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, 1997
[ ] 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___
5,235,631 shares of common stock $.01 par value were outstanding
as of November 10, 1997.
FORM 10-QSB
1st QTR.
FY 1998
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - September 30, 1997 and
June 30, 1997 (unaudited). . . . . . . . . . . . . .1
Consolidated Statements of Operations -
Three Months Ended
September 30, 1997 and 1996 (unaudited). . . . . . .3
Consolidated Statement of Stockholders' Equity
Year Ended June 30, 1997 and
Three Months Ended September 30, 1996 (unaudited). .4
Consolidated Statements of Cash Flows -
Three Months Ended
September 30, 1997 and 1996 (unaudited). . . . . . .5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis
Or Plan of Operations . . . . . . . . . . . . . . .7
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities. . . . . . . . . . . . . . . 10
Item 3. Defaults upon Senior Securities. . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of
Security Holders. . . .. . . . . . . . . . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 10
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1997 1997
ASSETS
Current Assets:
Cash $53,307 393,048
Trade accounts receivable, net of
allowance for doubtful accounts of
$50,000 at September 30, 1997
and $48,722 at June 30, 1997 577,812 333,535
Other current assets 10,100 10,100
Total current assets 641,219 736,683
Property and Equipment:
Oil and gas properties, at cost (using
the successful efforts method
of accounting):
Undeveloped offshore California properties 6,959,830 6,959,830
Undeveloped onshore domestic properties 787,133 714,605
Developed onshore domestic properties 3,425,803 3,383,523
Office furniture and equipment 80,446 80,446
11,253,212 11,138,404
Less accumulated depreciation and depletion (2,093,180) (2,059,461)
Net property and equipment 9,160,032 9,078,943
Investment in Bion Environmental
Technologies, Inc. (Bion) 671,104 503,328
Accounts receivable from officer
and affiliates 137,300 119,419
$10,609,655 10,438,373
September 30, June 30,
1997 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable trade $797,473 776,702
Other accrued liabilities 23,971 21,835
Royalties payable 416,406 468,968
Total current liabilities 1,237,850 1,267,505
Stockholders' Equity
Preferred stock, $.10 par value;
authorized 3,000,000 shares; none issued - -
Common stock, $.01 par value;
authorized 300,000,000 shares,
issued 5,235,631 shares at
September 30, 1997 and issued 5,230,631
shares at June 30, 1997 52,356 52,306
Additional paid-in capital 24,970,159 24,950,128
Cumulative unrealized loss (46,193) (213,969)
Accumulated deficit (15,604,517) (15,617,597)
Total stockholders' equity 9,371,805 9,170,868
Commitments and contingencies
$10,609,655 10,438,373
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30, September 30,
1997 1996
Revenue:
Oil and gas sales $317,206 346,651
Gain on sale of oil and gas properties 236,602 -
Other revenue 68,112 62,717
Total revenue 621,920 409,368
Expenses:
Lease operating expenses 94,604 113,868
Depreciation and depletion 89,225 98,580
Exploration expenses 50,019 219,620
Abandoned and impaired expense - 180,508
General and administrative 368,661 591,425
Stock option expense 6,331 12,879
Total expenses 608,840 1,216,880
Net income (loss) $13,080 (807,512)
Net income (loss) per common share $ * (0.17)
Weighted average number of common
shares outstanding 5,231,338 4,789,408
* less than $.01 per share
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended June 30, 1997 and the months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance, July 1, 1996 160 $16 4,488,283 44,882
Unrealized gain on equity securities - - - -
Stock options granted as compensation - - - -
Preferred stock converted into common stock (160) (16) 396,601 3,966
Shares issued for cash upon exercise of options - - 186,700 1,867
Shares issued for undeveloped oil and gas properties - - 63,000 630
Shares issued for developed oil and gas properties - - 500 5
Shares issued for services - - 7,500 75
Amortization of consulting expense - - - -
Shares of common stock reacquired and retired - - (4,070) (40)
UFG settlement - - 92,117 921
Net loss - - - -
Balance, June 30, 1997 - - 5,230,631 52,306
Unrealized gain on equity securities - - - -
Stock options granted as compensation - - - -
Shares issued for cash upon exercise of options - - 5,000 50
Net income - - - -
Balance, September 30, 1997 - $- 5,235,631 52,356
</TABLE>
<TABLE>
<CAPTION>
Cumulative
Additional Unamortized unrealized
paid-in consulting gain Accumulated
capital expense (loss) deficit Total
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1996 21,299,784 (105,000) (255,184) (13,160,590) 7,823,908
Unrealized gain on equity securities - - 41,215 - 41,215
Stock options granted as compensation 40,469 - - - 40,469
Preferred stock converted into common stock (3,950) - - - -
Shares issued for cash upon exercise of options 758,977 - - - 760,844
Shares issued for undeveloped oil and gas properties 172,620 - - - 173,250
Shares issued for developed oil and gas properties 1,604 - - - 1,609
Shares issued for services 29,925 - - - 30,000
Amortization of consulting expense - 105,000 - - 105,000
Shares of common stock reacquired and retired (18,022) - - - (18,062)
UFG settlement 2,668,721 - - - 2,669,642
Net loss - - - (2,457,007) (2,457,007)
Balance, June 30, 1997 24,950,128 - (213,969) (15,617,597) 9,170,868
Unrealized gain on equity securities - - 167,776 - 167,776
Stock options granted as compensation 6,331 - - - 6,331
Shares issued for cash upon exercise of options 13,700 - - - 13,750
Net income - - - 13,080 13,080
Balance, September 30, 1997 24,970,159 - (46,193) (15,604,517) 9,371,805
</TABLE>
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30, September 30,
1997 1996
Net cash used in operating activities ($401,898) (809,277)
Cash flows from investing activities:
Additions to property and equipment (228,712) (229,503)
Proceeds from sale of oil and gas
properties 295,000 -
Net cash provided by (used in)
investing activities 66,288 (229,503)
Cash flows from financing activities:
Stock issued for cash upon exercise
of options 13,750 541,188
Increase in accounts receivable from
officer and affiliates (17,881) (3,965)
Net cash (used in) provided by financing
activities (4,131) 537,223
Net decrease in cash (339,741) (501,557)
Cash at beginning of period 393,048 1,629,738
Cash at end of period $53,307 1,128,181
Supplemental cashflow information:
Cash paid for interest - -
Non-cash financing activities:
Stock issued for oil and gas properties - 1,609
See accompanying notes to consolidated financial statements.
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Three Months Ended September 30, 1997 and 1996
(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. For a
more complete understanding of the Company's operations and
financial position, reference is made to the consolidated
financial statements of the Company, and related notes thereto,
filed with the Company's annual report on Form 10-KSB for the
year ended June 30, 1997, previously filed with the Securities
and Exchange Commission.
(2) Investments
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.
The cost and estimated market value of the Company's
investment in Bion at September 30, 1997 and June 30, 1997 are as
follows:
Estimated
Unrealized Market
Cost Loss Value
September 30, 1997 $717,297 ( 46,193) 671,104
June 30, 1997 $717,297 (213,969) 503,327
Item 2. Management's Discussion and Analysis or Plan of Operations
Liquidity and Capital Resources.
At September 30, 1997, the Company had a working capital
deficit of $596,631 compared to a working capital deficit of
$530,822 at June 30, 1997.
The Company's current liabilities include royalties
payable of $416,406 at September 30, 1997 which represent the
Company's estimate of royalties payable on production
attributable to the Company's 91.68% owned subsidiary, Amber
Resources Company ("Amber"), interest in certain wells in
Oklahoma, including production prior to the acquisition
of Amber. 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 proceeds from the exercise of options
to purchase shares of its common stock for $13,750 during the
three months ended September 30, 1997.
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 net income for
the three months ended September 30, 1997 of $13,080 compared to
a net loss of $807,512 for the three months ended
September 30, 1996.
Revenue. Total revenue for the three month period ended
September 30, 1997 was $621,920 compared to $409,368 for the
three months ended September 30, 1996. Total revenue
for the three months ended September 30, 1997 included a gain on
sale of oil and gas properties of $236,602. Oil and gas sales
for the three months ended September 30, 1997 were $317,206
compared to $346,651 for the three months ended September 30,
1996. The Company's oil and gas sales were impacted by a
decrease in oil and gas production and oil prices.
Production volumes and average prices received for the three
month period ended September 30, 1997 and 1996 are as follows:
Three Months Ended
September 30,
1997 1996
Production:
Oil (barrels) 1,977 2,534
Gas (Mcfs) 140,525 150,417
Average Price:
Oil (per barrel) $17.96 $20.59
Gas (per Mcf) $2.00 $1.96
Lease Operating Expenses. Lease operating expenses were
$94,604 and $113,868 for the three months ended September 30,
1997 and 1996, respectively. On a MCF equivalent
basis, production expenses and taxes were $.62 and $.69,
respectively, during the three months period ended September 30,
1997 and 1996.
Depreciation and Depletion Expense. Depreciation and
depletion expense for the three months ended September 30, 1997
and 1996, respectively, were $89,225 and $98,580. On a
MCF equivalent basis, depreciation and depletion expense were
$.59 and $.60, respectively, per Mcf equivalent during the three
months period ended September 30, 1997 and 1996.
Exploration Expense. The Company recorded exploration
expenses of $50,019 and $219,620 for the three ended September
30, 1997 and 1996, respectively. Exploration costs
were attributed to the Company's participation in the shooting of
3-D seismic on prospects in the Sacramento Basin in Northern
California. By virtue of this seismic activity, the Company
has identified numerous new drilling locations. Recently the
Company began drilling on these properties and expects to
continue doing so for the next few years.
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 for the three months ended
September 30, 1997.
General and Administrative Expenses. General and
administrative expenses for the three months ended September 30,
1997 were $368,661 compared to $591,425 for the three months
ended September 30, 1996. General and Administrative expenses
decreased from the prior year as a result of a decrease in
salaries and public relation expenses.
Future Operations
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:
None.
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 10, 1997
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. Filed herewith electronically.
(99) Additional Exhibits. Not applicable.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 53,307
<SECURITIES> 0
<RECEIVABLES> 577,812
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 641,219
<PP&E> 11,253,212
<DEPRECIATION> 2,093,180
<TOTAL-ASSETS> 10,609,605
<CURRENT-LIABILITIES> 1,237,850
<BONDS> 0
0
0
<COMMON> 52,356
<OTHER-SE> 9,319,449
<TOTAL-LIABILITY-AND-EQUITY> 10,609,605
<SALES> 317,206
<TOTAL-REVENUES> 621,920
<CGS> 0
<TOTAL-COSTS> 608,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,080
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,080
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
