10-Q 1 delta10q.txt DELTA PETROLEUM CORPORATIN 10-Q (9-30-02) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (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, 2002 [ ] 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.) 475 17th Street, Suite 1400 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___ 22,662,000 shares of common stock $.01 par value were outstanding as of November 12, 2002. FORM 10-Q 1st QTR. FY 2003 INDEX PART I FINANCIAL INFORMATION PAGE NO. Item 1. Consolidated Financial Statements Consolidated Balance Sheets - September 30, 2002 and June 30, 2002 (unaudited).................................... 1 Consolidated Statements of Operations - Three Months Ended September 30, 2002 and 2001 (unaudited)...................... 3 Consolidated Statement of Stockholders' Equity and Comprehensive Income (loss) Year Ended June 30, 2002 and Three Months Ended September 30, 2002 (unaudited)............ 4 Consolidated Statements of Cash Flows - Three Months Ended September 30, 2002 and 2001 (unaudited)...................... 5 Notes to Consolidated Financial Statements (unaudited)....... 6 Item 2. Management's Discussion and Analysis Or Plan of Operations........................................ 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk... 20 Item 4. Controls and Procedures...................................... 20 PART II OTHER INFORMATION Item 1. Legal Proceedings............................................ 21 Item 2. Changes in Securities........................................ 21 Item 3. Defaults upon Senior Securities.............................. 21 Item 4. Submission of Matters to a Vote of Security Holders............................................. 21 Item 5. Other Information............................................ 21 Item 6. Exhibits and Reports on Form 8-K............................. 21 The terms "Delta", "Company", "we", "our", and "us" refer to Delta Petroleum Corporation unless the context suggests otherwise. i DELTA PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ----------------------------------------------------------------------------- September 30, June 30, 2002 2002 ----------- ----------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 2,894,000 $ 1,024,000 Marketable securities available for sale 573,000 485,000 Trade accounts receivable, net of allowance for doubtful accounts of $50,000 at September 30, 2002 and June 30, 2002 3,553,000 4,713,000 Prepaid assets 993,000 785,000 Other current assets 379,000 442,000 ----------- ----------- Total current assets 8,392,000 7,449,000 ----------- ----------- Property and Equipment: Oil and gas properties, at cost (using the successful efforts method of accounting) 74,863,000 73,002,000 Less accumulated depreciation and depletion (8,716,000) (7,018,000) ----------- ----------- Net property and equipment 66,147,000 65,984,000 ----------- ----------- Long term assets: Deferred financing costs 217,000 260,000 Partnership net assets 215,000 384,000 ----------- ----------- Total long term assets 432,000 644,000 $74,971,000 $74,077,000 =========== =========== 1 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS, CONTINUED ----------------------------------------------------------------------------- September 30, June 30, 2002 2002 ----------- ----------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 1,651,000 $ 3,498,000 Accounts payable 3,414,000 3,488,000 Derivative instruments 949,000 - Current foreign tax payable 703,000 703,000 Other accrued liabilities 368,000 31,000 ------------ ----------- Total current liabilities 7,085,000 7,720,000 ------------ ----------- Long-term Liabilities: Asset retirement obligation 651,000 - Long-term debt, net 22,933,000 21,441,000 ------------ ----------- Total long-term liabilities 23,584,000 21,441,000 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 22,659,000 shares at September 30, 2002 and 22,618,000 at June 30, 2002 227,000 226,000 Additional paid-in capital 76,564,000 76,514,000 Put option on Delta stock (2,886,000) (2,886,000) Accumulated other comprehensive income (867,000) (85,000) Accumulated deficit (28,736,000) (28,853,000) ------------ ----------- Total stockholders' equity 44,302,000 44,916,000 ------------ ----------- Commitments $74,971,000 $74,077,000 ============ =========== See accompanying notes to consolidated financial statements. 2 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ----------------------------------------------------------------------------- Three Months Ended September 30, September 30, 2002 2001 ------------- ------------- Revenue: Oil and gas sales $ 5,467,000 $ 2,416,000 Realized loss on derivative instruments, net (33,000) - Operating fee income 214,000 27,000 ----------- ----------- Total revenue 5,648,000 2,443,000 Operating expenses: Lease operating expenses 2,226,000 721,000 Depreciation and depletion 1,685,000 793,000 Exploration expenses 7,000 72,000 Dry hole costs - 125,000 Professional fees 177,000 324,000 General and administrative 908,000 286,000 Stock option expense 11,000 17,000 ----------- ----------- Total operating expenses 5,014,000 2,338,000 ----------- ----------- Income from operations 634,000 105,000 Other income and expenses: Other income 11,000 3,000 Interest and financing costs (508,000) (352,000) ----------- ----------- Total other income and expenses (497,000) (349,000) Income (loss) before cumulative effect of a Change in accounting principle 137,000 (244,000) Cumulative effect on prior years of FAS 143 - Accounting for Asset Retirement Obligations (20,000) ----------- Net income (loss) $ 117,000 $ (244,000) =========== =========== Net income (loss) per common share: Basic 0.01 (0.02) =========== =========== Diluted ** (0.02)* =========== =========== * Potentially dilutive securities outstanding were anti-dilutive ** Less than $.01 per share See accompanying notes to consolidated financial statements. 3 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Consolidated Statement of Stockholders' Equity and Comprehensive Income (Loss) Year ended June 30, 2002 and Three Months Ended September 30, 2002 (Unaudited) -----------------------------------------------------------------------------
Accumu- lated other compre- Additional Put Option hensive Common Stock paid-in on income Comprehensive Accumulated Shares Amount capital Delta stock (loss) income (loss) deficit Total ---------- -------- ----------- ------------ --------- -------------- ----------- ---------- Balance, July 1, 2001 11,160,000 $112,000 40,700,000 69,000 (22,600,000) 18,281,000 Comprehensive loss: Net loss - - - (6,253,000) (6,253,000) (6,253,000) ----------- Other comprehensive loss, net of tax Unrealized loss on equity securities - - - (154,000) (154,000) (154,000) ----------- Comprehensive loss - - - (6,407,000) =========== Stock options granted as compensation - - 143,000 - - 143,000 Fair value of warrants issued for common stock investment agreement - - - - - Warrant issued in exchange for common stock investment agreement - - - - - Shares issued for cash, net of commissions 72,000 1,000 224,000 - - 225,000 Shares issued for cash upon exercise of options 266,000 2,000 405,000 - - 407,000 Shares issued for services 14,000 48,000 48,000 Shares issued for oil and gas properties 9,703,000 97,000 26,862,000 - - 26,959,000 Put option on Delta stock - - 2,886,000 (2,886,000) - Shares issued for all outstanding shares of Piper Petroleum Company 1,377,000 14,000 5,220,000 5,234,000 Shares issued for debt 51,000 - 157,000 157,000 Shares reacquired and retired (25,000) - (131,000) - - (131,000) ---------- -------- ----------- ----------- ---------- ------------ ---------- Balance, June 30, 2002 22,618,000 226,000 76,514,000 (2,886,000) (85,000) (28,853,000) 44,916,000 Comprehensive loss: Net income - - - 117,000 117,000 117,000 ----------- Other comprehensive loss, net of tax Unrealized gain on equity securities - - - (782,000) (782,000) (782,000) ----------- Comprehensive loss - - - (665,000) =========== Stock options granted as compensation - - 11,000 - - 11,000 Shares issued upon exercise of options 41,000 1,000 39,000 - - 40,000 ---------- -------- ----------- ----------- --------- ------------ ---------- Balance, September 30, 2002 22,659,000 $227,000 $76,564,000 ($2,886,000) ($867,000) (28,736,000) 44,302,000 ========== ======== =========== =========== ========== ============ ==========
See accompanying notes to consolidated financial statements. 4 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) -----------------------------------------------------------------------------
Three Months Ended September 30, September 30, 2002 2001 ------------- ------------- Cash flows operating activities: Net income (loss) $ 117,000 $ (244,000) Adjustments to reconcile net income (loss) to cash used in operating activities: Depreciation and depletion 1,685,000 793,000 Stock option expense 11,000 17,000 Amortization of financing costs 101,000 141,000 Dry hole costs - 125,000 Cumulative effect on change in accounting principle 20,000 - Net changes in operating assets and operating liabilities: Decrease in trade accounts receivable 1,083,000 143,000 Increase in prepaid assets (208,000) (197,000) (Increase) decrease in other current assets 4,000 (7,000) Increase (decrease) in accounts payable trade (74,000) 401,000 Increase in other accrued liabilities 416,000 30,000 ----------- ---------- Net cash provided by operating activities $ 3,155,000 $1,202,000 ----------- ---------- Cash flows from investing activities: Additions to property and equipment, net (1,139,000) (386,000) Increase in long term assets 169,000 (48,000) ----------- ---------- Net cash used in investing activities (970,000) (434,000) ----------- ---------- Cash flows from financing activities: Stock issued for cash upon exercise of options 40,000 - Repayment of borrowings and financing costs (355,000) (841,000) ----------- ---------- Net cash provided by financing activities (315,000) (841,000) ----------- ---------- Net increase in cash and cash equivalents 1,870,000 (73,000) ----------- ---------- Cash at beginning of period 1,024,000 518,000 ----------- ---------- Cash at end of period $ 2,894,000 $ 445,000 =========== ========== Supplemental cash flow information - Cash paid for interest and financing costs $ 310,000 $ 210,000 =========== ==========
See accompanying notes to consolidated financial statements. 5 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) ----------------------------------------------------------------------------- (1) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q 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-K. 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-K for the year ended June 30, 2002, previously filed with the Securities and Exchange Commission. 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 assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include oil and gas reserves, bad debts, oil and gas properties, marketable securities, income taxes, derivatives, contingencies and litigation. Actual results could differ from these estimates. (2) Marketable Securities The Company classifies its investment securities as available-for-sale securities. Pursuant to Statement of Financial Accounting Standards No. 115 (SFAS 115), such securities are measured at fair market value in the financial statements with unrealized gains or losses recorded in other comprehensive income. At the time securities are sold or otherwise disposed of, gains or losses are included in earnings. 6 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) -----------------------------------------------------------------------------
Cumulative Unrealized Estimated Cost Gain (loss) Market Value -------- ----------- ------------ September 30, 2002 Bion Environmental Technologies, Inc. $152,000 $(117,000) $ 35,000 Tipperary Oil & Gas Company $418,000 $ 120,000 $538,000 -------- --------- -------- $570,000 $ 3,000 $573,000 -------- --------- -------- Cumulative Unrealized Estimated Cost Gain (loss) Market Value -------- ----------- ------------ June 30, 2002 Bion Environmental Technologies, Inc. $152,000 $(92,000) $ 60,000 Tipperary Oil & Gas Company $418,000 $ 7,000 $425,000 -------- --------- -------- $570,000 $(85,000) $485,000 -------- --------- --------
(3) Recently Issued Accounting Standards and Pronouncements Statement 145, Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145) was issued in April 2002. This statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of income taxes. As a result, the criteria in APB 30 will now be used to classify those gains and losses. Any gain or loss on the extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB 30 for classification as an extraordinary item shall be reclassified. The provisions of this Statement are effective for fiscal years beginning after January 1, 2003. The Company does not believe this statement will have a material impact to the Financial Statements. 7 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) ----------------------------------------------------------------------------- Statement 146, Accounting for Exit or Disposal Activities (SFAS No. 146), was issued in June 2002. SFAS No. 146 addresses significant issues regarding the recognition, measurement and reporting of disposal activities, including restructuring activities that are currently accounted in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Activity." SFAS No. 146 will be effective in January 2003. The Company is currently assessing the impact of SFAS No. 146. (4) Asset Retirement Obligations In July 2001, the Financial Accounting Standards Board approved for issuance SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset and is effective for fiscal years beginning after June 15, 2002. The Company adopted SFAS No. 143 on July 1, 2002 and recorded a liability for asset retirement obligations of $644,000 (using an 8% discount rate) and a cumulative effect on change in accounting principle on prior years of $20,000. For the three months ended September 30, 2002, the Company recognized $7,000 of acretion on the liability as a component of depletion expense. (5) Unproved Undeveloped Offshore California Properties The Company has ownership interests ranging from 2.49% to 75% in five unproved undeveloped offshore California oil and gas properties with aggregate carrying values of $9,722,000, at September 30, 2002 and June 30, 2002. These property interests are located in proximity to existing producing federal offshore units near Santa Barbara, California and represent the right to explore for, develop and produce oil and gas from offshore federal lease units. Preliminary exploration efforts on these properties have occurred and the existence of substantial quantities of hydrocarbons has been indicated. The recovery of the Company's investment in these properties will require extensive exploration and development activities (and costs) that cannot proceed without certain regulatory approvals that have been delayed and is subject to other substantial risks and uncertainties. Based on the preliminary indicated levels of hydrocarbons present from drilling operations conducted in the past, the Company believes the fair value of its property interests are in excess of their carrying value at September 30, 2002 and June 30, 2002 and that no impairment in the carrying value has occurred. Should the required regulatory approvals not be obtained or plans for exploration and development of the properties not continue, the carrying value of the properties would likely be impaired and written off. 8 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) ----------------------------------------------------------------------------- (6) Long Term Debt September 30, 2002 June 30, 2002 ------------------ ------------- A $18,918,000 $18,918,000 B 5,666,000 6,021,000 ----------- ----------- $24,584,000 $24,969,000 Current Portion 1,556,000 3,498,000 ----------- ----------- Long-Term Portion $23,028,000 $21,441,000 ----------- ----------- A. On May 31, 2002, the Company obtained a new $20 million credit facility with Bank of Oklahoma and Local Oklahoma Bank (the "Banks). The facility has a variable interest rate component based on the total debt outstanding, (6.25% at September 30, 2002) and a monthly commitment reduction of $82,000 as of September 30, 2002. The proceeds from this facility were used for the acquisition of Castle's properties and to pay off the remaining US Bank debt. The loan is collateralized by substantially all of Delta's oil and gas properties excluding the oil and gas properties collateralized under the Kaiser-Francis Oil Company ("KFOC") note discussed below. The Company's borrowing base and monthly commitment amount will be redetermined at least semi-annually. If as a result of any such monthly commitment reduction or reduction in the amount of our borrowing base, the total amount of our outstanding debt ever exceeds the amount of the revolving commitment then in effect, then within 30 days after we are notified by the Bank of Oklahoma, we must make a mandatory prepayment of principal that is sufficient to cause our total outstanding indebtedness to not exceed our borrowing base. The Company is in compliance with its quarterly debt covenants and restrictions. B. On December 1, 1999, the Company borrowed $8,000,000 at prime plus 1-1/2% from KFOC). In addition, the Company will be required to pay a fee of $250,000 on June 1, 2003 if the loan has not been retired prior to this date. The proceeds from this loan were used to pay off existing debt and the balance of the Point Arguello Unit and New Mexico acquisitions. 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 loan is collateralized by the Company's oil and gas properties acquired with the loan proceeds. 9 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) ----------------------------------------------------------------------------- (7) Stockholder's Equity Swartz Agreement On July 21, 2000, the Company entered into an investment agreement with Swartz Private Equity, LLC ("Swartz") and issued Swartz a warrant to purchase 500,000 shares of common stock exercisable at $3.00 per share until May 31, 2005. The Investment Agreement was amended and restated on April 10, 2002. A warrant to purchase 150,000 shares of the Company's common stock at $3.00 per share for five years was also issued to another unrelated company as consideration for its efforts in this transaction and have been recorded as an adjustment to equity. The investment agreement entitles the Company to issue and sell ("Put") up to $20 million of its common stock to Swartz, subject to a formula based on the Company's stock price and trading volume over a three year period following the effective date of a registration statement covering the resale of the shares to the public. 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. To exercise a Put, the Company must have an effective registration statement on file with the Securities and Exchange Commission covering the resale to the public by Swartz of any shares that it acquires under the investment agreement. Swartz will pay the Company the lesser of the market price for each share minus $0.25, or 91% of the market price for each share of common stock under the Put. The market price of the shares of common stock during the 20 business days immediately following the date the Company exercises a Put is used to determine the purchase price Swartz will pay and the number of shares the Company will issue in return. The Company cannot determine the exact number of shares of its common stock issuable under the investment agreement and the resulting dilution to its existing shareholders, which will vary with the extent to which the Company utilizes the investment agreement and the market price of its common stock. On September 4, 2002, Swartz exercised 100,000 warrants in a cashless exercise transaction, which was permitted in the investment agreement. As a result of this exercise, Swartz received 20,761 shares of the Company's common stock. 10 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) ----------------------------------------------------------------------------- (8) Commodity Derivative Instruments and Hedging Activities The Company periodically enters into commodity price risk transactions to manage its exposure to oil and gas price volatility. These transactions may take the form of futures contracts, swaps or options. All transactions are accounted for in accordance with requirements of SFAS No. 133 which the Company adopted on January 1, 2001. Accordingly, unrealized gains and losses related to the change in fair market value of derivative contracts which qualify and are designated as cash flow hedges are recorded as other comprehensive income or loss and such amounts are reclassified to oil and gas sales revenues as the associated production occurs. Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at market value in the consolidated balance sheet, and the associated unrealized gains and losses are recorded as current income or expense in the consolidated statement of operations. While such derivative contracts do not qualify for hedge accounting, management believes these contracts can be utilized as an effective component of commodity price risk activities. As of September 30, 2002, the Company recorded a derivative liability of approximately $870,000 for the fair market value of its derivative instruments designated as cash flow hedges and a corresponding loss in other comprehensive income. The hedging realized net losses were $33,000 for the three months ended September 30, 2002. The Company also recorded a liability of approximately $79,000 representing the fair value of derivatives that do not qualify as hedges. As of September 30, 2002, the Company had approximately 61,500 Bbls of oil and 1,220,000 Mcf of natural gas subject to commodity price risk contracts for the remainder of fiscal 2003. The fiscal 2003 contracts have weighted average floor prices of $25.61 per barrel and $3.03 per Mmbtu, with weighted average ceiling prices of $25.61 per barrel and $3.96 per Mmbtu, respectively. The Company has approximately 18,000 Bbls of oil and 386,000 Mcf of natural gas subject to commodity price risk contracts for fiscal 2004. The fiscal 2004 contracts have weighted average floor prices of $25.02 per barrel and $3.00 per Mmbtu, with weighted average ceiling prices of $25.02 per barrel and $4.50 per Mmbtu, respectively. The contracts discussed above represent both the Company's hedge and non-hedge positions as of September 30, 2002. (9) Comprehensive Income Comprehensive income (loss) includes all changes in equity during a period. The components of comprehensive income (loss) for the three months ended September 30, 2002 and 2001 are as follows: 11 DELTA PETROLEUM CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Three Months Ended September 30, 2002 and 2001 (Unaudited) ----------------------------------------------------------------------------- Three Months Ended Three Months Ended September 30, 2002 September 30, 2001 ------------------ ------------------ Net Income (loss) $ 117,000 $ (244,000) Other comprehensive income Change in fair value of derivative (870,000) - hedging instruments Unrealized gain (loss) on marketable Securities $ 88,000 (126,000) ------------- -------------- Other comprehensive income (782,000) (126,000) ------------- -------------- Comprehensive income (loss) $ (665,000) $ (370,000) ------------- -------------- (10) Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended September 30, ------------- 2002 2001 ---- ---- Numerator: Numerator for basic and diluted earnings per share - income available to common stockholders $ 117,000 $ (244,000) ------------ ------------ Denominator: Denominator for basic earnings per share-weighted average shares outstanding 22,629,000 11,164,000 Effect of dilutive securities- stock options and warrants 2,584,000 * ------------ ------------ Denominator for diluted earnings per common share 25,213,000 11,164,000 ------------ ------------ Basic earnings per common share $ .01 $ (.03) ------------ ------------ Diluted earnings per common share $ ** $ (.02) * Potentially dilutive securities outstanding were anti-dilutive. ** Less than $.01 per share 12 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-K. Critical Accounting Policies and Estimates ------------------------------------------ The discussion and analysis of the Company's financial condition and results of operations were based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Our significant accounting policies are described in Note 1 to our consolidated financial statements filed in Form 10-K for June 30, 2002. In response to SEC Release No. 33-8040, "Cautionary Advise Regarding Disclosure About Critical Accounting Policies," we have identified certain of these policies as being of particular importance to the portrayal of our financial position and results of operations and which require the application of significant judgment by management. These are discussed in Form 10-K for June 30, 2002. We analyze our estimates, including those related to oil and gas reserves, bad debts, oil and gas properties, marketable securities, income taxes, derivatives, contingencies and litigation, and base our estimates on historical experience and various other assumptions that we believe reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the Company's financial statements. Recently Issued Accounting Standards and Pronouncements ------------------------------------------------------- Statement 145, Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145) was issued in April 2002. This statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of income taxes. As a result, the criteria in APB 30 will now be used to classify those gains and losses. Any gain or loss on the extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB 30 for classification as an extraordinary item shall be reclassified. The provisions of this Statement are effective for fiscal years beginning after January 1, 2003. The Company does not believe this statement will have a material impact to the Financial Statements. 13 Statement 146, Accounting for Exit or Disposal Activities (SFAS No. 146), was issued in June 2002. SFAS No. 146 addresses significant issues regarding the recognition, measurement and reporting of disposal activities, including restructuring activities that are currently accounted in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Activity." SFAS No. 146 will be effective in January 2003. The Company is currently assessing the impact of SFAS No. 146. Liquidity and Capital Resources ------------------------------- Liquidity is a measure of a company's ability to access cash. We have historically addressed our long-term liquidity requirements through the issuance of debt and equity securities, when market conditions permit, and most recently through the use of a new bank credit facility and cash provided by operating activities. The prices we receive for future oil and natural gas production and the level of production have significant impacts on operating cash flows. We are unable to predict with any degree of certainty the prices we will receive for our future oil and gas production. We continue to examine alternative sources of long-term capital, including bank borrowings, the issuance of debt instruments, the sale of common stock, sales of non-strategic assets, and joint venture financing. Availability of these sources of capital and, therefore, our ability to execute our operating strategy will depend upon a number of factors, some of which are beyond our control. Working Capital --------------- At September 30, 2002, we had working capital of $1,402,000 compared to a working capital deficit of $271,000 at June 30, 2002. Our current assets include trade accounts receivable of $3,553,000. Our current liabilities include the current portion of long-term debt of $1,556,000 at September 30, 2002. The decrease in the current portion of long-term debt and increase in working capital from June 30, 2002 is primarily attributed the reduction of our monthly commitment under our current bank facility. Cash Provided by (Used in) Operating Activities ----------------------------------------------- During the three months ended September 30, 2002, we had cash provided by operating activities of $3,155,000 compared to cash provided by operating activities of $1,202,000 during the same period ended September 30, 2001. This increase in operating activities is a result of increased cash flow from the properties acquired from Castle Energy Corporation ("Castle") and Piper Petroleum Company ("Piper") during fiscal year 2002. 14 Offshore Undeveloped Properties ------------------------------- On January 9, 2002, we and several other plaintiffs filed a lawsuit in the United States Court of Federal Claims in Washington, D.C. alleging that the U.S. Government has materially breached the terms of forty undeveloped federal leases, some of which are part of our Offshore California properties. The suit seeks compensation for the lease bonuses and rentals paid to the Federal Government, exploration costs and related expenses. The total amount claimed by all lessees for bonuses and rentals exceeds $1.2 billion, with additional amounts for exploration costs and related expenses. Our claim (including the claim of our subsidiary Amber Resources Company) for lease bonuses and rentals paid by us and our predecessors is in excess of $152,000,000. In addition, our claim for exploration costs and related expenses will also be substantial. The Complaint is based on allegations by the collective plaintiffs that the United States has materially breached the terms of certain of their Offshore California leases by attempting to deviate significantly from the procedures and standards that were in effect when the leases were entered into, and by failing to carry out its own obligations relating to those leases in a timely and fair manner. More specifically, the plaintiffs have alleged that the judicial determination in the California v. Norton case that a 1990 amendment to the Coastal Zone Management Act required the Government to make a consistency determination prior to granting lease suspension requests in 1999 constitutes a material change in the procedures and standards that were in effect when the leases were issued. The plaintiffs have also alleged that the United States has failed to afford them the timely and fair review of their lease suspension requests which has resulted in significant, continuing and material delays to their exploratory and development operations. The forty undeveloped leases are located in the Offshore Santa Maria Basin off the coast of Santa Barbara and San Luis Obispo counties, and in the Santa Barbara Channel off Santa Barbara and Ventura counties. None of these leases are currently impaired, but in the event that there is some future adverse ruling by the California Coastal Commission under the Coastal Zone Management Act and we decide not to appeal such ruling to the Secretary of Commerce, or the Secretary of Commerce either refuses to hear our appeal of any such ruling or ultimately makes a determination adverse to us, it is likely that some or all of these leases would become impaired and written off at that time. In addition, it should be noted that our pending litigation against the United States is predicated on the ruling of the lower court in California v. Norton. The United States has appealed the decision of the lower court to the 9th Circuit Court of Appeals. In the event that the United States is not successful in its appeal(s) of the lower court's decision in the Norton case and the pending litigation with us is not settled, it would be necessary for us to reevaluate whether the leases should be considered impaired at that time. As the ruling in the Norton case currently stands, the United States has been ordered to make a consistency determination under the Coastal Zone Management Act, but the leases are still valid. If through the appellate process the leases are found not to be valid for some reason, or if the United States is finally ordered to make a consistency determination and either does not do so or finds that development is inconsistent with the Coastal Zone Management Act, it would appear that the leases would become impaired even though Delta would undoubtedly proceed with its litigation. It is also possible that other events could occur during the appellate process that would cause the leases to become impaired, and we will continuously evaluate those factors as they occur. 15 Offshore Producing Properties ----------------------------- Point Arguello Unit. Pursuant to a financial arrangement between Whiting and us, we hold what is essentially the economic equivalent of a 6.07% working interest, which we call a "net operating interest", in the Point Arguello Unit and related facilities. In layman's terms, the term "net operating interest" is defined in our agreement with Whiting as being the positive or negative cash flow resulting to the interest from a seven step calculation which in summary subtracts royalties, operating expenses, severance taxes, production taxes and ad valorem taxes, capital expenditures, Unit fees and certain other expenses from the oil and gas sales and certain other revenues that are attributable to the interest. Within this unit are three producing platforms (Hidalgo, Harvest and Hermosa) which are operated by Arguello, Inc., a subsidiary of Plains Resources, Inc. In an agreement between Whiting and Delta, Whiting agreed to retain all of the abandonment costs associated with our interest in the Point Arguello Unit and the related facilities. We anticipate that we will participate in the drilling of four wells in fiscal 2003. Each well will cost approximately $2.8 million ($170,000 to our interest). We anticipate the drilling costs to be paid through current operations or additional financing. Onshore Producing Properties ---------------------------- We estimate our capital expenditures for onshore properties to be approximately $6,000,000 for the year ending June 30, 2003. However, we are not obligated to participate in future drilling programs and will not enter into future commitments to do so unless management believes we have the ability to fund such projects. Agreement with Swartz --------------------- On July 21, 2000, we entered into an investment agreement with Swartz Private Equity, LLC ("Swartz") and issued Swartz a warrant to purchase 500,000 shares of common stock exercisable at $3.00 per share until May 31, 2005. The Investment Agreement was amended and restated on April 10, 2002. A warrant to purchase 150,000 shares of the Company's common stock at $3.00 per share for five years was also issued to another unrelated company as consideration for its efforts in this transaction and has been recorded as an adjustment to equity. The investment agreement entitles us to issue and sell ("Put") up to $20 million of our common stock to Swartz, subject to a formula based on our stock price and trading volume over a three year period following the effective date of a registration statement covering the resale of the shares to the public. Pursuant to the terms of this investment agreement the Company is not obligated to sell to Swartz all of the common stock referenced in the agreement nor does the Company intend to sell shares to the entity unless it is beneficial to the Company. 16 To exercise a Put, we must have an effective registration statement on file with the Securities and Exchange Commission covering the resale to the public by Swartz of any shares that it acquires under the investment agreement. The Company has filed a registration statement covering the Swartz transaction with the SEC. Swartz will pay us the lesser of the market price for each share minus $0.25, or 91% of the market price for each share of common stock under the Put. The market price of the shares of common stock during the 20 business days immediately following the date we exercise a Put is used to determine the purchase price Swartz will pay and the number of shares we will issue in return. If we do not Put at least $2,000,000 worth of common stock to Swartz during each one year period following the effective date of the Investment Agreement, we must pay Swartz an annual non-usage fee. This fee equals the difference between $200,000 and 10% of the value of the shares of common stock we Put to Swartz during the one year period. The fee is due and payable on the last business day of each one year period. Each annual non-usage fee is payable to Swartz, in cash, within five (5) business days of the date it accrued. We are not required to pay the annual non-usage fee to Swartz in years we have met the Put requirements. We are also not required to deliver the non-usage fee payment until Swartz has paid us for all Puts that are due. If the investment agreement is terminated, we must pay Swartz the greater of (i) the non-usage fee described above, or (ii) the difference between $200,000 and 10% of the value of the shares of common stock Put to Swartz during all Puts to date. We may terminate our right to initiate further Puts or terminate the investment agreement at any time by providing Swartz with written notice of our intention to terminate. However, any termination will not affect any other rights or obligations we have concerning the investment agreement or any related agreement. We cannot determine the exact number of shares of our common stock issuable under the investment agreement and the resulting dilution to our existing shareholders, which will vary with the extent to which we utilize the investment agreement and the market price of our common stock. Options ------- We received the proceeds from the exercise of options to purchase shares of our common stock of $40,000 and $407,000 during the three months ended September 30, 2002 and year ended June 30, 2002, respectively. Credit Facility --------------- We entered into our credit facility with Bank of Oklahoma and Local Oklahoma Bank ("Credit Facility") upon closing the Castle acquisition, which was subsequently amended. The Credit Facility, as amended, provides for a maximum borrowing base of $20 Million and a monthly commitment reduction of $82,000. The Credit Facility has a variable interest rate component of prime +1.5%/-.5% based on the total debt outstanding, (currently at prime +.5%). As of September 30, 2002, we had outstanding borrowings and letter of credits of $19,443,000 under the Credit Facility. 17 Our borrowing base and monthly commitment reduction will be redetermined at least semi-annually. This determination will be based on our "Engineered Value". This value is determined by our future net revenues discounted at the discount rate used by the Bank of Oklahoma as of the date that the redetermination is made using the pricing parameters used in the engineering report that is furnished to the Bank of Oklahoma. The most recent redetermination was effective October 1, 2002. The foregoing does not purport to be a complete summary of the Credit Agreement and other loan documents. Complete copies of the original credit facility documents are filed as exhibits to our Report on Form 8-K dated May 24, 2002. Results of Operations Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001 ----------------------------------------------------------- Net Earnings (Loss). Our net income for the three months ended September 30, 2002 was $117,000 compared to a net loss of $244,000 for the three months ended September 30, 2001. The results for the three months ended September 30, 2002 and 2001 were effected by the items described in detail below. Revenue. Total revenue for the three months ended September 30, 2002 was $5,648,000 compared to $2,443,000 for the three months ended September 30, 2001. Oil and gas sales for the three months ended September 30, 2002 were $5,467,000 compared to $2,416,000 for the three months ended September 30, 2001. The increase in oil and gas sales during the three months ended September 30, 2002 resulted from the acquisitions completed during fiscal 2002 offset by a slight decrease in oil and gas prices. Production volumes and average prices received for the three months ended September 30, 2002 and 2001 are as follows: Three Months Ended September 30, ------------------ 2002 2001 Onshore Offshore Onshore Offshore ------- -------- ------- -------- Production: Oil (barrels) 64,000 62,000 27,000 69,000 Gas (Mcf) 801,000 - 149,000 - Average Price: Net of forward contract sales and derivative activity Oil (per barrel) $25.50 $ 20.03 $26.03 $ 17.41 Gas (per Mcf) $ 3.19 - $ 3.37 - Gross of forward contract sales and derivative activity Oil (per barrel) $25.74 $ 20.79 $26.15 $ 17.41 Gas (per Mcf) $ 3.21 - $ 3.37 - Revenues for 2002 include impact of derivative loss of $33,000 18 Lease Operating Expenses. Lease operating expenses for the three months ended September 30, 2002 were $2,226,000 compared to $721,000 for the three months ended September 30, 2001. Lease operating expense increased compared to 2001 as a result of the acquisitions completed during fiscal 2002 compared to fiscal 2001. On a per Bbl equivalent basis, production expenses and taxes were $6.67 for onshore properties and $14.60 for offshore properties during the three months ended September 30, 2002 compared to $3.84 for onshore properties and $7.53 for offshore properties for the three months ended September 30, 2001. Our North Dakota properties owned during first quarter fiscal 2001 and sold during second quarter fiscal 2001 had low operating costs compared to it's production. The properties acquired during fiscal 2002 have more typical operating costs and as such, lease operating costs per equivalent Bbl increase during compared to the prior year. Depreciation and Depletion Expense. Depreciation and depletion expense for the three months ended September 30, 2002 was $1,685,000 compared to $793,000 for the three months ended September 30, 2001. On a per Bbl equivalent basis, the depletion rate was $6.91 for onshore properties and $4.83 for offshore properties during the three months ended September 30, 2002 compared to $10.82 for onshore properties and $3.30 for offshore properties for the three months ended September 30, 2001. The properties acquired during fiscal 2002 have longer remaining lives that what was owned previously. As such, depletion per equivalent Bbl decreased. Exploration Expenses and Dry Hole Expenses. Exploration expenses consist of geological and geophysical costs and lease rentals. Exploration expenses were $7,000 for the three months ended September 30, 2002 compared to $72,000 for the three months ended September 30, 2001. During the three months ended September 30, 2001, we incurred $125,000 in dry hole costs relating to an unsuccessful drilling program in South Dakota. Professional Fees. Professional fees for the three months ended September 30, 2002 were $177,000 compared to $324,000 for the three months ended September 30, 2001. Professional fees consist of corporate, legal and accounting costs related to investor relations and 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 three months ended September 30, 2002 were $908,000 compared to $286,000 for the three months ended September 30, 2001. The increase in general and administrative expenses is primarily attributed to increased costs associated with the acquisitions completed in fiscal 2002 including office relocation and additional staff. Stock Option Expense. Stock option expense has been recorded for the three months ended September 30, 2002 and 2001 of $11,000 and $17,000, respectively, for options granted to certain directors and consultants at option prices below the market price at the date of grant. The stock option expense for fiscal 2002 and 2001 can primarily be attributed to options to certain consultants that provide us with shareholder relations services and options to our directors. 19 Interest and Financing Costs. Interest and financing costs for the three months ended September 30, 2002 were $508,000 compared to $352,000 for the three months ended September 30, 2001. The increase in interest and financing costs can be attributed to the Castle acquisition which closed on May 31, 2002. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates and commodity prices. We do not use financial instruments to any degree to manage foreign currency exchange and interest rate risks and do not hold or issue financial instruments to any degree for trading purposes. All of our revenue and related receivables are payable in U.S. dollars. Market Rate and Price Risk -------------------------- Beginning in fiscal 2003, we began to hedge a portion of our oil and gas production using swap and collar agreements. The purpose of these hedge agreements is to provide a measure of stability to our cash flow in an environment of volital oil and gas prices and to manage the exposure to commodity price risk. Interest Rate Risk ------------------ We were subject to interest rate risk on $24,584,000 of variable rate debt obligations at September 30, 2002. The annual effect of a one percent change in interest rates would be approximately $250,000. The interest rate on these variable rate debt obligations approximates current market rates as of September 30, 2002. Item 4. Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of the design and operation and our disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based upon their evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings. On January 9, 2002, we filed a lawsuit along with several other companies in the United States Court of Federal Claims in Washington, D.C. alleging that the U.S. Government materially breached the terms of forty undeveloped federal leases, some of which are part of our Offshore California properties. The Complaint is based on our collective claims that post-leasing amendments to a federal statute governing offshore activities have now been interpreted to alter significantly our rights and abilities to move forward with further exploration and development activities, and that the Government has failed to carry out its own obligations under the leases which has resulted in substantial delays and interference in our exploration and development efforts. The forty undeveloped leases are located in the Offshore Santa Maria Basin off the coast of Santa Barbara and San Luis Obispo counties, and in the Santa Barbara Channel off Santa Barbara and Ventura counties. The suit seeks compensation for the lease bonuses and rentals paid to the Federal Government, exploration costs, and related expenses. The total amount claimed by all of the collective plaintiffs for bonuses and rentals exceeds $1.2 billion, with additional amounts for exploration costs and related expenses. Our claim (including the claim of our subsidiary Amber Resources Company) for lease bonuses and rentals paid by us and our predecessors is in excess of $152,000,000. In addition, we have asserted a claim for exploration costs and related expenses. The U.S. Government has not yet filed an answer to our Complaint. Item 2. Changes in Securities. During the quarter ended September 30, 2002, Delta issued securities in transactions that were not registered under the Securities Act of 1933 as follows: On September 4, 2002, Swartz exercised 100,000 options in a cashless exercise transaction, which was permitted in the investment agreement. As a result of this exercise, Swartz received 20,761 shares of the Company's common stock. 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. None. (b) Reports on Form 8-K. During the quarter ended September 30, 2002, Delta filed Reports on Form 8-K as follows: 1. Report on Form 8-K/A dated May 24, 2002, reporting information under Item 7, filed on August 9, 2002. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amended Report to be signed on its behalf by the undersigned, thereunto duly authorized. DELTA PETROLEUM CORPORATION (Registrant) By: /s/ Roger A. Parker ------------------------------------- Roger A. Parker President and Chief Executive Officer By: /s/ Kevin K. Nanke ------------------------------------- Kevin K. Nanke, Treasurer and Chief Financial Officer Date: November 13, 2002 CERTIFICATIONS PURSUANT TO RULE 13a-14 AND 15d-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Roger A. Parker, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Delta Petroleum Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; 22 b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Roger A. Parker ------------------------------------- Name: Roger A. Parker Title: Chief Executive Officer CERTIFICATIONS PURSUANT TO RULE 13a-14 AND 15d-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Kevin K. Nanke, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Delta Petroleum Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 23 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Kevin K. Nanke -------------------------------------- Name: Kevin K. Nanke Title: Chief Financial Officer 24 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF DELTA PETROLEUM CORPORATION PURSUANT TO 18 U.S.C. SECTION 1350 We certify that, to the best of our knowledge, the Quarterly Report on Form 10-Q of Delta Petroleum Corporation, for the period ending September 30, 2002: (1) complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta Petroleum Corporation. /s/ Roger A. Parker /s/ Kevin K. Nanke ------------------------------ ------------------------------ Roger A. Parker Kevin K. Nanke Chief Executive Officer Chief Financial Officer November 13, 2002 November 13, 2002 25