<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
DECEMBER 22, 1999
TOREADOR ROYALTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-2517 75-0991164
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER
IDENTIFICATION NO.)
4809 COLE AVENUE, SUITE 108
DALLAS, TEXAS 75205
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 559-3933
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<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
As previously disclosed under a Current Report on Form 8-K filed on
January 6, 2000, Toreador Exploration & Production, Inc. ("Toreador E&P"), a
wholly-owned subsidiary of Toreador Royalty Corporation ("Toreador"), purchased
certain oil and gas working interests located in Finney County, Kansas (the
"Assets") from Lario Oil & Gas Company ("Lario"), pursuant to a Purchase and
Sale Agreement dated as of November 24, 1999, between Lario and Toreador E&P
(the "Lario Agreement"). In accordance with the rules of the Securities and
Exchange Commission, Toreador omitted from the Form 8-K the required financial
statements and pro forma financial information for the Assets. This amendment to
the Form 8-K provides such financial statements and pro forma financial
information.
(a) Financial statements of businesses acquired.
Historical Statement of Revenues and Direct Operating Expenses for
the Year Ended December 31, 1999.
Supplementary Oil and Gas Information (unaudited).
(b) Pro Forma financial information.
Pro Forma Consolidated Balance Sheet (unaudited) of Toreador Royalty
Corporation as of September 30, 1999.
Pro Forma Consolidated Statements of Operations (unaudited) of
Toreador Royalty Corporation for the nine months ended September 30,
1999, and for the year ended December 31, 1998.
(c) Exhibits
10.1* Purchase and Sale Agreement, effective November 24, 1999,
between Lario Oil & Gas Company and Toreador Exploration &
Production, Inc.
10.2* First Amendment To Credit Agreement, effective December 17,
1999, between Compass Bank, as Lender, and Toreador Royalty
Corporation, Toreador Exploration & Production, Inc., and
Tormin, Inc., as Borrowers, and Toreador Acquisition
Corporation, as Guarantor.
10.3* Term Promissory Note, effective December 17, 1999, between
Compass Bank, as Lender, and Toreador Royalty Corporation,
Toreador Exploration & Production, Inc., and Tormin, Inc.,
as Borrowers, and Toreador Acquisition Corporation, as
Guarantor.
23.1 Consent of Ernst & Young LLP.
(1)
- -----------------------
* Previously filed in Current Report on Form 8-K filed on January 6, 2000.
<PAGE> 3
Report of Independent Auditors
To the Board of Directors of
Toreador Royalty Corporation
We have audited the accompanying Historical Statement of Revenues and Direct
Operating Expenses of the Lario Oil and Gas Properties Acquisition for the year
ended December 31, 1999. This historical statement is the responsibility of the
management of the owner of the Properties. Our responsibility is to express an
opinion on this historical statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the historical statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying historical statement, as described in Note 1, was prepared for
the purpose of complying with certain rules and regulations of the Securities
and Exchange Commission for inclusion in Form 8-K which will be filed by
Toreador Royalty Corporation. It is not intended to be a complete presentation
of the financial condition, results of operations and cash flows of the Lario
Oil and Gas Properties Acquisition.
In our opinion, the historical statement referred to above presents fairly, in
all material respects, the revenues and direct operating expenses of the Lario
Oil and Gas Properties Acquisition as described in Note 1 for the year ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Ernst & Young LLP
Dallas, Texas
March 2, 2000
(2)
<PAGE> 4
Lario Oil and Gas Properties Acquisition
Historical Statement of Revenues and Direct Operating Expenses
For the Year Ended December 31, 1999
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<TABLE>
<CAPTION>
For the year ended
December 31, 1999
------------------
<S> <C>
Revenues:
Crude oil and condensate $ 1,272,310
Natural gas 18,142
-----------
Total 1,290,452
-----------
Direct operating expenses:
Lease operating expenses 571,852
-----------
Revenues in excess of direct
operating expenses $ 718,600
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
(3)
<PAGE> 5
Lario Oil and Gas Properties Acquisition
Notes to Historical Financial Statement of Revenues and Direct Operating
Expenses
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
1. Basis of Presentation
On December 22, 1999, Toreador Exploration & Production, Inc. ("Toreador
E&P"), a wholly-owned subsidiary of Toreador Royalty Corporation
("Toreador"), purchased 50% of the Lario Oil & Gas Company ("Lario") oil and
gas working interests (the "Properties") located in Finney County, Kansas,
pursuant to a Purchase and Sale Agreement dated as of November 24, 1999,
between Lario and Toreador E&P (the "Lario Agreement"). The purchase price
for the Properties was $5,500,000, consisting of $5,000,000 cash and an
agreement to pay the amount of $500,000 on an installment basis. Half of this
amount ($250,000) is to be repaid by Toreador on a monthly basis, plus
interest at prime plus 1%, amortized over 13 months beginning January, 2000.
The remaining $250,000 plus interest at prime plus 1% (which is currently
9.5% per annum) is to be repaid by Toreador on January 23, 2001.
The accompanying historical statement of revenues and direct operating
expenses ("Historical Statement") was prepared from the historical accounting
records of Lario which are prepared on the accrual basis. Oil and gas
revenues and direct operating expenses relate to the 50% interest in the
Properties that were acquired by Toreador E&P. Oil and gas sales are
recognized on the sales method.
The Historical Statement varies from an income statement in that it does not
show certain expenses which were incurred in connection with ownership of the
Properties, including general and administrative expenses and income taxes.
These costs were not separately allocated to the Properties by Lario and any
pro forma allocation would be both time consuming and expensive and would not
be a reliable estimate of what these costs would actually have been had the
Properties been operated historically as a stand alone entity. In addition,
these allocations, if made using historical Lario general and administrative
structures and tax burdens, would not produce allocations that would be
indicative of the historical performance of the Properties had they been
assets of Toreador, due to the greatly varying size, structure, operations
and accounting of the two companies. Additionally, this statement does not
include provisions for depreciation, depletion and amortization as such
amounts would not be indicative of those costs which would be incurred by
Toreador upon allocation of the purchase price.
For the same reason, primarily the lack of segregated or easily obtainable
reliable data on asset values and related liabilities, a balance sheet is not
presented for the Properties.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and direct operating expenses
during the reporting period. Actual results could differ from those
estimates.
(4)
<PAGE> 6
Lario Oil and Gas Properties Acquisition
Notes to Historical Financial Statement of Revenues and Direct Operating
Expenses
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
2. Commitments and Contingencies
In the course of its business affairs and operations, the owner of the
Properties is subject to possible loss contingencies arising from government,
environmental and health and safety laws and regulations and third-party
litigation. There are no matters, which, in the opinion of management, will
have a material adverse effect on the financial results of the Properties.
SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)
Oil and Gas Operations
During the year ended December 31,1999, no exploration or incremental general
and administrative costs were incurred.
The following information is presented pursuant to Statement of Financial
Accounting Standards No. 69, Disclosures about Oil and Gas Producing Activities:
Oil and Gas Reserves
The following table identifies Toreador's net interest in estimated quantities
of proved oil and gas reserves associated with the Properties and changes in
such estimated quantities. In the absence of relevant detailed information from
Lario, reserve information presented below is based upon estimates of proved
reserves prepared by independent petroleum engineers as of December 31, 1999.
Proved reserves are estimated quantities of crude oil, including natural gas
liquids, and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed reserves are
those which are expected to be recovered through existing wells with existing
equipment and operating methods.
<TABLE>
<CAPTION>
Oil Gas
(Bbls) (Mcf)
----------- -----------
<S> <C> <C>
Proved reserves at December 31, 1998 1,111,504 82,344
Production 73,481 11,533
----------- -----------
Proved reserves at December 31, 1999 1,038,023 70,811
=========== ===========
Proved developed reserves at:
December 31, 1998 560,612 82,344
=========== ===========
December 31, 1999 487,131 70,811
=========== ===========
</TABLE>
(5)
<PAGE> 7
Lario Oil and Gas Properties Acquisition
Supplementary Oil and Gas Producing Activities (Unaudited)
December 31, 1999
- --------------------------------------------------------------------------------
Standardized Measures of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves
The Company has developed the Standardized Measure of Discounted Future Net Cash
Flows Relating to Proved Oil and Gas Quantities (Standardized Measure), before
income taxes, assuming year-end selling prices adjusted for future fixed and
determinable contractual price changes, year-end development and production
costs, and a 10% annual discount rate. The Standard Measure does not consider
the effects of income taxes as it is not feasible to identify all assets,
liabilities or indirect operating costs applicable to the Properties because
they were not maintained as a separate business unit.
The Standardized Measure does not purport to be an estimate of the fair market
value of Toreador's reserves. An estimate of fair value would also have taken
into account, among other things, the expected recovery of reserves in excess of
proved reserves, anticipated changes in future prices and costs and a discount
factor representative of the time value of money and risks inherent in producing
oil and gas.
<TABLE>
<CAPTION>
December 31, 1999
-----------------
<S> <C>
Future cash inflows $ 24,104,375
Future production costs 7,800,550
Future development costs 554,375
------------
Future net cash inflows 15,749,450
Ten percent annual discount 5,269,224
------------
Standardized Measure (before income taxes)
of discounted future net cash flows $ 10,480,226
============
</TABLE>
The oil and gas prices used to calculate future net cash inflows at December 31,
1999 were $23.89 per barrel and $1.50 per Mcf. The oil price is based on the New
York Mercantile Exchange ("NYMEX") historical crude pricing as of December 31,
1999, less $1.71 for quality and transportation differences. The gas price is
based on December NYMEX - Henry Hub pricing as of December 31, 1999, less $.93
for quality and transportation differences. The prices of crude oil and natural
gas have fluctuated over the past several years, which affects the computed cash
flows over the period shown. Because the price of crude oil and natural gas is
likely to remain volatile in the future, price changes can be expected to
continue to significantly affect the standardized measure of discounted future
net cash flows.
(6)
<PAGE> 8
Lario Oil and Gas Properties Acquisition
Supplementary Oil and Gas Producing Activities (Unaudited)
December 31, 1999
- --------------------------------------------------------------------------------
Changes in the Standardized Measure
The following are the principal sources of change in the standardized measure
(before income taxes):
<TABLE>
<CAPTION>
1999
------------
<S> <C>
Balance at January 1 $ 1,507,645
Changes resulting from :
Sales, net of production costs (612,733)
Net changes in prices and costs 9,933,981
Accretion of discount 150,765
------------
Balance at December 31 $ 10,979,658
============
</TABLE>
(7)
<PAGE> 9
TOREADOR ROYALTY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated financial information gives
effect to the acquisition of the Properties. The unaudited pro forma balance
sheet adjusts the September 30, 1999 historical balance sheet as though the
acquisition occurred on September 30, 1999. The unaudited pro forma statements
of operations for the nine month period ended September 30, 1999 and the year
ended December 31, 1998 are adjusted to reflect the acquisition as though it
occurred on January 1, 1998. The pro forma results exclude any nonrecurring
charges or credits directly attributable to the acquisition.
The unaudited pro forma financial information is based on assumptions and
includes adjustments as explained in the notes to the unaudited pro forma
consolidated financial information. The actual recording of the acquisition
could differ. The unaudited pro forma financial information is not necessarily
indicative of Toreador's financial position or results of operations that might
have occurred had the transaction occurred on the dates indicated above.
The unaudited pro forma financial information should be read in conjunction with
the historical financial statements and related notes thereto which are
contained in the Company's 1998 Annual Report on Form 10-K for the year ended
December 31, 1998, Toreador's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1999 and the historical statement of revenues and direct
operating expenses of the Properties and the Notes thereto included in this
Current Report on Form 8-K/A.
(8)
<PAGE> 10
TOREADOR ROYALTY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
As of September 30, 1999
Toreador Adjustments Pro Forma for
Historical for Acquisition the Acquisition
------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 20,539 $ -- $ 20,539
Short-term investments 760,375 (750,000)(b) 10,375
Accounts receivable 712,238 144,564 (a) 856,802
Marketable securities 252,006 (250,000)(b) 2,006
Federal income tax receivable 63,064 -- 63,064
Other current assets 56,528 -- 56,528
------------- ------------- -------------
Total current assets 1,864,750 (855,436) 1,009,314
------------- ------------- -------------
Other Assets 276,299 61,500(b) 337,799
Properties and equipment, less accumulated
depreciation, depletion and amortization 19,267,770 5,497,337(a) 24,765,107
------------- ------------- -------------
Total assets $ 21,408,819 $ 4,703,401 $ 26,112,220
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 262,912 $ 141,901(a) $ 404,813
Federal income tax payable 58,524
Current portion of long term debt -- 250,000(b) 250,000
------------- ------------- -------------
Total current liabilities 321,436 391,901 654,813
------------- ------------- -------------
Long term debt 10,355,000 4,311,500(b) 14,666,500
------------- ------------- -------------
Total liabilities 10,676,436 4,703,401 15,379,837
------------- ------------- -------------
Stockholders' equity:
Preferred stock, $1.00 par value, 4,000,000
shares authorized; 160,000 issued 160,000 -- 160,000
Common stock, $0.15625 par value, 20,000,000 shares and
10,000,000 authorized; 5,651,571 & 5,644,071 shares issued 883,058 -- 883,058
Capital in excess of par value 8,222,615 -- 8,222,615
Retained earnings 2,778,268 2,778,268
Accumulated other comprehensive loss (45,394) -- (45,394)
------------- ------------- -------------
11,998,547 -- 11,998,547
Treasury stock at cost: 474,700 and 438,400 shares (1,266,164) -- (1,266,164)
------------- ------------- -------------
Total stockholders' equity 10,732,383 -- 10,732,383
------------- ------------- -------------
Total liabilities and stockholders' equity $ 21,408,819 $ 4,703,401 $ 26,112,220
============= ============= =============
</TABLE>
The Company uses the successful efforts method of accounting for its oil and gas
producing activities.
See accompanying notes to unaudited pro forma consolidated financial statements.
(9)
<PAGE> 11
TOREADOR ROYALTY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Toreador Acquisition Pro Forma
Historical Historical Adjustments for the
Amounts Amounts for Acquisition Acquisition
------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 2,616,687 832,062(f) -- $ 3,448,749
Lease bonuses and rentals 319,510 -- -- 319,510
Interest and other income 87,838 87,838
Gain on sale of properties 851,726 -- -- 851,726
------------- ------------- ---------------- -------------
Total revenues 3,875,761 832,062 -- 4,707,823
Costs and expenses:
Lease operating expense 429,176 329,933(f) -- 759,109
Depreciation, depletion and amortization 604,563 -- 258,268(c) 862,831
Geological and geophysical 275,685 -- -- 275,685
General and administrative 1,216,423 -- -- 1,216,423
Interest expense 563,706 -- 250,814(e) 814,520
------------- ------------- ---------------- -------------
Total costs and expenses 3,089,553 329,933 509,082 3,928,569
------------- ------------- ---------------- -------------
Income (loss) before federal income taxes 786,208 502,128 (509,082) 779,254
Provision (benefit) for federal income taxes 267,311 -- (2,364)(d) 264,947
------------- ------------- ---------------- -------------
Net income (loss) $ 518,897 $ 502,128 $ (506,718) $ 514,307
============= ============= ================ =============
Dividends on preferred shares $ 270,000 $ 270,000
Net Income applicable to common shares 248,897 244,307
============= =============
Basic income per share $ 0.05 $ 0.05
Diluted income per share $ 0.05 $ 0.05
Weighted average shares outstanding:
Basic 5,188,582 5,188,582
Diluted 5,223,582 5,223,582
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
(10)
<PAGE> 12
TOREADOR ROYALTY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Toreador Acquisition Pro Forma
Historical Historical Adjustments for the
Amounts Amounts for Acquisition Acquisition
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 1,968,638 925,964(f) -- $ 2,894,602
Lease bonuses and rentals 168,664 -- 168,664
Interest and other income 171,338 -- -- 171,338
Gain on sale of marketable securities --
and other assets -- -- --
------------- ------------- ------------- -------------
Total revenues 2,308,640 925,964 -- 3,234,604
Costs and expenses:
Lease operating expense 583,441 545,510(f) -- 1,128,951
Dry holes and abandonments 133,113 -- -- 133,113
Depreciation, depletion and amortization 514,071 -- 358,564(c) 872,635
Geological and geophysical 517,870 -- -- 517,870
General and administrative 999,548 -- -- 999,548
Interest expense -- -- 358,931(e) 358,931
Loss on settlement of benefit plans 36,120 -- -- 36,120
------------- ------------- ------------- -------------
Total costs and expenses 2,784,163 545,510 717,495 4,047,168
------------- ------------- ------------- -------------
Income (loss) before federal income taxes (475,523) 380,454 (717,495) (812,564)
Provision (benefit) for federal income taxes (233,277) -- (114,594)(d) (347,871)
------------- ------------- ------------- -------------
Net income (loss) $ (242,246) $ 380,454 $ (602,901) $ (464,693)
============= ============= ============= =============
Dividends on preferred shares 19,500 19,500
------------- -------------
Net loss applicable to common shares (261,746) (484,193)
============= =============
Basic loss per share $ (0.05) $ (0.09)
Diluted loss per share $ (0.05) $ (0.09)
Weighted average shares outstanding:
Basic 5,125,063 5,125,063
Diluted 5,125,063 5,125,063
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
(11)
<PAGE> 13
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Pro forma adjustments are made to reflect the following:
(a) The acquisition of the Properties. The allocation of the pro forma
purchase price under the purchase method of accounting is presented
below:
<TABLE>
<S> <C>
Purchase Price ....................................... $ 5,500,000
Estimated purchase price adjustments, including
distributions of cash flows from the Properties
from October 1, 1999 to the closing date,
December 22, 1999 ................................. (144,564)
Other acquisition costs .............................. 141,901
-------------
Total Purchase Price .............................. $ 5,497,337
=============
</TABLE>
(b) To record the funding of the acquisition of the Properties. Such
funding came from the increase in current and long-term debt of
$4,561,500 and the capitalization of closing costs associated with the
financing instruments. This total is comprised of the $4,061,500 loan
from Compass and the $500,000 loan from Lario Oil & Gas Company. The
closing costs will be amortized over the lives of the respective
financing instruments. The properties are held as collateral by
Compass. Additionally, short-term investments of $750,000 and
marketable securities of $250,000 were liquidated to fund the
transaction.
(c) The increase in depreciation, depletion and amortization associated
with the Properties. The pro forma adjustment assumes a depreciation,
depletion and amortization rate per BOE of $4.57 for the year ended
December 31, 1998 and the nine months ended September 30, 1999 based
upon depletable costs of $5,497,337 and $5,138,793 at December 31,
1998 and September 30, 1999, respectively and proved reserves of
1,203,742 MBOE and 1,125,228 MBOE at January 1, 1998 and January 1,
1999, respectively.
(d) The decrease in federal and state income taxes associated with the
income and expenses generated by the Properties.
(12)
<PAGE> 14
(e) The increase in interest expense attributable to the increase in
current and long-term debt. Interest expense on the credit facilities
represents the floating rate Toreador would have incurred as if the
acquisition was funded at January 1, 1998. The interest rates on the
Compass facilities were 7.5% for the year ended December 31, 1998 and
for the six months ended June 30, 1999 and 8% for the three months
ended September 30, 1999. Interest expense and amortization of loan
fees totaled $325,113 and $248,911 for the year ended December 31,
1998 and the nine months ended September 30, 1999, respectively. The
Lario loan bears interest at 8.5%. The interest incurred for the Lario
loan was $33,818 and $1,903 for the year ended December 31, 1998 and
the nine months ended September 30, 1999, respectively.
(f) Oil and gas sales and lease operating expenses for the nine months
ended September 30, 1999 and for the year ended December 31, 1998 were
based on actual results.
(13)
<PAGE> 15
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.
TOREADOR ROYALTY CORPORATION
Date: March 3, 2000 By: /s/ G. Thomas Graves III
--------------------------
Name: G. Thomas Graves III
Title: President and
Chief Executive Officer
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------
<S> <C>
10.1* Purchase and Sale Agreement, effective November 24, 1999, between
Lario Oil & Gas Company and Toreador Exploration & Production, Inc.
10.2* First Amendment To Credit Agreement, effective December 17, 1999,
between Compass Bank, as Lender, and Toreador Royalty Corporation,
Toreador Exploration & Production, Inc., and Tormin, Inc., as
Borrowers, and Toreador Acquisition Corporation, as Guarantor.
10.3* Term Promissory Note, effective December 17, 1999, between Compass
Bank, as Lender, and Toreador Royalty Corporation, Toreador
Exploration & Production, Inc., and Tormin, Inc., as Borrowers, and
Toreador Acquisition Corporation, as Guarantor.
23.1 Consent of Ernst & Young LLP.
</TABLE>
- -----------------------
* Previously filed in Current Report on Form 8-K filed on January 6, 2000.
<PAGE> 1
Exhibit 23.1
We consent to the incorporation by reference in Registration Statement Form S-8
(No. 333-64331) of Toreador Royalty Corporation of our report dated March 2,
2000, with respect to the Historical Statement of Revenues and Direct Operating
Expenses of the Lario Oil and Gas Properties acquisition for the year ended
December 31, 1999 and included in its Current Report on Form 8-K/A dated March
3, 2000 and filed on January 6, 2000 filed with the Securities and Exchange
Commission.
Ernst & Young LLP
March 3, 2000
