As Filed: July 22, 1996 SEC File No.
------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Registration Statement on
Form S-3
Under the Securities Act of 1933
FRONTIER OIL EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Nevada 1070 87-0504461
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
3006 Highland Drive, Suite 206, Salt Lake City, Utah 84106 (801) 486-5555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
David N. Pierce, President, 3006 Highland Drive, Suite 206, Salt Lake City, Utah
84106 (801) 486-5555
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
James R. Kruse, Esq.
KRUSE, LANDA & MAYCOCK, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway
Salt Lake City, Utah 84101
Telephone: (801) 531-7090
Telecopy: (801) 359-3954
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment 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,
check the following box. / /
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================
Amount Proposed Maxi- Proposed Maxi- Amount
Title of Each Class of to be mum Offering mum Aggregate of Regis-
Securities Being Registered Registered Price Per Unit(1) Offering Price tration fee(3)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock(2) 1,289,025 $8.25 $10,634,456 $3,667
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</TABLE>
[FN]
(1) Bona fide estimate of maximum offering price solely for the purpose of
calculating the registration fee. The offering price for the common stock
being sold by selling stockholders is based on the average of the closing
sales price for the Registrant's Common Stock on the Nasdaq SmallCap Market
of $8.25 as of July 17, 1996 (rule 457(c)).
(2) Consists of shares held by selling stockholders and shares to be held
following the conversion of preferred stock of the Registrant and on exercise
of common stock purchase warrants and options. Pursuant to rule 416, there
are also being registered such additional securities as may become issuable
as a result of the antidilution provisions of the preferred stock, warrants,
and options.
(3) The Registrant has previously paid a registration fee in the amount of
$2,781 respecting the offer and sale by selling stockholders of 2,304,092
shares of Common Stock registered on registration statement no. 33-88354-D.
Pursuant to rule 429, the prospectus contained in this registration statement
also relates to the offer and sale by selling stockholders of 2,304,092 shares
of Common Stock registered in registration statement number 33-88354-D and
remaining unsold as of the date hereof.
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, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
Page 1 of pages.
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Exhibit index appears on consecutive page number .
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FRONTIER OIL EXPLORATION COMPANY
Cross-Reference Sheet
Cross-reference between items of part I of Form S-3 and the prospectus
filed by Frontier Oil Exploration Company as part of the Registration Statement.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER AND HEADING PROSPECTUS CAPTION
<S> <C> <C>
1. Forepart of the Registration Statement and Front Cover
utside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front Cover and
Prospectus Outside Back Cover
3. Summary Information, Risk Factors and Ratio of PROSPECTUS SUMMARY and
Earnings to Fixed Charges RISK FACTORS
4. Use of Proceeds USE OF PROCEEDS
5. Determination of Offering Price PLAN OF DISTRIBUTION
6. Dilution DILUTION
7. Selling Security Holders SELLING STOCKHOLDERS
8. Plan of Distribution PLAN OF DISTRIBUTION
9. Description of Securities DESCRIPTION OF
SECURITIES
10. Interest of Named Experts and Counsel EXPERTS and LEGAL
ATTERS
11. Material Changes n/a
12. Incorporation of Certain Information by Inside Front Cover
Reference
13. Disclosure of Commission Position on DESCRIPTION OF
Indemnification for Securities Act Liabilities SECURITIES
</TABLE>
SUBJECT TO COMPLETION--PRELIMINARY PROSPECTUS DATED JULY 22, 1996
3,593,117 Shares
FX ENERGY
(Frontier Oil Exploration Company)
Common Stock
All 3,593,117 shares of common stock, par value $0.001 per share (the
"Common Stock"), of FX Energy (the operating name of Frontier Oil Exploration
Company) (the "Company"), are being offered by certain selling stockholders (the
"Selling Stockholders"). See "SELLING STOCKHOLDERS" and "DESCRIPTION OF
SECURITIES" below.
The Selling Stockholders will offer their Common Stock through or to
securities brokers or dealers designated by them in the over-the-counter market,
in other transactions negotiated by the Selling Stockholders, or pursuant to
Rule 144 or another exemption from registration. Any such sale of Common Stock
by Selling Stockholders must be accompanied by, or follow the delivery of, a
prospectus filed with a current registration statement relating to the Common
Stock being offered, unless a Selling Stockholder elects to rely on Rule 144 or
another exemption from the registration requirements in connection with a
particular transaction. The Selling Stockholders and any broker, dealer, or
agent that participates with the Selling Stockholders in the sale of the Common
Stock offered hereby may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any commissions
or discounts received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting commissions under the
Securities Act. See "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" below.
The Company's Common Stock is quoted on the Nasdaq SmallCap Market under
the symbol "FXEN." On July 17, 1996, 1996, the last reported price for the
Company's Common Stock on the Nasdaq SmallCap Market was $8.25 per share. The
Common Stock has been approved for listing on the Nasdaq National Market under
the symbol "FXEN", subject only to notice of issuance. See "CERTAIN RECENT
EVENTS."
THE COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" on page 6
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE OR OTHER REGULATORY AUTHORITY, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER REGULATORY AUTHORITY
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Offering Proceeds to
Public(1) Commissions(2) Selling Stockholders
<S> <C> <C> <C>
By Selling Stockholders
Per Share $8.25 -- $8.25
Total $29,643,215 -- $29,643,215
</TABLE>
[FN]
(1) The price per share for the securities offered by the Selling
Stockholders is estimated at the last reported price for the Common Stock at
$8.25 on July 17, 1996, 1996. The Common Stock may be offered at the current
market price, which may vary through the period during which the securities
may be offered, or at such other prices as may be negotiated by the Selling
Stockholder and the purchaser at the time of sale.
(2) The securities to be sold by Selling Stockholders may be sold by them
through or to securities brokers or dealers, which sales may involve the
payment of commissions by the Selling Stockholders. There is no agreement
between the Company and any broker or dealer with respect to such sales.
The date of this Prospectus is , 1996.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders. In connection with this offering, the Company
estimates that it will incur costs of approximately $35,000 for legal,
accounting, printing, and other costs. Any separate costs of the Selling
Stockholders will be borne by them. Commissions or discounts paid in connection
with the sale of securities by the Selling Stockholders will be determined by
negotiations between them and the broker-dealer through or to which the
securities are to be sold and may vary depending on the broker-dealers'
commission or mark up schedule, the size of the transaction, and other factors.
See "PLAN OF DISTRIBUTION" below.
The Company is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such material can be inspected and copied at the public
reference facilities of the Commission in Washington, D.C., and certain regional
offices. Copies can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at the prescribed rates. See "ADDITIONAL
INFORMATION" below.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's following reports are hereby incorporated by reference into
this Prospectus:
. Annual report on Form 10-KSB for the fiscal year ended December 31, 1995
("1995 Form 10-KSB");
. Quarterly report on Form 10-QSB for the fiscal quarter ended March 31,
1996; and
. Current reports on Form 8-K dated May 3 and May 21, 1996.
. Proxy Statement related to the 1996 annual meeting of the Company's
stockholders.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which 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.
All documents subsequently filed by the Company pursuant to sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior to termination
of the offering shall be deemed to be incorporated by reference into this
Prospectus. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
The Company 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 referred to above which have been or may be
incorporated by reference into this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to Stockholder
Relations, FX Energy, at 3006 Highland Drive, Suite 206, Salt Lake City, Utah
84106, telephone number (801) 486-5555.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and the notes thereto appearing elsewhere
in this prospectus or incorporated herein by reference.
Unless otherwise indicated, all information herein relating to oil and gas
reserves has been calculated in accordance with the rules and regulations of the
Securities and Exchange Commission (the "SEC").
The Company
The Company is engaged in the exploration, development, and production of
oil and gas properties in the western United States and Poland. The Company
currently produces oil from fields in Montana and Nevada and explores for oil
and gas primarily in Poland. In August 1995, the Company was one of the first
independent energy companies to secure oil and gas exploration rights in Poland
(the "Baltic Concession"). The Baltic Concession covers approximately 2.4
million acres in northern Poland and is part of a geological region (the "Baltic
Platform") which reportedly has produced in excess of 150 million barrels of oil
("MMBbl") from four fields located approximately 50 miles to the northeast in
the Kaliningrad district of Russia. In May 1996, the Company entered into a
joint study agreement with the Polish Oil and Gas Company ("POGC") to reprocess
and reinterpret geological and geophysical data collected from a 6.25 million
acre area in the Carpathian region of southeastern Poland (the "Carpatian JSA").
Management believes that the Company's principal strengths are its existing
prospects in Poland, its access to previously collected geological and
geophysical data, its established network of strategic alliances and its
inventory of domestic properties.
The Company has identified several potential drilling prospects in the
Baltic Concession through the reprocessing and reevaluation of previously
collected seismic and drilling data. The Company intends to explore and, if
warranted, develop these prospects with RWE-DEA AG ("RWE-DEA"), a subsidiary of
RWE AG, Germany's fifth largest industrial company. The Company and RWE-DEA
recently initiated a 300 kilometer seismic survey on selected portions of the
Baltic Concession. The results of this survey will assist in the selection of
the site of an exploratory well scheduled to be drilled in late 1996. In the
Carpathian JSA, the Company and POGC are conducting a technical evaluation of a
target area and, if warranted, will apply for an exploration concession. The
Company has budgeted approximately $10.8 million for exploration and development
activities in Poland through 1997 and, as noted below, proposes a public
offering of Common Stock to fund such budget.
The Company currently produces oil exclusively in the United States. At
December 31, 1995, the Company had estimated proved reserves of 5.3 MMBbl with
estimated future net revenues, discounted at 10% and calculated without regard
to future tax expenses ("PV-10 Value"), of approximately $23.8 million.
Approximately 78% of the Company's production and 96% of its reserves are
concentrated in northern Montana's Cut Bank field. To enhance production in
this field, the Company intends to expand its current infill drilling program
which was initiated in late 1994. The Company has budgeted approximately $6.1
million for this program, subject to obtaining required additional financing.
The Company is also evaluating several exploration prospects in the western
United States and has identified a prospect in Nevada on which it intends to
drill an exploratory well in late 1996 in partnership with several independent
energy companies. The Company has budgeted approximately $7.6 million for
exploration and development activities in the United States through 1997,
subject to obtaining required additional financing.
Proposed Common Stock Offering
On June 10, 1996, the Company filed with the SEC a registration statement
on Form S-1 relating to the offer and sale of 3 million shares of Common Stock
at a price to be determined between the Company and the representatives of the
underwriters. The net offering proceeds will be used to repay bank debt and to
fund the Company's capital expenditure program, which includes exploration and
potential development in the onshore Baltic Platform and Carpathian regions of
Poland and development and exploration in the western United States.
The managing underwriters of the offering are Oppenheimer & Co., Inc., and
Hanifen, Imhoff Inc.
A registration statement relating to the above securities has been filed
with the Commission, but has not yet become effective. These securities may not
be sold, nor any offers to buy be accepted, prior to the time the registration
statement becomes effective. In addition, no sale of the securities may be made
in any state in which the offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state. See
"Certain Recent Events."
Business Strategy
The Company explores and develops oil and gas prospects potentially
containing recoverable reserves in excess of 25 MMBOE for international
properties and 10 MMBOE for domestic properties. This strategy includes the
following key elements:
. Focus on Poland. The Company believes that the Baltic Concession and the
Carpathian JSA provide it with a foundation upon which to build a significant
exploration and development operation in Poland. The Company believes this
foundation will allow it to capitalize on Poland's attractive combination of
significant reserve potential, underexplored acreage and favorable operating
environment. Beginning in 1989, Poland initiated a number of market-based
reforms which have resulted in the country's economy becoming one of the
fastest growing in Europe. Important elements of this transition have
included the introduction of both a broad-based privatization program and an
internationally competitive tax and royalty structure. Partially as a result
of these initiatives, Poland attracted approximately $6.8 billion in direct
foreign investment between 1989 and 1995. Several international oil
companies, including Texaco, Inc., Tenneco Co., Exxon Corp., Shell Oil Co.
and British Gas PLC, have either secured, or obtained the exclusive right to
negotiate for, exploration rights.
. Access existing geological and geophysical data. The Company focuses on
areas where it can reevaluate previously collected geological and geophysical
data. Between 1950 and 1993, state-sponsored agencies in Poland gathered
hundreds of line miles of seismic data and drilled 15 test wells in the
Baltic Concession to the same formation that is productive in established
fields in the Baltic Platform. While a majority of these wells indicated the
presence of hydrocarbons in that formation, none was completed for production
due, in management's opinion, to the outdated equipment and poor techniques
used to locate, drill and test the wells. The Company, with the assistance
of consultants that included Halliburton Energy Services, Ryder Scott Company
and Western Atlas, Inc., reevaluated seismic and well data generated by
earlier exploration efforts in the Baltic Concession. As a result of this
effort, the Company believes that it has identified potential oil reservoirs
in two structures that had previously been drilled and over a dozen undrilled
structures.
. Capitalize on strategic alliances. The Company seeks to form strategic
alliances to reduce its financial exposure and to gain additional technical
and operational expertise. This strategy is exemplified by the Company's
alliances with RWE-DEA covering the Baltic Concession and with POGC in the
Carpathian JSA. RWE-DEA, formerly Deutsche Texaco AG, is an established
producer, refiner and marketer of oil and gas in Europe and currently
produces oil in the Baltic Sea off Germany's northern coast. Pursuant to an
agreement with the Company, which is subject to consent by the Polish
government, RWE-DEA will earn a 50% interest in the Baltic Concession by
paying the Company $250,000, by providing up to $2.0 million for an ongoing
seismic survey and a planned exploratory well, and by funding 50% of the cost
of a second exploratory well. The Company will operate all wells it drills
jointly with RWE-DEA. In the Carpathian JSA, the Company is evaluating
existing geological and geophysical data contributed by POGC in order to
determine the hydrocarbon potential of a target area. The Company and POGC
may apply for exploration rights covering such target area upon the
completion of this analysis.
. Exploit domestic reserve base and prospects. The Company believes that its
existing domestic properties have significant development and exploration
potential. The Company recently completed an infill drilling program on a
1,000 acre tract of the Cut Bank field which, based on preliminary results,
the Company believes will increase production over the next two to three
years. The Company plans to expand this program to approximately 4,000
additional acres in the Cut Bank field beginning in late 1996. The Company
also has an ongoing program of prospect generation and exploration in the
western United States.
The Company's executive offices are located at 3006 Highland Drive, Suite
206, Salt Lake City, Utah 84106, telephone number (801) 486-5555. The Company's
Montana field office is located at the corner of Central and Main, Oilmont,
Montana 59466, telephone number (406) 337-2050. The registered address of
Frontier Poland Exploration and Producing Company Sp. z o.o ("FX Poland"), a
Polish subsidiary of the Company, is Wal Miedzesynski 646, 03-994 Warszawa,
Poland.
The Company intends to submit to its stockholders at its 1996 annual
meeting a proposal to change its name to FX Energy, Inc.
<TABLE>
<CAPTION>
The Offering
<S> <C>
Securities offered by Selling Stockholders 3,593,117 shares of Common Stock(1)
Common Stock outstanding before offering 8,704,596 shares(2)
Common Stock outstanding after offering 9,306,624 shares
Common Stock reserved for issuance 2,500,000 shares(3)
Fully diluted Common Stock 11,806,624 shares
Nasdaq Symbol FXEN
</TABLE>
[FN]
(1) Includes 2,991,089 shares of Common Stock currently issued and outstanding,
559,528 shares issuable on the exercise of options and common stock purchase
warrants, 17,500 shares issuable on the conversion of Company Preferred
Stock, and up to 25,000 shares that may be issued to a Selling Stockholder in
consideration of services.
(2) Includes 244,111 shares issued subsequent to March 31, 1996.
(3) In addition to the 559,528 shares of Common Stock issuable on the exercise
of options and warrants held by Selling Stockholders, 17,500 shares of Common
Stock issuable on the conversion of Company Preferred Stock and up to 25,000
shares of Common Stock that may be issued to a Selling Stockholder in
consideration of services reflected above, an additional 1,475,000 shares of
Common Stock are reserved for issuance on the exercise of outstanding options
at exercise prices ranging from $1.50 to $3.00 with a weighted average
exercise price of $2.42 per share, 825,000 shares are reserved for issuance
on the exercise of options previously granted but not yet exercisable at
$3.00 per share and 200,000 shares are reserved for issuance on the
satisfaction of certain contractual conditions relating to oil production
levels from the Company's producing properties in Montana and Nevada. The
foregoing does not give effect to the possible sale of 3,000,000 shares in
the Company's proposed public offering, 450,000 shares that may be sold on
exercise of the underwriters' over-allotment option, or 150,000 shares
issuable on the exercise of warrants to be granted to the representatives of
the underwriters.
No Net Proceeds
The Company will receive no proceeds from the sale of Common Stock by the
Selling Stockholders, but will incur costs of approximately $35,000 in
connection with such offering.
RISK FACTORS
The purchase of Common Stock involves a high degree of risk. Prospective
investors should consider, in addition to the negative implications of all other
information and financial data set forth herein, the following factors before
making an investment in the Common Stock. Certain portions of this Prospectus
and the materials incorporated herein by reference contain forward-looking
information concerning the Company, its plans and other future events. These
statements should be read in conjunction with the risks and uncertainties set
forth below, which could cause actual results to differ materially from such
forward-looking statements.
Factors Relating to the Company
History of Operating Losses
From its inception in January 1989 through March 31, 1996, the Company
incurred cumulative losses of $4.8 million and, because of its continued
exploration activities, expects that it will continue to incur losses and that
its accumulated deficit will increase. The Company reported losses of $992,000
and $2.5 million for the years ended December 31, 1994 and 1995, respectively,
and a loss of $583,000 for the quarter ended March 31, 1996. The Company
anticipates that it will incur losses through 1996 and possibly beyond,
depending on whether exploration of the Baltic Concession results in the
commencement of production in quantities sufficient to cover related operating
expenses and whether the infill drilling program in the Cut Bank field results
in significant and sustained increased production. See "ITEM 7. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA" and "ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS" in the 1995 Form 10-KSB.
Need for Additional Funding
The Company has sufficient capital to satisfy its operating requirements
through 1996, but will require substantial amounts of additional capital in
order to fund planned expenditures for its exploration program in Poland, its
infill development drilling program in Montana, and its other exploration
activities in the western United States. The Company has budgeted approximately
$18.4 million in capital expenditures through 1997, including approximately $8
million for exploration and potential development activities related to the
Baltic Concession, approximately $2.8 for the review and evaluation of available
geological and geophysical data and the potential initiation of exploratory
activities in the Carpathian region of Poland, approximately $6.1 million for
infill development drilling in the Cut Bank field of Montana, and approximately
$1.5 million for exploration activities in the western United States. The
Company proposes to undertake a public offering of 3 million shares of Common
Stock to obtain funding for this capital expenditure budget. See "Certain
Recent Events." There can be no assurance that the Company will be successful
in obtaining any required additional financing. If the proposed public offering
of Common Stock is not completed, the Company would be dependent upon obtaining
funds from alternative sources for its planned capital expenditures, and there
can be no assurance that such funds will be available or, if available, that
they can be obtained on terms favorable to the Company. Under the Company's
arrangement with RWE-DEA, RWE-DEA has agreed to provide up to $1 million for the
seismic survey currently underway in the Baltic Concession and up to $1 million
for the drilling of an exploratory well planned during 1996. The Company is
obligated to provide its 50% share of completion costs for the initial
exploratory well, if warranted, as well as any subsequent exploration or
development activities on the Baltic Concession, and the failure to provide any
further funding may result in the dilution of the Company's interest in specific
wells. If the Company were unable to fund its proposed study of the Carpathian
region in southeastern Poland, it may lose the opportunity to generate prospects
for future exploration in that area. The inability of the Company to continue
its infill development drilling program in Montana would correspondingly delay
the receipt of any potential increase in production revenues or the expansion of
reserves. Similarly, shortages of capital would also correspondingly delay the
Company's ongoing exploration program in the western United States.
Dependence on Activities in Poland
The Company's success will depend to a high degree on its activities in
Poland. This dependence is likely to be reflected in both the short-term
performance of the Common Stock and the Company's long-term financial results.
The Company currently intends to drill one exploratory well in Poland in late
1996 and to continue exploratory drilling in 1997, subject to available funds.
The market price of the Common Stock may experience significant fluctuations
based on the outcome of individual wells and the Company's other exploration
efforts in Poland. These fluctuations may be exacerbated by the fact that the
Common Stock, in management's opinion, currently trades to a significant degree
on the potential of the Company's current and planned activities in Poland. See
"Development Risks" and "Exploration Risks" below. The success of the Company's
efforts in Poland will depend, in addition to the risks normally associated with
the exploration for oil, on its ability to maintain its relationships with its
exploration partners and the Polish government and a number of other risks
associated with conducting operations in a foreign country. See "Risk Factors-
Factors Relating to Activities in Poland" below. If the Company's activities in
Poland are unsuccessful, the price of the Common Stock would likely suffer a
material decline, and investors would face the possible loss of a substantial
portion of their investment. Because of the preliminary stage of the Company's
activities in Poland, no assurance can be given that such activities will be
successful. See "ITEM 1. BUSINESS: Poland-Onshore Baltic Concession" in the
1995 Form 10-KSB.
Volatility of Common Stock
The market price for the Common Stock has been volatile in the past and
could fluctuate significantly in response to the results of specific exploration
drilling tests, variations in quarterly operating results and changes in
recommendations by securities analysts. Further, the trading volume of the
Common Stock is relatively small, and the market for the Common Stock may not be
able to efficiently accommodate significant trades on any given day.
Consequently, sizable sales or purchases of the Common Stock have in the past,
and may in the future, cause volatility in the market price of the Common Stock
to a greater extent than in other more actively traded securities. Until more
trading volume develops, larger transactions may not be able to be closed at the
then current market price for the Common Stock. In addition, the securities
markets regularly experience significant price and volume fluctuations that are
often unrelated or disproportionate to the results of operations of particular
companies. These broad fluctuations may adversely affect the market price of
the Common Stock. See "ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS" in the 1995 Form 10-KSB.
Dependence on RWE-DEA Strategic Alliance
The Company has budgeted $8.0 million for exploration and potential
development of the Baltic Concession through 1997 based, to a significant
degree, on the participation of RWE-DEA. If RWE-DEA elects not to participate
in the Baltic Concession for any reason, the Company could, at the discretion of
management, either seek a replacement partner or proceed as planned with a
substantially increased budget, subject to available funds. Although the
Company believes it would be able to locate an alternative strategic partner,
there can be no assurance that the Company would be successful in obtaining the
participation of another partner, that the terms of any such arrangement would
be favorable to the Company or that such efforts would not delay the Company's
exploration and development of the Baltic Concession.
Dependence on Polish Government Consent to RWE-DEA Assignment
Under the terms of its agreement with RWE-DEA, the Company is required to
assign to RWE-DEA 50% of its beneficial interest in its exploration and
exploitation agreement covering the Baltic Concession. RWE-DEA and the Company
are applying for approval of such assignment from the appropriate government
authorities. Although the Company believes, based on informal discussions among
representatives of the Company, RWE-DEA and the Polish government, that such
consent will be granted, there is no assurance that such consent will actually
be obtained. If the government does not consent to such assignment and if the
Company is not able to negotiate some other arrangement with RWE-DEA, the
Company will be required to reimburse RWE-DEA for all of its Baltic Concession
expenditures.
Dependence on Government Approval
Should the Company's exploration efforts discover hydrocarbons in the
Baltic Concession, the Company will be required to engage in negotiations with
national and local government officials of Poland regarding certain of the terms
and conditions of the required exploitation licenses. These negotiations would
include the determination of a development/exploitation fee within the range of
0.001% to 0.05% of the market value of the economically recoverable reserves
estimated to be in place, payable in five equal annual installments. In
addition, the granting of an exploitation license requires the consent of the
local governments having jurisdiction over the production area. Although the
Company has the exclusive right to receive an exploitation license in the Baltic
Concession and the local governments will receive 60% of royalties paid, the
Company could be subject to significant delays in obtaining the consents of
local authorities or satisfying other governmental requirements prior to
obtaining an exploitation license. Finally, the granting of an exploitation
license would require the Company to comply with certain environmental
regulations and may require the preparation of an environmental impact
statement. See "ITEM 1. BUSINESS" in the 1995 Form 10-KSB.
Exploration Risks
The Company's oil and gas exploration activities involve significant risks.
There can be no assurance that the use of technical expertise as applied to
geophysical or geological data will ensure that any well will encounter
hydrocarbons. Further, there is no way to know in advance of drilling and
testing whether any prospect encountering hydrocarbons will yield oil or gas in
sufficient quantities to be economically viable. Several test wells are
typically required to explore each prospect or exploration area. The Company
may continue to incur exploration costs in specific areas, including the Baltic
Concession and the Carpathian region in Poland, even if initial test wells are
plugged and abandoned or, if completed for production, do not result in
production in commercial quantities. To date, the Company has participated in
six exploratory test wells in the western United States, none of which has
resulted in the establishment of commercial production or reserves. The Company
has yet to drill a well in Poland; and all of the wells drilled previously by
third parties in the Baltic Concession were all plugged and abandoned. Through
1997, the Company has allocated up to $10.8 million of its capital budget for
its activities in Poland. There can be no assurance that the Company's efforts
will be successful. Many of the Company's exploration decisions are based on
scientific data gathered by third parties, some of which was gathered in the
1960s and 1970s. Although the Company has reprocessed such data, there can be
no assurance that such data is as reliable as data gathered either using modern
technology or under the Company's supervision. See "ITEM 1. BUSINESS" in the
1995 Form 10-KSB.
Possible Changes in Royalty Rate
The Company's activities in Poland are subject to the risk of changes in
the royalty rate to be paid on production. Poland's Council of Ministers sets a
base royalty rate for the extraction of each mineral. The base royalty rate for
oil is currently 6%, but could be increased unilaterally up to 10% (the current
maximum base royalty rate) by the Council of Ministers. In addition, the Polish
government can set the royalty rate for any particular oil and gas field in a
range between 50% and 150% of the base royalty rate, depending on the economic
viability of such field. See "ITEM 1. BUSINESS-Poland: Onshore Baltic
Concession" in the 1995 Form 10-KSB.
No Assurance of Commercial Production from the Baltic Concession
There has not been any commercial production of oil or gas from the Baltic
Concession. Various agencies of the Polish government have drilled seven
exploratory wells and eight stratigraphic wells in the Baltic Concession to the
same formation that is productive in established fields in the Baltic Platform.
None of these wells has been completed for production. Notwithstanding the
substantial data available regarding the Baltic Concession from these previous
drilling efforts and other exploration programs, the Company believes that
several exploration tests may be required to appraise the potential of any
structure which the Company identifies. There can be no assurance that such
tests will be successful. Although the Company has identified certain
structures within the Baltic Concession that it believes contain oil reservoirs,
there can be no assurance that oil is present in commercial quantities or that
the first exploratory well, the location of which will be determined by RWE-DEA,
will be drilled on one of these identified structures. Further, there can be no
assurance that the porosity, permeability or other characteristics of any
reservoir formation will support the production of oil in commercial quantities.
Similarly, although the Company believes that it has identified a number of
structures which have the potential to contain hydrocarbons, there can be no
assurance that such structures actually contain hydrocarbons. See "ITEM 1.
BUSINESS-Poland--Onshore Baltic Concession" in the 1995 Form 10-KSB.
No Assurance of Commercial Production from the Carpatian JSA
The exploration activity in the Carpatian JSA is in its initial stages and
no assurance can be given that it will result in any commercial production.
Although there is currently limited hydrocarbon production from certain shallow
formations in the Carpatian JSA, there has never been any commercial production
from the depths which the Company has the right to evaluate with POGC.
Dependence on Officers and Key Employees
The Company is dependent upon Mr. David N. Pierce, President, Mr. Andrew W.
Pierce, Operations Vice President, and other key personnel for its various
activities. The loss of the services of any of these individuals may materially
and adversely affect the Company. In addition, with respect to its activities
in Poland, the Company is dependent on Mr. Jerzey B. Maciolek, an executive
officer, and another employee, both Polish nationals, who have been instrumental
in assisting the Company in establishing its operations in Poland, and the loss
of the services of either person may materially and adversely affect the
Company's activities in Poland. The Company has entered into employment
agreements with Mr. David N. Pierce, Mr. Andrew W. Pierce, and Mr. Maciolek and
intends to enter into an employment agreements with the other individual who was
instrumental to the Company's activities in Poland. The Company does not
maintain key man insurance on any of its employees, nor does it currently have
directors' and officers' liability insurance. See "ITEM 9. DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT-Executive Officers and Directors" in the 1995 Form 10-KSB.
Risks Associated with Growth
The Company has had limited operations and, if its activities in Poland are
successful, may experience rapid growth. The Company's ability to manage this
growth will depend, in part, upon its ability to attract and retain quality
management and technical personnel. No assurance can be given that the Company
will be able to attract or retain such employees or otherwise manage any
potential expansion of its business. The likelihood of the success of the
Company must be considered in light of the expenses, difficulties, complications
and delays frequently encountered in connection with the early stages of an oil
and gas company. In particular, the Company's operations in Poland to date have
focused primarily on the evaluation of prospects, and the Company has little or
no experience in Poland regarding exploration, development production and
marketing and has not yet drilled a well in Poland. Although the Company does
have experience in these areas in the United States, there can be no assurance
that such experience will assist in its activities in Poland.
Possible Future Need for Additional Capital
If exploration of either the Baltic Concession or the Carpathian JSA is
successful in proving substantial oil reserves, the Company may require
significant amounts of additional capital for a development program, oil storage
and handling facilities, oil transportation assets, or other assets required to
support production. Under its agreements with RWE-DEA, either RWE-DEA or the
Company can propose up to 2 exploratory and 4 development wells annually. If
RWE-DEA were to propose the maximum number of wells in a year in which the
Company were unable to provide its 50% share of costs, estimated at $6 million
to $4.5 million, the Company would effectively lose its interest in such wells
drilled by RWE-DEA at its own risk and cost. In addition, the Company might
require additional capital to accelerate the infill drilling program in the
balance of its Cut Bank field property. The Company will also require
substantial amounts of additional capital to continue its planned geological and
geophysical studies, land acquisition, well drilling, and other exploration and
development activities. The Company expects that it will continue to require
cash from outside sources to fund its capital expenditure program through 1996
and beyond, unless its exploration program results in the discovery and
production of commercial quantities of oil or unless production increases
substantially from its currently producing properties, of which there can be no
assurance. The Company has no arrangement for any such additional financing,
but might seek funds from project financing, strategic alliances or other
sources, all of which may dilute the interest of the Company in the specific
project financed. In addition to the Company's currently proposed Common Stock
offering, the Company might seek funds through the sale of additional debt or
equity securities, all of which could significantly dilute the ownership of the
Company's existing shareholders. There can be no assurance that additional
funds could be obtained or, if obtained, would be obtained on terms favorable to
the Company. See "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS" in the 1995 Form 10-KSB.
Risk of Impairment of Recorded Value of Unproved Properties
The Company capitalizes costs related to unproved oil and gas properties
and recognizes expenses for costs to drill exploratory wells that do not result
in proved reserves at the time the well is plugged or abandoned. The Company
reviews its unproved properties periodically to assess whether an impairment
allowance should be recorded. At March 31, 1996, the Company had capitalized
costs related to the acquisition of unproved oil and gas properties in the
amount of $1.7 million, $1.3 million of which related to the Company's Lake
Valley, Nevada, exploration prospect. Should future events such as the drilling
of dry holes evidence that an impairment of recorded value has taken place, the
adverse impact on the Company's results of operations for the relevant period
could be significant. As a result of the foregoing, the results of operations
of the Company for any particular period may not be indicative of the results
that could be expected over longer periods. See "ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" in the 1995 Form 10-KSB.
Risks of Adverse Weather
A significant portion of the Company's exploration and development
activities are subject to periodic interruptions due to weather conditions that
may be quite severe in the areas where such activities are conducted. Heavy
precipitation may make travel to exploration sites or drilling locations
difficult or impossible. Extremely cold temperatures may delay or interrupt
drilling, well servicing and production. The foregoing may reduce production
volumes or increase production costs.
Effect of Oil Price Fluctuations on Borrowing Limit
The Company's revenues and profitability are substantially dependent upon
prevailing prices for oil. Many of the Company's producing oil wells produce at
relatively low volumes as compared to operating costs so that relatively minor
declines in oil prices can have a dramatic adverse impact on the amount of the
Company's economic reserves. See "Volatility of Commodity Prices and Markets"
below. The Company's bank indebtedness is reviewed semi-annually, and the
permitted borrowing limit is based on the lender's evaluation of the net
of the Company's reserves. If such estaimted net present value of the future
revenues from the Company's oil reserves were to decline below the outstanding
principal of the Company's bank loan, the borrowing limit could be reduced
and the Company would be required to pay the principal of the loan down to an
amount no greater than such borrowing limit unless payment is waived by the
lending bank. A decline in such value may require payment of
all or a portion of the loan. See "ITEM 2. PROPERTIES-Producing Properties" and
"ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS-Liquidity
and Capital Resources" in the 1995 Form 10-KSB.
Caution Respecting Forward-Looking Information
This Prospectus contains certain forward-looking information, including
discussions of the uncertainties of certain terms to be determined in
the future relating to the Baltic Concession and the Carpathian JSA;
uncertainties regarding future political, economic, regulatory, fiscal,
taxation and other policies in Poland; the future results of various
exploration and development activities; future events that may result
in the need for additional capital; future drilling and other exploration
schedules and sequences for various wells and other activities; the future
ability of the Company to attract drilling participants to share the costs
of exploration and development; and similar matters. Such information is
based on present circumstances and on the Company's predictions respecting
events that have not occurred, which may not occur or which may occur with
different consequences from those now assumed or anticipated. No assurance
can be given that actual events may not be different thatn the assumptions
on which such forward-looking information is based. See "ITEM 2.
PROPERTIES" in the 1995 Form 10-KSB.
Factors Relating to the Oil and Gas Industry
Uncertainty of Reserve Estimates and Future Net Revenues
There are numerous uncertainties inherent in estimating quantities of
proved oil reserves. The estimates in the 1995 Form 10-KSB and incorporated
into this Prospectus are based on various assumptions relating to rates of
future production, timing and amount of development expenditures, oil prices and
the results of planned development work. Actual future production rates and
volumes, revenues, taxes, operating expenses, development expenditures and
quantities of recoverable oil reserves may vary substantially from those assumed
in the estimates. Any significant change in these assumptions, including
changes that result from variances between projected and actual results, could
materially and adversely affect future reserve estimates. In addition, such
reserves may be subject to downward or upward revision based upon production
history, results of future development, prevailing oil prices and other factors.
See "ITEM 2. PROPERTIES-Producing Properties" and "ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS-Liquidity and Capital Resources"
in the 1995 Form 10-KSB.
Development Risks
The Company's infill drilling program in the Cut Bank field in Montana is
based on the engineering model used in a similar program conducted on a portion
of the Company's property by a previous owner. There can be no assurance that
the results of the Company's development program will achieve the results of the
engineering model on which it is based, significantly increase production or
reserves or result in a financial return to the Company. Whether or not the
development program is successful, no assurance can be given that the Company
will be able to discover, develop or purchase properties to replace its current
reserve base. See "ITEM 1. BUSINESS-Western United States" in the 1995 Form 10-
KSB.
Volatility of Commodity Prices and Markets
Oil prices have increased materially during 1996, but there can be no
assurance that such prices will continue. Oil and gas prices have been and are
likely to continue to be volatile and subject to wide fluctuations in response
to any of the following factors: relatively minor changes in the supply of and
demand for oil and gas; market uncertainty; political conditions in
international oil producing regions; the extent of domestic production and
importation of oil; the level of consumer demand; weather conditions; the
competitive position of oil or gas as a source of energy as compared with coal,
nuclear energy, hydroelectric power, and other energy sources; the refining
capacity of prospective oil purchasers; the effect of federal and state
regulation on the production, transportation, and sale of oil; and other
factors, all of which are beyond the control or influence of the Company. In
addition to its direct impact on the prices at which oil or gas may be sold,
adverse changes in the market or regulatory environment would likely have an
adverse effect on the Company's ability to obtain funding from lending
institutions, industry participants, the sale of additional securities, and
other sources.
Operating Hazards and Uninsured Hazards
Oil and gas drilling involves hazards such as fire, explosions, blow-outs,
pipe failures, casing collapses, unusual or unexpected formations and pressures
and environmental hazards such as oil spills, gas leaks, ruptures and discharges
of toxic gases, any one of which may result in environmental damage, personal
injury and other harm that could result in substantial liabilities to third
parties and losses to the Company. The Company maintains insurance against
certain risks which it believes are customarily insured against in the oil and
gas industry by companies of comparable size and scope of operations. The
insurance that the Company maintains does not cover all of the risks involved in
oil exploration, drilling and production and if coverage does exist, it may not
be sufficient to pay the full amount of any such liabilities. For example, the
Company does not maintain insurance against risks related to violations of
environmental laws. The Company may not be insured against all losses or
liabilities which may arise from all hazards because such insurance is
unavailable at economic rates, because of limitations in the Company's insurance
policies or because of other factors. Any uninsured loss could have a material
and adverse effect on the Company. See "ITEM 1. BUSINESS-Operational Hazards
and Insurance" in the 1995 Form 10-KSB.
Intense Competition in Oil and Gas Industry
The oil and gas industry is highly competitive. Most of the Company's
current and potential competitors have greater financial resources and a greater
number of experienced and trained managerial and technical personnel than the
Company. There can be no assurance that the Company will be able to compete
effectively with such firms.
United States Governmental Regulation, Taxation and Price Control
Oil and gas production and exploration are subject to comprehensive
federal, state and local laws and regulations controlling the exploration for
and production and sale of oil and gas and the possible effects of such
activities on the environment. Present, as well as future, legislation and
regulations could cause additional expenditures, restrictions and delays in the
Company's business, the extent of which cannot be predicted and which may
require the Company to limit substantially, delay or cease operations in some
circumstances. From time to time, regulatory agencies have proposed or 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. Because energy and taxation policies are subject to constant
revisions, no prediction can be made as to the ultimate effect of such
governmental policies and controls. See "ITEM 1. BUSINESS-Government
Regulation" in the 1995 Form 10-KSB.
Factors Relating to Activities in Poland
Political Uncertainties
The exploration, development and production of oil and gas in Poland will
be subject to ongoing uncertainties and risks, including risks of political
instability and changes in government, expropriation or nationalization of
private enterprises, export and transportation tariffs, local and national tax
requirements and other risks arising out of foreign government sovereignty over
the exploration area. The terms of the agreements with governmental agencies are
subject to administration by government officials and are, therefore, subject to
changes in government personnel, the development of new administrative policies
and practices and political changes in Poland. There can be no assurance that
the laws, regulations and policies applicable to the Company will not change,
that the laws and regulations will be applicable in any particular circumstance
or that the Company will be able to enforce its rights in Poland. The Company
anticipates that it will be required to demonstrate, to the satisfaction of the
Polish authorities, the Company's compliance with the concession terms
respecting exploration expenditures, results of exploration, environmental
protection matters and other factors. Although the exploration and exploitation
rights of the Company may be canceled by the Company at any time, the Company
would likely not be able to recover previous payments made under the rights or
any other costs incurred respecting the rights upon such cancellation. There can
be no assurance that the Company will be able to take measures to provide
adequate protection against any of the political uncertainties discussed above.
See "ITEM 1. BUSINESS-Poland--Onshore Baltic Concession" in the 1995 Form 10-
KSB.
Currency Risks
The Company will be subject to a variety of currency risks, including the
risks that currencies will not be convertible at satisfactory rates, that the
official conversion rates between United States and Polish currencies may not
accurately reflect the relative value of goods and services available or
required in Poland and that inflation will lead to the devaluation of the Polish
Zloty.
Repatriation of Earnings
The Company may be restricted as to the amount, manner or timing of the
repatriation to the United States of earnings from activities in Poland. The
Company has formed a wholly owned Polish subsidiary through which it will
conduct its activities in Poland. Currently, there are no restrictions on the
ability of a Polish entity to repay debt to a foreign parent corporation or to
pay fair market compensation to a foreign parent corporation for legitimate
services. However, Polish entities are limited in their ability to pay
dividends. Dividends can be paid only once annually and are limited in amount
to the extent of profits, as determined in compliance with Polish accounting and
regulatory requirements and as verified by an audit satisfying Polish
professional standards. In addition, the payment of dividends by the Polish
subsidiary is subject to a 5% withholding tax. Although the Company is entitled
to a credit against its United States tax obligations equal to the Polish
withholding tax, the Company may not be able to use this credit unless the
Company owes taxes in the United States. See "ITEM 1. BUSINESS-Poland--Onshore
Baltic Concession" in the 1995 Form 10-KSB.
Lack of Exploration and Development Infrastructure
There can be no assurance that the Company will be able to conduct an
effective and efficient exploration program in Poland. Further, the Company is
subject to certain risks which could substantially increase the cost of
exploration, development and production activities and reduce potential
financial returns, including the limited availability of certain modern
exploration, drilling and production equipment, supplies and services and the
lack of availability or limited capacity of oil and gas gathering, storage,
transportation and processing facilities.
Lack of Transportation and Marketing Arrangements
The Company has no transportation, refining or marketing arrangements
relating to future oil production in Poland. Instead, the Company is relying
primarily on a continuous increase in international demand for oil products and
the fact that Poland reportedly imports over 95% of its oil as the basis for its
belief that an available market exists for any oil that may be discovered.
Subject to obtaining appropriate approval, the Company is not precluded from
exporting oil, but the Company presently has no such arrangements. There can be
no assurance that the Company will be able to establish transportation, refining
or marketing arrangements to sell any oil discovered and produced in Poland on
terms favorable to the Company or that the Company will be able to make
arrangements for the exportation of oil in the event such exportation is
beneficial to the Company. See "ITEM 1. BUSINESS-Poland--Onshore Baltic
Concession" in the 1995 Form 10-KSB.
Poland's Governmental Regulation
The Company's activities in Poland are subject to certain laws and
regulations relating to the exploration for, and development, production,
marketing, transportation and storage of, oil, including measures relating to
the protection of the environment. The regulatory regime governing these
activities was recently promulgated and is relatively untested. Therefore,
there is no enforcement history or established practice that can aid the Company
in evaluating how the regulatory regime will affect the Company's operations.
Although management believes that the regulatory infrastructure currently in
place and now being further developed in Poland is generally consistent with the
government's stated purpose of encouraging both foreign investment and the
development of Poland's natural resources, there can be no assurance that such
governmental policy will not change or that new laws and regulations,
administrative practices or policies or interpretations of existing laws and
regulations will not materially and adversely affect the Company's activities in
Poland.
Poland's Environmental Regulations
The Company's operations are subject to environmental laws and regulations
in Poland. Poland's environmental laws and regulations may provide for
restrictions and prohibitions on spills, releases or emissions of various
substances produced in association with oil exploration and development.
Additionally, if significant quantities of gas are produced in conjunction with
the Company's production of oil, regulations prohibiting the flaring of gas and
the absence of a gas gathering and delivering system may restrict production or
may require significant expenditures by the Company to develop such a system
prior to the production of oil. Certain aspects of the Company's proposed
operations may require the submission and approval of environmental impact
assessments to governmental authorities in Poland prior to commencing
production.
The Company has only recently initiated field activities in connection with
its seismic program and has not incurred material environmental remediation
costs to date. Management believes that the Company is currently in material
compliance with all applicable laws and regulations. However, there can be no
assurance of such compliance or that applicable regulations or administrative
policies or practices will not be changed by the Polish government. The cost of
compliance with current regulations or any changes in environmental regulations
could require significant expenditures, and breaches of such regulations may
result in the imposition of fines and penalties, any of which may be material.
There can be no assurance that these environmental costs will not have a
material adverse effect on the Company's financial condition or results of
operations in the future.
Risks Relating to Offering
Shares Eligible for Future Sale
Substantially all of the approximately 8.7 million shares of Common Stock
currently issued and outstanding either (i) were sold in a registered offering,
(ii) have been held for in excess of two years and are eligible for resale under
Rule 144, promulgated under the Securities Act, (iii) were registered for resale
in registration statements declared effective March 30, 1995, or (iv) are
registered for resale pursuant to this prospectus. Although the resale of 1.6
million of such shares is subject to contractual restrictions (including 1.1
million shares which are owned by officer and directors of the Company and are
subject to volume and other restrictions under Rule 144), the possible resale of
the remaining 7.1 million shares may have a depressive effect on the public
trading market for the Common Stock. See "ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS" in the 1995 Form 10-KSB and "DESCRIPTION OF
SECURITIES-Covenant to Register Common Stock" below.
Substantial and Immediate Dilution
Persons purchasing Common Stock will suffer a substantial and immediate
dilution below the purchase price to the net tangible book value of their
shares. See "DILUTION" below.
Lack of Due Diligence Review
No securities broker-dealer or other person has been engaged to perform any
due diligence or similar review of this offering or the Company on behalf of the
Selling Stockholders, persons who may purchase Common Stock in this offering, or
any other person.
Control of the Company by Management
The current executive officers and directors of the Company hold sole or
shared voting and dispositive power over 1.1 million issued and outstanding
shares of Company Common, which constitutes approximately 12.2% of the 9.3
million shares of Common Stock that would be outstanding if the 17,500 shares of
Company Preferred Stock were converted into Common Stock, the 559,528 Options
and Warrants held by Selling Stockholders were exercised, and 25,000 shares of
Common Stock were issued by the Company to a Selling Stockholder in
consideration of services. Giving effect only to the exercise of all options
held by officers and directors, including options not yet completely vested,
current executive officers and directors would own a total of 3.2 million
shares, or approximately 28.0% of the 11.4 million shares that would be issued
and outstanding if all of the Company Preferred Stock were converted to Common
Stock, all of the Options and Warrants held by Selling Stockholders were
exercised, and the Company issued 25,000 shares of Common Stock to a Selling
Stockholder in consideration for services. As a result of such ownership, such
persons are able to substantially influence the election of all of the directors
of the Company and the outcome of other matters submitted to the stockholders
for consideration. See "ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT" in the 1995 Form 10-KSB and "DESCRIPTION OF SECURITIES" below.
Substantial Warrants and Options Outstanding
The Company has issued and outstanding warrants and options to purchase an
aggregate of up to 2.9 million shares of Common Stock at exercise prices ranging
from $1.10 to $3.00 with a weighted average exercise price of $2.52 per share.
In addition to the 559,528 shares of Common Stock issuable on the exercise of
Warrants and Options held by Selling Stockholders, 2,050,000 shares of Common
Stock are issuable on the exercise of options held by officers and directors of
the Company at exercise prices ranging from $1.50 to $3.00 per share, including
options to purchase 825,000 shares that are not fully vested. The existence of
such warrants and options may prove to be a hindrance to future financing by the
Company, and the exercise of such warrants and options may further dilute the
interests of all other stockholders. The possible future resale of Common Stock
issuable on the exercise of such warrants and options could adversely affect the
prevailing market price of the Common Stock. Further, the holders of options
and warrants may exercise them at a time when the Company would otherwise be
able to obtain additional equity capital on terms more favorable to the Company.
See "DESCRIPTION OF SECURITIES-Preferred Stock, Warrants, and Options
Outstanding" below and "ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT" in the 1995 Form 10-KSB.
Limited Contractual Restriction on Resale of Certain Shares of Common Stock
Certain Selling Stockholders are subject to contractual restrictions on the
sale of the Common Stock by them in this offering. Selling Stockholders that may
sell up to 1,577,045 shares of Common Stock (a) may not sell such Common Stock
in any public trading market for the Company's Common Stock between 15 days
prior to and 120 days after the effective date of an underwritten public
offering of the Company and (b) during the 12 weeks thereafter may sell an
amount not to exceed 1% of the number of shares of Company Common Stock then
issued and outstanding during any four week period. See "DESCRIPTION OF
SECURITIES-Preferred Stock, Warrants, and Options Outstanding," and "PLAN OF
DISTRIBUTION" below. Selling Stockholders holding an additional 516,004 shares
of Common Stock are restricted from reselling such shares for the period from 30
days prior to the filing of a registration statement relating to an underwritten
public offering for cash to 30 days after the abandonment of, or the last
closing in, the public offering, but not longer than 120 days. There can be no
assurance that such contractual restrictions will reduce the potential adverse
impact resulting from this offering on the trading market for the Company's
Common Stock. See "ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS" in the 1995 Form 10-KSB.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 31, 1996, and as adjusted to give pro forma effect to the subsequent
issuance of 244,111 shares of Common Stock and the receipt of proceeds therefrom
and from a stock subscription receivable, but without giving any effect to any
other changes to the Company after March 31, 1996.
<TABLE>
<CAPTION>
As of March 31, 1996
Pro Forma As
Actual Adjusted(1)
(In thousands)
<S> <C> <C>
Current portion of long-term debt $ 180 $ 180
------ --------
Long-term debt, net of current portion $3,439 $3,439
------ --------
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000
shares authorized; 17,500 issued and -- --
outstanding
Common Stock, $0.001 par value; 20,000,000
shares authorized; 8,460,485 issued and
outstanding; 8,704,596 shares issued and 8 9
outstanding, respectively(1)
Additional paid-in capital 10,665 11,497
Stock subscription receivable (90) --
Accumulated deficit (4,833) (4,852)
------ --------
Total stockholders' equity 5,750 6,654
------ --------
Total capitalization $9,189 $10,093
------ --------
</TABLE>
[FN]
(1) Subsequent to March 31, 1996, the Company issued 156,111 shares of Common
Stock for net proceeds of $680,000, issued 80,000 shares of Common Stock on
the exercise of options for $120,000, received $90,000 on a stock
subscription receivable and issued 8,000 shares for services. Does not
include an aggregate of 3,102,028 shares issuable upon (i) the conversion of
outstanding preferred stock, (ii) the exercise of outstanding options and
warrants, (iii) the issuance of shares contingent upon attaining certain
production levels in Montana and Nevada, and (iv) the issuance of up to
25,000 shares of Common Stock in consideration of services. Also does not
give effect to the possible sale of 3,000,000 shares in the Company's
proposed public offering, 450,000 shares that may be sold on exercise of the
underwriters' over-allotment option, or 150,000 shares issuable on the
exercise of warrants to be granted to the representatives of the
underwriters.
NO NET PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders. In connection with this offering, the Company
estimates that it will incur costs of approximately $35,000 for legal,
accounting, printing, and other costs. Any separate costs of the Selling
Stockholders will be borne by them.
DILUTION
Purchasers of shares of Common Stock from Selling Stockholders will likely
suffer substantial and immediate dilution in the adjusted net tangible book
value per share of the Common Stock they purchase below the purchase price for
such shares. As of March 31, 1996, as adjusted to give pro forma effect to the
subsequent issuance of 244,111 shares of Common Stock and the receipt of
proceeds therefrom and from collection of a stock subscription receivable, the
Company had a pro forma net tangible book value of $6.6 million, with 8,704,596
shares of Common Stock issued and outstanding, or approximately $0.76 per share,
after deducting a liquidation preference of $17,500 respecting the 17,500 shares
of the Company's outstanding preferred stock, which represents dilution of $7.49
per share below $8.25, the last sales price for the Common Stock on July 17,
1996.
CERTAIN RECENT EVENTS
Proposed Common Stock Offering
On June 10, 1995, the Company filed with the SEC a registration statement
on Form S-1 relating the offer and sale of 3 million shares of Common Stock at a
price to be determined between the Company and the representatives of the
underwriters. The net offering proceeds will be used to repay bank debt and to
fund the Company's capital expenditure program, which includes exploration and
potential development in the onshore Baltic Platform and Carpathian regions of
Poland and development and exploration in the western United States.
The managing underwriters of the offering are Oppenheimer & Co., Inc., and
Hanifen, Imhoff Inc.
A registration statement relating to the securities has been filed with the
Commission, but has not yet become effective. These securities may not be sold,
nor any offers to buy be accepted, prior to the time the registration statement
becomes effective. In addition, no sale of the securities may be made in any
state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Current Activities
The Company has developed a comprehensive exploration and development
program for the Baltic Concession. In May 1996, the Company, in partnership
with RWE-DEA, initiated a 300 kilometer seismic program which will build upon
previously collected data and assist in the determination of a drillsite for an
exploratory well from among three identified structures. The Company's ultimate
intention is to drill exploratory wells on all three structures with a target
depth of approximately 9,500 feet. If one or more of these three wells is found
to have commercial production, the Company will prepare a long-term field
development plan in conjunction with RWE-DEA, subject to obtaining required
financing. The Company has budgeted $8.0 million for its share of exploration
and development expenditures on the Baltic Concession through 1997. See
"Financial Plan" below.
Through the end of 1997, the Company intends to spend approximately $6.1
million on an expanded infill drilling development program on strategically
selected areas in the remainder of the Company's Cut Bank field, subject to
obtaining required funding. The Company has engaged Ryder Scott Company to
conduct an in-depth engineering analysis of the Company's Cut Bank field
properties, to review the recent infill drilling program and to assist in
designing the expanded program. Although management believes the expanded
development program will increase oil revenues and proved oil reserves, there
can be no assurance that the Company will actually realize substantial increases
in production and reserves or that any increases that are realized will be
sufficient to recover development costs incurred or result in a financial return
to the Company.
The Company, as operator, intends to drill an exploratory well in the Cobb
Creek prospect in late 1996 with a group of industry partners. The Company
identified this prospect through the reprocessing of geological and geophysical
data previously collected by other parties.
Financial Plan
As of March 31, 1996, as adjusted to give effect to the subsequent receipt
of $890,000 (including $90,000 received from a stock subscription receivable)
from the sale of securities and the exercise of options, the Company had working
capital of approximately $1.3 million. This working capital, together with the
$250,000 received from RWE-DEA related to its participation in the exploration
and potential development of the Baltic Concession, is expected to satisfy the
Company's operating requirements during 1996.
As of March 31, 1996, the Company had utilized approximately $600,000 of
its own funds for expenditures associated with obtaining the Baltic Concession,
obtaining and analyzing data provided by Polish sources and advancing the
related exploration effort to its current stage. The Company is obligated under
the Baltic Concession agreement to pay annual fees of approximately $58,000,
one-time geological and geophysical expenditures of $250,000 and to begin
drilling one well (at an estimated dry hole cost of approximately $1.0 million)
during 1996.
RWE-DEA, under a joint exploration arrangement, will provide up to $1.0
million for a seismic study now underway and up to $1.0 million in drilling and
testing costs for the initial test well in the Baltic Concession. The Company
has budgeted $18.4 million in capital expenditures through 1997, including (i)
approximately $8.0 million for exploration and potential development activities
related to the Baltic Concession, (ii) approximately $2.8 million for the review
and evaluation of available geological and geophysical data and the potential
initiation of exploratory activities in the Carpathian region, (iii)
approximately $6.1 million for infill development drilling in the Cut Bank field
in Montana and (iv) approximately $1.5 million for exploration activities in the
western United States. The actual expenditures for the foregoing items will be
dependent upon the actual results and costs of future exploration and
development activities. The Company estimates that the capital available from
the net proceeds from the offering of 3 million shares of Common Stock, the
Company's existing credit facility and, to the extent available, from
operations, will meet the Company's capital requirements through at least
December 31, 1997.
Even if the Company's proposed offering of 3 million shares of Common Stock
is completed, prior to the end of 1997, however, the Company may need additional
capital to accelerate planned exploration and development programs in both
Poland and the United States. If exploration of the Baltic Platform or
Carpathian region is successful in proving substantial oil reserves, the Company
may require additional capital to fund a multi-well development program, install
oil storage and handling facilities or purchase other assets or related
investments required to support large-scale production. The Company has no
arrangement for any such additional financing, but may seek required funds from
the sale of additional securities, project financing, strategic alliances with
other energy or financial partners or other arrangements, all of which may
dilute the interest of existing shareholders in the Company or in the specific
project financed. There can be no assurance that additional funds could be
obtained or, if obtained, would be on terms favorable to the Company.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock,
$0.001 par value; and 5,000,000 shares of preferred stock, $0.001 par value.
Preferred Stock
Under the Company's Articles of Incorporation, the Company's Board of
Directors is authorized, without shareholder action, to issue preferred stock in
one or more series and to fix the number of shares and rights, preferences and
limitations of each series. Among the specific matters that may be determined
by the Board of Directors are the dividend rate, the redemption price, if any,
conversion rights, if any, the amount payable in the event of any voluntary
liquidation or dissolution of the Company and voting rights, if any. The
Company has 17,500 shares of preferred stock, with an aggregate liquidation
preference of $17,500, issued and outstanding as of March 31, 1996.
Common Stock
As of the date of this Prospectus, the Company had 8,704,596 shares of
Common Stock issued and outstanding. The holders of Common Stock are entitled
to one vote per share on each matter submitted to a vote at any meeting of
stockholders. Holders of Common Stock do not have cumulative voting rights, and
therefore, a majority of the outstanding shares voting at a meeting of
stockholders are able to elect the entire Board of Directors, and if they do so,
minority stockholders would not be able to elect any members to the Board of
Directors. The Company's bylaws provide that a majority of the issued and
outstanding shares of the Company constitutes a quorum for stockholders'
meetings, except with respect to certain matters for which a greater percentage
quorum is required by statute.
Stockholders of the Company have no preemptive rights to acquire additional
shares of Common Stock or other securities. The Common Stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Company, the shares of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities and the
payment of any liquidation preferences.
Holders of Common Stock are entitled to receive such dividends as the Board
of Directors may from time to time declare out of funds legally available for
the payment of dividends. The Company seeks growth and expansion of its
business through the reinvestment of profits, if any, and does not anticipate
that it will pay dividends on the Common Stock in the foreseeable future.
The Company has reserved for issuance an aggregate of 3,102,028 shares of
Common Stock consisting of 17,500 shares issuable on the conversion of the same
number of shares of preferred stock, 2,034,528 shares on the exercise of
outstanding options and warrants at exercise prices ranging from $1.10 to $3.00
with a weighted average exercise price of $2.33 per share, 825,000 shares on the
exercise of options previously granted but not yet exercisable at $3.00 per
share, 200,000 shares issuable on the satisfaction of certain contractual
conditions relating to oil production levels from the Company's producing
properties in Montana and Nevada and up to 25,000 shares issuable in
consideration of services.
Certain Article and Bylaw Provisions
The Company's Articles of Incorporation divide the members of the Board of
Directors into three classes of directors, with each class to be as nearly equal
in number of directors as possible, serving staggered, three-year terms. See
"Management" in the 1995 Form 10-KSB. The Company's Articles of Incorporation
also provide that directors may be removed, with or without cause, by a two-
thirds majority of the shareholders at a meeting called for that purpose and
that any resulting vacancies can be filled by only a vote of a majority of the
directors remaining in office.
The Company's bylaws permit stockholders to nominate a person for election
as a director or bring other matters before a stockholder meeting only if
written notice of such intent is provided to the Company at least 30 days prior
to the meeting. Such notice of intent to nominate a person for election as a
director is required to set forth the same kind of information respecting such
nominee as would be required under the proxy rules of the SEC, including the
written consent of the nominee to serve as a director, if elected, and the name
and address of the stockholder making the nomination as well as the number of
shares of stock owned by such stockholder. In the case of other proposed
business, the notice must set forth a brief description of each matter proposed,
the name and address of the stockholder proposing the matter, the number of
shares of stock owned by such stockholder and any material interest of such
stockholder in such matter.
Nevada law provides that a merger or consolidation, sale or similar
transaction involving all or substantially all of the Company's assets, the
issuance of securities having an aggregate value equal to 5% or more of the
aggregate market of all outstanding shares of the corporation or the
reclassification, recapitalization or similar transaction involving an
"interested stockholder" (as defined), within three years after the stockholder
became interested, cannot be completed unless such transaction is approved by
the Board of Directors of the Company. After the expiration of three years
after a person becomes an interested stockholder, a transaction cannot be
completed with the interested stockholder unless it is approved by the Board of
Directors or a majority of the outstanding voting power not beneficially owned
by the interested stockholder, unless certain "fair price" provisions are met.
Such fair price provisions generally require that the amount of cash and the
market value of the consideration of the cash to be received per share by all
holders of the outstanding Common Stock of the Company not beneficially owned by
the interested stockholder be at least equal to the higher of the price per
share paid by the interested stockholder or the market value on the date of
announcement of the proposed combination. For purposes of these provisions, an
interested stockholder is one who beneficially owns, directly or indirectly, 10%
or more of the voting power of the outstanding stock of the corporation.
The foregoing provisions may tend to deter any potential unfriendly offers
or other efforts to obtain control of the Company that are not approved by the
Board of Directors and thereby deprive the stockholders of opportunities to sell
shares of Common Stock at prices higher than the prevailing market price. On
the other hand, these provisions may tend to assure continuity of management and
corporate policies and to induce any person seeking control of the Company or a
business combination with the Company to negotiate on terms acceptable to the
then elected Board of Directors.
Indemnification of Officers and Directors; Limitation of Liability
The Company's articles of incorporation and bylaws provide for
indemnification of the Company's officers and directors to the fullest extent
permitted by the Nevada corporation law, which provides for indemnification for
damages, including costs and attorney's fees, incurred in any pending or
completed action by reason of the fact that such person was an officer or
director of the Company if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company. The Company's articles of incorporation contain a provision that
limits the personal liability of the Company's directors or officers for damages
for breach of fiduciary duty as a director or officer, except for damages
resulting from acts or omissions that involve intentional misconduct, fraud or
knowing violations of law or the payment of dividends in violation of statute.
The effect of this provision is to eliminate the rights of the Company and its
stockholders to recover money damages against a director or officer for breach
of fiduciary duty of care except in certain circumstances. This provision does
not limit or eliminate the rights of the Company or any stockholder to seek non-
monetary relief such as an injunction or rescission in the event of a breach of
fiduciary duty. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provision, or otherwise, the Company
has been advised 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.
Registrar and Transfer Agent
The registrar and transfer agent of the Company's securities is Fidelity
Transfer Company, 357 South 200 East, Salt Lake City, Utah 84111, telephone
(801) 355-7177.
SELLING STOCKHOLDERS
The following table provides certain information, as of the date of this
prospectus, respecting the Selling Stockholders, the shares of Common Stock to
be sold by them and to be held by them following the offering, assuming the sale
of all offered shares. The total shares owned for each Selling Stockholder
gives effect to (a) the issuance of 17,500 shares of Common Stock on the
conversion of shares of Company Preferred Stock; (b) the issuance of 250,334
shares of Common Stock on the exercise of Options; (c) the issuance of 309,194
shares of Common Stock on the exercise of Warrants, and (d) the issuance of
25,000 shares of Common Stock in consideration of services.
The Selling Stockholders named below confirmed at the time they acquired
the Company Preferred Stock, the FX Producing Preferred Stock, the Options and
the Warrants that such securities were acquired for investment purposes only and
without a view toward their resale and acknowledged the existence of
restrictions on resale applicable to such securities. Such Selling Stockholders
can sell such securities only in limited circumstances. The Company is not
aware of any intention by any Selling Stockholder to sell such Company Preferred
Stock, Options or Warrants prior to their conversion or exercise. This offering
relates only to the sale of shares of Common Stock held or to be held by the
Selling Stockholders named in the following table. If a Selling Stockholder
sells the Company Preferred Stock, Options or Warrants held by such Selling
Stockholder prior to converting or exercising such securities into shares of
Common Stock, such shares of Common Stock will not be registered and may not be
resold pursuant to this offering.
<TABLE>
<CAPTION>
Shares Owned After
Shares Owned Prior to the Offering(1) the Offering
Common Company Shares to
Selling Stockholders Stock(2) Preferred(3) Warrants(4) Options(5) be Offered Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C>
Abrasive & Tool
Specialties Employees 4,000 - - - 4,000 - -
Profit Sharing Trust
Joseph W. Albright, Jr., 4,500 - - - 4,500 - -
Trustee
Alpine Securities Co. - - 2,500 - 2,500 - -
Mitchel C. Anderson 187 - - - 187 - -
B&B Production Co. 69,602 - - - 69,602 - -
Ballou Ventures, Ltd.(6) 6,848 - - - 6,848 - -
Michael L. Ballou 8,926 - - - 8,926 - -
Robert L. & Trenna J.
Ballou JTWROS(6) 3,414 - - - 3,414 - -
Gregory Barnett 2,000 - - - 2,000 - -
Andy S. Berman 15,600 - - - 15,600 - -
Bernice Berman(7) 89,782 - - - 89,782 - -
The Estate of John S.
Berman(7) 37,919 - - - 37,919 - -
Ronald J. Berman 120,000 - - - 120,000 - -
Bohemian Travel 2,000 - - - 2,000 - -
Roger Bonahoom 21,356 - - - 21,356 - -
Glenn C. Brown(8) 884 - - - 884 - -
Glenn C. Brown and Cecil
A. Brown JTWROS (8) 2,048 - - - 2,048 - -
George B. Bullock, Jr.,
IRA Rollover 10,000 - - - 10,000 - -
Daniel S. and Louise S. 10,833 - - - 10,833 - -
Cafolla(9)
Tony Church 1,000 - - - 1,000 - -
Horace I. Coward 3,682 - - - 3,682 - -
Robert I. Coward 50,000 - - 200,000 250,000 - -
CPM Construction 15,000 - - - 15,000 - -
Dan Cafolla & Associates
Inc. Profit Sharing 18,719 - - - 18,719 - -
Plan(9)
James E. and Helen L. 10,000 - - - 10,000 - -
Danchulis
Candy Dennewitz 2,500 - - - 2,500 - -
Robert Detwiler 5,000 - 20,000 - 25,000 - -
Marc Eller 33,042 - - - 33,042 - -
Robert J. Elsinger
and Janet Warner 5,110 - - - 5,110 - -
Essex Special Growth LT 22,000 - - - 22,000 - -
EV Marathon Gold &
Natural Resources Fund 50,000 - - - 50,000 - -
Everen Clearing Corp.
fbo Klaus Genssler IRA 12,500 - - - 12,500 - -
Rollover
F.J. Easton & Co. Pty. 70,000 - - - 70,000 - -
Ltd.
Richard Fechtor - - 15,000 - 15,000 - -
Sheldon Fechtor - - 15,000 - 15,000 - -
Peter D. Fenton - - 10,000 - 10,000 - -
Fenway Advisory Group 5,000 - - - 5,000 - -
Laurence Flood - - 100,000 - 100,000 - -
Robert E. Garrison II - - - 40,000 40,000 - -
Rolf Genssler 12,500 - - - 12,500 - -
Angie L. Giauque 168 - - - 168 - -
Brent J. Giauque 17,500 - - - 10,000 7,500 *
Christopher K. Giauque 1,166 - - - 666 500 *
James A. Giauque, Jr. 1,810 - - - 1,310 500 *
Jennifer A. Giauque 333 - - - 333 - -
Kent A. Giauque 3,000 - - - 1,000 2,000 *
Kent A. Giauque,
custodian for 833 - - - 333 500 *
Jessica J. Giauque
Kirk H. Gibson, Trustee 15,000 - - - 15,000 - -
G. R. Goodwin 15,940 - - - 15,940 - -
Dr. Wojciech Gorecki 30,000 - - - 30,000 - -
Peter Green 6,000 - - - 6,000 - -
Lloyd A. Hardcastle 5,500 - - - 3,500 2,000 *
Ann W. Harney 1,841 - - - 1,841 - -
Sue M. Harris 20,000 - - - 20,000 - -
Titus H. Harris III 10,000 - - - 10,000 - -
Hausmann Holdings 86,000 - - - 86,000 - -
Douglas Dee Heiner 3,500 - - - 1,000 2,500 *
Marek Hoffman 5,000 - - - 5,000 - -
Bruce F. Israel 37,176 - - - 37,176 - -
Daniel L. Israel 37,026 - - - 37,026 - -
J.R. Bacon Drilling, 25,453 - - - 25,453 - -
Inc.
KAL Investments 2,000 - - - 2,000 - -
William S. Kmon 14,243 - - - 11,243 3,000 *
Whitney Tate Krueger 5,000 - - - 5,000 - -
UGMA
Joseph W. Kryla 10,000 - - - 10,000 - -
Jack Kusaba 1,500 - - - 500 1,000 *
Peter J. Lagemann PMW
Bruckmann Tr.(10) 41,167 - - - 41,167 - -
Peter J. Lagemann(10) 13,000 - - - 13,000 - -
James Lawrence 11,111 - - - 11,111 - -
Chris Lawson 15,000 - - - 15,000 - -
Sanford J. Lewinthal, 1,093 - - - 1,093 - -
as agent
Charles K. Ligon 105,000 - - - 105,000 - -
Marilyn L. Little 3,686 - - - 3,686 - -
Alex B. Lovejoy Trust 3,333 - - - 3,333 - -
Donald W. Lovejoy Trust,
Gray Seifert & Co.,
Inc., as agent for 19,333 - - - 3,333 16,000 -
Lisa Woodward, Trustee
Karen D. Lovejoy, Gray
Seifert & Co., Inc., 10,000 - - - 10,000 - -
as agent
Robert M. Lovejoy 3,333 - - - 3,333 - -
Winifred Lovejoy Trust,
Gray Seifert & Co., 16,667 - - - 16,667 - -
Inc., as agent
Holly Lowry 2,500 - - - 2,500 - -
Theodore L. McCaugherty 25,000 - - - 25,000 - -
IRA
Lawrence McGary - - 67,000 - 67,000 - -
Peter Z. Michael 10,428 - - - 10,428 - -
MML Management, Ltd.(11) 319,325 - 43,194 - 362,519 - -
Frederick R. Mueller 124,100 - - - 124,100 - -
Robert Mueller 5,000 - - - 5,000 - -
Iwao Nakatani 28,000 - - - 4,000 24,000 *
National Australia 374,864 - 36,500 - 411,364 - -
Trustees(11)
Denny Nestripke 1,500 - - - 1,500 - -
The New Discovery Fund 25,000 - - - 25,000 - -
NML Nominees (Canaberra)
Limited Mullens
Highland Equity Fund 42,500 - - - 42,500 - -
Keith Painter 3,686 - - - 3,686 - -
Larry Papier 14,500 - - - 14,500 - *
Permanent Trustee
Company Ltd. Trust
Account c/o Mullens 18,000 - - - 18,000 - -
Harry S. Peterson, Jr. 15,000 - - - 15,000 - -
William S. Peterson 14,097 - - - 14,097 - -
Petresearch 27,500 - - - 27,500 - -
International,
Inc.(11)
Joseph M. Pierce 8,526 - - - 8,526 - -
Norman Prouty 80,000 - - - 80,000 - -
Rumsey Royalty Trust 25,000 - - - 25,000 - -
(12)(13)
Thair Schneiter 6,000 - - - 2,000 4,000 *
Roy Schoeman 25,000 - - - 25,000 - -
Trust FBO Grant G. 20,000 - - - 20,000 - -
Simmons, III
David E. Simpson 4,419 - - - 4,419 - -
Stanley M. Smith(14) 6,000 5,000 - - 5,000 6,000 -
Cameron O. Smith 2,917 - - - 2,917 - -
Robert A. Sprotte 23,042 - - - 23,042 - -
Tom Stahl 7,176 - - - 7,176 - -
Charles M. Strain 25,000 - - - 25,000 - -
Emily Harris Todd 10,000 - - - 10,000 - -
Beth Tolbert 1,474 - - - 1,474 - -
Walter E. Uhlman 47,800 - - - 37,000 10,800 *
Eugene Vivo - 12,500 - - 12,500 - -
Mark S. Wagner 25,000 - - - 25,000 - -
Bruce Watts 7,371 - - - 7,371 - -
Witold Andrzej Weil 5,000 - - - 5,000 - -
Westergaard Publishing 3,000 - - - 3,000 - -
The Wood River Trust 375,000 - - - 375,000 - -
(11)(12)
Kelly Hoa Yang 800 - - - 500 300 *
Paul R. Yoder, Jr. 12,500 - - - 12,500 - -
Leonardo Zangani - - - 10,334 10,334 - -
TOTAL 3,096,689 17,500 309,194 250,334 3,593,117 80,600 *
</TABLE>
[FN]
* Less than one percent.
(1) Shares owned prior to the offering include all shares of Common Stock
and underlying securities convertible or exercisable into shares of Common
Stock owned by the Selling Stockholder. Shares owned after the offering
assume the sale of all shares of Common Stock offered pursuant to this
offering. Percentage figures respecting the securities owned after the
offering give effect to the conversion of all Company Preferred Stock and the
exercise of all Warrants and Options by the Selling Stockholders.
(2) Includes (i) 1,322,248 shares of Common Stock issued on conversion of a
like number of shares of FX Producing Preferred Stock, including shares of FX
Producing Preferred Stock issued as dividends on the outstanding FX Producing
Preferred Stock prior to conversion; (ii) 667,500 shares of Common Stock
issued on conversion of a like number of shares of Company Preferred Stock;
and (iii) 65,000 shares of Common Stock issued on exercise of Options.
(3) Shares of Company Preferred Stock are convertible into shares of Common
Stock at the rate of one share of Common Stock for each share of Company
Preferred Stock held. Such shares of Company Preferred Stock must be
converted into shares of Common Stock before the resale of the Common Stock
offered by the Selling Stockholder pursuant to this offering.
(4) The Warrants are exercisable into shares of Common Stock at a weighted
exercise price of $2.07 per share. Such Warrants must be exercised to
purchase shares of Common Stock before the resale of the Common Stock offered
by the Selling Stockholder pursuant to this offering.
(5) The Options are exercisable into shares of Common Stock at an exercise
price of from $1.50 to $3.00 per share. Such Options must be exercised to
purchase shares of Common Stock before the resale of the Common Stock offered
by the Selling Stockholder pursuant to this offering.
(6) Robert Ballou is a partner in Ballou Ventures, Ltd. and is deemed to
be the beneficial owner of the shares held by Ballou Ventures, Ltd.
(7) Bernice Berman is deemed to be the beneficial owner of the shares held
by the estate of John S. Berman.
(8) Glen C. Brown also hold 2,000 shares of Common Stock jointly with
Cecil A. Brown.
(9) Daniel Cafolla is deemed to be the beneficial owner of the shares held
by Dan Cafolla & Associates, Inc., Profit Sharing Plan.
(10) Peter J. Lagemann is deemed to be the beneficial owner of the shares
held by Peter J. Lagemann PMW Bruckmann Tr.
(11) Gives effect to the issuance of up to 25,000 shares of Common Stock in
consideration for services.
(12) Taking into account the number of shares of Common Stock held by the
Selling Stockholder and the number of shares of Common Stock issuable on
conversion or exercise of underlying securities held by the Selling
Stockholder, the Selling Stockholder is the beneficial holder of 5% or more
of the issued and outstanding shares of Common Stock of the Company. See
"ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in
the 1995 Form 10-KSB.
(13) The Wood River Trust and Rumsey Royalty Trust are affiliates of
Sunshine Pacific.
(14) Includes 6,000 shares of Common Stock held by B&S Partners of which
Mr. Smith is a general partner.
PLAN OF DISTRIBUTION
General
This Prospectus relates to the public offer and sale by the Selling
Stockholders of an aggregate of 3,593,117 shares of Common Stock of the Company
consisting of (i) 650,500 shares Common Stock issued or issuable on conversion
of the same number of shares of Company Preferred Stock; (ii) 1,177,045 shares
of Common Stock issued on conversion of the same number of shares of 1994 8%
Payable in Cash or in Kind Cumulative Convertible Preferred Stock of FX
Producing Company, Inc., a wholly owned subsidiary of the Company; (iii) 250,334
shares of Common Stock issuable on exercise of outstanding options at a weighted
average exercise price of $2.16 per share; (iv) 309,194 shares of Common Stock
issuable on exercise of Common Stock purchase warrants at a weighted average
exercise price of $2.07 per share; (v) 1,376,044 shares of Common Stock now
outstanding; and (vi) 25,000 shares of Common Stock issuable in consideration of
services. See "SELLING STOCKHOLDERS" and "DESCRIPTION OF SECURITIES" above.
Sale of Common Stock
The Common Stock to be sold by the Selling Stockholders may be sold by
them, from time to time, in the over-the-counter market through or to securities
brokers or dealers that may receive compensation in the form of discounts,
concessions, or commissions from the Selling Stockholders and/or the purchasers
of Common Stock for whom they may act as agent, directly to purchasers in
transactions negotiated by the Selling Stockholders or pursuant to Rule 144 or
another exemption from registration. Any such sale of Common Stock by Selling
Stockholders must be accompanied by, or follow the delivery of, a prospectus
filed with a current registration statement relating to the Common Stock being
offered, unless a Selling Stockholder elects to rely on Rule 144 or another
exemption from the registration requirements in connection with a particular
transaction. The Selling Stockholders, and any dealers or brokers that
participate in the distribution of the Common Stock, may be deemed to be
"underwriters" as that term is defined in the Securities Act, and any profit on
the sale of Common Stock by them and any discounts, commissions, or concessions
received by any such dealers or brokers may be deemed to be underwriting
discounts and commissions under the Securities Act.
The Common Stock may be sold by the Selling Stockholders from time to time
in one or more transactions at a fixed offering price, which may be changed, or
at prices that may vary through the period during which the securities may be
offered, or at such other prices as may be negotiated by the Selling Stockholder
and the purchaser at the time of sale. The Company will pay expenses of this
offering incident to the offering and sale of the Common Stock to the public,
other than commissions and discounts of dealers or brokers. The Company does
not intend to enter into any arrangement with any securities dealer concerning
solicitation of offers to purchase the Common Stock.
Effect of Offering on Market
The trading volume of the Common Stock in the over-the-counter market is
limited. The sale or potential for sale of the 3.8 million shares of Common
Stock to be sold in this offering may have a depressive effect on the trading
price for such securities. See "ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS" in the 1995 Form 10-KSB.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1995, and for the year then ended, incorporated by reference
into this prospectus have been incorporated herein in reliance upon the
reports of Coopers & Lybrand, L.L.P., independent accountants, given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of the Company for the year ended December 31,
1994, incorporated by reference into this prospectus have been incorporated
herein in reliance upon the report of Barker & Folsom, certified public
accountants, given upon the authority of such firm as experts in accounting
and auditing.
The estimates of oil and gas reserves of the Company respecting its
properties are included herein in reliance upon the authority of Larry D.
Krause, petroleum engineering consultant, Billings, Montana, in reliance upon
his authority as an expert in petroleum engineering.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on form S-3 under the Securities Act of 1933, as amended.
For the purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. This prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto, to which reference hereby is made. Each statement made in
this prospectus concerning a document filed as an exhibit to the Registration
Statement is qualified in its entirety by reference to such exhibit for a
complete statement of its provisions. Any interested party may inspect the
Registration Statement and its exhibits, without charge, at the public reference
facilities of the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and 7 World Trade Center, Suite 1300, New York,
New York 10048. Any interested party may obtain copies of all or any portion of
the Registration Statement and its exhibits at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, the SEC
maintains a web site that contains reports, proxy and information statements and
other information regarding the Company and other registrants that file
electronically with the SEC at http://www.sec.gov.
- --------------------------------
TABLE OF CONTENTS FRONTIER OIL
EXPLORATION COMPANY
- --------------------------------
Section Page
Prospectus Summary............3
Risk Factors..................6
Capitalization...............17
No Net proceeds..............17 3,593,117 Shares of Common Stock
Dilution.....................18
Certain Recent Events........18
Description of Securities....19
Selling Stockholders.........22
Plan of Distribution.........25
Experts......................26
Additional Information.......27
No dealer, salesman, or other ---------------------------------
person has been authorized in
connection with this offering to give PROSPECTUS
any information or to make any
representation other than as ---------------------------------
contained in this prospectus and, if
made, such information or
representation must not be relied on
as having been authorized by the
Company. This prospectus does not
constitute an offer to sell or the
solicitation of an offer to buy any
securities covered by this prospectus
in any state or other jurisdiction to
any person to whom it is unlawful to
make such offer or solicitation in
such state or jurisdiction.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the securities
being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee $ 3,667
Attorneys' fees 20,000
Accountants' fees 5,000
State "blue sky" fees and expenses (including
attorneys' fees) 2,000
Printing expenses 2,000
Miscellaneous 2,333
Total $35,000
=======
</TABLE>
All expenses with the exception of the Securities and Exchange Commission
registration fee are estimates.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Sections 78.037 and 78.751 of the Nevada Revised Statutes and Article VI of
the Registrant's Articles of Incorporation provide for indemnification of the
Registrant's directors in a variety of circumstances, which include liabilities
under the Securities Act of 1933, as amended.
ITEM 27. EXHIBITS
Exhibits
The following exhibits are included as part of this report:
<TABLE>
<CAPTION>
SEC
Exhibit Reference
Number Number Title of Document Location
<S> <C> <C> <C>
Item 3. Articles of Incorporation and Bylaws
3.01 3 Restated and Amended Articles of Incorporation Incorporated by
Reference(1)
3.02 3 Bylaws Incorporated by
Reference(1)
Item 4. Instruments Defining the Rights of Security
Holders
4.01 4 Specimen Stock Certificate Incorporated by
Reference(1)
4.02 4 Designation of Rights, Privileges, and Preferences Incorporated by
of 1993 Series Preferred Stock of Frontier Oil Reference(1)
Exploration Company
Item 5. Opinion Regarding Legality
5.01 5 & 23 Opinion of Kruse, Landa & Maycock, L.L.C. This Filing
Item 10. Material Contracts
10.01 10 Purchase and Sale Agreement between B&B Production Incorporated by
Company and FX Producing Company, Inc., dated Reference(1)
April 1, 1994, regarding purchase of B&B/JRB
Assets
10.02 10 Purchase and Sale Agreement between J.R. Bacon Incorporated by
Drilling, Inc., and The Supply Store Company and Reference(1)
FX Drilling Company, Inc., regarding purchase of
B&B/JRB Assets
10.03 10 Real Property Exchange Agreement between Frontier Incorporated by
Oil Exploration Company, FX Drilling Company, Reference(1)
Inc., FX Producing Company, Inc., and B&B
Production and J.R. Bacon Drilling, Inc., dated
June 8, 1994, regarding purchase of B&B/JRB Assets
10.04 10 Exchange Escrow Agreement between FX Producing Incorporated by
Company, Inc., and B&B Production, Inc., and First Reference(1)
State Bank of Shelby, dated June 8, 1994,
regarding escrow of cash and FX Producing
preferred stock in relation to the purchase of
B&B/JRB Assets
10.05 10 Addendum dated July 21, 1994, to the Exchange Incorporated by
Escrow Agreement dated June 8, 1994 Reference(1)
10.06 10 Loan Agreement dated June 7, 1994, by and between Incorporated by
Bank One, Texas, N.A., and FX Producing Company, Reference(1)
Inc.
10.07 10 Promissory Note dated June 7, 1994, in the Incorporated by
original principal amount of $5,000,000 payable by Reference(1)
FX Producing Company, Inc., to Bank One, Texas,
N.A.
10.08 10 Guaranty dated June 7, 1994, by Frontier Oil Incorporated by
Exploration Company for the benefit of Bank One, Reference(1)
Texas, N.A., relating to the Bank Loan
10.09 10 Stock Pledge Agreement dated June 7, 1994, between Incorporated by
Frontier Oil Exploration Company and Bank One, Reference(1)
Texas, N.A., relating to pledge of common stock of
FX Producing Company, Inc.
10.10 10 Deed of Trust, Security Agreement, Financing Incorporated by
Statement and Fixture Filing dated June 7, 1994, Reference(1)
between FX Producing Company, Inc., as grantor,
Arthur R. Gralla, as trustee, and Bank One, Texas,
N.A., as grantee, relating to Nevada properties
10.11 10 Deed of Trust, Mortgage, Security Agreement, Incorporated by
Financing Statement, and Assignment of Production Reference(1)
dated June 7, 1994, between FX Producing Company,
Inc., as mortgagor and debtor, Arthur R. Gralla,
as trustee, and Bank One, Texas, N.A., as
mortgagee and secured party, relating to Montana
properties
10.12 10 Transfer Order Letter executed June 7, 1994, Incorporated by
between FX Producing Company, Inc., and Bank One, Reference(1)
Texas, N.A., relating to production from producing
properties of FX Producing Company, Inc.
10.13 10 Promissory Note dated June 7, 1994, in the Incorporated by
original principal amount of $1,385,000 payable by Reference(1)
Frontier Oil Exploration Company to FX Producing
Company, Inc.
10.14 10 Collateral Transfer of Note dated June 7, 1994, by Incorporated by
FX Producing Company, Inc., and Bank One, Texas, Reference(1)
N.A., relating to transfer of promissory note of
Frontier Oil Exploration Company
10.15 10 Form of Employment Agreement between R.L. Brown, Incorporated by
J.R. Bacon, and L. Bacon and Frontier Oil Reference(1)
Exploration Company
10.16 10 Exchange Agreement between Charles C. Rumsey, Incorporated by
Sunshine Pacific Corporation, A&C Associates, the Reference(1)
Rumsey Royalty Trust, and the Wood River Trust
dated June 7, 1994, regarding issuance of 500,000
shares of Common Stock in exchange for interests
in the Basin & Range Project
10.17 10 Assignment and Assumption dated June 7, 1994, Incorporated by
between Charles C. Rumsey, Jr., Sunshine Pacific Reference(1)
Corp., A&C Associates, The Rumsey Royalty Trust,
The Wood River Trust and Frontier Oil Exploration
Company
10.18 10 Investor's Rights Agreement dated June 7, 1994, Incorporated by
between Frontier Oil Exploration Company , Charles Reference(1)
C. Rumsey, Jr., Sunshine Pacific Corp., A&C
Associates, The Rumsey Royalty Trust, and The Wood
River Trust
10.19 10 Warrant to purchase 150,000 shares of Common Stock Incorporated by
at $1.10 issued to George E. Dullnig & Co. Reference(1)
10.20 10 Form of Warrant to Purchase Shares of Common Stock Incorporated by
at $1.65 with related schedule of optionees Reference(1)
10.21 10 Employment Agreements between Frontier Oil Incorporated by
Exploration Company and each of David Pierce and Reference(1)
Andrew Pierce, effective January 1, 1995 *
10.22 10 Form of Stock Option with related schedule (D. Incorporated by
Pierce, A. Pierce, and Others) * Reference(1)
10.23 10 1994 Employee Incentive Plan * Incorporated by
Reference(1)
10.24 10 Form of Stock Option granted to D. Pierce and A. Incorporated by
Pierce* Reference(1)
10.25 10 Crude Oil Purchase Contract dated March 16, 1994 Incorporated by
between Petro Source Partners, Ltd., and B&B Reference(1)
Production Company
10.26 10 Amended Crude Oil Purchase Contract dated August Incorporated by
15, 1994, between FX Drilling Company, Inc., and Reference(1)
Petro Source Partners, Ltd.
10.27 10 Agreement effective May 1, 1994 between J.R. Bacon Incorporated by
Drilling, Inc. and Crysen Refining, Inc. Reference(1)
10.28 10 Amended Agreement Letter dated June 30,1994, Incorporated by
between FX Drilling Company, Inc. and Crysen Reference(1)
Refining, Inc.
10.29 10 Agreement dated July 8, 1994 between FX Drilling Incorporated by
Company, Inc. and CENEX, Inc., regarding Crude Oil Reference(1)
Purchase Contract.
10.30 10 Agreements between FX Producing and each of Jerry Incorporated by
R. Bacon and Roy Brown dated December 2, 1994 Reference(1)
10.31 10 Preliminary Agreement between Frontier Oil Incorporated by
Exploration Company and the Ministry of Reference(1)
Environmental Protection, Natural Resources and
Forestry dated February 10, 1995, with translation
thereof
10.32 10 Agreement between Frontier Oil Exploration Company Incorporated by
and Roy L. Brown, Jerold R. Bacon, and Laura A. Reference(1)
Bacon dated February 7, 1995
10.33 10 Supplemental Agreement between FX Producing, Incorporated by
Frontier Oil Exploration Company, Roy L. Brown, Reference(1)
and Jerold R. Bacon dated February 27, 1995
10.34 10 Mining Usufruct Agreement between the State Incorporated by
Treasury of the Republic of Poland and Frontier Reference(3)
Poland Exploration and Producing Company, Sp.z
o.o. dated August 22, 1995
10.35 10 Amendment No. 1 to Mining Usufruct Agreement Incorporated by
Reference(4)
10.36 10 Frontier Oil Exploration Company 1995 Stock Option Incorporated by
and Award Plan* Reference(4)
10.37 10 Form of Non-Qualified Stock Option with related Incorporated by
schedule* Reference(4)
10.38 10 Non-Qualified Stock Option granted to Robert I. Incorporated by
Coward* Reference(4)
10.39 10 Letter Agreement dated effective August 3 , 1995, Incorporated by
between Lovejoy Associates, Inc., and Frontier Oil Reference(4)
Exploration Company re: Financial Consulting
Engagement*
10.40 10 Loan Agreement between Thomas B. Lovejoy and Incorporated by
Frontier Oil Exploration Company Reference(4)
10.41 10 Letter Agreement dated effective August 3, 1995, Incorporated by
between Lovejoy Associates, Inc., and Frontier Oil Reference(4)
Exploration Company re: Indemnification
10.42 10 Non-Qualified Stock Option granted to Thomas B. Incorporated by
Lovejoy* Reference(4)
10.43 10 Form of Amendment No. 1 to Loan Agreement dated Incorporated by
June 7, 1994, by and between FX Producing Company, Reference(5)
Inc., and Bank One, Texas, N.A.
10.44 10 Amendment No. 2 to Loan Agreement dated June 7, Incorporated by
1994, by and between FX Producing Company, Inc., Reference(5)
and Bank One, Texas, N.A.
10.45 10 Form of Concession dated December 20, 1995, Incorporated by
relating to concessions granted pursuant to the Reference(5)
Mining Usufruct Agreement, with related schedule
10.46 10 Agreement dated April 16, 1996, between Frontier Incorporated by
Poland Exploration and Producing Company Sp. Z o Reference(6)
o. and RWE-DEA Aktiengesellschaft fur Mineraloel
und Chemie, including exhibits, relating to Poland
Concession
10.47 10 Joint Study Agreement dated May 21, 1996, between Incorporated by
FX Energy (Frontier Oil Exploration Company) and Reference(7)
the Polish Oil and Gas Company, including
appendix, relating to joint study of area of
interest.
10.48 10 Amendments to Employment Agreements between Incorporated by
Frontier Oil Exploration Company and each of Reference(8)
David Pierce and Andrew Pierce, effective May 30,
1996 *
10.49 10 Employment Agreement between Frontier Oil Incorporated by
Exploration Company and Jerzey M. Maciolek Reference(8)
10.50 10 Amendment No. 3 to Loan Agreement dated June 7, Incorporated by
1994, by and between FX Producing, Inc., and Bank Reference(8)
One, Texas, N.A.
Item 23. Consents of Experts and Counsel
23.01 23 Consent of Barker & Folsom, previous Company This Filing
auditors
23.02 23 Consent of Coopers & Lybrand L.L.P., Company This Filing
auditors
23.03 23 Consent of Kruse, Landa & Maycock, L.L.C., This Filing
counsel to the Company (See Item 5)
23.04 23 Consent of Larry D. Krause, Petroleum Engineer This Filing
Item 24. Power of Attorney
24.01 24 Power of Attorney This Filing See
Signature Page
</TABLE>
[FN]
*Identifies each management contract or compensatory plan or arrangement
required to be filed as an exhibit.
(1)Incorporated by reference from the registration statement on Form SB-2, SEC
File No. 33-88354-D.
(2)Incorporated by reference from the report on Form 8-K dated August 16, 1995.
(3)Incorporated by reference from the report on Form 8-K dated August 22, 1995.
(4)Incorporated by reference from the quarterly report on Form 10-Q for the
quarter ended September 30, 1995.
(5)Incorporated by reference from the annual report on Form 10-KSB for the year
ended December 31, 1995.
(6)Incorporated by reference from the current report on Form 8-K dated May 3,
1996.
(7)Incorporated by reference from the current report on Form 8-K dated May 21,
1996.
(8)Incorporated by reference from the registration statement on Form S-1, SEC
File No. 333-05583.
ITEM 17. UNDERTAKINGS
Filings Incorporating Subsequent Exchange Act Documents by Reference (Regulation
S-K, Item 512(b))
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
Incorporated Annual and Quarterly Reports (Regulation S-K, Item 512(e))
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of rule 14a-3 or rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
article 3 of regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Rule 415 Offerings: Post-Effective Amendments (Regulation S-K, Item 512(a))
The undersigned Registrant will:
(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to include any
additional or changed material information in the plan of distribution.
(2) For the purpose of determining liability under the Securities
Act, treat each such post-effective amendment as a new registration
statement of the securities offered, and the offering of such securities at
that time to be the initial bona fide offering thereof.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the termination of the offering.
Indemnification (Regulation S-K, Item 512(h))
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer 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 small business issuer of expenses incurred or
paid by a director, officer, or controlling person of the small business issuer
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 small business issuer 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 Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements of filing on Form S-3
and authorized this registration statement to be signed on its behalf by the
undersigned in the city of Salt Lake City, state of Utah, on the 16th day of
July, 1996.
FRONTIER OIL EXPLORATION COMPANY
(Registrant)
By /s/ David N. Pierce
----------------------------
David N. Pierce, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David N. Pierce with power of substitution, as
his attorney-in-fact for him, in all capacities, to sign any amendments to this
Registration Statement and to file the same with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact or his
substitutes may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
stated on the 16th day of July, 1996.
/s/ David N. Pierce
- ------------------------------
David N. Pierce, Director and
President
(Principal Executive and
Financial Officer)
/s/ Andrew W. Pierce
- ------------------------------
Andrew W. Pierce, Director,
Vice-President and
Secretary (Principal
Operations Officer)
/s/ Thomas B. Lovejoy
- ------------------------------
Thomas B. Lovejoy, Director
/s/ Peter L. Raven
- ------------------------------
Peter L. Raven, Director
/s/ Scott J. Duncan
- ------------------------------
Scott J. Duncan, Director
/s/ James A. Giauque, III
- ------------------------------
James A. Giauque III,
Controller
KRUSE, LANDA & MAYCOCK, L.L.C.
EIGHTH FLOOR, BANK ONE TOWER
50 WEST BROADWAY (300 SOUTH)
SALT LAKE CITY, UTAH 84101-2034
TELEPHONE: (801) 531-7090
ATTORNEYS AT LAW TELECOPY: (801) 359-3954
(801) 531-9892
July 16, 1996
Board of Directors
Frontier Oil Exploration Company
3006 Highland Drive, Suite 206
Salt Lake City, Utah 84106
Re: Frontier Oil Exploration Company
Registration Statement on Form S-3
Gentlemen:
We have been engaged by Frontier Oil Exploration Company (the "Company") to
render our opinion respecting the legality of certain securities to be offered
and sold pursuant to the registration statement on form S-3 being filed by the
Company with the Securities and Exchange Commission (the "Registration
Statement"). Capitalized terms used but not defined herein have the same
meanings as set forth in the Registration Statement.
In connection with this engagement, we have examined the following:
1. Articles of incorporation of the Company;
2. Bylaws of the Company;
3. The Registration Statement; and
4. Unanimous consents of the Company's board of directors.
We have examined such other corporate records and documents and have made
such other examination as we deemed relevant.
Based upon the above examination, we are of the opinion that the Common
Stock to be sold pursuant to the Registration Statement will be, when sold in
accordance with the terms set forth in the Registration Statement, legally
issued, fully paid, and nonassessable under the Nevada Revised Statutes, as
amended.
This firm consents to being named in the Prospectus included in the
Registration Statement as having rendered the foregoing opinion and as having
represented the Company in connection with the Registration Statement.
Sincerely,
/s/ Kruse, Landa & Maycock, L.L.C.
KRUSE, LANDA & MAYCOCK, L.L.C.
KL&M/RCT:pjc
BARKER & FOLSOM
CERTIFIED PUBLIC ACCOUNTANTS
Thomas G. Barker, Jr., CPA, P.C. Randy K. Parker, CPA
M. Bradley Folsom, CPA, P.C. Nikki J. Thon
Member of APCPA Division of Firms
Member of SEC Practice Section
CONSENT OF INDEPENDENT AUDITORS
Frontier Oil Exploration Company and Subsidiaries
Barker & Folsom do hereby consent to (a) the incorporation by reference into the
Registration Statement on Form S-3 of Frontier Oil Exploration Company (the
"Company") of our opinion dated February 24, 1995, relating to the financial
statements as of December 31, 1994 and for the year then ended, as such report
is included in the Company's annual report on form 10-K for its fiscal year
ended December 31, 1995, and (b) the reference to us under the heading "Experts"
in such Registration Statement.
/s/ Barker & Folsom
Ogden, Utah
July 16, 1996
2655 Kiesel Avenue/Ogden, Utah 84401
(801) 621-0390/FAX (801) 392-7729
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 of our
report dated March 29, 1996 on our audit of the financial statements of
Frontier Oil Exploration Company. We also consent to the reference to our
firm under the caption "Experts".
/s/ Coopers & Lybrand, L.L.P.
COOPERS & LYBRAND, L.L.P.
Salt Lake City, Utah
July 19, 1996
CONSENT OF PETROLEUM ENGINEERING CONSULTANT
I hereby consent to the incorporation by reference into the registration
statement on Form S-3 of Frontier Oil Exploration Company (the "Company") of my
report as of December 31, 1995, respecting the estimated oil reserve information
for the Montana and Nevada producing properties of the Company, as such report
is referred to in the Company's annual report on form 10-K for its fiscal year
ended December 31, 1995.
/s/ Larry D. Krause
LARRY D. KRAUSE
Billings, Montana
July 16, 1996
