-----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, KaElI4pikPA75sOQNskJkouPiC+2P6B5zr5KkgiDcsyEeKY9GLQCdbpvwawlGlK8 K33RG+fbzKYo/Dbe8EcpLw== /in/edgar/work/0000821483-00-000042/0000821483-00-000042.txt : 20001114 0000821483-00-000042.hdr.sgml : 20001114 ACCESSION NUMBER: 0000821483-00-000042 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA PETROLEUM CORP/CO CENTRAL INDEX KEY: 0000821483 STANDARD INDUSTRIAL CLASSIFICATION: [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: 757984 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 0001.txt 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 September 30, 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___ 10,287,536 shares of common stock $.01 par value were outstanding as of November 6, 2000. FORM 10-QSB 1st QTR. FY 2001 INDEX PART I FINANCIAL INFORMATION PAGE NO. Item 1. Consolidated Financial Statements Consolidated Balance Sheets - September 30, 2000 and June 30, 2000 (unaudited) 1 Consolidated Statements of Operations - Three Months Ended September 30, 2000 and 1999 (unaudited) 3 Consolidated Statement of Stockholders' Equity Year Ended June 30, 2000 and Three Months Ended September 30, 2000 (unaudited) 4 Consolidated Statements of Cash Flows - Three Months Ended September 30, 2000 and 1999 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis Or Plan of Operations 13 PART II OTHER INFORMATION Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19 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) September 30, June 30, 2000 2000 ASSETS Current Assets: Cash $ 555,208 302,414 Trade accounts receivable, net of allowance for doubtful accounts of $50,000 at September 30, 2000 and June 30, 2000 1,115,924 613,527 Accounts receivable - related parties 132,827 142,582 Prepaid assets 511,307 373,334 Other current assets 220,495 198,427 Total current assets 2,535,761 1,630,284 Property and Equipment: Oil and gas properties, at cost (using the successful efforts method of accounting): Undeveloped offshore California properties 10,410,810 10,809,310 Undeveloped onshore domestic properties 451,795 451,795 Undeveloped foreign properties 623,920 623,920 Developed offshore California properties 3,618,471 3,285,867 Developed offshore Louisiana properties 3,252,504 - Developed onshore domestic properties 9,989,830 5,154,295 Office furniture and equipment 91,627 89,019 28,438,957 20,414,206 Less accumulated depreciation and depletion (3,003,219) (2,538,030) Net property and equipment 25,435,738 17,876,176 Long term assets: Deferred financing costs 480,704 366,996 Investment in Bion Environmental 215,617 228,629 Partnership net assets 839,147 675,185 Deposit on purchase of oil and gas properties 675,184 280,002 Total long term assets 2,210,652 1,550,812 $30,182,151 21,057,272 September 30, June 30, 2000 2000 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 6,250,976 1,765,653 Accounts payable 1,844,369 1,636,651 Other accrued liabilities 186,003 154,388 Royalties payable 44,050 58,733 Total current liabilities 8,325,398 3,615,425 Total long-term debt 6,220,522 6,479,115 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 9,759,492 shares at September 30, 2000 and 8,422,079 at June 30, 2000 97,595 84,221 Additional paid-in capital 38,150,243 33,746,861 Accumulated other comprehensive loss 64,047 77,059 Accumulated deficit (22,675,654) (22,945,409) Total stockholders' equity 15,636,231 10,962,732 Commitments $30,182,151 21,057,272 DELTA PETROLEUM CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, September 30, 2000 1999 Revenue: Oil and gas sales $2,358,602 116,540 Other revenue 53,845 30,288 Total revenue 2,412,447 146,828 Operating expenses: Lease operating expenses 942,732 39,147 Depreciation and depletion 465,189 34,634 Exploration expenses 13,147 415 Abandoned and impaired properties - 1,114 Professional fees 229,760 138,394 General and administrative 292,601 241,689 Stock option expense 211,042 109,986 Total operating expenses 2,154,471 565,379 Income (loss) from operations 257,976 (418,551) Other income and expenses: Other income 350,000 - Interest and financing costs (338,221) (107,475) Loss on sale of securities available for - (2,551) Total other income and expenses 11,779 (110,026) Net income (loss) $ 269,755 (528,577) Net income (loss) per common share: Basic $ 0.03 (0.08) Diluted $ 0.03 * * Potentially dilutive securities outstanding were anti-dulutive DELTA PETROLEUM CORPORATION AND SUBSIDIARY Consolidated Statement of Stockholders' Equity Year ended June 30, 2000 and three months ended September 30, 2000 (Unaudited) Additional Common Stock paid-in Shares Amount capital Balance, July 1, 1999 6,390,302 $ 63,903 29,476,275 Comprehensive loss: Net loss - - - Other comprehensive loss, net of tax Unrealized gain on equity securities - - - Less: Reclassification adjustment for losses included in net loss - - - Comprehensive loss - - - Stock options granted as compensation - - 500,208 Shares issued for cash 603,000 6,030 1,017,970 Shares issued for cash upon exercise of options 1,048,777 10,488 1,367,048 Shares and options issued with financing 75,000 750 565,472 Shares issued for oil and gas properties 215,000 2,150 547,413 Shares issued for deposit on oil and gas properties 90,000 900 272,475 Balance, June 30, 2000 8,422,079 84,221 33,746,861 Comprehensive loss: Net loss - - - Other comprehensive gain, net of tax Unrealized loss on equity securities - - - Less: Reclassification adjustment for losses included in net loss - - - Comprehensive loss - - - Stock options granted as compensation - - 186,042 Fair value of warrants issued for common stock investment agreement - - 1,435,797 Warrant issued in exchange for common stock investment agreement - - (1,435,797) Shares issued for cash 258,621 2,586 672,415 Shares issued for cash upon exercise of options 335,650 3,357 753,659 Shares issued for oil and gas properties 609,719 6,097 2,164,205 Shares issued for deposit on oil and gas properties 133,423 1,334 627,061 Balance, September 30, 2000 9,759,492 $ 97,595 38,150,243
Accumulated other comprehensive income Comprehensive Accumulated (loss) loss deficit Total Balance, July 1, 1999 (115,395) (19,578,359) 9,846,424 Comprehensive loss: Net loss (3,367,050) (3,367,050) (3,367,050) Other comprehensive loss, net of tax Unrealized gain on equity securities 79,665 - Less: Reclassification adjustment for losses included in net loss 112,789 192,454 192,454 Comprehensive loss (3,174,596) Stock options granted as compensation - - 500,208 Shares issued for cash - - 1,024,000 Shares issued for cash upon exercise of options - - 1,377,536 Shares and options issued with financing - - 566,222 Shares issued for oil and gas properties - - 549,563 Shares issued for deposit on oil and gas properties - - 273,375 Balance, June 30, 2000 77,059 (22,945,409) 10,962,732 Comprehensive loss: Net loss 269,755 269,755 269,755 Other comprehensive gain, net of tax Unrealized loss on equity securities (13,012) - Less: Reclassification adjustment for losses included in net loss - (13,012) (13,012) Comprehensive loss 256,743 Stock options granted as compensation - - 186,042 Fair value of warrants issued for common stock investment agreement - - 1,435,797 Warrant issued in exchange for common stock investment agreement - - (1,435,797) Shares issued for cash - - 675,001 Shares issued for cash upon exercise of options - - 757,016 Shares issued for oil and gas properties - - 2,170,302 Shares issued for deposit on oil and gas properties - - 628,395 Balance, September 30, 2000 64,047 (22,675,654) 15,636,231
DELTA PETROLEUM CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30, September 30, 2000 1999 Net cash provided by (used in) operating activities $ 335,528 (345,369) Cash flows from investing activities: Additions to property and equipment (5,704,447) (47,923) Deposit on purchase of oil and gas properties (46,789) (2,000,000) Proceeds from sale of securities available for sale - 2,551 Net cash used in investing activities (5,751,236) (2,045,372) Cash flows from financing activities: Stock issued for cash upon exercise of options 757,016 303,425 Issuance of common stock for cash 675,001 - Proceeds from borrowings 5,208,532 2,000,000 Repayment of borrowings (981,802) - Decrease (increase) in accounts receivable from related parties 9,755 27,331 Net cash provided by financing activities 5,668,502 2,330,756 Net increase (decrease) in cash 252,794 (59,985) Cash at beginning of period 302,414 99,545 Cash at end of period $ 555,208 39,560 Supplemental cash flow information - Cash paid for interest and financing costs $ 281,479 15,000 Non-cash financing activities: Common stock issued for the purchase of oil and gas properties $2,170,302 - Common stock issued for deposit on purchase of oil and gas properties $ 628,395 303,750 Overriding royalties issued for debt financing $ 130,000 -
See accompanying notes to consolidated financial statements. DELTA PETROLEUM CORPORATION AND SUBSIDIARY Notes to Consolidated Financial Statements Three Months Ended September 30, 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/A. 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/A for the year ended June 30, 2000, previously filed with the Securities and Exchange Commission. Liquidity The Company has incurred losses from operations over the past several years, prior to the quarter ended September 30, 2000, coupled with significant deficiencies in cash flow from operations for the same periods. As of September 30, 2000, the Company had a working capital deficit of $5,789,637. These factors among others may indicate the Company may not be able to meet its obligations in a timely manner. The Company has taken steps to produce 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 in future periods, 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 three months ended September 30, 1999, the Company realized a loss on the sale of securities available for sale of $2,551. The cost and estimated market value of the Company's investment in Bion at September 30, 2000 and June 30, 2000 are as follows: Estimated Unrealized Market Cost Gain Value September 30, 2000 $151,570 64,047 215,617 June 30, 2000 $151,570 77,059 228,629 (3) Oil and Gas Properties On July 10, 2000 and on September 28, 2000, the Company paid $3,745,000 and $1,845,000, respectively, to acquire interests in producing wells and acreage located in the Eland and Stadium fields in Stark County, North Dakota. The July 10, 2000 and September 28, 2000 payments resulted in the acquisition by the Company of 67% and 33%, respectively, of the ownership interest in each property acquired. The $3,745,000 payment on July 10, 2000 was financed through borrowings from an unrelated entity and personally guaranteed by two of the Company's officers, while the payment on September 28, 2000 was primarily paid out of the Company's net revenues from the effective date of the acquisitions through closing. Delta also issued 100,000 shares of its restricted common stock to an unaffiliated party for its consultation and assistance related to the transaction. On September 29, 2000, Delta completed the acquisition of 100% of the working interest in the West Delta Block 52 Unit, a producing property in Plaquemines Parish, Louisiana. The Company paid $1,529,157 and issued 509,719 restricted shares of its common stock as consideration for the properties. $1,463,532 was financed through borrowings from an unrelated entity and personally guaranteed by two of the Company's officers. (4) Deposit on Purchase of Oil and Gas Properties During the quarter ended September 30, 2000, the Company issued 133,423 shares of its restricted common stock as a deposit for the option to purchase interests in 680 producing wells and associated acreage in the Permian Basin located in eight counties in West Texas and Southeastern New Mexico from Saga Petroleum Corporation (SAGA) and its affiliates. (5) Long Term Debt September 30, June 30, 2000 2000 A $7,262,966 $7,504,306 B 3,745,000 -- C 1,463,532 -- D - 740,462 $12,473,498 $8,244,768 Current Portion 6,250,976 1,765,653 Long-Term Portion $ 6,220,522 $6,479,115 A. 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. The proceeds from this loan were used to pay off existing debt and the balance of the Point Arguello Unit and East Carlsbad field purchases. The Company is required to make minimum monthly payments of principal and interest 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 lender was given a 2.5% overriding royalty on the offshore properties purchased as required by the loan agreement. The estimated fair value of the overriding royalty interest of $130,000 was recorded as a deferred financing cost. The loan is collateralized by the Company's oil and gas properties acquired with the loan proceeds. B. On July 10, 2000, the Company borrowed $3,745,000 at 15% per annum from an unrelated entity which was personally guaranteed by two of the officers of the Company and matures on November 30, 2000. The loan is collateralized by the Company's oil and gas properties acquired with the loan proceeds. C. On September 29, 2000, the Company borrowed $1,463,532 at 15% per annum from an unrelated entity which was personally guaranteed by two officers of the Company and matures on November 30, 2000. The loan is collateralized by the Company's oil and gas properties acquired with the loan proceeds. D. On July 30, 1999, the Company borrowed $2,000,000 at 18% per annum from an unrelated entity which was personally guaranteed by two of the officers of the Company. 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) was assigned to each of the officers. The estimated fair value of each overriding royalty interest of $125,000 was recorded as a deferred financing cost. During the quarter ended September 30, 2000, the Company paid off the loan and expensed the unamortized costs. (6) Stockholder's Equity On July 5, 2000, the Company completed the sale of 258,621 shares of its restricted common stock to an unrelated entity for $750,001. A fee of $75,000 was paid and options to purchase 100,000 shares of the Company's common stock at $2.50 per share and 100,000 shares at $3.00 per share for one year were issued to an unrelated individual and entity and as consideration for their efforts and consultation related to the transaction. On July 21, 2000, the Company entered into a definitive agreement entitled "Investment Agreement" with Swartz Private Equity LLC ("Swartz") whereby Swartz has given a firm commitment to allow the Company to issue to Swartz up to a total of $20,000,000 of the Company's common stock over three years from time to time as often as monthly in amounts based upon certain market conditions and at prices based upon market prices for our common stock at the time of issuance. In order for the Company to issue stock to Swartz, the Company must have an effective Registration Statement on file with the Securities and Exchange Commission. As consideration Swartz has received a warrant to purchase 500,000 shares of our common stock at $3.00 per share for five years and may receive additional warrants to purchase our common stock under the terms of the Investment Agreement. A warrant to purchase 150,000 shares of the Company's common stock at $3.00 per share for five years was issued to another unrelated company as consideration for its efforts in this transaction. Pursuant to the terms of this investment agreement the Company is not obligated to sell to Swartz all of the common stock and additional warrants referenced in the agreement nor does the Company intend to sell shares and warrants to the entity unless it is beneficial to the Company. The Company received proceeds from the exercise of options to purchase shares of its common stock of $757,016 during the quarter ended September 30, 2000 and $1,377,536 during the year ended June 30, 2000. (7) Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended September 30, 2000 1999 Numerator: Numerator for basic and diluted earnings per share - income available to common stockholders $269,755 (528,577) Denominator: Denominator for basic earnings per share-weighted average shares outstanding 8,972,677 6,574,445 Effect of dilutive securities- stock options and warrants 1,496,741 1,281,124 Denominator for diluted earnings per common share 10,469,418 7,855,569 Basic earnings per common share $.03 (.08) Diluted earnings per common share $.03 * *Potentially dilutive securities outstanding were anti-dilutive. (8) Subsequent Events On October 2, 2000, Delta elected to exercise its option to purchase interests in 680 producing wells and associated acreage in the Permian Basin located in eight counties in West Texas and Southeastern New Mexico from Saga Petroleum Corporation and its affiliates. Delta paid Saga and its affiliates $500,000 in cash and issued an additional 156,160 (289,583 in total) shares of its restricted common stock as a deposit required by the Purchase and Sale Agreement between the parties. Delta has agreed to pay the bulk of the remainder of the $49,500,000 purchase price by December 1, 2000. Delta has not yet secured the financing and/or industry participants that will be necessary to acquire the properties. There are certain contract contingencies which must be satisfied by the seller before Delta is obligated to close on the purchase of the properties. If these contingencies are not satisfied the agreement requires the consideration paid to date to be returned to Delta. On October 25, 2000, the Company entered into a term loan agreement with US Bank through which the Company has borrowed $3,000,000 at prime plus 3% secured by its recently acquired interests in the Eland and Stadium fields in Stark County, North Dakota repayable monthly and matures on October 31, 2002. The loan proceeds were used to pay down other short-term debt used to acquire these properties. As part of the loan terms the Company entered into a contract with Enron North America Corp. to sell 3,500 barrels per month of the production from these properties at an equivalent well head price of approximately $28.25 per barrel for one year beginning November 1, 2000. Item 2. Management's Discussion and Analysis or Plan of Operations Forward Looking Statement 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 Company's actual results to differ materially from those expressed in such forward looking statements. These factors include, without limitation, the risks and factors included in the following text as well as other risks previously discussed in the Company's annual report on Form 10-KSB/A. Liquidity and Capital Resources. At September 30, 2000, we had a working capital deficit of $5,789,637 compared to a working capital deficit of $1,985,141 at June 30, 2000. Our current assets include an increase in trade accounts receivable from June 30, 2000 of approximately $500,000. This increase is primarily due to the accrued revenue from the two acquisitions completed at the end of the quarter. This receivable was also impacted by an increase in oil and gas prices. Our current liabilities include the current portion of long-term debt of $6,250,976 at September 30, 2000. The increase in the current portion of long-term debt from June 30, 2000 is primarily attributed to borrowings of $3,745,000 and $1,463,532 relating to the acquisition of interests in the Eland and Stadium fields in Stark County, North Dakota ("North Dakota") and the 100% working interest in the West Delta Block 52 Unit, a producing property in Plaquemines Parish, Louisiana ("West Delta"). These acquisitions were closed on September 28, 2000 and September 29, 2000, respectively. Subsequent to year-end, we established a $3,000,000 term loan with US Bank. The loan proceeds were used to pay down a portion of current debt. On July 5, 2000, we completed the sale of 258,621 restricted shares of our common stock to an unrelated entity for $750,001. A fee of $75,000 was paid and options to purchase 100,000 shares of our common stock at $2.50 per share and 100,000 shares at $3.00 per share for one year were issued to an unrelated individual and entity and as consideration for their efforts and consultation related to the transaction. On July 21, 2000, we entered into a definitive agreement entitled "Investment Agreement" with Swartz Private Equity LLC ("Swartz") whereby Swartz has given a firm commitment to allow us to issue to the Swartz up to a total of $20,000,000 of its common stock over three years from time to time as often as monthly in amounts based upon certain market conditions and at prices based upon market prices for our common stock at the time of issuance. In order for the Company to issue stock to Swartz, the Company must have an effective Registration Statement on file with the Securities and Exchange Commission. As consideration Swartz has received a warrant to purchase 500,000 shares of our common stock at $3.00 per share for five years and may receive additional warrants to purchase our common stock under the terms of the Investment Agreement. A warrant to purchase 150,000 shares of the our common stock at $3.00 per share for five years was issued to another unrelated company as consideration for its efforts in this transaction. Proceeds, if any, will be used for property acquisitions, debt reduction and working capital. Pursuant to the terms of this investment agreement we are not obligated to sell to Swartz all of the common stock and additional warrants referred in the agreement nor do we intend to sell shares and warrants to the entity unless it is beneficial to us. On October 2, 2000, we have elected to exercise our option to purchase interests in 680 producing wells and associated acreage in the Permian Basin located in eight counties in West Texas and Southeastern New Mexico from Saga Petroleum Corporation and its affiliates. We paid Saga and its affiliates $500,000 in cash and issued an additional 156,160 (289,583 in total) shares of our restricted common stock as a deposit required by the Purchase and Sale Agreement between the parties. We have agreed to pay the bulk of the remainder of the $49,500,000 purchase price by December 1, 2000. We have not yet secured the financing and/or industry participants that will be necessary to acquire the properties. There are certain contract contingencies which must be satisfied by the seller before we are obligated to close on the purchase of the properties. If these contingencies are not satisfied the agreement requires the consideration paid to date to be returned to us. We received proceeds from the exercise of options to purchase shares of its common stock of $757,016 during the quarter ended September 30, 2000 and $1,377,536 during the year ended June 30, 2000. 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 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 net income for the three months ended September 30, 2000 of $269,755 compared to a net loss of $528,577 for the three months ended September 30, 1999. The net income and net loss for the three months ended September 30, 2000 and 1999 were effected by numerous items, described in detail below. Revenue. Total revenue for the three months ended September 30, 2000 was $2,412,447 compared to $146,828 for the three months ended September 30, 1999. Oil and gas sales for the three months ended September 30, 2000 were $2,358,602 compared to $116,540 for the three months ended September 30, 1999. The increase of $2,242,062 in oil and gas revenue comparing the quarter ended September 30, 2000 to the quarter ended September 30, 1999 is primarily attributed to the acquisitions that occurred during the fiscal year ended June 30, 2000 and the quarter ended September 30, 2000. During the quarter ended September 30, 2000, the company sold 71,819 barrels of oil from our interests in the Point Arguello Unit located in federal waters offshore California and sold 64,415 Mcf of gas and 3,692 barrels of oil from our interests in the our New Mexico properties. Both of these properties were acquired during fiscal 2000. The Company also sold 10,102 Mcf of gas and 17,956 barrels of oil from the North Dakota acquisition that closed during the quarter ended September 30, 2000. We have committed to sell 25,000 barrels per month through December 2000 at $14.65 per barrel under fixed price contracts with production purchases. Production volumes and average prices received for the three-month periods ended September 30, 2000 and 1999 are as follows: Three Months Ended September 30, 2000 1999 Production - Onshore: Oil (Bbls) 22,589 1,076 Gas (Mcfs) 129,050 53,419 Average Price-Onshore : Oil (per Bbl) $29.05 20.64 Gas (per Mcf) $4.40 1.77 Production - Offshore- Oil (Bbls) 71,819 - Average Price-Offshore- Oil (per Bbl) $15.81 - Lease Operating Expenses. Lease operating expenses were $942,732 and $39,147 for the three months ended September 30, 2000 and 1999, respectively. On a Bbl equivalent basis, lease operating expenses were $3.85 and $3.92, during the three months ended September 30, 2000 and 1999, respectively for onshore properties. On a barrel equivalent basis, lease operating expenses were $10.77 during the three months ended September 30, 2000 for the offshore properties. The increase in lease operating expenses can be attributed to the acquisitions discussed above. Depreciation and Depletion Expense. Depreciation and depletion expense for the quarter ended September 30, 2000 was $465,189 compared to $34,634 for the quarter ended September 30, 1999. On a barrel equivalent basis, the depletion rate was $6.63 for onshore properties and $2.34 for offshore properties during the quarter ended September 30, 2000 compared to $3.47 for onshore properties for the quarter ended September 30, 1999. The increase in depletion rate per barrel equivalent for the onshore properties can be attributable to acquisitions of properties with shorter economic lives. Exploration Expenses. We recorded exploration expenses of $13,147 for the three months ended September 30, 2000 compared to $415 for the same period in 1999. Professional fees Professional fees for the three months ended September 30, 2000 were $229,760 compared to $138,394 for the same period in 1999. The increase in professional general and administrative expenses are primarily attributed legal fees for representation in negotiations and discussions with various state and federal governmental agencies relating to the company's undeveloped offshore California leases. General and Administrative Expenses. General and administrative expenses for the three months ended September 30, 2000 were $292,601 compared to $241,689 for the same periods in 1999. The increase in general and administrative expenses are primarily attributed to the increase in travel, corporate filings and the addition of a new employee. Stock Option Expense. Stock option expense has been recorded for the quarter ended September 30, 2000 and 1999 of $211,042 and $109,986, respectively, for options granted to and/or re-priced for certain officers, directors, employees and consultants at option prices below the market price at the date of grant. Other income. Other income represents the sale of our unsecured claim in bankruptcy against our former parent, Underwriters Financial Group. Interest and Financing Costs. Interest and financing costs for the three months ended September 30, 2000 and 1999 were $338,221 and $107,475, 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 MMS directed a Suspension of Operations (SOO), effective January 1, 1993, for the 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 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 and second quarters 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. Cost to Develop Offshore California Properties. The cost to develop four of the five undeveloped units (plus one lease) located offshore California, 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 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 over $200 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 our 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 remain at current levels, 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. Recently Issued Accounting Standards and Pronouncements In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 44 "Accounting for Certain Transactions involving Stock Compensation- and interpretation of APB Opinion No. 25 ("FIN 44"). This opinion provides guidance on the accounting for certain stock option transactions and subsequent amendments to stock option transactions. FIN 44 is effective July 1, 2000, but certain conclusions cover specific events that occur after either December 15, 1998 or January 12, 2000. To the extent that FIN 44 covers events occurring during the period from December 15, 1998 and January 12, 2000, but before July 1, 2000, the effects of applying this interpretation are to be recognized on a prospective basis. Re-priced options mentioned above may impact future periods. The Company's financial position and results of operations were not impacted by the adoption of FIN 44. In December 1999, the SEC released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements", which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. Subsequently, the SEC released SAB 101B, which delayed the implementations date of SAB 101 for registrants with fiscal years ending on June 30, 2001. The effects of implementation are to be reported with results no later than the quarter beginning April 1, 2001. The Company has not yet assessed the impact, if any, that SAB 101 might have on its financial position or results of operations. Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), was issued in June 1998, by the Financial Accounting Standards Board. SFAS 133 establishes new accounting and reporting standards for derivative instruments and for hedging activities. This statement required an entity to establish at the inception of a hedge the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. Those methods must be consistent with the entity's approach to managing risk. SFAS 133 was amended by SFAS 137 and is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company's financial position and results of operations were not impacted by the adoption of SFAS 133. 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 July 10, 2000; Items 2,5 and 7 Form 8-K/A dated July 10, 2000; Item 7 Form 8-K dated August 3, 2000; Items 5 and 7 Form 8-K dated September 7, 2000; Items 5 and 7 Form 8-K dated September 29, 2000; Items 2, 5 and 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 Date: November 9, 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 0002.txt
5 3-MOS JUN-30-2001 SEP-30-2000 555,208 0 1,248,751 50,000 0 2,535,761 28,438,957 3,003,219 30,182,151 8,325,398 0 0 0 97,595 15,538,636 30,182,151 2,358,602 2,762,447 0 2,154,471 0 0 338,221 269,755 0 269,755 0 0 0 269,755 .03 .02
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