<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 1, 2000
SOUTHERN MINERAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
NEVADA 0-8043 36-2068676
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1201 Louisiana Street, Suite 3350
Houston, Texas 77002-5609
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (713) 658-9444
- --------------------------------------------------------------------------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 1, 2000, Southern Mineral Corporation, a Nevada corporation
("SMC"), sold the interests held by its subsidiary, Neutrino Resources, Inc., a
Canadian oil and gas corporation incorporated under the Business Corporations
Act (Alberta), in Inverness and Swan Hills fields in Alberta, Canada. As total
consideration for the sale, Neutrino received $13.1 million Canadian (U.S. $9.0
million), subject to certain adjustments and rights of first refusals of
approximately $2.3 million Canadian (U.S. $1.45 million).
The terms and conditions of the sale are more fully described in the
Agreement of Purchase and Sale, a copy of which is included as Exhibit 10.1 to
this Current Report on Form 8-K and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable.
(b) Pro Forma Financial Information (unaudited).
<PAGE>
SELECTED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION (UNAUDITED)
The unaudited pro forma consolidated financial statements have been
prepared to give effect to the sale of Southern Mineral Corporation's interests
by its subsidiary, Neutrino Resources, Inc., in the Inverness and Swan Hills
fields in Alberta, Canada as if the sale had taken place on September 30, 1999
with respect to the unaudited pro forma consolidated balance sheet and as of
January 1, 1998 with respect to the unaudited pro forma consolidated statements
of operations for the year ended December 31, 1998 and the nine months ended
September 30, 1999.
The unaudited pro forma adjustments are based upon available financial
information and assumptions that the management of Southern Mineral Corporation
believes are reasonable. The unaudited pro forma consolidated financial
statements included herein do not purport to represent the financial position or
results of operations which would have occurred had such transactions been
consummated on the dates indicated or Southern Mineral Corporation's financial
position or results of operations for any future date or period.
The following unaudited pro forma consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and related notes included in Southern Mineral Corporation's 1998
Annual Report on Form 10-K.
<PAGE>
Southern Mineral Corporation and Subsidiaries
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)
September 30, 1999
<TABLE>
<CAPTION>
Pro Forma Pro-Forma
Historical Adjustments Consolidated
---------- ----------- ------------
Assets
------
<S> <C> <C> <C>
Current assets:
Cash and cash equilvalents $ 1,271 - $ 1,271
Receivables 4,825 - 4,825
Other 577 - 577
---------- ----------- ------------
Total current assets 6,673 - 6,673
Property and equipment, at cost using
successful efforts method for oil
and gas activities:
Oil and gas producing properties 130,901 (14,375) (1) 116,526
Mineral rights - - -
Unproven properties 2,435 - 2,435
Office equipment 545 - 545
Accumulated depreciation, depletion
and amortization (34,988) - (34,988)
---------- ----------- ------------
98,893 (14,375) 84,518
Properties held for resale and other 5,554 - 5,554
---------- ----------- ------------
Total assets $ 111,120 $ (14,375) $ 96,745
========== =========== ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 7,647 $ - $ 7,647
Canadian bank loan 18,837 - 18,837
Current portion of long-term debt 5,564 - 5,564
---------- ----------- ------------
Total current liabilities 32,048 - 32,048
Long-term debt (less current portion) 52,170 (8,914) (1) 43,256
Deferred income taxes 6,815 - 6,815
Stockholders' Equity
Common stock 130 - 130
Additional paid-in capital 30,874 - 30,874
Accumulated other comprehensive loss (1,196) - (1,196)
Retained deficit (9,669) (5,461) (1) (15,130)
Less: treasury stock (52) - (52)
---------- ----------- ------------
Total stockholders' equity 20,087 (5,461) 14,626
---------- ----------- ------------
Total liabilities and and stockholders' equity $ 111,120 $ (14,375) $ 96,745
========== =========== ============
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
Southern Mineral Corporation and Subsidiaries
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share amounts)
Year ended December 31, 1998
<TABLE>
<CAPTION>
Pro-Forma Pro-Forma
Historical Adjustments Consolidated
---------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Oil and gas $ 21,722 $ (973) (2) $ 20,749
Loss on sale of properties and others (250) - (250)
---------- ----------- ------------
Total revenue 21,472 (973) 20,499
Expenses:
Production 8,518 (675) (2) 7,843
Exploration 3,635 - 3,635
Impairment of proved oil and gas properties 9,344 - 9,344
Depreciation, depletion and amortization 10,505 (833) (3) 9,672
General and administrative 3,622 - 3,622
---------- ---------- ------------
Total expenses 35,624 (1,508) 34,116
---------- ---------- ------------
Income (loss) from operations (14,152) 535 (13,617)
Other income (deductions):
Interest and other income 330 - 330
Interest and debt expense (5,362) 274 (4) (5,088)
---------- ---------- ------------
Income (loss) before taxes (19,184) 809 (18,375)
Provision (benefit) for income taxes (2,775) 361 (5) (2,414)
---------- ---------- ------------
Net (loss) income $ (16,409) $ 448 $ (15,961)
========== ========== ============
Net income (loss) per share-basic $ (1.32) $ (1.28)
Net income (loss) per share-diluted $ (1.32) $ (1.28)
Weighted average number of shares outstanding-basic 12,422 12,422
Weighted average number of shares outstanding-diluted 12,422 12,422
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
Southern Mineral Corporation and Subsidiaries
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share amounts)
Nine months ended September 30, 1999
<TABLE>
<CAPTION>
Pro-Forma Pro-Forma
Historical Adjustments Consolidated
---------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Oil and gas $ 18,411 $ (1,920) (2) $ 16,491
Gain on sale of properties and others 12,181 - 12,181
---------- ----------- ------------
Total revenue 30,592 (1,920) 28,672
Expenses:
Production 6,634 (1,209) (2) 5,425
Exploration 1,965 - 1,965
Impairment of proved oil and gas properties 210 - 210
Depreciation, depletion and amortization 8,370 (1,162) (3) 7,208
General and administrative 3,134 - 3,134
Re-organization expenses 1,280 - 1,280
---------- ----------- ------------
Total expenses 21,593 (2,371) 19,222
---------- ----------- ------------
Income from operations 8,999 451 9,450
Other income (deductions):
Interest and other income 79 - 79
Interest and debt expense (5,273) 557 (4) (4,716)
---------- ----------- ------------
Income before taxes 3,805 1,008 4,813
Provision (benefit) for income taxes (419) 450 (5) 31
---------- ----------- ------------
Net income $ 4,224 $ 558 $ 4,782
========== =========== ============
Net income per share-basic $ 0.33 $ 0.37
Net income per share-diluted $ 0.31 $ 0.35
Weighted average number of shares outstanding-basic 12,822 12,822
Weighted average number of shares outstanding-diluted 17,881 17,881
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
SOUTHERN MINERAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and September 30, 1999
Note 1. Basis of Presentation
The unaudited pro forma consolidated financial statements reflect the
effect of the sale of the Inverness and Swan Hills fields by Neutrino Resources,
Inc., a wholly owned subsidiary of Southern Mineral Corporation for total
consideration of $8.9 million (US dollars) that closed on March 1, 2000. The
unaudited pro forma consolidated financial statements have been prepared to give
effect to these transactions as if they had taken place as of January 1, 1998
with respect to the unaudited pro forma consolidated statements of operations
for the year ended December 31, 1998 and the nine-month period ended September
30, 1999 and to give effect to the sale as if it had taken place on
September 30, 1999 with respect to the unaudited pro forma consolidated balance
sheet.
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1998 reflect the historical consolidated statement of
operations of Southern Mineral Corporation, which includes the operations from
the Company's Canadian subsidiary, Neutrino Resources Inc., as of July 1, 1998
as the Company purchased the outstanding common shares of Neutrino Resources
Inc. effective June 30, 1998. The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1998 also reflect the necessary pro
forma adjustments to remove the results of operations for the Inverness and Swan
Hills fields for the period Southern Mineral Corporation owned Neutrino
Resources Inc.
Note 2. Pro Forma Entries
The accompanying unaudited pro forma combined financial statements reflect
adjustments to record the following:
(1) To record the cash proceeds received as a reduction of outstanding
debt and to record the reduction to oil and gas producing properties for the net
book value of those properties sold as if the sale had taken place on September
30, 1999. Adjustment to retained earnings reflects the impairment of the net
book value of the Inverness and Swan Hills fields to the estimated fair market
value, recorded in the fourth quarter of 1999.
(2) To reduce revenue and expenses for 1998 and 1999 for the amounts
related to the oil and gas properties sold.
(3) To adjust depreciation, depletion and amortization for 1998 and 1999
for the amounts related to the oil and gas properties sold.
(4) To reduce interest expense for 1998 and 1999 for the reduction in the
outstanding debt of the
<PAGE>
Canadian subsidiary as a result of cash proceeds assumed to be applied against
the Company's outstanding debt.
(5) To adjust the provision for income taxes for the change in taxable
income as a result of the divestiture at an assumed effective tax rate of 44.6%
for the year ended December 31, 1998 and the nine months ended September 30,
1999, respectively.
(c) Exhibits.
10.1 Agreement of Purchase and Sale, dated February 16, 2000, between Neutrino
Resources Inc. and Star Oil & Gas Ltd.
99.1 Press Release, dated March 2, 2000.
<PAGE>
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.
SOUTHERN MINERAL CORPORATION
Date: March 16, 2000 By: /s/ MICHAEL E. LUTTRELL
--------------------------------
Michael E. Luttrell
Vice President-Finance and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- ------
10.1 Agreement of Purchase and Sale, dated February 16, 2000, between
Neutrino Resources Inc. and Star Oil & Gas Ltd.
99.1 Press Release, dated March 2, 2000.
<PAGE>
Exhibit 10.1
AGREEMENT OF PURCHASE AND SALE
------------------------------
THIS AGREEMENT made as of the 16th day of February, 2000
BETWEEN:
NEUTRINO RESOURCES INC., a body corporate, having an office in the
City of Calgary, in the Province of Alberta ("Vendor")
- and -
STAR OIL & GAS LTD., a body corporate, having an office in the City of
Calgary, in the Province of Alberta ("Purchaser")
WHEREAS Vendor wishes to sell the Assets and Purchaser wishes to purchase the
Assets, subject to and in accordance with the terms and conditions hereof;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual covenants and agreements hereinafter set forth, the Parties hereby
agree as follows:
ARTICLE I
INTERPRETATION
--------------
1.1 Definitions
In this Agreement, including the recitals and the Schedules, unless the
context otherwise requires:
(a) "Abandonment and Reclamation Obligations" means all obligations to
abandon the Wells and restore and reclaim the surface sites thereof,
to decommission and remove the tangible depreciable property and
assets comprised in the Tangibles, including, without limitation, the
Facilities, and restore and reclaim the surface sites thereof and to
reclaim and restore the lands to which the Surface Rights relate, all
in accordance with applicable law;
(b) "AFE" means an authority for expenditure, mail ballot, cash call or
any other similar approval given by a holder of a working interest in
the Assets;
(c) "this Agreement", "herein", "hereto", "hereof" and similar expressions
refer to this Agreement of Purchase and Sale, as amended from time to
time;
(d) "ARTC" means credits or rebates, commonly known as Alberta royalty tax
credits, under the Alberta Corporate Tax Act, in respect of royalties
payable to the Crown in right of Alberta;
1
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(e) "Assets" means the Petroleum and Natural Gas Rights, the Tangibles and
the Miscellaneous Interests;
(f) "Base Price" means Thirteen Million, One Hundred Thousand Dollars
($13,100,000.00), subject to adjustment pursuant to section 9.2;
(g) "Business Day" means any day which is not a Saturday, Sunday or
statutory holiday in Calgary, Alberta;
(h) "Closing" means the transfer of beneficial ownership of the Assets
from Vendor to Purchaser, the payment by Purchaser to Vendor of all
amounts contemplated by subsection 5.2(c), hereof and the completion
of other matters which are contemplated herein to be completed on or
before the Closing Date;
(i) "Closing Date" means the 1st day of March, 2000 or such other date as
may be agreed upon in writing by Vendor and Purchaser;
(j) "Closing Time" means 10:00 a.m. Calgary time on the Closing Date, or
such other time as may be agreed upon in writing by Vendor and
Purchaser;
(k) "Confidentiality Agreement" means the Confidentiality Agreement dated
December 17, 1999 between the Vendor and Purchaser;
(l) "Data" means all well files, lease files, agreement files, engineering
files and production records (including, without limitation, the Title
and Operating Documents), directly relating to the Petroleum and
Natural Gas Rights or the Tangibles, but specifically excluding
Proprietary Information;
(m) "Defect Value" means the decrease in value (expressed in $) of an
Asset as a result of an uncured and non-waived Title Defect affecting
title to such Assets;
(n) "Dollar" or "$" means a dollar of the lawful money of Canada;
(o) "Effective Time" means 8:00 a.m. Calgary time, on March 1, 2000;
(p) "Environmental Liabilities" means all environmental liabilities and
obligations that relate to the Assets or that arise in connection
with, or as a result of, the ownership thereof or operations, or lack
of operations, pertaining thereto, including, without limitation,
liabilities and obligations relating to or arising from:
(i) transportation, storage, use or disposal of toxic or hazardous
substances;
(ii) release, spill, escape or emission of toxic or hazardous
substances; or
(iii) pollution or contamination, of or damage to, the environment;
including, without limitation, liabilities and obligations to
compensate Third Parties for damages and losses resulting from the
items described in items (i) and (ii) above (including, without
limitation, damage to property, personal injury and death) and
liabilities and obligations to take action to prevent or rectify
2
<PAGE>
damage to or otherwise protect the environment and, for purposes of
this Agreement, "the environment" includes, without limitation, the
air, the surface and subsurface of the earth, bodies of water
(including, without limitation, rivers, streams, lakes and aquifers)
and plant, human and animal life;
(q) "Facilities" means the tangible depreciable property and assets
described in Part I of Schedule "B" and the Unit Facilities, if any;
(r) "GST" means the goods and services tax payable pursuant to the GST
Legislation;
(s) "GST Legislation" means the Excise Tax Act, 1980 RSC, c. E-1 5, as
amended and the regulations thereunder;
(t) "General Conveyance" means the general conveyance in the form of
Schedule "H";
(u) "Interest Amount" means simple interest on the Base Price from and
including the Effective Time up to but excluding the Closing Date at
the Prime Rate plus one percent (1%);
(v) "Lands" means lands described in the Land Schedule subject to the
restrictions and exclusions set forth therein as to Petroleum
Substances and geological formations;
(w) "Land Schedule" means Part I of Schedule "A";
(x) "Leases" means the leases, licences, permits and similar documents of
title described in the Land Schedule by virtue of which the holder
thereof is entitled to drill for, win, take, own or remove Petroleum
Substances within, upon or under the Lands or lands pooled or unitized
therewith, and includes, if applicable, all renewals and extensions of
such documents and all documents issued in substitution therefor;
(y) "Losses and Liabilities" means, in relation to a Party, losses, costs,
damages and expenses which such Party suffers, sustains, pays or
incurs, including, without limitation, legal fees on a "solicitor and
his own client" basis;
(z) "Miscellaneous Interests" means the interests of Vendor in all
property, assets, interests and rights (other than the Petroleum and
Natural Gas Rights and the Tangibles) directly related to the
Petroleum and Natural Gas Rights or the Tangibles but only to the
extent such property, assets, interests and rights are directly
related to Petroleum and Natural Gas Rights or the Tangibles,
including, without limitation, any and all of the following:
(i) contracts and agreements directly related to the Petroleum and
Natural Gas Rights or the Tangibles including, without
limitation, the Title and Operating Documents;
(ii) the Surface Rights;
3
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(iii) the Data;
(iv) the Wells, including well bores and all casing therein; and,
(v) the Unit Interest, if applicable,
but specifically excluding (a) Proprietary Information, (b) Petroleum
Substances produced prior to the Effective Time, (c) accounts
receivable accruing prior to the Effective Time, and (d) accounting
records.
(aa) "Parties" means the parties to this Agreement and "Party" means any
one of them;
(bb) "Permitted Encumbrances" means:
(i) liens for taxes, assessments and governmental charges, for
which payment is not due;
(ii) liens incurred or created in the ordinary course of business as
security in favour of the person who is conducting the
development or operation of the property to which such liens
relate for Vendor's proportionate share of costs and expenses
of such development or operation, for which payment is not due;
(iii) mechanics', builders' and materialmen's liens in respect of
services rendered or goods supplied, for which payment is not
due;
(iv) easements, rights of way, servitude's and other similar rights
in land (including, without limitation, rights of way and
servitude's for roads, railways, sewers, drains, gas and oil
pipelines, gas and water mains and electric light, power,
telephone, telegraph and cable television conduits, poles,
wires and cables);
(v) the right reserved to or vested in any municipality or
government or other public authority by the terms of any lease,
licence, franchise, grant or permit or by any statutory
provision, to terminate any such lease, licence, franchise,
grant or permit or to require annual or other periodic payments
as a condition of the continuance thereof;
(vi) rights of general application reserved to or vested in any
governmental or other public authority to levy taxes on
Petroleum Substances or the income or revenue therefrom, and
other governmental requirements and limitations of general
application;
(vii) royalty burdens, liens, adverse claims, penalties, reductions
in interests and other encumbrances set out in Schedule "A" or
Schedule "B";
(viii) the reservations, limitations, provisions and conditions in any
original grants from the Crown of any of the Lands or interests
therein and statutory exceptions to title; and
4
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(ix) the terms and conditions of the Title and Operating Documents;
(cc) "Petroleum and Natural Gas Rights" means (i) the interests in the
Leases to the extent they pertain to the Lands which are attributed to
Vendor in the Land Schedule and (ii) the interests (if any) in
royalties, net profits interests and similar interests attributed to
Vendor in the Land Schedule;
(dd) "Petroleum Substances" means crude oil, petroleum, natural gas,
natural gas liquids, and other related hydrocarbons (except coal) and
any and all other substances (including sulphur), whether liquid,
solid or gaseous and whether hydrocarbons or not, produced in
association therewith, the rights to which are granted pursuant to the
Leases;
(ee) "Prime Rate" means the rate of interest, expressed as a rate per
annum, designated by the main branch in Calgary of the National Bank
of Canada, as the reference rate used by it to determine rates of
interest charged on Canadian dollar commercial loans made in Canada
and which is announced by such bank, from time to time, as its prime
rate, provided that whenever such bank announces a change in such
reference rate, the "Prime Rate" shall correspondingly change
effective on the date the change in such reference rate is effective;
(ff) "Proprietary Information" means Vendor's interest in (i) all Seismic
Data and interpretations of Seismic Data, (ii) geological maps and
interpretations, (iii) valuations of the Assets and (iv) all income
tax and financial information;
(gg) "Purchase Price" has the meaning ascribed thereto in section 2.2;
(hh) "Right of First Refusal" means a right of first refusal, pre-emptive
right of purchase or similar right whereby a Third Party has the right
to acquire or purchase a portion of the Assets as a consequence of
Vendor having agreed to sell the Assets to Purchaser in accordance
herewith;
(ii) "Sale, Processing and Transportation Agreements" means agreements for
the sale of Petroleum Substances produced from the Lands or lands
pooled or unitized therewith and agreements providing for the
gathering, transportation, compression, processing, treatment or
storage of Petroleum Substances produced from the Lands or lands
pooled or unitized therewith, if any;
(jj) "Schedule" means a schedule to the Agreement;
(kk) "Seismic Data" means seismic data including surveyors' ground
elevation records, shot point maps, drillers' logs, shooters' records,
field records and record sections, including maps and interpretations
made therefrom;
(ll) "Specific Conveyances" means all conveyances, assignments, transfers,
novations and other documents or instruments that are reasonably
required or desirable, in accordance with normal oil and gas industry
practices, to convey, assign and transfer the Assets to Purchaser and
to novate Purchaser into the Title and Operating Documents in the
place and stead of Vendor with respect to the Assets, effective as of
the Effective Time;
5
<PAGE>
(mm) "Surface Rights" means all rights to use or occupy the surface of
lands (including, but not limited to, the Lands) which are used or
held for use in connection with the Petroleum and Natural Gas Rights
or the Tangibles, including rights to enter upon and occupy the
surface of lands on which the Tangibles and the Wells are located and
rights to use the surface of lands to gain access thereto;
(nn) "Tangibles" means (i) the interests of Vendor in the Facilities and
(ii) the interest of Vendor to the extent directly related to the
Petroleum and Natural Gas Rights in all other tangible depreciable
property and assets used or intended to be used in producing,
processing, gathering, transporting, treating, storing, measuring or
injecting Petroleum Substances or any of them produced from the Lands
or lands pooled or unitized therewith or in connection with water
injection or removal operations that pertain to the Petroleum and
Natural Gas Rights;
(oo) "Third Party" means any partnership, corporation, trust,
unincorporated organization, union, government, governmental or public
department or agency, individual or any heir, executor, administrator
or other legal representative of an individual other than a Party;
(pp) "Title Defect" means a defect, deficiency or discrepancy in or
affecting the title of Vendor in and to any of the Assets which is
sufficiently material and adverse to the enforcement of title that it
would not be acceptable to a knowledgeable, prudent purchaser acting
reasonably, and, without limiting the generality of the foregoing,
specifically includes:
(i) Vendor not being the beneficial owner of the interest
attributed to it in the Land Schedule, or holding a lesser
beneficial interest than such attributed interest;
(ii) Vendor's interests as described in the Land Schedule being
subject to a royalty, net profits interest or other similar
encumbrance not disclosed therein;
(iii) Vendor's interest as described in the Land Schedule being
subject to a reduction or conversion not disclosed therein,
other than as set forth in subclause (i) below; and
(iv) security interests registered against the interests of Vendor
in and to the Assets;
but specifically excludes:
(i) Vendor's interests as described in the Land Schedule having
converted from a before-payout interest to an after-payout
interest as a result of payout having occurred between the
Effective Date and the Closing Date, provided such contingent
reduction to Vendor's interest is disclosed in the Land
Schedule;
(ii) any defects or deficiencies in title otherwise disclosed
herein;
6
<PAGE>
(iii) the Permitted Encumbrances;
(iv) any missing or unsigned documents in the chain of Vendor's
title to the Petroleum and Natural Gas Rights or Tangibles
where:
(A) such document is not reasonably required to confirm the
creation, establishment or maintenance of such title and
the current status of title can otherwise be confirmed
with reasonable certainty; or
(B) such document represents a reduction of Vendor's interest
therein which is reflected in the Land Schedule;
(v) failure to confirm delay rental payments required to maintain
freehold Leases as having been paid, where the failure to make
such payment or payments by a date specified in the Lease will
not automatically result in a termination of the Lease; or
(vi) Vendor's or any predecessor's interest being only a beneficial
interest rather than a full legal interest;
(qq) "Title and Operating Documents" means, to the extent directly related
to the Petroleum and Natural Gas Rights or the Tangibles, (i) the
Leases, (ii) assignments, trust declarations, operating agreements,
royalty agreements, overriding royalty agreements, gross overriding
royalty agreements, participation agreements, farmin agreements, sale
and purchase agreements, pooling agreements, common stream agreements,
easements, surface leases and pipeline crossing agreements, (iii)
Sale, Processing and Transportation Agreements; (iv) agreements for
the construction, ownership and operation of gas plants, gas gathering
systems and other facilities, (v) permits, licences and approvals and
(vi) other agreements which relate to the Petroleum and Natural Gas
Rights or the Tangibles or the ownership, operation or exploitation
thereof;
(rr) "Unit" means the scheme or schemes of unitization for the production
of Petroleum Substances to which the Petroleum and Natural Gas Rights
are subject, including those listed in Schedule "C";
(ss) "Unit Agreement" means the agreement or agreements pursuant to which
the Unit was formed, as amended, if any;
(tt) "Unit Facilities" means all facilities, which are operated pursuant to
the terms of the Unit Operating Agreement, if any;
(uu) "Unit Interest" means all of Vendor's interests in the Unit, which is
or are attributable to the Petroleum and Natural Gas Rights, if any;
(vv) "Unit Operating Agreement" means the operating agreement referred to
in the Unit Agreement, as amended, if any; and
7
<PAGE>
(ww) "Wells" means those wells set forth in Part II of Schedule "B" and all
wells (including without limitation, producing, shut-in, suspended,
capped, injection and disposal wells), located on the Lands or lands
pooled or unitized therewith.
1.2 Article, Section and Schedule References
Except as otherwise expressly provided, a reference in this Agreement to an
"Article", "section", subsection", paragraph" or "Schedule" is a reference
to an article, section, subsection, paragraph or schedule of or to this
Agreement.
1.3 Interpretation Not Affected by Headings
The headings in this Agreement are for convenience only and shall not
affect the construction or interpretation of this Agreement.
1.4 Included Words
When the context reasonably permits, words suggesting the singular shall be
construed as suggesting the plural and vice versa, and words suggesting one
gender shall be construed as suggesting other genders.
1.5 Schedules
The following Schedules are attached to and form a part of this Agreement:
Schedule "A": Part I - Land Schedule
Part II - Rights of First Refusal
Schedule "B": Part I - Facilities
Part II - Wells
Schedule "C": Units
Schedule "D": Marketing
Schedule "E": Authorizations for Expenditures
(exceeding $25,000 for single operation)
Schedule "F": Lawsuits and Claims
Schedule "G": Officer's Certificate
Schedule "H": General Conveyance
Wherever any term or condition of such Schedules conflicts or is at
variance with any term or condition in the body of this Agreement, such
term or condition in the body of this Agreement shall prevail.
8
<PAGE>
1.6 Knowledge or Awareness
Where in this Agreement a representation or warranty is limited to the
knowledge or awareness of Vendor, such knowledge or awareness consists of
the actual knowledge or awareness, as the case may be, of the current
officers and managers of Vendor but does not include knowledge or awareness
of any other person.
ARTICLE 2
PURCHASE AND SALE
-----------------
2.1 Purchase and Sale
Vendor hereby agrees to sell the Assets to Purchaser and Purchaser hereby
agrees to purchase the Assets from Vendor, subject to and in accordance
with this Agreement.
2.2 Purchase Price
The purchase price to be paid by Purchaser to Vendor for the Assets (the
"Purchase Price") will be the Base Price plus the Interest Amount, as
adjusted pursuant to Article 4.
2.3 Allocation of Purchase Price
The Purchase Price shall be allocated among the Assets as follows:
(a) to Petroleum and Natural Gas Rights $10,479,999.00 (80%)
(b) to Tangibles $ 2,620,000.00 (20%)
(c) to Miscellaneous Interests $ 1.00
--------------
TOTAL $13,100,000.00
==============
The amount allocated above to the Petroleum and Natural Gas Rights shall be
adjusted by the Interest Amount and the adjustment amount determined
pursuant to Article 4.
2.4 Payment of Purchase Price
(a) A deposit shall be paid by Purchaser to Vendor as follows:
(i) Vendor acknowledges receipt of a certified cheque or bank draft
in favour of Vendor in the amount of $ 1,310,000.00, being ten
percent (10%) of the Base Price (the "Deposit") to be held as
trust monies by the law firm of Burnet, Duckworth, & Palmer
("BDP"), to be distributed in accordance with this Agreement;
(ii) if Closing occurs, the Deposit shall be distributed to Vendor
by BDP and the Deposit together with interest at the Prime Rate
plus one percent (1%) thereon from the date following receipt
up to but excluding the Closing Date ("Deposit Interest") shall
be applied in partial satisfaction of the Purchase Price
payable by the Purchaser hereunder to Vendor at Closing;
9
<PAGE>
(iii) if Closing does not occur due to a breach of this Agreement by
Purchaser, the Deposit together with any interest earned
thereon shall be forfeited to and distributed to Vendor by BDP
for Vendor's own account absolutely as a genuine pre-estimate
by Vendor and Purchaser of the damages, costs, losses and
expenses suffered and incurred by Vendor as a consequence of
such breach by Purchaser; and
(iv) if Closing does not occur for any reason or circumstance other
than that described in subsection 2.4(a)(iii), the Deposit
together with any interest earned thereon shall be paid to
Purchaser by BDP for the account of Purchaser absolutely.
(b) At Closing, Purchaser shall pay to Vendor by certified cheque or bank
draft the Purchase Price less the Deposit and Deposit Interest as
adjusted by all adjustments contemplated by this Agreement.
2.5 GST and Sales Taxes
(a) The Purchase Price does not include GST. At Closing, Purchaser shall
pay to Vendor by certified cheque or bank draft, an amount equal to
seven percent (7%) of the portion of the Purchase Price allocated to
Tangibles and Miscellaneous Interests pursuant to section 2.3, or a
reallocation determined pursuant to subsection 9.2(c)(ii) on account
of the GST payable by Purchaser in respect of its purchase of the
Assets pursuant hereto. Vendor shall remit such amount to the
appropriate taxation authorities in accordance with the GST
Legislation. Each Party represents that it holds a valid GST
registration account number at the date of Closing and that its
registration number for GST purposes is:
Vendor 89060 1966RT
Purchaser 104997598RT
(b) Purchaser shall also be solely liable for any and all sales and
similar taxes imposed by provincial or federal legislation in respect
of the purchase of the Assets pursuant hereto. If Vendor as agent of
the Crown is required to collect such taxes, Purchaser shall pay the
aggregate amount of such taxes to Vendor at Closing. Vendor shall
remit such amount to the appropriate authorities in accordance with
applicable legislation.
(c) After Closing, Purchaser will be responsible for, and shall indemnify
and save Vendor harmless in respect of, any amounts of GST and sales
and similar taxes (including interest and penalties) in respect of the
purchase and sale of the Assets pursuant hereto which are in excess of
the amounts collected by Vendor from Purchaser at Closing.
10
<PAGE>
ARTICLE 3
CLOSING
-------
3.1 Place of Closing
Unless otherwise agreed to in writing by the Parties, Closing shall take
place at the Closing Time on the Closing Date at the offices of Vendor, at
1400, 300 - 5/th/ Avenue SW, Calgary, Alberta.
3.2 Effective Time of Transfer
The transfer and assignment of the Assets from Vendor to Purchaser shall be
effective as of the Effective Time. However, possession and title to the
Assets shall not pass to Purchaser until Closing.
3.3 Deliveries at Closing - Escrow
(a) At Closing, Vendor shall table the following:
(i) the General Conveyance duly executed by Vendor;
(ii) all available Specific Conveyances duly executed by Vendor;
(iii) copies of all consents to disposition and waivers of Rights of
First Refusal obtained by Vendor prior to Closing with respect
to the sale of the Assets to Purchaser;
(iv) the certificate described in subsections 5.1(a) and (b); and
(v) such other items as may be specifically required hereunder, or
as may be reasonably requested by Purchaser upon reasonable
notice to Vendor.
(b) At Closing, Purchaser shall table the following:
(i) the amounts payable at Closing on account of the Purchase Price
and GST in accordance with this Agreement;
(ii) the certificate described in subsections 5.2(a) and (b); and
(iii) such other items as may be specifically required hereunder.
In addition, Purchaser will duly execute the General Conveyance and
the Specific Conveyances tabled by Vendor.
(c) The items tabled at Closing pursuant to subsections 3.3(a) and (b)
shall be held in escrow until all of such items have been tabled and
each of the Parties has acknowledged that it is satisfied therewith,
whereupon such escrow shall be terminated and the items described in
subsection 3.3(a) shall be delivered to Purchaser and the items
described in subsection 3.3(b) shall be delivered to Vendor and the
Closing shall be deemed to have occurred. If such escrow is not
released on or before 4:00 p.m. on the Closing Date and the Parties do
not agree
11
<PAGE>
to an extension of the escrow, the Closing shall be deemed not to have
occurred, the General Conveyance and the Specific Conveyances shall be
destroyed and the balance of the documents tabled by a Party pursuant
to this section 3.3 shall be returned to that Party.
3.4 Delivery of Data
To the extent that Vendor is reasonably able to deliver the Data to
Purchaser, Vendor shall, as soon as is practicable after Closing (and in
any event within 30 days of Closing), deliver to Purchaser the copies of
the Data which it has in its possession, provided that if Vendor retains
any interest in any property to which any of the Data relates, Vendor may
retain the original copy of such Data and provide a photocopy of it to
Purchaser.
3.5 Access to Records
Vendor may, at its sole expense, after Closing gain access to, during
regular business hours, and obtain from Purchaser copies or photocopies of,
any Title and Operating Documents, correspondence, documents or reports
which were delivered to Purchaser at Closing and which Vendor requires for
audits, or claims by Third Parties.
3.6 Specific Conveyances
It shall not be necessary for assignment and novation agreements to have
been executed prior to or at Closing by parties thereto other than Vendor
and Purchaser. After Closing, Vendor shall cooperate with Purchaser in its
procurement of the execution of such documents and any substitutions,
amendments or replacements thereof by the parties thereto other than Vendor
and Purchaser. After Closing, Purchaser shall use all reasonable efforts
to become, as soon as reasonably practicable, the recognized and beneficial
holder of the Assets in the place and stead of Vendor and shall promptly
register all Specific Conveyances; provided however, in furtherance thereof
and without limitation, Vendor may elect to register on behalf of Purchaser
all transfers of well licences, pipeline permits and similar documents.
Purchaser shall bear all costs, fees and deposits of every nature and kind
incurred (whether by Vendor or Purchaser) in registering any Specific
Conveyances and registering any further assurances required to convey the
Assets to Purchaser; and Vendor, acting reasonably, may include an amount
in respect thereof in the interim statement of adjustments contemplated by
section 4.2.
ARTICLE 4
ADJUSTMENTS
-----------
4.1 Costs and Revenues to be Apportioned
(a) Except as otherwise provided in this Agreement, all costs and expenses
relating to the Assets (including, without limitation, maintenance,
development, capital and operating costs) and all revenues relating to
the Assets (including, without limitation, proceeds from the sale of
production and fees from processing, treating or transporting
Petroleum Substances on behalf of Third Parties) shall be
12
<PAGE>
apportioned as of the Effective Time between Vendor and Purchaser on
an accrual basis in accordance with generally accepted accounting
principles, provided that:
(i) advances and cash calls made by Vendor in respect of the costs
of operations and capital expenditures relating to the Lands or
lands pooled or unitized therewith or facilities interests
included in the Assets which do not apply to costs incurred
prior to the Effective Time will be transferred to Purchaser
and an adjustment will be made in favour of Vendor equal to the
amount transferred;
(ii) deposits made by Vendor relating to current or future
operations on the Lands or on lands pooled or unitized
therewith shall be returned to Vendor;
(iii) costs and expenses of work done, services provided and goods
supplied shall be deemed to accrue for the purposes of this
Article when the work is done or the goods or services are
provided, regardless of when such costs and expenses become
payable;
(iv) no adjustments shall be made in respect of ARTC or similar
incentives, Vendor's overhead or overhead recovered by Vendor
in its capacity as operator; (v) Vendor shall report all net
revenue and pay all income tax on the net revenue from the
Effective Time to Closing;
(vi) revenues from the sale of Petroleum Substances will be deemed
to accrue from the time the Petroleum Substances are produced;
and
(vii) all rentals and similar payments in respect of the Leases or
Surface Rights comprised in the Assets and all taxes (other
than income taxes) levied with respect to the Assets or
operations in respect thereof will be apportioned between
Vendor and Purchaser on a per diem basis as of the Effective
Time.
(b) Vendor shall be entitled to an adjustment equal to the market value
net of royalties and taxes other than income taxes in respect of
Petroleum Substances, if any, attributable to the Assets which are in
tanks or in storage above the pipeline connection, at the Effective
Time. Purchaser shall be entitled to Petroleum Substances, if any,
attributable to the Assets and which were placed in tanks or in
storage at or after the Effective Time and the proceeds of sale in
respect of such Petroleum Substances sold by Vendor after the
Effective Time shall be for Purchaser's account. Sales of such
Petroleum Substances shall be deemed to occur on a "first in, first
out" basis.
4.2 Adjustments to Account
(a) An interim accounting of the adjustments pursuant to section 4.1 shall
be made at Closing, based on Vendor's good faith estimate of the costs
and expenses paid by Vendor and the revenues received by Vendor prior
to Closing. Vendor shall provide a statement setting forth the
adjustments to be made at Closing not
13
<PAGE>
later than three Business Days prior to Closing and shall assist
Purchaser in verifying the amounts set forth in such statement. A
further accounting of the adjustments pursuant to section 4.1 shall be
conducted within 120 days following the Closing Date. Additional
adjustments will be made from time to time after such 120 day period
as and when they are ascertained by the Parties, provided that,
subject to subsection 4.2(c), the Parties shall not be obligated to
make an adjustment more than one year after Closing unless such
adjustment has been specifically requested, by notice, within such
period. All adjustments after Closing shall be settled by payment by
the Party required to make payment hereunder within 30 days of being
notified of the determination of the amount owing.
(b) During the one year period following the Closing Date, each Party may
audit the books, records and accounts of the other respecting the
Assets, for the purpose of effecting adjustments pursuant to this
Article. Such audit shall be conducted upon reasonable notice to the
other Party at such Party's offices during normal business hours, and
shall be conducted at the sole expense of the Party conducting the
audit.
(c) Notwithstanding subsection 4.2(a), the Parties will be required to
make an adjustment pursuant to this Article 4 more than one year after
the Closing Date if:
(i) the adjustment arises from a Crown royalty audit commenced
within four years of the end of the year in which Closing
occurred and a written request for the adjustment is given by
one Party to the other Party within 120 days of its receipt of
the results of the audit; or
(ii) the adjustment arises from a joint venture audit commenced
within two years of the end of the year in which Closing
occurred and a written request for the adjustment is given by
one Party to the other Party within 120 days of its receipt of
the results of the audit.
(d) An adjustment payable by a Party after Closing pursuant to this
section 4.2 which is not paid within 30 days of a written request for
payment from the other Party, shall bear interest at the Prime Rate
plus one percent per annum payable by the paying Party to the other
Party from the end of such 30 day period until the adjustment is paid.
(e) All adjustments provided for in this Article shall be adjustments to
the Purchase Price.
ARTICLE 5
CONDITIONS OF CLOSING
---------------------
5.1 Purchaser's Conditions
The obligation of Purchaser to purchase the Assets pursuant hereto is
subject to the satisfaction at or prior to the Closing Date of the
following conditions precedent, which are for the exclusive benefit of
Purchaser and may be waived by Purchaser, in whole or in part by written
notice to Vendor, delivered on or before the Closing Date:
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<PAGE>
(a) Representations and Warranties: the representations and warranties of
------------------------------
Vendor herein contained shall be true in all material respects when
made and as of the Closing Date and a certificate of an officer of
Vendor to that effect, in the form of Schedule "G", shall have been
delivered by Vendor to Purchaser at Closing;
(b) Obligations: all obligations of Vendor contained in this Agreement
-----------
contemplated herein to be performed prior to or at Closing shall have
been timely performed in all material respects and a certificate of an
officer of Vendor to that effect in the form of Schedule "G" shall
have been delivered by Vendor to Purchaser at Closing;
(c) No Material Damage: there shall have occurred no physical damage to
------------------
the Assets or any portion thereof between the Effective Time and the
Closing Date which, in the reasonable opinion of the Purchaser has
materially and adversely affected the aggregate value of the Assets;
and
(d) Regulatory Approvals: all regulatory approvals required with
--------------------
respect to the transactions contemplated herein (other than for the
transfer of Well licences and pipeline permits) shall have been
obtained on terms and conditions satisfactory to Purchaser, acting
reasonably.
If any of the foregoing conditions precedent have not been complied with,
or waived by Purchaser, at or before the Closing Date, Purchaser may, in
addition to any other remedies which it may have available to it, on that
date (but not thereafter) terminate its obligations to purchase the Assets
by written notice to Vendor specifying what conditions precedent have not
been satisfied and, in such event Purchaser and Vendor shall be released
and discharged from all obligations hereunder except as provided in section
5.4 and those contained in the Confidentiality Agreement, and the Deposit
and any interest earned thereon shall be returned to Purchaser
5.2 Vendor's Conditions
The obligation of Vendor to sell the Assets pursuant hereto is subject to
the satisfaction at or prior to the Closing Date of the following
conditions precedent, which are for the exclusive benefit of Vendor and may
be waived by Vendor, in whole or in part by written notice to Purchaser,
delivered on or before the Closing Date:
(a) Representations and Warranties: the representations and warranties of
------------------------------
Purchaser herein contained shall be true in all material respects when
made and as of the Closing Date and a certificate of an officer of
Purchaser to that effect, in the form of Schedule "G", shall have been
delivered by Purchaser to Vendor at Closing;
(b) Obligations: all obligations of Purchaser contained in this
-----------
Agreement to be performed prior to or at Closing shall have been
timely performed in all material respects and a certificate of an
officer of Purchaser to that effect, in the form of Schedule "G",
shall have been delivered by Purchaser to Vendor at Closing;
(c) Payment: all amounts to be paid by Purchaser to Vendor at Closing
-------
pursuant hereto shall have been paid to Vendor by Purchaser in the
form stipulated in this Agreement; and
15
<PAGE>
(d) Regulatory Approvals: all regulatory approvals required with respect
--------------------
to the transactions contemplated herein shall have been obtained on
terms and conditions satisfactory to Vendor, acting reasonably.
If any of the foregoing conditions precedent has not been complied with, or
waived by Vendor at or before the Closing Date, Vendor may, in addition to
any other remedies which it may have available to it, terminate its
obligations to sell the Assets to Purchaser by written notice to Purchaser
specifying what conditions precedents have not been satisfied and, in such
event, Purchaser and Vendor shall be released and discharged from all
obligations hereunder except as provided in section 5.4 and those contained
in the Confidentiality Agreement.
5.3 Efforts to Fulfill Conditions Precedent
Purchaser and Vendor shall proceed diligently and in good faith and use all
reasonable efforts to fulfill and assist in the fulfillment of the
conditions precedent.
5.4 Failure of a Condition Due to a Breach
If a condition set forth in section 5.1 or 5.2 is not satisfied as a result
of a breach by a Party of its obligations hereunder, such Party shall be
liable to the other Party for the other Party's Losses and Liabilities
resulting from such breach if such other Party elects to terminate its
obligations to purchase or sell the Assets pursuant hereto. Notwithstanding
the foregoing, Vendor's measure of damages for a breach by Purchaser of its
obligations hereunder shall be limited to retention of the Deposit and any
interest earned thereon.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
------------------------------
6.1 Representations and Warranties of Vendor
Vendor represents and warrants to Purchaser that:
(a) Standing: Vendor is a corporation, duly organized and validly
--------
existing under the laws of Canada, is authorized to carry on business
in all jurisdictions in which the Assets are located, and has all the
requisite corporate power and authority to sell, assign, transfer and
convey the Assets to Purchaser in accordance with this Agreement;
(b) No Conflicts: the consummation of the transactions contemplated
------------
herein will not violate, nor be in conflict with, any of the
constating documents, by-laws or governing documents of Vendor or any
judgment, decree, order, law, statute, rule or regulation applicable
to Vendor;
(c) Execution of Documents: this Agreement has been duly executed and
----------------------
delivered by Vendor and all other documents (including the General
Conveyance and the Specific Conveyances) executed and delivered by
Vendor pursuant hereto will be duly executed and delivered by Vendor,
and this Agreement does, and such documents will, constitute legal,
valid and binding obligations of Vendor,
16
<PAGE>
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, preference, reorganization, moratorium and
other similar laws affecting creditors' rights generally and the
discretion of courts with respect to equitable or discretionary
remedies and defences;
(d) Residency for Tax Purposes: Vendor is not a non-resident of Canada
--------------------------
within the meaning of the Income Tax Act (Canada);
(e) Finders' Fees: Vendor has not incurred any obligation or liability,
-------------
contingent or otherwise, for brokers' or finders' fees in respect of
this transaction for which Purchaser shall have any obligation or
liability;
(f) No Authorizations: no authorization or approval or other action by,
-----------------
and no notice to or filing with, any governmental authority or
regulatory body exercising jurisdiction over the Assets or Vendor is
required for the due execution, delivery and performance by Vendor of
this Agreement, other than authorizations, approvals or exemptions
previously obtained and currently in force or those required in
connection with the transfer of well licences and pipeline permits;
(g) Title: except for the Permitted Encumbrances, the Assets will, at the
-----
Closing Date, be free and clear of all liens, mortgages, pledges,
royalties, encumbrances and adverse claims created by, through or
under Vendor; and, except as may be expressly set forth elsewhere in
this Agreement, Vendor does not otherwise make any representation,
warranty or covenant as to title to or the liens, mortgages,
royalties, encumbrances or adverse claims affecting the Assets;
(h) No Third Party Rights: except for Permitted Encumbrances, the Assets
---------------------
are not now and at the Closing Time will not be subject to reduction
or alteration by rights of payout/conversion, rights to purchase,
farmin rights or any other rights held by a Third Party which were
created by, through or under Vendor or of which Vendor is aware;
(i) Quiet Enjoyment: subject to the rents, covenants, conditions and
---------------
stipulations in the Leases and Permitted Encumbrances, from and after
Closing, Purchaser will be entitled to hold and enjoy the interests
attributed to Vendor in the Schedules hereto for Purchaser's own use
and benefit without any interruption of or by Vendor or any Third
Party claiming by, through or under Vendor;
(j) No Lawsuits or Claims: to the best of Vendor's knowledge, there are
---------------------
no judgments and no claims, proceedings, actions or lawsuits in
existence, contemplated or threatened against or with respect to the
Assets or the interests of Vendor therein other than as disclosed in
Schedule "F";
(k) Good Standing under Agreements: to the best of Vendor's knowledge,
------------------------------
Vendor is not in material breach of any term or provision of any Title
and Operating Document nor does Vendor have any knowledge of receipt
of any notice of default or alleged default under any Title and
Operating Document, which default has not been rectified, other than
as disclosed in Schedule "A";
(l) Provision of Documents: prior to Closing, Vendor will make available
----------------------
to Purchaser all Title and Operating Documents in its possession or to
which it has access;
17
<PAGE>
(m) AFEs: there are no AFEs or other financial commitments pursuant to
----
which Vendor's share of expenditures to be incurred in respect of a
single operation conducted or to be conducted after the Effective Time
is estimated to exceed $25,000 other than as described in Schedule "E"
and as permitted by section 8.2;
(n) Royalties and Taxes: to the best of Vendor's knowledge, all ad
-------------------
valorem, property, production, severance and similar taxes and
assessments based on or measured by the ownership of property or the
production of Petroleum Substances or the receipt of proceeds
therefrom and all royalties and rentals in respect of the Assets which
have become due and payable prior to the Effective Time have been
properly and fully paid and discharged;
(o) Rights of First Refusal: except as set forth in Part II of Schedule
-----------------------
"A", the sale of the Assets pursuant hereto is not subject to any
Rights of First Refusal created by, through or under Vendor or of
which Vendor otherwise has knowledge;
(p) Sale, Processing and Transportation Agreements: to the best
----------------------------------------------
of Vendor's knowledge, Vendor is not a party to or bound by any Sale,
Processing and Transportation Agreements which cannot be terminated
without penalty or notice from Vendor of 30 days or less except as set
forth in Schedule "D";
(q) Operations: to the extent the same are operated by Vendor, the Assets
----------
have been drilled, completed, constructed, maintained and operated in
accordance with good oilfield practice and in material compliance with
applicable law and if operated by Vendor, the Tangibles are in good
and operable condition, reasonable wear and tear excepted; and
(r) Environmental Matters: Vendor is not aware of any environmental matter
---------------------
materially and adversely affecting the Assets nor has Vendor received
notice of:
(i) any material non-compliance in relation to the Assets with any
law intended to protect health, safety or the environment which
has not been remedied in all material respects; or
(ii) any claim in relation to the Assets by any Third Party of
material environmental damage (including pollution).
(s) Environmental Liabilities: to the best of Vendor's knowledge, there
-------------------------
has been no material increase in the Environmental Liabilities during
the period commencing May 1, 1999, and ending on the Closing Date.
6.2 Negation of Other Representations and Warranties
(a) Vendor makes no representations or warranties except as expressly set
forth in section 6.1 and, in particular, and without limitation,
Vendor hereby expressly negates any representations or warranties by
it, whether contained in any information memorandum or otherwise, with
respect to:
(i) any data or information supplied by Vendor to Purchaser or its
representatives;
18
<PAGE>
(ii) the quality, quantity or recoverability of Petroleum Substances
within or under the Lands or any lands pooled or unitized
therewith;
(iii) the value of the Assets or the future cashflow therefrom;
(iv) the quality, condition, fitness or merchantability of any
tangible depreciable equipment or property, interests in which
are comprised in the Assets; and
(v) Vendor's title in and to the Assets.
Purchaser acknowledges and confirms that it has not relied on any
data, information or advice from Vendor with respect to any or all of
the matters specifically enumerated in this paragraph in connection
with the purchase of the Assets pursuant hereto and that, except for
the representations and warranties contained in section 6.1, Purchaser
is purchasing the Assets pursuant hereto on an "as is, where is"
basis. Purchaser confirms that it has not relied on any covenants,
representations or warranties outside this Agreement (whether in
contract or in tort). Purchaser acknowledges and confirms that it has
performed its own due diligence and will continue to rely upon its own
due diligence, evaluations and projections as the same relate to the
Assets, including without limitation, environmental due diligence.
(b) Except with respect to the representations and warranties in section
6.1, Purchaser forever releases and discharges Vendor and its
directors, officers, agents and employees from any claims by, and all
liability (whether in contract or in tort) to, Purchaser or
Purchaser's representatives, assigns and successors, as a result of
the use or reliance upon advice, information, statements, opinions or
materials pertaining to the Assets which was or were delivered or made
available to Purchaser or its representatives by Vendor or any of its
directors, officers, agents or employees.
6.3 Representations and Warranties of Purchaser
Purchaser represents and warrants to Vendor, that:
(a) Standing: Purchaser is a corporation, duly organized and validly
--------
existing under the laws of the Province of Alberta, is authorized to
carry on business in all jurisdictions in which the Assets are
located, and has the requisite corporate power and authority to
purchase and pay for the Assets in accordance with this Agreement;
(b) No Conflicts: the consummation of the transactions contemplated
------------
herein will not violate, nor be in conflict with, the constating
documents, by-laws or governing documents of Purchaser or any
judgment, decree, order, law, statute, rule or regulation applicable
to Purchaser;
(c) Execution of Documents: this Agreement has been duly executed and
----------------------
delivered by Purchaser and all other documents (including the General
Conveyance and the Specific Conveyances) executed and delivered by
Purchaser pursuant hereto will be duly executed and delivered by
Purchaser, and this Agreement does, and such documents will,
constitute legal, valid and binding obligations of Purchaser,
19
<PAGE>
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, preference, reorganization, moratorium and
other similar laws affecting creditors' rights generally and the
discretion of the courts with respect to equitable or discretionary
remedies and defenses;
(d) Finders' Fees: Purchaser has not incurred any obligation or
-------------
liability, contingent or otherwise, for brokers' or finders' fees in
respect of this transaction for which Vendor shall have any obligation
or liability;
(e) Purchase Price: Purchaser either now has or will have at Closing all
---------------
money that Purchaser will need to pay to Vendor upon Closing or
alternatively Purchaser now has a binding contractual right to receive
all money that Purchaser will need to pay to Vendor and such money
will be available to Purchaser for payment to Vendor at Closing;
(f) No Authorizations: No authorization or approval or other action by,
-----------------
and no notice to or filing with, any governmental authority or
regulatory body exercising jurisdiction over the Assets or Purchaser
is required for the due execution, delivery and performance by
Purchaser of this Agreement, other than authorizations, approvals or
exemptions previously obtained and currently in force or those
required in connection with the transfer of well licences and pipeline
permits;
(g) Investment Canada Act: Purchaser shall comply with the provisions of
---------------------
the Investment Canada Act, to the extent that the purchase of the
Assets by Purchaser is reviewable pursuant to the Investment Canada
Act (Canada); and
(h) Qualification: Purchaser meets all qualification requirements of
-------------
Third Parties (including without limitation, governmental agencies) to
purchase and to take a transfer of the Assets, including without
limitation, the well licences and pipeline permits and shall accede
to, comply with and perform the requirements of such Third Parties,
acting reasonably.
6.4 Time Limitation
No claim under this Article 6 for breach of a representation or warranty,
or both shall be made or be enforceable by a Party unless written notice of
such claim, with reasonable particulars, is given by such Party to the
Party against whom the claim is made within a period of 12 months from the
Closing Date. No claim shall be made by a Party in respect of the
representations and warranties made by the other Party in this Agreement
except pursuant to this Article 6 for breach of a representation or
warranty, or both.
6.5 Limitation
The maximum cumulative liability of Vendor to Purchaser as a result of any
breach of a representation, warranty or covenant, together with the value
of indemnities provided by Vendor under this Agreement, shall not, in the
aggregate, exceed the Purchase Price. The representations and warranties
of Vendor and Purchaser made herein or pursuant
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hereto are made for the exclusive benefit of Purchaser and Vendor, as the
case may be, and are not transferable and may not be made the subject of
any assignment or right of subrogation in favour of any other person.
ARTICLE 7
INDEMNITIES
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7.1 General Indemnity
(a) Except as otherwise provided in this Article 7 or in Article 4, and
subject to section 6.5, Vendor shall, from and after Closing:
(i) be liable for; and
(ii) indemnify Purchaser from and against all of Purchaser's Losses
and Liabilities in respect of
any claim (whether valid or invalid) made by a Third Party against
Purchaser as a consequence of acts or omissions in respect of the
Assets or operations in respect thereof which occurred or are alleged
by the Third Party to have occurred prior to the Effective Time,
provided that written notice of a claim pursuant to this subsection
7.1(a) must be provided by Purchaser to Vendor within 12 months of the
Closing Date.
(b) Except as otherwise provided in this Article 7 or in Article 4,
Purchaser shall, from and after Closing:
(i) be liable for; and
(ii) indemnify Vendor from and against all of Vendor's Losses and
Liabilities in respect of
any claim (whether valid or invalid) made by a Third Party against
Vendor as a consequence of acts or omissions in respect of the Assets
or operations in respect thereof which occurred or are alleged by the
Third Party to have occurred after the Effective Time.
7.2 Environmental and Related Obligations
Purchaser acknowledges that it is purchasing the Assets on an "as is, where
is" basis and that it has taken into account its assumption of
responsibility for Environmental Liabilities and Abandonment and
Reclamation Obligations and the release of Vendor from responsibility
therefor when Purchaser evaluated the Assets and determined the Base Price.
Except as provided in section 7.3, Purchaser shall:
(a) be liable for; and
(a) shall indemnify Vendor from and against all Losses and Liabilities of
Vendor in respect of
all Environmental Liabilities howsoever and by whomsoever caused and
whether they occur or arise in whole or in part prior to, on or subsequent
to the Effective Time and all
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Abandonment and Reclamation Obligations. Purchaser shall not be entitled to
exercise and hereby waives any rights or remedies Purchaser may now or in
the future have against Vendor in respect of such Environmental Liabilities
and Abandonment and Reclamation Obligations, whether such rights and
remedies are pursuant to the common law or statute or otherwise, including
without limitation, the right to name Vendor as a third party to any action
commenced by any Third Party against Purchaser.
7.3 Limitation
The indemnities provided for in this Article 7 apply only if Closing
occurs. Purchaser's obligations to indemnify Vendor pursuant to section
7.2 are subject to, and shall not limit or reduce Purchaser's right, in
respect of a breach of any representation and warranty contained in
subsections 6.1(r) or 6.1(s), provided that written notice of such breach
is provided by Purchaser to Vendor within 12 months of the Closing Date.
ARTICLE 8
MAINTENANCE OF ASSETS
---------------------
8.1 Maintenance of Assets Prior to Closing
From the date hereof until the Closing Date, Vendor, shall, to the extent
that the nature of its interest permits, and subject to the Title and
Operating Documents and any other agreements and documents to which the
Assets are subject:
(a) maintain the Assets in a proper and prudent manner in accordance with
good oil and gas industry practices and in material compliance with
all applicable laws, rules, regulations, orders and directions of
governmental and other competent authorities;
(b) pay or cause to be paid all costs and expenses relating to the Assets
which become due from the date hereof to the Closing Date; and
(c) perform and comply with all covenants and conditions contained in the
Title and Operating Documents and any other agreements and documents
to which the Assets are subject.
8.2 Consent of Purchaser
Notwithstanding section 8.1, from the date hereof until the Closing Date,
Vendor shall not, without the written consent of Purchaser, which consent
shall not be unreasonably withheld by Purchaser and which, if provided,
will be provided in a timely manner:
(a) make any commitment or propose, initiate or authorize any capital
expenditure with respect to the Assets of which Vendor's share is in
excess of $25,000 except in case of an emergency or in respect of
amounts which Vendor is committed to expend or is deemed to authorize
without its specific authorization or approval;
(b) surrender or abandon any of the Assets;
(c) amend in any material respect or terminate any Title and Operating
Documents or enter into any new agreement or commitment relating to
the Assets; or
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(d) sell, encumber or otherwise dispose of any of the Assets or any part
or portion thereof except sales of Petroleum Substances in the normal
course of business.
8.3 Following Closing
(a) Following Closing, Vendor shall hold its title to the Assets in trust
for Purchaser until all necessary notifications, registrations and
other steps required to transfer such title to Purchaser have been
completed.
(b) Following Closing, Vendor shall represent Purchaser in all matters
arising under a Title and Operating Document until Purchaser is
substituted as a party thereto in the place of Vendor and Vendor is
released therefrom, whether by novation, notice of assignment or
otherwise and, in furtherance thereof;
(i) all payments relating to the Assets received by Vendor pursuant
to such Title and Operating Document, other than those to which
Vendor is entitled under Article 4, shall be received and held
by Vendor as a trustee for Purchaser and Vendor shall promptly
remit such amounts to Purchaser;
(ii) Vendor shall forward all statements, notices, AFE's and other
information received by it pursuant to such Title and Operating
Document that pertain to the Assets to Purchaser promptly
following their receipt by Vendor; and
(iii) Vendor shall forward to other parties to the Title and
Operating Document such notices and elections pursuant to such
Title and Operating Document pertaining to the Assets as
Purchaser may reasonably request, provided that Vendor may
refuse to follow instructions which it reasonably believes to
be unlawful, unethical, or in conflict with an applicable
contract.
(c) Purchaser shall indemnify and save harmless Vendor from and against
all of Vendor's Losses and Liabilities arising as a consequence of the
provisions of subsections 8.3(a) and (b) hereof, except to the extent
caused by the gross negligence or willful misconduct of Vendor or its
servants, agents or employees. Vendor shall indemnify and save
harmless Purchaser from all of Purchaser's Losses and Liabilities
arising as a result of the gross negligence or willful misconduct of
Vendor for purposes of this subsection.
ARTICLE 9
THIRD PARTY RIGHTS AND CONSENTS
-------------------------------
9.1 Consents
Where an assignment of any of the Assets requires the consent of Third
Parties, Vendor shall use all reasonable efforts to obtain such consents
prior to closing. After Closing, Vendor shall cooperate with Purchaser in
Purchaser's attempts to secure such consents.
9.2 Rights of First Refusal
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(a) If all or any portion of the Assets is subject to a Right of First
Refusal, then Vendor shall promptly serve all notices as are required
thereunder and shall otherwise comply with the provisions thereof.
Purchaser, acting reasonably, shall allocate the Base Price to those
Assets which are subject to such Rights of First Refusal and within
three (3) Business Days of the execution of this Agreement shall
advise Vendor in writing of the same and such allocations shall be
used for the purposes of Right of First Refusal notices except where
such allocations are, in Vendor's opinion, unreasonable.
(b) Purchaser may not waive the existence or operation of any Right of
First Refusal. If a Right of First Refusal is exercised, the Assets
which are subject thereto shall not be sold to Purchaser pursuant
hereto and shall cease to be subject to this Agreement. Purchaser
shall nevertheless purchase the Assets which are not subject to the
exercised Rights of First Refusal.
(c) If any of the Assets cease to be subject to this Agreement pursuant to
subsection 9.2(b):
(i) the term "Assets", "Lands", "Leases", "Miscellaneous
Interests", "Petroleum and Natural Gas Rights" and "Tangibles"
shall be deemed amended to reflect the exercise of the Right of
First Refusal and Purchaser shall purchase all of the remaining
Assets; and
(ii) the Base Price shall be reduced by the aggregate amount
allocated pursuant to subsection 9.2(a) to the Assets subject
to the exercised Rights of First Refusal and the allocation of
the Purchase Price pursuant to section 2.3 shall be adjusted
accordingly.
ARTICLE 10
TITLE, REVIEW AND DEFECTS
-------------------------
10.1 Title Review
Between the execution of this Agreement and the Closing, Vendor shall make
available to Purchaser and its representatives, at Vendor's offices during
normal business hours, all title documents (including contracts,
correspondence and files) in its possession pertaining to the Assets for
purposes of permitting Purchaser to review Vendor's title to the Assets.
Purchaser shall conduct its review of Vendor's title to the Assets with
diligence. From time to time, as soon as reasonably practicable after
determination, and in any event, no later than the fifth Business Day
before the Closing Date, Purchaser shall notify the Vendor in writing of
any Title Defects. Such notice shall include a description of each Title
Defect, the remedy sought by Purchaser, the Assets directly affected by the
Title Defects and Purchaser's good faith estimate of the decrease in value
attributed by Purchaser to such interests by reason of the existence of the
Title Defect(s). Vendor shall use all reasonable efforts to cure or
rectify, by no later than two Business Days before Closing Date, the Title
Defects described in Purchaser's notice to Vendor.
10.2 Title Defects
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(a) No later than two Business Days before Closing Date, Purchaser shall
confirm to Vendor its good faith estimate ("Purchaser's Estimate") of
the aggregate Defect Values. If Purchaser's Estimate is less than five
percent (5%) of the Base Price, Vendor and Purchaser shall complete
the purchase and sale of the Assets, without any adjustment of the
Purchase Price on account of Title Defects. If Purchaser's Estimate is
five percent (5%) of the Base Price or greater, Purchaser shall
immediately meet with Vendor and provide Vendor access to all
information, analysis and calculations used by Purchaser to arrive at
Purchaser's Estimate. If, after meeting with Purchaser, Vendor does
not agree with Purchaser's Estimate, the issue shall be resolved
pursuant to the provisions of the Arbitration Act (Alberta). Each
Party shall promptly prepare and submit to the arbitrator its good
faith estimate of all disputed Defect Values. Once the arbitrator has
received both submissions, the arbitrator shall provide a copy of each
Party's submission to the other Party. The arbitrator will be
instructed to select either Vendor's good faith estimate or
Purchaser's good faith estimate of the Defect Values and shall have no
power whatsoever to reach any other result. The arbitrator will be
instructed to select the estimate, which more closely reflects the
actual aggregate Defect Values.
(b) If the aggregate Defect Values as agreed upon by the Parties or as
determined by the arbitrator is less than five percent (5%) of the
Base Price, Purchaser shall be deemed to have waived the uncured Title
Defects and shall be obligated to complete the purchase and sale of
the Assets, without any adjustment of the Purchase Price on account of
Title Defects.
(c) If the aggregate Defect Values as agreed upon by the Parties or as
determined by the arbitrator is five percent (5%) of the Base Price or
greater, either Vendor or Purchaser may terminate this Agreement upon
written notice given to the other Party within five Business Days of
such agreement or determination, as the case may be. If neither Party
gives such notice, then Purchaser will be deemed to have waived the
uncured Title Defects and shall be obligated to complete the purchase
and sale of the Assets, without any adjustment of the Purchase Price
on account of Title Defects; in which event, the Closing shall have
taken place on the fifth Business Day following the expiry of the
period in which a notice of termination could have been given by
either Party.
(d) If a Party gives notice of termination pursuant to this section,
neither Vendor nor Purchaser shall have any further obligation or
liability to the other as a result of such termination, and the
Deposit and any interest earned thereon shall be returned to
Purchaser.
ARTICLE 11
ARBITRATION
-----------
11.1 General Arbitration Provisions
If any matter upon which the Parties do not agree is required to be
referred to arbitration pursuant to the terms hereof or if the Parties
agree to refer any matter arising hereunder to arbitration, the arbitration
shall be before a single arbitrator. Any such arbitration, including the
selection of the arbitrator, shall be governed by the Arbitration Act
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(Alberta). The decision of any such arbitrator shall be final and binding
on the Parties and the costs and fees relating thereto shall be borne and
paid in the manner the arbitrator determines to be fair and equitable.
ARTICLE 12
OPERATORSHIP
------------
12.1 Transfer of Operatorship
Purchaser acknowledges that Vendor will not be able to transfer
operatorship of some or all of the Assets to Purchaser at or after Closing.
Vendor covenants with Purchaser that Vendor shall do those things as
Purchaser may reasonably request in order to obtain the appropriate
consents and approvals for the transfer to Purchaser of operatorship of
those of the Assets which Vendor currently operates.
12.2 Removal of Signs
At and after Closing, Vendor may remove any signs which indicate its
ownership or operation of the Assets. Purchaser will be responsible to
erect or install signs required by governmental agencies to indicate that
Purchaser is the operator of the Assets, if applicable and to notify other
working interest owners, gas purchasers, suppliers, contractors,
governmental agencies and other Third Parties of Purchaser's interest in
the Assets on and after Closing.
ARTICLE 13
GENERAL
-------
13.1 Further Assurances
Each Party will, from time to time and at all times after Closing, without
further consideration, do such further acts and deliver all such further
assurances, deeds and documents as shall be reasonably required in order to
fully perform and carry out the terms of this Agreement.
13.2 No Merger
Subject to the limitations set forth herein, the covenants,
representations, warranties and indemnities contained in this Agreement
shall survive Closing and shall not merge in any assignments, conveyances,
transfers or other documents executed and delivered at or after Closing,
notwithstanding any rule of law, equity or statute to the contrary and such
rules are hereby waived.
13.3 Entire Agreement
The provisions contained in any and all documents and agreements collateral
hereto shall at all times be read subject to the provisions of this
Agreement, and in the event of conflict the provisions of this Agreement
shall prevail. This Agreement supersedes all other agreements, documents,
writings and verbal understanding between the Parties relating to the
subject matter hereof except the Confidentiality Agreement which shall
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remain in full force and effect in accordance with its terms with respect
to any assets of Vendor that are not the subject of this Agreement.
13.4 Governing Law
This Agreement shall be subject to and interpreted, construed and enforced
in accordance with the laws of the Province of Alberta and the laws of
Canada applicable therein and shall be treated as a contract made in the
Province of Alberta. The Parties irrevocably attorn and submit to the
jurisdiction of the courts of the Province of Alberta and courts of appeal
therefrom in respect of all matters arising out of this Agreement.
13.5 Enurement
This Agreement may not be assigned by a Party without the prior written
consent of the other Party, which consent may be arbitrarily withheld.
This Agreement shall be binding upon and shall enure to the benefit of the
Parties and their respective administrators, trustees, receivers,
successors and permitted assigns.
13.6 Time of Essence
Time shall be of the essence in this Agreement.
13.7 Notices
The addresses and fax number of each Party for notices shall be as follows:
Vendor: NEUTRINO RESOURCES INC.
1400, 300 - 5th Avenue SW
CALGARY, ALBERTA T2P 3C4
Attention: Land Manager
Fax No.: (403) 215-3501
Purchaser: STAR OIL & GAS LTD.
3500, 150 - 6TH Avenue SW
CALGARY, ALBERTA T2P 3Y7
Attention: Vice President Land
Fax No.: (403) 232-3397
Any notice, communication or statement (a "notice") required, permitted or
contemplated hereunder shall be in writing and shall be delivered as
follows:
(a) by delivery to a Party between 8:00 a.m. and 4:00 p.m. on a Business
Day at the address of such Party for notices, in which case the notice
shall be deemed to have been received by that Party when it is
delivered; or
(b) by telecopier to a Party to the telecopier number of such Party for
notices, in which case, if the notice was telecopied prior to 4:00
p.m. on a Business Day the notice shall be deemed to have been
received by that Party when it was
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telecopied and if it was telecopied on a day which is not a Business
Day or is telecopied after 4:00 p.m. on a Business Day, it shall be
deemed to have been received on the next following Business Day.
A Party may from time to time change its address for service or its
telecopier number for service by giving written notice of such change to
the other Party.
13.8 Invalidity of Provisions
In case any of the provisions (or portion thereof) of this Agreement
should be determined to be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining
provisions (or portion thereof) contained herein shall not in any way be
affected or impaired thereby.
13.9 Waiver
No waiver by any Party of any breach (whether actual or anticipated) of
any of the terms, conditions, representations or warranties contained
herein shall take effect or be binding upon that Party unless the waiver
is expressed in writing under the authority of that Party. Any waiver so
given shall extend only to the particular breach so waived and shall not
limit or affect any rights with respect to any other or future breach.
13.10 Remedies Generally
No failure on the part of any Party in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy in
law or in equity or by statute or otherwise conferred.
13.11 Amendment
This Agreement shall not be varied in its terms or amended by oral
agreement or by representations or otherwise other than by an instrument
in writing dated subsequent to the date hereof, executed by a duly
authorized representative of each Party.
13.12 Public Announcements
Until Closing has occurred, no Party shall release any information
concerning this Agreement and the transactions herein provided for
without the prior written consent of the other Party, which consent shall
not be unreasonably withheld. Nothing contained herein shall prevent a
Party at any time from furnishing information, (i) to any governmental
agency or regulatory authority or to the public if required by applicable
law, provided that the Parties shall advise each other in advance of any
public statement which they propose to make; or (ii) in connection with
obtaining consents or complying with Rights of First Refusal.
13.13 Counterpart Execution
This Agreement may be executed in counterpart and all executed
counterparts together shall constitute one agreement.
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IN WITNESS WHEREOF the Parties have executed this Agreement as of the day
and year first above written.
NEUTRINO RESOURCES INC. STAR OIL & GAS LTD.
Per: _________________________ Per: _____________________________
Per: _________________________ Per: _____________________________
This is the execution page attached to and forming part of an Agreement of
Purchase and Sale dated the
16TH day of February, 2000, between Neutrino Resources Inc., as Vendor, and Star
Oil & Gas Ltd. as Purchaser
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Exhibit 99.1
Contact:
Michael E. Luttrell
Vice President-Finance
and CFO
(713) 658-9444
March 2, 2000
SOUTHERN MINERAL SELLS CANADIAN PACKAGE
Houston, Texas - Southern Mineral Corporation (OTC Bulletin Board: SMINQ.OB)
today announced the sale of the interests of its Canadian subsidiary, Neutrino
Resources Inc., in Inverness and Swan Hills fields in Alberta, Canada. The sale
is effective March 1, 2000 for total consideration of $13.1 million Canadian (US
$9.0 million), subject to certain adjustments and rights of first refusals of
approximately $ 2.3 million Canadian (US $ 1.45 million). Closing on all but
the amounts related to the rights of first refusal occurred on March 1, 2000.
Net proceeds from the sale will be used for reduction of Canadian bank
indebtedness. The Company does not expect to sell any other properties in the
near future.
Southern Mineral Corporation is an oil and gas acquisition, exploration and
production company that owns interests in oil and gas properties located along
the Texas Gulf Coast, Canada and Ecuador. The Company's principal assets include
interests in the Big Escambia Creek field in Alabama and the Pine Creek field in
Alberta, Canada. The Company's common stock is quoted on the OTC Bulletin Board
under the trading symbol "SMINQ.OB".
This news release contains forward-looking statements within the meaning of the
Securities Litigation Reform Act. The projections and statements reflect the
Company's current views with respect to future events and financial performance
that involve risks and uncertainties including price volatility, production
levels, drilling results, capital availability, successful negotiations with
other parties, evaluation of opportunities, operational and other risks,
uncertainties and factors described from time to time in the Company's publicly
available SEC reports. Actual results may differ materially from those
projected.
