As filed with the Securities and Exchange Commission, May 19, 1999
Securities Act File No. 333-78673; Exchange Act File No. 0-20760
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Amendment No. to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
GREKA ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1091986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
630 Fifth Avenue, Suite 1501
New York, New York 10111
(212) 218-4680
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_____________________
Randeep S. Grewal
Greka Energy Corporation
630 Fifth Avenue, Suite 1501
New York, New York 10111
(212) 218-4680
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
____________________
Copies of Communications to:
Roger V. Davidson, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
(303) 292-2400
Approximate date of commencement of proposed sale to public:
As soon as practicable after the registration statement becomes effective
__________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest investment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]__________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount
of Securities to be to be Offering Price Aggregate Offering of
Registered Registered Per Share (2) Price Regis-
(1) tration fee
_____________________________________________________________________________
Common Stock, no par
value held by Selling
Security Holders 157,622 Shares $7.375 $1,162,462 $323(3)
(1) This registration statement covers an additional indeterminate number of
shares of our common stock which may be issued in accordance with Rule
416.
(2) The proposed maximum offering price is estimated solely for the purpose
of determining the registration fee and calculated pursuant to Rule
457(c). The average of the high and low prices of our common stock
reported by the Nasdaq SmallCap Market on May 11, 1999 were used for the
estimate.
(3) Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
The information in this prospectus is not complete and may be changed.
The selling security holders may not sell these securities until the
registration statement filed with the SEC is effective. This prospectus is
not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated May 19, 1999
PROSPECTUS
Greka Energy Corporation
157,622 Shares of Common Stock
The shares of our common stock covered by this prospectus are being sold
by the security holders listed under the heading "Selling Security Holders."
Those selling security holders previously received the shares of common stock
from us. We will not receive any of the proceeds from the sales of the shares
of common stock by the selling security holders.
Our common stock is traded in the Nasdaq SmallCap Market under the
trading symbol "GRKA." The closing sales price of our common stock was $7.25
May 11, 1999.
There are certain risks involved with the ownership of our common stock,
including risks related to our business and the markets for our common stock.
(See "Risk Factors" beginning on page 6.)
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary
is a criminal offense.
The date of this prospectus is ,1999
TABLE OF CONTENTS
Page
About this Prospectus 2
Information Made Available to You 2
Incorporation of Certain Documents by Reference 3
Prospectus Summary 4
Risk Factors 6
Use of Proceeds 14
Selling Security Holders 14
Plan of Distribution 15
Legal Matters 16
Experts 16
Securities And Exchange Commission Position
on Certain Indemnification 17
ABOUT THIS PROSPECTUS
You should only rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holders are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted.
INFORMATION MADE AVAILABLE TO YOU
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission. Certain information in
the Registration Statement has been omitted from this prospectus in accordance
with the rules of the SEC.
We file annual reports, quarterly reports and current reports, proxy
statements and other information with the SEC. Our file number is 0-20760.
You may read and copy materials that we have filed with the SEC,
including the registration statement, at the following SEC public reference
rooms:
450 Fifth Street, N.W. Northwest Atrium Center 7 World Trade Center
Room 1024 500 West Madison Street Suite 1300
Washington, D.C. 20549 Suite 1400 New York, New York 10048
Chicago, Illinois 60661
You can call the SEC at 1-800-732-0330 for further information about the
public reference room.
We are required to file electronic versions of these documents with the
SEC. Those documents may be accessed through the SEC's Internet site at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are deemed to be incorporated by reference in
this registration statement and to be a part of this prospectus.
1. Our annual report on Form 10-KSB for the year ended December 31, 1998.
2. Our current reports on Form 8-K reporting events dated each of
February 18, 1999 and March 15, 1999.
3. Our proxy statement for the our annual meeting of shareholders held
July 2, 1998.
4. The joint proxy statement for our and Saba Petroleum Company's
special meetings of shareholders held March 19, 1999.
5. The description of our no par value common stock which is contained
in our amendment to the registration statement on Form 8-A filed with the SEC
on September 12, 1997.
All documents subsequently filed by us with the SEC pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the
termination of the offering shall be deemed to be incorporated by reference
into this prospectus.
We will provide, without charge, to each person to whom a copy of this
prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated into this prospectus by reference.
Written or telephone requests for such copies should be directed to our
office: Greka Energy Corporation, 630 Fifth Avenue, Suite 1501, New York, New
York 10111, (212) 218-4680.
PROSPECTUS SUMMARY
This is only a summary and does not contain all the information that may
be important to you. You should read the more detailed information contained
in and incorporated by reference into this prospectus, including but not
limited to, the risk factors beginning on page 6. "We" as used in this
prospectus includes our subsidiaries unless the context requires otherwise.
About Us
We are an integrated company committed to creating shareholder value by
capitalizing on consistent cash flow hedged from oil price fluctuation within
integrated operations, exploiting exploration and production opportunities and
penetrating new niche markets utilizing proprietary technology with emphasis
on short radius horizontal drilling technology patented by BP Amoco. We have
oil and gas production and development activities in North and South America
and the Far East, with primary areas of activity in Alberta, California,
Louisiana, Texas, New Mexico, Colombia, Indonesia and China.
Our principal business office is located at 630 Fifth Avenue, Suite 1501,
New York, New York 10111. The telephone number at that address is (212)
218-4680.
Forward-Looking Statements
This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements that concern our business. All
statements, other than statements of historical facts, included in or
incorporated by reference into this prospectus that address activities, events
or developments that we expect, believe or anticipate will or may occur in the
future, including the following matters are forward looking statements:
* the benefits we expect to result from our recent acquisition of Saba
Petroleum Company, including the following:
* synergies in the form of increased revenues,
* decreased expenses and avoided expenses and expenditures that
we expect to realize as a result of the transaction, and
* the complementary nature of our horizontal drilling technology
and certain oil reserves acquired with the acquisition of
Saba,
* year 2000 issues,
* future capital,
* development and exploration expenditures,
* drilling of wells,
* reserve estimates,
* future production of oil and gas,
* repayment of debt,
* business strategies, and
* expansion and growth of business operations.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our perception of the following:
* historical trends,
* current conditions,
* expected future developments, and
* other factors we believe are appropriate in the circumstances.
Such statements are subject to a number of assumptions including the
following:
* risks and uncertainties, including the risk factors in this
prospectus,
* general economic and business conditions,
* the business opportunities that may be presented to and pursued by
us,
* changes in laws or regulations and other factors, many of which are
beyond our control, and
* availability to obtain project financing on favorable conditions.
Significant factors that could prevent us from achieving our stated goals
include:
* our failure to integrate our operations and Saba or to achieve the
synergies expected from the acquisition of Saba,
* declines in the market prices for oil and gas, and
* adverse changes in the regulatory environment affecting us.
You are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward-looking statements.
The Offering
Shares of common stock outstanding prior to this offering 4,856,718
Shares of common stock offered by this prospectus 157,622
Nasdaq SmallCap Market symbol for our common stock GRKA
RISK FACTORS
Prior to making an investment decision, you should carefully consider,
together with the other information contained in and incorporated by reference
into this prospectus, the following risk factors.
We have incurred operating losses and we may incur continued losses for the
foreseeable future.
We incurred losses for the years ended December 31, 1998 and 1997. Saba
incurred losses for the year ended December 31, 1998. We may incur continued
losses for the foreseeable future. In addition, we may experience
fluctuations in future operating results due to a variety of factors including
the following:
* general economic conditions,
* specific economic conditions in the oil and gas industry, and
* capital and other costs relating to the expansion of operations.
Many of those factors are out of our control. There can be no assurance that
our operations will generate sufficient revenues to become profitable.
We may not be able to successfully integrate our business operations with
Saba.
The consolidation of functions and integration of departments, systems
and procedures of Saba and us present significant management challenges and
require special attention. We cannot assure you that such actions will be
successfully accomplished as rapidly as currently expected or that the
combined operations of the companies will realize any of the anticipated
benefits of our acquisition of Saba. We cannot assure you that any benefits
will result from our proprietary horizontal drilling technology being used on
our properties or that other synergies will result from the combination of the
business operations of the two companies.
We have substantial capital requirements.
We make, and will continue to make, substantial capital expenditures for
the exploitation, production and acquisition of oil and gas reserves. We have
financed these expenditures primarily from private placements of our common
stock. If revenues or our ability to borrow decreases as a result of lower oil
and gas prices, operating difficulties or declines in reserves, we may have
limited ability to fund the capital requirements to undertake or complete
future exploitation, production and acquisition programs. We cannot assure
you that additional debt or equity financing or cash generated by operations
will be available to meet these requirements.
We plan to attempt to sell or dispose of our non-core oil and gas
properties which should result in our receipt of significant amounts of cash
during 1999, a major portion of which may be applied to our bank indebtedness.
However, the timing of any sale and the amounts realized therefrom
nevertheless may not be sufficient or early enough to permit us to make our
bank payments and fund our committed exploration activities, in which cases we
would be required to seek other financing or attempt to reduce our exploratory
commitments. There is no assurance that we will be able to do either or that
the terms of any new financing or reduction in commitments will be favorable
to us.
We may inadvertently acquire properties with environmental problems or
structural contamination.
We intend to acquire additional oil and gas properties. Although we
perform a review of the acquired properties that we believe is consistent
with industry practices, such reviews are inherently incomplete. It generally
is not feasible to review in depth every individual property involved in each
acquisition. Ordinarily, we will focus our due diligence efforts on the
higher valued properties and will sample the remainder. However, even an
in-depth review of all properties and records may not necessarily reveal
existing or potential problems nor will it permit us to become sufficiently
familiar with the properties to assess fully their deficiencies and
capabilities. We may not inspect every well. Additionally, structural or
environmental problems, such as ground water contamination, are not
necessarily observable even when we undertake an inspection. We may be
required to assume preclosing liabilities, including environmental
liabilities, and may acquire interests in properties on an "as is" basis. We
cannot assure you that our acquisitions will be successful.
We compete with companies with greater market share and resources.
We compete with other companies which have substantially greater market
share, greater financial and other resources, better name recognition and
longer operating histories. We may therefore not be able to acquire desirable
oil and gas properties to develop.
There is substantial doubt that we can continue as a going concern.
Our current liabilities are in excess of our apparent ability to meet
such obligations as they come due. Our auditors have included an explanatory
paragraph in their opinion on our financial statements to state that there is
substantial doubt as to our ability to continue as a going concern. We cannot
assure you that our business plans will be successful to address that issue.
We cannot pay our debts now due.
Our entire principal indebtedness to Bank One of $20.1 million was
classified as currently payable at December 31, 1998. Additionally, we were
not in compliance with the loan agreement's financial covenants at December
31, 1998. In May 1999, we entered into a $11 million financing agreement with
Bank of New York. We used $6 million from that financing to reduce our
indebtedness with Bank One. We also entered into a forbearance agreement with
Bank One under which Bank One has agreed to forbear from exercising its
remedies to collect the indebtedness owed by us through and including May 30,
1999, provided that we pay Bank One a total of $16 million prior to June 11,
1999 and we deliver documents to Bank One necessary to create a security
interest in the assets of our subsidiary Sabacol to secure the payment of the
loan from Bank One to us. We plan to pay the remaining $11 million owed to
Bank One under the forbearance agreement with proceeds from the planned sale
of non-core assets. There is not any assurance that we will be successful in
our efforts to pay our debt with Bank One or meet our obligations under the
forbearance agreement.
We currently depend on a few key customers in Colombia, the loss of which
could adversely affect us.
Empresa Colombiana de Petroles, known as Ecopetrol and which also owns a
50% working interest in our Colombian Nare Association properties, accounted
for a significant portion of our total oil and gas revenues in 1998 and 1997.
Prices received from the sale of oil produced at our Colombian properties are
determined by formulas set by Ecopetrol. The formula for determining the
price paid for crude oil produced at our Colombian properties is based
upon the average of specified fuel oil and international crude oil prices,
which average is then discounted relative to the price of West Texas
Intermediate crude oil. There can be no assurance that Ecopetrol will not
decrease the prices it pays for our oil in the future. On March 17, 1999, our
subsidiary Sabacol entered into an agreement with Omimex, a privately held oil
and gas company which operates a substantial portion of our producing
properties, to sell our Colombian properties to Omimex. We expect to
consummate that transaction in the second quarter of 1999. In the event that
transaction is not consummated:
* a material decrease in the price paid by Ecopetrol would have a
material adverse effect on our financial condition and future
operations, and
* the loss of Ecopetrol as a purchaser could have a material adverse
effect on us.
Some of our oil and gas properties have significant environmental
contamination risks.
We have environmental risks associated with one of our Colombian
properties.
We plan to sell all of our Colombian properties and relieve ourselves of
any environmental liabilities associated with those properties. However, if
that sale is not consummated, we may be affected by environmental risks
associated with one of our Colombian properties. Our Cocorna Concession in
Colombia located in the Cocorna Association expired in February 1997 under its
governing documents, and the property interest reverted to Ecopetrol. Under
the terms of the acquisition of the Concession, we were required to perform
various environmental remedial operations. Colombian officials claim that we
and the operator were obligated to treat the water for disposal on the
Concession with a water treatment plant. Colombian officials are requiring
that the plant be built. There can be no assurance as to the amount of our
future expenditures associated with the environmental requirements for the
Cocorna Concession. The property in Colombia in which we have an interest may
be affected by additional environmental remedial operations as reported to us
by a third party who had performed a due diligence review of the property.
We have environmental risks associated with one of our mineral properties
in California.
In 1993, we acquired a producing mineral interest in California from a
major oil company. At the time of acquisition, our investigation revealed
that a discharge of diluent a light, oil-based fluid which is often mixed with
heavier grades of crude had occurred on the acquired property. The purchase
agreement required the seller to remediate the area of the diluent spill.
After we assumed operation of the property, we became aware of the fact that
diluent was seeping into a drainage area which traverses the property. We
requested that the seller bear the cost of remediation. The seller has taken
the position that its obligation is limited to the specified contaminated area
and that the source of the contamination is not within the area that the
seller has agreed to remediate. We also found a second area of diluent
contamination and believe the major oil company is responsible for this
contamination as well. Should we be required to remediate the area ourselves,
our cost could be significant. Present estimates are that the cost of complete
remediation could approach $750,000. Since the investigation is not
complete, we are unable to accurately estimate the cost to be borne by us.
We have environmental risks associated with one of our oil and gas
properties in California.
In 1995, we agreed to acquire an oil and gas interest in California on
which a number of out of production oil wells had been drilled by the seller.
The acquisition agreement required that we assume the obligation to abandon
any wells that we did not return to production, irrespective of whether
certain consents of third parties necessary to transfer the property to us
were obtained. We were unable to secure all of the requisite consents to
transfer the property but nevertheless may have the obligation to abandon the
wells. A preliminary estimate of the cost of abandoning the wells and
restoring the well sites is approximately $1.5 million. We have been unable to
determine our exposure to third parties if we elect to plug such wells without
first obtaining necessary consents. Management believes we have no obligation
to remediate this property because we believe the seller did not give us any
consideration to enter into the contract for the property. However, there can
be no assurance that material costs for remediation or other environmental
compliance will not be incurred by us in the future. These environmental
compliance costs could materially and adversely affect us.
We have environmental risks associated with our asphalt refinery.
We own an asphalt refinery in Santa Maria, California, with which
significant environmental remediation obligations are associated. Although the
party who sold the asphalt refinery to us agreed to remediate portions of the
refinery property, the extent of such agreement and ultimate responsibility
for a complete clean-up is uncertain.
We could incur costs to comply with environmental laws and regulations.
Most of the properties that have been purchased by us have been in
production for a number of years and should be expected to have environmental
problems typical of oil field operations generally, and may contain other
areas of greater environmental concern. We have identified a number of areas
in which contamination exists on properties acquired by us.
We have agreed to indemnify some sellers from various environmental
liabilities, including those that are associated with the seller's prior
obligations. Many of these properties were in production during years in
which environmental controls were significantly more lax than they are
presently. At the time of an acquisition, there may be unknown conditions
which subsequently may give rise to an environmental liability. Consequently,
it is difficult to assess the extent of our obligation under these
indemnities.
Our foreign operations have currency exchange and asset repatriation risks.
We have producing properties in Colombia and Canada and are undertaking
exploration operations in Indonesia. Risks inherent in international
operations generally include the following:
* local currency instability,
* inflation,
* the risk of realizing economic currency exchange losses when
transactions are completed in currencies other than United States
dollars, and
* the ability to repatriate earnings under existing exchange control
laws.
Changes in domestic and foreign import and export laws and tariffs can
also materially impact international operations. In addition, foreign
operations involve political, as well as economic, risks such as:
* nationalization,
* expropriation,
* contract renegotiation, and
* changes in laws resulting from governmental changes.
In addition, many licenses and agreements with foreign governments are
for a fixed term and may not be held by production. In the event of a dispute,
we may be subject to the exclusive jurisdiction of foreign courts or may not
be successful in subjecting foreign persons to the jurisdiction of courts in
the United States. We may also be hindered or prevented from enforcing our
rights with respect to a governmental instrumentality because of the doctrine
of sovereign immunity. We will continue to be subject to these risks in
Colombia if we do not consummate the planned sale of our Colombian properties.
Our Colombian operations have personnel safety, labor continuity, asset
repatriation and sanctions.
Colombia, which has a history of political instability, is currently
experiencing such instability due to, among other the following factors:
* insurgent guerrilla activity,
* drug-related violence and actual and alleged drug-related political
payments,
* kidnaping of political and business personnel,
* the potential change of the national government by means other than
a recognized democratic election,
* labor unrest, including strikes and civil disobedience, and
* a substantial downturn in the overall rate of economic growth.
There can be no assurance that these matters, individually or
cumulatively, will not materially affect our Colombian properties and
operations or by affecting Colombian governmental policy, have an adverse
impact on our Colombian properties and operations if we do not consummate the
planned sale of our Colombian properties.
Uncertainties in the United States, Colombia bilateral political, trade and
investment relations.
By the Foreign Assistance Act of 1961, the President of the United States
is required to determine whether to certify that certain countries have
cooperated with the United States, or taken adequate steps on their own, to
achieve the goals of the United Nations Convention Against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances. In 1995, 1996, 1997 and 1998,
the President did not certify Colombia. The 1995 and 1998 decertifications
were subject to a so-called "national interest" waiver, effectively
nullifying its statutory effects. Based on the 1996 and 1997 Presidential
decertification, the United States imposed substantial economic sanctions on
Colombia, including the withholding of bilateral economic assistance, the
blocking of Export-Import Bank and Overseas Private Investment Corporation
loans and political risk insurance, and the entry of the United States votes
against multilateral assistance to Colombia in the World Bank and the
InterAmerican Development Bank.
The consequences of continued and successive United States
decertifications of Colombian activities are not fully known, but may include
the imposition of additional economic sanctions on Colombia in 1999 and
succeeding years. The President also has authority to impose far-reaching
economic, trade and investment sanctions on Colombia pursuant to the
International Emergency Economic Powers Act of 1978, which powers were
exercised in 1988 and 1989 against Panama in a dispute over narcotics
trafficking activities by the Panamanian government. The Colombian
government's reaction to United States sanctions could potentially include,
among other things, restrictions on the repatriation of profits and the
nationalization of Colombian assets owned by United States entities.
Accordingly, imposition of the foregoing economic and trade sanctions on
Colombia could materially affect our long-term financial results if we do not
sell our Colombian properties.
We may be subject to Colombian labor disturbances.
All of the workers employed at our Colombian fields belong to one of two
unions. While we have experienced organized work disruptions, including
intermittent disruption of production during the course of discussions with
those unions, there have been no major union disturbances. There can be no
assurance, however, that we will not experience such disturbances, including
significant production interruption due to sabotage, work slowdowns or work
stoppages if we do not consummate the planned sale of our Colombian
properties.
Our quarterly results may fluctuate due to volatility of oil and gas prices
and markets.
Our revenues, cash flow, profitability and future rate of growth are
dependent upon prevailing prices for oil, gas and asphalt. Our ability to
maintain or increase our borrowing capacity and to obtain additional capital
on attractive terms is also to some extent dependent on these commodities
prices. Historically, oil and gas prices and markets have been volatile and
are likely to continue to be volatile in the future. Prices for oil and gas
are subject to wide fluctuations in response to relatively minor changes in
supply of and demand for oil and gas, market uncertainty and a variety of
additional factors that are beyond our control. Those factors include:
* international political conditions,
* the domestic and foreign supply of oil and gas,
* the level of consumer demand, weather conditions,
* domestic and foreign governmental regulations,
* the price and availability of alternative fuels, and
* overall economic conditions.
Significant declines in the price of oil or gas, such as the declines in
oil prices during 1998, would adversely affect our revenues, operating income
and borrowing capacity and may require a reduction in the carrying value of
our oil and gas properties.
Much of our domestic production is heavy, low gravity, viscous crude oil
from the Central Coast Fields. Often these crudes contain significant amounts
of sulfur and metals, which make it undesirable feedstock for most refineries.
In times of excess supply of competitive crudes and low producer prices,
these crudes are often the first crudes rejected by California crude
purchasers. This means that the demand and price paid for much of our
production from the Central Coast Fields can vary significantly.
Replacement Of Our Oil And Gas Reserves Is Uncertain.
Our future success depends upon our ability to find, develop or acquire
additional oil and gas reserves that are economically recoverable. Except to
the extent that we conduct successful exploitation and production activities
or acquire properties containing proved reserves, our estimated net proved
reserves will generally decline as reserves are produced. We cannot assure you
that our planned exploitation and production projects and acquisition
activities will result in significant additional reserves or that we will have
continuing success drilling productive wells economically. If prevailing
oil and gas prices were to increase significantly, our costs to add new
reserves could increase.
The drilling of oil and gas wells involves a high degree of risk,
especially the risk of dry holes or of wells that are not sufficiently
productive to provide an economic return on the capital expended to drill the
wells. In addition, our drilling operations, including our contract services,
may be curtailed, delayed or canceled as a result of numerous factors,
including the following:
* title problems,
* weather conditions,
* compliance with governmental requirements, and
* shortages or delays in the delivery of equipment.
Our estimates of oil and gas reserves and future net revenues are uncertain.
The documents incorporated by reference into this prospectus include
estimates of net proved oil and gas reserves and the future net revenues from
those reserves which have been prepared by us and our independent petroleum
engineers. There are numerous uncertainties inherent in estimating
quantities of proved oil and gas reserves, including many factors beyond our
control. Reserve engineering is a subjective process of estimating the
underground accumulations of oil and gas that cannot be measured in an exact
manner. The estimates incorporated by reference into this prospectus are
based on various assumptions required by the SEC including the following:
* constant oil and gas prices,
* operating expenses, and
* capital expenditures.
Those estimates therefore, are inherently imprecise indications of future net
revenues. The following actual amounts may vary substantially from the
estimated amounts:
* amount of production,
* revenues,
* taxes,
* development expenditures,
* operating expenses, and
* quantities of recoverable oil and gas reserves to be encountered.
Any significant variance in the assumptions used for the estimates of
reserves could materially affect the estimated quantity and value of reserves
incorporated by reference into this prospectus. In addition, our reserves may
be subject to downward or upward revision based upon the following:
* production history,
* results of future development,
* availability of funds to acquire additional reserves,
* prevailing oil and gas prices, and
* other factors.
In addition, the calculation of the estimated present value of the future
net revenue using a 10% discount rate as required by the SEC is not
necessarily the most appropriate discount factor based on interest rates in
effect from time to time and risks associated with our reserves or the oil and
gas industry in general.
It is also possible that independent petroleum engineers may make
estimates of reserves and future net revenues from the same available data
that are different than our estimates or the estimates of different
independent petroleum engineers. Should this occur, management would adopt the
estimates of its independent engineers.
In calculating reserves on a barrels of oil equivalent basis, gas was
converted to oil at a certain ratio. While this convention approximates the
energy equivalent of oil and gas on a British thermal unit basis, it may not
represent the relative prices received by us on the sale of its oil and gas
production.
The estimated future net revenues attributable to net proved reserves are
prepared in accordance with SEC guidelines, and are not intended to reflect
the fair market value of reserves. In accordance with the rules of the SEC,
reserve estimates are prepared using period end prices received for oil and
gas. Future reductions in prices below those prevailing at December 31, 1998
would result in the estimated quantities and present values of reserves being
reduced.
We face substantial operating hazards and uninsured risks.
Our oil and gas business involves a variety of operating risks, including
the following:
* fire
* explosions
* blow-outs
* pipe failure
* casing collapse
* abnormally pressured formations, and
* environmental hazards such as
* oil spills,
* gas leaks,
* ruptures, and
* discharges of toxic gases.
The occurrence of any of those events could result in the following:
* substantial losses due to injury and loss of life,
* severe damage to and destruction of property, natural resources and
equipment,
* pollution and other environmental damage,
* clean-up responsibilities, and
* regulatory investigation and penalties and suspension of operations
We maintain general liability insurance coverage for our operations but
have not obtained insurance coverage for certain environmental hazards. The
occurrence of a significant unfavorable event not fully covered by insurance
will have a material adverse effect on our financial condition and results of
operations. Furthermore, we cannot predict whether insurance will continue to
be available at a reasonable cost or at all.
We face substantial governmental regulation and environmental risks.
Our business is subject to various laws and regulations which may be
changed from time to time in response to economic or political conditions.
Matters subject to regulation include the following:
* discharge permits for drilling operations,
* drilling bonds,
* reports concerning operations,
* the spacing of wells,
* unitization and pooling of properties,
* taxation, and
* environmental protection.
From time to time, regulatory agencies have imposed price controls and
limitations on production by restricting the rate of flow of oil and gas wells
below actual production capacity in order to conserve supplies of oil and gas.
We can issue significant amounts of stock without shareholder approval.
We may, under the Nasdaq SmallCap Market listing requirements, issue
without shareholder approval securities representing the present or potential
issuance of up to 20% of the number of shares of common stock outstanding
prior to the issuance of such securities. Any such issuances could be used as
a method of discouraging, delaying or preventing a change in control of us or
could significantly dilute our public ownership, which could adversely affect
the market value of our common stock. There can be no assurance that we will
not undertake to issue such shares if we deem it appropriate to do so.
We have not previously paid dividends on our common stock.
We have not previously paid any cash or other dividends on our common
stock and do not anticipate payment of any dividends for the foreseeable
future. We anticipate that any earnings would be retained by us to finance
our operations and future growth and expansion.
The price of our common stock could be volatile.
The trading prices of our common stock could be subject to wide
fluctuations in response to the following:
* quarterly variations in actual or anticipated results of our
operations,
* changes in analysts' earnings estimates,
* changes in securities analysts' earnings estimates,
* announcements of technological innovations by us or our competitors,
* general conditions in the oil and gas industry, or
* other factors.
Further, the trading volume of our stock currently is relatively small,
and the market for our stock may not be able to efficiently accommodate
significant trades on any given day. Consequently, sizable trades of our
common stock have in the past, and may in the future, cause volatility in the
market price of our common stock to a greater extent than in more actively
traded securities. These broad fluctuations may adversely affect the market
price of our common stock.
Our articles of incorporation eliminate our directors' liability.
Our Articles of Incorporation contain a provision eliminating our
directors' liability to us or our shareholders for monetary damages for a
breach of their fiduciary duty. However, a director's liability is not
eliminated in circumstances involving certain wrongful acts, such as the
breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of law. Our Articles of
Incorporation also obligate us to indemnify our directors and officers to the
fullest extent permitted under Colorado law. While we believe that these
provisions are very standard and necessary to assist us in attracting and
retaining qualified individuals to serve as directors, they could also serve
to insulate our directors against liability for actions which damage us or our
shareholders.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock by the selling security holders.
SELLING SECURITY HOLDERS
The following table shows for the selling security holders, the following
information:
* the number shares of common stock beneficially owned by them as of
May 12, 1999,
* the number of shares of common stock covered by this prospectus, and
* the number of shares of common stock to be retained after this
offering, if any.
<TABLE>
Number of Shares Number of Shares Percent
Of Common Stock Number of of Common Stock Of Class
Beneficially Shares of Beneficially Beneficially
Owned before the Common Stock Owned After the Owned After
Name Offering To be Sold Offering The Offering
<S> <C> <C> <C> <C>
Pembrooke
Holdings
Corporation 16,736 16,736 0 0
International
Publishing
Holding s.a. 416,979 140,886 276,093 5.7 %
</TABLE>
PLAN OF DISTRIBUTION
We are registering the shares of our common stock covered by this
prospectus.
As used in this prospectus, the selling security holder includes donees,
pledgees, transferees or other successors in interest who will hold the
selling security holders' shares after the date of this prospectus. We are
paying the costs, expenses and fees of registering the common stock, but the
selling security holders will pay any underwriting or brokerage commissions
and similar selling expenses relating to the sale of the shares of common
stock.
The selling security holders may sell our common stock at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, at negotiated prices or such other price as the selling security
holders determine from time to time. The selling security holders may sell
from time to time some or all of their common stock in one or more
transactions (which may involve block transactions):
* the Nasdaq SmallCap Market or on such other market on which the
common stock may from time to time be trading;
* in privately negotiated transactions;
* short sales;
* in ordinary brokers' transactions;
* in transactions involving cross or block trades or otherwise;
* through purchases by brokers, dealers or underwriters as principal
and resale by those purchasers for their own accounts under this
prospectus;
* through market makers or into an existing market for the common
stock;
* in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents;
* in transactions in involving the writing of options, swaps or other
derivatives; or
* in any combination of the selling options described in this
prospectus, or by any other legally available means.
The selling security holders may enter into hedging transactions with
broker-dealers who may engage in short sales of our common stock in the course
of hedging the positions they assume. The selling security holders also may
enter into option or other transactions with broker-dealers that require the
delivery by those broker-dealers of the common stock. Thereafter, the shares
may be resold under this prospectus.
The selling security holders shall have the sole and absolute discretion
not to accept any purchase offer or make any sale of shares if they deem the
purchase price to be unsatisfactory at any particular time. We cannot assure
you that all or any of the shares offered in this prospectus will be issued
to, or sold by, the selling security holders.
In their selling activities, the selling security holders will be subject
to applicable provisions of the Securities Exchange Act of 1934 and the
Securities Exchange Act's rules and regulations, including Regulation M, which
may limit the activity of the selling security holders and the timing of
purchases and sales of our common stock. Furthermore, under Regulation M,
persons engaged in a distribution of securities are prohibited form
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. The foregoing may affect the marketability of the shares of our
common stock. Any selling security holders who may be "affiliated purchasers"
of ours as defined in Regulation M, have been further advised that they must
coordinate their sales under this prospectus with each other and us for
purposes of Regulation M.
The selling security holders and any broker-dealers involved in the sale
or resale of our common stock may qualify as "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933. In addition, the broker-
dealers' commissions, discounts or concessions may qualify as underwriters'
compensation under the Securities Act. If any selling security holders or any
broker-dealer qualifies as an "underwriter," then they will be subject to the
prospectus delivery requirements of Section 153 of the Securities Act, which
may include delivery through the facilities of the NASD.
In conjunction with sales to or through brokers, dealers or agents, the
selling security holders may agree to indemnify them against liabilities
arising under the Securities Act. We know of no existing arrangements between
the selling security holders, any other shareholder, broker, dealer,
underwriter or agent relating to the sale or distribution of our common stock.
In addition, to selling its common stock under this prospectus, the
selling security holders may:
* Transfer their common stock in other ways not involving market makers
or established trading markets, including by gift, distribution, or
other transfer; or
* Sell their common stock under Rule 144 of the Securities Act, if the
transaction meets the requirements of Rule 144.
We will amend or supplement this prospectus if required under the
Securities Act.
LEGAL MATTERS
Ballard Spahr Andrews & Ingersoll, LLP, will pass upon the validity of
common stock offered by this prospectus.
EXPERTS
The financial statements of Greka Energy Corporation and Saba
Petroleum Company incorporated by reference in this prospectus to the extent
and for the periods indicated in their reports, have been audited by Arthur
Andersen LLP and Bateman & Co., P.C., and PricewaterhouseCoopers LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firms as experts in giving said reports. Reference is made
to said reports of Arthur Andersen LLP, each of which includes an explanatory
paragraph with respect to the uncertainty regarding Greka Energy
Corporation's ability to continue as a going concern as discussed in Note 1
to the financial statements.
The information incorporated by reference into this prospectus regarding
our total proved reserves of oil and gas was based on reports prepared by the
following independent engineers: Netherland, Sewell & Associates, Inc. The
information incorporated by reference into this prospectus regarding Saba's
total proved reserves of oil and gas was based on reports prepared by the
following independent engineers: Netherland, Sewell & Associates, Inc. and
Sproule Associates Limited. Our reserve estimates are incorporated by
reference into this prospectus in reliance upon the authority of said persons
as experts with respect to the matters covered by their reports and the giving
of their reports to us and Saba.
SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION
The Colorado Business Corporation Act provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in
connection with an action suit, or proceeding brought by reason of their
position as a director, employee, or agent. The person being indemnified must
have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation.
Our Articles of Incorporation obligate us to indemnify our directors and
officers to the fullest extent permitted under Colorado law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses of the offering, all of which are to be borne by
the Registrant, are as follows:
Total Registration Fee Under Securities Act of 1933 $ 323
Printing and Engraving 5,000*
Accounting Fees and Expenses 7,000*
Legal Fees and Expenses 15,000*
Blue Sky Fees and Expenses (including related legal fees) 1,000*
Transfer Agent Fees 2,000*
Miscellaneous 1,677*
____________
Total 32,000
============
*Estimated
Item 15. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation eliminate the personal
liability of directors to the Registrant or its shareholders for monetary
damages for breach of fiduciary duty to the extent permitted by Colorado law.
The Registrant's Articles of Incorporation and By-Laws provide that the
Registrant shall indemnify its officers and directors to the extent permitted
by Colorado law, which authorizes a corporation to indemnify directors,
officers, employees or agents of the corporation in non-derivative suits if
such party acted in good faith and in a manner such party reasonably believed
to be in or not opposed to the best interest of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The Colorado Business Corporation
Act further provides that indemnification shall be provided if the party in
question is successful on the merits or otherwise.
Item 16. Exhibits
The following Exhibits are filed as part of this Form S-3 Registration
Statement pursuant to Item 601 of Regulation S-B or incorporated by reference
to other filings:
Exhibit
Number Description
_________ ___________________________________________
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP concerning the
legality of the common stock offered hereby.**
23.1 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1 to this registration statement).**
23.2 Consent of Arthur Andersen LLP, independent public accountants.*
23.3 Consent of Bateman & Co., Inc., P.C., independent certified
public accountants.*
23.4 Consent of PricewaterhouseCoopers LLP, independent certified
public accountants.*
23.5 Consent of Netherland, Sewell & Associates, Inc.**
23.6 Consent of Sproule Associates Limited.**
____________________
* Filed herewith.
** Previously filed.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereto) that, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) to include any additional or changed material information on the
plan of distribution.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York on the 19 day of May 1999.
GREKA ENERGY CORPORATION
/s/ Randeep S. Grewal
By: ______________________________
Randeep S. Grewal, Chief Executive
Officer, and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
/s/ Randeep S. Grewal
___________________ Chairman of the Board of May 19, 1999
Randeep S. Grewal Directors and Chief
Executive Officer
(Principal Executive
Officer, Financial Officer
and Accounting Officer)
/s/ Dr. Jan F. Holtrop
___________________ Director May 19, 1999
Dr. Jan F. Holtrop
/s/ Dirk Van Keulen
___________________ Director May 19, 1999
Dirk Van Keulen
/s/ George G. Andrews
___________________ Director May 19, 1999
George G. Andrews
/s/ David Vaughan
___________________ Director May 19, 1999
David Vaughan
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
__________________________
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
GREKA ENERGY CORPORATION
(Name of Company as specified in charter)
GREKA ENERGY CORPORATION
FORM S-3 REGISTRATION STATEMENT
The following Exhibits are filed as part of the Registrant's Form S-3
Registration Statement pursuant to Item 601 of Regulation S-B.
Exhibit
Number Description
_______ ___________________________________________
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP concerning the
legality of the common stock offered hereby.**
23.1 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1 to this registration statement).**
23.2 Consent of Arthur Andersen LLP, independent public accountants.*
23.3 Consent of Bateman & Co., Inc., P.C., independent certified public
accountants.*
23.4 Consent of PricewaterhouseCoopers LLP, independent certified
public accountants.*
23.5 Consent of Netherland, Sewell & Associates, Inc.**
23.6 Consent of Sproule Associates Limited.**
____________________
* Filed herewith.
** Previously filed.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated April 15, 1999
on the financial statements of Greka Energy Inc. as of and for the year ended
December 31, 1998 and our report dated April 15, 1999 on the financial
statements of Saba Petroleum Company as of and for the year ended December 31,
1998, both included in GREKA Energy Inc.'s for the year ended December 31,
1998 and to all references to our Firm included in this registration statment.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
May 14, 1999
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Greka
Energy Corporation on Form S-3 (File No. 333-____________), and any amendment
thereto pursuant to Rule 462 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), of our report dated April 14, 1998, on our
audits of the consolidated financial statements of Greka Energy Corporation,
formerly identified as Petro Union, Inc. dba Horizontal Ventures, Inc., as of
December 31, 1997 and for each of the two years in the period ended
December 31, 1997. We also consent to the reference to our firm under the
caption "Experts" in this Registration Statement and any amendment thereto
pursuant to Rule 462 promulgated under the Securities Act.
BATEMAN & CO., INC. P.C.
Houston, Texas
May 15, 1999
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 (File No. 333-78673) of our report, which contains an
explanatory paragraph concerning the company's ability to continue as a
going concern, dated April 15, 1998 relating to the financial statements and
financial statement schedule, which appears in Saba Petroleum Company's
Annual Report on Form 10-K for the year ended December 31, 1997. We also
consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers
Los Angeles, California
May 19, 1999
