-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MI2Ro+IafXsWiA1UjZ/th8BE3aPhwxK4byFzrNKyMdkDPqBsF8OpOXjtzKectn5j LwF9klHSG+gruU1i7mEgOg== 0000821483-00-000024.txt : 20000515 0000821483-00-000024.hdr.sgml : 20000515 ACCESSION NUMBER: 0000821483-00-000024 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA PETROLEUM CORP/CO CENTRAL INDEX KEY: 0000821483 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 841060803 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16203 FILM NUMBER: 629349 BUSINESS ADDRESS: STREET 1: 555 17TH ST STE 3310 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032939133 MAIL ADDRESS: STREET 1: 555 17TH STREET STREET 2: SUITE 3310 CITY: DENVER STATE: CO ZIP: 80202 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-16203 Delta Petroleum Corporation (Exact name of registrant as specified in its charter) Colorado 84-1060803 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 555 17th Street, Suite 3310 Denver, Colorado 80202 (Address of principal executive offices) (Zip Code) (303) 293-9133 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ 7,972,179 shares of common stock $.01 par value were outstanding as of May 5, 2000. FORM 10-QSB 3rd QTR. FY 2000 INDEX PART I FINANCIAL INFORMATION PAGE NO. Item 1. Consolidated Financial Statements Consolidated Balance Sheets - March 31, 2000 and June 30, 1999 (unaudited) 1 Consolidated Statements of Operations - Three and Nine Months Ended March 31, 2000 and 1999 (unaudited) 3 Consolidated Statement of Stockholders' Equity Year Ended June 30, 1999 and Nine Months Ended March 31, 2000 (unaudited) 4 Consolidated Statements of Cash Flows - Three and Nine Months Ended March 31, 2000 and 1999 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis Or Plan of Operations 11 PART II OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities 17 Item 3. Defaults upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 The terms "Delta", "Company", "we", "our", and "us" refer to Delta Petroleum Corporation unless the context suggests otherwise. DELTA PETROLEUM CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, June 30, 2000 1999 ASSETS Current Assets: Cash $ 419,449 99,545 Trade accounts receivable, net of allowance for doubtful accounts of $50,000 March 31, 2000 and June 30, 1999 907,736 113,841 Accounts receivable - related parties 163,205 116,855 Other current assets 196,800 10,100 Total current assets 1,687,190 340,341 Property and Equipment: Oil and gas properties, at cost (using the successful efforts method of accounting): Undeveloped offshore California properties 9,109,310 7,369,830 Undeveloped onshore domestic properties 476,795 506,363 Undeveloped foreign properties 623,920 623,920 Developed offshore California properties 4,547,411 - Developed onshore domestic properties 5,128,834 2,231,187 Office furniture and equipment 88,432 82,489 19,974,702 10,813,789 Less accumulated depreciation and depletion (2,045,199) (1,650,228) Net property and equipment 17,929,503 9,163,561 Long term assets: Deferred financing costs 391,453 - Investment in Bion Environmental 313,548 257,180 Partnership net assets 476,049 - Deposit on purchase of oil and gas properties - 1,616,050 Total long term assets 1,181,050 1,873,230 $ 20,797,743 11,377,132 March 31, June 30, 2000 1999 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 1,451,636 393,542 Other accrued liabilities 41,961 10,000 Royalties payable 74,073 127,166 Current portion of long-term debt: Related party - 105,268 Other 1,806,163 - Total current liabilities 3,373,833 635,976 Long-term debt: Related party - 894,732 Other 6,759,506 - Total long-term debt 6,759,506 894,732 Stockholders' Equity: Preferred stock, $.10 par value; authorized 3,000,000 shares, none issued - - Common stock, $.01 par value; authorized 300,000,000 shares, issued 7,913,379 shares at March 31, 2000 and 6,390,302 at June 30, 1999 79,134 63,903 Additional paid-in capital 32,490,035 29,476,275 Accumulated other comprehensive loss 161,978 (115,395) Accumulated deficit (22,066,743) (19,578,359) Total stockholders' equity 10,664,404 9,846,424 Commitments $ 20,797,743 11,377,132 DELTA PETROLEUM CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, March 31, 2000 1999 Revenue: Oil and gas sales $ 1,180,436 157,072 Other revenue 59,086 34,001 Total revenue 1,239,522 191,073 Operating expenses: Lease operating expenses 951,903 44,250 Depreciation and depletion 187,905 34,885 Exploration expenses 15,251 8,024 Dry hole costs - 6,482 General and administrative 525,856 528,145 Stock option expense 81,795 57,370 Total operating expenses 1,762,710 679,156 Loss from operations (523,188) (488,083) Other income and expenses: Interest and financing costs (384,152) - Loss on sale of securities available for sale (110,238) (74,511) Total other income and expenses (494,390) (74,511) Net loss $ (1,017,578) (562,594) Net loss per common share - basic and diluted $ (0.13) (0.09) Weighted average of common Shares outstanding 7,603,376 6,012,524 DELTA PETROLEUM CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended March 31, March 31, 2000 1999 Revenue: Oil and gas sales $ 1,852,135 463,978 Gain on sale of oil and gas properties - 957,147 Other revenue 121,221 155,741 Total revenue 1,973,356 1,576,866 Operating expenses: Lease operating expenses 1,363,850 169,344 Depreciation and depletion 394,971 128,411 Exploration expenses 37,495 64,316 Dry hole costs - 226,189 General and administrative 1,317,414 1,202,737 Stock option expense 293,860 86,045 Total operating expenses 3,407,590 1,877,042 Loss from operations (1,434,234) (300,176) Other income and expenses: Interest and financing costs (941,360) (10,000) Loss on sale of securities available for sale (112,789) (96,553) Total other income and expenses (1,054,149) (106,553) Net loss $ (2,488,383) (406,729) Net loss per common share - basic and diluted $ (0.35) (0.07) Weighted average of common Shares outstanding 7,011,750 5,764,920 DELTA PETROLEUM CORPORATION AND SUBSIDIARY Consolidated Statement of Stockholders' Equity Year ended June 30, 1999 and nine months ended March 31, 2000 (Unaudited) Additional Common Stock paid-in Shares Amount capital Balance, June 30, 1998 5,513,858 $ 55,139 25,571,921 Comprehensive loss: Net loss - - - Other comprehensive loss, net of tax Unrealized loss on equity securities - - - Less: Reclassification adjustment for losses included in net loss - - - Comprehensive loss - - - Stock options granted as compensation - - 2,081,423 Shares issued for cash upon exercise of options 120,000 1,200 158,800 Shares issued for cash 196,444 1,964 354,011 Shares issued for services 10,000 100 15,650 Shares issued for oil and gas properties 250,000 2,500 621,420 Shares issued for deposit on oil and gas properties 300,000 3,000 613,050 Fair value of warrant extended and repriced - - 60,000 Balance, June 30, 1999 6,390,302 63,903 29,476,275 Comprehensive loss: Net loss - - - Other comprehensive gain, net of tax Unrealized gain on equity securities - - - Less: Reclassification adjustment for losses included in net loss - - - Comprehensive loss - - - Stock options granted as compensation - - 293,860 Shares issued for cash 603,000 6,030 1,017,970 Shares issued for cash upon exercise of options 630,077 6,301 589,045 Shares and options issued with financing 75,000 750 565,472 Shares issued for oil and gas properties 115,000 1,150 244,663 Shares issued for deposit on oil and gas properties 100,000 1,000 302,750 Balance, March 31, 2000 7,913,379 $ 79,134 32,490,035
Accumulated other comprehensive income Comprehensive Accumulated (loss) loss deficit Total Balance, July 1, 1998 457,594 (16,579,600) 9,505,054 Comprehensive loss: Net loss (2,998,759) (2,998,759) (2,998,759) Other comprehensive loss, net of tax Unrealized loss on equity securities (669,542) - Less: Reclassification adjustment for losses included in net loss 96,553 (572,989) (572,989) Comprehensive loss (3,571,748) Stock options granted as compensation - - 2,081,423 Shares issued for cash upon exercise of options - - 160,000 Shares issued for cash - - 355,975 Shares issued for services - - 15,750 Shares issued for oil and gas properties - - 623,920 - Shares issued for deposit on oil and gas properties - - 616,050 Fair value of warrant extended and repriced - - 60,000 Balance, June 30, 1999 (115,395) (19,578,359) 9,846,424 Comprehensive loss: Net loss (2,488,383) (2,488,383) (2,488,383) Other comprehensive gain, net of tax Unrealized gain on equity securities 164,584 - Less: Reclassification adjustment for losses included in net loss 112,789 277,373 277,373 Comprehensive loss (2,211,010) Stock options granted as compensation - 293,860 Shares issued for cash - 1,024,000 Shares issued for cash upon exercise of options - 595,346 Shares and options issued with financing 566,222 Shares issued for oil and gas properties - 245,813 Shares issued for deposit on oil and gas properties - 303,750 Balance, March 31, 2000 161,978 (22,066,742) 10,664,405
DELTA PETROLEUM CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31, March 31, 2000 1999 Net cash used in operating activities $ (1,560,865) (1,266,131) Cash flows from investing activities: Additions to property and equipment (7,320,300) (486,235) Proceeds from sale of oil and gas properties - 1,384,000 Proceeds from sale of securities available for sale 135,411 174,602 Net cash provided by (used in) investing activities (7,184,889) 1,072,367 Cash flows from financing activities: Stock issued for cash upon exercise of options 595,346 - Issuance of common stock for cash 1,024,000 356,475 Proceeds from borrowings 13,142,427 - Repayment of borrowings and financing costs (5,655,928) - Decrease (increase) in accounts receivable from related parties (40,187) 53,050 Net cash provided by financing activities 9,065,658 409,525 Net increase in cash 319,904 215,761 Cash at beginning of period 99,545 17,135 Cash at end of period $ 419,449 232,896 Supplemental cash flow information - Cash paid for interest and financing costs $ 459,207 10,000 Non-cash financing activities: Common stock issued for the purchase of oil and gas properties $ 549,563 123,750 Common stock, options and overriding royalties issued for services relating to debt financing $ 891,223 - Common stock issued for undeveloped foreign properties $ - 623,920 See accompanying notes to consolidated financial statements. DELTA PETROLEUM CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements Three and Nine Months Ended March 31, 2000 and 1999 (Unaudited) (1) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and, in accordance with those rules, do not include all the information and notes required by generally accepted accounting principles for complete financial statements. As a result, these unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto filed with the Company's most recent annual report on Form 10-KSB. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of the financial position of the Company and the results of its operations have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the complete fiscal year. For a more complete understanding of the Company's operations and financial position, reference is made to the consolidated financial statements of the Company, and related notes thereto, filed with the Company's annual report on Form 10-KSB for the year ended June 30, 1999, previously filed with the Securities and Exchange Commission. Liquidity The Company has incurred losses from operations over the past several years coupled with significant deficiencies in cash flow from operations for the same period. As of March 31, 2000, the Company had a working capital deficit of $1,686,643. These factors among others may indicate that without increased cash flow from operations, sale of oil and gas properties or additional financing the Company may not be able to meet its obligations in a timely manner. The Company is taking steps to reduce losses and generate cash flow from operations which management believes will generate sufficient cash flow to meet its obligations in a timely manner. Should the Company be unable to achieve its projected cash flow from operations additional financing or sale of oil and gas properties could be necessary. The Company believes that it could sell oil and gas properties or obtain additional financing, although, there can be no assurance that such financing would be available on a timely basis or acceptable terms. (2) Investments The Company's investment in Bion Environmental Technologies, Inc. (Bion) is classified as an available for sale security and reported at its fair market value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity. During the nine months ended March 31, 2000, the Company received an additional 21,162 shares of Bion's common stock for rent provided by the Company. Also during the nine months ended March 31, 2000, the Company realized a loss on the sale of securities available for sale of $112,789. The cost and estimated market value of the Company's investment in Bion at March 31, 2000 and June 30, 1999 are as follows: Estimated Unrealized Market Cost Gain (Loss) Value March 31, 2000 $151,570 161,978 313,548 June 30, 1999 $372,575 (115,395) 257,180 (3) Oil and Gas Properties On November 1, 1999, the Company acquired interests in 11 oil and gas producing properties located in New Mexico and Texas for a cost of $2,879,850. On December 1, 1999, the Company completed the acquisition of the equivalent of a 6.07% working interest in the form of a financial arrangement termed a "net operating interest" in the Point Arguello Unit, and its three platforms (Hidalgo, Harvest and Hermosa), along with a 100% interest in two and an 11.11% interest in one of the three leases within the adjacent undeveloped Rocky Point Unit from an unrelated entity. The seller is unrelated and will retain its proportionate share of future abandonment liability associated with both the onshore and offshore facilities of the Point Arguello Unit. The acquisition had a purchase price of approximately $6,758,550 consisting of $5,625,000 in cash and 500,000 shares of the Company's restricted common stock with a fair market value of $1,133,500. In addition, the agreement provides that if development and operating expenses are greater than production revenues then, at Delta's election, until December 31, 2000, the seller will invest up to $1,000,000 in Delta through the purchase of Delta Preferred Stock to cover excess expenses incurred by Delta. (4) Long Term Debt - Related Party On May 24, 1999, the Company borrowed $1,000,000 at 18% per annum from two of the Company's officers maturing on June 1, 2001. The Company's officers borrowed these funds from a private lender at the same 18% per annum interest rate and other loan terms which were passed through to the Company. On December 1, 1999 the Company paid the loan in full. (5) Long Term Debt - Other On July 30, 1999, the Company borrowed $2,000,000 at 18% per annum from an unrelated entity which was personally guaranteed by the officers of the Company. On December 1, 1999, the Company paid a portion of the principal and accrued interest leaving a principal balance of $726,293. The Company paid a 2% origination fee to the lender. As consideration for the guarantee of the Company indebtedness, the Company entered into an agreement with two of its officers, under which a 1% overriding royalty interest in the properties acquired with the proceeds of the loan (proportionately reduced to the interest in each property) will be assigned to each of the officers. Each overriding royalty has a fair market of approximately $125,000 which was recorded as an adjustment to the purchase price. On November 1, 1999, the Company borrowed approximately $2,880,000 at 18% per annum from an unrelated entity maturing on January 31, 2000, which was personally guaranteed by two officers of the Company. The loan proceeds were used to purchase the 11 producing wells and associated acreage in New Mexico and Texas. On December 1, 1999, the Company paid the loan in full. The Company also paid a 1% origination fee to the lender. As consideration for the guarantee of the Company indebtedness, the Company agreed to assign a 1% overriding royalty interest to each officer in the properties acquired with the proceeds of the loan (proportionately reduced to the interest acquired in each property). Each overriding royalty has a fair market of approximately $37,500 which was recorded as an adjustment to the purchase price. The Company also paid a 1% origination fee to the lender. On December 1, 1999, the Company borrowed $8,000,000 at prime plus 1-1/2% from an unrelated entity. The loan agreement provides for a 4-1/2 year loan with additional compensation to the lender if paid after September 1, 2000. The proceeds from this loan were used to pay off existing debt and the balance of the Point Arguello Unit purchase. The Company is required to make minimum monthly payments equal to the greater of $150,000 or 75% of net cash flows from the acquisitions completed on November 1, 1999 and December 1, 1999. The Company has assumed the minimum payments of $150,000 per month for the determination of the current portion of long term debt. The loan is collateralized by the Company's oil and gas properties acquired with the loan proceeds to date in the current fiscal year. (6) Shareholders' Equity On January 4, 2000, the Company completed the sale of 175,000 shares of the Company's common stock in a private transaction to an unrelated entity for $350,000. (7) Earnings (loss) Per Share Basic earnings (loss) per share is computed by dividing net earnings (loss) attributes to common stock by the weighted average number of common shares outstanding during each period, excluding treasury shares. Diluted earnings (loss) per share is computed by adjusting the average number of common share outstanding for the dilative effect, if any, of convertible preferred stock, stock options and warrant. The effect of potentially dilutive securities outstanding were antidilutive during the three and nine months ended March 31, 2000 and 1999. Item 2. Management's Discussion and Analysis or Plan of Operations Forward Looking Statements The statements contained in this report which are not historical fact are "forward looking statements" that involve various important risks, uncertainties and other factors which could cause the our actual results to differ materially from those expressed in such forward looking statements. These factors include, without limitation, the risks and factors set forth below as well as other risks previously discussed in our annual report on Form 10-KSB. Liquidity and Capital Resources. At March 31, 2000, we had a working capital deficit of $1,686,643 compared to a working capital deficit of $295,635 at June 30, 1999. Our current assets include accounts receivable from related parties (including affiliated companies) of $163,205 at March 31, 2000 which is primarily for drilling costs, and lease operating expense on wells owned by the related parties and operated by us. The amounts are due on open account and are non- interest bearing. Our current liabilities include current portion of long-term debt of $1,806,163 at March 31, 2000. We borrowed these funds to acquire certain oil and gas properties. Our working interest share of the future estimated development costs based on estimates developed by the operating partners relating to four of our five undeveloped offshore California properties approximates $217 million. No significant amounts are expected to be incurred during fiscal 2000 and $1.0 million and $4.2 million are expected to be incurred during fiscal 2001 and 2002, respectively. There are additional, as yet undetermined, costs that we expect in connection with the development of the fifth undeveloped property in which we have an interest (Rocky Point Unit). Because the amounts required for development of these undeveloped properties are so substantial relative to our present financial resources, we may ultimately determine to farmout all or a portion of our interest. If we were to farmout our interests, our interest in the properties would be decreased substantially. In the event that we are not able to pay our share of expenses as a working interest owner as required by the respective operating agreements, it is possible that we might lose some portion of our ownership interest in the properties under some circumstances, or that we might be subject to penalties which would result in the forfeiture of substantial revenues from the properties. Alternatively, we may pursue other methods of financing, including selling equity or debt securities. There can be no assurance that we can obtain any such financing. If we were to sell additional equity securities to finance the development of the properties, the existing common shareholders' interest would be diluted significantly. On May 24, 1999, we borrowed $1,000,000 at 18% per annum from our officers under a promissory note maturing on June 1, 2001. This promissory note was identical in terms to the promissory note under which these officers borrowed the money from a private lender which they, in turn, loaned to us. On December 1, 1999, we paid the loan in full. On July 30, 1999, we borrowed $2,000,000 at 18% per annum from an unrelated entity maturing on August 1, 2001 which was personally guaranteed by two of our officers. The loan proceeds were used as deposit funds for the Point Arguello acquisition. We paid a 2% origination fee to the lender. In addition, as consideration for the guarantee of our indebtedness, we entered into an agreement with our officers, under which a 1% overriding royalty interest in the properties acquired with the proceeds form the loans (proportionately reduced to the interest in each property acquired) will be assigned to each of the officers. Each overriding royalty has a fair market value of approximately $125,000 which was recorded as an adjustment to the purchase price. On December 1, 1999, we paid a portion of the principal and accrued interest leaving a principal balance of $726,293. On November 1, 1999, we acquired interests in 11 oil and gas producing properties located in New Mexico and Texas for a cost of $2,879,850. Also on November 1, 1999, we borrowed the funds for the above mentioned acquisition at 18% per annum from an unrelated entity maturing on January 31, 2000, which was personally guaranteed by two of our officers. As consideration for the guarantee of our indebtedness we agreed to assign a 1% overriding royalty interest to each officer in the properties acquired with the proceeds of the loan (proportionately reduced to the interest acquired in each property). Each overriding royalty has a fair market value of approximately $37,500 which was recorded as an adjustment to the purchase price. We also paid a 1% origination fee to the lender. On December 1, 1999, we paid the loan in full. On December 1, 1999, we acquired a 6.07% working interest in the Point Arguello Unit, its three platforms (Hidalgo, Harvest, and Hermosa), along with a 100% interest in two and an 11.11% interest in one of the three leases within the adjacent Rocky Point Unit for $5.6 million in cash consideration and the issuance of 500,000 shares of the our common stock with an estimated fair value of $1,133,550. On December 1, 1999, we borrowed $8,000,000 at prime rate plus 1-1/2% from an unrelated entity. The loan agreement provides for a 4-1/2 year loan with additional compensation to the lender if paid after September 1, 2000. The proceeds from this loan were used to payoff existing debt and the balance of the Point Arguello Unit purchase. We are required to make monthly payments equal to the greater of $150,000 or 75% of net cash flows from the acquisitions completed on November 1, 1999 and December 1, 1999. The loan is collateralized by our oil and gas properties acquired with the loan proceeds. On January 4, 2000, we completed the sale of 175,000 shares of our common stock in a private transaction to an unrelated entity for $350,000. We expect to raise additional capital by selling our common stock in order to fund our capital requirements for our portion of the costs of the drilling and completion of development wells on our proved undeveloped properties during the next twelve months. There is no assurance that we will be able to do so or that we will be able to do so upon terms that are acceptable. We do not currently have a credit facility for future development costs with any bank and we have not determined the amount, if any, that we could borrow against our existing properties. We will continue to explore additional sources of both short-term and long-term liquidity to fund our operations and our capital requirements for development of our properties including establishing a credit facility, sale of equity or debt securities and sale of properties. Many of the factors which may affect our future operating performance and liquidity are beyond our control, including oil and natural gas prices and the availability of financing. After evaluation of the considerations described above, we presently believe that our cash flow from our existing producing properties, proceeds from the sale of producing properties, and other sources of funds will be adequate to fund our operating expenses and satisfy our other current liabilities over the next year or longer. Results of Operations Income (loss). We reported a loss for the three and nine months ended March 31, 2000 of $1,017,578 and $2,488,383 compared to a net loss of $562,594 and $406,726 for the three and nine months ended March 31, 1999. The losses for the three and nine months ended March 31, 2000 and 1999 were effected by numerous items, described in detail below. Revenue. Total revenues for the three and nine months ended March 31, 2000 were $1,239,522 and $1,973,356 compared to $191,073 and $1,576,866 for the three and nine months ended March 31, 1999, respectively. Oil and gas sales for the three and nine months ended March 31, 2000 were $1,180,436 and $1,852,135 compared to $157,072 and $463,978 for the three and nine months ended March 31, 1999, respectively. Our total revenue increased for the nine months ended March 31, 2000 compared to the nine months, ended March 31, 1999 due to the increase in oil and gas revenue resulting from two acquisitions during the quarter ended December 31, 1999. The Company currently has an $8.25 contract price on the first 25,000 barrels per month produced on its offshore California property. This contract expires on May 31, 2000. Included in total revenue for the nine months ended March 31, 1999 was a sale of certain oil and gas properties resulting in a gain of $957,147. Production volumes and average prices received for the three and nine month periods ended March 31, 2000 and 1999 are as follows: Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 Production - Onshore: Oil (Bbls) 3,680 1,447 7,544 3,653 Gas (Mcfs) 114,478 61,588 285,011 206,158 Average Price-Onshore: Oil (per Bbl) $27.13 9.19 $23.17 10.38 Gas (per Mcf) $2.57 2.33 $2.28 2.07 Production - Offshore- Oil (Bbls) 76,140 - 106,996 - Average Price-Offshore- Oil (per Bbl) $10.26 - $9.97 - Lease Operating Expenses. Lease operating expenses were $951,903 and $1,363,850 for the three and nine months ended March 31, 2000 compared to $44,250 and $168,344 for the three and nine months ended June 30, 1999, respectively. On a Bbl equivalent basis, lease operating expenses were $9.62 and $8.42, per Bbl equivalent during the three and nine months ended March 31, 2000 compared to $3.78 and $4.45, per Bbl equivalent for the same periods in 1999, respectively. Lease operating expenses increased for the three and nine months compared to the prior year as a result of the following. During the quarter ended December 31, 1999, we acquired the equivalent of a 6.07% working interest in the Point Arguello Unit located offshore California and working interests in eleven producing wells in New Mexico and Texas. Lease operating expenses of the Point Arguello Unit offshore California are higher than are commonly experienced with onshore properties on a cost per barrel produced. Also, lease operating expenses relating to the Point Arguello Unit for the quarter ended March 31, 2000 were higher than projected by the operator by approximately $115,000 relating to unplanned turbine and compressor repair costs. Depreciation and Depletion Expense. Depreciation and depletion expense for the three and nine months ended March 31, 2000 were $187,905 and $394,971 compared to $34,885 and $128,411 for the same period in 1999, respectively. On a Bbl equivalent basis, depreciation and depletion expense was $1.90 and $2.43 per Bbl equivalent during the three and nine months ended March 31, 2000 compared to $2.99 and $3.38 per Bbl equivalent for the same period in 1999, respectively. The increase in depreciation and depletion expense can be attributable to the acquisition of certain oil and gas properties during the quarter ended December 31, 1999. Exploration Expenses. We recorded exploration expenses of $15,251 and $37,495 for the three and nine months ended March 31, 2000 compared to $8,024 and $64,316 for the same period in 1999, respectively. Dry Hole Costs. We recorded dry hole costs for six dry holes during the nine month period ended March 31, 1999. General and Administrative Expenses. General and administrative expenses for the three and nine months ended March 31, 2000 were $525,856 and $1,317,414 compared to $528,145 and $1,202,737 for the same periods in 1999, respectively. The increase in general and administrative expenses can be attributed to increased investor relation activity. Interest and Financing Costs. Interest and financing costs for the three and nine months ended March 31, 2000 were $384,152 and $941,360 compared to $0 and $10,000 for the same period in 1999, respectively. The increase in interest and financing costs can be contributed to the debt established to purchase certain oil and gas properties. Future Operations We, directly and through our subsidiary, Amber Resources Company, own interests in five undeveloped federal units (plus one additional lease) and in one producing federal unit containing three platforms, all located in federal waters offshore California near Santa Barbara. Current Status. On October 15, 1992 the US Dept of Interior Minerals Management Service (MMS) directed a Suspension of Operations (SOO), effective January 1, 1993, for the Pacific Outer Continental Shelf (POCS) undeveloped leases and units, pursuant to 30 CFR 250.110. The SOO was directed for the purpose of preparing what became known as the California Offshore Oil and Gas Energy Resources (COOGER) Study. Two-thirds of the cost of the Study was funded by the participating companies in lieu of the payment of rentals on the leases. Additionally, all operations were suspended on the leases during this period. On November 12, 1999, as the COOGER Study drew to a conclusion, the MMS approved requests made by the operating companies for a Suspension of Production (SOP) status for the POCS leases and units. During the period of a SOP the lease rentals resume and each operator is required to perform exploration and development activities in order to meet certain milestones set out by the MMS. Progress toward the milestones is monitored by the operator in quarterly reports submitted to the MMS. In February 2000 all operators completed and timely submitted to the MMS a preliminary "Description of the Proposed Project". This was the first milestone required under the SOP. Quarterly reports were also prepared and submitted for the last quarter of 1999 and the first quarter of 2000. In order to continue to carry out the requirements of the MMS, all operators of the units in which we own non-operating interests are currently engaged in studies and project planning to meet the next milestone leading to development of the leases. Where additional drilling is needed the operators will bring a mobile drilling unit to the POCS to further delineate the undeveloped oil and gas fields. When this work is completed the plans for development of these fields will be prepared. The plans will include the description and assessment of the environmental impacts of the facilities including platforms, the number of wells to be drilled, pipelines, oil and gas processing facilities and marketing. We are participating in these activities through meetings and consultations and by sharing the costs as invoiced by the operators. Cost to Develop Offshore California Properties. The cost to develop four of our five undeveloped units (plus one lease) located offshore California, in which Delta owns an interest, including delineation wells, environmental mitigation, development wells, fixed platforms, fixed platform facilities, pipelines and power cables, onshore facilities and platform removal over the life of the properties (assumed to be 38 years), is estimated by the partners to be slightly in excess of $3 billion. Our share based on our current working interest of such costs over the life of the properties is estimated to be approximately $216 million. There will be additional costs of a currently undetermined amount to develop the Rocky Point Unit which is the fifth undeveloped unit in which we own an interest. To the extent that we do not have sufficient cash available to pay our share of expenses when they become payable under the respective operating agreements, it will be necessary for us to seek funding from outside sources. Likely potential sources for such funding are currently anticipated to include (a) public and private sales of our Common Stock (which may result in substantial ownership dilution to existing shareholders), (b) bank debt from one or more commercial oil and gas lenders, (c) the sale of debt instruments to investors, (d) entering into farm- out arrangements with respect to one or more of our interests in the properties whereby the recipient of the farm-out would pay the full amount of our share of expenses and we would retain a carried ownership interest (which would result in a substantial diminution of our ownership interest in the farmed-out properties), (e) entering into one or more joint venture relationships with industry partners, (f) entering into financing relationships with one or more industry partners, and (g) the sale of some or all of our interests in the properties. It is unlikely that any one potential source of funding would be utilized exclusively. Rather, it is more likely that we will pursue a combination of different funding sources when the need arises. Regardless of the type of financing techniques that are ultimately utilized, however, it currently appears likely that because of our small size in relation to the magnitude of the capital requirements that will be associated with the development of the subject properties, we will be forced in the future to issue significant amounts of additional shares, pay significant amounts of interest on debt that presumably would be collateralized by all of our assets (including its offshore California properties), reduce our ownership interest in the properties through sales of interests in the property or as the result of farm-outs, industry financing arrangements or other partnership or joint venture relationships, or to enter into various transactions which will result in some combination of the foregoing. In the event that we are not able to pay our share of expenses as a working interest owner as required by the respective operating agreements, it is possible that we might lose some portion of our ownership interest in the properties under some circumstances, or that we might be subject to penalties which would result in the forfeiture of substantial revenues from the properties. While the costs to develop the offshore California properties in which we own an interest are anticipated to be substantial in relation to our small size, management believes that the opportunities for us to increase our asset base and ultimately improve our cash flow are also substantial in relation to our size. Although there are several factors to be considered in connection with our plans to obtain funding from outside sources as necessary to pay our proportionate share of the costs associated with developing our offshore properties (not the least of which is the possibility that prices for petroleum products could decline in the future to a point at which development of the properties is no longer economically feasible), we believe that the timing and rate of development in the future will in large part be motivated by the prices paid for petroleum products. To the extent that prices for petroleum products were to decline below their recent levels, it is likely that development efforts will proceed at a slower pace such that costs will be incurred over a more extended period of time. If petroleum prices increase, however, we believe that development efforts will intensify. Our ability to successfully negotiate financing to pay our share of development costs on favorable terms will be inextricably linked to the prices that are paid for petroleum products during the time period in which development is actually occurring on each of the subject properties. PART II - OTHER INFORMATION Item 1. Legal Proceedings. We are not directly engaged in any material pending legal proceedings to which we or our subsidiaries are a party or to which any of our property is subject. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 27. Financial Data Schedule. (b) Reports on Form 8-K: Form 8-K dated January 4, 2000; Items 5 & 7 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DELTA PETROLEUM CORPORATION (Registrant) s/Aleron H. Larson, Jr. Aleron H. Larson, Jr. Chairman of the Board, and Treasurer s/Kevin K. Nanke Kevin K. Nanke, Chief Financial Officer And Principal Accounting Officer Date: May 12, 2000 INDEX (2) Plan of Acquisitions, Reorganization, Arrangement, Liquidation, or Succession. Not applicable. (3) Articles of Incorporation and By-laws. The Articles of Incorporation and Articles of Amendment to Articles of Incorporation and By-laws of the Registrant were filed as Exhibits 3.1, 3.2, and 3.3, respectively, to the Registrant's Form 10 Registration Statement under the Securities and Exchange Act of 1934, filed September 9, 1987, with the Securities and Exchange Commission and are incorporated herein by reference. Statement of Designation and Determination of Preferences of Series A Convertible Preferred Stock of Delta Petroleum Corporation is incorporated by Reference to Exhibit 28.3 of the Current Report on Form 8-K dated June 15, 1988. Statement of Designation and Determination of Preferences of Series B Convertible Preferred Stock of Delta Petroleum Corporation is incorporated by reference to Exhibit 28.1 of the Current Report on Form 8-K dated August 9, 1989. (4) Instruments Defining the Rights of Security Holders. Not applicable. (9) Voting Trust Agreement. Not applicable. (10) Material Contracts. Not applicable. (11) Statement Regarding Computation of Per Share Earnings. Not applicable. (12) Statement Regarding Computation of Ratios. Not applicable. (13) Annual Report to Security Holders, Form 10-Q or Quarterly Report to Security Holders. Not applicable. (16) Letter re: Change in Certifying Accountants. Not applicable. (17) Letter re: Director Resignation. Not applicable. (18) Letter Regarding Change in Accounting Principals. Not applicable. (19) Previously Unfiled Documents. Not applicable. (21) Subsidiaries of the Registrant. Not applicable. (22) Published Report Regarding Matters Submitted to Vote of Security Holders. Not applicable. (23) Consent of Experts and Counsel. Not applicable. (24) Power of Attorney. Not applicable. (27) Financial Data Schedule. Filed herewith electronically. (99) Additional Exhibits. EX-27 2
5 9-MOS JUN-30-2000 MAR-31-2000 419,449 0 1,070,941 50,000 0 1,687,190 19,974,702 2,045,199 2,797,743 3,373,833 0 0 0 79,134 10,585,270 20,797,743 1,852,135 1,973,356 0 3,407,590 0 112,789 941,360 (2,488,383) 0 (2,488,383) 0 0 0 (2,488,383) (.35) (.35)
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