SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-16203
Delta Petroleum Corporation
(Exact name of registrant as specified in its charter)
Colorado 84-1060803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 17th Street, Suite 3310
Denver, Colorado 80202
(Address of principal (Zip Code)
executive offices)
(303) 293-9133
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
5,014,884 shares of common stock $.01 par value were outstanding
as of November 12, 1996.
FORM 10-QSB
1st QTR.
FY 1997
INDEX
PART I FINANCIAL INFORMATION
PAGE
NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - September 30, 1996 and
June 30, 1996 (unaudited). . . . . . . . . . . . . .1
Consolidated Statements of Operations -
Three Months Ended
September 30, 1996 and 1995 (unaudited). . . . . . .3
Consolidated Statement of Stockholders' Equity
Year Ended June 30, 1996 and
Three Months Ended September 30, 1995 (unaudited). .4
Consolidated Statements of Cash Flows -
Three Months Ended
September 30, 1996 and 1995 (unaudited). . . . . . .5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis
Or Plan of Operations . . . . . . . . . . . . . . .9
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities. . . . . . . . . . . . . . . 15
Item 3. Defaults upon Senior Securities. . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 15
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1996 1996
ASSETS
Current Assets:
Cash $1,128,181 1,629,738
Trade accounts receivable, net of
allowance for doubtful accounts of $48,722 at
September 30, 1996 and June 30, 1996 449,684 377,260
Other current assets 10,100 12,100
Total current assets 1,587,965 2,019,098
Property and Equipment:
Oil and gas properties, at cost (using
the successful efforts method
of accounting):
Undeveloped offshore California
properties 6,786,580 6,786,580
Undeveloped onshore domestic properties 971,648 971,648
Developed onshore domestic properties 3,150,563 2,919,451
Office furniture and equipment 78,188 78,188
10,986,979 10,755,867
Less accumulated depreciation and depletion (1,886,023) (1,787,443)
Net property and equipment 9,100,956 8,968,424
Investment in Bion Environmental
Technologies, Inc. (Bion) 571,439 411,483
Accounts receivable from officer
and affiliates 120,692 116,727
$11,381,052 11,515,732
September 30, June 30,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable trade $258,203 304,050
Other accrued liabilities 87,729 68,297
Royalties payable 611,990 649,835
Liabilities payable by Underwriters Financial
(UFG) (the Company's former parent)
Note payable, including accrued interest 2,669,642 2,669,642
Total current liabilities 3,627,564 3,691,824
Stockholders' Equity
Preferred stock, $.10 par value;
authorized 3,000,000 shares; none issued - 16
Common stock, $.01 par value;
authorized 300,000,000 shares,
issued 5,014,884
shares at September 30, 1996 and
issued 3,550,882
shares at June 30, 1996 50,148 44,882
Additional paid-in capital 21,850,210 21,299,784
Unamortized consulting expense (60,000) (105,000)
Cumulative unrealized loss (118,768) (255,184)
Accumulated deficit (13,968,102) (13,160,590)
Total stockholders' equity 7,753,488 7,823,908
Commitments and contingencies
$11,381,052 11,515,732
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30, September 30,
1996 1995
Revenue:
Oil and gas sales $346,651 203,869
Other revenue 62,717 14,072
Total revenue 409,368 217,941
Expenses:
Lease operating expenses 113,868 95,329
Depreciation and depletion 98,580 78,891
Exploration expenses 219,620 14,663
Abandoned and impaired expense 180,508 -
General and administrative 591,425 351,598
Stock option expense 12,879 293,125
Interest on notes payable - 102,893
Total expenses 1,216,880 936,499
Net loss ($807,512) (718,558)
Net loss per common share ($0.17) (0.20)
Weighted average number of common
shares outstanding 4,789,408 3,649,698
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended June 30, 1996 and three months ended
September 30, 1996
(UNAUDITED)
<TABLE>
Obligation
Preferred Stock Common Stock payable in
Shares Amount Shares Amount common stock
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1995 - $- 3,550,882 35,509 46,400
Unrealized gain on equity securities - - - - -
Shares issued for cash -- preferred stock 160 16 - - -
Commission paid on issuance of preferred stock - - - - -
Shares issued for cash - common stock - - 140,478 1,405 -
Shares issued for cash-redeemable common stock - - 276,000 2,760 -
Commission paid on issuance of redeemable
common stock - - - - -
Capital contributions from UFG - - - - -
Shares issued for cash upon exercise of options - - 351,350 3,513 -
Shares issued for undeveloped oil and gas properties - - 31,127 311 -
Shares issued for developed oil and gas properties - - 5,000 50 -
Stock options granted as compensation - - - - -
Shares issued for services - - 127,046 1,270 -
Amortization of consulting expense - - - - -
Common stock issued for amortization of obligation - - 6,400 64 (46,400)
Net loss - - - - -
Balance, June 30, 1996 160 16 4,488,283 44,882 -
Unrealized gain on equity securities - - - - -
Preferred stock converted into common stock (160) (16) 396,601 3,966 -
Shares issued for cash upon exercise of options - - 129,500 1,295 -
Shares issued for developed oil and gas properties - - 500 5 -
Stock options granted as compensation - - - - -
Amortization of consulting expense - - - - -
Net loss - - - - -
Balance, September 30, 1996 - $- 5,014,884 50,148 -
</TABLE>
<TABLE>
Cumulative
Additional Unamortized unrealized
paid-in consulting gain Accumulated
capital expense (loss) deficit Total
<CAPTION>
<S> <C> <S> <C> <C> <C>
Balance, July 1, 1995 15,627,201 - (350,142) (9,832,360) 5,526,608
Unrealized gain on equity securities - - 94,958 - 94,958
Shares issued for cash -- preferred stock 1,599,984 - - - 1,600,000
Commission paid on issuance of preferred stock (160,000) - - - (160,000)
Shares issued for cash - common stock 637,710 - - - 639,115
Shares issued for cash-redeemable common stock 747,240 - - - 750,000
Commission paid on issuance of redeemable
common stock (75,000) - - - (75,000)
Capital contributions from UFG 62,098 - - - 62,098
Shares issued for cash upon exercise of options 1,660,837 - - - 1,664,350
Shares issued for undeveloped oil and gas properties 115,290 - - - 115,601
Shares issued for developed oil and gas properties 16,825 - - - 16,875
Stock options granted as compensation 365,977 - - - 365,977
Shares issued for services 655,286 (656,556) - - -
Amortization of consulting expense - 551,556 - - 551,556
Common stock issued for amortization of obligation 46,336 - - - -
Net loss - - - (3,328,230) (3,328,230)
Balance, June 30, 1996 21,299,784 (105,000) (255,184) (13,160,590) 7,823,908
Unrealized gain on equity securities - - 136,416 - 136,416
Preferred stock converted into common stock (3,950) - - - -
Shares issued for cash upon exercise of options 539,893 - - - 541,188
Shares issued for developed oil and gas properties 1,604 - - - 1,609
Stock options granted as compensation 12,879 - - - 12,879
Amortization of consulting expense - 45,000 - - 45,000
Net loss - - - (807,512) (807,512)
Balance, September 30, 1996 21,850,210 (60,000) (118,768) (13,968,102) 7,753,488
</TABLE>
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30, September 30,
1996 1995
Net cash used in operating activities ($809,277) (608,476)
Cash flows from investing activities:
Additions to property and equipment (229,503) (72,111)
Net cash used in investing activities (229,503) (72,111)
Cash flows from financing activities:
Stock issued for cash upon
exercise of options 541,188 478,044
Payment of notes payable - (100,000)
Issuance of common stock for cash - 20,280
Issuance of redeemble common stock - 750,000
Commission paid on issuance of redeemable
common stock - (75,000)
Increase in accounts receivable from
officer and affiliates (3,965) (4,128)
Net cash provided by financing activities 537,223 1,069,196
Net (decrease) increase in cash (501,557) 388,609
Cash at beginning of period 1,629,738 55,833
Cash at end of period $1,128,181 444,442
Supplemental cashflow information:
Cash paid for interest - -
Non-cash financing activities:
Stock issued for oil and gas properties $1,609 99,851
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Three Months Ended September 30, 1996 and 1995
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form
10-QSB and, in accordance with those rules, do not
include all the information and notes required by generally
accepted accounting principles for complete financial statements.
As a result, these unaudited consolidated financial statements
should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto filed with
the Company's most recent annual report on Form 10-KSB. In the
opinion of management, all adjustments, consisting only of normal
recurring accruals, considered necessary for a fair presentation
of the financial position of the Company and the
results of its operations have been included. Operating results
for interim periods are not necessarily indicative of the results
that may be expected for the complete fiscal year.
(2) Investments
The Company adopted Statement of Financial Standards No. 115
as of July 1, 1994. The Company's investment in Bion
Environmental Technologies, Inc. (Bion) is classified as an
available for sale security and reported at its fair market
value, with unrealized gains and losses excluded from earnings
and reported as a separate component of stockholders' equity.
During first quarter fiscal 1997, the Company exchanged a $23,540
receivable for 7,846 shares of Bion's common stock.
The cost and estimated fair market value of its investment
in Bion at September 30, 1996 and June 30, 1996 are as follows:
Estimated
Unrealized Market
Cost (Loss) Value
September 30, 1996 $690,207 (118,768) 571,438
June 30, 1996 $666,667 (255,184) 411,483
(3) Contingencies
Investment in Offshore California Property:
The Company has an investment in certain undeveloped
offshore California properties of $6,786,580 at September 30,
1996. The Company's ability to ultimately develop the
properties is subject to a number of uncertainties, including the
operator's ability to obtain the necessary permits and
authorizations relating to the development activities. The
Company's ability to realize its investment in the offshore
California properties is dependent on its ability
to develop the properties or to sell some or all of its interests
in the properties. Accordingly, the financial statements do not
include any adjustments that would result if the Company could
not realize its investment.
Investment in Amber - Note Payable by UFG:
A portion of the shares of Amber Resources Company, a
majority owned subsidiary of the Company, are pledged to secure a
note payable by the Company's former parent, Underwriters
Financial Group ("UFG") which note is currently in default on
December 11, 1995, UFG filed Chapter 11 bankruptcy protection
with the United States Bankruptcy Court Fourth Southern District
of New York. There exists an uncertainty as to whether the
Company's former parent has the ability to ultimately repay or
otherwise satisfy the obligation. If the encumbered portion of
the Amber shares were lost the company's interest in Amber would
be reduced from 91.68% to 19.74%. The ultimate outcome of the
matter cannot presently be determined. Accordingly, the
financial statements do not include any adjustments that would
result if the holder of the note were to foreclose on the Amber
shares held as collateral and the Company were otherwise unable
to satisfy the obligation and retain the shares.
At September 30, 1996 and June 30, 1996, the note payable
recorded in the accompanying financial statements represents
UFG's obligation under the Snyder Note, which
was recorded upon the transfer of the common stock of Amber to
the Company by UFG in connection with the Plan of Reorganization.
The note payable bears interest at 18% and was
due January 15, 1995. The note is currently in default. Past
due amounts accrued interest at 18% per year through June 30,
1996. The Company did not record interest expense related to
the UFG note to Snyder Oil Corporation ("SOCO") during the first
quarter of fiscal 1997 because bankruptcy rules preclude SOCO
from recovering post-petition interest on its claim
against UFG. SOCO is listed by UFG as an unsecured creditor in
the Schedules and Statements of Affairs filed by UFG with the
Bankruptcy Court. The note is secured by 3,357,003 shares
of common stock of Amber. The note has been recorded in the
accompanying consolidated financial statements as a liability of
the Company since a portion of the common shares of
Amber owned by the Company are pledged to secure the note and
because of the uncertainties regarding UFG's ability to fulfill
its obligations under the note.
The net assets and liabilities of Amber included in the
accompanying consolidated financial statements as of September
30, 1996 are summarized as follows:
Assets:
Current Assets $ 115,789
Oil and gas properties:
Undeveloped offshore California properties 5,006,276
Developed onshore properties, net 1,441,210
6,447,486
Accumulated depreciation and depletion (768,480)
Net oil and gas properties 5,679,006
Total Assets 5,794,795
Liabilities -
Current liabilities 1,362,197
Net assets $ 4,432,598
The revenue and expenses of Amber included in the
accompanying consolidated financial statements for the three
months ended September 30, 1996 are as follows:
Revenue $ 210,937
Expenses ( 326,185)
Net loss $ (115,248)
Item 2. Management's Discussion and Analysis or Plan of
Operations
Background
In October 1992, Delta concluded a series of agreements with
Underwriters Financial Group, Inc. ("UFG") (collectively, the
"UFG Agreement") to participate in a plan to reorganize
and recapitalize Delta (the "Plan of Reorganization"). Prior to
the reorganization, UFG owned approximately 89% of the
outstanding shares of common stock of Delta. Under the terms of
the UFG Agreement, UFG transferred its oil and gas properties and
certain other related assets to Delta as a contribution to the
capital of Delta. The assets transferred included producing and
non-producing oil and gas properties, accounts receivable, oil
field equipment, and office furniture and equipment. UFG also
transferred 4,110,660 shares of common stock of Amber
to Delta. The shares transferred represented an 88.09% interest
in Amber.
Also in connection with the Plan of Reorganization, Delta
issued 1,030,000 shares of common stock to Messrs. Burdette A.
Ogle and Ronald Heck (collectively, "Ogle") in exchange
for their working interests in two federal offshore California
oil and gas units and 167,317 shares of common stock of Amber.
The oil and gas properties and shares of common stock of
Amber received from Ogle were recorded at Ogle's predecessor cost
of approximately $45,000. The assets transferred to
Delta by UFG were recorded at the predecessor cost of the assets
to UFG, as adjusted.
UFG followed the full cost method of accounting for its oil
and gas properties. The predecessor cost of the producing
properties transferred was adjusted to conform to the
Company's policy of accounting for oil and gas properties under
the successful efforts method of accounting. The predecessor
cost of each oil and gas property was further adjusted, if
necessary, to reduce the amount recorded to the estimated fair
value of the oil and gas reserves attributable to the property,
if less than the adjusted predecessor cost of the property.
Under the terms of the UFG Agreement, UFG agreed to assume
certain existing liabilities of Delta and Amber totaling
$1,325,175. On April 14, 1993, the Company entered into an
agreement with UFG (the "Clarification Agreement") which provided
for the issuance by UFG of a non-interest bearing promissory note
payable to the Company in the amount of $1,325,175
to evidence UFG's obligation to repay the Company for the
obligations UFG had assumed under the UFG Agreement. The
Clarification Agreement also provided for the pledge of 556,289
shares of common stock of the Company held by UFG as collateral
for performance under the promissory note and clarification and
revision of certain other provisions of the UFG
Agreement. On February 23, 1995, the Company and UFG executed
and entered into a letter agreement dated February 22, 1995, in
which Delta agreed to convert $736,932 of principal and
interest due from UFG under its promissory note dated March 31,
1993 into 491,300 shares of UFG common stock. In addition, UFG
and Delta agreed that the remaining $736,932 owed by
UFG to Delta would be satisfied by the transfer of 92,117 shares
of Delta common stock from UFG to Delta. Delta agreed to file a
registration statement covering the registration of the
remaining 888,063 shares of Delta's common stock owned by UFG and
UFG agreed that the shares would be held by Delta as collateral
pending the discharge of UFG's obligations to
Snyder Oil Corporation. Upon the effectiveness of the
registration statement, UFG would have the right to sell all or
some of the Delta shares covered by the registration statement at
a price of not less than $6.875 or the bid price on the effective
date, whichever is higher. As of November 12, 1996, the
registration statement has not been declared effective. An
escrow would be established for the 888,063 shares pending sale
to assure that the shares are sold pursuant to the terms of the
agreement and to assure that the first proceeds are used to
discharge UFG's promissory note to Snyder Oil Corporation
("SOCO") thereby releasing to Delta the Amber Resources Company
common stock held by SOCO as collateral for the promissory note.
Certain of the oil and gas properties transferred had been
pledged by UFG to secure existing indebtedness, which
indebtedness remained an obligation of UFG under the terms of the
UFG Agreement. To the extent the existing secured indebtedness
on a particular property exceeded its adjusted predecessor cost,
the transfer of the property was recorded in the
accompanying financial statements at its adjusted predecessor
cost and a liability was recorded in an amount equal to the asset
recorded. To the extent the existing secured indebtedness on a
particular property was less than the adjusted predecessor cost,
the property was recorded at its adjusted predecessor cost, the
related liability was recorded and the net amount was reflected
as a capital contribution by UFG. Subsequent payments by UFG
which reduce the liabilities recorded by the Company are recorded
as a reduction of the liability and a capital contribution.
3,357,003 shares of common stock of Amber transferred to the
Company by UFG are pledged to secure a note payable to Snyder Oil
Corporation (the "Snyder Note"). The balance due on the note
payable at the time of the transfer of the Amber shares to Delta
of $2,091,761 was recorded as a liability of Delta because of the
uncertainty of the ability of UFG to fulfill its obligations
under the note.
Liquidity and Capital Resources.
At September 30, 1996, the Company had a working capital
deficit of $2,039,599 compared to a working capital deficit of
$1,672,726 at June 30, 1996. The Company's working
capital deficit is in part a result of the note payable to Snyder
Oil Corporation ("Snyder") of $2,669,642 which is non recourse to
Delta and which are payable by its former parent, UFG.
Although there is no assurance that it will do so, the Company
expects UFG to discharge this note and the other obligations
within the next twelve months through the sale of the stock it
owns in Delta and/or through other means, at which time the
Company's working capital deficit will be correspondingly
reduced. If UFG were unable to pay the promissory note payable
to Snyder, Delta's ownership interest in Amber could be reduced
to 19.74%. Although there is no assurance that it would succeed
in doing so, Delta would attempt to make other arrangements
to discharge the promissory note and thereby retain the Amber
shares securing the promissory note (see "Future Operations"
below). Nevertheless, although the loss of these Amber shares
would significantly reduce the Company's oil and gas revenues and
reserves attributable to its ownership of Amber (see "Future
Operations" below), the properties owned directly by Delta
and the revenues therefrom would not be affected.
The Company's current liabilities include royalties
payable of $611,990 at September 30, 1996 which represent the
Company's estimate of royalties payable on production
attributable to Amber's interest in certain wells in Oklahoma,
including production prior to the acquisition of Amber. The
Company is attempting to identify the royalty owners and
calculate the amounts owed to each owner, which it expects will
require some time. To date, no significant claims have been
asserted against Amber by royalty owners for amounts due for
prior production. The Company is awaiting the outcome of
litigation in various courts which may impact the method of
calculating the Company's obligation for royalties payable on
recoupment gas. To date no claims have been asserted against
Amber by royalty owners for royalties due on recoupment gas
produced. The Company believes that the operators of the
affected wells have paid some of the royalties on behalf of the
Company and have withheld such amounts from revenues attributable
to the Company's interest in the wells. The Company has
contacted the operators of the wells in an attempt to determine
what amounts the operators have paid on behalf
of the Company over the past five years, which amounts would
reduce the amounts owed by the Company. To date the Company has
not received information adequate to allow it to determine
the amounts paid by the operators. The Company has been informed
by its legal counsel that the applicable statue of limitations
period for actions on written contracts arising in the state of
Oklahoma is five years. The statute of limitation has expired
for royalty owners to make a claim for a portion of the estimated
royalties that had previously been accrued. Accordingly, these
amounts have been written off and recorded as other income.
The Company believes that it is unlikely that all
claims that might be made for payment of royalties payable in
suspense or for recoupment royalties payable would be made at
one time. Further, Amber, rather than Delta, would be directly
liable for payment of any such claims. The Company believes,
although there can be no assurance, that it may ultimately be
able to settle with potential claimants for less than the amounts
recorded for royalties payable.
The Company expects to raise additional capital by selling
its common stock in order to fund its capital requirements for
its portion of the costs of the drilling and completion of
development wells on its proved undeveloped properties during the
next twelve months. There is no assurance that it will be able
to do so or that it will be able to do so upon terms that are
acceptable. The Company does not currently have a credit
facility with any bank and it has not determined the amount, if
any, that it could borrow against its existing properties. The
Company will continue to explore additional sources of both
short-term and long-term liquidity to fund its working capital
deficit and its capital requirements for development of its
properties including establishing a credit facility, sale of
equity or debt securities and sale of non-strategic
properties. Many of the factors which may affect the Company's
future operating performance and liquidity are beyond the
Company's control, including oil and natural gas prices and the
availability of financing.
The Company received the proceeds from the exercise of
options to purchase shares of its common stock for $541,188
during the three months ended September 30, 1996.
After evaluation of the considerations described above,
the Company believes that its cash flow from its existing
producing properties, proceeds from the sale of producing
properties, and other sources of funds will be adequate to fund
its operating expenses and satisfy its other current liabilities
over the next year or longer.
Results of Operations
Net Earnings (Loss). The Company reported a net loss for
the three months ended September 30, 1996 of $807,512 compared to
a net loss of $718,558 for the three months ended
September 30, 1995.
Revenue. Total revenue for the three month period ended
September 30, 1996 was $409,368 compared to $217,941 for the
three months ended September 30, 1995. Oil and gas
sales for the three months ended September 30, 1996 were $346,651
compared to $203,869 for the three months ended September 30,
1995. The Company's oil and gas sales were impacted
by an increase in oil and gas prices, the recovery of production
attributable to underbalanced positions and an increase in
production from newly drilled and recompleted wells.
Production volumes and average prices received for the three
month period ended September 30, 1996 and 1995 are as follows:
Three Months Ended
September 30,
1996 1995
Production:
Oil (barrels) 2,861 2,153
Gas (Mcfs) 156,367 116,795
Average Price:
Oil (per barrel) $18.24 $16.50
Gas (per Mcf) $1.88 $1.44
Lease Operating Expenses. Lease operating expenses were
$113,868 and $95,329 for the three months ended September 30,
1996 and 1995, respectively. On a MCF equivalent
basis, production expenses and taxes were $.66 and $.73,
respectively, during the three months period ended September 30,
1996 and 1995.
Depreciation and Depletion Expense. Depreciation and
depletion expense for the three months ended September 30, 1996
and 1995, respectively, were $98,580 and $78,891. On a
MCF equivalent basis, depreciation and depletion expense were
$.57 and $.61, respectively, per Mcf equivalent during the three
months period ended September 30, 1996 and 1995.
Exploration Expense. The Company recorded exploration of
oil and gas properties of $219,620 and $14,663 for the three
ended September 30, 1996 and 1995, respectively. The
increase in exploration costs can be attributed to the Company's
participation in the shooting of 3-D seismic on two prospects in
Northern California.
Abandoned and impaired. The company recorded an expense for
abandonment and impairment of oil and gas properties of $180,508
for the three months ended September 30, 1996. There were no
abandonment and impairment expenses by the company for the same
periods in 1995.
General and Administrative Expenses. General and
administrative expenses for the three months ended September 30,
1996 were $591,425 compared to $351,598 for the three months
ended September 30, 1995. General and Administrative expenses
increased from the prior year as a result of an increase in
broker and shareholder relations expense to attempt to create a
more liquid trading market for the Company's common stock.
Interest on Notes Payable. Interest on notes payable was
$102,893 for the three months ended September 30, 1995. Interest
expense includes interests on the Company's convertible
note payable issued in November 1992 and paid in full during the
first quarter of fiscal 1996 and interest on the Snyder Note
which was recorded in October 1992. The Company did not record
interest expense related to the UFG note to Snyder Oil
Corporation ("SOCO") during the first quarter of fiscal 1997
because bankruptcy rules preclude SOCO from recovering
post-petition interest on its claim against UFG. SOCO is listed
by UFG as an unsecured creditor in the
Schedules and Statements of Affairs filed by UFG with the
Bankruptcy Court.
Future Operations
The Company believes there is risk that UFG will be unable
to timely repay the Snyder Note which is currently in default,
and that the encumbered portion of the Amber shares owned
by Delta could be lost to Delta unless Delta is able to make
other arrangements to allow it to keep the shares and/or to
realize the equivalent value from UFG. On December 11, 1995, UFG
filed Chapter 11 bankruptcy protection with the Unites States
Bankruptcy Court for the Southern District of New York. The
Company holds certificates representing 888,063 shares of Delta
common stock which are in the name of UFG as collateral pending
the discharge of UFG's obligation to Snyder Oil Corporation. As
a result, the Company could cancel such collateral
shares and reduce the number of shares outstanding or attempt to
resell some or all of these shares and use the proceeds therefrom
to pay the debt owed by UFG encumbering the Amber
shares.
The loss of the encumbered Amber shares would reduce Delta's
ownership interest in Amber to 19.74%. Amber's oil and gas
revenue during the three months ended September 30,
1996 amounted to approximately $175,000 which constituted
approximately 50% of the Company's consolidated oil and gas
revenues. Amber's proved oil and gas reserves attributable
to its onshore properties are estimated to be 5,300 Bbls of oil
and 1.85 Bcf of gas. Amber's proved undeveloped oil and gas
reserves attributable to its offshore California properties are
estimated to be 10,162,000 Bbls of oil and 14.38 Bcf of gas. A
loss of the encumbered Amber shares would significantly reduce
the Company's oil and gas revenue and reserves and have a
material effect on the operations of the Company (see Note 4 to
the "Consolidated Financial Statements).
The Company's Offshore California proved undeveloped
reserves are attributable to its interests in four federal units
(plus one additional lease) located offshore California near
Santa Barbara. While these interests represent ownership of
substantial oil and gas reserves classified as proved
undeveloped, the cost to develop the reserves will be very
substantial. The Company may be required to farm out all or a
portion of its interests in these properties if it cannot fund
its share of the development costs. There can be no assurance
that the Company can farm out its interests on acceptable terms.
If the Company were to farm out its interests in these
properties, its share of the proved reserves attributable to the
properties would be decreased substantially. The Company may
also incur substantial dilution of its interests in the
properties if it elects to use other methods of financing the
development costs.
These units have been formally approved and are regulated by
the Minerals Management Service of the Federal Government.
However, due to a history of opposition to offshore drilling
and production in California by some individuals and groups, the
process of obtaining all of the necessary permits and
authorizations to develop the properties will be lengthy and even
after all required approvals are obtained, lawsuits may possibly
be filed to attempt to further delay the development of the
properties. While the Federal Government has recently attempted
to expedite this process, there can be no assurance that it will
be successful in doing so. The Company does not have a
controlling interest in and does not act as the operator of any
of the offshore California properties and consequently will not
control the timing of either the development of the properties or
the expenditures for development. Management and its
independent engineering consultant have considered the these
factors relating to timing of the development of the reserves in
the preparation of the reserve information relating to these
properties. As additional information becomes available in the
future, the Company's estimates of the proved undeveloped
reserves attributable to these properties could change, and such
changes could be substantial.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. The Company is not engaged in any
material pending legal proceedings to which the Company or its
subsidiaries are a party or to which any of its property is
subject.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K:
Form 8-K dated November 1, 1996; Item 5. Other
Events; Item 7. Financial Statements and Exhibits
Form 8-K dated October 10, 1996; Item 5. Other
Events; Item 7. Financial Statements and Exhibits
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DELTA PETROLEUM CORPORATION
(Registrant)
s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
Chairman of the Board, Treasurer
and Chief Financial Officer
s/Kevin K. Nanke
Kevin K. Nanke, Controller and
Principal Accounting Officer
Date: November 12, 1996
INDEX
(2) Plan of Acquisitions, Reorganization, Arrangement,
Liquidation, or Succession. Not applicable.
(3) Articles of Incorporation and By-laws. The Articles of
Incorporation and Articles of Amendment to Articles of
Incorporation and By-laws of the Registrant were filed as
Exhibits 3.1, 3.2, and 3.3, respectively, to the Registrant's
Form 10 Registration Statement under the Securities and Exchange
Act of 1934, filed September 9, 1987, with the Securities and
Exchange Commission and are incorporated herein by reference.
Statement of Designation and Determination of Preferences of
Series A Convertible Preferred Stock of Delta Petroleum
Corporation is incorporated by Reference to Exhibit
28.3 of the Current Report on Form 8-K dated June 15, 1988.
Statement of Designation and Determination of Preferences of
Series B Convertible Preferred Stock of Delta
Petroleum Corporation is incorporated by reference to Exhibit
28.1 of the Current Report on Form 8-K dated August 9, 1989.
(4) Instruments Defining the Rights of Security Holders.
Not applicable.
(9) Voting Trust Agreement. Not applicable.
(10) Material Contracts. Not applicable.
(11) Statement Regarding Computation of Per Share Earnings. Not
applicable.
(12) Statement Regarding Computation of Ratios. Not applicable.
(13) Annual Report to Security Holders, Form 10-Q or Quarterly
Report to Security Holders. Not applicable.
(16) Letter re: Change in Certifying Accountants. Not applicable.
(17) Letter re: Director Resignation. Not applicable.
(18) Letter Regarding Change in Accounting Principals. Not
applicable.
(19) Previously Unfiled Documents. Not applicable.
(21) Subsidiaries of the Registrant. Not applicable.
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders. Not applicable.
(23) Consent of Experts and Counsel. Not applicable.
(24) Power of Attorney. Not applicable.
(27) Financial Data Schedule.
(99) Additional Exhibits. Not applicable.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 1,128,181
<SECURITIES> 0
<RECEIVABLES> 449,684
<ALLOWANCES> 48,722
<INVENTORY> 0
<CURRENT-ASSETS> 1,587,965
<PP&E> 10,986,979
<DEPRECIATION> 1,886,023
<TOTAL-ASSETS> 11,381,052
<CURRENT-LIABILITIES> 3,627,564
<BONDS> 0
0
0
<COMMON> 50,148
<OTHER-SE> 7,703,340
<TOTAL-LIABILITY-AND-EQUITY> 11,381,052
<SALES> 346,651
<TOTAL-REVENUES> 409,368
<CGS> 0
<TOTAL-COSTS> 1,216,880
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (807,512)
<INCOME-TAX> 0
<INCOME-CONTINUING> (807,512)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,512)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
