SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT UNDER TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 3, 1996
Commission File Number: 0-25386
FRONTIER OIL EXPLORATION COMPANY
(Exact Name of Registrant as Specified in its Charter)
NEVADA 87-0504461
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3006 HIGHLAND DRIVE
SUITE 206
SALT LAKE CITY, UTAH 84106
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(801) 486-5555
N/A
(Former name, former address, and formal fiscal year, if changed since
last report)
<PAGE>
ITEM 5. OTHER EVENTS
On May 3, 1996, FX Energy, the operating name of Frontier Oil Exploration
Company (the "Company") entered into an agreement, effective April 16, 1996,
with RWE-DEA Aktiengesellschaft fur Mineraloel und Chemie, Hamburg, Germany
("RWE-DEA"), for joint further operations on the Company's approximately 2.4
million acre Baltic Platform concession area in northern Poland.
This agreement grants to RWE-DEA the right to earn a 50% interest in the
concession area by reimbursing the Company $250,000 in costs incurred to date,
paying up to $1,000,000 (plus 10% contingency) for a seismic survey now being
initiated of the Gladysze and two other structures within the concession area,
and bearing up to $1,000,000 (plus 10% contingency) of the cost of a first drill
test scheduled for the last half of 1996 at a location to be designated by RWE-
DEA. The Company has the right to select the location of a second test for
drilling in early 1997. If RWE-DEA does not bear its 50% share of the costs of
this second test, RWE-DEA is required to reassign its 50% interest to the
Company. The Company is designated as the operator of all joint operations.
The agreement with RWE-DEA is subject to approval by the Polish
authorities. Based on informal discussions between the Company, RWE-DEA, and
the Polish authorities, the Company expects that such approval will be obtained
timely. If such required approval is not obtained, the Company is required to
return the initial $250,000 cash payment.
The Company has authorized the initiation of a seismic survey over the
Gladysze and two other structures within the concession area, with permitting
now under way and field work scheduled to commence during the second quarter of
1996. The interpretation by the Company and RWE-DEA of the new data during the
third quarter will serve as the basis for locating the initial test well
scheduled for late 1996.
Initial drilling will be to the PreCambrian basement at a target depth of
9,500 feet at a cost of approximately $1,000,000 to $1,250,000 per dry hole.
The Company estimates that the total cost of a well completed for production
will be approximately $1,500,000 for the first well, with the individual cost of
successive wells being somewhat lower.
RWE-DEA is a subsidiary of RWE AG, headquartered in Hamburg, Germany, a
fully integrated major German petroleum company with worldwide chemical
activities. RWE-DEA advises that it reported 1994/95 fiscal year revenue of
US$15.9 billion from exploration and production of oil and gas worldwide,
underground gas storage facilities, manufacturing and marketing of petroleum
products, and chemical business. RWE AG reports that it is the fifth largest
industrial enterprise in Germany with reported 1994/95 fiscal year revenue of
US$42.4 billion
To date the Company has utilized its own funds for expenditures associated
with obtaining the exploration rights to the concession area, obtaining and
analyzing the data available from Polish sources, and advancing the exploration
effort to its current stage. As of December 31, 1995, the Company had incurred
approximately $584,000 in costs associated with the Baltic Platform project. If
the agreements with RWE-DEA are not approved by the Polish authorities, the
Company will require approximately $2,000,000 to meet the concession
requiremetns to drill a test during 1996. In such circumstances, the Company
would be dependent on obtaining required funds through a joint exploration
arrangement with another firm, the sale of securities, or some other source.
There can be no assurance that such alternative financing could be arranged
timely or on favorable terms.
The Company's share of the costs of a second well, completion costs of
productive wells, exploration wells on additional prospects, and further
appraisal wells may increase the total expenditures in connection with the
Baltic Platform concession area to $6,000,000 to $8,000,000 through the end of
1997. The Company presently has no commitment for funding such expenditures.
If the planned drilling results in the discovery of producible reserves, the
Company may seek the required additional funds through the sale of securities or
additional participation from others to fund field development or to obtain
long-term development and production support, which would dilute the interest
retained by the Company. Conversely, if the initial drilling results are
negative or inconclusive and RWE-DEA elects not to continue, the Company would
require substantial additional funds to proceed with the exploration of other
prospects within the Onshore Baltic concession area, if deemed warranted by the
Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. Not applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits. The following exhibit is included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
10.01 10 Agreement dated effective April This
16, 1996, between Frontier Filing
Poland Exploration and
Producing Company Sp. Zo. o.
and RWE-DEA Aktiengesellschaft
fur Mineraloel und Chemie,
including exhibits, relating to
Onshore Baltic concession area
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 8, 1996 FRONTIER OIL EXPLORATION COMPANY
By: /s/ David N. Pierce
Dated April 16, 1996
Frontier Poland Exploration and Producing Company Sp. z o.o.
and
RWE-DEA Aktiengesellschaft fur Mineraloel und Chemie
Farm-out Agreement relating to Concession Blocks
051, 052, 071, 072, 073, 091, 092, 093, 111, 112, and 113
in the onshore Baltic region of northern Poland
<PAGE>
TABLE OF CONTENTS PAGE
1.DEFINITIONS AND INTERPRETATIONS 2
2.ASSIGNMENT OF INTERESTS 3
3.FARM-OUT OBLIGATIONS 4
4.COSTS 5
5.CONDUCT AND CONTROL OF OPERATIONS 5
6.INTERESTS 6
7.WARRANTIES AND UNDERTAKINGS 7
8.FURTHER ASSURANCE 9
9.INFORMATION 9
10.CONFIDENTIALITY 10
11.FORCE MAJEURE 10
12.ASSIGNMENT 11
13.AMENDMENT 11
14.RELATIONSHIP 11
15.NOTICES 12
16.TERMINATION 13
17.GOVERNING LAW/ARBITRATION 13
APPENDIX Form of Assignment of Percentage Interest
Form of Joint Operating Agreement
Map of Contract Area
<PAGE>
This Agreement is made as of the 16th day of April, 1996 BETWEEN
Frontier Poland Exploration and Producing Company Sp. z o.o., a Polish limited
liability company, being an affiliate (100 %) of Frontier Oil Exploration
Company, Salt Lake City, Utah, USA, with an office at Wal Miedzeszynski 646, 03-
994 Warszawa/Poland (hereinafter called "Frontier") of the first part, and RWE-
DEA Aktiengesellschaft fur Mineraloel und Chemie, a German Corporation having an
office at Uberseering 40, 22297 Hamburg (hereinafter called "RWE-DEA") of the
second part;
both companies are being referred to individually as "Party" and collectively as
"Parties".
WHEREAS
a) Frontier is the present holder of the Polish exploration concessions
covering the onshore portions of concession blocks 051, 052, 071, 072, 091,
092, 093, 111, 112, 113 and 073 (the "Concessions") in the northern baltic
onshore region of the Republic of Poland pursuant to that certain Mining
Usufruct Agreement dated the 22nd day of August, 1995, as amended by
Amendment No. 1 (the "Usufruct Agreement") between Frontier and the Minister
of Environmental Protection, Natural Resources and Forestry in his capacity
as Concession Authority;
b) Frontier currently owns a one hundred percent (100%) interest in and to the
Concessions and in and under the Usufruct Agreement;
c) Frontier and RWE-DEA have agreed in principle on the form of a Joint
Operating Agreement (the "JOA");
d) RWE-DEA desires to acquire a fifty percent (50%) undivided interest in and to
the Concessions and in and under the Usufruct Agreement and in and under the
JOA, and Frontier is willing to assign and transfer such interest to RWE-DEA
upon the terms and conditions hereinafter contained.
e) For all purposes of this Agreement and the assignment and transfer of
interest the term "RWE-DEA" shall also include an affiliate of RWE-DEA which
might be established to carry out the purpose of this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATIONS
1.1In this Agreement the following words and expressions shall bear the
meanings respectively set opposite them below:
"Assigned Area" the area covered by the Concessions;
"Assignment Documents" the instruments of
assignment comprising the Deed of Assignment of the
Concession and the Assignment of Percentage Interest in
the forms set out in the Appendix hereto, and any other
documents evidencing the transfer of interests to RWE-
DEA, subject to such amendments as may be requested by
the Government and as are approved by the Parties such
approval not to be unreasonably withheld;
"Farm-Out Interest" means a fifty percent (50 %) interest in the
Concessions, the Usufruct and the JOA to be assigned to
RWE-DEA upon fulfillment by RWE-DEA of the Farm-Out
Obligation;
"Farm-Out Well" means the initial exploration well, being drilled and to
be determined by RWE-DEA;
"Government" means The State Treasury of the Republic of Poland;
"Contingent Well" means the well at a location to be determined by
Frontier in accordance with the Usufruct Agreement and
the JOA and to be drilled subsequent to the initial
Farm-Out Well.
1.2Words and expressions defined in the JOA shall, unless the context otherwise
requires, bear the same meanings when used in this Agreement; this Agreement
shall prevail in cases of conflict between both agreements.
2. ASSIGNMENT OF INTERESTS
2.1Each Party shall execute such of the Assignment Documents applicable to the
Farm-Out Interest to which it is shown therein as a Party in order that 50%
interest in the Usufruct, the JOA and the Concessions shall be owned
beneficially by RWE-DEA, whether by assignment of interest therein or by
virtue of the transfer of ownership interest in Frontier itself, or by any
other reasonable method, so that thereafter the respective interests of the
Parties in the Assigned Area shall be as set out in clause 6 hereof.
2.2This Assignment of interests is subject to the Government's approval
including, if applicable, the permission for RWE-DEA to become a fifty
percent (50%) Co-Concession holder in the Concessions or the permission for
RWE-DEA to become a fifty percent (50%) owner of Frontier.
2.3Frontier shall use all reasonable endeavours to obtain the consent of the
Government to the assignment including the permission of the Government for
RWE-DEA to become a Co-Concession holder in the Concessions or a stockholder
of Frontier as soon as possible. The Parties shall execute, if and when
required by the law any and all documentation required by the Government.
2.4If despite such endeavours, the Government refuses consent to the assignment
or fails to give its consent in terms reasonably acceptable to Frontier and
RWE-DEA on or before December 31, 1996 (or such later date as RWE-DEA and
Frontier may agree in writing) this Agreement shall automatically terminate,
and except as otherwise provided herein, neither RWE-DEA nor Frontier shall
have any further rights or be subject to any further obligations hereunder
and payments by RWE-DEA to Frontier already made under this Agreement will
be refunded.
2.5The parties may elect a method other than a simple assignment of interests
to provide RWE-DEA with the required 50% beneficial interest in the
Concessions, the Usufruct and the JOA. For example, RWE-DEA may elect to
simply acquire 50% direct ownership interest in Frontier. The parties shall
cooperate in electing and carrying out the method of transfer of interest
which best accomplishes their joint goal of sharing equally the beneficial
interest in the oil and gas interests in the Concession area, and shall
prepare and sign such documents as will best accomplish that goal.
3. FARM-OUT OBLIGATIONS
3.1In consideration of the assignment of the Farm-Out Interest by Frontier,
RWE-DEA will within fifteen (15) working days of execution of this Agreement
pay to Frontier a one time fee of US Dollar $250,000 without any interest
for past costs reimbursals.
3.2RWE-DEA will finance 100% of the seismic acquisition and processing costs
covering leads "A", "E" and "B" up to an amount of US Dollar $1,000,000 plus
10% for contingencies. Costs in excess of this amount will be shared at a
50% : 50% basis.
3.3RWE-DEA will pay 100% of the drilling, testing and abandoning costs up to US
Dollar $1,000,000 of the Farm-Out Well. This well is to be spudded in 1996
and drilled to a depth sufficient to comply with the Usufruct Agreement
(Base Cambrian or 3.000 meters). Costs in excess of US Dollar $1,000,000
will be shared at a 50%:50% basis. RWE-DEA will have the ultimate decision
in selecting the drilling location. The timing for drilling is subject to
completion of seismic acquisition and availability of a suitable drilling
rig.
3.4Within 60 days after completing or abandoning the Farm-Out Well Frontier
shall propose a location on one of the two remaining leads and RWE-DEA shall
have an additional 30 days to agree to pay for and participate in the
drilling of this Contingent Well or to withdraw from the joint venture. If
RWE-DEA agrees to participate at that point they will have earned a 50%
interest in the Concessions. The anticipated spud date for the Contingent
Well is the second quarter 1997.
3.5Upon the completion of the Farm-Out Well, RWE-DEA may elect to re-assign its
interest to Frontier in the same proportions assigned by Frontier to RWE-DEA
herein. In such case, RWE-DEA will have no further obligations to
participate in further obligations under the JOA, the Usufruct Agreement and
the Concessions. There will be no reimbursement for costs incurred for RWE-
DEA's account and/or paid by RWE-DEA pursuant to the terms of this
Agreement, the JOA or the Usufruct Agreement.
4. COSTS
The Parties will be responsible for any charges, costs, fees, penalties or
fines required for the enforcement of this Agreement and related to the
execution of the documents to be entered into pursuant hereto.
5. CONDUCT AND CONTROL OF OPERATIONS
5.1The Farm-Out Well shall be drilled by the Operator. The Operator shall
calculate, make cash calls, report on and invoice the other Party for all
costs, expenses and charges payable by the Operator under this Agreement.
Such calculations, cash calls, reports, charges and invoicing shall be
carried out under the terms of the JOA.
5.2 All decisions relating to the testing and suspending, temporary suspending
or abandonment of operations contemplated hereunder shall be made pursuant
to the provisions set out in the JOA.
5.3The JOA shall be deemed to apply to all operations carried out hereunder and
Frontier and RWE-DEA shall comply with the requirements of the JOA and
similarily the relief from liability set forth in the JOA shall apply,
unless specifically superseded by the terms of this Agreement.
5.4RWE-DEA shall have the right of access at all reasonable times and at its
sole risk and expense to the seismic operations and to the location of the
Farm-Out Well and/or the drilling operations provided RWE-DEA gives Frontier
reasonable notice of the date such access is required and identifies the
representative or representatives to whom such access is to be granted.
5.5RWE-DEA shall have the right to audit the accounts and records of the
Operator relating to the seismic operations and the Farm-Out Well in
accordance, mutatis mutandis, with the provisions of Paragraph 3 of Section
III of the Accounting Procedure attached to the JOA.
6. INTERESTS
As provided for in Clause 2, Frontier undertakes to assign and transfer to
RWE-DEA its Farm-Out Interest with the result that thereafter the ownership
interests of Frontier and RWE-DEA in and to the Concessions, the Usufruct,
and the JOA (insofar, in each case, as the same relates to the Assigned
Area) shall be:
Frontier 50 %
RWE-DEA 50 %
7. WARRANTIES AND UNDERTAKINGS
7.1Frontier hereby represents and warrants to RWE-DEA as set out in paragraphs
a) through f) below that:
a) the information contained in this Agreement including the Recitals which
has been supplied by it is true and accurate in all material respects;
and
b) the Farm-Out Interest to be assigned by it pursuant to this Agreement is
owned legally and beneficially by it and upon execution and delivery of
any of the Assignment Documents will be free and clear of all charges,
claims, liens, encumbrances and equities other than as stated or
referred to in this Agreement or the Usufruct Agreement or the JOA and
is not subject to any royalties, overriding royalties, net profit
arrangements or similar payments other than royalties and payments due
under or by virtue of the Concessions or the Usufruct Agreement or the
JOA or by virtue of any statutory enactment; and
c) there has been no default by it under the Concessions nor any notice
issued to or act or omission of it which, with the passage of time,
notice, or both, would constitute a default under or otherwise result in
the Concessions ceasing to be in full force and effect and no amounts
payable by it under the Concessions are past due and it has not given
notice of intention to withdraw and has not withdrawn from the
Concessions; and
d) there has been no default by it under the Usufruct Agreement which is
material in the context of this Agreement nor any notice issued to or
act or omission of it which, with the passage of time, notice, or both,
would constitute a default under or result in the Usufruct Agreement
ceasing to be in full force and effect and no material amounts payable
by it under the Usufruct Agreement are past due and it has not given
notice of intention to withdraw and has not withdrawn from the Usufruct
Agreement; and
e) save as provided in the Usufruct Agreement and save as Evaluation
Material (as defined and provided under the Confidentiality Letter
Agreement dated December 12, 1995, between the Parties) owned by third
parties, it is under no confidentiality undertaking in respect of any
information or data which relates to or is referable to the Farm-Out
Interest; and
f) no sole risk project has been proposed by it, or carried out by it,
pursuant to the JOA.
7.2Frontier hereby represents and warrants to RWE-DEA that in relation to
matters which should properly be within its knowledge:
a) The Concessions are valid and subsisting and all terms and conditions
thereof required to be fulfilled prior to the date hereof, as the terms
thereof have been modified or amended in agreement with the Government,
have been duly complied with by it in all material respects and all
licences and consents of governments or governmental authorities
required in connection therewith and with operations conducted to date
thereunder have been duly obtained and remain in full force and effect;
and
b) no litigation, arbitration or administrative proceeding is in being,
pending or the threat of which is recorded in writing and no judgement
or award has been given or made by any court or other tribunal or
governmental agency which relates to the Farm-Out Interest or to
operations under the Usufruct Agreement; and
c) RWE-DEA has been supplied with a true, complete and accurate copy of the
Concessions and the Usufruct Agreement and there are not in existence
any other agreements or documents amending, supplementing or affecting
the same or affecting the Farm-Out Interest.
7.3Frontier undertakes that it will, to the extent that it is reasonably within
its power to do so, refrain from doing any act or thing or from authorising
any act or thing to be done over which it has control or which it can
otherwise by the exercise of any right or power reasonably prevent from
being done which if done would to its knowledge prevent any of the
representations and warranties set out in Sub-clause 7.1 and Sub-clause 7.2
from being true and accurate were the same to be repeated at the date of
execution of the Assignment Documents pursuant to Clause 2 by reference to
circumstances existing at such date.
7.4Each Party warrants and undertakes to the other Party that it has and will
have all requisite corporate power and authority to execute this Agreement
and the Assignment Documents to which it is a party and to perform its
obligations hereunder and thereunder and such execution and performance has
been duly authorised by all appropriate corporate action.
8. FURTHER ASSURANCE
The Parties agree to execute and deliver to each other all such additional
instruments and to do all such further acts and things as may be reasonably
requested by any Party to effect the assignment contemplated by this
Agreement or more fully to vest in and assure RWE-DEA of all rights, powers,
privileges and remedies intended to be conferred upon RWE-DEA under this
Agreement and under the Assignment Documents.
9. INFORMATION
9.1 Frontier shall afford RWE-DEA access to all data and information relating to
the Assigned Area previously acquired pursuant to Joint Operations under the
Concessions and Usufruct Agreement and shall furnish to RWE-DEA any such
data and information as RWE-DEA may reasonably request. Frontier will
exercise best efforts to obtain reasonable access to third party information
previously provided to RWE-DEA pursuant to the aforementioned
Confidentiality Letter Agreement.
9.2In the event that RWE-DEA fails to fulfil its obligations pursuant to Clause
3 any data and information furnished to RWE-DEA under Sub-clause 9.1 shall
be returned, together with all copies thereof, to Frontier.
10.CONFIDENTIALITY
Except as required by law, Each of the Parties agrees to keep confidential
on and subject to the terms set out in the JOA:
a) the terms of this Agreement; and
b) all information and data it may acquire or receive under or in
connection with this Agreement.
11.FORCE MAJEURE
Any obligation of any Party hereunder, other than the obligations to make
payments of money, shall be suspended if and for so long as such Party is
prevented or hindered from complying therewith by any cause beyond the
reasonable control of such Party, provided always that a lack of funds shall
be deemed not to be a cause beyond reasonable control. In such event, such
Party shall give notice of the occurrence of each cause as soon as
reasonably possible to the other Party stating the date and extent of such
occurence. Any of the Parties whose obligations have been suspended as
aforesaid shall resume the performance of the obligations as soon as
reasonably possible after the removal of the cause and shall so notify the
other Party provided that the right to resume performance of such
obligations shall terminate on relinquishment or revocation of the
Concessions.
12.ASSIGNMENT
12.1 Each of the Parties may assign or transfer the whole or any part of its
Percentage Interest in accordance with the terms of the Usufruct Agreement
and the JOA provided that any third party assignee or transferee shall as a
condition to such assignment agree to become a party to this Agreement and
shall fulfil the obligations of the Assignor under this Agreement to the
extent that they are not fulfilled by Assignor.
12.2 The provisions of this Agreement shall inure to the benefit of and be
binding on the successors in title and permitted assignees of the Parties.
13.AMENDMENT
This Agreement may only be altered, varied or amended by written instrument
executed by all the Parties.
14.RELATIONSHIP
14.1 Nothing in this Agreement shall be construed as creating a partnership
of any kind, or association, or a trust, or as imposing upon any Party any
duty, obligation or liability of a partnership nature and each Party shall
be individually and severally responsible hereunder only for its obligations
as set out in this Agreement.
14.2 Those Parties subject to the taxing jurisdiction of the United States of
America agree to elect, under Section 761 (a) of the Internal Revenue Code
of 1986, as amended (the "Code"), to be excluded from all of the provisions
of Subchapter K of Chapter 1, Subtitle A of the Code.
14.3 Nothwithstanding anything to the contrary contained in this Agreement, a
Party not subject to the income tax laws of the United Stated of America
shall not be required to do or execute anything which might subject it or
its income to any United States of Amercia tax and nothing contained in this
Agreement shall constitute or shall be construed as constituting a
submission by any Party to the taxation jurisdiction of the United States of
America.
15.NOTICES
Any notice required to be given pursuant to this Agreement shall be in
writing and shall be given by delivering the same by hand at, or by sending
the same by prepaid first class post (confirmed by telefax/facsimile) or
telefax/facsimile to, the relevant address set out below or such other
address as any Party wishing to change its address may notify to the other
Party from time to time. Any such notice given as aforesaid shall be deemed
to have been given or received at the time of delivery (if delivered by
hand), the first working day next following the day of sending (if sent by
facsimile) and the twentieth working day next following the day of sending
(if sent by post).
Frontier Oil Exploration Company
3006 Highland Drive Nr. 206
Salt Lake City, UT 84106
U.S.A.
Fax: 001-801-486-5575
Phone: 001-801-486-5555
RWE-DEA Aktiengesellschaft
fur Mineraloel und Chemie
Uberseering 40
22297 Hamburg
Germany
Fax: 49-40-6375-3590
Phone: 49-40-6375-2357
16.TERMINATION
In the event of termination of this Agreement for any reason, whether or not
under the terms of this Agreement, such termination shall be without
prejudice to any rights, liabilities and obligations accrued or outstanding
at the date of termination or otherwise arising in respect of Farm-Out Well
operations carried out prior to such termination.
17.GOVERNING LAW / ARBITRATION
17.1 The laws of the Republic of Austria shall govern the validity,
construction, interpretation, and effect of this Agreement, excluding any
choice of law rules which would otherwise require the application of laws of
any other jurisdiction.
17.2 Any dispute arising in connection with this Agreement shall be
exclusively and finally settled by arbitration in Vienna, Austria, in
accordance with the Rules of UNCITRAL, the United Nations Commission on
International Trade Law.
17.3 The arbitration panel shall render its decisions in writing, and such
written decisions and conclusions with respect to the disputes so settled
shall be final and binding on the parties to the arbitration proceeding, and
confirmation and enforcement of the awards so rendered may be obtained and
entered in any court having jurisdiction thereof.
IN WITNESS whereof the Parties have caused this Agreement to be executed by
their duly authorised representatives the day month and year first above
written.
Frontier Poland Exploration RWE-DEA Aktiengesellschaft
and Producing Company Sp. z o.o. fur Mineraloel und Chemie
By: /s/ David N. Pierce By: /s/ Wolfgang Schaefer
