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 December 31, 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___
5,149,634 shares of common stock $.01 par value were outstanding
as of February 10, 1997.
FORM 10-QSB
2nd QTR.
FY 1997
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - December 31, 1996 and
June 30, 1996 (unaudited). . . . . . . . . . . . . .1
Consolidated Statements of Operations -
Three and Six Months Ended
December 31, 1996 and 1995 (unaudited) . . . . . . .3
Consolidated Statement of Stockholders' Equity
Year Ended June 30, 1996 and
Six Months Ended December 31, 1996 (unaudited) . . .5
Consolidated Statements of Cash Flows -
Six Months Ended
December 31, 1996 and 1995 (unaudited) . . . . . . .6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis
Or Plan of Operations . . . . . . . . . . . . . . . . 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities. . . . . . . . . . . . . . . 17
Item 3. Defaults upon Senior Securities. . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . 17
Item 5. Other Information. . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 17
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
1996 1996
ASSETS
Current Assets:
Cash $948,117 1,629,738
Trade accounts receivable, net of
allowance for doubtful accounts
of $48,722 at December 31, 1996
and June 30, 1996 558,523 377,260
Other current assets 10,100 12,100
Total current assets 1,516,740 2,019,098
Property and Equipment:
Oil and gas properties, at cost (using
the successful efforts method
of accounting):
Undeveloped offshore California
properties 6,959,830 6,786,580
Undeveloped onshore domestic properties 1,133,200 971,648
Developed onshore domestic properties 3,236,730 2,919,451
Office furniture and equipment 78,188 78,188
11,407,948 10,755,867
Less accumulated depreciation and depletion (1,966,846) (1,787,443)
Net property and equipment 9,441,102 8,968,424
Investment in Bion Environmental
Technologies, Inc. (Bion) 731,106 411,483
Accounts receivable from affiliates 121,437 116,727
$11,810,385 11,515,732
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)
December 31, June 30,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable trade 346,544 304,050
Other accrued liabilities 39,475 68,297
Royalties payable 574,191 649,835
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 3,629,852 3,691,824
Stockholders' Equity
Preferred stock, $.10 par value;
authorized 3,000,000 shares; 160 issued
at June 30, 1996 - 16
Common stock, $.01 par value;
authorized 300,000,000 shares,
issued 5,117,634
shares, at December 31, 1996
and 4,488,283
issued shares at June 30, 1996 51,176 44,882
Additional paid-in capital 22,224,558 21,299,784
Unamortized consulting expense (15,000) (105,000)
Cumulative unrealized loss 40,899 (255,184)
Accumulated deficit (14,121,100) (13,160,590)
Total stockholders' equity 8,180,533 7,823,908
Commitments and contingencies
$11,810,385 11,515,732
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31, December 31,
1996 1995
Revenue:
Oil and gas sales $432,698 255,417
Other revenue 58,116 14,914
Total revenue 490,814 270,331
Expenses:
Lease operating expenses 134,736 97,961
Depreciation and depletion 80,823 52,923
Exploration expenses 70,114 20,148
General and administrative 346,982 735,813
Stock option expense 11,157 -
Interest on notes payable - 108,172
Total expenses 643,812 1,015,017
Net loss ($152,998) (744,686)
Loss per common share ($0.03) (0.18)
Weighted average number of common
shares outstanding 5,037,998 4,093,474
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
December 31, December 31,
1996 1995
Revenue:
Oil and gas sales $779,349 459,286
Other revenue 120,833 28,986
Total revenue 900,182 488,272
Expenses:
Lease operating expenses 248,604 193,290
Depreciation and depletion 179,403 131,814
Exploration expenses 289,734 34,811
Abandoned and impaired properties 180,508 -
General and administrative 938,407 1,087,411
Stock option expense 24,036 293,125
Interest on notes payable - 211,065
Total expenses 1,860,692 1,951,516
Net loss ($960,510) (1,463,244)
Loss per common share ($0.20) (0.38)
Weighted average number of common
shares outstanding 4,914,076 3,871,586
<TABLE>
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended June 30, 1996 and six months ended
December 31, 1996
Unaudited)
<CAPTION>
Obligation
Preferred Stock Common Stock payable in
Shares Amount Shares Amount common stock
<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 - - 169,250 1,693 -
Shares issued for undeveloped oil and gas properties - - 63,000 630 -
Shares issued for developed oil and gas properties - - 500 5 -
Stock options granted as compensation - - - - -
Amortization of consulting expense - - - - -
Net loss - - - - -
Balance, December 31, 1996 - $- 5,117,634 51,176 -
</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, 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 - - 296,083 - 296,083
Preferred stock converted into common stock (3,950) - - - -
Shares issued for cash upon exercise of options 730,464 - - - 732,157
Shares issued for undeveloped oil and gas properties 172,620 - - - 173,250
Shares issued for developed oil and gas properties 1,604 - - - 1,609
Stock options granted as compensation 24,036 - - - 24,036
Amortization of consulting expense - 90,000 - - 90,000
Net loss - - - (960,510) (960,510)
Balance, December 31, 1996 22,224,558 (15,000) 40,899 (14,121,100) 8,180,533
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31, December 31,
1996 1995
Net cash used in operating activities ($931,846) (1,078,143)
Cash flows from investing activities:
Additions to property and equipment (477,222) (170,598)
Net cash (used in) provided by
investing activities (477,222) (170,598)
Cash flows from financing activities:
Stock issued for cash upon exercise
of options 732,157 992,913
Payment of notes payable - (100,000)
Issuance of common stock for cash - 89,115
Issuance of redeemble common stock - 750,000
Commission paid on issuance of redeemable
common stock - (75,000)
(Increase) Decrease in accounts
receivable from officer and affiliates (4,710) 5,557
Net cash provided by financing activities 727,447 1,662,585
Net (decrease) increase in cash (681,621) 413,844
Cash at beginning of period 1,629,738 55,833
Cash at end of period $948,117 469,677
Supplemental cashflow information:
Cash paid for interest - $2,420
Non-cash financing activities:
Stock issued for oil and gas properties $174,859 132,476
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Six Months Ended December 31, 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.
The cost and estimated fair market value of its investment
in Bion at December 31, 1996 and June 30, 1996 are as follows:
Estimated
Unrealized Market
Cost Gain/(Loss) Value
December 31, 1996 $690,207 40,899 731,106
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 $6,959,830 at December 31,
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 farmout or 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, Inc. ("UFG") which note is
currently in default. On December 11, 1995, UFG filed Chapter
11 bankruptcy protection with the United States Bankruptcy Court
for the Southern District of New York. There exists an
uncertainty as to whether the Company's former parent's 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 December 31, 1996 and June 30, 1996, the note payable
recorded in the accompanying financial statements represents
UFG's obligation to Snyder Oil Corporation (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 accrue interest compounded at 18% per
year. 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 December 31,
1996 are summarized as follows:
Assets:
Current Assets $ 177,925
Oil and gas properties:
Undeveloped offshore California properties 5,006,276
Developed onshore properties, net 1,446,949
6,453,225
Accumulated depreciation and depletion (809,676)
Net oil and gas properties 5,643,549
Total Assets 5,821,474
Liabilities -
Current liabilities 1,320,920
Net assets $4,500,554
The revenue and expenses of Amber included in the
accompanying consolidated financial statements for the six months
ended December 31, 1996 are as follows:
Revenue $ 476,731
Expenses (524,023)
Net loss $ (47,292)
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 as 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 will 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 February 10, 1996, the
registration statement has been filed with the SEC but has not
yet been declared effective. An escrow will 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 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
this 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 December 31, 1996, the Company had a working capital
deficit of $2,113,112 compared to a working capital deficit of
$1,672,726 at June 30, 1996. The decrease in working
capital from June 30, 1996 to December 31,1996 can be attributed
to the increase in oil and gas drilling including exploration
costs attributable to the shooting of 3-D seismic on two
prospects in Northern California. The Company's working capital
deficit is also in part a result of the note payable to Snyder
Oil Corporation ("Snyder") of $2,669,642 which is nonrecourse to
Delta and which is 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 also include royalties
payable in suspense 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's current liabilities also include royalties payable on
recoupment gas produced on certain wells owned by Amber. 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 wouldreduce 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 in
the state of Oklahoma is five years. The statue 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 is unlikely that all claims that
might be made for payment of the 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 $732,157
during the six months ended December 31, 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 and six months ended December 31, 1996 of $152,998 and
$960,510 compared to a net loss of $744,686 and
$1,463,244 for the three and six months ended December 31, 1995.
Revenue. Total revenue for the three and six months ended
December 31, 1996 were $490,814 and $900,182 compared to $270,331
and $488,272 for the three and six months ended
December 31, 1995, respectively. Oil and gas sales for the
three and six months ended December 31, 1996 were $432,698 and
$779,349 compared to $255,417 and $459,286 for the
three and six months ended December 31, 1995, respectively. 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
and six months ended December 31, 1996 and 1995 are as follows:
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
Production:
Oil (barrels) 2,187 2,221 4,721 4,374
Gas (Mcfs) 175,962 125,477 326,379 242,272
Average Price:
Oil (per barrel) $21.92 $15.72 $21.21 $16.14
Gas (per Mcf) $ 2.18 $1.76 $2.08 $1.60
Lease Operating Expenses. Lease operating expenses were
$134,736 and $248,604 for the three and six months ended
December 31, 1996 and $97,961 and $193,290 for the three and
six months ended December 31, 1995, respectively. On a Mcf
equivalent basis, lease operating expenses were $.71 and $.70,
respectively, per Mcf equivalent during the three and six months
ended December 31, 1996 compared to $.71 and $.72, respectively,
per Mcf equivalent for the same periods in 1995.
Depreciation and Depletion Expense. Depreciation and
depletion expense for the three and six months ended December 31,
1996 were $80,823 and $179,4038 compared to $52,923
and $131,814 for the same period in 1995. On a Mcf equivalent
basis, depreciation and depletion expense were $.43 and $.51,
respectively, per Mcf equivalent during the three and six
months ended December 31, 1996 compared to $.38 and $.49,
respectively, per Mcf equivalent for the same periods in 1995.
The increase in Depreciation and Depletion expense can be attributable
to the increase in production of oil and
gas during the three and six months ended December 31, 1996.
Abandoned and Impaired Expense. The company recorded an
expense for abandonment and impairment of oil and gas properties
of $180,508 relating to a dry hole for the six months ended December 31,
1996. There were no abandonment and impairment expenses by the
company for the same periods in 1995.
Exploration Expenses. Exploration expenses consist of
geological and geophysical costs and lease rentals. Exploration
expenses for the three and six months ended December 31, 1996
were $70,114 and $289,734 compared to $20,148 and $34,811 for the
same period in 1995. 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.
General and Administrative Expenses. General and
administrative expenses for the three and six months ended
December 31, 1996 were $346,982 and $938,407
compared to $735,813 and $1,087,411 for the same periods in 1995.
General and Administrative expenses decreased
from 1995 to 1996 primarily because of the Company's decreased
level of investor and broker relation costs.
Interest on Notes Payable. Interest on notes payable were
$108,172 and $211,065 for the three and six months ended
December 31, 1995. Interest expense had included interest 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 UFG note to Snyder Oil Corporation ("SOCO").
During the first quarter of fiscal 1997, the Company ceased
accruing interest for the UFG Note 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 one or more of the obligations encumbering the
assets contributed by UFG and that such UFG assets could
be lost to Delta unless Delta is able to make other arrangements
to allow it to keep the assets and/or to realize the equivalent
value from UFG. Such other arrangements might include legal
action by Delta against UFG. In addition, the Company holds as
collateral certificates representing 888,063 shares of Delta
common stock which are in the name of UFG. This
collateral is held to secure the discharge of liabilities payable
by UFG including UFG's obligations to Snyder and the release of
Amber's shares held by Snyder as collateral for the
Snyder note. It is and has been the Company's position that
Delta could either 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 Delta's assets or contractually owed
directly to Delta. In April 1995, the Company filed with
the Securities and Exchange Commission a Registration Statement
on Form S-3 (amended October 31, 1995) to register 1,360,888
shares of common stock previously issued to certain
shareholders, including UFG along with 1,187,000 shares
underlying outstanding warrants and options. While the Company
will not receive any of the proceeds, UFG has agreed that the
proceeds from sales of shares owned by UFG, will be used to
reduce the liabilities payable by UFG including the Snyder note.
Payments by UFG on the note payable and other liabilities are
accounted from as a capital contribution to the Company.
On December 11, 1995, UFG filed for Chapter 11 bankruptcy
protection with the United States Bankruptcy Court for the
Southern District of New York. Delta's position and alternative
courses of action are being reviewed by its management and legal
counsel.
The principal asset at risk of loss is the encumbered
portion of the Amber shares owned by Delta. 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 six
months ended December 31, 1995 amounted to $229,562 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 approximately 17,000 Bbls of oil and 3.85 Bcf of gas at
June 30, 1994. Amber's proved undeveloped oil and gas reserves
attributable to its offshore California properties are estimated
to be 10,582,000 Bbls of oil and 12.96 Bcf of gas at June
30, 1995. 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.
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 also
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 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 and Item 7. Financial Statements and
Exhibits.
Form 8-K dated January 7, 1997; Item 5. Other
Events and 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: February 12, 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. Statement of Designation
and Determination of Preferences of Series C Convertible
Preferred Stock of Delta Petroleum Corporation is
incorporated by reference to Exhibit 4.1 of the Current
Report on Form 8-K dated June 7, 1996.
(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>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 948,117
<SECURITIES> 0
<RECEIVABLES> 558,523
<ALLOWANCES> 48,722
<INVENTORY> 0
<CURRENT-ASSETS> 1,516,740
<PP&E> 11,407,948
<DEPRECIATION> 1,966,846
<TOTAL-ASSETS> 11,810,385
<CURRENT-LIABILITIES> 3,629,852
<BONDS> 0
0
0
<COMMON> 51,176
<OTHER-SE> 8,129,357
<TOTAL-LIABILITY-AND-EQUITY> 11,180,385
<SALES> 779,349
<TOTAL-REVENUES> 900,182
<CGS> 0
<TOTAL-COSTS> 1,860,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (960,510)
<INCOME-TAX> 0
<INCOME-CONTINUING> (960,510)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (960,510)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> 0
</TABLE>
