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As filed with the Securities and Exchange Commission on February 3, 1998
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 95-2841597
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
HARKEN ENERGY CORPORATION
5605 NORTH MACARTHUR BLVD., SUITE 400
IRVING, TEXAS 75038
(972) 753-6900
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
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GREGORY S. PORTER
VICE PRESIDENT - LEGAL
HARKEN ENERGY CORPORATION
5605 NORTH MACARTHUR BLVD., SUITE 400
IRVING, TEXAS 75038
(972) 753-6900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
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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: [ ]
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If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Unit(1) Price(1) Registration Fee
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Common Stock, par value $ 0.01 955,313 $5.84 $5,579,027.92 $1,690.61
per share
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low sales
prices of the common stock as reported by the American Stock Exchange on
January 27, 1998.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
955,313 Shares
HARKEN ENERGY CORPORATION
Common Stock
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The 955,313 shares (the "Shares") of common stock, par value $0.01 per
share ("Common Stock"), of Harken Energy Corporation, a Delaware corporation
("Harken" or the "Company"), offered hereby are being offered by the
stockholders of the Company named herein (the "Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of the Shares, but
the Company has agreed to bear certain expenses of registration of the Shares
under the federal and state securities laws (currently estimated to be $7,500),
and of any offering and sale hereunder not including certain expenses such as
commissions and discounts of underwriters, dealers or agents. See "Selling
Stockholders" and "Use of Proceeds."
The Common Stock is traded on the American Stock Exchange, under the
symbol "HEC." On February __, 1998, the closing sales price of the Common Stock
as reported on the American Stock Exchange was $_____ per share.
The Shares may be offered and sold from time to time by the Selling
Stockholders directly or through broker-dealers or underwriters who may act
solely as agents, or who may acquire the Shares as principals. The
distribution of the Shares may be effected in one or more transactions that may
take place through the American Stock Exchange or any other national securities
exchange on which the Common Stock is approved for listing in the future,
including block trades or ordinary broker's transactions, or through privately
negotiated transactions, or through an underwritten public offering, or through
a combination of any such methods of sale, at such prices as may be obtainable.
Usual and customary or specially negotiated brokerage fees or commissions may
be paid by the Selling Stockholders in connection with such sales. See "Plan
of Distribution."
To the extent required, the specific shares of Common Stock to be sold,
the purchase price, public offering price, names of any agent, dealer or
underwriter, and any applicable commission or discount with respect to a
particular offering will be set forth in an accompanying Prospectus Supplement.
The aggregate proceeds to the Selling Stockholders from the sale of the Shares
will be the purchase price thereof less the aggregate agents' commissions and
underwriters' discounts, if any, and other expenses of distribution not borne
by the Company.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of any of
the Shares may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any commission
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution" for indemnification arrangements.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 4 PRIOR TO AN INVESTMENT IN THE
SHARES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this Prospectus is February __, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied, at prescribed rates, at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, as
well as at the regional offices of the Commission at Seven World Trade Center,
13th Floor, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60601. Copies of such material
may also be obtained at prescribed rates by writing to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Common Stock is listed on the American Stock Exchange. Such documents are
also available at the Web site maintained by the Commission
(http://www.sec.gov). Reports, proxy statements and other information
described above may also be inspected and copied at the offices of the American
Stock Exchange at 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act, with respect
to the Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is hereby made to such
Registration Statement and exhibits. Statements contained herein concerning
the provisions of any documents are necessarily summaries of those documents,
and each statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission. The Registration Statement and
any amendments thereto, including exhibits filed as a part thereof, are
available for inspection and copying as set forth above.
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 8
Selling Stockholders . . . . . . . . . . . . . . . . . . 9
Plan of Distribution . . . . . . . . . . . . . . . . . . 10
Legal Matters . . . . . . . . . . . . . . . . . . . . . . 11
Experts . . . . . . . . . . . . . . . . . . . . . . . . . 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR
ANY OFFER TO OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(3) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997;
(4) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
(5) The Company's Proxy Statement for the Annual Meeting of Stockholders
of Harken held on June 9, 1997, as amended and supplemented by the
additional soliciting materials dated May 12, 1997 for the Annual
Meeting of Stockholders of Harken held on June 9, 1997; and
(6) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, as amended, including all
amendments and reports filed for the purpose of updating such
description.
All documents filed by Harken pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any subsequently filed supplement to this Prospectus or
in any document that also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom a copy of
this Prospectus has been delivered, upon written or oral request, a copy of any
or all documents incorporated by reference in this Prospectus, other than
exhibits to such documents unless such exhibits are specifically incorporated
by reference in such documents. Written or oral requests for such copies
should be directed to Gregory S. Porter, Harken Energy Corporation, 5605 North
MacArthur Blvd., Suite 400, Irving, Texas 75038 (Telephone: (972) 753-6900).
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THE COMPANY
Harken is engaged in oil and gas exploration, development and production
operations both domestically and internationally through its various
wholly-owned subsidiaries and joint venture investments. Harken's domestic
operations include oil and gas exploration and production operations in the
Four Corners Area of Utah, Arizona and New Mexico, the Gulf Coast of Texas, the
Texas Panhandle, the Magnolia region of Arkansas and the Carlsbad region of New
Mexico. Harken's international operations include five exclusive Colombian
Association Contracts between Harken's wholly-owned subsidiary, Harken de
Colombia, Ltd., and Empresa Colombiana de Petroleos, the state-owned oil
company of the Republic of Colombia.
Harken was incorporated in 1973 in the State of California and
reincorporated in 1979 in the State of Delaware. Harken's principal offices
are located at 5605 North MacArthur Blvd., Suite 400, Irving, Texas 75038 and
its telephone number is (972) 753-6900.
RISK FACTORS
Prior to making an investment decision, prospective investors should
consider carefully all of the information set forth in this Prospectus and, in
particular, should evaluate the following risk factors.
VOLATILITY OF HARKEN COMMON STOCK TRADING PRICE
The daily closing prices of the Common Stock as reported by the American
Stock Exchange has fluctuated significantly over the past 12 months, ranging
from a high of $7.50 per share to a low of $3.50 per share. Management
believes that the price fluctuations and trading activity in the Common Stock
during the past 12 months are attributable to a number of factors, including
Harken's international exploration activities. There can be no assurance that
future announcements regarding Harken's international exploration efforts will
not have a substantial adverse effect on the then prevailing market price of
the Common Stock.
LOSSES FROM CONTINUING OPERATIONS
Harken reported losses from continuing operations for the fiscal years
ended December 31, 1994, 1995 and 1996 in the amounts of $8,211,000, $1,625,000
and $341,000, respectively. For the first nine months of 1997, Harken reported
income of approximately $152,000. There can be no assurance, however, that
Harken will continue to remain profitable.
POTENTIAL DILUTION; EFFECT OF SALES OF COMMON STOCK ON MARKET PRICE
As of January 23, 1998, there were 121,811,534 shares of Common Stock
outstanding. Harken has reserved a significant number of shares of Common
Stock for future issuance as described below. There can be no assurance that
the issuance of the shares of Common Stock which have been reserved for future
issuance will not have a material adverse effect on the then prevailing market
price of the Common Stock. Furthermore, issuance of the shares of Common Stock
as described below could result in significant dilution to the stockholders of
the Company.
On June 11, 1997, Harken issued $70,000,000 in principal amount of its
5 1/2% Senior Convertible Notes due 2002 (the "Notes"). The Notes are
convertible into shares of Common Stock by the holders thereof at a conversion
price of $5.00 per share at any time after July 21, 1997. The Company has the
right to force the mandatory conversion of all outstanding Notes into Common
Stock at any time after June 11, 1998. As of January 12, 1998, Notes in the
principal amount of $39,880,000 remained outstanding and up to 7,976,000 shares
of Common Stock could be required to be issued upon conversion of such Notes.
In October and December 1997, Harken entered into two separate
Development Finance Agreements (the "Development Finance Agreements") with
seven institutional investors (the "Investors"), pursuant to which the
Investors provided funds to Harken to finance drilling of three prospects in
Colombia. In exchange, the
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Investors received the right to receive future payments from Harken based on
Harken's net profits from the three prospects (the "Participation"). The
Investors have the right, for a period of two years beginning in October 1998,
to convert all or part of the Participation into shares of Common Stock. The
number of shares of Common Stock to be issued upon conversion of the
Participation will be equal to the quotient of (i) the Payment Amount (less any
distributions made in respect of the Participation) plus an amount equal to 15%
interest per annum on the net Payment Amount compounded monthly (the "Invested
Amount"), divided by (ii) the market price of the Common Stock at the time of
conversion. Harken also has the right to convert the Participation into shares
of Common Stock with the number of shares of Common Stock to be issued to be
equal to the quotient of (i) the Payment Amount (less any distribution made in
respect of the Participation) plus an amount equal to 25% interest per annum on
the net Payment Amount compounded monthly, divided by (ii) the market price of
the Common Stock at the time of conversion. Harken can also elect to pay cash
upon any conversion of the Participation in lieu of issuing shares of Common
Stock. The Development Finance Agreements also require the issuance of
additional shares of Common Stock in the event of a conversion to the extent
that the Investors do not, under certain circumstances, realize the Invested
Amount from the sale of the shares of Common Stock issued upon conversion.
Harken has reserved additional shares of Common Stock for issuance as
follows: (i) 2,143,937 shares of Common Stock have been reserved for issuance
upon exercise of outstanding warrants; and (ii) 8,831,999 shares of Common
Stock have been reserved for issuance upon exercise of outstanding stock
options and stock options which may be issued pursuant to Harken's existing
stock option plans.
PREFERRED STOCK AUTHORIZED FOR ISSUANCE
Harken has ten million shares of preferred stock available for issuance.
The Board of Directors is authorized to issue such preferred stock in one or
more series and to set the designations, preferences, powers and relative
rights and restrictions thereof without further approval by the stockholders of
the Company. Presently, Harken has four series of preferred stock authorized,
but no shares of preferred stock are currently outstanding. Such shares of
preferred stock, if issued, would have certain preferences over the shares of
Common Stock with respect to the payment of dividends and upon liquidation,
dissolution, winding-up and in certain instances, voting. The Board of
Directors of Harken also may authorize additional series of preferred stock in
the future that have similar or additional preferences over the shares of
Common Stock.
RISKS RELATED TO INTERNATIONAL OPERATIONS
Harken presently conducts operations in Colombia and anticipates that it
will conduct significant operations in Colombia in the future. Foreign
properties, operations or investments may be adversely affected by local
political and economic developments, exchange controls, currency fluctuations,
royalty and tax increases, retroactive tax claims, renegotiation of contracts
with governmental entities, expropriation, import and export regulations and
other foreign laws or policies governing operations of foreign-based companies,
as well as by laws and policies of the United States affecting foreign trade,
taxation and investment. In addition, as certain of Harken's operations are
governed by foreign laws, in the event of a dispute, Harken may be subject to
the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdiction of courts in the United States.
Harken may also be hindered or prevented from enforcing its rights with respect
to a governmental instrumentality because of the doctrine of sovereign
immunity. Exploration and production activities in areas outside the United
States are also subject to the risks inherent in foreign operations, including
loss of revenue, property and equipment as a result of hazards such as
expropriation, nationalization, war, insurrection and other political risks.
Harken anticipates that full development of the oil and gas reserves in
the contract areas covered by Harken's five Colombian Association Contracts
will take several years and may require extensive production facilities which
could require significant additional capital expenditures. The ultimate amount
of such expenditures cannot be presently predicted. Harken anticipates that
amounts required to fund international activities, including those in Colombia,
will be funded from existing cash balances, asset sales, stock issuances,
production payments, operating cash flows and potentially from industry
partners; however, there can be no
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assurance that Harken will have adequate funds available to it to fund its
international activities without participation from industry partners or that
participation from industry partners can be obtained to fund such international
activities. In addition, Harken faces certain deadlines for completing
specific projects required pursuant to the five Colombian Association
Contracts. Failure to meet any of such deadlines could result in Harken losing
its rights to one or more of the Association Contracts, which could have a
material adverse effect on Harken's business.
UNCERTAINTIES IN UNITED STATES -- COLOMBIA RELATIONS
Pursuant to the Foreign Assistance Act of 1961, the President of the
United States is required to determine whether to certify that certain
countries have cooperated with the United States, or taken adequate steps on
their own, to achieve the goals of the United Nations Convention Against
Illicit Traffic in Narcotic Drugs and Psychotropic Substances. In 1995, 1996
and 1997, the President did not certify Colombia. As a result, the United
States imposed substantial economic sanctions on Colombia, including the
withholding of bilateral economic assistance, the blocking of Export-Import
Bank and Overseas Private Investment Corporation loans and political risk
insurance, and the entry of the United States votes against multilateral
assistance to Colombia in the World Bank and the InterAmerican Development
Bank. It is likely that the United States will continue to not certify
Colombia as long as the current Colombian government remains in power.
The consequences of continued and successive United States
decertifications of Colombian activities are not fully known, but may include
the imposition of additional economic sanctions on Colombia in 1998 and
succeeding years. The President also has authority to impose far-reaching
economic, trade and investment sanctions on Colombia pursuant to the
International Emergency Economic Powers Act of 1978. The Colombian
government's reaction to United States sanctions could potentially include,
among other things, restrictions on the repatriation of profits and the
nationalization of Colombian assets owned by United States entities.
Accordingly, imposition of the foregoing economic and trade sanctions on
Colombia could materially affect the performance of the Common Stock and the
Company's long-term financial results.
INDUSTRY RISKS
Oil and Gas Price Volatility. The revenues generated by Harken are
highly dependent upon the prices of crude oil and natural gas. Fluctuations in
the energy market make it difficult to estimate future prices of oil and
natural gas. Fluctuations in energy prices are caused by a number of factors,
including regional, domestic and international demand, energy legislation,
federal or state taxes on sales of crude oil and natural gas, production
guidelines established by the Organization of Petroleum Exporting Countries,
and the relative abundance of supplies of alternative fuel such as coal.
Additionally, changing international economic and political conditions may have
a dramatic impact upon crude oil and natural gas prices. Many of these factors
are beyond the control of Harken.
Business Risks. Harken must continually acquire or explore for and
develop new oil and gas reserves to replace those being depleted by production.
Without successful drilling or acquisition ventures, Harken's oil and gas
assets, properties and revenues derived therefrom will decline over time. To
the extent Harken engages in drilling activities, such activities carry the
risk that no commercially viable oil or gas production will be obtained. The
cost of drilling, completing and operating wells is often uncertain. Moreover,
drilling may be curtailed, delayed or canceled as a result of many factors,
including shortage of available working capital, title problems, weather
conditions, environmental concern, shortages of or delays in delivery of
equipment, as well as the financial instability of well operators, major
working interest owners and drilling and well servicing companies. The
availability of a ready market for Harken's oil and gas depends on numerous
factors beyond its control, including the demand for and supply of oil and gas,
the proximity of Harken's natural gas reserves to pipelines, the capacity of
such pipelines, fluctuation in seasonal demand, the effects of inclement
weather, and government regulation. New gas wells may be shut-in for lack of a
market until a gas pipeline or gathering system with available capacity is
extended into the area.
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Operating Hazards and Uninsured Risks. The operations of Harken are
subject to the inherent risks normally associated with exploration for and
production of oil and gas, including blowouts, cratering, pollution and fires,
each of which could result in damage to or destruction of oil and gas wells or
production facilities or damage to persons and property. As is common in the
oil and gas industry, Harken is not fully insured against these risks, either
because insurance is not available or because Harken has elected to self-insure
due to high premium costs. The occurrence of a significant event not fully
insured against could have a material adverse effect on Harken's financial
condition.
Environmental Regulation. Harken's domestic activities are subject to
various Navajo, federal, state, and local laws and regulations covering the
discharge of material into the environment or otherwise relating to protection
of the environment. In particular, Harken's oil and gas exploration,
development, production, its activities in connection with storage and
transportation of liquid hydrocarbons and its use of facilities for treating,
processing, recovering, or otherwise handling hydrocarbons and wastes therefrom
are subject to stringent environmental regulation by governmental authorities.
In addition to these domestic laws and regulations, Harken's international
operations are subject to the laws, regulations and governmental approvals of
each foreign country in which it conducts activities including, but not limited
to, environmental laws and regulations governing oil and gas operations. The
environmental legislation of Colombia provides for restrictions and
prohibitions on spills, releases or emissions of various substances produced in
association with oil operations. Under Colombia's environmental laws, the
Company is required to submit a report evaluating the environmental impact of
any actions proposed to be taken which might have a negative impact on the
environment for approval to the Colombian Ministry of the Environment.
Specifically, Harken is required to submit environmental impact reports
regarding each well Harken proposes to drill, all seismic activities and any
proposed pipelines or trucking activity. Failure to timely receive approval of
environmental reports has in the past delayed Harken's operations and there can
be no assurance that Harken will not suffer future delays. Colombia's
regulatory framework with regard to environmental protection is not as fully
developed and detailed as that which exists in the United States. The Company
intends that its operations in Colombia will be designed to meet standard
international petroleum industry practice and, as they develop, Colombian
requirements. Such domestic and foreign laws and regulations have increased
the costs of planning, designing, drilling, installing, operating and
abandoning Harken's oil and gas wells and other facilities and may do so in the
future.
Imprecise Nature of Reserve Estimates. Reserve estimates are imprecise
and may be expected to change as additional information becomes available.
Furthermore, estimates of oil and gas reserves, of necessity, are projections
based on engineering data, and there are uncertainties inherent in the
interpretation of such data as well as the projection of future rates of
production and the timing of development expenditures. Reserve engineering is
a subjective process of estimating underground accumulations of oil and gas
that cannot be measured in an exact way, and the accuracy of any reserve
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment.
Competition. The oil and gas industry is competitive in all its phases.
Competition is particularly intense respecting the acquisition of desirable
producing properties and the sale of oil and natural gas production. Harken's
competitors in oil and gas exploration, development and production include
major oil companies and numerous independent oil and gas companies, and
individual producers and operators. Many of Harken's competitors possess and
employ financial and personnel resources substantially greater than those which
are available to Harken, and may, therefore, be able to pay greater amounts for
desirable leases and to define, evaluate, bid for and purchase a greater number
of producing prospects than the financial or personnel resources of Harken will
permit.
Extensive Regulation. The production of oil and gas is subject to
extensive Navajo, federal and state laws, rules, orders and regulations
governing a wide variety of matters, including the drilling and spacing of
wells, allowable rates of production, prevention of waste and pollution and
protection of the environment. In addition to these domestic laws and
regulations, Harken's international operations are subject to the laws,
regulations and governmental approvals of each foreign country in which it
conducts activities including, but not limited to, environmental laws and
regulations governing oil and gas operations. Such laws, rules and regulations
are subject to change. Any such change in any law, rule or regulation could
have the effect of
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increasing the Company's cost of exploration or production or may limit the
Company's revenues by regulating the level of oil and gas production, either of
which could have a material adverse effect on the financial condition of the
Company.
USE OF PROCEEDS
Harken will not receive any part of the proceeds from the sale of Shares
by the Selling Stockholders.
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SELLING STOCKHOLDERS
This Prospectus covers the offer and sale of the Shares by the Selling
Stockholders. Set forth below are the names of the Selling Stockholders, the
nature of any position, office or other material relationship that the Selling
Stockholders have had within the last three years with the Company or any of
its predecessors or affiliates, the number of shares of Common Stock owned by
the Selling Stockholders as of the date of this Prospectus, the number of
shares of Common Stock which may be offered by the Selling Stockholders
pursuant to this Prospectus, and the number of shares of Common Stock owned by
the Selling Stockholders upon completion of the offering if all of the Shares
held by the Selling Stockholders are sold. Any or all of the Shares listed
below may be offered for sale by the Selling Stockholders from time to time.
Percent of
Common Stock
Shares Owned Shares Shares Owned Owned After
Prior to the Offered After the the
Selling Stockholders Offering Hereby Offering(1) Offering(1)
- -------------------------------------- ------------- ------- ------------ ------------
Sidro S.A. 18,000 18,000 -0- -0-
Lambertine Holdings Ltd. 12,000 12,000 -0- -0-
Rauscher Pierce & Clark (Guernsey) Ltd. 820,464(2) 480,015 340,449(2) (3)
EnCap Energy Capital Fund III, L.P. 265,293(4)(5) 65,293 200,000(4) (3)
EnCap Energy Capital Fund III-B, L. P. 246,616(4)(5) 46,616 200,000(4) (3)
BOCP Energy Partners, L.P. 215,591(4)(5) 15,591 200,000(4) (3)
Energy Capital Investment Company PLC 222,500(4)(5) 22,500 200,000(4) (3)
Dalworth Capital Limited 198,960(6) 141,445 57,515(6) (3)
James Ladner 145,616(6) 116,816 28,800(6) (3)
Marcus Mueller 37,037(6) 37,037 -0- (3)
- -------------------
(1) Assumes no other disposition or acquisition of Common Stock and all
Shares included herein are sold.
(2) Includes warrants to purchase 808,464 shares of Common Stock.
(3) Less than one percent.
(4) Includes warrants to purchase 75,169 shares of common stock held by EnCap
Equity 1994 Limited Partnership, warrants to purchase 24,831 shares of
common stock held by Energy Capital Investment Company PLC, and warrants
to purchase 100,000 shares of common stock held by EnCap Investments LC.
(5) Gary R. Petersen, a Director of Harken, is a managing director of EnCap
Investments L.C., the general partner of EnCap Energy Capitol Fund III,
L.P., EnCap Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P.,
and Mr. Petersen is a director of Energy Capital Investment Company PLC.
(6) Represents shares of common stock issuable upon exercise of warrants.
9
11
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of Common Stock
owned by the Selling Stockholders. It is anticipated that the Selling
Stockholders will offer the Shares in the manner set forth on the cover page of
this Prospectus, from time to time, directly or through broker-dealers or
underwriters who may act solely as agents or may acquire the Shares as
principals, in all cases as designated by the Selling Stockholders. Such
underwriters or broker- dealers acting either as principal or as agent, may
receive compensation in the form of usual and customary or specifically
negotiated underwriting discounts, concessions or commissions from the Selling
Stockholders or the purchasers of the securities offered hereby for whom they
may act as agent.
The net proceeds to the Selling Stockholders from the sale of Common
Stock so offered will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any, and other
expenses of issuance and distribution not borne by the Company. The Selling
Stockholders and any dealers or agents that participate in the distribution of
Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act.
At any time a particular offer of Common Stock is made, to the extent
required, the specific shares of Common Stock to be sold, the purchase price,
public offering price, the names of any such agent, dealer or underwriter and
any applicable commission or discount with respect to a particular offering
will be set forth in an accompanying Prospectus Supplement. Such Prospectus
Supplement may, if necessary, be in the form of a post-effective amendment to
the Registration Statement of which this Prospectus is a part, and will be
filed with the Commission to reflect the disclosure of additional information
with respect to the distribution of such securities.
Pursuant to certain agreements between the Company and Selling
Stockholders, the Company has agreed to file a "shelf" registration statement
pursuant to Rule 415 under the Securities Act covering the sale of shares of
Common Stock held by the Selling Stockholders, and to use its reasonable best
efforts to maintain the effectiveness of any such registration statement for no
less than one year from the date of effectiveness of such registration
statement. In addition, the Company has agreed to bear certain expenses of
registration of the Shares under the federal and state securities laws
(currently estimated to be $7,500) and of any offering and sale hereunder not
including certain expenses such as commissions or discounts of underwriters,
dealers or agents attributable to the sale of such Common Stock. The Company
has also agreed to indemnify the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Selling Stockholders may be required to make in respect
thereof.
To comply with the securities laws of certain jurisdictions, the
securities offered hereby may be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
The Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales
by the Selling Stockholders and any other such person. Furthermore, under Rule
10b-6 under the Exchange Act, any person engaged in a distribution of the
Common Stock may not simultaneously engage in market making activities with
respect to such securities for a period of two business days prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the securities offered hereby.
10
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LEGAL MATTERS
The validity of the Shares will be passed upon for Harken by Gregory S.
Porter, Esq., Vice President - Legal of Harken.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which is incorporated by reference herein, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
11
13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by the Company in connection with the offering
described in this Registration Statement are estimated as follows:
Commission Registration Fee . . . . . . . . $ 1,690.61
Printing and Engraving Expenses . . . . . . 2,000.00
Accounting Fees and Expenses . . . . . . . 2,000.00
Blue Sky Fees and Expenses . . . . . . . . 1,000.00
Miscellaneous . . . . . . . . . . . . . . . 809.39
----------
Total . . . . . . . . . . . . . $ 7,500.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of Delaware
("Delaware Law"), a Delaware corporation may indemnify its directors, officers,
employees and agents against expenses (including attorneys fees), judgments,
fines and settlements in nonderivative suits, actually and reasonably incurred
by them in connection with the defense of any action, suit or proceeding in
which they or any of them were or are made parties or are threatened to be made
parties by reason of their serving or having served in such capacity. Delaware
law, however provides that such person must have acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests
of the corporation, and in the case of a criminal action, such person must have
had no reasonable cause to believe his or her conduct was unlawful. Section 145
further provides that in connection with the defense or settlement of any
action by or in the right of the corporation, a Delaware corporation may
indemnify its directors and officers against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in
good faith, in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made
with respect to any claim, issue or matter as to which such person has been
adjudged liable for negligence or misconduct unless the Court of Chancery or
the court in which such action or suit is brought approves such
indemnification. Section 145 further permits a Delaware corporation to grant
its directors and officers additional rights of indemnification through bylaw
provisions and otherwise, and to purchase indemnity insurance on behalf of its
directors and officers. Indemnification is mandatory to the extent a claim,
issue or matter has been successfully defended.
Article Ten of the Company's Certificate of Incorporation and Article VII
of the Company's bylaws provide, in general, that the Company shall indemnify
its directors and officers under certain of the circumstances defined in
Section 145. The Company has entered into agreements with each member of its
Board of Directors pursuant to which it will advance to each director costs of
litigation in accordance with the indemnification provisions of the Company's
Certificate of Incorporation and bylaws.
ITEM 16. EXHIBITS.
4.1 - Form of certificate representing shares of Common Stock (filed as Exhibit 1 to Harken's Registration
Statement on Form 8-A, File No. 0-9207, and incorporated by reference herein).
II-1
14
4.2 - Certificate of the Designations, Powers, Preferences and Rights of Series C Cumulative Convertible
Preferred Stock, $1.00 par value of Harken Energy Corporation (filed as Exhibit 4.3 to Harken's
Annual Report on Form 10-K for fiscal year ended December 31, 1989, File No. 0-9207, and incorporated
by reference herein).
4.3 - Certificate of the Designations of Series D Preferred Stock, $1.00 par value of Harken Energy
Corporation (filed as Exhibit 4.3 to Harken's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995, File No. 0-9207, and incorporated by reference herein).
*5.1 - Opinion of Gregory S. Porter, Esq.
*23.1 - Consent of Arthur Andersen LLP.
*23.2 - Consent of Gregory S. Porter, Esq. (included in opinion filed as Exhibit 5.1).
*24.1 - Powers of Attorney.
- --------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereto) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in
volume of securities offered (if the total
dollar value of securities offered would not
exceed that which was registered) and any
deviation from the low or high end of the
estimated maximum offering range may be
reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price
represent no more than a 20% change in the
maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs
II-2
15
is contained in periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, 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. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irving, State of Texas, on February 3, 1998.
HARKEN ENERGY CORPORATION
*
--------------------------------------------------
Mikel D. Faulkner, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board and Chief February 3, 1998
------------------------------- Executive Officer (Principal
Mikel D. Faulkner Executive Officer)
* President and Chief Operating February 3, 1998
------------------------------- Officer and Director
Richard H. Schroeder
* Senior Vice President, Chief February 3, 1998
------------------------------- Financial Officer and Director
Bruce N. Huff (Principal Accounting Officer and
Principal Financial Officer)
* Senior Vice President and Director February 3, 1998
-------------------------------
Stephen C. Voss
* Director February 3, 1998
-------------------------------
Gary R. Petersen
II-4
17
*
Director February 3, 1998
-------------------------------
Michael M. Ameen, Jr.
Director February 3, 1998
-------------------------------
Michael R. Eisenson
* Director February 3, 1998
-------------------------------
Hobart A. Smith
* Director February 3, 1998
-------------------------------
Donald W. Raymond
* Director February 3, 1998
-------------------------------
Gary B. Wood
*Gregory S. Porter, by signing his name hereto, does hereby sign this
Registration Statement on behalf of Harken Energy Corporation and each of the
above-named officers and directors of such Company pursuant to powers of
attorney, executed on behalf of the Company and each officer and director.
/s/ Gregory S. Porter
- ---------------------
Gregory S. Porter,
Attorney-in-Fact
II-5
18
INDEX TO EXHIBITS
Sequentially
Exhibit No. Exhibit Numbered Page
----------- ------- -------------
4.1 Form of certificate representing shares of Harken common
stock, par value $.01 per share (filed as Exhibit 1 to
Harken's Registration Statement on Form 8-A, File No. 0-
9207, and incorporated by reference herein).
4.2 Certificate of the Designations, Powers, Preferences and
Rights of Series C Cumulative Convertible Preferred Stock,
$1.00 par value of Harken Energy Corporation (filed as
Exhibit 4.3 to Harken's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, File No. 0-9207, and
incorporated by reference herein).
4.3 Certificate of the Designations of Series D Preferred
Stock, $1.00 par value of Harken Energy Corporation (filed
as Exhibit 4.3 to Harken's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1995, File No.
0-9207, and incorporated by reference herein).
*5.1 Opinion of Gregory S. Porter, Esq.
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Gregory S. Porter, Esq. (included in opinion
filed as Exhibit 5.1).
*24.1 Powers of Attorney.
- -------------
* Filed herewith