BENTON OIL & GAS CO, 424B2, 1997-01-13

BENTON OIL & GAS CO
424B2, 1997-01-13
CRUDE PETROLEUM & NATURAL GAS

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<PAGE> 1

424,608 Shares

BENTON OIL AND GAS COMPANY
COMMON STOCK

This Prospectus relates to the offering of an aggregate of 424,608 shares of
Common Stock (the "Shares"), $.01 par value, of Benton Oil and Gas Company (the
"Company"), offered for the account of certain stockholders of the Company (the
"Selling Stockholders"). An aggregate of 168,360 of the Shares are issuable by
the Company upon the exercise of certain outstanding common stock purchase
warrants (the "Warrants") issued to certain investors, brokers and advisors in
connection with various transactions described herein under "Description of
Warrants" and an aggregate of 246,500 of the Shares are issuable by the Company
upon the exercise of certain outstanding stock options (the "Options") issued to
certain consultants and employees of an affiliate of the Company in connection
with and as additional compensation for services rendered. See "Description of
Options." This Prospectus is to be used for the public resale of the Shares so
issued by the Selling Stockholders. The Company will receive an aggregate of
$3,630,035, assuming all Warrants and Options are exercised. In addition, this
Prospectus relates to an aggregate of 9,748 Shares being offered by Selling
Stockholders described herein who acquired such Shares upon the exercise of
Options and/or Warrants, as more fully described under "Description of Warrants"
and "Description of Options." The Company will not receive any proceeds from the
sale of the Shares offered by the Selling Stockholders. See "Use of Proceeds,"
"Selling Stockholders" and "Plan of Distribution."

The Shares may be sold from time to time by the Selling Stockholders, or by the
pledgees, transferees or other successors in interest. Such sales may be made on
The New York Stock Exchange, in the over-the-counter market, or otherwise at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The Shares may be sold by one or
more of the following: (a) block trades (which may include crosses) in which the
broker or dealer so engaged will attempt to sell the Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) exchange
transactions in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (e) secondary distributions. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers participating in such sales may receive
commissions, discounts or concessions from the Selling Stockholders or
purchasers for whom they may act as agent or to whom they sell as principal, or
both, in amounts to be negotiated immediately prior to the sale and which are
not expected to exceed those customary in the type of transactions involved.
Such brokers or dealers and any other participating brokers or dealers may be
deemed to be "underwriters' within the meaning of the Act in connection with
such sales, and any commissions, discounts, concessions or profits received by
them may be deemed to be underwriting compensation under the Act.

The Shares are being offered by the Selling Stockholders without any
underwriting discounts or commissions.

All fees and expenses of registration of the resale of the Shares, estimated
to be approximately $15,000, shall be borne by the Company. Normal commission
expenses and brokerage fees, as well as the fees of counsel to the Selling
Stockholders, and any applicable transfer taxes, are payable individually by the
Selling Stockholders.

<PAGE> 2

On January 10, 1997 the last sale price of the Company's Common Stock on
the Nasdaq Stock Market was $22.88 per share.

INVESTORS SHOULD CONSIDER THE MATTERS SET FORTH UNDER "RISK FACTORS,"
beginning on page 6.

----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------

The date of this Prospectus is January 10, 1997

<PAGE> 3

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company can be inspected and
copied at the Public Reference Room of the Commission, Room 1024, Judiciary
Plaza Building, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and 13th Floor, Seven World Trade Center, New York, New York.
Copies of this material may be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza Building, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such material can be
inspected at the offices of The New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.

The Company has filed with the Commission in Washington, D.C., a Registration
Statement on Form S-3 together with all amendments, exhibits, and schedules
thereto (the "Registration Statement") under the Act, with respect to the Shares
offered by this Prospectus. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Shares, reference is made to the
Registration Statement and to the exhibits and schedules incorporated therein by
reference or filed as a part thereof. Statements made in this Prospectus as to
the contents of any contract, agreement or document referred to are not
necessarily complete; with respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to the exhibit for a complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, heretofore filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Exchange Act, are hereby
incorporated by reference, except as superseded or modified herein: (i) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995, as amended on Form 10-K/A filed on June 14, 1996; (ii) the Company's
Current Report on Form 8-K filed March 27, 1996, (iii) the Company's Current
Report on Form 8-K filed January 12, 1996; (iv) the Company's Current Report on
Form 8-K filed January 8, 1996; (v) the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996; (vi) the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996; (vii) the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996; (viii) the
Company's Current Report on Form 8-K filed December 17,1996; and (ix) the
description of Common Stock contained in the Company's Registration Statements
and amendments filed pursuant to the Exchange Act on March 17, 1989, May 14,
1991 and May 15, 1992.

Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and shall be a part hereof from the date of filing of such
document. Any statement contained in the documents incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, on the
written or oral request of such person, a copy of any and all of the documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed to Benton Oil and Gas Company, 1145
Eugenia Place, Suite 200, Carpinteria, California 93013 (the principal executive
offices of the Company), telephone (805) 566-5600, Attn: Corporate Secretary.

3
<PAGE> 4

TABLE OF CONTENTS

PAGE

AVAILABLE INFORMATION......................................................3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................3

THE COMPANY................................................................5

RISK FACTORS...............................................................6

RECENT DEVELOPMENTS........................................................9

USE OF PROCEEDS...........................................................11

SELLING STOCKHOLDERS......................................................11

DESCRIPTION OF WARRANTS...................................................17

DESCRIPTION OF OPTIONS....................................................17

PLAN OF DISTRIBUTION......................................................18

LEGAL MATTERS.............................................................18

EXPERTS...................................................................18

GLOSSARY..................................................................19

No person has been authorized to give any information or make any
representations, other than those contained or incorporated by reference in this
Prospectus, in connection with the offering referred to herein and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or any Selling Stockholder. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy the securities
registered hereby in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained or incorporated
by reference herein is correct as of any time subsequent to the date hereof.

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<PAGE> 5

THE COMPANY

The Company is an independent energy company which has been engaged in the
development and production of oil and gas properties since 1989. Although
originally active only in the United States, the Company has developed
significant interests in Venezuela and Russia, and recently sold substantially
all of its remaining United States oil and gas interests. The Company's
operations are conducted principally through its 80%-owned Venezuelan
subsidiary, Benton-Vinccler, C.A. ("Benton-Vinccler"), which operates in the
South Monagas Unit in Venezuela, and its 34%-owned Russian joint venture,
GEOILBENT, which operates in the North Gubkinskoye Field in Siberia, Russia.

As of December 31, 1995, the Company had total assets of $214.8 million ($388.0
million at September 30, 1996), total estimated proved reserves of 96,212 MBOE,
and a standardized measure of discounted future net cash flow, before income
taxes, for total proved reserves of $372.3 million. For the year ended December
31, 1995 and the nine months ended September 30, 1996, the Company had total
revenues of $65.1 million and $115.7 million, respectively and net income of
$10.6 million and $18.9 million, respectively.

The Company has been successful in increasing reserves, production, revenues and
earnings during the last two years. From year-end 1993 through 1995, estimated
proved reserves increased from 42,785 MBOE to 96,212 MBOE, and net production
increased from a total of 519 MBOE in 1993 to 6,647 MBOE in 1995. As production
has increased over this period, average lifting costs per Bbl have declined from
$7.26 to $1.19 in Venezuela, and from $16.22 to $5.63 in Russia. Between 1993
and 1995, the Company's annual revenues increased from $7.5 million to $65.1
million.

The following table summarizes the Company's financial operating data, proved
reserves and production activity in Venezuela and Russia for each of the three
years ended December 31:

VENEZUELA(1) RUSSIA
------------------------------- ---------------------------------
Dollars in thousands 1993 1994 1995 1993 1994 1995(2)
---- ---- ---- ---- ---- -------

<S> <C> <C> <C> <C> <C> <C>
Oil and Gas Revenues $ 1,333 $21,472 $49,174 $ 324 $ 3,513 $ 6,016
Expenses(3) 1,394 8,806 17,876 558 3,670 4,276
------- ------- ------- ------- ------- -------
Results of Operations from Oil
and Gas Producing Activities $ (61) $12,666 $31,298 $ (234) $ (157) $ 1,740
======= ======= ======= ======= ======= =======
Proved Reserves (MBOE) 19,389 60,707 73,593 10,121 17,540 22,618
Average Daily Production (BOE) 440 6,902 14,949 77 806 1,345

<FN>
(1) Includes 100% of the reserve information, production activity and
financial data, without deduction for minority interest. All
Venezuelan reserves are attributable to an operating service agreement
between Benton-Vinccler and Lagoven, S.A. ("Lagoven") an affiliate of
the national oil company, Petroleos de Venezuela, S.A. ("PdVSA"),
under which all mineral rights are owned by the Government of
Venezuela.

(2) The financial information related to Russia and included in the 1995
presentation contains information for the nine months ended September
30, 1995, the end of the fiscal period for GEOILBENT.

(3) Expenses include lease operating costs and production taxes and depletion.
</TABLE>

The Company was incorporated in Delaware in September 1988. The principal
executive offices of the Company are located at 1145 Eugenia Place, Suite 200,
Carpinteria, California 93013, and its telephone number at that address is (805)
566-5600.

<PAGE> 6

RISK FACTORS

In addition to the other information contained in this Prospectus, investors
should carefully consider the following factors in connection with an investment
in the Shares:

Risk from Substantial Concentration of Operations

The Company's cash flow-generating operations are substantially concentrated in
Venezuela. For 1995, the Company derived approximately 78% of its consolidated
oil and gas revenues and approximately 76% of its proved reserves from its
Venezuelan operations. If the Venezuelan operations are adversely effected, the
Company, due to its concentration in and reliance on the Venezuelan operations,
will experience an adverse impact on its financial condition and operations.
There are significant operating and economic risks associated with conducting
business in Venezuela.

Political and Economic Risks of International Operations--General

Substantially all of the Company's oil and gas producing operations and
non-financial assets are in Venezuela and Russia and all operating income is
expected to be generated from these countries (absent any new investments). As a
result, the Company is subject to certain political, economic and other
uncertainties including risks of war, civil disturbance, expropriation,
nationalization, renegotiation or modification of existing contracts, taxation
policies, foreign exchange restrictions, international monetary fluctuations and
other hazards arising out of foreign governmental sovereignty over the Company's
operations.

Political and Economic Risks of International Operations--Venezuela

The Company began to operate in Venezuela in 1992. For 1995, the Company derived
approximately 78% of its consolidated oil and gas revenues and approximately 76%
of its proved reserves from its Venezuelan operations. The petroleum industry in
Venezuela is highly regulated by the government with respect to such matters as
maximum daily production, methods of production and environmental matters, both
directly and indirectly through PdVSA. In addition, the timing and extent of the
Company's development activities are subject to the approval of Lagoven and the
Ministry of Energy and Mines. There can be no assurance that the government or
PdVSA will not impose significant new regulations regarding the petroleum
industry generally or that the development activities proposed by
Benton-Vinccler will receive the necessary approval. The Company also expects to
increase its exposure to Venezuela through the continued investment in
Benton-Vinccler and the Delta Centro consortium. While Benton-Vinccler has never
had a material dispute or payment interruption with Lagoven, PdVSA or the
Venezuelan government, the country of Venezuela has experienced significant
political and economic instability, high inflation, and shortages of foreign
currency.

Political and Economic Situation. In May 1993, the Venezuelan Senate voted to
authorize the impeachment of President Carlos Andres Perez. Subsequently, Rafael
Caldera was elected president and took office in February 1994. Upon assuming
the presidency, President Caldera was immediately faced with a solvency crisis
in the banking system which necessitated a government takeover of nine financial
institutions, including Banco Latino, one of the largest Venezuelan banks.
Consequently, the bolivar devalued sharply, inflation rose and gross domestic
product ("GDP") contracted. Though Venezuela experienced positive GDP growth for
1995, it was the first increase in three years, and the 1995 GDP figures did not
reflect the full effects of a currency devaluation at year end. On April 22,
1996, the Venezuelan government announced the lifting of controls on foreign
exchange transactions, having announced the lifting of controls on interest
rates one week earlier. The Venezuelan government also announced a $1.4 billion
preliminary loan accord with the International Monetary Fund. Although these
actions have led to the devaluation of the bolivar and a rise in interest rates
and are likely to lead to temporary increases in inflation, they are generally
viewed as likely to have a positive effect in the long term. There can be no
assurance, however, that such actions will be successful in resolving
Venezuela's economic difficulties.

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<PAGE> 7

Inflation and Currency Controls. Venezuela has experienced high levels of
inflation over the past decade. The consumer price inflation rate was
approximately 38% for calendar year 1993, 61% for 1994, and 60% for 1995. In
addition to increasing the Company's bolivar-denominated expenses with respect
to its Venezuelan operations, these high rates of inflation led the Venezuelan
government to devalue the bolivar by 41% on December 11, 1995. In July 1994, the
Venezuelan government imposed a program of currency exchange controls that was
lifted in April 1996. Pursuant to its agreement with Lagoven, Benton-Vinccler
receives its payments from Lagoven in U.S. dollars deposited directly into a
U.S. bank account. Although the lifting of currency controls is expected to lead
to increased economic stability in the long term, it is likely to lead to a
temporary rise in inflation in Venezuela.

Oil Production and OPEC. News reports speculate that Venezuela is currently
producing oil in excess of the output quota established by OPEC. While Venezuela
remains a member of OPEC and has yet to face any sanctions, there is a risk that
pressure from OPEC could cause Venezuela to cut oil production voluntarily to
comply with the established quotas or take action that could depress world oil
prices. Such compliance could require a significant reduction in Venezuelan oil
production and could have a material adverse impact on Benton-Vinccler.

Political and Economic Risks of International Operations--Russia

Since the dissolution of the Soviet Union in 1991, Russia has experienced
periods of political unrest and instability, high inflation, wide currency
exchange rate swings, contractions in GDP, volatile tariff and taxation
policies, and the lack of a clear and stable legal and administrative
environment governing oil and gas licensing and operations. There can be no
assurance that any of these factors in addition to other factors may not persist
or worsen and therefore negatively affect the Company's operations in Russia.

In addition to the factors discussed above, Russia has established an export
tariff on all oil produced in and exported from Russia which, as imposed, has
the effect of reducing the potential profits to the Company and could render its
proved reserves attributable to Russia uneconomic. In July 1996, oil export
tariffs were terminated in accordance with an IMF loan condition. However,
Russia has proposed that such tariffs be replaced by an excise, pipeline or
other tax on producers which may equal or exceed the export tariff, but it is
unclear how such other tax rates and regimes will be set and administered. The
legislative and regulatory environment in Russia continues to be subject to
frequent change and uncertainty.

The Company believes it will not receive any significant distributions from
GEOILBENT for several years because substantially all of the money received by
GEOILBENT from the North Gubkinskoye Field will be reinvested to fund
development activities.

Properties Under Development

As of December 31, 1995, approximately 65% of the Company's proved reserves were
undeveloped and required development activities, consisting primarily of
development drilling and construction of production facilities. As a result, the
Company will require substantial capital expenditures to develop all of its
proved reserves. At December 31, 1995, the anticipated future development costs
for proved reserves in Venezuela and Russia were $76.4 million and $36.7
million, respectively. The Company does not currently have the capital to
develop all of these reserves, and if such capital does not otherwise become
available, the Company will either enter into joint ventures to develop the
projects, which will result in the Company retaining a smaller interest, or not
develop the reserves. There can be no certainty regarding the commercial
feasibility of developing these reserves, the availability of financing, or the
timing or costs associated therewith. If such capital is available, there can be
no assurance that the Company will be able to develop and produce sufficient
reserves to recover the costs expended and operate the wells profitably.

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<PAGE> 8

Engineers' Estimates of Reserves and Future Net Revenue

Estimates of economically recoverable oil and gas reserves and of future net
cash flows are based upon a number of variable factors and assumptions, all of
which are to some degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, taxes, and development and
operating expenditures may not occur as estimated. Future results of operations
of the Company will depend upon its ability to develop, produce and sell its oil
and gas reserves. The reserve data incorporated by reference herein are
estimates only and are subject to many uncertainties. Actual quantities of oil
and gas may differ considerably from the amounts set forth herein. In addition,
different reserve engineers may make different estimates of reserve quantities
and cash flows based upon the same available data.

Development of Additional Reserves

The Company's future success may also depend upon its ability to find or acquire
additional oil and gas reserves that are economically recoverable. Except to the
extent that the Company conducts successful exploration or development
activities or acquires properties containing proved reserves, the proved
reserves of the Company will generally decline as reserves are produced. There
can be no assurance that the Company will be able to discover additional
commercial quantities of oil and gas, or that the Company will be able to
continue to acquire interests in under-developed oil and gas fields and enhance
production and reserves by drilling replacement wells and drilling development
wells, or that the Company will have continuing success drilling productive
wells and acquiring under-developed properties at low finding costs.

Retention and Attraction of Key Personnel

The Company depends to a large extent on the abilities and continued
participation of certain key employees, the loss of whose services could have a
material adverse effect on the Company's business. In an effort to minimize the
risk, the Company has entered into employment agreements with certain key
employees. There can be no assurance that the Company will be able to attract
and retain such personnel on acceptable terms and the failure to do so could
have a material adverse effect on the Company.

Anti-Takeover Provisions

The Delaware General Corporation Law contains certain provisions which may delay
or prevent an attempt by a third party to acquire control of the Company. The
Company has also adopted a Stockholders' Rights Plan designed to impede a
hostile attempt to acquire the Company. In addition, the severance provisions of
employment agreements with certain members of management could impede an
attempted change of control of the Company.

Ability to Issue Preferred Stock

The Company may issue Preferred Stock in the future without stockholder approval
and upon such terms and conditions, and having such rights, privileges and
preferences, as the Board of Directors may determine. The rights of the holders
of Common Stock will be subject and subordinate to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of Preferred Stock could have the effect of making
it more difficult for a third party to acquire, or discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company. The
Company has no outstanding Preferred Stock and no present plans to issue any
shares of Preferred Stock.

RISKS RELATED TO THE OIL AND GAS INDUSTRY

Risk of Oil and Gas Operations

The Company's operations are subject to all of the risks normally incident to
the operation and development of oil and gas properties and the drilling of oil
and gas wells, including encountering unexpected formations or pressures,
blowouts, cratering and fires, and, in horizontal wellbores, the increased risk
of mechanical failure and

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<PAGE> 9

collapsed holes, the occurrence of any of which could result in personal
injuries, loss of life, environmental damage and other damage to the properties
of the Company or others. In addition, because the Company acquires interests in
under-developed oil and gas fields that have been operated by others for many
years, the Company may be liable for any damage or pollution caused by any prior
operations of such oil and gas fields. In accordance with customary industry
practice, the Company is not fully insured against these risks, nor are all such
risks insurable. Accordingly, there can be no assurance that such insurance as
the Company does maintain will be adequate to cover any losses or exposure for
liability.

Current Oil and Gas Industry Conditions

Historically, the markets for oil and natural gas have been volatile and are
likely to continue to be volatile in the future. Prices for oil and natural gas
are subject to wide fluctuation in response to relatively minor changes in
supply of and demand for oil and natural gas, market uncertainty and a variety
of additional factors that are beyond the control of the Company. These factors
include political conditions in the Middle East, the foreign supply of oil and
natural gas, the price of foreign imports, the level of consumer product demand,
weather conditions, domestic and foreign government regulations, the price and
availability of alternative fuels and overall economic conditions. Lower oil
prices also may reduce the amount of the Company's oil that is economic to
produce. In addition, the marketability of the Company's production depends upon
the availability and capacity of gathering systems and pipelines.

Government Regulation; Environmental Risks

The Company's business is regulated by certain federal, state, local and foreign
laws and regulations relating to the development, production, marketing and
transmission of oil and gas, as well as environmental and safety matters. There
can be no assurance that laws and regulations enacted in the future will not
adversely affect the Company's exploration for, or the production and marketing
of, oil and gas.

Oil and gas operations are subject to extensive foreign, federal, state and
local laws regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment. Numerous governmental
departments issue rules and regulations to implement and enforce such laws which
are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. The regulatory burden on the oil and gas
industry increases its cost of doing business and consequently affects its
profitability. These laws, rules and regulations affect the operations of the
Company. Compliance with environmental requirements generally could have a
material adverse effect upon the capital expenditures, earnings or competitive
position of the Company.

Competition

The oil and gas exploration and production business is highly competitive. A
large number of companies and individuals engage in the drilling for oil and
gas, and there is a high degree of competition for desirable oil and gas
properties suitable for drilling and for materials and third-party services
essential for their exploration and development. Many of the Company's
competitors have greater financial and other resources than does the Company.

RECENT DEVELOPMENTS

On September 20, 1996, the Company signed an agreement with Crestone Energy
Corporation ("Crestone"), a privately held corporation headquartered in Denver,
Colorado, which provides for the acquisition of Crestone by the Company in a
stock transaction. If the merger is approved by the Crestone stockholders, the
Company will issue one share of its common stock for each seven outstanding
shares of Crestone common stock which will result in the issuance of
approximately 735,700 shares of the Company's common stock. Upon consummation,
approximately 28.4 million shares of the Company's common stock will be
outstanding after such issuance.

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<PAGE> 10

Provided that the merger is approved by Crestone's stockholders, the Company
anticipates that the transaction will be completed during the fourth quarter of
1996. There can be no assurance that the transaction will be consummated.

Crestone Energy Corporation's primary asset is a large undeveloped acreage
position in the South China Sea, under a Petroleum Contract with the China
National Offshore Oil Corporation (CNOOC) for an area known as Wan'an Bei,
WAB-21. The WAB-21 Contract covers approximately six million acres, with an
option for another one million acres under certain circumstances, and lies
within an area which is the subject of a territorial dispute between The
People's Republic of China and Vietnam. Vietnam has also executed an agreement
on a portion of the same offshore acreage with Conoco, a unit of DuPont
Corporation. The territorial dispute has existed for many years, and there has
been limited exploration and no development activity in the area under dispute.
It is uncertain when or how this dispute will be resolved, and under what terms
the various countries and parties to the agreements may participate in the
resolution, although certain proposed economic solutions currently under
discussion would result in Crestone's interest being reduced.

The WAB-21 Contract requires certain seismic survey activities to occur by May
1997. If such activities are not completed, the contract is subject to
cancellation. Because of the territorial dispute, no such activities have
occurred by Crestone and may not occur by May 1997. CNOOC has indicated in
writing a willingness to extend the seismic operation deadline for two years
because of the lack of resolution of the territorial dispute and has furnished
Crestone a letter wherein CNOOC has extended such deadline for an additional
period through June 1, 1999. There can be no assurance that the dispute will be
resolved within the period of this or any further extension. Additionally, the
WAB-21 Contract may be in a state of technical default because Crestone has not
registered to do business in China, and there has been no written waiver of such
default, although CNOOC has acknowledged that such a waiver is necessary.

Exploration and development of the area will require substantial capital
expenditures which Benton cannot provide from its cash flow from current
operations. Benton expects that it will be necessary to raise additional funds
from joint ventures or the sale of additional debt or equity or other
arrangements which may reduce its interest in the WAB-21 Contract. There can be
no assurance that such joint ventures can be formed or such funds can be raised
or such other arrangements made on terms acceptable to Benton.

There have been limited exploration activities in the WAB-21 Contract area.
There can be no assurance that oil or natural gas can be commercially produced
from the area. Natural gas is in plentiful supply in the region and currently
there is no ready market for additional natural gas supplies. Crestone will be a
wholly-owned subsidiary of the Company and will continue as the operator and
contractor of WAB-21.

<PAGE> 11

USE OF PROCEEDS

Assuming all of the Warrants and Options are exercised, the Company will receive
an aggregate of $3,630,035 which it will use for general working capital
purposes. The Company will receive no proceeds from the resale of Common Stock
by the Selling Stockholders.

SELLING STOCKHOLDERS

The following table sets forth information as of November 27, 1996 with respect
to the beneficial ownership of Common Stock by the Selling Stockholders:

- ------------------------------------------------- ------------------------ ------------------ ----------------- -----------------
NAME OF SELLING SHARES OF COMMON SHARES TO SHARES OF PERCENTAGE OF
STOCKHOLDER STOCK OWNED PRIOR BE SOLD PURSUANT COMMON STOCK TO SHARES TO BE
TO OFFERING HERETO BE OWNED AFTER OWNED AFTER
OFFERING OFFERING
- ------------------------------------------------- ------------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Alfred Albiston 316(1) 316 0 *
Jollie N. Allen 475(2) 475 0 *
Richard M. Allen 158(3) 158 0 *
Harold E. Anderson 3,000(4) 3,000 0 *
Alfred Baalas 5,000(5) 2,000 3,000 *
George W. Baird 919(6) 517 402 *
Frederick G. Bauling 406(1) 316 90 *
Daniel B. Bias 203(3) 158 45 *
Glenn L. Beichley 203(3) 158 45 *
James H. Blake 17,047(5) 2,000 15,047 *
Nicholas G. Blurton-Jones 406 316 90 *
Andrew P. Bodnar 2,390(7) 2,390 0 *
James and Margot Bourque 3,237(5) 2,000 1,237 *
Edward R. Bower, TTEE Bower Family Trust 3,658(8) 2,848 810 *
Steve and Betty Bordner 406(1) 316 90 *
Paul Brinkman 2,066(9) 1,796 270 *
Eugene B. Brownell, TTEE 316(1) 316 0 *
Penelope Brownell 316(1) 316 0 *
Steven L. Burks 2,230(10) 2,230 0 *
Rob Burns 393(11) 393 0 *
James C. Cade 2,336(9) 1,796 540 *
Peter J. and Donna J. Cantelon 950 950 0 *
Casserly, Janice and Olivas, Richard, TTEEs 4,000(12) 4,000 0 *
Cavlogix 750(13) 750 0 *
James R. Chadwick 17,000(5) 2,000 15,000 *
Frances A. Chapman 6,000(19) 1,000 5,000 *
Juan Francisco Clerico 100,000(14) 100,000 0 *
Corporate Securities Group 1,586(15) 1,586 0 *
Crowell Weedon & Co. 6,475(16) 247 6,228 *
Thomas Timothy Cullum 2,231(17) 2,231 0 *
Cumberland Associates 505,000(18) 5,000 500,000 *
Haig Davidian 105,000(46) 5,000 100,000 *
Jerry P. Davidian 22,500(52) 20,000 2,500 *
Marc H. Davidian 25,000(52) 20,000 5,000 *
</TABLE>

11
<PAGE> 12
<TABLE>
<CAPTION>

- ------------------------------------------------- ------------------------ ------------------ ----------------- -----------------
NAME OF SELLING SHARES OF COMMON SHARES TO SHARES OF PERCENTAGE OF
STOCKHOLDER STOCK OWNED PRIOR BE SOLD PURSUANT COMMON STOCK TO SHARES TO BE
TO OFFERING HERETO BE OWNED AFTER OWNED AFTER
OFFERING OFFERING
- ------------------------------------------------- ------------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C>
Mahendra Defonseka 1,162(19) 1,000 162 *
Vassily Dobrynin 3,000(20) 3,000 0 *
Sam Dote 475(2) 475 0 *
David Dowgialo 17,932(21) 632 17,300 *
Robert E. Duncan, TTEE Duncan Family 70,664(22) 4,230 66,434 *
Trust
Donald R. and Margaret A. Durling 2,000(5) 2,000 0 *
Marital Trust Part B of the L.S. & V.S. Eaton 66,044(22) 4,230 61,814 *
Rev. Trust
Karl T. and Helen J. Edwards 610(2) 475 135 *
Lawrence and Lucille Elsbernd 655 155 500 *
Marlyn N. Ely 950(23) 950 0 *
Joe B. Fields, TTEE Fields Family Trust 34,856(22) 4,230 30,626 *
First Associated Securities 965(24) 965 0 *
Ronald E. Foltz 1,500(25) 1,500 0 *
Joan Forester 1,000(19) 1,000 0 *
Frank B. Foster 610(2) 475 135 *
Elmer and Nancy Fox, TTEEs 1,000(19) 1,000 0 *
Fox & Company 500(29) 500 0 *
GBS Financial Corp. 242(26) 242 0 *
Leon L. Gean 406(1) 316 90 *
Cyma E. Gillilan 406(1) 316 90 *
Goldman, Sachs & Co. 3,975(27) 3,975 0 *
Hamill - Wheaton Partners 2,355(28) 2,285 70 *
Edward Hafer 1,500(25) 1,500 0 *
Paul H. Hauge 500(29) 500 0 *
Richard E. Haymond 406(1) 316 90 *
John V. Helmann 2,004(30) 2,004 0 *
Gerald Hendricks 4,000(19) 1,000 3,000 *
Tony and Karen Hernandez 2,500(31) 2,500 0 *
Charles E. Hicks 316(1) 316 0 *
George T.E. Hicks 1,500 1,500 0 *
Darol Hoffman 61,230(22) 4,230 57,000 *
Stephen L. Hoog, LTC 1,900(25) 1,500 400 *
Helen Hosler 158(3) 158 0 *
John T. Huey 1,000(19) 1,000 0 *
George L. and Peggy W. Hunt 2,562(19) 1,000 1,562 *
David Davidson, TTEE Jendresen Trust "B" 13,632(19) 1,000 12,632 *
Clifford and Alva Johnson, TTEEs 4,230(22) 4,230 0 *
Gerald and Betty Johnson, TTEEs 1,593(32) 1,558 35 *
Kavanaugh Financial 308(33) 308 0 *
Keane Securities Co., Inc. 1,800(34) 1,800 0 *
Kingsley & Co. 50(35) 50 0 *
Morton Kirchenbaum 2,500(31) 2,500 0 *
Pete and Marilyn Koonce 9,724(36) 2,174 7,550 *
Evgeny Kramar 3,000(20) 3,000 0 *
William Kronen 608(37) 608 0 *
Iosif Levinson 10,000(38) 10,000 0 *
</TABLE>

12
<PAGE> 13
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------ ------------------ ----------------- -----------------
NAME OF SELLING SHARES OF COMMON SHARES TO SHARES OF PERCENTAGE OF
STOCKHOLDER STOCK OWNED PRIOR BE SOLD PURSUANT COMMON STOCK TO SHARES TO BE
TO OFFERING HERETO BE OWNED AFTER OWNED AFTER
OFFERING OFFERING
- ------------------------------------------------- ------------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C>
Roger C. Lind 633(39) 633 0 *
Linsco/Private Ledger Corp. 3,047(40) 1,069 1,978 *
Steven A. Lopate 2,000 2,000 0 *
Jane L. McKee 316(1) 316 0 *
Laurel C. and Martha M. Meade 2,111(41) 2,111 0 *
James A. Meisel 813(39) 633 180 *
William Morrill 467(1) 316 151 *
Kenneth Press Nemzer and Marilyn Levin 2,500(31) 2,500 0 *
Nemzer
Paul Nicholson 1,692(42) 1,692 0 *
Boris Nikulin 3,000(20) 3,000 0 *
Robert and Rebecca Oehlman 1,250(19) 1,000 250 *
Irving Oschin 3,166(43) 3,166 0 *
John O. Parsons 406(1) 316 90 *
Peacock, Hislop, Staley and Given, Inc. 5,237(44) 5,183 54 *
Gordon W. and Myra L. Peterson 4,862(19) 1,000 3,862 *
Mona K. Pinne 950(23) 950 0 *
Alexandr Porsov 47,500(45) 47,500 0 *
Orlin John Rajala 500(29) 500 0 *
Guy G. Reine 2,000(5) 2,000 0 *
Robert S. Rich 475(2) 475 0 *
Leonard Ross 28,100(52)(47) 25,580 2,520 *
Morrison Rutherford, M.D. 316 316 0 *
San Diego Pinecone, Ltd. 301 301 0 *
Richard Sandow 2,231(17) 2,231 0 *
Jeffrey Barnes, TTEE Scheidts Trust 4,007(48) 4,007 0 *
John J. Sexton 389(49) 389 0 *
Harold S. Shanbaum 67(50) 67 0 *
Dimitri Sharov 15,000(51) 15,000 0 *
Signal Securities, Inc. 1,398 1,398 0 *
Kenneth S. Souza 2,880 (53) 1,651 1,229 *
John R. Stahr, TTEE 10,696(54) 7,230 3,466 *
D. Stuart Steele, M.D. and Richard Steele, 2,000(5) 2,000 0 *
TTEES
Lanny D. Stout 2,715 2,715 0 *
Elizabeth Suskind 3,643(55) 35 3,608 *
Fred S. and Mary W. Taylor 2,000(5) 2,000 0 *
Titan Value Equities Group 4,689(56) 304 4,385 *
Toluca Pacific Securities 335(57) 335 0 *
Rene Tornare 1,500(25) 1,500 0 *
U.S. Securities Clearing Corp. 232(58) 232 0 *
Vinccler, C.A. 208,000(59) 8,000 200,000 *
Abraham G. and Juliana G. van den Broek 1,266(60) 1,266 0 *
H.G. and B.E. von Dallwitz 4,364(23) 950 3,414 *
William R. Wagner 203(3) 158 45 *
David Wang 203(3) 158 45 *
John Weil 200(61) 47 153 *
Martin J. Welch 633(39) 633 0 *
</TABLE>

13
<PAGE> 14

<FN>
* Less than 1%

(1) Includes 316 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(2) Includes 475 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(3) Includes 158 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(4) Includes 3,000 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(5) Includes 2,000 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(6) Includes 517 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(7) Includes 2,390 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(8) Includes 2,848 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(9) Includes 1,796 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(10) Includes 2,230 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(11) Includes 393 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(12) Includes 4,000 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(13) Includes 750 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(14) Includes 100,000 shares subject to options which are currently exercisable or exercisable within 60 days of the date
hereof.

(15) Includes 1,586 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(16) Includes 150 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(17) Includes 2,231 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(18) Includes 5,000 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(19) Includes 1,000 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(20) Includes 3,000 shares subject to options which are currently exercisable or exercisable within 60 days of the date hereof.

(21) Includes 632 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(22) Includes 4, 230 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.
</TABLE>

<PAGE> 15

<TABLE>
<S> <C>
(23) Includes 950 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(24) Includes 965 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(25) Includes 1,500 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(26) Includes 242 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(27) Includes 3,975 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(28) Includes 2,285 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(29) Includes 500 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(30) Includes 2,004 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(31) Includes 2, 500 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(32) Includes 1,558 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(33) Includes 308 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(34) Includes 1,800 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(35) Includes 50 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(36) Includes 2,174 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(37) Includes 608 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(38) Includes 10,000 shares subject to options which are currently exercisable or exercisable within 60 days of the date
hereof.

(39) Includes 633 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(40) Includes 1,069 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(41) Includes 2,111 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(42) Includes 1,692 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(43) Includes 3,166 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(44) Includes 5,183 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(45) Includes 47,500 shares subject to options which are currently exercisable or exercisable within 60 days of the date
hereof.

(46) Includes 5,000 shares subject to options which are currently exercisable or exercisable within 60 days of the date hereof.

(47) Includes 5,580 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(48) Includes 4,007 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(49) Includes 389 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.
</TABLE>

<PAGE> 16

<S> <C>
(50) Includes 67 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(51) Includes 15,000 shares subject to options which are currently exercisable or exercisable within 60 days of the date
hereof.

(52) Includes 20,000 shares subject to options which are currently exercisable or exercisable within 60 days of the date
hereof.

(53) Includes 1,651 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(54) Includes 7,230 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(55) Includes 35 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(56) Includes 304 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(57) Includes 335 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(58) Includes 232 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(59) Includes 8,000 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(60) Includes 1,266 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(61) Includes 47 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date hereof.

(62) Includes 1,663 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.

(63) Includes 2,300 shares subject to warrants which are currently exercisable or exercisable within 60 days of the date
hereof.
</TABLE>

16
<PAGE> 17

DESCRIPTION OF WARRANTS

Of the Shares offered hereby, 3,511 shares were issued upon exercise of Warrants
and 24,798 shares will be issued upon the exercise of Warrants which were issued
to brokers as additional compensation in connection with an offering in January
1992. The Company issued Warrants to purchase an aggregate of 29,841 shares of
Common Stock, with an exercise price of $12.03 per share. These Warrants were
not exercisable until one year following the date of issuance and expire January
3, 1997.

Of the Shares offered hereby, 33,734 shares are issuable upon the exercise of
Warrants which were issued to investors who participated in the Chalkley
prospect. The Company issued Warrants to purchase an aggregate of 33,734 shares
of Common Stock in February 1992 with an exercise price of $15.19 per share.
These Warrants expire February 28, 1997.

Of the Shares offered hereby, 3,384 shares are issuable upon the exercise of
Warrants which were issued to brokers who participated in the Chalkley prospect
selling effort. The Company issued Warrants to purchase an aggregate of 3,384
shares of Common Stock in February 1992, with an exercise price of $9.00 per
share. These Warrants expire February 28, 1997.

Of the Shares offered hereby, 1,737 shares were issued upon exercise of Warrants
and 21,044 shares will be issued upon the exercise of Warrants which were issued
to certain persons in connection with the acquisition of property. The Company
issued Warrants to purchase an aggregate of 24,998 shares of its Common Stock in
February 1992, with an exercise price of $9.00 per share. These Warrants expire
February 12, 1997.

Of the Shares offered hereby, 2,000 shares were issued upon exercise of Warrants
and 47,500 shares will be issued upon the exercise of Warrants which were issued
to investors in the Benton Oil & Gas 1989-3 Drilling Program and the Benton Oil
& Gas 1990-1 Drilling Program. These Warrants were issued to investors in these
partnerships upon dissolution of such partnerships in October 1992. The Company
issued Warrants to purchase an aggregate of 530,258 shares of the Company's
Common Stock with an exercise price of $10.00 per share. The Warrants were not
exercisable until October 1993 and expire October 30, 1997.

Of the Shares offered hereby, 8,000 shares will be issuable upon exercise of
Warrants which were issued to a Company consultant in connection with the
Venezuelan operations in July 1994. The Company issued Warrants to purchase an
aggregate of 150,000 shares of its Common Stock at an exercise price of $7.50
per share. These Warrants expire on July 15, 2004.

Of the Shares offered hereby, 1,000 shares were issued upon the exercise of
Warrants and 29,900 shares will be issued upon the exercise of Warrants which
were issued to brokers as additional compensation in connection with the 8%
Debenture Offering in May 1992. The Company issued Warrants to purchase an
aggregate of 31,400 shares of Common Stock, with an exercise price of $10.297
per share. These Warrants were not exercisable until one year following the date
of issuance and expire April 22, 1997.

DESCRIPTION OF OPTIONS

Of the Shares offered hereby, 246,500 shares will be issued upon the exercise of
certain Options granted by the Company. The Company has granted Options to six
individuals in consideration of services rendered in connection with the
Company's Russian operations and to certain consultants of the Company (certain
of these Options were subsequently transferred). The Options vest pursuant to a
vesting schedule set forth in the stock option agreements. On the date hereof,
all Options granted to these advisors are exercisable at a price ranging from
$7.875 per share to $10.875 per share. The Options expire beginning January 2002
through September 2005.

17
<PAGE> 18

Of the Shares offered hereby, 1,500 shares were issued in connection with the
exercise of Options issued to an advisor of the Company in July 1992. These
Options were exercisable at a price of $7.30 per share.

PLAN OF DISTRIBUTION

All fees and expenses of registration of the Shares, estimated to be
approximately $15,000, shall be borne by the Company. Normal commission expenses
and brokerage fees, as well as the fees of counsel to the Selling Stockholders,
and any applicable transfer taxes, are payable individually by the Selling
Stockholders.

There is no assurances that the Selling Stockholders will sell any or all of the
Shares offered hereby. The Company has agreed to maintain the effectiveness of
the Registration Statement of which this Prospectus is a part until the earlier
of the date on which all Shares have been sold by the Selling Stockholders, or a
period of not less than two years from the date hereof.

LEGAL MATTERS

The legality of the securities offered hereby is being passed upon by Emens,
Kegler, Brown, Hill and Ritter Co., L.P.A., Columbus, Ohio.

EXPERTS

The financial statements incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.

The information appearing herein or incorporated herein with respect to proved
oil and gas reserves of the Company at December 31, 1994 and 1995, to the extent
stated herein, was estimated by the Company and audited by Huddleston & Co.,
Inc., independent petroleum engineers, and is included herein on the authority
of such firm as experts in petroleum engineering.

18
<PAGE> 19

GLOSSARY

When the following terms are used in the text they have the meanings indicated.

MCF. "Mcf" means thousand cubic feet. "MMcf" means million cubic feet. "Bcf"
means billion cubic feet. "Tcf" means trillion cubic feet.

BBL. "Bbl" means barrel. "MBbl" means thousand barrels. "MMBbl" means million
barrels. "BBbl" means billion barrels.

BOE. "BOE" means barrels of oil equivalent, which are determined using the ratio
of one barrel of crude oil, condensate or natural gas liquids to six Mcf of
natural gas so that six Mcf of natural gas is referred to as one barrel of oil
equivalent or "BOE." "MBOE" means thousands of barrels of oil equivalent.
"MMBOE" means millions of barrels of oil equivalent.

CAPITAL EXPENDITURES. "Capital Expenditures" means costs associated with
exploratory and development drilling (including exploratory dry holes);
leasehold acquisitions; seismic data acquisitions; geological, geophysical and
land-related overhead expenditures; delay rentals; producing property
acquisitions; and other miscellaneous capital expenditures.

COMPLETION COSTS. "Completion Costs" means, as to any well, all those costs
incurred after the decision to complete the well as a producing well. Generally,
these costs include all costs, liabilities and expenses, whether tangible or
intangible, necessary to complete a well and bring it into production, including
installation of service equipment, tanks, and other materials necessary to
enable the well to deliver production.

DEVELOPMENT WELL. A "Development Well" is a well drilled as an additional well
to the same reservoir as other producing wells on a lease, or drilled on an
offset lease not more than one location away from a well producing from the same
reservoir.

EXPLORATORY WELL. An "Exploratory Well" is a well drilled in search of a new and
as yet undiscovered pool of oil or gas, or to extend the limits of a field under
development.

FINDING COST. "Finding Cost," expressed in dollars per BOE, is calculated by
dividing the amount of total capital expenditures incurred related to
acquisitions, exploration and development costs (reduced by proceeds from any
sale of oil and gas properties) by the amount of total net reserves added or
reduced as a result of property acquisitions and sales, drilling activities and
reserve revisions during the same period.

FUTURE DEVELOPMENT COST. "Future Development Cost" of proved non-producing
reserves, expressed in dollars per BOE, is calculated by dividing the amount of
future capital expenditures related to development properties by the amount of
total proved non-producing reserves associated with such activities.

GROSS ACRES OR WELLS "Gross Acres or Wells" are the total acres or wells, as the
case may be, in which an entity has an interest, either directly or through an
affiliate.

LIFTING COSTS. "Lifting Costs" are the expenses of lifting oil from a producing
formation to the surface, consisting of the costs incurred to operate and
maintain wells and related equipment and facilities, including labor cots,
repair and maintenance, supplies, insurance, production, severance and windfall
profit taxes.

MMBTU. "MMBtu" means one million British thermal units. A British thermal unit
is the amount of heat needed to raise the temperature of one pound of water one
degree Fahrenheit.

NET ACRES OR WELLS. A party's "Net Acres" or "Net Wells" are calculated by
multiplying the number of gross acres or gross wells in which that party has an
interest by the fractional interest of the party in each such acre or well.
19

<PAGE> 20

OIL AND GAS LEASE. An "Oil and Gas Lease" is an agreement whereby the grantee
receives for a period of time the full or partial interest in oil and gas
properties, oil and gas mineral rights, fee rights, or other rights of the
grantor granting the grantee the right to drill for, produce and sell oil and
gas upon payment of rentals, bonuses and/or royalties. Oil and Gas Leases are
generally acquired from private landowners and federal and state governments.

PRODUCING PROPERTIES OR RESERVES. "Producing Reserves" are Proved Developed
Reserves expected to be produced from existing completion intervals now open for
production in existing wells. "Producing Properties" are properties to which
Producing Reserves have been assigned by an independent petroleum engineer.

PROVED DEVELOPED BEHIND-PIPE RESERVES. "Proved Developed Behind-Pipe Reserves"
are reserves contained in geological formations through which an existing well
has been drilled but from which the well has not yet produced. The reserves are
said to be "behind pipe" because the oil and gas are sealed out of the well bore
by the casing leading to the existing completion interval. Behind-Pipe Reserves
are classified as Proved Developed only if the cost of completing the well for
production of such reserves is relatively small compared to the cost of a new
well.

PROVED DEVELOPED RESERVES. "Proved Developed Reserves" are Proved Reserves which
can be expected to be recovered through existing wells with existing equipment
and operating methods.

PROVED RESERVES. "Proved Reserves" are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years known
oil and gas reservoirs under existing economic and operating conditions, that
is, on the basis of prices and costs as of the date the estimate is made and any
price changes provided for by existing conditions.

PROVED UNDEVELOPED RESERVES. "Proved Undeveloped Reserves" are Proved Reserves
which can be expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is required for
recompletion.

RESERVES. "Reserves" means crude oil and natural gas, condensate and natural gas
liquids, which are net of leasehold burdens, are stated on a net revenue
interest basis, and are found to be commercially recoverable.

ROYALTY INTEREST. A "Royalty Interest" is an interest in oil and gas property
entitling the owner to a share of oil and gas production (or the proceeds of the
sale thereof) free of the costs of production.

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS, BEFORE PROVISION FOR
INCOME TAXES. The "Standardized Measure of Discounted Future Net Cash Flows,
Before Provision for Income Taxes" is a method of determining the present value
of Proved Reserves. Future net revenues from Proved Reserves are estimated
assuming that oil and gas prices and production and development costs remain
constant. The resulting stream of revenues, before provision for income taxes,
is then discounted at the rate of 10% per year to obtain a present value.

3-D SEISMIC. "3-D Seismic" is the method by which a three dimensional image of
the earth's subsurface is created through the interpretation of aerially
collected seismic data. 3-D surveys allow for a more detailed understanding of
the subsurface than do conventional surveys and contribute significantly to
field appraisal, development and production.

UNDEVELOPED ACREAGE. "Undeveloped Acreage" is oil and gas acreage (including, in
applicable instances, rights in one or more horizons which may be penetrated by
existing wellbores, but which have not been tested) to which Proved Reserves
have not been assigned by independent petroleum engineers.

WORKING INTEREST. A "Working Interest" is the operating interest under an Oil
and Gas Lease which gives the owner the right to drill, produce and conduct
operating activities on the property and a share of production, subject

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to all royalties, overriding royalties and other burdens and to all costs of
exploration, development and operations and all risks in connection therewith.

In this Prospectus, natural gas volumes are stated at the legal pressure base of
the state or area in which the reserves are located at 60 degrees Fahrenheit.