U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form SB-2/A-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Providence Resources, Inc.
(Name of small business issuer in its charter)
Texas (State of jurisdiction of incorporation or organization) | 1311 (Primary Standard Industrial Classification Code Number) | 06-1538201 (I.R.S. Employer Identification No.) |
2610-1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X2, (604) 602-1717
(Address and telephone number of principal executive offices)
2610-1066 West Hastings Street, Vancouver, British Columbia, Canada V6E 3X2, (604) 602-1717
(Address of principal place of business or intended principal place of business)
Lawyer's Aid Service, Inc., 408 West 17th Street, Ste. 101, Austin, TX 78701, (512) 474-2020
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _________________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _________________________.
If the delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.o
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered | Amount of securities to be registered (1) | Proposed maximum offering price per share (2) | Proposed maximum aggregate offering price | Amount of registration fee |
Common Stock, $0.0001 par value per share (3) | 12,669,920 | $0.58 | $7,348,553.60 | $786.30 |
Common Stock, $0.0001 par value per share (4) | 6,334,960 | $1.00 | $6,334,960.00 | $677.84 |
Common Stock, $0.0001 par value per share (5) | 188,190 | $0.72 | $135,496.80 | $14.50 |
Total | 19,193,070 |
| $13,819,010.40 | $1,478.64 |
| (1) | The shares to be registered may be offered for sale and sold from time to time subsequent to the date on which this registration statement remains effective, by or for the accounts of the selling security holders. |
| (2) | Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c). and (g). |
| (3) | Shares of common stock being registered for resale that are owned by certain selling security holders named in the prospectus. For the purposes of these 12,669,920 shares, the registrant has used the average of the closing bid and ask prices of the common stock as reported on the Over the Counter Bulletin Board on January 3, 2007. |
| (4) | Represents shares of common stock being registered for resale that have been or may be acquired upon the exercise of common stock purchase warrants at an exercise price of $1.00 per share issued to certain selling security holders named in the prospectus. |
| (5) | Represents shares of common stock being registered for resale that have been or may be acquired upon the exercise of common stock purchase warrants at an exercise price of $0.72 per share issued to certain selling security holders named in the prospectus. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The Offering:
Per Share Total Offering Price¹ $ 0.72 $ 13,819,010.40 Proceeds² $ 0 $ 0 Offering Expenses³ $ 0.0027 $ 52,288.84 ¹ The average weighted offering price of the shares and shares underlying warrants, estimated solely for the purpose of computing the amount of the registration fee (the proposed maximum offering price of the shares are $0.58, $0.72, and $1.00). The securities will be offered at the prevailing market price or in negotiated transactions ² If the selling security holders exercise their warrants in full, Providence will receive $0.72 or $1.00 per share, an aggregate of approximately $6,470,457. ³ Offering expenses include legal, accounting, printing and related costs incurred in connection with this offering. | Providence Resources, Inc. is registering a total of 12,669,920 shares of common stock and 6,523,150 shares underlying warrants to purchase shares of common stock. The common stock to be registered constitutes 37.30% of the issued and outstanding stock as of February 26, 2007. The securities are being registered for resale on behalf of the security holders identified beginning on page 10. Security holders will determine whether to exercise their purchase warrants and the timing thereof. In addition, the security holders will determine the method for selling their common stock and the timing thereof. Providence's common stock is quoted under the symbol "PVRS" on the Over-the-Counter Bulletin Board. |
This offering represents a registration of issued and outstanding shares and shares underlying warrants on behalf of certain security holders of Providence Resources, Inc. Owning Providence's common stock involves a high degree of risk and the securities offered hereby are highly speculative. See "RISK FACTORS" beginning on page 4 to read about risks. You should carefully consider these risks in holding shares of Providence's common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offence.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the prospectus filed with the Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where such offer or sale is prohibited.
TABLE OF CONTENTS
| Prospectus Summary | 1 | |||||
| Risk Factors | 4 | |||||
| Use of Proceeds | 9 | |||||
| Determination of Offering Price | 10 | |||||
| Selling Security Holders | 10 | |||||
| Plan of Distribution | 18 | |||||
| Legal Proceedings | 20 | |||||
| Directors, Executive Officers, Promoters and Control Persons | 20 | |||||
| Security Ownership of Certain Beneficial Owners and Management | 22 | |||||
| Description of Securities | 23 | |||||
| Interest of Named Experts and Counsel | 23 | |||||
| Disclosure of Commission Position on Indemnification for Securities Act Liabilities | 24 | |||||
| Description of Business | 24 | |||||
| Management's Discussion and Analysis | 31 | |||||
| Description of Property | 37 | |||||
| Certain Relationships and Related Transactions | 37 | |||||
| Market for Common Equity and Related Stockholder Matters | 38 | |||||
| Executive Compensation | 39 | |||||
| Financial Statements | 40 | |||||
| Changes In and Disagreements with Accounts or Accounting and Financial Disclosure | 41 | |||||
| Available Information and Reports to Securities Holders | 41 | |||||
| Indemnification of Directors and Officers | 41 | |||||
| Other Expenses of Issuance and Distribution | 41 | |||||
| Recent Sales of Unregistered Securities | 41 | |||||
| Index to and Description of Exhibits | 49 | |||||
| Undertakings | 50 | |||||
| Signatures | 51 | |||||
ii PROSPECTUS SUMMARY You should rely only on the information contained in this prospectus. Providence has not authorized any other person to provide you with information different from that contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or the sale of any common stock. The prospectus is not an offer to sell, nor is it an offer to buy, common stock in any jurisdiction in which the offer or sale is not permitted. The following summary is qualified in its entirety by the more detailed information and financial statements with related notes appearing elsewhere in this prospectus. For purposes of this prospectus, unless otherwise indicated or the context otherwise requires, all references herein to “Providence,” “we,” “us,” and “our,” refer to Providence Resources, Inc., a Texas corporation, and our subsidiaries. All references herein to “Providence Exploration” refer to Providence Exploration, LLC, our wholly owned subsidiary, and its subsidiary PDX Drilling I, LLC. The Company Providence is involved in the exploration and development of oil and gas in Hamilton, Comanche and Val Verde Counties, Texas. Oil and gas exploration and development activities are conducted for us by Harding Company, a Dallas, Texas based independent operator. Over the next twenty four months we intend to: o produce a full evaluation of the initial prospects in the Marble Falls and Barnett Shale leases; o continue post drilling “fracing” in the Marble Falls and Barnett Shale leases (fracing is the fracturing of geologic formations which open up pathways for the oil or gas to flow to the well); o fully develop the Marble Falls and Barnett Shale leases for oil and gas production; o seismically explore the Val Verde leases; o interpret the Val Verde seismic data; and o develop the Val Verde leases with multiple deep drilling targets for natural gas production. We are also involved in the purchase, refurbishment and sale of drilling and service rigs in Young County, Texas. Corporate Information Providence was incorporated under the laws of the State of Texas on February 17, 1993. Our executive offices are located at 2610-1066 West Hastings Street, Vancouver, British Columbia, Canada, and our telephone number is (604) 602-1717. Providence’s registered statutory office is located at 408 West 17th Street, Ste. 101, Austin, Texas 78701. Our website address, www.providencereesouresinc.com, remains under construction. Information contained on our website is not deemed part of this prospectus. Plan of Distribution Providence is registering a total of 12,669,920 shares of common stock and 6,523,150 shares underlying warrants to purchase common stock for resale on behalf of our selling security holders. The selling security holders or pledgees, donees, transferees, or other successors in interest selling shares received from a named selling security holder as a gift, partnership, distribution, or other non-sale-related transfer after the effective date of this registration statement may sell the shares from time to time. Registration of the securities does not mean, however, that the securities will be offered or sold as the selling security holders may decide not to sell all or any of the shares they are allowed to sell under this registration statement, and the warrants may not be exercised. The selling security holders will act independently of Providence in making any decision with respect to the timing, manner and size of each sale. Sales could be made on the Over-the-Counter Bulletin Board (symbol “PVRS”) or otherwise, at prices related to the then current market price, or at privately negotiated prices. Risk Factors Investing in our stock involves certain risks. Please review the Risk Factors beginning on page 4. Summary Financial Information The following summary of financial information should be read together with Providence’s financial statements along with their accompanying notes and Management’s Plan of Operation included elsewhere within this prospectus. The summary financial information for the periods ended September 30, 2006 and 2005 has been derived from Providence’s unaudited consolidated financial statements. The summary financial information for the year ended December 31, 2005 has been derived from Providence’s audited consolidated financial statements. In the opinion of management, the unaudited financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments which consist only of normal recurring adjustments necessary for a fair presentation of the financial statements and results of operations for the periods presented. The periods ended September 30, 2006 and December 31, 2005 contain no revenue or cost of revenue since our acquisition of Providence Exploration occurred on September 29, 2006. RISK FACTORS An investment in the securities registered hereby is highly speculative and involves a substantial degree of risk which should be considered only by persons who can afford to lose their entire investment. Investors should carefully consider each and every risk involved herein as well as all other information contained in this prospectus. Statements made in this prospectus may constitute forward-looking statements and are subject to many risks and uncertainties, including but not limited to, the failure of Providence to meet future capital needs and complete intended internal development due to difficulty, impracticality and/or impossibility. If any of the following risks actually occur, Providence’s business, financial condition and operating results could be materially adversely affected. Risks Related To Providence’s Business Providence has a history of operating losses and such losses may continue in the future. Since Providence’s inception in 1993, our operations have resulted in a continuation of losses and an accumulated deficit of $11,834,164 at September 30, 2006. We will continue to incur operating losses until such time as we begin producing oil and gas revenue, which may or may not eventuate. Should Providence fail to produce oil and gas revenue we may continue to operate at a loss and may never be profitable. Providence has a limited operating history. Providence acquired Providence Exploration on September 29, 2006, which company first began oil and gas exploration operations during the fourth quarter of 2005. As such, our limited operating history provides an inadequate track record from which to base future projections of successful operation. Providence has a history of uncertainty about continuing as a going concern. Providence’s audits for the periods ended December 31, 2005 and December 31, 2004 expressed substantial doubt as to our ability to continue as a going concern as a result of recurring losses, an accumulated deficit of $11,834,164 as of September 30, 2006, and revenue generating activities that were insufficient to sustain operations. Unless we are able to cure this pattern of reoccurring losses and insufficient revenue, our ability to continue as a going concern will be in jeopardy. Providence cannot represent that we will be successful in continuing operations. Providence has not, to date, generated sufficient revenue from operations to cover expenses and may not generate sufficient revenue over the next twelve months to ensure continued oil and gas development operations. Should Providence be unable to realize sufficient revenue over that time period, it will be forced to raise additional capital to remain in operation. We have no commitments for the provision of additional capital and can offer no assurance that such capital will be available if necessary to continue operations. We may not be successful in integrating the business operations of Providence Exploration, LLC into our business operations, stifling growth and disrupting our business. Providence’s recent acquisition of Providence Exploration involves the integration of companies that have previously operated independently. Successful integration will depend on our ability to consolidate operations and procedures and to integrate Providence Exploration’s management team with our own. If we are unable to do so, we may not realize the anticipated potential benefits of the acquisition, our business development could be stifled, and results of operations may suffer. Difficulties could include the loss of key employees, the disruption of Providence Exploration’s ongoing businesses, and possible inconsistencies in standards, controls, procedures and policies. We may be unable to manage the growth of our business which failure could negatively affect development, operating results, and fiscal independence. We believe that if our growth plan is successful, our business will grow in size and complexity. Any new sustained growth would place a significant strain on our management systems and operational resources requiring us to recruit, hire and retain new managerial, finance and support personnel. Our ability to compete effectively would also require us to maintain and improve operational, financial, and management information systems on a timely basis. Should Providence be unable to manage growth effectively, both our business development and our operating results would be negatively effected which in turn would preclude us from becoming financially independent of outside funding sources. Risks Related to the Oil and Gas Industry Oil and natural gas drilling and producing operations involve various risks which could result in net losses. Drilling activities are subject to many risks, including the risk that no commercially productive reservoirs will be discovered. Wells which we drill may not be productive, and, thus, we may not be able to recover all or any portion of our investment in such wells. Drilling for oil and natural gas may involve unprofitable efforts, not only from dry wells, but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting drilling, operating and other costs. The seismic data and other technologies which we use do not allow us to know conclusively prior to drilling a well that oil or natural gas is present or may be produced economically. The cost of drilling, completing and operating a well is often uncertain, and cost factors can reduce the feasibility of a project to produce a profit. Further, our drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including: |X| unexpected drilling conditions; |X| title problems; |X| pressure or irregularities in formations; |X| equipment failures or accidents; |X| adverse weather conditions; and other governmental requirements; and |X| cost of, or shortages or delays in the availability of, drilling rigs, equipment and services. Our operations are subject to all the risks normally incident to the operation and development of oil and natural gas properties and the drilling of oil and natural gas wells, including: |X| encountering well blowouts; |X| cratering and explosions; |X| pipe failure; |X| fires; |X| formations with abnormal pressures resulting in uncontrollable flows of oil and natural gas; |X| brine or well fluids; and |X| release of contaminants into the environment and other environmental hazards and risks. The nature of these risks is such that some liabilities including environmental fines and penalties could exceed our ability to pay for the damages. We could incur significant costs due to these risks that could result in net losses. Providence is subject to federal, state and local laws and regulations which could create liability for personal injuries, property damage, and environmental damages. Exploration and development, exploitation, production and sale of oil and natural gas in the United States is subject to extensive federal, state and local laws and regulations, including complex tax laws and environmental laws and regulations. Existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations could harm Providence’s business, results of operations and financial condition. We may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include oil and gas production and saltwater disposal operations and our processing, handling and disposal of hazardous materials, such as hydrocarbons and naturally occurring radioactive materials, discharge permits for drilling operations, spacing of wells, environmental protection, reports concerning operations, and taxation. Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, reclamation costs, remediation, clean-up costs and other environmental damages. Shortages of oil field equipment, services and qualified personnel could reduce Providence’s profit margin, cash flow and operating results. The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. There have also been shortages of drilling rigs and other equipment, as demand for rigs and equipment has increased along with the number of wells being drilled. These factors also cause significant increases in costs for equipment, services and personnel. Higher oil and natural gas prices generally stimulate increased demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services. We cannot be certain when or if we will experience these issues and these types of shortages or price increases which could significantly decrease any profit margin, cash flow and operating results on any particular well or restrict our ability to drill additional wells. The results of Providence’s operations depend on the production and maintenance efforts of Harding Company, a third party. The operation of Providence’s oil and natural gas operations in Comanche, Hamilton and Val Verde Counties are dependent on an independent local operator, Harding Company. The fact that we are dependent on the operations of a third party to produce revenue from our oil and natural gas assets could restrict our ability to generate a net profit from operations. Oil and natural gas prices are volatile, and any substantial decrease in prices could cause Providence to continue to operate at a loss. Our future financial condition, results of operations and the carrying value of our oil and natural gas properties will depend primarily upon the prices we receive for production. Oil and natural gas prices historically have been volatile and are likely to continue to be volatile in the future. Our cash flow from operations will be highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include: |X| the level of consumer demand; |X| the domestic supply; |X| domestic governmental regulations and taxes; | X| the price and availability of alternative fuel sources; |X| weather conditions; and |X| market uncertainty. These factors and the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices would not only reduce future revenue, but could reduce the amount of oil and natural gas that we can produce economically and, as a result, could cause us to continue to operate at a loss. Should the oil and natural gas industry experience significant price declines, we may continue to operate at a loss. Risks Related to Providence’s Shares Providence does not pay dividends. Providence does not pay dividends. Providence has not paid any dividends since inception and has no intention of paying any dividends in the foreseeable future. Any future dividends would be at the discretion of our board of directors and would depend on, among other things, future earnings, our operating and financial condition, our capital requirements, and general business conditions. Therefore, shareholders should not expect any type of cash flow from their investment. Return of investor’s capital contributions is not guaranteed. The shares registered hereby are speculative and involve a high degree of risk. There can be no guarantee that shareholders will realize a substantial return on an investment, or any return at all, or that he or she will not lose their entire investment. For this reason, each investor should read this registration statement carefully and should consult with his or her legal counsel, accountant(s), or business advisor(s) prior to making any investment decision. Providence may require additional capital funding. There can be no guarantee that we will not require additional funds, either through additional equity offerings or debt placements, in order to expand our operations. Such additional capital may result in dilution to our current shareholders. Further, our ability to meet short-term and long-term financial commitments will depend on future cash. There can be no assurance that future income will generate sufficient funds to enable us to meet our financial commitments. If the market price of our common stock declines as the selling security holders sell their stock, the selling security holders or others may be encouraged to engage in short selling, further depressing the market price. The significant downward pressure on the price of the common stock as the selling security holders sell material amounts of common stock could encourage short sales by the selling security holders or others. Short selling is the selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold it short. Significant short selling of a company’s stock creates an incentive for market participants to reduce the value of that company’s common stock. If a significant market for short selling our common stock develops, the market price of our common stock could be significantly depressed. Future shareholders of Providence’s preferred stock may face certain risks. Providence has 25,000,000 shares of authorized preferred stock. Though no shares are currently issued and outstanding, shares may be issued in the future, which shares will involve a high degree of risk. The preferred stock authorized in the articles of incorporation, allows the board of directors to designate the dividend, voting, conversion and liquidation rights or preferences of any class of preferred stock. However, the board of directors has never designated any class or series of preferred stock, nor has it ever set forth any description or designation of the rights or preferences of the preferred stock. As such, the board of directors may not allow dividends, voting, conversion, or liquidation rights. Additionally, the designation may change from time to time. Providence’s shareholders may face significant restrictions on their stock. Providence’s stock differs from many stocks in that it is a “penny stock.” The Commission has adopted a number of rules to regulate “penny stocks” including, but not limited to, those rules from the Securities Act as follows: 15g-3 which details that broker/dealers must disclose quotes and other info relating to the penny stock market; 15g-4 which explains that compensation of broker/dealers must be disclosed; 15g-5 which explains that compensation of persons associated in connection with penny stock sales must be disclosed; 15g-6 which outlines that broker/dealers must send out monthly account statements; and 15g-9 which defines sales practice requirements. Since Providence’s securities constitute a “penny stock” within the meaning of the rules, the rules would apply to us and our securities. Because these rules provide regulatory burdens upon broker-dealers, they may affect the ability of shareholders to sell their securities in any market that may develop; the rules themselves may limit the market for penny stocks. Additionally, the market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. Shareholders should be aware that, according to Commission Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered from patterns of fraud and abuse. These patterns include: o control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; o manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; o "boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; o excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and o the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. Cautionary Note Regarding Forward Looking Statements When used in this prospectus, the words “believes,” “anticipates,” “expects,” “plans”, and similar expressions are intended to identify forward-looking statements. The outcomes expressed in such statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected, including the risks described in this Risk Factors section. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these statements. Providence also undertakes no obligation to update these forward-looking statements. USE OF PROCEEDS All proceeds from the sale of the common shares by the selling security holders will go to the selling security holders who offer and sell their shares. Providence will not receive any proceeds from the sale of the common shares by the selling security holders. However, we will receive approximately $6,470,457 if the selling security holders exercise their warrants in full. The warrant holders may exercise their warrants at any time until their expiration, as further described in the Description of Securities section. Since the warrant holders may exercise the purchase warrants in their own discretion, we cannot plan on any specific uses of proceeds beyond the application of proceeds to general corporate purposes. Providence will bear all expenses incident to the registration of the shares of common stock under federal and state securities laws other than expenses incident to the delivery of the shares to be sold by the selling security holders. Any transfer taxes payable on the shares to be sold by the selling security holders and any commissions and discounts payable to underwriters, agents, brokers or dealers will be paid by the selling security holders. DETERMINATION OF OFFERING PRICE The selling security holders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices, or at privately negotiated prices. SELLING SECURITY HOLDERS As of February 26, 2007, 51,449,627 common shares of Providence’s common stock are held of record by 241 shareholders. The following tables set forth the names of the selling security holders and the number of shares of common stock and warrants to purchase shares of common stock owned beneficially by each selling security holder as of February 26, 2007. Except as may be identified in the tables, none of the selling security holders have, or within the past three years have had, any position, office or material relationship with Providence or any of our predecessors or affiliates. The tables have been prepared based upon information furnished to Providence by or on behalf of the selling security holders. The selling security holders may decide to sell all, some, or none (or exercise and sell all, some or none) of the securities listed below. Providence cannot provide any estimate of the number of securities that any of the selling security holders will hold in the future. The securities (including those shares to be issued upon exercise of the warrants) beneficially owned by each of the selling security holders are being registered to permit public secondary trading, and the selling security holders may offer these shares for resale from time to time. See Plan of Distribution. For purposes of the following tables, beneficial ownership is determined in accordance with the rules of the Commission, and includes voting power and investment power with respect to such shares. All percentages are approximate. As explained below under Plan of Distribution, Providence has agreed to bear certain expenses (other than broker discounts and commissions, if any) in connection with the registration statement, which includes this prospectus. Further information concerning all of the following selling security holders and securities is listed under the section title Recent Sales of Unregistered Securities, below. The following table’s warrant exercise price is $1.00. None of the security holders in the following table are broker-dealers. The following selling security holders are broker-dealers. These security holders are not underwriters. These security holders obtained their respective securities as commissions on the above offering. The following table's warrant exercise price is $0.72. PLAN OF DISTRIBUTION Providence is registering a total of 19,193,070 shares of common stock and shares underlying warrants to purchase common stock for resale on behalf of our selling security holders. The selling security holders or pledgees, donees, transferees or other successors in interest selling shares received from a named selling security holder as a gift, partnership distribution or other non-sale-related transfer after the effective date of this registration statement may sell the shares from time to time. Registration of the common stock does not mean, however, that the common stock will be offered or sold. The selling security holders may also decide not to sell all or any of the shares they are allowed to sell under this registration statement. The selling security holders will act independently of Providence in making any decision with respect to the timing, manner and size of each sale. The sales may be made in negotiated transactions or on the over-the-counter market at prevailing market prices or privately negotiated prices. The selling security holders could effect such transactions by selling the shares to or through broker-dealers by one or more of, or a combination of, the following mechanisms: o a block trade in which the broker-dealer so engaged attempts to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, o purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this registration statement, o an exchange distribution in accordance with the rules of such exchange, o ordinary brokerage transactions and transactions in which the broker solicits purchasers, and o privately negotiated transactions. Providence will file post-effective amendments to this registration statement as required, to include any additional or changed material information pertinent to this plan of distribution or any facts or events, which individually or together represent a fundamental change in the information contained in this registration statement. Further, Providence’s responsibilities will include the obligation to file a post-effective amendment to this registration statement upon being notified by a selling security holder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker-dealer. Post-effective amendment will disclose: o the name of each such selling shareholder and the participating broker-dealer, o the number of shares involved, o the price at which such shares will be sold, o the commissions paid or discounts or concessions allowed to such broker-dealer, where applicable, o that such broker-dealer did not conduct any investigation to verify the information set out or incorporated by reference in this registration statement, and o additional facts material to the transaction. The selling security holders could enter into hedging transactions with broker-dealers in connection with distributions of Providence’s common stock or otherwise. Pursuant to such transactions, broker-dealers could engage in short sales of the shares in the course of hedging the positions they assume with selling security holders. The selling security holders could also sell shares short and redeliver Providence’s common stock to close out such short positions. The selling security holders could enter into an option or other transactions with broker-dealers which require the delivery to the broker-dealer of Providence’s common stock. The broker-dealer could then resell or otherwise transfer such shares pursuant to this registration statement. The selling security holders could also loan or pledge the shares to a broker-dealer. The broker-dealer may sell common stock so loaned, or upon default the broker-dealer may sell the pledged shares pursuant to this registration statement. Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling security holders. Broker-dealers or agents may also receive compensation from the purchasers of Providence’s common stock for whom they act as agents or to whom they sell as principals, or both. Compensation as to a particular broker-dealer might be in excess of customary commissions and will be in amounts to be negotiated in connection with our common stock. Selling security holders, broker-dealers and agents may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act of 1933, as amended, in connection with the sale of the shares. Accordingly, any commission, discount or concession received by them and any profit on the resale of Providence’s common stock purchased by them may be deemed to be underwriting discounts or commissions under the Securities Act. Since the selling security holders may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act, the selling security holders will be subject to the registration statement delivery requirements of the Securities Act. Further, any securities covered by this registration statement which qualify for sale pursuant to Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather than pursuant to this registration statement. The selling security holders have advised Providence that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities. No underwriter or coordinating broker is acting in connection with the proposed sale of shares by the selling security holders. Providence’s common stock may be sold only through registered or licensed brokers if required under applicable state securities laws. Further, in certain states, our common stock can not be sold unless registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and met. Under the applicable rules and regulations of the Exchange Act, any person engaged in the distribution of Providence’s common stock may not simultaneously engage in market making activities with respect to Providence’s shares for a period of five business days prior to the commencement of such distribution. Further, each selling security holder will be subject to the applicable provisions of the Exchange Act and the associated rules and regulations under the Exchange Act, including Regulation M, which provisions limit the timing of purchases and sales of shares of Providence’s common stock by the selling security holders. Providence will make copies of this registration statement available to the selling security holders and have informed them of the need for delivery of copies of this registration statement to purchasers at or prior to the time of any sale of our common stock. Providence will bear all costs, expenses and fees in connection with the registration of our common stock. The selling security holders will bear all commissions and discounts, if any, attributable to the sales of shares. The selling security holders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. LEGAL PROCEEDINGS Providence is not a party to any pending legal proceeding or litigation. Further, Providence’s officers and directors know of no legal proceedings against them or Providence’s business being contemplated by any governmental authority. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following table sets forth the name, age and position of each director and executive officer of Providence: Nora Coccaro was appointed to Providence’s board of directors and as our chief executive officer, chief financial officer and principal accounting officer on November 16, 1999. She will serve until the second succeeding annual meeting and until such time as a successor is elected and qualified. Ms. Coccaro also serves as an officer and director (December 2005 to present) of Newtech Resources, Inc., an OTC:BB quoted company without current operations, an officer and director (February 2004 to present) of Solar Energy Limited, an OTC: BB quoted company involved in the development of alternative sources of energy, an officer and director (from January 15, 2000 to present) of Sona Development Corp., an OTC: BB quoted company without current operations, and as an officer and director (October 2003 to present) of ASP Ventures Corp., an OTC: BB quoted company without current operations. Ms. Coccaro has also served as an officer and director (February 2000 to January 2004) of OpenLimit, Inc., an OTC: BB quoted company involved in credit card encryption technology, as a director (1998 until May 1999) of Americana Gold & Diamond Holdings, Inc. an OTC: BB quoted company without current operations, and as an officer and director (1997 until 1999) of Black Swan Gold Mines, a Toronto Senior Listing company with diamond exploration activities in Brazil. Since September 1998, Ms. Coccaro has acted as the Consul of Uruguay to Western Canada. Ms. Coccaro attended medical school at the University of Uruguay before becoming involved in the management of public entities. Markus Mueller was appointed to Providence’s board of directors on May 28, 2003, and was appointed as Chairman of the Board of directors on October 26, 2006. He will serve until the third succeeding annual meeting and until such time as a successor is elected and qualified. Mr. Mueller also serves as a director (August 2000 to present) of Scherrer & Partner Portfolio Management AG Zurich and of First Equity Securities AG Zurich, both of which are involved in asset management for private clients and manage investment funds. Prior to Mr. Mueller’s current engagements, he acted as a director (1995 to 2000) of Jefferies AG Zurich (Switzerland) and as the managing director (1995 to 2000) of Jefferies Management AG Zug (Switzerland), both of which are also involved in asset management for private clients. Charles Crowell was elected to Providence’s board of directors on November 17, 2006, and will serve until the next annual meeting and until such time as a successor is elected and qualified. Mr. Crowell serves as a director (July 2002 to present) of Gasco Energy, Inc., an AMEX listed natural gas and petroleum exploitation, development, and production company. Since 1993, Mr. Crowell has been a practicing attorney and a consultant to oil and gas companies, and was a senior member (November 1995 to June 1998) of Crowell & Bishop, PLLC, Attorneys. Mr. Crowell has served as director (June 1999 to February 2001) of Comanche Energy, Inc., an OTC:BB quoted energy company. Mr. Crowell has also held the position of manager (September 1996 to June 2000) at Enigma Engineering Company, LLC. Mr. Crowell has served as director (June 1997 to October 1998) of Arakis Energy Corporation, a NASDAQ National Market listed company, as director (December 1989 to May 1993) and chairman of the board (August 1990 to December 1992) of Aero Services International, Inc., a NASDAQ National Market listed company, and as director (October 1989 to May 1993) of Triton Europe, plc, a London Stock Exchange quoted company. Mr. Crowell holds a BA degree from Johns Hopkins and a JD from University of Arkansas. He was admitted to the practice of law in Texas in 1974. Randy Buchamer was elected to Providence’s board of directors on November 17, 2006, and will serve until the next annual meeting and until such time as a successor is elected and qualified. Mr. Buchamer is the chief executive officer (August 2001 to present) and was the chairman of the board (August 2001 to January 2003) of Voice Mobility Inc., an OTC:BB and TSX quoted unified communications company. Mr. Buchamer serves as director and chief financial officer (March 2004 to present) of Bradner Ventures Ltd, a reporting company registered with the Commission without operations. He is also a director of BC ADVANTAGE FUNDS, a British Columbia based government accredited management capital fund. Mr. Buchamer served as director of Heartland Oil and Gas Ltd. (October 2002 to May 2005) an OTC:BB quoted gas extraction company. Mr. Buchamer was the managing director of operations (March 1999 to April 2000) of The Jim Pattison Group and was responsible for supporting the operations of the subsidiaries. Mr. Buchamer was the vice-president and chief operating officer (March 1988 to March 1999) for Mohawk Oil, a producer and seller of petroleum products. Mr. Buchamer holds an Executive Management Development Degree (condensed EMBA) from Simon Fraser University and attended the University of Illinois in Business Administration (Marketing and Finance). He has also completed courses at the IBM Canada Business Management School. No other person is expected to make any significant contributions to Providence who is not an executive officer or director of Providence. Board of Directors Committees The board of directors has not established an audit, nomination, or compensation committee. An audit committee typically reviews, acts on and reports to the board of directors with respect to various auditing and accounting matters, including the recommendations and performance of independent auditors, the scope of the annual audits, fees to be paid to the independent auditors, and internal accounting and financial control policies and procedures. Certain stock exchanges currently require companies to adopt a formal written charter that establishes an audit committee that specifies the scope of an audit committee’s responsibilities and the means by which it carries out those responsibilities. In order to be listed on any of these exchanges, Providence will be required to establish an audit committee. Further, since we increased the number of directors to four on November 17, 2006, and wish to differentiate certain directors’ duties with regard to committees, we expect to establish an audit committee, as well as determining who will become a member of such committee at our next board of directors meeting. Directors currently are not reimbursed for out-of-pocket costs incurred in attending meetings and no director receives any compensation for services rendered as a director. Providence will most likely adopt a provision for compensating directors in the future. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information concerning the ownership of Providence’s common stock as of February 26, 2007, with respect to: (i) all directors; (ii) each person known by us to be the beneficial owner of more than five percent of our common stock; and (iii) our directors and executive officers as a group. * Additionally, Charles Crowell has 50,000 common share purchase warrants exercisable at $1.00 per share before July 25, 2009. DESCRIPTION OF SECURITIES The following is a summary of the material terms of Providence’s capital stock. This summary is subject to and qualified by our articles of incorporation and bylaws. Common Stock As of February 26, 2007, there were approximately 241 shareholders of record holding a total of 51,449,627 shares of fully paid and non-assessable common stock of the 100,000,000 shares of common stock, par value $0.0001, authorized. The board of directors believes that the number of beneficial owners is substantially greater than the number of record holders because a portion of our outstanding common stock is held in broker “street names” for the benefit of individual investors. The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. Preferred Stock As of February 26, 2007, there were no shares issued and outstanding of 25,000,000 shares of preferred stock, par value $0.0001, authorized. Providence’s preferred stock may have such rights, preferences and designations and may be issued in such series as determined by the board of directors. Convertible Promissory Note Providence has issued (i) seven debentures in the aggregate amount of $3,320,000 at 7% interest that are convertible into common shares at $0.35 per share at any time until November 30, 2010, and (ii) one debenture in the amount of $250,000 at 10% interest convertible into common shares at $0.10 per share at any time until May 6, 2010. Warrants Providence has issued (i) 348,000 common share purchase warrants exercisable at $0.30 per share at any time until December 1, 2010, (ii) 6,684,960 common share purchase warrants exercisable at $1.00 per share at any time until July 25, 2009, (iii) 188,190 common share purchase warrants exercisable at $0.72 per share at any time until November 7, 2009, and (iv) 46,500 common share purchase warrants exercisable at $0.72 per share at any time until November 20, 2009. Transfer Agent and Registrar Providence’s transfer agent and registrar is Interwest Transfer, 1981 E. Murray-Holladay Road, Holladay, Utah, 84117–5164. Interwest’s phone number is (801) 272-9294. INTEREST OF NAMED EXPERTS AND COUNSEL No expert or counsel whose services were used in the preparation of this prospectus was hired on a contingent basis or will receive a direct or indirect interest in Providence. Legal Matters The validity of the shares of common stock offered hereby will be passed upon for Providence by Gerald Einhorn, Esq. Auditors Providence’s audited financial statements as of December 31, 2005 and 2004, audited by Chisholm, Bierwolf & Nilson, LLC, Providence’s independent auditors, have been included in this registration statement in reliance upon the reports and review of Chisholm, Bierwolf & Nilson, LLC, given their authority as experts in accounting and auditing. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification is asserted by such director, officer or controlling person, the registrant will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue, unless the indemnification claim is for expenses incurred by one of the registrant’s directors, officers or controlling persons in the successful defense of any action, suit or proceeding. DESCRIPTION OF BUSINESS Business Providence was incorporated under the laws of the State of Texas on February 17, 1993, as “GFB Alliance Services, Inc.” We have since undergone several name changes and on May 13, 1999, pursuant to an amendment to our articles of incorporation, adopted the name “Healthbridge, Inc.” During early 2002 we acquired exclusive ownership of the Valides® Modular Infectious Waste Disposal System and the Medides System. The acquisition included all the intellectual property associated with the technologies including patents, patents pending, proprietary software, and licenses required to manufacture, operate and market these technologies worldwide. Prior to year end 2005 we decided to discontinue all operations connected to the Valides® Modular Infectious Waste Disposal System and the Medides System due to our inability to successfully commercialize this technology. Providence decided to enter into the oil and gas business in November of 2005. We executed a secured promissory note with Providence Exploration dated December 1, 2005, to loan up to $5,000,000 to fund its oil and gas exploration and development activities and lease purchases. On April 10, 2006, we executed a Securities Exchange Agreement with Providence Exploration and the membership unit holders of Providence Exploration and concurrently entered into a Note Exchange Agreement with the holders of certain of Providence Exploration’s promissory notes, which agreements resulted in the acquisition of Providence Exploration as a wholly owned subsidiary on September 29, 2006. Our name was effectively changed from “Healthbridge, Inc.” to “Providence Resources, Inc.” on October 3, 2006. Providence is now involved in the exploration and development of oil and gas in Hamilton, Comanche and Val Verde Counties, Texas. Oil and gas exploration and development activities are conducted for us by Harding Company, a Dallas, Texas based independent operator. We are also involved in the purchase, refurbishment and sale of drilling and service rigs through Providence Exploration’s wholly owned subsidiary PDX Drilling I, LLC on site in Young County, Texas. Oil and Gas Exploration in Comanche and Hamilton Counties On October 1, 2005, Providence Exploration purchased interests in approximately 6,272 acres of oil and gas leases located in Comanche and Hamilton Counties, Texas, from Harding Company, in exchange for $3,136,273. Providence Exploration acquired a 90% working interest while Harding Company retained a 10% working interest in the leases. Providence Exploration is entitled to earn a 68.4% net revenue interest subject to fulfilling its financial commitments to the exploration and development of the leases. Harding Company remains responsible for conducting seismic research on the leases, making recommendations on drill site locations, and drilling and operating wells located on the leases. Providence Exploration is responsible for one hundred percent (100%) of the costs associated with conducting the seismic program, drilling, and completing the wells on the project. Harding Company is responsible for ten percent (10%) of future expenses related to the shipment of any gas produced from project wells. Under this arrangement, Providence Exploration intends to develop and produce oil and gas from the Marble Falls and Barnett Shale and Strawn formations in prospect specific areas of the Fort Worth basin. Harding Company. Harding Company (www.hardingcompany.com) is a 52 year old, Dallas-based oil and gas exploration, development and operating company. While Harding Company has conducted operations throughout Texas and the region, it is currently primarily engaged in conducting operations in the Barnett Shale. Harding Company has extensive experience in implementing three dimensional seismic and horizontal drilling techniques. Development Activities to Date. Since executing a Joint Exploration Agreement, Providence Exploration and Harding Company have initiated seismic and drilling operations. Based on the results of these seismic operations, Providence Exploration acquired an additional 1,102.53 acres in Comanche County from Harding Company in July of this year for $330,751.50, bringing the total acreage leased by us in Comanche and Hamilton Counties to 7,374 acres. The four initial drill sites in Comanche County are as follows: Our oil and gas pipeline infrastructure is a five mile, 6 and 5/8 inch, pipeline gathering system in Southeast Comanche County which has been constructed by Comanche County Pipeline, LLC, a partnership owned 90% by Providence Exploration, LLC and 10% by Harding Company and others. The system will gather gas to an existing hydrocarbon dew point control plant that will be capable of handling our initial volumes. The system will need to be extended after the volumes reach 500 MCF per day. The extension will increase capacity to as much as 5,000 MCF per day and will be able to deliver volumes directly into an existing Atmos Texas Pipeline system in Hamilton County. Our gathering system is designed and constructed to meet or exceed all Department of Transportation and Texas Railroad Commission regulations. When the system is complete, it will allow production to flow directly to competitive markets which will assure consistent prices for production. Timetable for Activities. The projected expenditures for Comanche and Hamilton Counties are subject to the confirmation of gas from the Strawn formation since the Barnett Shale has not yet been proven commercial. Oil and Gas Exploration in Val Verde County On March 30, 2006, Providence Exploration purchased approximately 12,832 acres of oil and gas leases located in Val Verde County, Texas from Global Mineral Solutions, L.P. located in Val Verde County, Texas, in exchange for $3,849,600, of which $1,924,800 was paid in cash and $1,924,500 by a promissory note which was converted into 3,500,000 shares of our common stock on October 4, 2006. Global Mineral Solutions, L.P. retained a thirteen percent (13%) carried interest in the leases that will convert to a 13% working interest after the completion of the first eight wells. Description of Val Verde Target. The Val Verde leases include multiple deep drilling targets for natural gas exploration, development and production within the Ellenberger carbonate, Strawn carbonate and Pennsylvanian-Wolfcamp sandstone reservoirs. Harding Company Participation. Harding Company has agreed to operate and fund five percent (5%) of the proposed three dimensional seismic program that is to be conducted over the Val Verde leases according to the terms of a Letter Agreement dated March 30, 2006. During the seismic program, Harding Company is to be paid $25,000 per month and one hundred percent (100%) of the costs associated with engaging third party consultants to assist with the interpretation of the results obtained from the seismic program. Harding Company has further agreed to act as our operator for drilling and developing the property, and has acquired a five percent (5%) working interest in the leases for $192,480 with an option to acquire an additional five percent (5%) working interest in the leases on or before March 31, 2007 by paying Providence Exploration an amount equal to eleven and one half percent (11.5%) of the costs associated with drilling the first eight (8) wells on the property. Development Activities to Date. Harding Company has scoped and prepared an extensive technical review of the current seismic data and development of a design for a 3D seismic survey over leases in 2006; these “seismic” activities are used to locate oil and gas by projecting sound waves into the earth. Six seismic acquisition contractors received our survey design parameters, which parameters are expected to improve the usability of the seismic data in the area. The bids were evaluated based on their technical, cost, and crew availability metrics. We are now ready to complete a contract for the survey. Concurrently, we have contacted the other operators with adjacent leases and have proposed that they: i) participate in our planned 3D seismic survey to lower our overall costs, or ii) alternatively the participation by all operators in a joint 3D seismic survey to be provided by a third party (using the same contractors that bid on our own planned 3D survey and our basic design). A joint 3D survey would be more cost efficient to Providence. Timetable for Activities. Acquisition and Disposition of Drilling and Service Rigs PDX Drilling I, LLC, a wholly owned subsidiary of Providence Exploration, is involved in the acquisition, refurbishment and sale of drilling and service rigs, in addition to providing drilling services. Drilling rigs are used to drill oil and gas wells while service rigs are used to rework and maintain existing oil and gas wells. Since inception, PDX has acquired one drilling rig, two service rigs, and the basic components to build two additional drilling rigs. PDX has also sold one service rig and one drilling rig. The other service rig was destroyed in an accident and PDX has a claim to the insurance for this rig. As PDX has gauged the drilling and service rig market during the last quarter, it has decided to wind down its drilling and service rig acquisition and sales operations. PDX is selling its components for the two remaining drilling rigs. Provision of Drilling Services During the last half of 2005 and the first calendar quarter of 2006, PDX provided drilling services to operators in the area surrounding Graham, Texas. During such period, PDX drilled four wells and serviced a number of existing wells with its service rigs. Management has since terminated its drilling services due to difficulties getting qualified personnel and operators and the increasing and prohibitive costs which has resulted in losses. Competition The oil and gas business in Texas is highly competitive. We compete with over 1,000 independent companies, many with greater financial resources and larger staff than we have available. Texas hosts approximately 40 significant independent operators including Marathon Oil, Houston Exploration Company and Newfield Exploration Company in addition to over 950 smaller operations with no single producer dominating the area. Major operators such as Exxon, Shell Oil, ConocoPhillips, Mobil and others that are considered major players in the oil and gas industry retain significant interests in Texas. We believe that we can successfully compete against the independent companies by focusing our efforts on the efficient development of our leases. Market The products to be sold by us, oil and natural gas, are commodities purchased by many distribution and retail companies. Crude oil can be sold whenever it is produced subject to transportation cost. Natural gas requires transportation from point of production to the purchaser by pipeline. Patents, Trademarks, Licenses, Franchises,Concessions, We currently have no patents, trademarks, licenses, franchises, concessions, or labor contracts. However, the leases acquired for oil, gas and mineral interests do provide for the provision of royalty payments in the event that production is realized from the leases. Government Regulation of Exploration and Production Providence’s oil and gas exploration, including future production and related operations are subject to extensive rules and regulations promulgated by federal and state agencies. Failure to comply with such rules and regulations can result in substantial penalties. The regulatory burden on the oil and gas industry adds to our cost of doing business and affects our profitability. Because such rules and regulations are frequently amended or interpreted differently by regulatory agencies, we are unable to accurately predict the future cost or impact of complying with such laws. Providence’s oil and gas exploration and future production operations are and will be affected by state and federal regulation of gas production, federal regulation of gas sold in interstate and intrastate commerce, state and federal regulations governing environmental quality and pollution control, state limits on allowable rates of production by a well or pro-ration unit and the amount of gas available for sale, state and federal regulations governing the availability of adequate pipeline and other transportation and processing facilities, and state and federal regulation governing the marketing of competitive fuels. For example, a productive gas well may be “shut-in” because of an over-supply of gas or lack of an available gas pipeline in the areas in which we may conduct operations. State and federal regulations generally are intended to prevent waste of oil and gas, protect rights to produce oil and gas between owners in a common reservoir, control the amount of oil and gas produced by assigning allowable rates of production and control contamination of the environment. Pipelines are subject to the jurisdiction of various federal, state and local agencies. Many state authorities require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration and production of oil and gas. Such states also have ordinances, statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of properties, the regulation of spacing, plugging and abandonment of wells, and limitations establishing maximum rates of production from wells. However, no Texas regulations provide such production limitations with respect to our operations. Environmental Regulation The recent trend in environmental legislation and regulation has been generally toward stricter standards, and this trend will likely continue. Providence does not presently anticipate that we will be required to expend amounts relating to future oil and gas production operations that are material in relation to our total capital expenditure program by reason of environmental laws and regulations, but because such laws and regulations are subject to interpretation by enforcement agencies and are frequently changed by legislative bodies, we are unable to accurately predict the ultimate cost of such compliance for 2006. Providence is subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and areas containing threatened and endangered plant and wildlife species, and impose substantial liabilities for unauthorized pollution resulting from our operations. The following environmental laws and regulatory programs appear to be the most significant to our operations in 2007: Clean Water and Oil Pollution Regulatory Programs – The federal Clean Water Act (“CWA”) regulates discharges of pollutants to surface waters. The discharge of crude oil and petroleum products to surface waters also is precluded by the Oil Pollution Act (“OPA”). Our operations are inherently subject to accidental spills and releases of crude oil and drilling fluids that may give rise to liability to governmental entities or private parties under federal, state or local environmental laws, as well as under common law. Minor spills may occur from time to time during the normal course of our future production operations. We will maintain spill prevention control and countermeasure plans (“SPCC plans”) for facilities that store large quantities of crude oil or petroleum products to prevent the accidental discharge of these potential pollutants to surface waters. Clean Air Regulatory Programs – Our operations are subject to the federal Clean Air Act (“CAA”), and state implementing regulations. Among other things, the CAA requires all major sources of hazardous air pollutants, as well as major sources of certain other criteria pollutants, to obtain operating permits, and in some cases, construction permits. The permits must contain applicable Federal and state emission limitations and standards as well as satisfy other statutory and regulatory requirements. The 1990 Amendments to the CAA also established new monitoring, reporting, and recordkeeping requirements to provide a reasonable assurance of compliance with emission limitations and standards. Providence currently obtains construction and operating permits for our compressor engines; we are not presently aware of any potential adverse claims in this regard. Waste Disposal Regulatory Programs – Our operations will generate and result in the transportation and disposal of large quantities of produced water and other wastes classified by EPA as “non-hazardous solid wastes”. The EPA is currently considering the adoption of stricter disposal and clean-up standards for non-hazardous solid wastes under the Resource Conservation and Recovery Act (“RCRA”). In some instances, EPA has already required the clean up of certain non-hazardous solid waste reclamation and disposal sites under standards similar to those typically found only for hazardous waste disposal sites. It also is possible that wastes that are currently classified as “non-hazardous” by EPA, including some wastes generated during our drilling and production operations, may in the future be reclassified as “hazardous wastes”. Because hazardous wastes require much more rigorous and costly treatment, storage, transportation and disposal requirements, such changes in the interpretation and enforcement of the current waste disposal regulations would result in significant increases in waste disposal expenditures. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) – CERCLA, also known as the “Superfund” law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to have caused or contributed to the release or threatened release of a “hazardous substance” into the environment. These persons include the current or past owner or operator of the disposal site or sites where the release occurred and companies that transported disposed or arranged for the disposal of the hazardous substances under CERCLA. These persons may be subject to joint and several liabilities for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources. Providence is not presently aware of any potential adverse claims in this regard. Texas Railroad Commission – The State of Texas has promulgated certain legislative rules pertaining to exploration, development and production of oil and gas that are administered by the Texas Railroad Commission. The rules govern permitting for new drilling, inspection of wells, fiscal responsibility of operators, bonding wells, the disposal of solid waste, water discharge, spill prevention, liquid injection, waste disposal wells, schedules that determine the procedures for plugging and abandonment of wells, reclamation, annual reports and compliance with state and federal environmental protection laws. We believe that we will function in compliance with these rules. We believe that all of our operations are in substantial compliance with current applicable federal, state and local environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse effect our financial position, cash flows or results of operations. There can be no assurance, however, that current regulatory requirements will not change, currently unforeseen environmental incidents will not occur or past non-compliance with environmental laws or regulations will not be discovered. Employees Providence currently has 2 employees and 1 consultant and uses an independent operator, Harding Company, to operate and manage our interests in oil and gas operations. Providence uses consultants, attorneys, and accountants as necessary to assist in the development of our business. MANAGEMENT’S DISCUSSION AND ANALYSIS This Management’s Plan of Operation and Results of Operations and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition below. The following discussion should be read in conjunction with our financial statements and notes thereto included in this prospectus. Our fiscal year end is December 31. General Providence’s current financial condition and results of operations depend primarily on private financing activities as well as revenue generated from the operations of Providence Exploration. Providence Exploration has a limited history of generating revenue, which cannot be viewed as an indication of continued growth, and a historical record of incurring losses. Should Providence be unable to generate revenue to the point where we can realize net cash flow, such failure will have an impact on our ability to continue business operations. Business Strategy Over the next twelve months, Providence, working with Harding Company, intends to: |X| continue post drilling “fracing” in the Marble Falls and Barnett Shale leases (fracing is the fracturing of geologic formations which open up pathways for the oil or gas to flow to the well); |X| explore to develop the Marble Falls and Barnett Shale and Strawn leases for oil and gas production; |X| seismically explore the Val Verde leases; |X| interpret the Val Verde seismic data; and |X| develop the Val Verde leases with multiple deep drilling targets for natural gas production. Providence’s business development strategy is prone to significant risks and uncertainties that can have an immediate impact on efforts to realize net cash flow. This impact may deter future prospects of revenue. Results of Operations During the nine month period ended September 30, 2006, Providence was involved in (i) finalizing those agreements pertaining to the acquisition of Providence Exploration, and (ii) raising additional capital by way of common stock offerings to fund the exploration, development and prospective production from those properties Providence Exploration has under lease. During the same nine month period, Providence Exploration (i) realized revenues from servicing equipment sales, (ii) completed the purchase of the Val Verde County leases, (iii) began seismic exploratory preparation on the Val Verde County leases, (iv) initiated seismic operations, identified drill sites and acquired an additional 1,103 acres in the Marble Falls and Barnett Shale leases, and (v) commenced drilling on the Marble Falls and Barnett Shale formations. Providence expects to realize revenues within the next twelve months of operation from servicing equipment sales and from oil and gas production. However, we can provide no assurance that either activity will produce revenue within this time frame or at all. In the near term, we will not be able to generate sufficient cash flow from operations to sustain our business as we continue to incur lease development expenses. Further, there can be no assurance that Providence will ever be able to generate sufficient cash flows to sustain operations. Our business development strategy is prone to significant risks and uncertainties, certain of which can have an immediate impact on our efforts to realize positive net cash flow and deter the prospect of future revenue. Losses Net losses for the three month period ended September 30, 2006, increased to $976,160 from $113,043 for the three month period ended September 30, 2005. Net losses for the nine month period ended September 30, 2006, increased to $2,680,965 from $495,974 for the nine month period ended September 30, 2005. The increase in net losses over the comparative three and nine month periods can be primarily attributed to an increase in general and administrative expenses and an increase in interest expenses. Providence did not generate any revenues during this period. For the period from February 17, 1993 to December 31, 2005, Providence recorded an accumulated operating loss of $9,153,101. Our operating loss is attributable to general and administrative expenses, interest expenses on financings, and losses of $299,248 incurred as the result of discontinued operations related to the Valides® and Medides Systems medical waste sterilization and disposal technologies. We will likely continue to operate at a loss through fiscal 2006 due to the nature of Providence’s oil and gas exploration and development operations and cannot be certain that we will ever generate revenue from operations. Expenses General and administrative expenses for the three month period ended September 30, 2006, increased to $293,572 from $110,694 for the three month period ended September 30, 2005. General and administrative expenses for the nine month period ended September 30, 2006, increased to $913,122 from $221,255 for the nine month period ended September 30, 2005. The increase in general and administrative expenses over the comparative three and nine month periods can be primarily attributed to increases in legal, consulting and accounting costs related to the Providence Exploration acquisition and our common stock offering. Providence expects that general and administrative expenses will decrease in future periods. For the period from February 17, 1993 to December 31, 2005, Providence recorded general and administrative expenses of $468,677. These general and administrative expenses include consulting fees, professional fees, accounting costs, and costs associated with the preparation of Exchange Act of 1934 disclosure documentation. Interest expenses for the for the three month period ended September 30, 2006, increased to $878,345 from $6,199 for the three month period ended September 30, 2005. Interest expenses for the nine month period ended September 30, 2006, increased to $2,155,712 from $22,155 for the nine month period ended September 30, 2005. The increase in interest expense over the comparative three and nine month periods can be attributed as follows: (i) $194,370 from the accrued interest on the eight outstanding convertible debentures, with a principal value equal to $3,570,000 as of September 30, 2006, (ii) $1,292,695 from the differences between market values and transaction values for shares issued for principal and interest on the eight convertible debentures, (iii) $668,496 on the below-market value, at $0.10 per warrant, for 6,684,960 warrants issued in the recent equity financing, and (iv) $151 for other interest expenses. For the period from February 17, 1993 to December 31, 2005, Providence recorded interest expenses on financings of $200,517. Depreciation expenses for the nine months ended September 30, 2006 and 2005 were $1,019 and $264 respectively. Depreciation expense for the years ended December 31, 2005 and 2004 was $491 and $753 respectively. Capital Expenditures Providence spent no amounts on capital expenditures for the period from February 17, 1993 (inception) to September 30, 2006, except those costs of unproved properties acquired with Providence Exploration and related exploration costs.
The Offering
Securities offered by the selling security holders Up to 12,669,920 shares of common stock and shares
underlying 6,334,960 warrants exercisable at $1.00 and
188,190 warrants exercisable at $0.72.
Stock outstanding as of February 26, 2007 51,449,627 common shares.
Terms of the Offering The selling security holders will determine when and
how they will sell the common stock offered in this
prospectus. See Plan of Distribution.
Use of proceeds Providence will not receive any of the proceeds from
the sale of common stock by the selling security
holders. Providence will receive approximately
$6,470,457 if the selling security holders exercise all
warrants hereby registered.
Statement of Operations Summary
Nine Months Ended Year Ended
September 30, December 31,
2006 2005 2005
General and Admin. Expense $ 913,144 $ 221,255 $ 468,677
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Loss from Operations 913,144 221,255 468,677
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Interest Expense 2,155,712 22,155 200,517
Interest Income 387,792 869 23,585
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Loss before discontinued operations 2,681,064 242,541 645,609
--------------- ---------------- ----------------
Loss from discontinued operations - 262,890 299,248
Foreign currency translation
Adjustment 99 9,457 9,057
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Net Loss 2,680,965 495,974 935,800
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Loss per share from continuing
operations, basic and diluted 0.13 0.03 0.08
Net loss per share, basic and diluted $ 0.13 $ 0.07 $ 0.12
Balance Sheet Summary
September December
30, 2006 31, 2005
------------------- --------------
------------------- --------------
Working Capital $ 2,265,771 $ 4,932,269
------------------- --------------
------------------- --------------
Current Assets 4,930,205 5,127,339
Property and equipment 47,979 1,019
Total other assets 24,022,191 -
------------------- --------------
Total Assets 29,000,375 5,128,358
------------------- --------------
------------------- --------------
Current Liabilities 2,664,434 195,070
Long-term Liabilities 3,990,208 3,645,000
------------------- --------------
Total Liabilities 6,654,642 3,840,070
------------------- --------------
------------------- --------------
Share capital 34,165,429 10,427,019
Accumulated other comprehensive income 14,469 14,370
Deficit accumulated during the development stage 11,834,164 9,153,101
------------------- --------------
------------------- --------------
Shareholders' equity 22,345,734 1,288,288
------------------- --------------
------------------- --------------
Total liabilities and shareholders' equity $ 29,000,375 $ 5,128,358
------------------- --------------
3a51-1 which defines penny stock as, generally speaking, those securities which are not listed on either NASDAQ or a national securities exchange and are priced under $5, excluding securities of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years, greater than $5 million if in operation less than three years, or average revenue of at least $6 million for the last three years; 15g-1 which outlines transactions by broker/dealers which are exempt from 15g-2 through 15g-6 as those whose commissions from traders are lower than 5% total commissions;
15g-2 which details that brokers must disclose risks of penny stock on Schedule 15G;
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
Roman Sandmayr None 0 (0) 60,000 30,000 0.13%
Roland Wiesmann None 0 (0) 25,000 12,500 0.05%
Markus Wassmer None 0 (0) 40,000 20,000 0.08%
Heidi Haefeli None 0 (0) 80,000 40,000 0.17%
Roger Curchod None 0 (0) 50,000 25,000 0.10%
Westwood Trading Ltd. None 0 (0) 170,000 85,000 0.35%
(Oliver Chaponnier)
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Brigadoon Investments None 0 (0) 150,000 75,000 0.31%
Ltd. (Marco Montanari
Fuer)
Dr. Harvey Glicker* None 0 (0) 83,300 41,650 0.17%
Victor T. Aellen** None 0 (0) 16,000 8,000 0.03%
Hans Peter Stocker None 0 (0) 50,000 25,000 0.10%
Hansruedi Schumacher*** None 0 (0) 50,000 25,000 0.10%
Daniel Beck None 0 (0) 100,000 50,000 0.21%
Dr. Marc-Andre Schwab None 0 (0) 60,000 30,000 0.13%
Dieter Schaerer None 170,000 (0) 80,000 40,000 0.49%
Klimkin Associated SA** None 0 (0) 100,000 50,000 0.21%
(Karl-Heinz Hemmerle)
Elsbeth Russenberger**** None 0 (0) 100,000 50,000 0.21%
Steve Nelson None 0 (0) 40,000 20,000 0.08%
Global Leveraged None 0 (0) 300,000 150,000 0.63%
Investment (Christian
Diem)
Global Undervalued None 0 (0) 450,000 225,000 0.94%
Investment (George
Scherrer)*****
George Scherrer***** None 0 (0) 100,000 50,000 0.21%
Ilse Kaufmann None 0 (0) 85,000 42,500 0.18%
Germal GmbH (Hansruedi None 0 (0) 250,000 125,000 0.52%
Schumacher***)
Martin Alex Murbach None 0 (0) 100,000 50,000 0.21%
Bruce Colgin None 0 (0) 50,000 25,000 0.10%
Crenshaw Family None 0 (0) 333,330 166,665 0.70%
Partnership, Ltd.
(Kirby Crenshaw)**
Theodore L. Rhyne None 0 (0) 15,000 7,500 0.03%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Southwest Securities, None 0 (0) 20,000 10,000 0.04%
Inc. FBO Steve Nelson
IRA**
Southwest Securities, None 0 (0) 30,000 15,000 0.06%
Inc. FBO Mishawn M.
Nelson IRA**
Wyler Esther None 0 (0) 70,000 35,000 0.15%
James R. Foster None 0 (0) 100,000 50,000 0.21%
Daryl. M. Anderson None 0 (0) 25,000 12,500 0.05%
Peter Kubin and Marie None 0 (0) 100,000 50,000 0.21%
Kubin
Paul D. Stewart None 0 (0) 50,000 25,000 0.10%
William Marc and None 0 (0) 166,680 83,340 0.35%
Elizabeth Brogdon Hill
Willowbend Ventures, LP None 0 (0) 166,680 83,340 0.35%
(Jeffrey Wohlwend)
David Hunter None 0 (0) 50,000 25,000 0.10%
Michael Crabtree None 0 (0) 100,000 50,000 0.21%
Meera Khedkar None 0 (0) 8,500 4,250 0.02%
Nicolas Mathys None 1,700,000 (0) 1,666,670 833,335 6.54%
Randall A. Crenshaw None 0 (0) 500,000 250,000 1.04%
Spiral Bridge Family None 0 (0) 50,000 25,000 0.10%
Limited Partnership
(Robert Fenell)
Rodney Robert Martin None 0 (0) 33,330 16,665 0.07%
Bank Julius Baer & Co. None 0 (0) 380,000 190,000 0.79%
Ltd (Swiss private bank
owners)
Niconsult GmbH (Nico None 0 (0) 20,000 10,000 0.04%
Civelli)
Patrick Meier None 0 (0) 53,000 26,500 0.11%
Joseph Simone* None 0 (0) 50,000 25,000 0.10%
Kenneth W. Mullane None 0 (0) 10,000 5,000 0.02%
Peter E. Kenefick None 0 (0) 50,000 25,000 0.10%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Chris J. Kaskow** None 0 (0) 60,000 30,000 0.13%
Sharad Khedkar None 0 (0) 25,000 12,500 0.05%
Billie H. & Georgia M. None 0 (0) 25,000 12,500 0.05%
Hill
Hernan P. & Beverly 0 (0)
Puentes None 10,000 5,000 0.02%
Vladimir Mitrovic None 0 (0) 10,000 5,000 0.02%
Samuel Weir None 0 (0) 66,660 33,330 0.14%
David J. Serra None 0 (0) 50,000 25,000 0.10%
Rebecca L. Gettemy None 0 (0) 50,000 25,000 0.10%
Michael J. Schneider None 0 (0) 33,330 16,665 0.07%
Joseph C. Bork None 0 (0) 16,670 8,335 0.03%
Curry Plumbing And None 0 (0) 33,330 16,665 0.07%
Heating (Brent Curry)
Katy M. Chen None 0 (0) 50,000 25,000 0.10%
Sally M. Chen None 0 (0) 50,000 25,000 0.10%
Gen Liang Shi None 0 (0) 20,000 10,000 0.04%
Jerry Hart None 0 (0) 41,670 20,835 0.09%
Harold Milbrodt None 0 (0) 20,000 10,000 0.04%
Thomas E. Jordan None 0 (0) 35,000 17,500 0.07%
Christoph Oeschger None 0 (0) 25,000 12,500 0.05%
Finter Bank Zurich None 0 (0) 860,000 430,000 1.79%
(Swiss private bank
owners)
Dr. Robert. M. Squire None 0 (0) 30,000 15,000 0.06%
M.D
Alan Miller None 0 (0) 40,000 20,000 0.08%
Randy Clarkson None 0 (0) 50,000 25,000 0.10%
Dr. Frank M. Andrews** None 0 (0) 35,000 17,500 0.07%
Kim Davies Roth IRA None 0 (0) 40,000 20,000 0.08%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Michelle Maggio None 0 (0) 20,000 10,000 0.04%
Kate Mcknight None 0 (0) 60,000 30,000 0.13%
Stanley Fineberg None 0 (0) 25,000 12,500 0.05%
Harolyn and Harvey None 0 (0) 25,000 12,500 0.05%
Glicker*
Charles Hough None 0 (0) 33,330 16,665 0.07%
Steve Hamilton None 0 (0) 16,670 8,335 0.03%
Clarie Spencer None 0 (0) 50,000 25,000 0.10%
Berkeley Alliance None 0 (0) 33,330 16,665 0.07%
Capital Circle (Edward
Lu)
Barry Davis Roth IRA None 0 (0) 340,000 170,000 0.71%
TTASSB Partners (Thomas None 0 (0) 70,000 35,000 0.15%
Sweeney)
Nachum Y. Klar None 0 (0) 10,000 5,000 0.02%
Robert Patch Jr. None 0 (0) 50,000 25,000 0.10%
Alfred Berg None 0 (0) 166,670 83,335 0.35%
Wayne A. Reuter None 0 (0) 20,000 10,000 0.04%
Theodore T. Magel None 0 (0) 16,670 8,335 0.03%
David Hunter None 0 (0) 20,000 10,000 0.04%
Charles B. Crowell Director 0 (0) 100,000 50,000 0.21%
(subsequent to
offering)
Frank Andrews** None 0 (0) 10,000 5,000 0.02%
Barry Donnell None 0 (0) 100,000 50,000 0.21%
Elite Trading, LLC None 0 (0) 416,700 208,350 0.87%
(Adam Green)
Bennett Bovarnick None 0 (0) 20,000 10,000 0.04%
Michael Swanson None 0 (0) 2,000 1,000 0.00%
Brad Holland None 0 (0) 100,000 50,000 0.21%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Middlemarch Partners None 0 (0) 100,000 0 0.21%
Limited (Cecilia
Kershaw)
Brant Investments None 0 (0) 0 50,000 0.00%
Limited for Middlemarch
Partners Limited
Joshua Klar None 0 (0) 86,700 43,350 0.18%
David Klar None 0 (0) 16,700 8,350 0.03%
Joseph Sorrentino None 0 (0) 20,000 10,000 0.04%
Bank Vontobel AG (Swiss None 0 (0) 100,000 50,000 0.21%
private bank owners)
Crenshaw Family None 0 (0) 166,670 83,335 0.35%
Partnership, Ltd.
(Kirby Crenshaw)**
Mary Contini None 0 (0) 15,000 7,500 0.03%
Mauricio A Platacuadros None 0 (0) 33,330 16,665 0.07%
Tom Vaughn** None 0 (0) 33,330 16,665 0.07%
Harvey Glicker* None 0 (0) 25,000 12,500 0.05%
Herbert Naiztat None 0 (0) 16,000 8,000 0.03%
Alfred Berg None 0 (0) 250,000 125,000 0.52%
Charles Wronski None 0 (0) 30,000 15,000 0.06%
Southwest Securities, None 0 (0) 15,000 7,500 0.03%
Inc. FBO Steve Nelson
IRA**
Southwest Securities, None 0 (0) 15,000 7,500 0.03%
Inc. FBO Mishawn M.
Nelson IRA**
Charles Harbey None 0 (0) 16,670 8,335 0.03%
Kevin McKnight None 0 (0) 20,000 10,000 0.04%
Nasim Nasir None 0 (0) 16,670 8,335 0.03%
Peter Santamaria None 0 (0) 20,000 10,000 0.04%
Sherman Dreiseszun None 0 (0) 41,670 20,835 0.09%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Dennis Estrada None 0 (0) 16,670 8,335 0.03%
Jerald Gunnelson None 0 (0) 83,340 41,670 0.17%
P J Noble None 0 (0) 25,000 12,500 0.05%
Rick Riley None 0 (0) 20,000 10,000 0.04%
Nelson Canache None 0 (0) 92,000 46,000 0.19%
Mauricio A None 0 (0) 16,670 8,335 0.03%
Platacuadros**
Joseph Simone* None 0 (0) 100,000 50,000 0.21%
Benjamin Fakheri None 0 (0) 10,000 5,000 0.02%
Angela K. Holahan None 0 (0) 16,670 8,335 0.03%
Ernest G. Ianetti None 0 (0) 20,000 10,000 0.04%
Victor T. Aellen None 0 (0) 8,000 4,000 0.02%
Leonard M. Rhoades None 0 (0) 16,000 8,000 0.03%
David Iannacconi None 0 (0) 20,000 10,000 0.04%
Chris J. Kaskow** None 0 (0) 60,000 30,000 0.13%
Tom Vaughn** None 0 (0) 83,340 41,670 0.17%
Mathew Todd Frailey None 0 (0) 30,000 15,000 0.06%
Joseph Simone* None 0 (0) 60,000 30,000 0.13%
Robert Katan None 0 (0) 20,000 10,000 0.04%
David Vezzetti None 0 (0) 20,000 10,000 0.04%
Y. Shmuel Herz None 0 (0) 16,670 8,335 0.03%
Sean Hajo None 0 (0) 30,000 15,000 0.06%
Michael J. Simone** None 0 (0) 100,000 50,000 0.21%
Randolph Wallace None 0 (0) 20,000 10,000 0.04%
Joseph Hope None 0 (0) 20,000 10,000 0.04%
Arno Gassner None 0 (0) 50,000 25,000 0.10%
Wayne Todd Ervin None 0 (0) 83,000 41,500 0.17%
V K Mullins None 0 (0) 10,000 5,000 0.02%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Security Holder Position or Number of Number of Shares Number of Warrants Percentage of
(natural persons with Material Shares (and Offered for the Offered For the Shares Owned By
power to vote or to Relationship warrants) Held Selling Security Selling Security the Selling
dispose of the Before the Holder Accounts Holder Accounts Security Holders
securities offered) Offering After the Offering
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
Carol H Cassidy None 0 (0) 10,000 5,000 0.02%
Sueperior Investments None 0 (0) 20,000 10,000 0.04%
LLC (Susan DeMarco)
Klimkin Associated SA None 0 (0) 50,000 25,000 0.10%
(Karl-Heinz Hemmerle)**
Stewart Kennedy** None 0 (0) 10,000 5,000 0.02%
Dominik Zehnder None 0 (0) 20,000 10,000 0.04%
Michael J. Simone** None 0 (0) 50,000 25,000 0.10%
Michael Monaco None 0 (0) 100,000 50,000 0.21%
Stewart Kennedy** None 0 (0) 40,000 20,000 0.08%
Antonio Herrero None 0 (0) 83,300 41,650 0.17%
Carla and Mark Coyle None 0 (0) 15,000 7,500 0.03%
Victoria Stapleton None 0 (0) 10,000 5,000 0.02%
Laurence Maguire None 0 (0) 17,000 8,500 0.04%
Michael B. Oring None 0 (0) 140,000 70,000 0.29%
- ------------------------- ----------------- ---------------- ------------------- -------------------- -------------------
- ----------------------------------------------- ------------------ ------------------------- ----------------------------
Security Holder (natural persons Position or Number of Shares (and Number of Warrants Offered
with power to vote or to dispose of Material warrants) Held For the Selling Security
the securities offered) Relationship Before the Offering Holder Accounts
- ----------------------------------------------- ------------------ ------------------------- ----------------------------
CR Innovations AG (Christian Russenberger)**** None 0 (0) 122,640
JTE Finanz AG (Joe Eberhard******) None 0 (0) 35,700
Chris Trina None 0 (0) 7,350
Quentin Bischoff None 0 (0) 1,500
Todd McKnight None 0 (0) 21,000
- ----------------------------------------------- ------------------ ------------------------- ----------------------------
* Purchased shares under the offering on three occasions:
Harvey and Harolyn Glicker for a total of 133,300 shares
Joseph Simone for a total of 210,000 shares
** Purchased shares under the offering on two occasions:
Victor T. Aellen for a total of 24,000 shares
Klimkin Associated SA for a total of 150,000 shares
Crenshaw Family Partnership, Ltd. for a total of 500,000 shares
Southwest Securities, Inc. FBO Steve Nelson IRA for a total of 35,000 shares
Southwest Securities, Inc. FBO Mishawn M. Nelson IRA for a total of 45,000 shares
Dr. Frank M. Andrews for a total of 45,000 shares
Tom Vaughn for a total of 116,670 shares
Chris J. Kaskow for a total of 120,000 shares
Mauricio A Platacuadros for a total of 50,000 shares
Michael J. Simone for a total of 150,000 shares
Stewart Kennedy for a total of 50,000 shares
*** Germal GmbH (with Hansruedi Schumacher as voting power) and Hansruedi Schumacher purchased shares under the offering
**** Elsbeth Russenberger and Christian Russenberger are married
***** Global Undervalued Investment (with George Scherrer as voting power) and George Scherrer purchased shares under the
offering
****** Joe Eberhard owns 400,000 shares
----------------------------- --------------- --------------------------------------------------------
Name Age Position
----------------------------- --------------- --------------------------------------------------------
----------------------------- --------------- --------------------------------------------------------
Nora Coccaro 49 Chief executive officer, chief financial officer,
principal accounting officer, and director
----------------------------- --------------- --------------------------------------------------------
----------------------------- --------------- --------------------------------------------------------
Markus Mueller 48 Chairman of the board of directors
----------------------------- --------------- --------------------------------------------------------
----------------------------- --------------- --------------------------------------------------------
Charles Crowell 62 Director
----------------------------- --------------- --------------------------------------------------------
----------------------------- --------------- --------------------------------------------------------
Randy Buchamer 50 Director
----------------------------- --------------- --------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Title of Names and Addresses of Management, Nominees Number of Shares Percent of
Class And Certain Beneficial Owners Class
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Nora Coccaro - chief executive officer, chief financial
officer, principal accounting officer, and director
2610-1066 West Hastings St. 353,500 0.69%
Vancouver, British Columbia, Canada
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Markus Mueller - chairman of the board of directors 7,184,384 13.96%
c/o FES AG, Bleicherweg 66
CH-8022 Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Randy Buchamer - director 500,000 0.97%
4275 Canterbury Crescent
North Vancouver, B.C. V7R 3N4
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Charles Crowell - director
503 University Tower
6440 N. Central Expressway 100,000* 0.19%
Dallas, Texas 75206
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Nicolas Mathys
Weinberghohe 17 3,366,670 6.54%
CH-6340 Baar, Switzerland
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Bo Thorwald Berglin 2,658,759 5.17%
Splugenstrasse 12
CH-8002 Zurich, Switzerland
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Common Officer and Directors as a Group 7,537,884 14.65%
- --------------------------------------------------------------------------------------------------------------------
ACT LIABILITIES |X| The Marrs # 1 well has been drilled to test the Strawn formation. An evaluation of the well is in process. |X| The Steward #1H well was completed in the Barnett Shale formation and fracture stimulated in three individual frac stages on October 27, 2006. The well flowed back frac treatment fluid from October 27 to November 6, 2006, followed by swabbing, which resulted in the recovery of 98% of the fluid treatment volume. Gas lift with nitrogen was conducted to increase fluid recovery and total treatment recovery was increased to 132%. Due to a high water production rate of greater than 1,000 barrels of water per day gas production was hindered which prevented a commercial Barnett Shale completion. Operations at the Steward #1H have been suspended at this time. |X| The Nowell #1H well was completed in the Barnett Shale formation and frac stimulated in four individual frac stages on October 25, 2006. The well flowed back until tubing was run in the well. Artificial lift operations were conducted using a swab unit followed by gas lift with nitrogen. Gas lift was installed to remove fluids at an increased rate. To date, a volume equal to 95% of the total fluid treatment volume has been recovered from the Barnett Shale completion. Due to a high water production rate of greater than 1,000 barrels of water per day gas production was hindered which prevented a commercial Barnett Shale completion. The initial Barnett Shale completion was abandoned with a cast iron bridge plug set over the Barnett Shale perforations and recompletion to the Ellenberger breccia porosity is currently being tested. The Ellenberger breccia porosity has been perforated and swabbed down with a show of oil and limited water production. An acid treatment will be conducted in the near future and the Ellenberger breccia porosity tested further for oil and gas. |X| The Patton #2H well has been drilled 3,752 feet into the Ellenberger formation and subsequently logged. The logs are being reviewed and evaluated at this time. The well is located in close proximity to the Providence-owned pipeline infrastructure.
- ------------ -- -- ---------------- ---------------- --------------- ------------------ -------------- --------------
Number Land Drill and Complete Pipeline Monthly Total
Of Wells
------------------
---------------- --------------- ------------------ -------------- --------------
2006
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
Actual July 1 $330,757 $1,847,345 $2,178,102
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
August 1 $1,910,345 $1,910,345
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
September 1 $369,460 $369,460
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
October
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
Estimated November $1,224,500 $1,224,500
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
December 1 $670,380 $670,380
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
2007
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
January
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
February 2 $1,340,760 $1,340,760
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
March $2,095,300 $2,095,300
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
April 2 $1,340,760 $1,340,760
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
May 1 $670,380 $670,380
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
June
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
July
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
August
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
September
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
October
---------------- --------------- ------------------ -------------- --------------
---------------- --------------- ------------------ -------------- --------------
Grand Total 9 $330,757 $8,149,430 $3,319,800 $11,799,987
- ----------------------------------- ---------------- --------------- ------------------ -------------- --------------
- ---------- --- -- ------------- -------------- --------------- ------------ ------------ ------------- --------------
Number 3D Seismic Drilling Pipeline Overhead Monthly Total
Of Wells
------------ ------------ ------------- --------------
-------------- --------------- ------------ ------------ ------------- --------------
2006
-------------- --------------- ------------ ------------ ------------- --------------
-------------- --------------- ------------ ------------ ------------- --------------
Actual July $25,000 $25,000
-------------- --------------- ------------ ------------ ------------- --------------
-------------- --------------- ------------ ------------ ------------- --------------
August
-------------- --------------- ------------ ------------ ------------- --------------
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September $25,000 $25,000
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October
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Estimated November
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December
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2007
-------------- --------------- ------------ ------------ ------------- --------------
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January $25,000
$25,000
-------------- --------------- ------------ ------------ ------------- --------------
-------------- --------------- ------------ ------------ ------------- --------------
February $1,380,000 $1,405,000
$25,000
-------------- --------------- ------------ ------------ ------------- --------------
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March $25,000
$25,000
-------------- --------------- ------------ ------------ ------------- --------------
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April $25,000
$25,000
-------------- --------------- ------------ ------------ ------------- --------------
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May
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June 1 $3,724,500 $3,724,500
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July
-------------- --------------- ------------ ------------ ------------- --------------
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August $500,000 $500,000
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September
-------------- --------------- ------------ ------------ ------------- --------------
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October 1 $3,724,500 $500,000 $4,224,500
-------------- --------------- ------------ ------------ ------------- --------------
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Grand Total 2 $1,380,000 $7,449,000 $150,000 $9,979,000
$1,000,000
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Royalty Agreements and Labor Contracts
