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): June 2, 1998
Commission File Number: 0-25386
FX ENERGY, INC.
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(Exact Name of Registrant as Specified in its Charter)
NEVADA 87-0504461
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3006 HIGHLAND DRIVE
SUITE 206
SALT LAKE CITY, UTAH 84106
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(Address of Principal Executive (Zip Code)
Offices)
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)
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ITEM 5. OTHER EVENTS
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FX Energy, Inc., announced on June 2, 1998, that the Company had entered into
two separate agreements with the Polish Oil and Gas Company (POGC). The first
is the signing of an Option Agreement with POGC whereby FX and POGC grant
reciprocal options to participate in the exploration of their respective
Pomeranian interests in northwestern Poland. POGC holds exploration rights or
preferential rights to exploration on approximately 1.8 million acres directly
north and west of FX Energy's 2.3 million acre Pomeranian concession. POGC is
providing access to geological and geophysical data in the Pomeranian region
including 3-D seismic.
Under the Option Agreement, POGC will have the right to participate for a one-
third interest on a block by block basis in the ten concession blocks held by
FX. Each concession block is approximately 1,000 square kilometers, or 250,000
acres. FX will pay the cost of reprocessing up to 1,500 kilometers of existing
2-D seismic data and will have the right to participate in exploration of the
1.8 million acre POGC holdings for a one-third interest. The main exploration
target in the Pomeranian region is the lower Permian Main Dolomite which has
been identified by POGC's 3-D seismic survey.
On March 2, 1998, Apache Corporation acquired an option to participate on a
50/50 basis in the Company's Pomeranian concession by reprocessing 1,000
kilometers of seismic data. Apache must exercise its option by December 31,
1998. If Apache elects to exercise its option, it will have also have the right
to participate for a one-third interest under the Option Agreement announced
today.
FX also announced the signing of a memorandum of understanding with POGC to
undertake joint operations on POGC's Lachowice Concession which lies within the
perimeter of FX Energy's 1.4 million-acre Western Carpathian Concession. The
Lachowice Concession was drilled by POGC and tested gas from three wells at
rates of 6.8, 5.8 and 2.5 million cubic feet of gas (MMcfg) per day from
Devonian reef. The wells were not produced because seismic imaging at the time
was inadequate to demonstrate that the area had sufficient reserves to warrant
the capital expenditure necessary to get the gas to market.
The memorandum of understanding contemplates the reentry of the three wells,
construction of surface production facilities and pipeline connection. Under a
prior agreement, Apache also has the right to participate in Lachowice on terms
equal to FX.
The specific terms of the joint operation, including the purchase price of the
gas by POGC, the division of interests between the parties, and the manner in
which revenues and costs will be shared in future development of the area, are
currently being negotiated.
FX Energy is engaged in the exploration, exploitation and development of
reserves in Poland where it has four major oil and gas project areas (Lublin,
Carpathian, Pomeranian and Baltic). A seismic acquisition program is underway
with Apache in FX Energy's 5 million acre Lublin Basin project area where
drilling operations are scheduled to begin in late June 1998.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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The following is filed as an exhibit to this report:
SEC
Item No. Reference
No. Title of Document
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10 10.01 Option Agreement between FX Energy Poland Sp. z o.o.,
amd POGC dated effective May 20, 1998, relating to
Pomeranian
concessions.
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SIGNATURES
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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: June 2, 1998 FX ENERGY, INC.
By: /s/ Scott J. Duncan, Vice President
OPTION AGREEMENT
Dated Effective as of May 20, 1998
Between
Polskie Gornictwo Naftowe I Gazownictwo S. A.
Oddzial Biuro Geologiczne - GEONAFTA
and
FX ENERGY, INC.
Pertaining to the Pomeranian Concessions
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OPTION AGREEMENT
This Option Agreement (this "Agreement"), is entered into effective as of May
20, 1998, between and among Polskie Gornictwo Naftowe I Gazownictwo S. A.,
Oddzial Buro Geologiczne - GEONAFTA, a Polish joint stock company ("POGC") and
FX Energy, Inc., a Nevada corporation ("FXEN").
RECITALS
A.Through the support and cooperation of POGC, FXEN (through Polish
subsidiaries) has acquired certain rights to explore for and exploit natural
gas and oil in the Pomeranian region of northwest Poland, under the FX
Usufruct (as defined in this Agreement) pursuant to a Mining Usufruct
Agreement.
B.POGC has acquired certain rights to explore for natural gas and oil in the
same region, under the POGC Usufructs (as defined in this Agreement). In
addition, POGC has acquired a substantial amount of geological and
geophysical data in the Pomeranian region, and has generously shared some of
this data with FXEN.
C.In view of the mutual interests of POGC and FXEN in the Pomeranian area, FXEN
wishes to grant to POGC the option to participate in operations on the FX
Usufruct Area and POGC wishes to grant to FXEN the option to participate with
POGC in operations on the POGC Usufruct Area.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated herein by this reference, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
DEFINITIONS
"Participation Interest(s) shall have the meaning described in Article 2.3.
"Hydrocarbon Concession Block(s)" refers to one or more of the 480 numbered
rectangular areas, each encompassing approximately 1,000 square kilometers,
which in the aggregate comprise a grid promulgated by the Bureau of Geological
Concessions for the purpose of identifying hydrocarbon concession areas.
"FX Usufruct" means that certain Mining Usufruct Agreement dated October 30,
1997, between FX Energy Poland Sp. z o.o. and Partners, Commercial Partnership,
and the State Treasury of the Republic of Poland, covering the following ten
Hydrocarbon Concession Blocks: no. 85, 86, 87, 88, 89, 105, 108, 109, 129 and
149.
"POGC Concession(s) or Usufruct(s)" refers to one or more of the following four
concessions/usufructs: Swierzno-Rybokarty, Jarkowo-Piaski, Swidwin-Bialogard,
and Ciechnowo-Polczyn Zdroj, all of which are situated entirely or partially
within the Hydrocarbon Concession Blocks in the Pomerania region.
"Pomeranian Region" refers to all those onshore lands covering Hydrocarbon
Concession Blocks 25-29, 45-49, 62-69, 81-89, 101-105, 108-109, 129, and 149.
ARTICLE 1. IDENTIFICATION OF INTERESTS
1.1 FXEN, through wholly-owned subsidiaries, is the holder of rights to explore
for and exploit natural gas and oil ("Hydrocarbon Rights") in those lands
covered by the FX Usufruct. POGC, directly or through wholly-owned
subsidiaries, is the holder of Hydrocarbon Rights in those lands covered by
the POGC Concessions and has certain preferential rights with respect to
other lands in the Pomeranian Region.
1.2 FXEN has entered into an agreement granting Apache Overseas, Inc.
("APACHE") an option to acquire 50% of FXEN's beneficial interest in the FX
Usufruct, subject to any interests granted or burdens created prior to
exercise of that option. FXEN and APACHE plan to arrange for the FX
Usufruct and the concessions issued pursuant thereto to be held by a Polish
commercial partnership comprised of one Polish limited liability company
owned by FXEN and another Polish limited liability company owned by APACHE.
In cases where this Agreement results in ownership being shared by FXEN, an
assignee of FXEN and POGC, (or any two of them), they shall hold such
interests through a Polish commercial partnership comprised of one Polish
limited liability company owned by POGC, another Polish limited liability
company owned by FXEN and another Polish limited liability company owned by
an assignee of FXEN (or any two of them).
1.3 POGC, as the sole owner of the POGC Concessions, is not at present a party
to any operating agreement or similar document (other than the applicable
usufruct and concession agreements) with respect to its ownership of the
mineral rights therein or the operation thereof. POGC will promptly inform
FXEN in writing about any agreements affecting ownership of the interests
in and operations on the POGC Concessions. FXEN and APACHE are in the
process of drafting the documents which will govern their respective rights
and obligations, which at present include Partnership Agreements, Joint
Operating Agreements, and Accounting Procedure Agreements (collectively,
and including substitute documents, the "Operating Documents"). FXEN and
APACHE have agreed that APACHE will be responsible for management and
control of operations and of the partnerships which will hold the Usufructs
and the concessions. FXEN and APACHE will promptly inform POGC in writing
about any agreements affecting ownership of the interests in and operations
on the FX Usufruct.
1.4 FXEN and APACHE have agreed to reprocess up to 1,000 km. of existing 2-D
seismic data on or near the FX Usufruct. FXEN hereby agrees to pay for the
reprocessing of up to 1,500 km. of additional existing 2-D seismic on or
near the FX Usufruct or the POGC Usufructs, as selected jointly by FXEN and
POGC. FXEN hereby further agrees to pay for selected staff of Geonafta
Pila to collect, compile, interpret, copy and distribute existing
geological and geophysical data (including reprocessed data) pertaining to
the Pomeranian region, in order to provide a comprehensive and integrated
geological and geophysical database for further interpretation.
ARTICLE 2. GRANT OF OPTIONS TO POGC
2.1 FXEN hereby grants to POGC an option to take an interest of up to thirty
three and one third percent (33.333%) in all or part of the FX Usufruct.
2.2 POGC may exercise its option on a "Block by Block" basis; that is, it may
take an interest in one, or several, or all of the Hydrocarbon Concession
Blocks in the Usufruct. In order to maintain uniform interests, when POGC
first designates the percentage interest (other than zero percent) it will
take in a Block, then it must thereafter take either the same (non-zero)
percentage, or it may take zero, with respect to all other Blocks in the
Usufruct.
2.3 A discovery well in one Block may lead to the grant of a single
exploitation concession covering land within that Block as well as
contiguous land within an adjacent Block. In such case, the ownership
interests of the parties in such exploitation concession shall be the same
as their interests in the discovery well first drilled by one or more of
the parties hereto after the date of this Agreement, whether or not a First
Well (defined below) has been drilled in the adjacent Block. For all
purposes of this Agreement, including the "Block by Block" option described
in Article 2.2, the land covered by the exploitation concession shall be
considered to be in the Block where the initial discovery was made.
ARTICLE 3. EXERCISE OF OPTION BY POGC
3.1 FXEN, as Operator, will provide at least 60 days' notice to POGC of its
intention to drill the first well after the date of this Agreement (the
"First Well") in each Block on lands covered by the FX Usufruct. The
notice of the proposed First Well shall include an estimate of costs, an
anticipated spud date, and technical information supporting the proposed
well, such as seismic sections, maps and petrophysical logs (where
available). If POGC wishes to take an interest in such Block it may do so
by exercising its option as provided below and by participating in such
First Well. If POGC does not exercise its option and participate in any
particular First Well, it shall have no further interest in the Block in
which such First Well was drilled.
3.2 POGC shall have thirty (30) days from the date of notice of a First Well to
give written notice to FXEN that POGC has elected to join in the proposed
well and in the related Block. If POGC elects to exercise its option, it
shall designate in the notice of election the amount of interest it wishes
to take (its "Participation Interest"), which may be any amount up to the
maximum permitted under Article 2.1, subject to the provisions for uniform
interest in Article 2.2. If POGC does not provide a notice of election
within said thirty (30) day period such failure shall be deemed
conclusively and irrevocably to be an election by POGC not to exercise the
applicable option. Any delay in the actual spud of the well shall not
extend the time for exercise of the option.
3.3 If POGC makes an affirmative election to join in a First Well, then it
shall be responsible for its Participation Interest share of all costs of
such well, regardless of whether such costs were incurred before or after
the election. In addition, POGC shall also be responsible for its
Participation Interest share of all other costs related to the applicable
Block which accrue on or after (but not before) the actual spud date of the
applicable First Well, including any usufruct fees, concession fees,
training fees, general and administrative costs, geological and geophysical
costs, drilling, production and operating costs, and taxes and royalties,
all in accordance with the Operating Documents.
3.4 If POGC makes an affirmative election to participate in a First Well it
shall, within thirty (30) days after its notice of election, become a
signatory to the applicable Operating Documents.
ARTICLE 4. GRANT OF OPTIONS TO FXEN
4.1 POGC hereby grants to FXEN or its assignee an option to take an interest of
up to thirty three and one-third percent (33.333%) in all or any one or
more of the POGC Concessions as specified in Definitions. If at the time
FXEN has a partner in the FX Usufruct, then POGC hereby agrees to grant to
such partner (provided such partner is acceptable to POGC, which acceptance
shall not be unreasonably withheld in the case of a technically and
financially competent partner) an option to take an interest of up to
thirty three and one-third percent (33.333%) in all or any one or more of
the POGC Concessions as specified in Definitions.
4.2 FXEN and/or its partner or assignee may exercise its option on a
"Concession by Concession" basis; that is, each may take an interest in
one, or several, or all of the four POGC Usufructs. In order to maintain
uniform interests, when FXEN or its partner or assignee first designates
the percentage interest (other than zero percent) it will take in a POGC
Usufruct, then it must thereafter take either the same (non-zero)
percentage, or it may take zero, with respect to all other POGC Usufructs.
4.3 A discovery well in one POGC Usufruct may lead to the grant of a single
exploitation concession covering land within that Usufruct as well as
contiguous land within an adjacent Usufruct. In such case, the ownership
interests of the parties in such exploitation concession shall be the same
as their interests in the discovery well first drilled by one or more of
the parties hereto after the date of this Agreement, whether or not a First
Well (defined below) has been drilled in the adjacent Block. For all
purposes of this Agreement, including the "Concession by Concession" option
described in Article 4.2, the land covered by the exploitation concession
shall be considered to be in the Usufruct where the initial discovery was
made.
4.4 FXEN and its partner or assignee (if any) each may exercise its option
independently of the other and each may exercise its option on a
"Concession by Concession" basis; that is, each may take an interest in
one, or several, or all of the POGC Concessions.
ARTICLE 5. EXERCISE OF OPTIONS BY FXEN OR PARTNER/ASSIGNEE
5.1 POGC, as Operator, will provide at least 60 days' notice to FXEN and any
partner or assignee of its intention to drill the First Well after the date
of this Agreement in each POGC Concession. The notice of the proposed
First Well shall include an estimate of costs, an anticipated spud date,
and technical information supporting the proposed well, such as seismic
sections, maps and petrophysical logs (where available). In addition, the
notice shall be accompanied by copies of any and all documents relating to
the applicable mineral rights and the operations thereon. If either FXEN
or its partner or assignee wishes to take an interest in such POGC
Concession it may do so by exercising its option as provided below and by
participating in such First Well. If either FXEN or its partner or
assignee does not exercise its option and participate in any particular
First Well, it shall have no further interest in the POGC Concession in
which such First Well was drilled.
5.2 FXEN and its partner or assignee each shall have thirty (30) days from the
date of notice of a First Well to give written notice to POGC that it has
elected to join in the proposed well and in the related POGC Concession. If
either FXEN or its partner or assignee elects to exercise its option, it
shall designate in the notice of election the amount of interest it wishes
to take (its "Participation Interest"), which may be any amount up to the
maximum permitted under in Article 4.1. If either FXEN or its partner or
assignee does not provide a notice of election within said thirty (30) day
period such failure shall be deemed conclusively and irrevocably to be an
election by FXEN or its partner or assignee, as applicable, not to exercise
the applicable option. Any delay in the actual spud of the well shall not
extend the time for exercise of the option.
5.3 If either FXEN or its partner or assignee makes an affirmative election to
join in a First Well, then it shall be responsible for its Participation
Interest share of all costs of such well, regardless of whether such costs
were incurred before or after the election. In addition, FXEN or its
partner or assignee, as applicable, shall also be responsible for its
Participation Interest share of all other costs related to the applicable
POGC Concession which accrue on or after (but not before) the actual spud
date of the applicable First Well, including any usufruct fees, concession
fees, training fees, general and administrative costs, geological and
geophysical costs, drilling, production and operating costs, and taxes and
royalties, all in accordance with the Operating Documents.
5.4 If either FXEN or its partner or assignee makes an affirmative election to
participate in a First Well it shall, within thirty (30) days after its
notice of election, become a signatory to a set of operating documents to
be prepared which mirror the Operating Documents referred to in Article
1.3.
5.5 In the event that one of FXEN or its partner or assignee elects to take up
its option on a given POGC Concession and the other does not, the party
electing to exercise its option shall also have the right to take all or
part of the share of the party which has elected not to exercise its
option, on giving notice to POGC to that effect within the time set out in
Article 5.2 above. The party electing to exercise its option shall not
have the right to take an interest greater than forty nine percent (49%) in
the aggregate without the consent of POGC.
ARTICLE 6. GRANT OF RIGHT TO INITIATE AND CONDUCT OPERATIONS ON POGC
USUFRUCTS IN CERTAIN CIRCUMSTANCES
6.1 It is possible that FXEN or its partner or assignee may wish to initiate
and conduct geological and geophysical investigations or drilling and
producing operations on POGC Concessions. To the extent POGC is not already
conducting actual field operations in the same location, POGC may grant its
consent and may authorize and assist FXEN or its partner or assignee in
conducting operations in such case.
6.2 To the extent land is open for concession in the Pomeranian Region
(including lands as to which POGC may have certain preferential rights),
the commercial partnership formed by the parties shall, on request by any
one party, apply for the usufruct and concession(s) over so much of the
remaining open land as such requesting party may desire. The interests of
all parties in such lands shall be subject to the Operating Documents.
ARTICLE 7. INFORMATION AND CONFIDENTIALITY
7.1 All information and data (geophysical, geological, engineering, production
marketing or otherwise) provided to a party hereunder shall be kept
confidential by such party unless the release of such information to a
third party is required by law. The term during which information is to be
kept secret and confidential shall coincide with the term of this Agreement
or for a period of three years from the effective date of this Agreement,
whichever is later.
7.2 The parties hereto agree to strictly observe and abide by the terms and
conditions governing data received by any of them from the government of
the Republic of Poland or from any party hereto.
7.3 The applicable operating party shall notify each of the other parties
hereto at least monthly of progress toward selection of First Wells. So
long as there is any POGC Concession, or any Hydrocarbon Concession Block
within the area covered by the FX Usufruct, where a First Well has not been
drilled, each party hereto shall have access to all data of the other
parties hereto pertaining to the selection of First Well drill sites in
which the accessing party has a right to participate, including all seismic
and other geological, geophysical, geochemical and production data, in
order to allow such party to be ready to make its determination whether or
not to exercise its options.
ARTICLE 8. FURTHER ASSURANCE AND ASSISTANCE
The Parties agree to execute and deliver to each other all such additional
documents and instruments and do all such further acts and things as may be
reasonably requested by any Party to effectively carry out the intent of this
Agreement. In particular, POGC will use its best efforts to help obtain the
necessary concessions and permits on behalf of itself and FXEN.
ARTICLE 9. ASSIGNMENT; ABANDONMENT
9.1 To the extent that option rights under this Agreement have not yet become
exercisable, the rights and obligations under this Agreement shall be
assigned only to:
a. an affiliate of the assigning party; or
b. a third party (with the prior consent of the other parties hereto which
shall not be unreasonably withheld in the case of a technically and
financially competent assignee) provided that such third party also
receives assignment of all the Usufruct rights of the assigning party
which are still subject to option rights of the other parties hereto.
After exercise (or expiry, as the case may be) of any option granted
hereunder, the rights of the participating parties in any Usufruct shall be
governed by the Operating Documents which apply to that Usufruct.
9.2 Each party to this Agreement may exercise its rights and perform its
obligations hereunder through one or more subsidiaries or affiliates, in
which case the term "APACHE", "POGC" or "FXEN", as applicable, shall be
deemed to refer to and include such subsidiaries or affiliates.
9.3 If any party decides to abandon, relinquish or allow to expire undrilled
any Block or Usufruct that is subject to this Agreement, it shall give
notice to the other parties and an opportunity to take over such Block or
Usufruct on terms to be agreed at the time. The parties shall endeavor to
give notice sufficiently far in advance to allow the other parties adequate
time to evaluate, decide and commence any required operations.
ARTICLE 10. AMENDMENT
This Agreement may only be altered, varied or amended by written instrument
executed by all the parties.
ARTICLE 11. TERM AND TERMINATION
This Agreement shall be valid for a term of three years and shall expire on May
20, 2001, unless both FXEN and POGC agree in writing to extend the term beyond
that date. In addition, either party may terminate this Agreement on 180 days'
written notice to the other. The expiration or termination of this Agreement
pertains to the options to be exercised hereunder, and shall have not limit or
terminate the rights of the parties in case options have been exercised; such
rights shall be governed by the Operating Documents.
ARTICLE 12. 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 addresses 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 first working
day next following the day of receipt (if sent by post).
Polish Oil and Gas Company
FX Energy, Inc. Geological Bureau - GEONAFTA
Attn: Andy Pierce Attn: Marek Hoffmann
3006 Highland Drive, Suite 206 ul. Jagiellonska 76
Salt Lake City, UT 84106 03-301 Warsaw, Poland
Telephone: 1-801-486-5555 Telephone: 48-22-811-2606
Fax: 1-801-486-5575 Fax: 48-22-811-2878
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.
FX Energy, Inc. Polskie Gornictwo Naftowe I Gazownictwo S. A.
Oddzial Buro Geologiczne - GEONAFTA
By:/s/ Andy Pierce, Director By:/s/ Marek Hoffmann, Director
