SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 17, 1996
FORTUNE PETROLEUM CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-12334 95-4114732
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
515 W. Greens Road, Suite 720, Houston, Texas 77067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 872-1170
Registrant's telecopier number, including area code: (713) 872-1213
N/A
_______________________________________________________________________________
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
ASSETS ACQUIRED AND PARTIES TO THE TRANSACTION. On April 17, 1996
Fortune Petroleum Corporation ("Fortune") entered into a non-binding Letter of
Intent with Texoil, Inc. ("Texoil") pursuant to which Texoil, Inc. will be
acquired through merger by Fortune in a tax-free transaction. Texoil, Inc. has
two wholly-owned subsidiaries, Texoil Company and Texoil Argentina, S.A. (all
three entities collectively referred to herein as "Texoil"). It is contemplated
that Texoil Argentina, S.A. will be dissolved prior to the completion of this
transaction. Texoil, is a publicly traded independent oil and gas exploration
company. Its common stock and class A and B Warrants are quoted on the NASDAQ
small-cap market under the symbols "TXLI", "TXLIW" and "TXLIZ", respectively.
Texoil's assets include among other things; 1) working and overriding
royalty interests which the company retained in exploratory projects sold to
Texas Meridian Resources Corporation in 1992, and from which a majority of
Texoil's 1995 revenues were derived; 2) three large onshore exploratory
prospects located on the Texas and Louisiana Gulf Coast which have considerable
3-D seismic shooting in progress or planned in 1996 (the 3-D Prospects); 3) an
inventory of other Gulf Coast exploratory projects at varying stages of
geological and geophysical evaluation; 4) an extensive geological and
geophysical database and 5) other producing oil and gas properties. Pending the
closing of the transaction, Fortune has agreed to fund Texoil's share of the
cost of shooting over 100 miles of 3-D seismic on the three 3-D Prospects and
certain of Texoil's other reasonable and necessary costs in exchange for a
security interest in portion of Texoil's interest in the 3-D Prospects and,
under certain circumstances, the right to earn an interest in the 3-D Prospects
should the transaction not close. Texoil's share of those seismic costs over the
next six months is projected to be approximately $1 million. The remainder of
the costs will be borne by Texoil's partners in the prospects.
PURCHASE PRICE. In the transaction, the shareholders of Texoil would
receive one share of Fortune common for every 3.2 Texoil shares, subject to
adjustments. Prior to the record date of the transaction, all Texoil preferred
shareholders will exchange their shares and any accrued dividends into common
shares of Texoil at the market price of such shares on the effective date of the
transaction, in a total aggregate amount of not more than 1,700,000 shares of
Texoil common shares. The combined maximum number of Fortune common shares the
Company will issue to the Texoil common and preferred shareholders is 1,845,000
for all of such outstanding stock (subject to adjustments). In addition,
approximately $1.1 million of debt owed to certain Texoil shareholders will be
converted to Fortune common shares (the Liquidation Shares) at the average of
the closing market price of such stock on the ten business days immediately
prior to the closing of the Transaction. Thereafter, Fortune shall provide
assistance in the liquidation of the Liquidation Shares by ensuring that such
shareholders receive the entire amount of their previously existing loan amounts
within fifteen (15) months of the closing of the transaction. All Fortune shares
received in the transaction by the current officers, directors and principal
shareholders of Texoil, except for the Liquidation Shares, will be subject to a
lock up agreement which will be no shorter than six months and no later than the
date all Liquidation shares have been sold.
The Letter of Intent states that, subject to further review, the
outstanding options and warrants of Texoil will be assumed by Fortune in
accordance with their terms. The parties expect that the transaction will close
on or before August 15, 1996.
OTHER TERMS AND CONDITIONS. In the event that the board of directors of
either party fails to approve a definitive merger agreement as described in the
letter of intent, the party which fails to approve the definitive merger
agreement shall pay the sum of $50,000 to the other as liquidated damages.
Further, the transaction is subject to a number of contingencies, including
completion of due diligence by Texoil and Fortune, execution of a definitive
merger agreement, effectiveness of a registration statement for the Fortune
shares, listing of the Fortune shares that will be issued on the American Stock
Exchange, approval of the merger by the directors and shareholders of both
companies, and to the receipt by Texoil of a favorable opinion from an
investment banking firm or other person suitable to both Texoil and Fortune
regarding the fairness of the proposed transaction to Texoil's shareholders.
There can be no assurance that these contingencies will be satisfied or that the
transaction will close. Given the uncertainty as to whether the transaction will
be completed, no financial statements have been filed herewith. It is
anticipated that a Registration Statement containing financial statements and
proxy statements will be filed in the near future.
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ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) Omitted
(b) Exhibits.
2.1 -- Letter of Intent dated April 17, 1996, among Texoil, Inc.
and Registrant
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FORTUNE PETROLEUM CORPORATION
By: /s/ J. MICHAEL URBAN
J. Michael Urban
Vice-President and
Chief Financial Officer
Date: April 29, 1996
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