ITEM 1. BUSINESS
- -------------------------------------------------------------------------------
GENERAL
Since its organization in June 1985, the Company has been engaged principally in oil exploration in the Great Basin and Range of Nevada ("Great Basin"), an area that management believes is one of the most promising unexplored onshore domestic areas with potential for the discovery of major oil reserves. In continuing to advance this exploration, the Company's strategy is to generate exploration prospects with the most recent generally available scientific techniques, expand and improve the Company's strategic land position, and establish arrangements with other oil exploration firms active in Nevada to obtain additional scientific data, leases, and funding.
Until 1994, the Company had only limited revenue, consisting of modest amounts of interest income earned on net proceeds from the sale of securities and revenue from producing properties. In order to supplement its own exploration efforts, between 1993 and 1994, the Company acquired certain leases and properties in Railroad Valley, Nevada, including the Eagle Springs field. In the Eagle Springs field, the Company has reworked and returned to production eleven acquired wells, drilled a new water injection well, drilled and placed into production eight additional wells, replaced and improved surface equipment to handle increased production and to lower long-term operating costs, and undertook a 3D seismic evaluation program. Much of this development work was conducted under an agreement with Plains Petroleum Operating Company, which was acquired in August 1995 by Barrett Resources Corporation (together, "Barrett"), resulting in Barrett acquiring a 40% interest in the Eagle Springs field. In November 1996, the Company acquired Barrett's interest in the Eagle Springs field, effective August 1, 1996. The Company plans to continue additional drilling in the Eagle Springs field to place into production undeveloped reserves and to drill at additional locations to test horizons that are productive in existing wells.
During 1996, the Company continued with exploration drilling on two prospects, including a test that discovered the Ghost Ranch field on a different geologic structure approximately one-half mile south of the Eagle Springs field. The first Ghost Ranch discovery well reached total depth in late July 1996 and resulted in significant production and increases in the Company's oil reserves. The Company plugged a second Ghost Ranch well in November 1996, after determining it was not economic to produce. The Company completed a third Ghost Ranch well for production in February 1997, which is now producing at levels comparable to the discovery well, and commenced a fourth well in March 1997 that the Company intends to complete for production in April 1997. The Company has a 60% working interest in the Ghost Ranch field and is the operator. Barrett continues to hold the remaining 40% working interest pursuant to the agreement discussed above. Of the other wells drilled during 1996, one well in Toano Draw is still being tested and one well in Pine Valley was plugged and abandoned.
During most of the first half of 1996, the Company's exploration and development activities were significantly restricted due to shortages of working capital and cash. Following the receipt of net proceeds from the sale of securities during the second quarter of 1996, the Company was financially able to resume its exploration and development program.
The Company continues to increase and improve its geological and geophysical expertise respecting the Great Basin of Nevada through its own efforts and by obtaining data from third parties as part of joint exploration, property acquisition, or data sharing arrangements and from drilling and other field work in which the Company participates. In addition, all information is continually reanalyzed as additional drilling data is gathered and as new computer modeling and other analytical tools become available to the industry. This has enabled the Company to increase substantially its understanding of the geology, location, potential, and other characteristics of exploration prospects in Nevada. To date, the Company has funded its exploration program principally from the sale of its equity securities. The Company also benefits from capital provided by oil industry participants for drilling and other exploration of certain oil prospects through joint arrangements typical in the oil industry. In November 1996 the Company established a bank credit facility to provide debt financing.
NEVADA EXPLORATION
During the early 1980s, the Great Basin emerged as a possible new frontier area for oil exploration. Conventional wisdom in the oil industry at the time held that certain geological indicators pointed to north and central Nevada as a possible repository of large (by continental United States standards) petroleum deposits. Between 1980 and 1983, Gulf Oil Corporation ("Gulf") conducted a detailed study of the hydrocarbon potential of north and central Nevada and other frontier exploration areas. The study, conducted by Gulf personnel and by outside consultants, generated a mass of raw data pertaining to the age and depositional history of potential oil-bearing formations. In 1983, Gulf was acquired by Chevron USA, Inc. ("Chevron"). In connection with that acquisition, a number of Gulf's exploration projects were terminated, including the study of Nevada, and a number of Gulf's employees voluntarily retired. One such retiree was Dr. Grant Steele, who had been manager of geology for Gulf's central exploration group and oversaw, coordinated, controlled, and managed Gulf's study of the Great Basin of Nevada.
Personal and professional interest in the potential of the Great Basin of Nevada continued after his early retirement from Gulf in 1983. In 1985, Dr. Steele organized the Company and recruited Kenneth L. Ransom, who had served under Dr. Steele as a senior geologist with Gulf's central exploration group and who had also been deeply involved with Gulf's study of the Great Basin of Nevada. Following its organization, the Company acquired rights to Gulf's data base, conducted additional geological survey work, acquired oil and gas lease holdings in north and central Nevada, and began detailed exploration of the area.
BUSINESS STRATEGY
The Company has assembled a management and technical team of persons with specialized technical training and experience concentrated on Nevada oil exploration. In all, the Company's technical team has over 75 years of combined Nevada oil exploration experience, much of it with major oil companies. The Company believes that the working experience of its executives and employees in Nevada is a significant factor in the Company's exploration progress to date and in its ability to act as operator under exploration arrangements with other exploration firms such as Enserch Exploration, Inc. ("Enserch"), Berry Petroleum Company ("Berry"), Parker and Parsley Petroleum Company (successor-in-interest to Santa Fe Energy Resources, Inc.) ("P&P"), and Barrett. This team employs the following strategies in guiding the Company's Nevada exploration:
. Take full advantage of the most advanced generally available scientific exploration tools and techniques such as 3D and reprocessed seismic data to generate drilling prospects and select specific drilling locations. . Generate promising exploration prospects in areas in which the Company holds or believes that it can acquire a preemptive lease position and upgrade lease holdings based on further prospect evaluation. . Seek joint exploration agreements with other exploration firms active in Nevada to diversify the risk and to obtain additional scientific data and expertise, land, and funding. . Increase revenues by drilling in the Eagle Springs and Ghost Ranch fields to develop proven reserves and to test horizons productive in existing wells. . Continually generate prospect concepts for the long-term exploration of the Great Basin.
Science
The Company seeks to utilize the most advanced available scientific tools and techniques to evaluate the risk and exploration potential of specific prospects. The Company's oil exploration model for the Great Basin of Nevada continually evolves from a large data base collected, originally by Gulf and, since 1985, by the Company. As a result of the Company's own work as well as information sharing arrangements with others, the Company now has access to over 1,400 line miles of 2D seismic data, much of it reprocessed with new analytical computer programs, newly acquired high resolution 3D seismic surveys, and gravity data gathered by the Company as well as by Exxon, P&P, Mobil, Chevron, Enserch, and Berry. Data from 3D seismic, gravity, reprocessed seismic surveys, and previous drilling are integrated as a guide to further exploration. The Company believes that it benefits from the long-term involvement of the Company's personnel in Nevada oil exploration and operations, which enhances the Company's ability to share data and expertise with industry participants.
Prospect Generation and Leasing
The Company's leasing program is coordinated with prospect generation and exploration results. As areas of interest are identified, the Company attempts to acquire leases or other exploration rights on what preliminarily appears to be the most promising prospect areas in order to establish a preemptive lease position prior to generating a specific drilling prospect. As specific prospect evaluation advances, the Company may seek leases on additional areas or relinquish leases on areas that appear less promising, thereby reducing lease holding costs. As a result, the Company has substantially increased the size of its gross acreage while, in management's opinion, improving the exploration potential of its leaseholdings.
Joint Exploration
The Company regularly seeks joint exploration arrangements with other oil exploration firms active in Nevada to obtain access to additional scientific data and technical expertise, particularly relatively expensive geophysical data, including 3D seismic. Joint exploration arrangements are sought with firms that have significant lease positions in the prospect area and that can bear a portion of the costs of specified further exploration. The Company also utilizes joint exploration arrangements to spread the risks of specific exploration, attempting to retain a larger interest by bearing a greater proportion of the related costs in those prospect areas in which management believes that the risks and reserve potential warrant such action. In situations in which management perceives a higher degree of risk or a smaller potential for the prospect, it seeks to retain a smaller interest and bear a smaller share of related costs. With the acquisition of Barrett's 40% interest in the Eagle Springs field, the Company assumed the cost and associated risk of 100% of operations in the Eagle Springs field. Industry interest in oil exploration in Nevada has fluctuated significantly in previous years, and there can be no assurance that the Company can continue to identify oil exploration firms to undertake joint exploration of Nevada prospects.
Drilling Near Existing Production
Further exploration drilling is required to delineate the extent of productive horizons in individual fields and complete development where warranted. In the Eagle Springs and Ghost Ranch fields, the Company's geophysical and geological evaluation is ongoing to locate possible additional drilling locations to develop the undeveloped reserves and to test the horizons that are productive in the existing wells. In both fields, the Company has surface facilities capable of handling additional production. The Company also intends to continue to drill exploration wells in areas of existing production in the Pine and Railroad Valleys to further evaluate reservoir extent and characteristics, increase production, and obtain data that might benefit the Company's overall exploration effort. The Company intends to pursue these drilling objectives in Pine Valley as well as specific prospects in Railroad Valley as involving somewhat lower risk than exploration testing in areas with relatively less drilling history or other exploration success to date.
Long-Term Exploration
Management anticipates that it will take several years to explore fully the target areas that may be identified by the Company in the Great Basin of Nevada, as is the case in many frontier areas of exploration, and believes that it is important to provide for an ongoing presence for the Company in Nevada exploration. In such a long term exploration effort, the results of early exploration serve as a guide for identifying new prospects so it is important, in management's view, to continually identify new prospect concepts and areas for possible future exploration while advancing existing prospects to the drilling stage.
During recent years, the Company has focused its activities on drilling in the Eagle Springs to exploit proved undeveloped reserved and to evaluate at new locations horizons that are productive in existing wells and to drill in additional exploratory prospects in the Pine, Railroad, and Huntington Valleys and Toano Draw of Nevada. In 1996, the Company's exploration effort led to the discovery of the Ghost Ranch field, which it is now developing. Through 1997, the Company will continue its exploration and development activities in such areas. In addition, the Company will continue its acquisition of 3D seismic data and reanalysis of existing 2D seismic data. The Company will also continue its evaluation of data to identify additional exploration targets, expand its lease holdings where warranted, and seek additional exploration arrangements with other industry participants.
GHOST RANCH FIELD
Based on results of its Eagle Springs 3D seismic program, in 1996 the Company identified the Ghost Ranch prospect located just south of the Eagle Springs field. The Ghost Ranch no. 48-35 discovery well reached total depth in late July 1996 and is now producing at a restricted rate of 200 to 250 barrels of oil per day, resulting in significant production and increases to the Company's oil reserves. The Ghost Ranch no. 58-35 well, the second well drilled in Ghost Ranch, was intended to test a different horizon than the discovery well. This well initially demonstrated excellent fluid deliverability. However, after testing the heavy, viscous oil and water from the well, the Company determined that the water cut was too high to produce economically, and the well was plugged. In February 1997, the Company completed the Ghost Ranch no. 38-35 well for production, and the well is now producing approximately 320 barrels of oil per day. In March 1997, the Company commenced drilling the Ghost Ranch no. 47-35 well, which the Company intends to complete for production in April 1997. The Company believes that discovery of the Ghost Ranch field confirms the effectiveness of 3D seismic as an exploration and development tool in Nevada. The Company has a 60% working interest in the Ghost Ranch field, and Barrett holds the remaining 40% working interest. Activities in the Ghost Ranch field with Barrett are conducted by the Company as operator, under the overall direction of a technical committee made up of representatives of both companies. The Company intends to continue drilling of the Ghost Ranch field during 1997 by drilling at up to three locations to test horizons productive in the existing wells.
EAGLE SPRINGS
In 1993 and 1994, to supplement the Company's own exploration efforts, it acquired approximately 3,040 gross acres in Railroad Valley, Nevada, with eleven shut-in wells in the Eagle Springs field. In connection with the acquisition, the Company implemented certain in-field environmental remediation measures and resolved issues raised by various regulatory agencies and the claims of entities which asserted an ownership interest or had advanced funds or services to the field.
Since acquisition of the Eagle Springs properties, the Company has returned eleven acquired wells to production, drilled a water injection well, drilled and placed into production eight additional wells, replaced and improved surface equipment to handle increased production and to lower long term operating costs, and undertaken a 3D seismic evaluation program. Much of this work in the Eagle Springs field was completed with Barrett pursuant to a 1994 agreement under which Barrett provided $1,920,000 in specified well costs to earn a 40% interest in the Company's Eagle Springs producing properties, agreed to bear 40% of all costs thereafter, and obtained the right to participate in other specified Company exploration projects under agreed terms. In November 1996, the Company acquired Barrett's 40% interest in the Eagle Springs field, effective August 1, 1996, for $2.4 million, funded from the sale of the Company's equity securities and funds drawn under the Company's recently established bank credit facility. (See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.") Pursuant to the 1994 agreement, Barrett continues to have an interest in the Ghost Ranch field but in May 1996, elected to terminate its interest in the North Humboldt prospect. Prior to the acquisition of the 40% interest in the Eagle Springs field from Barrett, the Company diversified the economic risks associated with drilling and the other activities in the Eagle Springs field because, as a 40% working interest owner, Barrett was responsible for 40% of all costs. As a result of the acquisition of Barrett's interest in November 1996, effective August 1, 1996, the Company assumed 100% of the cost and associated risk of operations in the Eagle Springs field.
The Company intends to pursue a long-term development program of the Eagle Springs field based on its 3D seismic study to test at additional locations horizons that are productive in existing wells and to increase proved reserves. The Company originally intended to conduct additional development drilling with Barrett in Eagle Springs during 1996. However, limited funding during early 1996 and the Company's decision to initiate its exploration program in the Ghost Ranch field delayed the development program of the Eagle Springs field.
The Company intends to evaluate engineering data from existing wells together with any additional wells that may be productive to determine whether a reduced well spacing from 20 acres to 10 acres, which is the spacing approved by regulatory authorities, may be economically beneficial. If the Company concludes that reduced well spacing would increase the financial return from the field, the total number of available well locations would be increased, which would correspondingly extend the period during which the Eagle Springs field could be developed. In addition, the Company has initiated a larger ongoing reservoir study of the Eagle Springs field oriented toward development of a secondary or tertiary improved oil recovery project.
EXPLORATION ACTIVITIES
Toano Draw
In accordance with an agreement with P&P, the Company identified an exploration target in the Deadman Creek area of Toana Draw, Elko County, Nevada, based on the Company's review of available data regarding the Deadman Creek no. 44-13 test drilled by another operator in the mid 1980s that encountered favorable oil shows but was not completed for production. The Company reentered and completed the well, which has been tested at rates of 20 to 40 barrels per day. Based on the test results, the Company is acquiring the surface equipment to place this well into production, which should commence by the second quarter of 1997. As a result, the Company will earn a 100% working interest in 5,013 gross acres (4,261 net acres), subject to P&P's 15% working interest in each well after the Company has recouped costs incurred.
Pine Valley
Based on results from nonproducing tests previously drilled by the Company in Pine Valley, during the fourth quarter of 1996 the Company drilled and tested the Pine Creek no. 1-7 well in Pine Valley. A high gravity, low pour point oil was recovered from the well, but the water cut was too high to produce economically. Based on the dipmeter logs and 2D seismic data, updip locations may exist for the reservoirs which tested oil. In order to further refine these potential updip drilling locations as well as identify other exploratory drilling targets, the Company and its partners have approved a 16.75 square mile 3D seismic acquisition program. This seismic program is designed to identify updip drilling locations from the numerous shows in the Company's Pine Creek no. 1-7 exploratory well. In addition, the 3D survey will also be used to identify other exploratory drilling targets in the 16.75 square mile 3D seismic program.
Under a 1994 joint exploration agreement with Enserch and Berry ("Enserch/Berry"), the Company and Enserch/Berry had planned to drill the Pinon Prospect in Pine Valley in 1996, but later the parties elected not to drill such well so the joint exploration agreement has expired. The acreage contributed by the Company to the joint exploration arrangement has been returned to it.
On January 22, 1996, the Company entered into a revised agreement with Hugoton Energy Corporation and Maxwell Petroleum, Inc. ("Hugoton/Maxwell"), respecting exploration of the Pine Creek prospect in Pine Valley, Nevada. Hugoton/Maxwell elected not to complete a 3D seismic study in the area, as required by the agreement, and paid the Company $75,000 as liquidated damages.
North Humboldt Prospect
The Company identified the North Humboldt prospect based on data available pursuant to its agreements with P&P and subsequently obtained a lease from P&P respecting this prospect. Under the 1994 agreement with the Company respecting the Eagle Springs field, Barrett originally exercised its right to earn an interest in the Company's acreage in an area of mutual interest in North Humboldt, and the Company and Barrett then had developed a plan to undertake joint exploration of the prospect. In May 1996, Barrett elected to terminate its interest in the North Humboldt prospect. The Company has now undertaken a technical evaluation of the seismic data and outlined boundaries for a 3D seismic evaluation of the North Humboldt prospect.
Little Smoky and Antelope Valley
The Company has participated in four test wells in these two valleys in previous years. Although all of these tests were plugged and abandoned, they added significantly to the Company's information in these two sparsely drilled yet promising prospect valleys. The Company will continue to evaluate the exploration potential of these two valleys.
Newark Valley
The Company is conducting ongoing geological evaluation of prospects in Newark Valley.
JOINT EXPLORATION ARRANGEMENTS
Enserch/Berry Operating Agreement
Effective March 1993, the Company entered into an operating agreement with Enserch/Berry that designated the Company as operator to undertake a joint exploration program on approximately 91,000 gross leased acres in Pine, Diamond, Little Smoky, and Antelope Valleys of northeastern Nevada. The Company and Enserch/Berry each contributed acreage and data and provided 50% of the required funds for drilling and acquiring additional acreage and data. The parties identified four areas of mutual interest covering an aggregate of 500,000 acres. Through 1995, the parties drilled five test wells, all of which were dry holes that were plugged and abandoned. Due to a change in management of Enserch/Berry, the parties did not drill the sixth well under the exploration agreement. In July 1996, the Company negotiated a new agreement to supersede the original exploration agreement with Enserch/Berry. Under the new agreement Enserch/Berry assigned all of its interest in 46,600 gross acres in Pine, Little Smoky, and Antelope Valleys to the Company. The Company also received all of Enserch/Berry's rights to over 57 line miles of jointly acquired seismic data in those valleys, an access license to over 61 miles of Enserch/Berry proprietary seismic, and an option to acquire an additional 100 miles of seismic data in Pine Valley, Nevada.
P&P Marketing and Exploration Agreement
In December 1992, the Company entered into an exploration agreement with P&P's predecessor-in-interest, appointing the Company the exclusive marketing representative for P&P's fee mineral interest in northern Nevada. Under the terms of the exploration agreement, the Company had access to P&P's proprietary geological and geophysical data respecting the P&P properties and adjacent lands, with the express right to reprocess the seismic data. Under the agreement, the Company identified the Deadman Creek, North Humboldt, and Pine Creek prospects, and acquired leases to approximately 36,400 gross acres. The Company has agreed to grant P&P an overriding royalty in these leaseholds and to provide to P&P copies of any seismic and geological data acquired in the prospects. The Company determined not to drill any other prospects on the P&P acreage under the agreement and released the remaining acres subject to the P&P agreement when it expired in December 1996.
Exploration Arrangements
The Company intends to continue to negotiate with interested parties to fund further drilling on defined prospects in a number of locations in the Great Basin of Nevada. The ultimate goal of the Company is to arrange for the exploration and, if oil reservoirs are discovered, development of its holdings, using the Company's own limited financing, to the extent available. In some instances, the Company may reach an agreement with other firms in which all participants contribute acreage and available scientific data and bear a portion of the costs of agreed drilling or other exploration, thereby earning a shared ownership in the contributed acreage and production, if any. The nature and extent of the Company's participation, share of costs, and interest retained in various arrangements will be dependent on the acreage it has under lease in the target area, the amount of scientific information it has available as compared to the other participants, the relative financial strength of the participants, the risks and rewards perceived by the various participants, and other factors. These arrangements are very project specific and will likely vary from drilling prospect to drilling prospect.
Joint exploration agreements with industry participants to obtain leases, scientific data, and funds for drilling and other exploration typically set forth obligations that the participants must perform timely in order to earn specified property interests, permit funding participants to terminate their participation at specified points during the exploration program, and condition continuation of joint efforts on obtaining satisfactory results. If such a participant elects not to continue with respect to any well, the Company would be required to fund all of the costs of such well if it proceeded, in which case it would be dependent on proceeds from the sale of securities and production revenue, which would delay or limit planned drilling.
CONCENTRATION OF ACTIVITIES IN FRONTIER AREA
Exploration for oil is a highly speculative business. There is no way to know in advance of drilling and testing whether any prospect will yield oil in sufficient quantities to be economically feasible. The completion of a well for production or the initiation of production in paying quantities does not necessarily mean that the well will be economic because it may not produce sufficient revenues to recover related costs and generate a financial return to the Company. Management of the Company has focused its efforts on acquiring lease positions, developing data, and exploring and drilling in the Great Basin area of Nevada, a largely unproved and unexplored geological province. While the Company holds exploration rights to a significant number of acres, its holdings are insignificant when compared to the size of the potential geological area. Other than in the Eagle Springs field and Ghost Ranch field, no significant ongoing commercial production of oil has been established on the Company's properties. In addition, the areas targeted by the Company, other than the Eagle Springs field and Ghost Ranch field, have geological and geophysical complexities which may hinder the development or establishment of significant production or reserves. There is no assurance that these problems can be overcome or that the Company's drilling program will be commercially successful.
Despite the expertise of management, the significant amount of data that the Company has collected with respect to Nevada, and the expenditure of several million dollars in property acquisition, data collection, and exploration since 1985, the Company has established only limited reserves and developed limited ongoing production as a result of its exploratory drilling program. The Ghost Ranch discovery well, which was placed into production recently, is the first exploration test by the Company that has resulted in significant ongoing production and reserves. The oil production from the Eagle Springs field was acquired by the Company in 1993 and, except for the increased production resulting from certain reworking of existing wells and the eight development wells drilled by the Company, did not result from the Company's exploration activities. Although the Company began to receive oil production revenue from the Eagle Springs field in early 1994 and from the Ghost Ranch well in mid-1996, the Company's success will continue to depend on the results of drilling, evaluation, and testing of its various prospects.
NORTH WILLOW CREEK AND TOMERA RANCH DISCOVERIES
The Company continues to receive limited production from two North Willow Creek wells drilled in previous years, but production continues to decline. Management has concluded that the wells are not producing to the potential indicated by initial tests and engineering and geologic evaluations. In 1996, the Company removed the production equipment from one of its Tomera Ranch wells, which is therefore no longer in production. The Company's remaining Tomera Ranch well continues to have only limited sustained production. The Company continues to evaluate the productive potential of the area.
Both the North Willow Creek and Tomera Ranch wells hold acreage over productive zones that the Company believes can be produced at higher rates with additional evaluation and reworking, including chemical treatments, heat treatments, hydraulic fracturing treatments, and other alternative measures. There can be no assurance that such efforts will be successful or that the wells will produce in profitable quantities. If such efforts are successful, the Company plans additional evaluation drilling as warranted.
COMPETITION AND MARKETS
Competition in the oil and gas industry is intense. The acquisition and exploration of oil and gas prospects are highly competitive. The Company competes with numerous other firms and individuals in its activities. The Company's current and potential competitors include major oil companies and other independent operators, many of which have greater financial resources, broader exploration programs, a greater number of managerial and technical personnel, and facilities substantially larger than those of the Company. There can be no assurance that the Company will be able to compete effectively in the exploration for oil in Nevada.
The Company faces intense competition in obtaining risk capital for test drilling within the Great Basin province. Management believes that competition for drilling funds from such sources is principally dependent on an analysis by the potential industry participant of the costs of drilling and related activities, the likelihood of discovering oil or other hydrocarbons in commercial quantities, and the potential size of oil reserves which geologic and engineering analyses indicate may eventually be established.
The Company believes that an important consideration in obtaining risk capital for drilling, new exploration rights, and joint exploration and development arrangements with other industry participants is the amount and quality of the Company's scientific data and exploration experience in Nevada. The Company also believes that it benefits from its use of 3D seismic and reprocessed 2D seismic data and its experience in correlating that data with the results of actual drilling.
In its efforts to obtain oil leases within the Great Basin, the Company encounters competition from lease speculators, independent oil firms, and major oil companies. The ability to acquire leases is generally determined by the amount of cash paid to acquire the lease, the royalty or other interest retained by the transferor, and the nature of any commitment to drill on the lease acreage. The Company seeks to acquire leases in those areas that have been identified through geological and geophysical data as having potential to produce oil in sufficient quantities to be economic.
The availability of a ready market for production and the prices obtained for production of oil depend on a number of factors beyond the Company's control, the effects of which cannot be predicted accurately. Such factors include the extent of domestic production and imports of oil; the competitive position of oil as a source of energy as compared to gas, coal, nuclear energy, hydroelectric power, and other energy forms; the refining capacity of prospective purchasers; transportation costs; the availability and capacity of pipelines and other means of transportation; and the effect of federal and state regulation on production, transportation, and sale of oil.
GOVERNMENT REGULATION
The exploration for and production of oil in the United States are subject to extensive regulation by both federal and state authorities. The following discussion concerning regulation of the oil and gas industry is necessarily brief and is not intended to constitute a complete discussion of the various statutes, rules, regulations, and governmental orders to which operations of the Company may be subject.
Environmental Regulations
Operations of the Company are subject to comprehensive federal, state, and local laws and regulations governing the storage, use, and discharge of materials into the environment, the remediation of environmental impacts, and other matters relating to environmental protection, all of which may adversely affect the Company's operations and costs of doing business. It is probable that state and federal environmental laws and regulations or their interpretations will become more stringent in the future. There can be no assurance that measures to further regulate the disposal of oil waste may not be adopted. Environmental laws and regulations are frequently changed so the Company is unable to predict the ultimate cost of compliance. The Company does not believe that it will be required in the near future to expend material amounts due to current environmental laws and regulations.
Present, as well as future, legislation and regulations could cause additional expenditures, restrictions, and delays in the Company's business, the extent of which cannot be predicted and which may require the Company to limit substantially, delay or cease operations in some circumstances or subject the Company to various governmental controls. From time to time, regulatory agencies have proposed or imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. Because federal energy and taxation policies are subject to constant revisions, no prediction can be made as to the ultimate effect of such governmental policies and controls on the Company.
In connection with the acquisition of the Eagle Springs property, the Company performed limited environmental inquiries and agreed to undertake certain work to remediate a contaminated drilling pit at a former water injection well site. That work was completed at a cost of $111,000 in coordination with federal and state supervising agencies in early 1994, for which the Company received the Bureau of Land Management's "Health of the Land" award. The Company does not believe that it has any material continuing financial obligation respecting remediation of environmental matters involving the Eagle Springs field. However, there can be no assurance that new remediation issues will not arise in the future due to existing undiscovered conditions or future legislation.
As a negotiated term of the acquisition of the Eagle Springs lease, the Company agreed to indemnify the secured creditor from which the Company acquired a portion of its property interests against claims for environmental liability. The Company does not believe that it has any material financial obligation under such agreement.
State and Local Regulation of Drilling and Production
State regulatory authorities have established rules and regulations requiring permits for drilling, drilling bonds, and reports concerning drilling and producing activities. Such regulations also cover the location of wells, the method of drilling and casing wells, the surface use and restoration of well locations, and the plugging and abandoning of wells, the density of well spacing within a given area, and other matters. Nevada also has statutes and regulations governing a number of environmental and conservation matters, including the unitization and pooling of oil properties and establishment of maximum rates of production from oil wells.
Federal Leases
The Company conducts significant portions of its activities under federal oil and gas leases. These operations must be conducted in accordance with detailed federal regulations and orders which regulate, among other matters, drilling and operations on these leases and calculation and disbursement of delayed rentals and royalty payments to the federal government.
Safety and Health Regulations
The Company must also conduct its operations in accordance with various laws and regulations concerning occupational safety and health. Currently, the Company does not foresee expending additional material amounts to comply with these occupational safety and health laws and regulations. However, since such laws and regulations are frequently changed, the Company is unable to predict the future effect of these laws and regulations.
OPERATIONAL HAZARDS AND INSURANCE
The Company's operations are subject to the usual hazards incident to the drilling for and the production of oil. These hazards include, but are not limited to, pipe failure, blowouts, cratering, explosions, uncontrollable flows of oil, natural gas, or well fluids, fires, pollution, releases of toxic gas, and other environmental hazards and risks. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage, and suspension of operations and could result in the Company incurring substantial losses and liabilities to third parties..
In order to lessen the effects of these hazards, the Company maintains insurance of various types to cover its operations. As is customary in exploration arrangements with other energy companies under which specified drilling is to be conducted, the operator is required to purchase and pay for insurance against risks customarily insured against in the oil and gas industry by others conducting similar activities. The Company has general liability insurance of $1 million per occurrence, with a $2 million aggregate limitation, including coverage for certain oil industry activities. Management believes that the Company's current insurance coverage is adequate; however, the Company may not be insured against all losses or liabilities which may arise from all hazards because such insurance is unavailable at economic rates, because of limitations on the insurance policy, or other factors. The Company's insurance does not cover every potential risk associated with the exploration, drilling, and production of oil. In particular, coverage is not available for certain types of environmental hazards. The occurrence of a significant adverse event, the risks of which are not fully covered by insurance, could have a materially adverse effect on the Company. Moreover, no assurance can be given that adequate insurance will be available at reasonable rates or that the Company or the operators of wells in which the Company owns an interest will elect to maintain certain types or amounts of insurance.
The Company's activities are subject to periodic interruptions due to weather conditions, which may be quite severe at various times of the year. Periods of heavy precipitation make travel to exploration or drilling locations difficult and/or impossible, while extremely cold temperatures limit or interrupt drilling, pumping, and/or production activities or increase operating costs.
EMPLOYEES
The Company has 16 employees, including four executive officers (all of whom are also directors), four technical employees in addition to the executive officers, four field operations employees, and four administrative employees. None of the Company's employees is represented by a collective bargaining organization, and the Company considers its relationship with its employees to be satisfactory.
- -------------------------------------------------------------------------------
ITEM 2.
ITEM 2. PROPERTIES
- -------------------------------------------------------------------------------
The Company's principal oil and gas properties are located in Nevada.
In the oil and gas industry and as used herein, the word "gross" well or acre is a well or acre in which a working interest is owned; the number of gross wells is the total number of wells in which a working interest is owned. A "net" well or acre is deemed to exist when the sum of fractional ownership working interests in gross wells or acres equals one. The number of net wells or acres is the sum of the fractional working interests owned in gross wells or acres.
PROVED RESERVES
The following table sets forth the estimated oil reserves, net to the Company's interest, of oil and gas properties as of December 31, 1996. The reserve information is based on the independent appraisal prepared by Malkewicz Hueni Associates, Inc., Golden, Colorado, and was calculated in accordance with the rules and regulations of the Securities and Exchange Commission. In accordance with such rules and regulations, the estimates of future net revenues from the Company's proved reserves are made using a sales price of $18.06, the weighted average oil sales price in effect as of December 31, 1996, the date of such estimate, and are held constant throughout the life of the properties. (See "ITEM 1. BUSINESS.") PRESENT VALUE OF ESTIMATED FUTURE ESTIMATED NET ESTIMATED PROVED RESERVES OIL REVENUES, DISCOUNTED AT 10% (1) ---------- -------------------- (MBBL) (IN THOUSANDS) Proved Developed Producing Railroad Valley............. 1,844.9 $11,274.4 North Willow Creek.......... 5.8 23.2 Tomera Ranch field.......... 0.1 (0.3) ------- ---------- 1,850.8 11,270.3
Proved Developed Nonproducing Railroad Valley............ 49.2 246.4 Railroad Valley............
Proved Undeveloped Railroad Valley............ 1,823.3 11,404.9 -------- --------- Total ............... 3,723.3 $22,921.6 ======== =========
(1) Neither prices nor costs have been escalated. The operating costs, based on information provided by the Company, are computed by estimating expenditures to be incurred in developing and producing the proved oil reserves, based on year-end costs and assuming the continuation of existing economic conditions. (See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.") The discounted amounts have been reduced by the Company's share of estimated development costs in the amount of approximately $5,182,000.
The oil reserves assigned to the properties in this evaluation were determined by analyzing current test data, extrapolating historical production data, and comparing field data with the production history of similar wells in the area. The current volatility of oil prices provides an element of uncertainty. If prices should vary significantly from those projected in the appraisal, the resulting values would change substantially. (As of February 1997, the Company was receiving approximately $14.50 per Bbl for oil sold.) The reserve estimates contained in the engineering report are based on accepted engineering and evaluation principles. The present value of estimated future net revenues, discounted at 10%, does not necessarily represent an estimate of a fair market value for the evaluated properties.
There are numerous uncertainties inherent in estimating quantities of proved oil reserves. The estimates in the appraisal are based on various assumptions relating to rates of future production, timing, and amount of development expenditures, oil prices, and the results of planned development work. Actual future production rates and volumes, revenues, taxes, operating expenses, development expenditures, and quantities of recoverable oil reserves may vary substantially from those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could materially and adversely affect future reserve estimates. In addition, such reserves may be subject to downward or upward revision based upon production history, results of future development, prevailing oil prices, and other factors. The borrowing base under the Company's recently established credit facility is based on the estimate of the Company's reserves. Therefore, any downward revision of this estimate could have an adverse effect on the Company's borrowing capability under the credit facility.
The actual amount of the Company's proved reserves are also dependent on the prevailing price for oil, which is beyond the Company's control or influence. Oil prices were relatively higher during 1996 than recent previous years, but have subsequently declined. There can be no assurance that oil prices will not substantially decline in the future. Oil and gas prices have been and are likely to continue to be volatile and subject to wide fluctuations in response to any of the following factors: relatively minor changes in the supply of and demand for oil and gas; market uncertainty; political conditions in international oil producing regions; the extent of domestic production and importation of oil; the level of consumer demand; weather conditions; the competitive position of oil or gas as a source of energy as compared with coal, nuclear energy, hydroelectric power, and other energy sources; the refining capacity of prospective oil purchasers; the effect of federal and state regulation on the production, transportation and sale of oil; and other factors, all of which are beyond the control or influence of the Company.
In an effort to limit the adverse effects of extreme declines in oil prices, the Company has entered into agreements with Crysen Refining, Inc., Salt Lake City, Utah, to sell oil from its currently producing fields through August 1997 at minimum fixed prices (See "Production and Sale of Oil" below), and with Petro Source Corporation, Salt Lake City, Utah, to sell oil from a portion of the Ghost Ranch field through August 1997. Notwithstanding these agreements, adverse changes in the market or regulatory environment would likely have an adverse effect on the Company's ability to obtain additional funding from lending institutions, industry participants, the sale of additional securities, and other sources. During 1996, Crysen and Petro-Source accounted for 86% and 14%, respectively, of the Company's oil sales revenues.
WELLS AND ACREAGE
Shown below is a tabulation of the productive wells owned by the Company in Nevada as of December 31, 1996, following the purchase of Barrett's 40% interest in the Eagle Springs field in November 1996, effective August 1, 1996.
PRODUCTIVE OIL WELLS -------------------- GROSS NET ------- ------- 21.0 20.6
Set forth below is information respecting the developed and undeveloped acreage owned by the Company in Nevada as of December 31, 1996, following the purchase of Barrett's 40% interest in the Eagle Springs field in November 1996, effective August 1, 1996.
DEVELOPED ACREAGE UNDEVELOPED ACREAGE ----------------- ------------------- GROSS NET GROSS NET -------- -------- --------- --------- 4,120 4,088 176,268 171,947
The Company's leases in Eagle Springs (2,960 gross and net acres), Ghost Ranch (80 gross and 48 net acres), Tomera Ranch (680 gross and net acres), and North Willow Creek (400 gross and net acres) are held by production. The Company's undeveloped leases have various primary terms ranging from one to ten years. Management believes that the expiration of any individual or group of related undeveloped leasehold interests would not have a material adverse effect on the Company. Annual rentals on all undeveloped leases aggregate approximately $185,000.
DRILLING ACTIVITIES
Set forth below is a tabulation of wells drilled and completed in which the Company has participated and the results thereof for each of the periods indicated.
YEAR ENDED DECEMBER 31, --------------------------------------- 1994 1995 1996 ----------- ----------- ------------- GROSS NET GROSS NET GROSS NET ----- ----- ----- ----- ----- ------ Exploratory: Dry.................... 3 1.05 2.0 0.84 2.0 1.16 Oil.................... -- -- -- -- 2.0 1.60 Gas.................... -- -- -- -- -- -- ----- ----- ----- ----- ----- ------ Totals............. 3 1.05 2.0 0.84 4.0 2.76 ===== ===== ===== ===== ===== ======
Development: Dry.................... -- -- -- -- -- -- Oil.................... 3 1.8 5.0 3.0 -- -- Gas.................... -- -- -- -- -- -- ----- ----- ----- ----- ----- ------ Totals............. 3 1.8 5.0 3.0 -- -- ===== ===== ===== ===== ===== ======
PRODUCTION AND SALE OF OIL
The following table summarizes certain information relating to the Company's net oil produced and sold from the Company's Nevada properties, after royalties, during the periods indicated.
YEAR ENDED DECEMBER 31, ---------------------------- 1994(1) 1995(1) 1996 -------- -------- -------
Average net daily production of oil (Bbl) 121 240 325
Average sales price of oil ($ per Bbl) $10.80 $11.61 $15.87
Average production cost ($ per Bbl)(2) $10.36 $4.84 $4.01
(1) Represents production from North Willow Creek, Tomera Ranch and Eagle Springs. (2) Includes lifting costs (electricity, fuel, water disposal, repairs, maintenance, pumper, and similar items), and production taxes. The amount in 1994 excludes costs related to completion of remediation of a contaminated drilling pit at a former water injection drillsite.
Production from Eagle Springs started in January 1994, and currently accounts for about 81% of the Company's oil production. This consists of oil produced and sold net to the Company's interest from the eleven wells the Company acquired, reworked, and returned to production commencing in early January 1994 plus the eight new wells subsequently drilled and placed into production, net of production royalties. However, certain of the wells have been shut-in from time to time, sometimes for several months. Other wells have been shut-in for shorter periods during particular months because of mechanical problems. Currently, one well is temporarily shut-in and not in production. The Company intends to undertake remedial work when its schedule permits, when appropriate rig and equipment are available in the area, and when funds are available.
The oil from the Eagle Springs and Pine Valley, Nevada, wells is sold to Crysen Refining, Inc., Salt Lake City, Utah, an unrelated purchaser, under agreements continuing through August 1997, and from month-to-month thereafter, unless terminated by either party, at a price equal to Amoco Oil Company's Wyoming per barrel sour crude oil posted price, adjusted for gravity and oil quality, less transportation of $3.05 or $2.90 per barrel, depending on the producing field, but in no case less than $9.50 per barrel after deduction of all charges. For example, during the month of January 1997, the Company received a net price of $18.21 per barrel, after deducting transportation charges. The sale of oil is subject to price adjustments, production curtailments, and similar provisions common in oil purchase contracts.
The oil from the Ghost Ranch field is sold to Petro Source Refining Partners, Salt Lake City, Utah, an unrelated purchaser. During January 1997, the Company received a net price per barrel of $17.08.
The Company's oil exploration and production activities are dependent on the prevailing price for oil, which is beyond the Company's control or influence, and there is no assurance that the Company's wells can be produced at levels in excess of related production costs. Oil prices were relatively higher during 1996 than recent previous years, but have declined during early 1997. There can be no assurance that oil prices will not substantially decline in the future. Oil and gas prices have been and are likely to continue to be volatile and subject to wide fluctuations in response to any of the following factors: relatively minor changes in the supply of and demand for oil and gas; market uncertainty; political conditions in international oil producing regions; the extent of domestic production and importation of oil; the level of consumer demand; weather conditions; the competitive position of oil or gas as a source of energy as compared with coal, nuclear energy, hydroelectric power, and other energy sources; the refining capacity of prospective oil purchasers; the effect of federal and state regulation on the production, transportation and sale of oil; and other factors, all of which are beyond the control or influence of the Company. In addition to its direct impact on the prices at which oil or gas may be sold, adverse changes in the market or regulatory environment would likely have an adverse effect on the Company's ability to obtain funding from lending institutions, industry participants, the sale of additional securities, and other sources.
Production costs relating to Nevada production for 1994 include costs associated with various production testing measures on the Tomera Ranch and North Willow Creek wells and fixed costs allocable to a limited number of wells. The substantial increase in average daily production in 1995 is attributable to returning the Eagle Springs wells to production and drilling additional wells during such period. Production costs in 1994 were inordinately high per barrel of oil produced due to start up costs associated with the revamped production facility and repairs to equipment that had been shut down without maintenance for over a year. In early 1994, the Company incurred additional costs of operating in winter due to energy costs for heating the oil and operating the wells using propane as its main fuel to generate power for the pumping units. Production costs in 1995 decreased dramatically due to higher production, improved production facilities, and utilization of more cost-efficient energy sources used in operations Overall operating costs are a combination of costs associated with each well and costs associated with operation of the entire field. As additional wells are added to the production system, the field operating costs will be spread among additional wells, lowering the impact of such costs on each well and per barrel produced. In addition, the Company has been changing to more cost effective energy sources for continuing production in a further effort to control costs. This consists principally of a large capacity boiler that is fueled principally by natural gas from the wells, which requires only supplementary propane and, because its large capacity heats the oil to higher temperatures, will reduce costs for well treatment chemicals and increases production efficiencies. Because of the foregoing, the Company expects that production costs per barrel will continue to decrease as additional wells are drilled and placed into production to obtain economics of scale and dilute the impact of fixed operating costs. In addition, operating costs may continue to vary materially due to the costs of ongoing treatment or reworking of existing wells and the impact of the other factors discussed above.
The Company has only minor gas production which is used in operations to reduce energy costs.
TITLE TO PROPERTIES
Substantially all of the Company's working interests are held pursuant to leases from third parties. The Company performs only a minimal title investigation before acquiring undeveloped properties, and a title opinion is typically obtained only prior to the commencement of drilling operations. The Company has obtained other documentary confirmation of title on its principal producing properties and believes that it has satisfactory title to such properties. The Company's properties are subject to customary royalty interests, liens for current taxes, and other common burdens which the Company believes do not materially interfere with the use of such properties and whose economic effect has been appropriately reflected in the Company's acquisition costs of such properties.
OFFICES
The Company's principal executive offices located at 12596 West Bayaud, Suite 300, Lakewood, Colorado 80228-2019, are rented from an unrelated party under a lease expiring September 1, 1998, and requiring monthly payments of $3,553 plus certain common area charges. The Company also maintains a field operations office at 2561 South 560 West, Suite 200, Woods Cross, Utah 84087.
- -------------------------------------------------------------------------------
ITEM 3.
Item 3. Articles of Incorporation and Bylaws - ----------------------------------------------------------- 3.01 3 Articles of Incorporation Incorporated by Reference(2)
3.02 3 Bylaws Incorporated by Reference(2) Instruments Defining the Rights of Item 4.
Item 4. Security Holders, Including Indentures - -----------------------------------------------------------
4.01 4 Specimen Common Stock Certificate Incorporated by Reference(1)
4.02 4 Designation of Rights, Privileges, and Incorporated Preferences of 1991 Series Preferred by Stock Reference(1)
4.03 4 Designation of Rights, Privileges and Incorporated Preferences of 1994 Series Convertible by Preferred Stock Reference(3)
4.04 4 Designation of Rights, Privileges and Incorporated Preferences of 1995 Series Convertible by Preferred Stock Reference(7)
4.05 4 Designation of Rights, Privileges and Incorporated Preferences of 1996 by Series 6% Convertible Preferred Stock Reference(8)
4.06 4 Designation of Rights, Privileges and Incorporated Preferences of 1996-2 Series 6% by Convertible Preferred Stock Reference(9)
4.07 4 Designation of Rights, Privileges and Incorporated Preferences of 1996-3 Series 8% by Convertible Preferred Stock Reference(9)
4.08 4 Certificate of Designation of 1996-4 Incorporated Series Preferred Stock by Reference(10)
4.09 4 Form of Underwriter's Warrant to Purchase Incorporated Units by Reference(5)
4.10 4 Form of Warrant Agreement between the Incorporated Company and Atlas Stock Transfer by Corporation relating to M Warrants Reference(7)
4.11 4 Form of Warrants to Kevin L. Spencer and Incorporated Jay W. Enyart by Reference(9)
4.12 4 Warrant to First Geneva Holdings, Inc., Incorporated relating to offering of 1996 Preferred by Stock Reference(9)
4.17 4 Form of Warrant to placement agent and Incorporated assigns relating to offer of 1996-4 by Series Preferred Stock, with related Reference(10) schedule
4.18 4 Form of First Amendment to the This Filing Designation of Rights, Privileges, and Preferences of 1996-2 Series 6% Convertible Preferred Stock
Item 10. Material Contracts - -----------------------------------------------------------
10.01 10 Option Agreement between N. Thomas Steele Incorporated and Foreland Corporation, dated June 24, by 1985** Reference(6)
10.02 10 Option Agreement between Kenneth L. Incorporated Ransom and Foreland Corporation, dated by June 24, 1985** Reference(6)
10.03 10 Option Agreement between Grant Steele and Incorporated Foreland Corporation, dated June 24, by 1985** Reference(6)
10.04 10 Form of Options to directors dated April Incorporated 30, 1991 with respect to options by previously granted 1986** Reference(1)
10.05 10 Form of Stock Appreciation Rights Incorporated Agreement between the Company and by officers, with related schedule** Reference(4)
10.06 10 Form of Nonqualified Stock Option between Incorporated the Company and unrelated third parties, by with related schedule Reference(4)
10.07 10 Crude Oil Purchase Agreement between the Incorporated Company and Crysen Refining, Inc., dated by September 1, 1993 (Nye County, Nevada) Reference(3)
10.08 10 Crude Oil Purchase Agreement between the Incorporated Company and Crysen Refining, Inc., dated by September 1, 1993 (Eureka County, Nevada) Reference(3)
10.09 10 Lease Agreement dated June 7, 1993, by Incorporated and between Ulster Joint Venture and the by Company regarding Union Terrace Office, Reference(3) as amended
10.10 10 Agreement dated August 9, 1994, between Incorporated Plains Petroleum Operating Company and by the Company Reference(3)
10.11 10 Form of Promissory Notes relating to Incorporated certain options exercised by officers, by with related schedule Reference(5)
10.12 10 Form of Option granted pursuant to reload Incorporated provisions of previously granted options by with related schedule* Reference(5)
10.13 10 Letter dated January 25, 1995 from Plains Incorporated Petroleum Operating Company regarding by Plains' election under the Agreement Reference(7) dated August 9, 1994.
10.14 10 Form of Letter Agreement dated March 8, Incorporated 1995 between the Company and Parsley & by Parsley Development, L.P. regarding Reference(7) Exploration Agreement.
10.15 10 Form of Letter Agreement dated March 24, Incorporated 1995 between the Company and Mobil by Exploration & Producing U.S., Inc., Reference(7) regarding the Rustler Prospect Farmout Agreement
10.16 10 Form of Registration Agreement relating Incorporated to Units consisting of 1995 Series by Preferred Stock and M Warrants Reference(7)
10.17 10 Crysen Refining, Inc., document Incorporated respecting extension of Crude Oil by Purchase Agreement Reference(7)
10.18 10 Form of Registration Agreement relating Incorporated to 1996 Series Convertible Preferred by Stock Reference(9)
10.19 10 Amendment and Replacement of Acreage Incorporated Exchange and Seismic Agreement dated by September 1, 1995, between Foreland Reference(9) Corporation, Hugoton Energy Corporation and Maxwell Petroleum, Inc.
10.20 10 Form of Revised Executive Employment Incorporated Agreement between the Company and by executive officers, with related Reference(10) schedule**
10.21 10 Form of Nonqualified Stock Options Incorporated granted to executive officers dated July by 18, 1996, with related schedule** Reference(10)
10.22 10 Form of Nonqualified Stock Options Incorporated granted to executive officers in by connection with employment agreements, Reference(10) with related schedule**
10.23 10 Form of Nonqualified Stock Options Incorporated granted to employees in connection with by employment agreements, with related Reference(10) schedule
10.24 10 Form of Registration Rights Agreement Incorporated relating to offer of 1996-4 Series by Preferred Stock, with related schedule Reference(10)
10.25 10 Purchase and Sale Agreement dated Incorporated November 14, 1996, between Plains by Petroleum Operating Company and Eagle Reference(11) Springs Production Limited Liability Company, respecting the purchase of Plains' interest in the Eagle Springs field, with related Assignment, Conveyance, and Bill of Sale
10.26 10 Purchase Contract Confirmation dated Incorporated September 1, 1996, between Foreland by Corporation and Petro Source Refining Reference(12) Partners
10.27 10 Revolving Credit Agreement dated November This Filing 13, 1996, by and among Foreland Corporation, Eagle Springs Production Limited Liabilty Company, and Colorado National Bank
10.28 10 Promissory Note dated November 13, 1996 This Filing by Foreland Corporation and Eagle Spring Production Limited Liability Company
Item 23. Consents of Experts and Counsel - ----------------------------------------------------------- 23.01 23 Consent of Hein + Associates LLP, This Filing certified public accountants
23.02 23 Consent of Malkewicz Hueni Associates, This Filing Inc.
Item 27. Financial Data Schedule - ----------------------------------------------------------- 27.01 Financial Data Schedule This Filing
(1)Incorporated by reference from the Company's registration statement on form S-2, SEC file number 33-42828. (2)Incorporated by reference from the Company's registration statement on form S-1, SEC file number 33-19014. (3)Incorporated by reference from the Company's registration statement on form S-1, SEC file number 33-81538. (4)Incorporated by reference from the Company's registration statement on form S-2, SEC file number 33-64756. (5)Incorporated by reference from the Company's registration statement on form S-2, , SEC file number 33-86076. (6)Incorporated by reference from the Company's annual report on form 10-K for the fiscal year ended December 31, 1985. (7)Incorporated by reference from the Company's annual report on form 10-K for the fiscal year ended December 31, 1994. (8)Incorporated by reference from the Company's annual report on form 10-K for the fiscal year ended December 31, 1995. (9)Incorporated by reference from the Company's registration statement on form S-3, SEC file number 333-3779. (10) Incorporated by reference from the Company's quarterly report on form 10-Q for the period ending September 30, 1996. (11) Incorporated by reference from the Company's interim report on form 8-K dated November 15, 1996. (12) Incorporated by reference from the Company's registration statement on form S-3, SEC file number 333-19063.
* FILED AS AN EXHIBIT TO THIS ANNUAL REPORT ON FORM 10-K. ** IDENTIFIES EACH MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO BE FILED AS AN EXHIBIT.
(b) Reports on Form 8-K.
During the last quarter of the fiscal year ended December 31, 1996, the Company filed reports on form 8-K as follows:
DATE OF EVENT REPORTED ITEM REPORTED
November 15, 1996 (amended Item 2. Acquisition of Assets January 9 and January 27, Item 7. Financial Statements and 1997) Exhibits
December 27, 1996 Item 5.