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, 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 executive offices) (Zip Code)
(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___
6,678,902 shares of common stock $.01 par value were outstanding
as of November 10, 1999.
FORM 10-QSB
1st QTR.
FY 2000
INDEX
PART I FINANCIAL INFORMATION
PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - September 30, 1999 and
June 30, 1999 (unaudited) 1
Consolidated Statements of Operations -
Three Months Ended
September 30, 1999 and 1998 (unaudited) 3
Consolidated Statement of Stockholders' Equity
Year Ended June 30, 1999 and
Three Months Ended September 30, 1999 (unaudited) 4
Consolidated Statements of Cash Flows -
Three Months Ended
September 30, 1999 and 1998 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis
Or Plan of Operations 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 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
The terms "Delta", "Company", "we", "our", and "us" refer to
Delta Petroleum Corporation unless the context suggests otherwise.
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1999 1999
ASSETS
Current Assets:
Cash $ 39,560 99,545
Trade accounts receivable, net of
allowance for doubtful accounts of $50,000
September 30, 1999 and June 30, 1999 161,484 113,841
Accounts receivable - related parties 95,687 116,855
Other current assets 10,900 10,100
Total current assets 307,631 340,341
Property and Equipment:
Oil and gas properties, at cost (using
the successful efforts method
of accounting):
Undeveloped offshore California
properties 7,369,830 7,369,830
Undeveloped onshore domestic properties 476,795 506,363
Undeveloped foreign properties 623,920 623,920
Developed onshore domestic properties 2,307,804 2,231,187
Office furniture and equipment 83,363 82,489
10,861,712 10,813,789
Less accumulated depreciation and
depletion (1,684,862) (1,650,228)
Net property and equipment 9,176,850 9,163,561
Long term assets:
Deferred financing costs 27,400 -
Investment in Bion Environmental 229,938 257,180
Deposit on purchase of oil and gas
properties 3,919,800 1,616,050
Total long term assets 4,177,138 1,873,230
$13,661,619 11,377,132
September 30, June 30,
1999 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 410,584 393,542
Accrued interest 90,675 -
Other accrued liabilities 10,000 10,000
Royalties payable 108,289 127,166
Current portion of long-term debt:
Related party 144,000 105,268
Other 216,425 -
Total current liabilities 979,973 635,976
Long-term debt:
Related party 856,000 894,732
Other 1,823,575 -
Total long-term debt 2,679,575 894,732
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 6,653,902
shares at September 30, 1999
and 6,390,302
at June 30, 1999 66,539 63,903
Additional paid-in capital 30,190,800 29,476,275
Accumulated other comprehensive loss (148,332) (115,395)
Accumulated deficit (20,106,936) (19,578,359)
Total stockholders' equity 10,002,071 9,846,424
Commitments
$13,661,619 11,377,132
See accompanying notes to consolidated financial statements.
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30, September 30,
1999 1998
Revenue:
Oil and gas sales $ 116,540 202,479
Other revenue 30,288 61,160
Total revenue 146,828 263,639
Operating expenses:
Lease operating expenses 39,147 77,979
Depreciation and depletion 34,634 68,716
Exploration expenses 415 41,714
Abandoned and impaired properties 1,114 -
Dry hole costs - 97,218
General and administrative 380,083 379,146
Stock option expense 109,986 6,845
Total operating expenses 565,379 671,618
Loss from operations (418,551) (407,979)
Other income and expenses:
Interest expense (107,475) -
Loss on sale of securities available
for sale (2,551) (12,989)
Total other income and expenses (110,026) (12,989)
Loss $(528,577) (420,968)
Basic and diluted loss per common share $ (0.08) (0.08)
Weighted average number of common
shares outstanding 6,574,445 5,515,684
See accompanying notes to consolidated financial statements.
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Year ended June 30, 1999 and three months ended September 30, 1999
(Unaudited)
<TABLE>
Additional
Common Stock paid-in
Shares Amount capital
<S> <C> <C> <C>
Balance, June 30, 1998 5,513,858 $ 55,139 25,571,921
Comprehensive loss:
Net loss - - -
Other comprehensive loss, net of tax
Unrealized loss on equity securities - - -
Less: Reclassification adjustment for losses included
in net loss - - -
Comprehensive loss - - -
Stock options granted as compensation - - 2,081,423
Shares issued for cash upon exercise of options 120,000 1,200 158,800
Shares issued for cash 196,444 1,964 354,011
Shares issued for services 10,000 100 15,650
Shares issued for oil and gas properties 250,000 2,500 621,420
Shares issued for deposit on oil and gas properties 300,000 3,000 613,050
Fair value of warrant extended and repriced - - 60,000
Balance, June 30, 1999 6,390,302 63,903 29,476,275
Comprehensive loss:
Net loss - - -
Other comprehensive loss, net of tax
Unrealized loss on equity securities - - -
Less: Reclassification adjustment for losses included
in net loss - - -
Comprehensive loss - - -
Stock options granted as compensation - - 109,986
Shares issued for cash upon exercise of options 163,600 1,636 301,789
Shares issued for deposit on oil and gas properties 100,000 1,000 302,750
Balance, September 30, 1999 6,653,902 $ 66,539 30,190,800
</TABLE>
<TABLE>
Accumulated
other
comprehensive
income Comprehensive Accumulated
(loss) Income deficit Total
<S> <C> <C> <C> <C>
Balance, July 1, 1998 457,594 (16,579,600) 9,505,054
Comprehensive loss:
Net loss (2,998,759) (2,998,759) (2,998,759)
Other comprehensive loss, net of tax
Unrealized loss on equity securities (669,542) -
Less: Reclassification adjustment for losses included
in net loss 96,553 (572,989) (572,989)
Comprehensive loss (3,571,748)
Stock options granted as compensation - - 2,081,423
Shares issued for cash upon exercise of options - - 160,000
Shares issued for cash - - 355,975
Shares issued for services - - 15,750
Shares issued for oil and gas properties - - 623,920
Shares issued for deposit on oil and gas properties - - 616,050
Fair value of warrant extended and repriced - - 60,000
Balance, June 30, 1998 (115,395) (19,578,359) 9,846,424
Comprehensive loss:
Net loss (528,577) (528,577) (528,577)
Other comprehensive loss, net of tax
Unrealized loss on equity securities (35,488) -
Less: Reclassification adjustment for losses included
in net loss 2,551 (32,937) (32,937)
Comprehensive loss (561,514)
Stock options granted as compensation - - 109,986
Shares issued for cash upon exercise of options - - 303,425
Shares issued for deposit on oil and gas properties - - 303,750
Balance, September 30, 1999 (148,332) (20,106,936) 10,002,071
See accompanying notes to consolidated financial statements.
</TABLE>
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30, September 30,
1999 1998
Net cash used in operating activities $ (345,369) (239,564)
Cash flows from investing activities:
Additions to property and equipment (47,923) (134,928)
Deposit on purchase of oil and gas
properties (2,000,000) -
Proceeds from sale of securities
available for sale 2,551 49,597
Net cash used in investing activities (2,045,372) (85,331)
Cash flows from financing activities:
Stock issued for cash upon exercise
of options 303,425 -
Issuance of common stock for cash - 5,975
Proceeds from borrowing 2,000,000 400,000
Decrease (increase) in accounts
receivable from
related parties 27,331 (88,798)
Net cash provided by financing activities 2,330,756 317,177
Net decrease in cash (59,985) (7,718)
Cash at beginning of period 99,545 17,135
Cash at end of period $ 39,560 9,417
Supplemental cash flow information -
Cash paid for interest $ 15,000 -
Non-cash financing activities-
Common stock issued for deposit on purchase
of oil and gas properties $ 303,750 -
See accompanying notes to consolidated financial statements.
DELTA PETROLEUM CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Three Months Ended September 30, 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 for the year ended June 30, 1999,
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.
During the three months ended September 30, 1999, the
Company received an additional 4,354 shares of Bion's common
stock for rent provided by the Company. Also during the
three months ended September 30, 1999, the Company realized
a loss on the sale of securities available for sale of
$2,551.
The cost and estimated market value of the Company's
investment in Bion at September 30, 1999 and June 30, 1998
are as follows:
Estimated
Unrealized Market
Cost Loss Value
September 30, 1999 $378,270 (148,332) 229,938
June 30, 1999 $372,575 (115,395) 257,180
(3) Deposit on Purchase of Oil and Gas Properties
During the year ended June 30, 1999, the Company
entered into an agreement to acquire a 6.07% working
interest in the Point Arguello Unit, its three platforms
(Hidalgo, Harvest and Hermosa), along with a 100% interest
in two and an 11.11% interest in one of the three leases
within the adjacent undeveloped Rocky Point Unit from an
unrelated entity. The unrelated entity will retain its
proportionate share of future abandonment liability
associated with both the onshore and offshore facilities of
the Point Arguello Unit. The agreement called for an
initial issuance of 300,000 shares of restricted common
stock and a $1,000,000 deposit which the Company completed
in fiscal 1999. In addition, the agreement called for
$2,000,000 to be paid by August 2, 1999 and the final
payment of $3,000,000, to be paid on or before December 1,
1999. On August 2, 1999, as required by the agreement, the
Company paid an additional $2,000,000. The final payment is
to be adjusted for operating expenses and permitted capital
expenditures of the working interest from April 1,1999 to
December 1, 1999.
Under the agreement, if Delta does not make the final
payment of approximately $3,000,000 Delta would, upon
closing, acquire an approximate 3.035% net operating
interest in the Point Arguello Unit and one half of the
sellers working interest in the undeveloped Rocky Point
Unit. In addition, the agreement provides that if
development and operating expenses are not covered by
production revenues then, at Delta's election, until
December 31, 2000, the seller will invest up to $2,000,000
in Delta through the purchase of Delta Preferred Stock to
cover such costs.
(4) Long Term Debt - Related Party
On May 24, 1999, the Company borrowed $1,000,000 at 18%
per annum from the Company's officers maturing on June 1,
2001. The Company agreed to make monthly payments of
interest only for the first six months and thereafter
monthly principal and interest payments of $29,375 through
June 1, 2001 with the remaining principal amount payable at
the maturity date.
(5) Long Term Debt - Other
On July 30, 1999, the Company borrowed $2,000,000 at
18% per annum from an unrelated entity maturing on August 1,
2001 which was personally guaranteed by the officers of the
Company. The Company agreed to pay a 2% origination fee and
to make monthly payments of interest only for the first six
months and thereafter monthly principal and interest
payments of $58,750 through August 1, 2001 with the
remaining principal amount payable at the maturity date.
As consideration for the guarantee of the Company
indebtedness, the Company entered into an agreement with its
officers, under which a 1% overriding royalty interest in
the properties acquired with the proceeds of the loan
(proportionately reduced to the interest in each property)
will be assigned to each of the officers.
(6) Subsequent Events
On November 1, 1999, the Company acquired interests in
11 oil and gas producing properties located in New Mexico
and Texas for a cost of $2,879,850.
Also on November 1, 1999, the Company borrowed the
funds for the above mentioned acquisition at 18% per annum
from an unrelated entity maturing on January 31, 2000, which
was personally guaranteed by the officers of the Company.
As consideration for the guarantee of the Company
indebtedness, the Company agreed to assign a 1% overriding
royalty interest to each officer in the properties acquired
with the proceeds of the loan (proportionately reduced to
the interest acquired in each property). The Company also
agreed to pay a 1% origination fee.
Item 2. Management's Discussion and Analysis or Plan of
Operations
Forward Looking Statement
The statements contained in this report which are not
historical fact are "forward looking statements" that
involve various important risks, uncertainties and other
factors which could cause the Company's actual results to
differ materially from those expressed in such forward
looking statements. These factors include, without
limitation, the risks and factors set forth below as well as
other risks previously discussed in the Company's annual
report on Form 10-KSB.
Liquidity and Capital Resources.
Our current assets include accounts receivable from
related parties (including affiliated companies) of $95,687
at September 30, 1999 which is primarily for drilling costs,
and lease operating expense on wells owned by the related
parties and operated by us. The amounts are due on open
account and are non-interest bearing. Our current
liabilities include royalties payable of $108,289 at
September 30, 1999 which represent our estimate of royalties
payable on production attributable to our 91.68% owned
subsidiary's, Amber Resources Company ("Amber"), interest in
certain wells in Oklahoma, including production prior to the
acquisition of Amber. We believe that the operators of the
affected wells have paid some of the royalties on our behalf
and have withheld such amounts from revenues attributable to
our interest in the wells. We have been in contact with the
operators of the wells in an attempt to determine what
amounts the operators have paid on our behalf over the past
five years, which amounts would reduce the amounts we owe.
We have been informed by our 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 limitations 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.
We believe 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. We believe, although
there can be no assurance, that we may ultimately be able to
settle with potential claimants for less than the amounts
recorded for royalties payable.
Our working interest share of the future estimated
development costs relating to our undeveloped offshore
California properties approximates $217 million. No
significant amounts are expected to be incurred during
fiscal 2000 and $1.0 million and $4.2 million are expected
to be incurred during fiscal 2001 and 2002, respectively.
The amounts required for development of these undeveloped
properties are so substantial relative to our present
financial resources, we may ultimately determine to farmout
all or a portion of our interest. If we were to farmout our
interests, our interest in the properties would be decreased
substantially. Alternatively, we may pursue other methods
of financing, including selling equity or debt securities.
There can be no assurance that we can obtain any such
financing. If we were to sell additional equity securities
to finance the development of the properties, the existing
common shareholders' interest would be diluted
significantly.
On May 24, 1999, we borrowed $1,000,000 at 18% per
annum from our officers under a promissory note maturing on
June 1, 2001. We agreed to make monthly payments of
interest only for the first six months and thereafter
monthly principal and interest payments of $29,375 through
June 1, 2001 with the remaining principal amount payable at
the maturity date.
On July 1, 1999, we borrowed $2,000,000 at 18% per
annum from an unrelated entity maturing on August 1, 2001
which was personally guaranteed by our officers. We agreed
to pay a 2% origination fee and to make monthly payments of
interest only for the first six months and thereafter
monthly principal and interest payments of $58,750 through
August 1, 2001 with the remaining principal amount payable
at the maturity date.
As consideration for the guarantee of our indebtedness,
we entered into an agreement with our officers, under which
a 1% overriding royalty interest in the properties acquired
with the proceeds form the loans (proportionately reduced to
the interest in each property acquired) will be assigned to
each of the officers.
On November 1, 1999, we acquired interests in 11 oil
and gas producing properties located in New Mexico and Texas
for a cost of $2,879,850.
Also on November 1, 1999, we borrowed the funds for the
above mentioned acquisition at 18% per annum from an
unrelated entity maturing on January 31, 2000, which was
personally guaranteed by the officers of the Company. As
consideration for the guarantee of our indebtedness we
agreed to assign a 1% overriding royalty interest to each
officer in the properties acquired with the proceeds of the
loan (proportionately reduced to the interest acquired in
each property). We also agreed to pay a 1% origination fee.
We expect to raise additional capital by selling our
common stock in order to fund our capital requirements for
our portion of the costs of the drilling and completion of
development wells on our proved undeveloped properties
during the next twelve months. There is no assurance that
we will be able to do so or that we will be able to do so
upon terms that are acceptable. We do not currently have a
credit facility with any bank and we have not determined the
amount, if any, that we could borrow against our existing
properties. We will continue to explore additional sources
of both short-term and long-term liquidity to fund our
operations and our capital requirements for development of
our properties including establishing a credit facility,
sale of equity or debt securities and sale
of properties. Many of the factors which may affect our
future operating performance and liquidity are beyond our
control, including oil and natural gas prices and the
availability of financing.
After evaluation of the considerations described above,
we believe that our cash flow from our existing producing
properties, proceeds from the sale of producing properties,
and other sources of funds will be adequate to fund our
operating expenses and satisfy our other current liabilities
over the next year or longer.
Results of Operations
Loss. We reported a loss for the three months ended
September 30, 1999 of $528,577 compared to $420,968 for the
three months ended September 30, 1998. The losses for the
three months ended September 30, 1999 and 1998 were effected
by numerous items, described in detail below.
Revenue. Total revenues for the three months ended
September 30, 1999 were $146,828 compared to $236,639 for
the three months ended September 30, 1998. Oil and gas
sales for the three months ended September 30, 1999 were
$116,540 compared to $202,479 for the three months ended
September 30, 1998. Our oil and gas sales decreased as a
result of the sale of certain oil and gas properties
effective October 1, 1998.
Production volumes and average prices received for the
three month periods ended September 30, 1999 and 1998 are as
follows:
Three Months Ended
September30,
1999 1998
Production:
Oil (barrels) 1,076 1,848
Gas (Mcfs) 53,419 94,139
Average Price:
Oil (per barrel) $ 20.64 $11.11
Gas (per Mcf) $ 1.77 $1.93
Lease Operating Expenses. Lease operating expenses
were $39,147 and $77,979 for the three months ended
September 30, 1999 and 1998, respectively. On a Mcf
equivalent basis, lease operating expenses were $.57, per
Mcf equivalent during the three months ended September 30,
1999 compared to $.74, 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 in an area that is more costly to operate than
existing production.
Depreciation and Depletion Expense. Depreciation and
depletion expense for the three months ended September 30,
1999 were $34,634 compared to $68,716 for the same period in
1998. On a Mcf equivalent basis, depreciation and
depletion expense was $.58 per Mcf equivalent during the
three months ended September 30, 1999 compared to $.65 per
Mcf equivalent for the same period in 1998. The decrease in
depreciation and depletion expense can be attributable to
the sale of certain oil and gas properties effective October
1, 1998.
Exploration Expenses. We recorded exploration expenses
of $417 for the three months ended September 30, 1999
compared to $41,714 for the same period in 1998.
Exploration costs decreased from 1999 to 1998 as the Company
did not renew certain non-strategic leases in the Sacramento
Basin in Northern California.
Dry Hole Costs. We recorded dry hole costs for three
dry holes during the three month period ended September 30,
1998.
General and Administrative Expenses. General and
administrative expenses for the three months ended September
30, 1999 were $380,083 compared to $379,146 for the same
periods in 1998.
Future Operations
We, directly and through our subsidiary, Amber
Resources Company, own interests in four undeveloped federal
units (plus one additional lease) located in federal waters
offshore California near Santa Barbara.
Our 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 October 15, 1992 the MMS directed
a Suspension of Operations ("SOO") effective January 1,
1993, for the POCS non-producing leases and units, pursuant
to CFR 250.110, to enable the lease owners to participate in
what became known as the COOGER Study. This allowed the
leases to be held under an SOO during the term of the study
thereby permitting the owners to cease paying lease payments
to the Federal government and suspending the requirements
relating to development of these leases during this period.
The MMS has extended the SOO from time to time to allow
completion of the COOGER Study. Most recently the MMS
directed an additional SOO through November 15, 1999 when
unit operators are required to have submitted descriptions
of their exploration plans for the leases to support their
requests for Suspension of Production ("SOP") status for the
leases. Each operator has or will submit what the MMS has
termed a Schedule of Events for a specific lease or unit
that it operates and also a request for an SOP time period
to execute the Schedule of Events.
In order to carry out the requirements of the MMS, all
operators of the units in which we own 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. We are participating with the
operators in meeting the MMS schedules through meetings, and
consultations and in 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. Our share
of such costs over the life of the properties is estimated
to be $216,000,000.
To the extent that we do not have sufficient cash
available to pay our share of expenses when they become
payable under the respective operating agreements, it will
be necessary for us to seek funding from outside sources.
Likely potential sources for such funding are currently
anticipated to include (a) public and private sales of our
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 our interests in
the properties whereby the recipient of the farm-out would
pay the full amount of our share of expenses and we would
retain a carried ownership interest (which would result in a
substantial diminution of our 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 our interests
in the properties.
It is unlikely that any one potential source of funding
would be utilized exclusively. Rather, it is more likely
that we 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 our small size
in relation to the magnitude of the capital requirements
that will be associated with the development of the subject
properties, we 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 our assets (including its offshore
California properties), reduce our 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 we are not
able to pay our share of expenses as a working interest
owner as required by the respective operating agreements, it
is possible that we might lose some portion of our ownership
interest in the properties under some circumstances, or that
we might be subject to penalties which would result in the
forfeiture of substantial revenues from the properties.
While the costs to develop the offshore California
properties in which we own an interest are anticipated to be
substantial in relation to our small size, management
believes that the opportunities for us to increase our asset
base and ultimately improve our cash flow are also
substantial in relation to our size. Although there are
several factors to be considered in connection with our
plans to obtain funding from outside sources as necessary to
pay our proportionate share of the costs associated with
developing our offshore properties (not the least of which
is the possibility that prices for petroleum products could
decline in the future to a point at which development of the
properties is no longer economically feasible), we believe
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 were
to decline below their recent 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. If petroleum prices increase,
however, we believe that development efforts will intensify.
Our ability to successfully negotiate financing to pay our
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
We have completed a review of our 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 our 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 our review, we currently believe that
the Year 2000 issue will not pose material operational
problems for the Company. To our knowledge, after
investigation, no "embedded technology" (such as microchips
in an electronic control system) of the Company poses a
material Year 2000 concern.
Because we believe that we have no material internal
Year 2000 problems, we have not and do not expect to expend
a significant amount of funds to address Year 2000 issues.
It is our policy to continue to review our suppliers'
Year 2000 compliance and require assurance of Year 2000
compliance from new suppliers; however, such monitoring does
not involve a significant cost to us.
In addition to the foregoing, we have contacted our
major vendors and have received either oral or written
assurances from our major vendors or have reviewed
assurances contained on vendors' web sites that they have no
material Year 2000 problems. We believe that our vendors
are largely fungible; therefore, in the event a vendor's
representations regarding its Year 2000 compliance were
untrue for any reason, we believe that we could find
adequate Year 2000-compliant vendors as substitutes.
We have also received either oral or written assurances
from our customers or have reviewed assurances contained on
our 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 our
expected Year 2000 compliance and the estimated cost thereof
include internal computer hardware or software problems
which have not as yet been identified by us, 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.
We are not directly engaged in any material pending
legal proceedings to which we or our subsidiaries are a party or
to which any of our property is subject.
The operators of the offshore Federal units in which we
own interests have each filed Notices of Appeal on behalf of
themselves and the co-owners of the various units, including
Delta, with the United States Department of Interior of a June
25, 1999 order issued by the Regional Director, Pacific OCS
Region, terminating existing Suspensions of Production in effect
prior to the present Suspension of Operations. We do not expect
that the outcome of any later appeal that might be filed pursuant
to the Notice of Appeal will have any material affect upon our
property interests because the operators are in the process of
requesting new Suspension of Production status for each of the
units which, if granted, will replace the existing Suspension of
Operations.
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:
August 25, 1999; Items 5 & 7.
November 1, 1999; Items 2 & 7.
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 11, 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 39,560
<SECURITIES> 0
<RECEIVABLES> 257,171
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 307,631
<PP&E> 10,861,712
<DEPRECIATION> 1,684,862
<TOTAL-ASSETS> 13,661,619
<CURRENT-LIABILITIES> 979,973
<BONDS> 0
0
0
<COMMON> 66,539
<OTHER-SE> 9,935,532
<TOTAL-LIABILITY-AND-EQUITY> 13,661,619
<SALES> 116,540
<TOTAL-REVENUES> 146,828
<CGS> 0
<TOTAL-COSTS> 565,379
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,551
<INTEREST-EXPENSE> 107,475
<INCOME-PRETAX> (528,577)
<INCOME-TAX> 0
<INCOME-CONTINUING> (528,577)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (528,577)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
