catalytic Solutions 70
Other assets 113
-------
$ 11,062
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Brokerage account - marketable securities $ 284
Accounts payable and accrued liabilities 224
Oil and gas sales payable 70
-------
Total current liabilities 578
-------
Bank debt 3,231
-------
Key employee bonus plan 218
-------
Other 101
-------
Minority interest 4,614
-------
Commitments and contingent liabilities (Note 6)
Stockholders' equity:
Preferred stock, $.10 par value;
10,000,000 shares authorized; None issued
Common stock, $.01 par value;
100,000,000 shares authorized; 7,093,150 shares issued 71
Additional paid-in capital 18,061
Net unrealized loss on available-for-sale securities (305)
Accumulated deficit (15,507)
------
2,320
------
$11,062
======
</TABLE>
See accompanying notes.
<PAGE>
HALLADOR PETROLEUM COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
--------- ----------
<S> <C> <C>
Revenue:
Oil $2,585 $3,961
Gas 633 371
NGLs 281 421
Gain on sale of prospects 397 136
Interest income 285 271
Non-recurring right-of-way road rentals 129
Gain on stock sales 90
------ ------
4,400 5,160
Costs and expenses:
Lease operating 2,848 2,887
Geological and geophysical 155 697
Dry hole cost 93 424
Impaired leasehold cost 409 350
Impairment of marketable securities 500
Depreciation, depletion and amortization 469 482
General and administrative 606 451
Interest 360 501
------ ------
5,440 5,792
------ ------
Loss before minority interest (1,040) (632)
Minority interest 311 99
------ -----
Net loss $ (729) $ (533)
====== =====
Basic and diluted loss per share $ (.10) $ (.08)
====== =====
Weighted average number of shares outstanding 7,093 7,093
</TABLE>
See accompanying notes.
<PAGE>
HALLADOR PETROLEUM COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (729) $ (533)
Depreciation, depletion, and amortization 469 482
Minority interest (311) (99)
Impairment of leasehold 262
Change in accounts receivable 40 203
Change in payables and accrued liabilities (212) 107
Impairment of marketable securities 500
Other 31
------ ------
Net cash provided by (used in)
operating activities (243) 453
------ ------
Cash flows from investing activities:
Short-term investments (229) (900)
Evaluated properties (428) (735)
Unproved properties (194) (106)
Other assets (72) (90)
------ ------
Net cash used in investing activities (923) (1,831)
------ ------
Cash flows from financing activities:
Repayment of borrowings (2,092) (498)
Minority interest investment 5,025
Brokerage account 284
------ ------
Net cash provided by (used in)
financing activities (1,808) 4,527
------ ------
Net increase (decrease) in cash
and cash equivalents (2,974) 3,149
Cash and cash equivalents, beginning of year 6,047 2,898
------ ------
Cash and cash equivalents, end of year $ 3,073 $ 6,047
====== ======
Interest paid $ 360 $ 501
</TABLE>
See accompanying notes.
<PAGE>
HALLADOR PETROLEUM COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
Stock Shares Capital Deficit
------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 71 7,093 $18,061 $(14,245)
Net loss (533)
Balance at December 31, 1997 71 7,093 18,061 (14,778)
Net loss (729)
--- ----- ------ -------
Balance at December 31, 1998 $ 71 7,093 $18,061 $(15,507)
=== ===== ====== =======
</TABLE>
Comprehensive loss for 1998 was approximately $942,000.
See accompanying notes.
<PAGE>
HALLADOR PETROLEUM COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Presentation and Consolidation
- ---------------------------------------
The accompanying consolidated financial statements include the accounts of
Hallador Petroleum Company and its wholly owned subsidiaries, collectively
referred to herein as the "Company." All significant intercompany accounts
and transactions have been eliminated. The Company is engaged in the
exploration, development, and production of oil and natural gas primarily
in California. The Company also engages in the trading and acquisition
of non-producing oil and gas mineral leases and fee-simple minerals in
the Rocky Mountain Region.
On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership. The Company is the general partner and
received a 70% interest in the partnership in return for contributing
its net assets, and Yorktown represents the limited partners and received
a 30% interest for its $5,025,000 cash contribution. The Company, being
the general partner, consolidates the activity of the partnership and
presents the 30% limited partners' interest as a minority interest.
The Company is a 92% partner in Santa Barbara Partners (SBP), a general
partnership, and accounts for its investment using the proportionate
consolidation method.
Oil and Gas Properties
- ----------------------
The Company accounts for its oil and gas activities using the successful
efforts method of accounting. Under the successful efforts method, the
costs of successful wells, development dry holes and productive leases are
capitalized and amortized on a units-of-production basis over the life of
the related reserves. Exploratory dry hole costs and other exploratory
costs, including geological and geophysical costs, are expensed as
incurred. Delay rentals are also expensed as incurred. Cost centers for
amortization purposes are determined on a field-by-field basis. Estimated
future abandonment and site restoration costs, net of anticipated salvage
values, are accrued based on units-of-production. Unproved properties
with significant acquisition costs are periodically assessed for
impairment in value, with any impairment charged to expense.
Quarterly the carrying value of each field is assessed for impairment. If
estimated future undiscounted net revenues are less than the recorded
amounts, an impairment charge is recorded.
Marketable Securities
- ---------------------
Marketable securities consist of investments in common stocks and are
accounted for as "available-for-sale securities." Temporary declines in
value are recorded as a reduction to equity, and other-than-temporary
declines, are recognized as an expense. The Company uses the specific
identification method as a basis for calculating realized gains.
<PAGE>
Statement of Cash Flows
- -----------------------
Cash equivalents include investments (primarily commercial paper) with
maturities of three months or less from the date of purchase.
Reporting Comprehensive Income
- ------------------------------
In June 1997 the FASB issued FAS 130, Reporting Comprehensive Income,
which was adopted by the Company beginning January 1, 1998.
Income Taxes
- ------------
Income taxes are provided based on the liability method of accounting
pursuant to FAS 109, Accounting for Income Taxes. The provision for
income taxes is based on pretax financial taxable income. Deferred tax
assets and liabilities are recognized for the future expected tax
consequences of temporary differences between income tax and financial
reporting and principally relate to differences in the tax basis of assets
and liabilities and their reported amounts, using enacted tax rates in
effect for the year in which differences are expected to reverse. If it
is more likely than not that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recognized.
Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual amounts could differ from those
estimates.
(2) BANK DEBT
---------
The South Cuyama field (the "Field"), the Company's principal asset, is
pledged to U. S. Bank National Association (USB) under a $3,000,000
revolving line of credit executed on March 10, 1999. The proceeds from
this loan were used to payoff Trust Company of the West. The loan is
interest only, payable monthly, at LIBOR + 1.5%. The LIBOR rate at
December 31, 1998 was 5.32%. The principal is due on March 31, 2002. On
March 15, 1999, the Company, at its discretion, paid down $2,000,000 on
the revolver.
(3) INCOME TAXES
------------
The Company has the following tax carryforwards at December 31, 1998 (in
thousands):
<TABLE>
<S> <C>
Statutory depletion $ 3,500
Tax net operating losses (NOLs), utilization limited
(expires in 1999-2003) 5,500
Tax NOLs, utilization not limited (expires in 2005-2010) 4,900
</TABLE>
The Company has fully reserved its net deferred tax asset account of
approximately $3,700,000.
<PAGE>
(4) STOCK OPTIONS AND BONUS PLANS
-----------------------------
Stock Option Plan
- -----------------
In December 1995, the Company granted 620,000 options to its CEO and
another 62,000 options to other employees at an exercise price of $1.00.
These options are now fully vested. No options were granted in 1996 or
1998. In 1997, 65,500 options were granted then relinquished during 1998.
At December 31, 1998 68,000 options are available for grant under the plan
and 682,000 are outstanding. No options were exercised during the last
three years.
Options to purchase a 3% partnership interest in Hallador Petroleum, LLP
are outstanding as of December 31, 1998. The exercise price for these
options was based on the fair market value on the date of grant.
The Company accounts for its plans under APB 25, Accounting for Stock
Issued to Employees. Had compensation costs for the plan been determined
consistent with FAS 123, Accounting for Stock-Based Compensation, the
effect on 1997 operations would have been immaterial.
401-(k) Plan
- ------------
The Company maintains a 401-(k) Plan, which all full-time employees are
able to participate in after six months of service. The Company matches
dollar-for-dollar up to 4% of all employee contributions when oil prices
are $13.00 or greater per barrel; vesting occurs immediately. The
Company's contributions for 1998 and 1997 were $25,000 and $27,000,
respectively.
Key Employee Bonus Plan
- -----------------------
At present, Mr. Stabio, CEO, is the only participant in the key employee
bonus plan. Bonuses are computed based on cash flow attributed to the
South Cuyama field. Bonuses accrued for 1998 and 1997 were $13,000 and
$27,000, respectively. Interest accrues on this amount at 30-day risk
free rates. As of December 31, 1998, the amounts owing Mr. Stabio were
$218,000. The amounts owing will not be paid until the earliest to occur
of the following: (i) termination of the participant's employment; (ii)
the merger of the Company into another entity or the sale by the
Company of substantially all of its assets; or (iii) the exercise by a
participant of any stock option issued by the Company, which requires a
payment by the participant of more than $100,000. The amounts accrued are
unfunded and unsecured.
(5) MAJOR CUSTOMERS
---------------
During 1998 and November through December 1997, Tosco purchased the
Field's oil production, while production during the first ten months was
purchased by KOCH.
(6) COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------
The California legislature passed a bill, which will increase the
Company's operator bond from $100,000 to $250,000 to be phased in over a
five-year period. In addition, an idle well bill was passed to insure
that funds will be available to properly plug and abandon (P&A) California
wells upon their depletion. There are 175 idle wells in the Field.
During May 1999, the Company plans to submit to the California Department
of Oil and Gas (DOG) a plan regarding the future plan for idle wells. If
the plan is not accepted by the DOG, the Company will be required to pay a
$500 annual fee for each idle well until such well is P&A. Such fees, if
any, would be placed in escrow for the Company's benefit and maintained by
the State of California.
<PAGE>
(7) OIL AND GAS RESERVE DATA (UNAUDITED)
------------------------------------
The following reserve estimates for the year ended December 31, 1997 were
prepared by independent Petroleum engineers based on data supplied by
management. Reserve estimates for the year ended December 31, 1998 were
prepared by one of the Company's consulting petroleum engineers. The
Company cautions that there are many uncertainties inherent in estimating
proved reserve quantities and in projecting future production rates.
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and NGLs which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved
developed oil and gas reserves are those reserves expected to be recovered
through existing wells with existing equipment and operating methods.
ANALYSIS OF CHANGES IN PROVED DEVELOPED RESERVES
------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Oil NGLs Gas
(BBLs) (BBLs) (MCF)
------ ------ -----
<S> <C> <C> <C>
Balance at December 31, 1996 2,833 260 605
Revisions of previous estimates (410) (53) (1)
Discoveries-Sac Basin 275
Production (222) (30) (138)
------ ---- -----
Balance at December 31, 1997 2,201 177 741
Revisions of previous estimates (1,978) (150) 650
Discoveries-Sac Basin 844
Production (223) ( 27) (300)
------ ---- -----
Balance at December 31, 1998 0 0 1,935
====== ==== =====
Net of 30% minority interest 1,354
=====
There are no significant proved undeveloped reserves.
</TABLE>
<PAGE>
Using the SEC's definition of proved reserves, reserves can only be
attributable to a field if it generates positive cash flow based on prices
being received at December 31, 1998. The Company was receiving $8.59 per
barrel in the South Cuyama field at December 31, 1998. Using this
historical low price, no positive future net revenue could be attributable
to the Field. The table below (in 000s) shows management's reserves for
the Field based on prices of $11 per barrel and assumes that oil prices
will escalate $1 per barrel starting in the year 2001 with a ceiling of
$18. This pro forma reserve report assumes that marginal production
currently shut-in due to low oil prices will start up again in April 1999
and new production will be obtained from new wells, horizontal drilling,
and water flooding. The Field is currently producing 695 barrels per day
(to the 100%) and management estimates that in 2003 daily production will
peak at 1,267 barrels per day. During 1998, the highest average daily
production achieved in the Field was 1,097.
<TABLE>
<CAPTION>
Quantities
to the 100% Net to Company Price
--------------- --------------- ------------------
Oil Gas NGLs Oil Gas NGLs Oil Gas NGLs
--- --- ---- --- --- ---- --- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 266 54 23 177 36 15 $11 $2.36 $10.70
2000 328 66 28 219 44 19 11 2.36 10.70
2001 383 78 33 255 51 22 12 2.36 10.70
2002 420 85 39 280 56 25 13 2.36 10.70
2003 456 92 39 304 61 26 14 2.36 10.70
2004 430 90 38 287 60 25 15 2.36 10.70
2005 408 53 35 272 55 23 16 2.36 10.70
2006 387 78 33 258 52 22 17 2.36 10.70
2007 368 74 31 245 49 21 18 2.36 10.70
Remainder 2,444 526 207 1,629 329 137 2.36 10.70
----- ---- --- ----- --- ---
Total 5,890 1,196 506 3,926 793 335
<CAPTION>
Revenue
------------------- Total
Oil Gas NGLs Revenue
--- --- ---- --------
<S> <C> <C> <C> <C>
1999 $1,947 $ 85 $ 161 $2,193
2000 2,409 104 203 2,716
2001 3,060 120 235 3,415
2002 3,640 132 268 4,040
2003 4,256 144 278 4,678
2004 4,305 142 268 4,715
2005 4,352 130 246 4,728
2006 4,386 123 235 4,744
2007 4,410 116 225 4,751
Remainder 29,322 776 1,466 31,564
------ ----- ----- ------
Total 62,087 1,872 3,585 67,544
<CAPTION>
Daily Oil
Total Total Cash Production to
Revenue Expenses Flow PV10 the 100%
------- -------- ------ ------ -------------
<S> <C> <C> <C> <C> <C>
1999 $2,193 $1,944 $ 249 $ 238 739
2000 2,716 2,216 500 432 911
2001 3,415 2,629 786 618 1,064
2002 4,040 2,825 1,215 871 1,167
2003 4,678 3,020 1,658 1,077 1,267
2004 4,715 3,015 1,700 1,001 1,194
2005 4,728 3,012 1,716 919 1,133
2006 4,744 3,009 1,735 848 1,075
2007 4,751 3,005 1,746 774 1,022
Remainder 31,564 25,191 6,373 2,108
------ ------ ------ ------
67,544 49,866 17,678 8,886
Net of 30% minority interest $12,375 $6,220
<PAGE>
</TABLE>
The following table (in millions) sets forth a standardized measure of the
discounted future net cash flows attributable to the Company's proved oil
and gas reserves (hereinafter referred to as "SMOG.") Future cash inflows
were computed using December 31, 1997 product prices of $15 for oil and
NGLs and $2.50 for gas. Future production costs represent the estimated
future expenditures to be incurred in producing the reserves, assuming
continuation of economic conditions existing at year-end. Discounting the
annual net cash inflows at 10% illustrates the impact of timing on these
future cash inflows. As discussed above, since there are no reserves
attributable to the Field, SMOG data for 1998 is not presented. The
future net revenue discounted at 10% using December 31, 1998 prices for
the Company's reserves other than the Field are less than $800,000
<TABLE>
<CAPTION>
1997
----
<S> <C>
Future cash inflows $ 39
Future cash outflows - production costs (29)
Future income taxes ---
Future net cash flows 10
10% discount factor (3)
---
SMOG $ 7
===
Net of 30% minority interest $ 5
===
</TABLE>
The following table (in millions) summarizes the principal factors
comprising the changes in SMOG:
<TABLE>
<CAPTION>
1997
----
<S> <C>
SMOG, beginning of year $ 17
Sales of oil and gas, net of production costs (2)
Net changes in prices and production costs (11)
Revisions of previous quantity estimates (3)
Accretion of discount 2
Change in income taxes 3
Other 1
---
SMOG, end of year $ 7
===
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE: None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
CORTLANDT S. DIETLER, 77, has been a director of the Company since
November 1995. Since April 1995, he has been the President and Chief
Executive Officer of TransMontaigne Inc. Mr. Dietler was the founder of
Associated Natural Gas Corporation and he served as its Chairman and Chief
Executive Officer until its December 1994 merger with PanHandle Eastern
Corp (now Duke Energy Corp.) Mr. Dietler serves as a director of Forest
Oil Corporation and Key Production Company.
DAVID HARDIE, 48, is the Chairman of the Board and has served as a
director of the Company since July 1989. He serves as a director for
Pacific Grain Products, Inc., Woodland, CA, a private company, which
manufactures rice and grain products. He is a General Partner of Hallador
Venture Partners LLC, the General Partner of Hallador Venture Fund II &
III. He also serves as a director and partner of other private entities
that are owned by members of his family.
STEVEN HARDIE, 45, has been a director since 1994. Mr. Hardie and David
Hardie are brothers. For the last 14 years Mr. Hardie has been a
self-employed film producer. He also serves as a director and partner of
other private entities that are owned by members of his family.
BRYAN H. LAWRENCE, 56, has been a director of the Company since November
1995. He is a founder and senior manager of Yorktown Partners LLC that
manages investment partnerships formerly affiliated with Dillon, Read &
Co. Inc., an investment-banking firm (Dillon Read.) Mr. Lawrence had been
employed with Dillon, Read since 1966, serving most recently as a Managing
Director until the merger of Dillon Read with SBC Warburg in September
1997. Mr. Lawrence also serves as a Director of D&K Healthcare Resources,
Inc., TransMontaigne, Inc., and Vintage Petroleum, Inc. (each a United
States public company), Benson Petroleum, Ltd. and Cavell Energy Corp.
(each a Canadian public company) and certain non-public companies in the
energy industry in which Yorktown partnership hold equity interests
including Meenan Oil Co., Inc., Fintube Limited Partnership,
PetroSantander Inc., Strega Energy Inc., Savoy Energy, L.P., Concho
Resources Inc., Ricks Exploration, Inc. and Athanor Resources Inc. Mr.
Lawrence is a graduate of Hamilton College and also has a MBA from
Columbia University.
VICTOR P. STABIO, 51, is the President, Chief Executive Officer (CEO),
Chief Financial Officer and a director of Hallador Petroleum Company. Mr.
Stabio joined the Company in March 1991 as its President and CEO. Mr.
Stabio has been active in the oil and gas business for the past 27 years.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------------------
Name and
Principal Other Annual
Position Year Salary Bonus (1) Compensation (2)
- ------------------ ---- --------- ---------- -----------------
<S> <C> <C> <C> <C>
Victor P. Stabio
President 1998 $103,000 $15,000 $3,107
1997 103,000 29,000 4,300
1996 103,000 57,000 3,600
</TABLE>
(1) Includes amounts, payment of, which is deferred, pursuant to the Key
Employee Bonus Plan.
(2) Company's contribution to the 401(k) Plan.
During 1997, Mr. Stabio was granted an option to purchase 1.75% of
Hallador Petroleum, LLP for $294,000 that expires December 31, 2010.
No options were exercised during the last three years. At December 31,
1998 Mr. Stabio had 620,000 exercisable options none of which were
in-the-money.
Change in Control Arrangements
- -------------------------------
As of December 31, 1998, the Company has accrued $218,000 payable to Mr.
Stabio pursuant to the key employee bonus plan which upon the merger of
the Company into another entity or the sale by the Company of
substantially all of its assets will become payable.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table is as of March 26, 1999.
<TABLE>
<CAPTION>
Name No. Shares (1) % of Class (1)
- ------------------------------------ --------------- -------------
<S> <C> <C>
David Hardie and Steven Hardie as 3,791,259 53
Nominee for Hardie Family Members (2)
Victor P. Stabio (3) 682,937 9
Cortlandt S. Dietler (4) 100,000 1
Bryan H. Lawrence (5) 2,328,500 33
SBC Warburg Dillion Read Inc. (6) 421,500 6
All directors and executive officer
as a group (3) 6,902,696 96
</TABLE>
(1) Based on total outstanding shares of 7,093,150 if no options are held
by the named directors, or based on a pro forma calculation of the
total outstanding shares including shares issued upon exercise of
options held by the named director or by members of the named group.
Beneficial ownership of certain shares have been, or is being,
specifically disclaimed by certain directors in ownership reports
filed with the SEC.
(2) The Hardie family business address is 740 University Avenue, Suite
110, Sacramento, California 95825.
(3) Includes 620,000 shares issuable upon the exercise of options by Mr.
Stabio.
(4) Mr. Dietler's address is P. O. Box 5660, Denver, Colorado 80217.
All shares are held by Pinnacle Engine Company LLC, wholly owned by
Mr. Dietler.
(5) Mr. Lawrence's address is 410 Park Avenue, 19th Floor, New York, NY
10022. Mr. Lawrence owns 50,000 shares directly, and the remainder
is held by Yorktown Energy Partners II, L.P., an affiliate.
(6) SBC Warburg Dillon Read Inc.'s address is 535 Madison Avenue, New
York, NY 10022.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown)
invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited
liability limited partnership. The Company is the general partner and
received a 70% interest in the partnership in return for contributing its
net assets, and Yorktown represents the limited partners and received a
30% interest for its $5,025,000 cash contribution. The Company, being the
general partner, consolidates the activity of the partnership and presents
the 30% limited partners' interest as a minority interest.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Articles of Incorporation of Kimbark Oil and Gas
Company, effective September 24, 1987 (1)
3.2 Articles of Amendment to Restated Articles of Incorporation
of Kimbark Oil & Gas Company, effective December 14, 1989,
to effect change of name to Hallador Petroleum Company and
to change the par value and number of authorized shares of
common stock (1)
3.3 Amendment to Articles of Incorporation dated December 31,
1990 to effect the one-for-ten reverse stock split (2)
3.4 By-laws of Hallador Petroleum Company, effective November 9,
1993 (4)
10.1 Composite Agreement and Plan of Merger dated as of July 17,
1989, as amended as of August 24, 1989, among Kimbark Oil &
Gas Company, KOG Acquisition, Inc., Hallador Exploration
Company and Harco Investors, with Exhibits A, B, C and D
(1)
10.2 Hallador Petroleum Company 1993 Stock Option Plan *(3)
10.3 Not used
10.4 Not used
10.5 Hallador Petroleum Company Key Employee Bonus Compensation
Plan *(3)
10.6 Not used
10.7 Not used
10.8 EOTT Contract (10)
10.9 First Amendment to the 1993 Stock Option Plan *(6)
<PAGE>
10.10 First Amendment to Key Employee Bonus Compensation Plan *(6)
10.11 Stock Purchase Agreement dated November 15, 1995 (6)
10.12 Second Amendment to Key Employee Bonus Compensation Plan
*(7)
10.13 Hallador Petroleum, LLP Agreement (9)
10.14 Hallador Petroleum, LLP Stock Option Agreement *(9)
21.1 List of Subsidiaries (2)
27.1 Financial Data Schedule (10)
-------------------
(1) Incorporated by reference (IBR) to the 1989 Form 10-K.
(2) IBR to the 1990 Form 10-K.
(3) IBR to the 1992 Form 10-KSB.
(4) IBR to the 1993 Form 10-KSB.
(5) Not used.
(6) IBR to the 1995 Form 10-KSB.
(7) IBR to the September 30, 1996 Form 10-QSB.
(8) IBR to the September 30, 1997 Form 10-QSB.
(9) IBR to the December 31, 1997 Form 10-KSB.
(10) Filed herewith.
* Management contracts or compensatory plans.
Stockholders may obtain a copy of any listed exhibit by writing to Teressa
Jones, Secretary of the Company. Reasonable expenses will be charged for
copies and postage. 1995 through 1998 exhibits can also be obtained via
EDGAR at the SEC's web site.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the 1998 fourth quarter.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HALLADOR PETROLEUM COMPANY
BY:/S/VICTOR P. STABIO
VICTOR P. STABIO, CEO
Dated: March 26, 1999
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
/S/ DAVID HARDIE Chairman March 26, 1999
DAVID HARDIE
/S/ VICTOR P. STABIO CEO, Principal Financial March 26, 1999
VICTOR P. STABIO and Accounting Officer
and Director
/S/ BRYAN LAWRENCE Director March 26, 1999
BRYAN LAWRENCE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,073
<SECURITIES> 1,224
<RECEIVABLES> 793
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,090
<PP&E> 19,142
<DEPRECIATION> 13,508
<TOTAL-ASSETS> 11,062
<CURRENT-LIABILITIES> 578
<BONDS> 3,231
0
0
<COMMON> 71
<OTHER-SE> (305)
<TOTAL-LIABILITY-AND-EQUITY> 11,062
<SALES> 0
<TOTAL-REVENUES> 4,400
<CGS> 0
<TOTAL-COSTS> 5,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360
<INCOME-PRETAX> (729)
<INCOME-TAX> 0
<INCOME-CONTINUING> (729)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (729)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
Exhibit 10.8
EOTT ENERGY Operating Limited Partnership
4900 California Avenue, Suite A-320
Bakersfield, CA 93309
(805) 859-2150 Fax (805) 859-2161
December 8, 1998
CRUDE OIL PURCHASE CONTRACT
TO: Hallador Production Company
Attn: Vic Stabio
1660 Lincoln Street, Suite 2700
Denver, CO 80264
The undersigned "Seller," whether one or more, hereby represents, warrants
and declares that it is authorized to deliver and sell (and receive 100%
of the proceeds) for all of the "oil" produced from the following:
Lease(s): South Cuyama #5093872 and Hibberd #5093873
Described as: Santa Barbara, CA
This Crude Oil Purchase Agreement "Agreement" between Hallador Production
Company hereinafter called "Seller," and EOTT ENERGY Operating Limited
Partnership hereinafter called "Buyer," sets forth the terms and
conditions under which Seller agrees to sell and deliver, and Buyer agrees
to purchase and receive, the crude and/or condensate ("oil") from the
above described Lease(s), to wit:
I: TERM:
Effective January 1, 1999 through June 30, 1999 and continuing
thereafter on a six month evergreen.
II. TYPE OF OIL:
Buena Vista
III. QUANTITY:
Approximately 800-1,100 bbls per day.
IV. DELIVERY:
Delivery shall be made from designated shipping tanks and/or
through sales meters into EOTT's designated carrier from the South
Cuyama and Hibberd leases. Title shall pass from Hallador
Production Company to EOTT as crude oil passes through the outlet
flange of the tank.
V. PRICE:
Average of Chevron, Union, and Equiva's Buena Vista posting plus
$.05 per bbl gravity adjusted EDQ.
VI. PAYMENT:
Payment shall be made on the twentieth (20th) of the month
following the month of delivery.
VII. INVOICES:
All invoices, invoicing documents and invoicing matters for EOTT
Energy Operating Limited Partnership, shall be sent to the
following address:
CONTRACTS: INVOICES: DIVISION ORDERS:
- --------------------- --------------------- ---------------------
EOTT ENERGY Operating EOTT ENERGY Operating EOTT ENERGY Operating
Limited Partnership Limited Partnership Limited Partnership
Attn: Kari Kaiser/ Attn: Crude Oil Attn: Division Order
Lease Acquisition Accounting Department
4900 California Avenue 111 West Ocean Blvd. P. O. Box 4666
Suite A-320 Suite 1700 Houston TX 77251-4666
Bakersfield CA 93309 Long Beach CA 90802
Phone #805-859-2150 Fax invoices to:
Fax #805-859-2161 310-436-9319
Hallador Production Company EOTT ENERGY Operating Limited Partnership
By: /S/VICTOR P. STABIO By: /S/TED MCCURDY
Printed: Victor P. Stabio Printed: Ted McCurdy
Title: President Title: Manager, Lease Acquisitions
Date: December 10, 1998 Date: December 8, 1998
Tax ID# 84-0428142
Please return one executed copy in the self addressed envelope.
EOTT ENERGY CORP.
General Partner
