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 March 31, 1999
[ ] 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___
6,020,302 shares of common stock $.01 par value were outstanding
as of May 4, 1999.
FORM 10-QSB
3rd QTR.
FY 1999
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 31, 1999 and
June 30, 1998 (unaudited). . . . . . . . . . . . . .1
Consolidated Statements of Operations -
Three and Nine Months Ended
March 31, 1999 and 1998 (unaudited). . . . . . . . .3
Consolidated Statement of Stockholders' Equity
Year Ended June 30, 1998 and
Nine Months Ended March 31, 1999 (unaudited) . . . .5
Consolidated Statements of Cash Flows -
Three and Nine Months Ended
March 31, 1999 and 1998 (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. . . . . . . . . . . . . . . . . 16
Item 2. Changes in Securities. . . . . . . . . . . . . . . 16
Item 3. Defaults upon Senior Securities. . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . 16
Item 5. Other Information. . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 16
i
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, June 30,
1999 1998
ASSETS
Current Assets:
Cash $232,896 17,135
Trade accounts receivable, net of
allowance for doubtful accounts of $50,000 at
March 31, 1999 and June 30, 1998 108,070 224,285
Accounts receivable - related parties 74,365 127,415
Other current assets 100 10,100
Total current assets 415,431 378,935
Property and Equipment:
Oil and gas properties, at cost (using
the successful efforts method
of accounting):
Undeveloped offshore California properties 7,369,830 6,959,830
Undeveloped onshore domestic properties 675,938 726,127
Undeveloped foreign properties 623,920 -
Developed onshore domestic properties 2,335,508 3,369,881
Office furniture and equipment 81,321 80,446
11,086,517 11,136,284
Less accumulated depreciation and depletion (1,446,117) (2,234,525)
Net property and equipment 9,640,400 8,901,759
Investment in Bion Environmental
Technologies, Inc. (Bion) 299,280 1,069,149
$10,355,111 10,349,843
March 31, June 30,
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable trade $365,704 570,469
Other accrued liabilities 10,000 10,000
Royalties payable 146,031 264,320
Total current liabilities 521,735 844,789
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 6,020,302
shares at March 31, 1999 and 5,513,858
shares at June 30, 1998 60,203 55,139
Additional paid-in capital 26,832,797 25,571,921
Accumulated comprehensive income (loss) (73,295) 457,594
Accumulated deficit (16,986,329) (16,579,600)
Total stockholders' equity 9,833,376 9,505,054
Commitments
$10,355,111 10,349,843
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31, March 31,
1999 1998
Revenue:
Oil and gas sales $157,072 210,808
Gain on sale of oil and gas properties - 216,273
Other revenue 34,001 94,541
Total revenue 191,073 521,622
Expenses:
Lease operating expenses 44,250 79,560
Depreciation and depletion 34,885 48,591
Exploration expenses 8,024 192,386
Dry hole costs 6,482 -
Minimum royalty - related party - 350,000
General and administrative 528,145 304,292
Stock option expense 57,370 4,922
Realized loss on sale of securities 74,511 -
Total expenses 753,667 979,751
Net loss ($562,594) (458,129)
Net loss per common share ($0.09) (0.08)
Weighted average number of shares outstanding 6,012,524 5,436,758
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
March 31, March 31,
1999 1998
Revenue:
Oil and gas sales $463,978 1,004,069
Gain on sale of oil and gas properties 957,147 650,417
Other revenue 155,741 236,419
Total revenue 1,576,866 1,890,905
Expenses:
Lease operating expenses 169,344 268,796
Depreciation and depletion 128,411 201,262
Exploration expenses 64,316 418,828
Dry hole costs 226,189 -
Minimum royalty - related party - 350,000
General and administrative 1,202,737 1,063,682
Stock option expense 86,045 16,731
Realized loss on sales of securities 96,553 -
Interest expense 10,000 -
Total expenses 1,983,595 2,319,299
Net loss ($406,729) (428,394)
Net loss per common share ($0.07) (0.08)
Weighted average number of shares outstanding 5,764,920 5,316,348
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended June 30, 1998 and nine months ended March 31, 1999
<TABLE>
<CAPTION>
Additional
Common Stock paid-in
Shares Amount capital
<S> <C> <C> <C>
Balance, July 1, 1997 5,230,631 $52,306 24,950,128
Unrealized gain on equity securities - - -
Stock options granted as compensation - - 46,402
Shares issued for cash upon exercise of options 114,100 1,141 202,395
Shares issued for cash 156,950 1,570 348,430
Shares issued for services 22,500 225 64,463
Shares reacquired and retired (10,323) (103) (39,897)
Net loss - - -
Balance, June 30, 1998 5,513,858 55,139 25,571,921
Unrealized loss on equity securities - - -
Stock options granted as compensation - - 86,545
Shares issued for cash 196,444 1,964 354,011
Shares issued for services 10,000 100 15,650
Shares issued for properties 300,000 3,000 744,670
Fair value of warrant extended and repriced - - 60,000
Net income - - -
Balance, March 31, 1999 6,020,302 60,203 26,832,797
</TABLE>
<TABLE>
<CAPTION>
Accumulated
comprehensive
income Accumulated
(loss) deficit Total
<S> <C> <C> <C>
Balance, July 1, 1996 (213,969) (15,617,597) 9,170,868
Unrealized gain on equity securities 671,563 - 671,563
Stock options granted as compensation - - 46,402
Shares issued for cash upon exercise of options - - 203,536
Shares issued for cash - - 350,000
Shares issued for services - - 64,688
Shares reacquired and retired - - (40,000)
Net loss - (962,003) (962,003)
Balance, June 30, 1998 457,594 (16,579,600) 9,505,054
Unrealized loss on equity securities (530,889) - (530,889)
Stock options granted as compensation - - 86,545
Shares issued for cash - - 355,975
Shares issued for services - - 15,750
Shares issued for properties - - 747,670
Fair value of warrant extended and repriced - - 60,000
Net income - (406,729) (406,729)
Balance, March 31, 1999 (73,295) (16,986,329) 9,833,376
</TABLE>
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
March 31, March 31,
1999 1998
Net cash used in operating activities ($1,266,131) (1,092,666)
Cash flows from investing activities:
Additions to property and equipment (486,235) (544,496)
Proceeds from sale of oil and gas properties 1,384,000 1,023,432
Proceeds from sale of securities available 174,602 46,532
Net cash provided by investing activities 1,072,367 525,468
Cash flows from financing activities:
Issuance of common stock and options for 356,475 350,000
Stock issued for cash upon exercise of options - 53,750
Decrease in accounts receivable
from officer and affiliates 53,050 11,031
Net cash provided by financing activities 409,525 414,781
Net increase (decrease) in cash 215,761 (152,417)
Cash at beginning of period 17,135 393,048
Cash at end of period $232,896 240,631
Supplemental cashflow information:
Cash paid during the period for interest $10,000 3,633
Non-cash financing activity:
Common stock issued for undeveloped properties $683,920 -
Common stock issued for producing properties $123,750 -
See accompanying notes to consolidated financial statements.
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Nine Months Ended March 31, 1999 and 1998
(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/A for the
year ended June 30, 1998, previously filed with the Securities
and Exchange Commission.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (Statement No. 130), effective
for years beginning after December 15, 1997. Statement No. 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general-
purpose financial statements. The Company adopted Statement No.
130 effective July 1, 1998 and, accordingly, has reported
accumulated other comprehensive income (loss) as a separate line
item in the stockholders' equity section of its consolidated
balance sheets at March 31, 1999 and
June 30, 1998. The components of total comprehensive income
(loss) for the periods consist of net earnings and unrealized
gain (loss) on equity securities and are as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
Net loss $(562,594) (458,129) (406,729) (428,394)
Other comprehensive
income (loss) 28,172 77,091 (530,889) 835,099
Total comprehensive
income (loss) $(534,422) (381,038) (937,618) 406,705
(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. During the nine months ended
March 31, 1999, the Company received an additional 10,321
shares of Bion's common stock for rent provided by the Company.
Also during the nine months ended March 31, 1999, the Company
realized a loss on the sale of securities available for sale
of $96,553.
The cost and estimated market value of the Company's
investment in Bion at March 31, 1999 and June 30, 1998 are as
follows:
Estimated
Unrealized Market
Cost Gain (loss) Value
March 31, 1999 $372,575 ( 73,295) 299,280
June 30, 1998 $611,555 457,594 1,069,149
(3) Oil and Gas Properties
On October 12, 1998, the Company entered into an agreement
with an unrelated entity to acquire two exploration licenses
covering approximately 1.9 million acres in the Pavlodar
region of Eastern Kazakhstan in exchange for 250,000 shares of
the Company's common stock and 500,000 warrants to purchase
common stock at prices ranging from $3.50 to $5.00 per
share.
On November 16, 1998, the Company completed the sale of 23
oil and gas wells located in the Anadarko Basin of Oklahoma for
$1,384,000 to an unrelated entity.
On December 17, 1998, the Company amended its Purchase and
Sale Agreement with Burdette A. Ogle ("Ogle") dated January 3,
1995. As a result of this amended agreement, at
the time of each minimum annual payment the Company will be
assigned an interest in three undeveloped offshore Santa Barbara,
California, federal oil and gas units proportionate to the
total $8,000,000 production payment. Accordingly, the annual
$350,000 minimum payment has been recorded as an addition to
undeveloped offshore California properties. In addition,
pursuant to this agreement, the Company extended and repriced a
previously issued warrant to purchase 100,000 shares of the
Company's common stock. The $60,000 fair value placed on
the extension and repricing of this warrant was recorded as an
addition to undeveloped offshore California properties.
(4) Loan Payable
On August 20, 1998, the Company entered into a loan
agreement with an unrelated entity for $400,000 which was due and
paid by November 20, 1998. Interest on the loan was payable
at an annual rate of 10%. In addition to the principal and
interest payment required, the Company also paid this entity a
$50,000 fee. The officers personally guaranteed this loan at the
time it was created.
(5) Shareholders' Equity
On January 1, 1999, the Company completed a sale of 194,444
shares of the Company's common stock to Evergreen Resources, Inc.
for net proceeds to the Company of $350,000.
On January 12, 1999, the Company issued 50,000 shares of its
common stock to an unrelated entity for an option to acquire
certain oil and gas properties.
Item 2. Management's Discussion and Analysis or Plan of
Operations
Liquidity and Capital Resources.
At March 31, 1999, the Company had a working capital deficit
of $106,304 compared to a working capital deficit of $465,854 at
June 30, 1998. On January 1, 1999, the Company
completed a sale of 194,444 shares of the Company's common stock
to Evergreen Resources, Inc. for net proceeds to the Company of
$350,000.
The Company's current assets include accounts
receivable from related parties (including affiliated companies)
of $74,365 at March 31, 1999 which is primarily for drilling
costs, and lease operating expense on wells owned by the related
parties and operated by the Company. The amounts are due on open
account and are non-interest bearing. The Company's
current liabilities include royalties payable of $146,031 at
March 31, 1999 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. 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.
On August 20, 1998, the Company entered into a loan
agreement with an unrelated entity for $400,000 which was due and
paid by November 20, 1998 and was collateralized by all producing
oil and gas properties owned by the Company and personally
guaranteed by the Company's officers. Interest on the loan was
payable at an annual rate of 10%. In addition to the principal
and interest payment required, the Company also paid this
entity a $50,000 fee.
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 operations and its
capital requirements for development of its properties including
establishing a credit facility, sale of equity or debt securities
and sale of 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.
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 nine months ended March 31, 1999 of $562,594 and
$406,729 compared to $458,129 and $428,394 for the
three and nine months ended March 31, 1998, respectively.
Revenue. Total revenues for the three and nine months ended
March 31, 1999 were $191,073 and $1,576,866 compared to $521,622
and $1,890,905 for the three and nine months
ended March 31, 1998, respectively. Oil and gas sales for the
three and nine months ended March 31, 1999 were $157,072 and
$463,978 compared to $210,808 and $1,004,069 for the
three and nine ended March 31, 1998, respectively. The Company's
oil and gas sales decreased as a result of the sale of certain
oil and gas properties.
Production volumes and average prices received for the three
and nine month periods ended March 31, 1999 and 1998 are as
follows:
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
Production:
Oil (barrels) 1,447 1,501 3,653 10,045
Gas (Mcfs) 61,588 95,490 206,158 357,952
Average Price:
Oil (per barrel) $ 9.19 $13.15 $10.38 $17.22
Gas (per Mcf) $ 2.33 $2.00 $2.07 $2.32
Lease Operating Expenses. Lease operating expenses were
$44,250 and $169,344 for the three and nine months ended March
31, 1999 and $79,560 and $268,796 for the three and
nine months ended March 31, 1998, respectively. On a Mcf
equivalent basis, lease operating expenses were $.63 and $.74,
respectively, per Mcf equivalent during the three and nine months
ended March 31, 1999 compared to $.35 and $.64, respectively, per
Mcf equivalent for the same periods in 1998. The decrease in
lease operating expense can be attributed to the sale of certain
oil and gas properties.
Depreciation and Depletion Expense. Depreciation and
depletion expense for the three and nine months ended March 31,
1999 were $34,885 and $128,411 compared to $48,591 and
$201,262 for the same periods in 1998. On a Mcf equivalent
basis, depreciation and depletion expense was $.50 and $.56,
respectively, per Mcf equivalent during the three and nine months
ended March 31, 1999 compared to $.47 and $.48, respectively, per
Mcf equivalent for the same periods in 1998. The decrease in
depreciation and depletion expense can be attributable to the
sale of certain oil and gas properties during the second quarter
of fiscal 1999.
Exploration Expenses. The Company recorded exploration
expenses of $8,024 and $64,316 for the three and nine months
ended March 31, 1999 compared to $192,386 and
$418,828 for the same period in 1998. Exploration costs during
fiscal 1998 were attributed to the Company's participation in the
shooting of 3-D seismic on prospects in the Sacramento Basin
in Northern California.
Dry Hole Costs. The company recorded dry hole costs of
$6,482 and $226,189 relating to six dry holes during the three
and nine month periods ended March 31, 1999.
General and Administrative Expenses. General and
administrative expenses for the three and nine months ended March
31, 1999 were $528,145 and $1,202,737 compared to $304,292
and $1,063,682 for the same periods in 1998. General and
administrative expenses for the nine months ended March 31, 1999
increased from the prior year as a result of bonuses paid to
management of approximately $265,000.
Future Operations
Delta Petroleum Corporation, directly and through its
subsidiary, Amber Resources Company, owns interests in four
undeveloped federal units (plus one additional lease) located
in federal waters offshore California near Santa Barbara.
The Company's development plan currently provides for 22
wells from one platform set in a water depth of approximately 328
feet for the Gato Canyon Unit; 63 wells from one
platform set in a water depth of approximately 1,300 feet for the
Sword Unit; 60 wells from one platform set in a water depth of
approximately 336 feet for the Point Sal Unit; and 183 wells
from two platforms for the Lion Rock Unit. On the Lion Rock
Unit, platform A would be set in a water depth of approximately
507 feet, and Platform B would be set in a water depth of
approximately 484 feet. The reach of the deviated wells from
each platform required to drain each unit falls within the reach
limits now considered to be "state-of-the-art."
Current Status. On November 5, 1996, the MMS issued a
Directed Suspension of Operations for the POCS Non-Producing
Leases and Units, pursuant to CFR 250.10(b)(4),
extending the existing Suspension of Operations ("SOO") from
January 1, 1997 until December 31, 1998. This action permitted
unit owners to cease paying lease payments to the Federal
government and suspended the requirements relating to development
of the leases during this period. The Directive cited the fact
that the MMS had requested in 1992 that the lease owners
participate in what became known as the COOGER (California
Offshore Oil and Gas Energy Resources) Study and during the term
of the study that the leases would be held under an SOO.
The MMS issued a second letter on December 24, 1996 with the
intent to notify all lease owners of the course of action to be
followed by the lease and unit operators prior to the
expiration of the SOO. In another letter, on December 3, 1998
(which superseded a September 17, 1998 MMS letter), the MMS
informed all owners and operators that due to delays in the
COOGER Study, the SOO's on the units would be extended through
the second quarter of 1999 and revised the dates for actions
required by the previous letters. During the first half of 1999
each operator is to meet with the MMS to discuss conceptual plans
that will lead to the timely development of the leases. By May
15, 1999, each operator has been directed to submit what
the MMS has termed a "Schedule of Events" for a specific lease or
unit that it operates and also request for a Suspension of
Production time period to execute the Schedule of Events. The
lease Suspension of Operations and unit Schedule of Events, when
approved by the MMS, will go into effect on July 1, 1999.
In order to carry out the requirements of the December 31,
1996 and December 3, 1998 MMS letters, all operators of the units
in which the Company owns non-operating interests
(described below) are currently engaged in studies to develop a
conceptual framework and general timetable for continued
delineation and development of the leases. For delineation, the
operators will outline the mobile drilling unit well activities,
including number and location. For development, the operators'
reports will cover the total number of facilities involved,
including platforms, pipelines, onshore processing facilities,
transportation systems and marketing plans.
The Company is participating with the operators in meeting the
MMS schedules through meetings and consultations and is sharing
in the costs as invoiced by the operators.
Cost to Develop Offshore California Properties. The cost to
develop all of the offshore California properties in which Delta
owns an interest, including delineation wells, environmental
mitigation, development wells, fixed platforms, fixed platform
facilities, pipelines and power cables, onshore facilities and
platform removal over the life of the properties (assumed to be
38 years), is estimated to be slightly in excess of $3 billion.
The Company's share of such costs over the life of the properties
is estimated to be $216,000,000.
To the extent that Delta does not have sufficient cash
available to pay its share of expenses when they become payable
under the respective operating agreements, it will be
necessary for Delta to seek funding from outside sources. Likely
potential sources for such funding are currently anticipated to
include (a) public and private sales of Delta Common Stock
(which may result in substantial ownership dilution to existing
shareholders), (b) bank debt from one or more commercial oil and
gas lenders, (c) the sale of debt instruments to investors, (d)
entering into farm-out arrangements with respect to one or more
of Delta's interests in the properties whereby the recipient of
the farm-out would pay the full amount of Delta's share of
expenses and Delta would retain a carried ownership interest
(which would result in a substantial diminution of Delta's
ownership interest in the farmed-out properties), (e) entering
into one or more joint venture relationships with industry
partners, (f) entering into financing relationships
with one or more industry partners, and (g) the sale of some or
all of Delta's interests in the properties.
It is unlikely that any one potential source of funding
would be utilized exclusively. Rather, it is more likely that
Delta will pursue a combination of different funding sources when
the need arises. Regardless of the type of financing techniques
that are ultimately utilized, however, it currently appears
likely that because of Delta's small size in relation to the
magnitude of the capital requirements that will be associated
with the development of the subject properties, Delta will be
forced in the future to issue significant amounts of additional
shares, pay significant amounts of interest on debt that
presumably would be collateralized by all of
Delta's assets (including its offshore California properties),
reduce its ownership interest in the properties through sales of
interests in the property or as the result of farm-outs, industry
financing arrangements or other partnership or joint venture
relationships, or to enter into various transactions which will
result in some combination of the foregoing. In the event that
Delta is not able to pay its share of expenses as a working
interest owner as required by the respective operating
agreements, it is possible that Delta might lose some portion of
its ownership interest in the properties under some
circumstances, or that Delta might be subject
to penalties which would result in the forfeiture of substantial
revenues from the properties.
While the cost to develop the offshore California properties
in which Delta owns an interest are anticipated to be substantial
in relation to Delta's small size, management believes
that the opportunities for Delta to increase its asset base and
ultimately improve its cash flow are also substantial in relation
to its size. Although there are several factors to be considered
in connection with Delta's plans to obtain funding from outside
sources as necessary to pay its proportionate share of the costs
associated with developing its offshore properties (not the least
of which is the possibility that prices for petroleum products
could continue to decline in the future to a point at which
development of the properties is no longer economically
feasible), management believes that the timing and rate of
development in the future will in large part be
motivated by the prices paid for petroleum products.
To the extent that prices for petroleum products decline
further from their current near historic lows, it is likely that
development efforts will proceed at a slower pace to the end that
costs will be incurred over a more extended period of time. In
the event that petroleum prices increase, however, management
believes that development efforts will intensify. Delta's
ability to successfully negotiate financing to pay its share of
development costs on favorable terms will be inextricably linked
to the prices that are paid for petroleum products during the
time period in which development is actually occurring on each of
the subject properties.
Year 2000
The Company has completed a review of its computer system
and applications (which began in fiscal 1997) to identify the
systems that could be affected by the "Year 2000" issue.
The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the
applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations.
On the basis of its review, the Company currently believes
that the Year 2000 issue will not pose material operational
problems for the Company. To the Company's knowledge after
investigation, no "embedded technology" (such as microchips in an
electronic control system) of the Company poses a material Year
2000 concern.
Because the Company believes that it has no material
internal Year 2000 problems, the Company has not and does not
expect to expend a significant amount of funds to address Year
2000 issues. It is Company policy to continue to review its
suppliers' Year 2000 compliance and require assurance of Year
2000 compliance from new suppliers; however, such monitoring
does not involve a significant cost to the Company.
In addition to the foregoing, the Company has contacted its
major vendors and has received either oral or written assurances
from its major vendors or has reviewed assurances
contained on vendors' web sites that they have no material Year
2000 problems. The Company believes that its vendors are largely
fungible; therefore, in the event a vendor's representations
regarding its Year 2000 compliance were untrue for any reason,
the Company believes that it could find adequate Year
2000-compliant vendors as substitutes.
The Company has also received either oral or written
assurances from its customers or has reviewed assurances
contained on its customers' web sites that they have no Year 2000
problems which would materially adversely affect the business or
operations of the Company.
The information contained in this Year 2000 discussion is
forward-looking and involves risks and uncertainties that may
cause actual results to vary materially from those projected.
Some factors that could significantly impact Delta's expected
Year 2000 compliance and the estimated cost thereof include
internal computer hardware or software problems which have not
as yet been identified by Delta, and currently undisclosed and
unanticipated problems which may be encountered by third parties
with whom Delta has business relationships.
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: May 10, 1999
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.
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 232,896
<SECURITIES> 0
<RECEIVABLES> 182,435
<ALLOWANCES> 50,000
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<CURRENT-ASSETS> 415,431
<PP&E> 11,086,517
<DEPRECIATION> 1,446,117
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<BONDS> 0
0
0
<COMMON> 60,203
<OTHER-SE> 9,773,173
<TOTAL-LIABILITY-AND-EQUITY> 10,355,111
<SALES> 463,978
<TOTAL-REVENUES> 1,576,866
<CGS> 0
<TOTAL-COSTS> 1,983,595
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