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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest even reported) February 23, 1996
FORTUNE PETROLEUM CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 1-12334 95-4114732
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
One Commerce Green, 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
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 23, 1996, Fortune Petroleum Corporation ("Fortune" or "the
Company") sold its interest in all but one of its California properties for
cash in the amount of $800,000. The properties sold consisted of the Company's
interest in the Hopper Canyon, Holser Canyon, Oxnard and Sheils Canyon Fields
in Ventura County and the Bacon Hills Field in Kern County. The sale was
effective December 31, 1995. In connection with the sale, Fortune is required
to pay commissions and expenses estimated to be $75,000.
The Company's sole remaining California property is the Sespe Field,
Ventura County, California. Fortune has entered into a letter of intent to
sell this property to Seneca Resources for approximately #340,000. The sale is
expected to close in the first quarter of 1996, with an effective date of
December 1, 1995. The sale of the Sespe property is subject to completion of
due diligence by the parties, and no assurance can be given that such sale will
occur.
All of the Company's California properties were pledged to secure the
Company's Credit Facility with BankOne, Texas. Concurrently with the closing
of the sale of the non-Sespe
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properties, Fortune paid down the Credit Facility by $1.1 million, representing
the entire indebtedness secured by the Company's California properties.
The closing of the sale of the non-Sespe properties and the
anticipated sale of the Sespe property will complete the Company's strategic
move to focus its efforts on exploration in the gulf Coast and south Texas
areas. As previously announced, in furtherance of the change in focus, the
Company has also completed the relocation of its headquarters to Houston.
At December 31, 1994 (the latest date as of which data is available),
Fortune owned and operated 39 gross and 29.92 net wells located in California.
Production in California during 1994 totaled approximately 63,021 net barrels
of oil and 68,626 net Mcf of gas. This represented about 72% of the Company's
1994 oil production and about 6.7% of its gas production. Properties located
in California, which are all operated by the Company, comprised approximately
92% of Fortune's net proved oil reserves and 31% of Fortune's net proven gas
reserves as of December 31, 1994.
Despite the high percentage of oil production represented by these
properties, the costs of operating the wells in California was, in the view of
management, disproportionately high in relation to the revenues generated. The
high cost of production in California on the Company's properties was a result
of several factors, including the low gravity of the oil, the small production
from each well and environmental and workers' compensation costs. Therefore,
the net income received by the Company on the California properties was small
in relation to the cost of operation.
It is anticipated that the Company will take a writedown against its
1995 results as a result of the sale. The writedown is expected to be $1.5
million, but the exact amount will depend on the Company's depletion allowance
through the effective dates of the transactions.
Item 5. OTHER EVENTS.
As previously disclosed, in connection with the financing of the
acquisition of the Timbalier Block in December 1995, Fortune issued 1,321,117
shares of its Common Stock to a group of European investors in a transaction
which qualified for an exemption from the registration requirements of the
Securities Act of 1933 under Regulation S. Under the terms of the agreements
with such purchasers, the purchasers would be entitled to receive additional
shares under "reset" provisions which called for a recalculation of the
purchase price at the expiration of the 40 day holding period for the initial
stock acquisition.
Such recalculation have now been completed, and indicate that the
purchasers are entitled to receive an aggregate of an additional 1,265,729
shares. The Company has applied for listing of such shares with the American
Stock Exchange and cannot issue the shares until such listing is approved. In
addition, the Company and the AMEX are conducting an inquiry into unusual
trading activity in the Fortune Common Stock on the Exchange during the
recalculation period under the "reset" provision. The Company cannot predict
when any additional shares will be issued to these purchasers.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses sold. To be filed by
amendment with the time permitted by the Commission's rules.
(b) Pro forma financial information. To be filed by amendment
with the time permitted by the Commission's rules.
(c) Exhibits.
2.1 Purchase and Sale Agreement dated February 23, 1996,
between Fortune Petroleum Corporation and Arnold and Joan
Travis and The Wood Family Trust
SIGNATURES
Pursuant to the requirements of the Securities 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
Date: March 8, 1996 By: s/ TYRONE J. FAIRBANKS
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Tyrone J. Fairbanks, President
and Chief Executive Officer