As Filed With the Securities and Exchange Commission on March 19, 2004
Registration Statement No. ____________
=============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DELTA PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Colorado
(State or jurisdiction of incorporation or organization)
84-1060803
(I.R.S. Employer Identification Number)
475 17th Street, Suite 1400
Denver, Colorado 80202
(303) 293-9133
(Address and telephone number of issuer's principal executive offices)
Roger A. Parker, Chief Executive Officer
475 17th Street, Suite 1400
Denver, Colorado 80202
(303) 293-9133
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to public: As soon as the
registration statement is effective.
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, 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. [ ]
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class of Securities Amount to be Price Offering Registration
to be Registered Registered(1) Per Unit(2) Price(2) Fee(2)
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Common Stock,
$.01 par value 4,000,000 $8.87 $35,480,000 $4,495.32
=============================================================================
(1) In the event of a stock split, stock dividend or similar transaction
involving our common stock, in order to prevent dilution, the number of shares
registered shall automatically be increased to cover the additional shares in
accordance with Rule 416(a) under the Securities Act of 1933, as amended (the
"Securities Act").
(2) In accordance with Rule 457(c), the aggregate offering price of our stock
is estimated solely for calculating the registration fees due for this filing.
For the initial filing of this Registration Statement, this estimate was based
on the average of the high and low sales price of our stock reported by the
Nasdaq National Market on March 15, 2004, which was $8.87 per share.
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.
SUBJECT TO COMPLETION; DATED MARCH 19, 2004
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The information in this prospectus is not complete and may be changed. The
securities may not be sold until the registration statement filed with the
Securities and Exchange 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 the offer or sale is not permitted.
Up to 4,000,000 Shares
Delta Petroleum Corporation
Common Stock
----------------------------
The selling shareholders may use this prospectus in connection with sales
of up to 4,000,000 shares of our common stock.
Trading Symbol
NASDAQ National Market
"DPTR"
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Consider carefully the risk factors beginning on page 7 of this prospectus.
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The selling shareholders may sell the common stock at prices and on terms
determined by the market, in negotiated transactions or through underwriters.
We will not receive any proceeds from the sale of shares by the selling
shareholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is _________, 2004.
AVAILABLE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, as amended, and in accordance therewith file reports and other
information with the Securities and Exchange Commission. Such reports and
other information filed by us can be inspected and copied at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Requests for copies should be
directed to the Commission's Public Reference Section, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for more information on the public reference rooms. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
including us, that file electronically.
We have filed with the Commission a Registration Statement on Form S-3
(together with all exhibits, amendments and supplements, the "Registration
Statement") of which this prospectus constitutes a part, under the Securities
Act of 1933, as amended (the "Securities Act"). This prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules of the
Commission. For further information pertaining to us, reference is made to
the Registration Statement. Statements contained in this prospectus or any
document incorporated herein by reference concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
document filed with the Commission. Copies of the Registration Statement are
on file at the offices of the Commission, and may be inspected without charge
at the offices of the Commission, the addresses of which are set forth above,
and copies may be obtained from the Commission at prescribed rates. The
Registration Statement has been filed electronically through the Commission's
Electronic Data Gathering, Analysis and Retrieval System and may be obtained
through the Commission's Web site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we have filed with the Commission shall be
deemed to be incorporated in this prospectus and to be a part hereof from the
date of the filing of such documents:
1. Annual Report on Form 10-K for fiscal year ended June 30, 2003,
filed on September 23, 2003, Exchange Act reporting number 0-16203.
2. Current Report on Form 8-K/A, dated May 24, 2002, filed on August 19,
2002, Exchange Act reporting number 0-16203.
3. Current Report on Form 8-K, dated September 19, 2003, filed on October
2, 2003, Exchange Act reporting number 0-16203.
4. Definitive proxy materials on Schedule 14A filed on October 24, 2003,
Exchange Act reporting number 0-16203.
5. Quarterly Report on Form 10-Q for the quarter ended September 30,
2003, filed on November 6, 2003, Exchange Act reporting number 0-16203.
6. Amendment No. 1 to Current Report on Form 8-K, dated September 19,
2003, filed on December 2, 2003, Exchange Act reporting number 0-16203.
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7. Current Report on Form 8-K, dated December 9, 2003, filed on December
19, 2003, Exchange Act reporting number 0-16203.
8. Quarterly Report on Form 10-Q for the quarter ended December 31,
2003, filed on February 4, 2004, Exchange Act reporting number 0-16203.
9. Current Report on Form 8-K (excluding the information provided in Item
12 thereof), dated February 4, 2004, filed on February 5, 2004,
Exchange Act reporting number 0-16203.
10. Current Report on Form 8-K dated March 8, 2004, filed on March 8, 2004,
Exchange Act reporting number 0-16203.
11. The description of our common stock contained in our Registration
Statement on Form 10 filed September 9, 1987, Exchange Act reporting
number 0-16203.
12. All documents filed by us, subsequent to the date of this prospectus,
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, prior to the termination of the offering described
herein.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for all purposes to the extent
that a statement contained in this prospectus or in any other subsequently
filed document which is also incorporated herein by reference modifies or
replaces such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, on written or oral request of
such person, a copy of any or all documents incorporated by reference in this
prospectus. Requests for such copies should be directed to Aleron H. Larson,
Jr., Delta Petroleum Corporation, Suite 1400, 475 17th Street, Denver,
Colorado 80202, or (303) 293-9133.
CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS
We are including the following discussion to inform our existing and
potential security holders generally of some of the risks and uncertainties
that can affect us and to take advantage of the "safe harbor" protection for
forward-looking statements afforded under federal securities laws. From time
to time, our management or persons acting on our behalf make forward-looking
statements to inform existing and potential security holders about us. These
statements may include projections and estimates concerning the timing and
success of specific projects and our future (1) income, (2) oil and gas
production, (3) oil and gas reserves and reserve replacement and (4) capital
spending. Forward-looking statements are generally accompanied by words such
as "estimate," "project," "predict," "believe," "expect," "anticipate,"
"plan," "goal" or other words that convey the uncertainty of future events or
outcomes. Sometimes we will specifically describe a statement as being a
forward-looking statement. In addition, except for the historical information
contained in this prospectus, the matters discussed in this prospectus are
forward-looking statements. These statements by their nature are subject to
certain risks, uncertainties and assumptions and will be influenced by various
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factors. Should any of the assumptions underlying a forward-looking statement
prove incorrect, actual results could vary materially.
We believe the factors discussed below are important factors that could
cause actual results to differ materially from those expressed in a forward-
looking statement made herein or elsewhere by us or on our behalf. The factors
listed below are not necessarily all of the important factors. Unpredictable
or unknown factors not discussed herein could also have material adverse
effects on actual results of matters that are the subject of forward-looking
statements. We do not intend to update our description of important factors
each time a potential important factor arises. We advise our shareholders that
they should (1) be aware that important factors not described below could
affect the accuracy of our forward-looking statements and (2) use caution and
common sense when analyzing our forward-looking statements in this document or
elsewhere, and all of such forward-looking statements are qualified by this
cautionary statement.
Historically, natural gas and crude oil prices have been volatile. These
prices rise and fall based on changes in market demand and changes in the
political, regulatory and economic climate and other factors that affect
commodities markets generally and are outside of our control. Deviations in
the market prices of both crude oil and natural gas may have a significant
effect on the quantities and future values of reserves.
Projecting future rates of oil and gas production is inherently
imprecise. Producing oil and gas reservoirs generally have declining
production rates.
All of our reserve information is based on estimates. Reservoir
engineering is a subjective process of estimating underground accumulations of
oil and natural gas that cannot be measured in an exact way. There are
numerous uncertainties inherent in estimating quantities of proved natural gas
and oil reserves.
Changes in the legal and/or regulatory environment could have a material
adverse effect on our future results of operations and financial condition.
Our ability to explore for and economically produce and sell our oil and gas
production is affected and could possibly be restrained by a number of legal
and regulatory factors, particularly with respect to our offshore California
properties.
Our drilling operations are subject to various risks common in the
industry, including cratering, explosions, fires and uncontrollable flows of
oil, gas or well fluids.
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TABLE OF CONTENTS
Prospectus Summary .................................................... 6
Risk Factors........................................................... 7
Use of Proceeds ....................................................... 16
Determination of Offering Price ....................................... 16
Recent Material Changes in our Business ............................... 16
Selling Security Holders ............................................. 17
Plan of Distribution .................................................. 19
Description of Securities to Be Registered ............................ 20
Interests of Named Experts and Counsel ................................ 20
Commission Position on Indemnification for
Securities Act Liabilities ........................................... 21
5
PROSPECTUS SUMMARY
The following is a summary of the pertinent information regarding this
offering. This summary is qualified in its entirety by the more detailed
information and financial statements and related notes incorporated by
reference into this prospectus.
Delta
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Delta Petroleum Corporation ("Delta," the "Company," "we" or "us") is a
Colorado corporation organized on December 21, 1984. We maintain our
principal executive offices at 475 Seventeenth Street, Suite 1400, Denver,
Colorado 80202, and our telephone number is (303) 293-9133. Our common stock
is listed on the NASDAQ National Market under the symbol "DPTR."
We are engaged in the acquisition, exploration, development and
production of oil and gas properties. As of June 30, 2003, we had varying
interests in 488 gross (260 net) productive wells located in fourteen (14)
states and offshore California. These do not include varying small interests
in 666 gross (5.2 net) wells located primarily in Texas which are owned by our
subsidiary Piper Petroleum Company. We also have interests in five federal
units and one lease offshore California near Santa Barbara along with a
financial interest in a nearby producing offshore federal unit. We operate
approximately 270 of the wells and the remaining wells are operated by
independent operators. All of these wells are operated under contracts which
we believe are standard in the industry. At June 30, 2003, we estimated
onshore proved reserves to be approximately 3,698,000 Bbls of oil and 55.2 Bcf
of gas, of which approximately 2,608,000 Bbls of oil and 28.6 Bcf of gas were
proved developed reserves. At June 30, 2003, we estimated offshore proved
reserves to be approximately 2,051,000 Bbls of oil, of which approximately
919,000 Bbls were proved developed reserves. Our reserve estimates change
continuously and are evaluated by us on an annual basis. Deviations in the
market prices of both crude oil and natural gas may have a significant effect
on the quantities and future values of our reserves.
The Offering
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Securities Offered Up to 4,000,000 shares of our common stock offered
by the selling shareholders.
Offering Price The shares being offered pursuant to this prospectus
are being offered by the selling shareholders from
time to time at the then current market price.
Common Stock 30,320,000 shares (as of March 12, 2004).
Outstanding
Dividend Policy We do not anticipate paying dividends on our common
stock in the foreseeable future.
Use of Proceeds The shares offered pursuant to this prospectus are
being sold by the selling shareholders and we will
not receive any proceeds of the offering.
6
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information in this prospectus, the following:
Risks Related to Our Stock
1. We may issue shares of preferred stock with greater rights than our
common stock.
Although we have no current plans, arrangements, understandings or
agreements to issue any preferred stock, our certificate of incorporation
authorizes our board of directors to issue one or more series of preferred
stock and set the terms of the preferred stock without seeking any further
approval from our shareholders. Any preferred stock that is issued may rank
ahead of our common stock, in terms of dividends, liquidation rights and
voting rights.
2. There may be future dilution of our common stock.
To the extent options to purchase common stock under our employee and
director stock option plans are exercised, holders of our common stock will
incur dilution. In addition, if we sell additional equity or convertible debt
securities, such sales could result in additional dilution to our
shareholders.
3. Our management controls a significant percentage of our outstanding
common stock and their interests may conflict with those of our shareholders.
As of March 12, 2004, our directors and executive officers and their
respective affiliates collectively and beneficially owned approximately 40% of
our outstanding common stock. In addition, one of our affiliates, Castle
Energy Corporation, has agreed to vote in favor of all of management's
nominees for director and in favor of other matters recommended by our Board
of Directors. This concentration of voting control gives our directors and
executive officers and their respective affiliates substantial influence over
any matters which require a shareholder vote, including, without limitation,
the election of directors, even if their interests may conflict with those of
other shareholders. It could also have the effect of delaying or preventing a
change in control of or otherwise discouraging a potential acquiror from
attempting to obtain control of us. This could have a material adverse effect
on the market price of our common stock or prevent our shareholders from
realizing a premium over the then prevailing market prices for their shares of
common stock.
4. Sales of substantial amounts of our common stock may adversely affect
our stock price and make future offerings to raise more capital difficult.
Sales of a large number of shares of our common stock in the market after
this offering or the perception that sales may occur could adversely affect
the trading price of our common stock. As of March 12, 2004, 30,320,000
shares of our common stock were outstanding, almost all of which are freely
tradable, subject to certain volume limitations and other requirements
applicable to affiliates. As of March 12, 2004, options and warrants to
purchase up to a total of approximately 5,474,800 shares of our common stock
were outstanding.
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We may issue additional restricted securities or register additional
shares of common stock under the Securities Act in the future for our use in
connection with future acquisitions. Pursuant to Securities Act Rule 145, the
volume limitations and certain other requirements of Rule 144 would apply to
resales of these shares by affiliates of the businesses that we acquire for a
period of one year from the date of their acquisition, but otherwise these
shares would be freely tradable by persons not affiliated with us unless we
contractually restrict their resale.
The availability for sale, or sale, of the shares of common stock
eligible for future sale could adversely affect the market price of our common
stock.
5. Provisions in some of our stock option grants to key employees could
delay or prevent a change in control of the Company, even if that change would
be beneficial to our shareholders.
Certain provisions in option grants to certain of our key employees
provide that in the event of a change of control of the Company we will
immediately cause all of such employees' then outstanding unexercised options
to be exercised by the Company on behalf of such employees and that we will
pay all related federal, state and local taxes applicable to such exercise.
Such provisions could delay, discourage, prevent or render more difficult an
attempt to obtain control of the Company, whether through a tender offer,
business combination, proxy contest or otherwise.
6. We do not expect to pay dividends on our common stock.
We do not expect to pay any dividends, in cash or otherwise, with respect
to our common stock in the foreseeable future. We intend to retain any
earnings for use in our business. In addition, the credit agreement relating
to our $50 million credit facility with the Bank of Oklahoma, U.S. Bank and
Hibernia Bank prohibits us from paying any dividends until the loan is
retired.
7. The market price of our common stock has risen significantly in a
very short period of time.
The market price of our common stock increased from approximately $6 per
share to approximately $9 per share during the month of January 2004. There
can be no assurance that the market price of our common stock will remain at
or near its current level, which is near an historic high.
8. The common stock is an unsecured equity interest in the Company.
As an equity interest, the common stock will not be secured by any of the
assets of the Company. Therefore, in the event of the liquidation of the
Company, the holders of the common stock will receive a distribution only
after all of the Company's secured and unsecured creditors have been paid in
full. There can be no assurance that the Company will have sufficient assets
after paying its secured and unsecured creditors to make any distribution to
the holders of the common stock.
8
Risks Related to our Company
1. We have substantial debt obligations, and shortages of funding could
hurt our future operations.
As the result of debt obligations that we have incurred in connection
with purchases of oil and gas properties, we are obligated to make substantial
monthly payments to our lenders on loans that encumber our oil and gas
properties and our production revenue. As of the date of this prospectus, we
owe Bank of Oklahoma, U.S. Bank and Hibernia Bank, collectively, approximately
$31 million, and we are required to pay approximately $350,000 per month to
service this debt. In the event that oil and gas prices and/or production
rates drop to a level such that we are unable to pay the minimum principal and
interest payments that are required by our debt agreements, it is likely that
we would lose our interest in some or all of our properties. In addition, our
level of oil and gas activities, including exploration and development of
existing properties, and additional property acquisitions, will be
significantly dependent on our ability to successfully complete funding
transactions.
2. A default under our credit agreement could cause us to lose our
properties.
Our credit facility with Bank of Oklahoma, U.S. Bank and Hibernia Bank
allows us to borrow, repay and re-borrow amounts, up to a maximum amount of
$50 million. In order to obtain this facility, we granted a first and prior
lien to the lending banks on most of our oil and gas properties, certain
related equipment, oil and gas inventory, certain bank accounts and proceeds.
Under the terms of our credit agreement, the oil and gas properties mortgaged
must represent not less than 80% of the engineered value of our oil and gas
properties as determined by the Bank of Oklahoma using its own pricing
parameters.
Our borrowing base, which determines the amounts that we are allowed to
borrow or have outstanding under our credit facility, is $32,850,000 as of the
date of this prospectus. Subsequent determinations of our borrowing base will
be made by the lending banks at least semi-annually on October 1 and April 1
of each year or as unscheduled redeterminations. In connection with each
determination of our borrowing base, the banks will also redetermine the
amount of our monthly commitment reduction. Our monthly commitment reduction
is currently $350,000 and will continue at that amount until the amount of the
monthly commitment reduction is redetermined. Our borrowing base and the
revolving commitment of the banks to lend money under the credit agreement
must be reduced as of the first day of each month by an amount determined by
the banks under our credit agreement. The amount of the borrowing base must
also be reduced from time to time by the amount of any prepayment that results
from our sale of oil and gas properties. If, as a result of any such monthly
commitment reduction or reduction in the amount of our borrowing base, the
total amount of our outstanding debt were to exceed the amount of the
revolving commitment then in effect, then, within 30 days after we are
notified by the Bank of Oklahoma, we would be required to make a mandatory
prepayment of principal to reduce our outstanding indebtedness so that it
would not exceed our borrowing base. If for any reason we were unable to pay
the full amount of the mandatory prepayment within the requisite 30-day
period, we would be in default of our obligations under our credit agreement.
For so long as the revolving commitment is in existence or any amount is
owed under any of the loan documents, we will also be required to comply with
9
loan covenants that will limit our flexibility in conducting our business and
which could cause us significant problems in the event of a downturn in the
oil and gas market. If an event of default occurs and continues after the
expiration of any cure period that is provided for in our credit agreement,
the entire principal amount due under the loan documents, all accrued interest
and any other liabilities that we might have to the lending banks under the
loan documents will all become immediately due and payable, all without notice
of default of any kind. The foregoing information is provided to alert
investors that there is risk associated with our existing debt obligations.
It is not intended to provide a summary of the terms of our agreements with
our lenders.
3. Until recently, we have operated at a loss and have a substantial
accumulated deficit.
Although we have recently begun to achieve profits from our operations,
we have incurred substantial losses from our operations in most of the past
several years except fiscal years 2001 and 2003, and at December 31, 2003, we
had an accumulated deficit of $25,580,000. During the six months ended
December 31, 2003, we had total revenue of $15,192,000, operating expenses of
$12,222,000 and net income of $2,016,000. During the fiscal year ended June
30, 2003, we had total revenue of $23,980,000, operating expenses of
$20,967,000 and net income of $1,257,000. During the fiscal year ended June
30, 2002, we had total revenue of $8,033,000, operating expenses of
$13,074,000 and a net loss of $6,253,000. During the fiscal year ended June
30, 2001, we had total revenue of $12,712,000, operating expenses of
$11,093,000 and net income of $345,000.
4. The substantial cost to develop certain of our offshore California
properties could result in a reduction of our interest in these properties or
cause us to incur penalties.
Certain of our offshore California undeveloped properties, in which we
have ownership interests ranging from 2.49% to 75%, are attributable to our
interests in four of our five federal units (plus one additional lease)
located offshore of California near Santa Barbara. The cost to develop these
properties will be very substantial. The cost to develop all of these
offshore California properties in which we own an interest, including
delineation wells, environmental mitigation, development wells, fixed
platforms, fixed platform facilities, pipelines and power cables, onshore
facilities and platform removal over the life of the properties (assumed to be
38 years), is estimated to be in excess of $3 billion. Our share of such
costs, based on our current ownership interest, is estimated to be over $200
million. Operating expenses for the same properties over the same period of
time, including platform operating costs, well maintenance and repair costs,
oil, gas and water treating costs, lifting costs and pipeline transportation
costs, are estimated to be approximately $3.5 billion, with our share, based
on our current ownership interest, estimated to be approximately $300 million.
There will be additional costs of a currently undetermined amount to develop
the Rocky Point Unit. Each working interest owner will be required to pay its
proportionate share of these costs based upon the amount of the interest that
it owns. If we are unable to fund our share of these costs or otherwise cover
them through farmouts or other arrangements, then we could either forfeit our
interest in certain wells or properties or suffer other penalties in the form
of delayed or reduced revenues under our various unit operating agreements.
10
5. The development of the offshore units could be delayed or halted.
Our offshore California leases are located in federal units that have
been formally approved and are regulated by the Minerals Management Service of
the federal government ("MMS"). There has historically been political
resistance to the development of these leases due to environmental concerns.
At the request of the local regulatory agencies of the affected Tri-Counties
in California, the MMS initiated a study, called the California Offshore Oil
and Gas Energy Resources (COOGER) study, which was intended to present a
long-term regional perspective of potential onshore constraints that should be
considered when developing the existing undeveloped offshore leases. The
COOGER study took several years to complete and was presented as a final
document in January of 2000. During the period while the COOGER study was
being completed, the MMS unilaterally approved suspensions of operations for
the affected leases, which had the effect of allowing most of our offshore
leases to continue in effect after their stated expiration dates.
During that same period, the State of California commenced litigation in
Federal Court in California which, among other things, challenged the ability
of the MMS under federal law to approve the subject suspensions and thereby
extend the terms of the leases without providing the State of California with
a formal determination that the granting of the suspensions was consistent
with the requirements of the Coastal Zone Management Act. On June 22, 2001,
the California Federal Court ordered the MMS to set aside its approval of the
suspensions of our offshore leases that were granted while the COOGER study
was being completed, and to direct suspensions, including all milestone
activities, for a time sufficient for the MMS to provide the State of
California with a consistency determination under federal law. On July 2,
2001, these milestones were suspended by the MMS, but as of the date of this
prospectus, the MMS has not yet made a consistency determination. On February
26, 2004 the parties were ordered by the Court to engage in mediation to
attempt to reach a final resolution of all of their disputes.
On January 9, 2002, we and several other plaintiffs filed a separate
lawsuit in the United States Court of Federal Claims in Washington, D.C.,
alleging that the U.S. government materially breached the terms of the leases
for our offshore California properties. Our suit seeks compensation for the
lease bonuses and rentals paid to the Federal government, exploration costs,
and related expenses. While it is still our present intent to develop our
offshore California properties as soon as possible, the ultimate outcome and
effects of the litigation pertaining to these properties are not certain at
the present time. In the event that we make a determination that development
of all or any portion of these properties is not feasible, we intend to write
off an appropriate portion of these assets on our balance sheet irrespective
of the status of our litigation against the United States government at that
time. As of December 31, 2003, these properties had an aggregate carrying
value of $10,201,000.
6. We will have to incur substantial costs in order to develop our
reserves and we may not be able to secure funding.
We have significant undeveloped properties in addition to those in
offshore California discussed above that will require substantial costs to
develop. During the fiscal year ended June 30, 2003, we did not participate
in the drilling of any offshore wells, but we did participate in the drilling
of nine onshore wells, of which three were non-productive, at a cost to us of
approximately $2,145,000. The cost of these wells either has been or will be
paid out of our cash flow. Although we believe that we will participate in
11
the drilling of additional wells during our 2004 fiscal year, our level of oil
and gas activity, including exploration and development and property
acquisitions, will be to a significant extent dependent upon our cash flow
from operations, which is in turn dependent upon the prices that we receive
from the sale of our oil and gas production.
7. Current and future governmental regulations will affect our
operations.
Our activities are subject to extensive federal, state, and local laws
and regulations controlling not only the exploration for and sale of oil, but
also the possible effects of such activities on the environment. Present as
well as future legislation and regulations could cause additional
expenditures, restrictions and delays in our business, the extent of which
cannot be predicted, and may require us to cease operations in some
circumstances. In addition, the production and sale of oil and gas are
subject to various governmental controls. Because federal energy policies are
still uncertain and are subject to constant revisions, no prediction can be
made as to the ultimate effect on us of such governmental policies and
controls.
8. We hold only a minority interest in certain properties and,
therefore, generally will not control the timing of development.
We currently hold a minority interest in and do not operate approximately
40% of the wells in which we own an interest, and we are dependent upon the
operators of the wells that we do not operate to make most decisions
concerning such things as whether or not to drill additional wells, how much
production to take from such wells, or whether or not to cease operation of
such wells. Further, we do not act as operator of, and, with the exception of
Rocky Point, we do not own a controlling interest in, any of our offshore
California properties. While we, as a working interest owner, may have some
voice in the decisions concerning the wells, we are not the primary decision
maker concerning them. As a result, we will generally not control the timing
of either the development of most of these non-operated properties or the
expenditures for their development. Because we are not in control of the
non-operated wells, we may not be able to cause wells to be drilled even
though we may have the funds with which to pay our proportionate share of the
expenses of such drilling, or, alternatively, we may incur development
expenses at a time when funds are not available to us.
9. We have no long-term contracts to sell oil and gas.
We do not have any long-term supply or similar agreements with
governments or other authorities for which we act as a producer. We are
therefore dependent upon our ability to sell oil and gas at the prevailing
wellhead market price. There can be no assurance that purchasers will be
available or that the prices they are willing to pay will remain stable.
10. Our business is not diversified.
Since all of our resources are devoted to one industry, purchasers of our
common stock will be risking essentially their entire investment in a company
that is focused only on oil and gas activities.
12
11. Our shareholders do not have cumulative voting rights.
Holders of our common stock are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the holders of more
than 50% of our outstanding common stock will be able to elect all of our
directors. As of March 12, 2004, our directors and executive officers and
their respective affiliates collectively and beneficially owned approximately
40% of our outstanding common stock.
12. We depend on key personnel.
We currently have only four employees that serve in management roles, and
the loss of any one of them could severely harm our business. In particular,
Roger A. Parker and John Wallace are responsible for the operation of our oil
and gas business, Aleron H. Larson, Jr. is responsible for other business and
corporate matters, and Kevin K. Nanke is our chief financial officer. We do
not have key man insurance on the lives of any of these individuals.
Risks Related to our Business
1. Our future success depends upon our ability to find, develop and
acquire additional oil and gas reserves that are economically recoverable.
The rate of production from oil and natural gas properties declines as
reserves are depleted. As a result, we must locate and develop or acquire new
oil and gas reserves to replace those being depleted by production. We must
do this even during periods of low oil and gas prices when it is difficult to
raise the capital necessary to finance activities. Without successful
exploration or acquisition activities, our reserves and revenues will decline.
We may not be able to find and develop or acquire additional reserves at an
acceptable cost or obtain necessary financing for these activities in the
future.
2. The exploration, development and operation of oil and gas properties
involve substantial risks that may result in a total loss of investment.
The business of exploring for and, to a lesser extent, developing and
operating oil and gas properties involves a high degree of business and
financial risk, and thus a substantial risk of investment loss that even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. We may drill wells that are unproductive or, although productive,
do not produce oil and/or gas in economic quantities. Acquisition and
completion decisions generally are based on subjective judgments and
assumptions that are speculative. It is impossible to predict with certainty
the production potential of a particular property or well. Furthermore, a
successful completion of a well does not ensure a profitable return on the
investment. A variety of geological, operational, or market-related factors,
including, but not limited to, unusual or unexpected geological formations,
pressures, equipment failures or accidents, fires, explosions, blowouts,
cratering, pollution and other environmental risks, shortages or delays in the
availability of drilling rigs and the delivery of equipment, loss of
circulation of drilling fluids or other conditions may substantially delay or
prevent completion of any well or otherwise prevent a property or well from
being profitable. A productive well may become uneconomic in the event water
or other deleterious substances are encountered which impair or prevent the
production of oil and/or gas from the well. In addition, production from any
well may be unmarketable if it is contaminated with water or other deleterious
substances.
13
3. You should not place undue reliance on reserve information because it
is only an estimate.
Certain of our Exchange Act reports filed with the Commission contain
estimates of oil and gas reserves, and the future net cash flows attributable
to those reserves, prepared by Ralph E. Davis Associates, Inc. and Mannon &
Associates (together, the "Engineers"), our independent petroleum and
geological engineers. There are numerous uncertainties inherent in estimating
quantities of proved reserves and cash flows from such reserves, including
factors beyond the Company's control and the Engineers' control. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and gas that cannot be measured in an exact manner. The accuracy of an
estimate of quantities of oil and gas reserves, or of cash flows attributable
to such reserves, is a function of the available data, assumptions regarding
future oil and gas prices, expenditures for future development and
exploitation activities, and engineering and geological interpretation and
judgment. Reserves and future cash flows may also be subject to material
downward or upward revisions based upon production history, development and
exploitation activities and oil and gas prices. Actual future production,
revenue, taxes, development expenditures, operating expenses, quantities of
recoverable reserves and value of cash flows from those reserves may vary
significantly from the assumptions and estimates in our Exchange Act reports
filed with the Commission, certain of which are incorporated by reference into
this prospectus. In addition, reserve engineers may make different estimates
of reserves and cash flows based on the same available data. The estimated
quantities of proved reserves and the discounted present value of future net
cash flows attributable to those reserves included in certain of the Exchange
Act reports were prepared by the Engineers in accordance with the rules of the
Commission, and are not intended to represent the fair market value of such
reserves.
4. We may suffer losses or incur liability for events that we or the
operator of a property has chosen not to obtain insurance.
Our operations are subject to hazards and risks inherent in producing and
transporting oil and natural gas, such as fires, natural disasters,
explosions, pipeline ruptures, spills, and acts of terrorism, all of which can
result in the loss of hydrocarbons, environmental pollution, personal injury
claims and other damage to properties of the Company and others. As
protection against operating hazards, we maintain insurance coverage against
some, but not all, potential losses. In addition, we believe any operators of
properties in which we have or may acquire an interest will maintain similar
insurance coverage. The occurrence of an event that is not covered, or not
fully covered, by insurance could have a material adverse effect on our
business, financial condition and results of operation.
5. Our use of hedging arrangements could result in financial losses or
reduce our income.
We currently engage in hedging arrangements for a portion of our oil and
natural gas production in order to reduce our exposure to fluctuations in the
prices of oil and natural gas. These hedging arrangements expose us to risk
of financial loss in some circumstances, including when production is less
than expected; the counter-party to the hedging contract defaults on its
contract obligations; or there is a change in the expected differential
between the underlying price in the hedging agreement and the actual prices
14
received. In addition, these hedging arrangements may limit the benefit we
would otherwise receive from increases in prices for oil and natural gas.
6. The volatility of natural gas and oil prices could have a material
adverse effect on our business.
Our revenues, profitability and future growth and the carrying value of
our oil and gas properties depend to a large degree on prevailing oil and gas
prices. Our ability to maintain or increase our borrowing capacity and to
obtain additional capital on attractive terms also substantially depends upon
oil and gas prices. Prices for oil and gas are subject to large fluctuations
in response to relatively minor changes in the supply and demand for oil and
gas, uncertainties within the market and a variety of other factors beyond our
control. These factors include weather conditions in the United States; the
condition of the United States economy; the actions of the Organization of
Petroleum Exporting Countries; governmental regulation; political stability in
the Middle East and elsewhere; the foreign supply of oil and gas; the price of
foreign imports; and the availability of alternative fuel sources.
A sharp decline in the price of natural gas and oil prices would result
in a commensurate reduction in our revenues, income and cash flows from the
production of oil and gas and could have a material adverse effect on the
carrying value of our proved reserves and our borrowing base. In the event
prices fall substantially, we may not be able to realize a profit from our
production and would operate at a loss. In recent decades, there have been
periods of both worldwide overproduction and underproduction of hydrocarbons
and periods of both increased and relaxed energy conservation efforts. Such
conditions have resulted in periods of excess supply of, and reduced demand
for, crude oil on a worldwide basis and for natural gas on a domestic basis.
These periods have been followed by periods of short supply of, and increased
demand for, crude oil and natural gas. The excess or short supply of crude
oil has placed pressures on prices and has resulted in dramatic price
fluctuations even during relatively short periods of seasonal market demand.
7. Our ability to market the oil and gas that we produce is essential to
our business.
Several factors beyond our control may have a material adverse effect on
our ability to market the oil and gas that we discover. These factors include
the proximity, capacity and availability of oil and gas pipelines and
processing equipment; the level of domestic production and imports of oil and
gas; the demand for oil and gas by utilities and other end users; the
availability of alternative fuel sources; the effect of inclement weather;
state and federal regulation of oil and gas marketing; and market fluctuations
of prices, taxes, royalties, land tenure, allowable production and
environmental protection. The extent of these factors cannot be accurately
predicted, but any one or a combination of these factors may result in our
inability to sell our oil and gas at prices that would result in an adequate
return on our invested capital.
8. We are subject to complex governmental regulations which may have a
material adverse effect on our cost of doing business.
Petroleum and natural gas exploration, development and production are
subject to various types of regulation by local, state and federal agencies.
We may be required to make large expenditures to comply with these regulatory
requirements. Legislation affecting the petroleum and natural gas industry is
under constant review for amendment and expansion. Also, numerous departments
15
and agencies, both federal and state, are authorized by statute to issue and
have issued rules and regulations binding on the petroleum and natural gas
industry and its individual members, some of which carry substantial penalties
for failure to comply. Any increases in the regulatory burden on the
petroleum and natural gas industry created by new legislation would increase
our cost of doing business and, consequently, adversely affect our
profitability. A major risk inherent in drilling is the need to obtain
drilling permits from local authorities. Delays in obtaining drilling
permits, the failure to obtain a drilling permit for a well or the failure to
obtain a drilling permit without unreasonable conditions or costs could have a
material adverse effect on our ability to effectively develop our properties.
9. Our competitors may have greater resources which could enable them to
pay a higher price for properties and to better withstand periods of low
market prices for oil and natural gas.
The petroleum and natural gas industry is intensely competitive, and we
compete with other companies which have substantially larger financial
resources, operations, staffs and facilities. Many of these companies not
only explore for and produce crude oil and natural gas but also carry on
refining operations and market oil and other products on a regional, national
or worldwide basis. Such companies may be able to pay more for productive oil
and natural gas properties and exploratory prospects or define, evaluate, bid
for and purchase a greater number of properties and prospects than our
financial or human resources permit. In addition, such companies may have a
greater ability to continue exploration activities during periods of low
hydrocarbon market prices. Our ability to acquire additional properties and
to discover reserves in the future will be dependent upon our ability to
evaluate and select suitable properties and to consummate transactions in a
highly competitive environment.
USE OF PROCEEDS
The proceeds from the sale of the shares of common stock offered pursuant
to this prospectus will be received directly by the selling shareholders, and
we will not receive any proceeds from the sale of these shares.
DETERMINATION OF OFFERING PRICE
The shares registered herein are being sold by the selling shareholders,
and not by us, and are therefore being sold at the market price as of the date
of sale. Our common stock is traded on the Nasdaq National Market System
under the symbol "DPTR." On March 18, 2004, the reported closing price for
our common stock on the Nasdaq National Market System was $10.37.
RECENT MATERIAL CHANGES IN OUR BUSINESS
There have been no material changes in our business since June 30, 2003,
that have not been reported in our reports on Forms 10-Q and 8-K, except as
set forth below:
On February 25, 2004 we completed the sale of 4 million shares of our
common stock at a price of $8 per share in a private placement for
approximately $30 million in net proceeds. Of that amount, approximately
$26.5 million is planned to be used to finance additional drilling
expenditures and the remainder is planned to be used to repay debt and for
general corporate purposes. We agreed to register all the shares sold in the
16
private offering for resale by the purchasers. The shares being offered for
resale pursuant to this prospectus are the same shares that we sold in our
private offering.
On March 1, 2004 we used proceeds from our private placement to pay
$3.75 million (including a prepayment penalty of $250,000) to the
Kaiser-Francis Oil Company as payment in full of our debt obligation to
Kaiser-Francis.
On February 27, 2004 we agreed with Castle Energy Corporation, an
affiliate, to sell to Castle certain of our properties located in Pennsylvania
that we initially acquired from Castle in 2002, subject to the condition that
we obtain an appraisal of the properties from an independent third party that
is consistent with the sales price. The sales price for the properties is $8
million in cash, payable in full at closing. We will continue to operate the
properties for a period not to exceed six months and we retained a right of
first refusal to repurchase the properties if Castle should decide to sell
them in the future. As of the date of this prospectus, Castle is the owner of
8,887,875 shares(or approximately 29%) of our currently issued and outstanding
shares and three members of our Board of Directors are also directors of
Castle, all of whom abstained from voting on this transaction. We believe
that the terms and conditions of our sale of properties to Castle are no less
favorable to us than we could have obtained from an independent third party.
Closing of the transaction is expected to occur on March 31, 2004.
On December 18, 2003, John Wallace (age 44) became our Executive Vice
President. Mr. Wallace was Vice President of Exploration and Acquisitions for
United States Exploration, Inc. ("USX"), a publicly-held oil and gas
exploration company, from May 1998 to December 2003, when he became employed
by Delta. For more than five years prior to joining USX, Mr. Wallace was
President of The Esperanza Corporation, a privately-held oil and gas
acquisition company, and Vice President of Dual Resources, Inc., a privately-
held oil and gas exploration company. Mr. Wallace is the son of John B.
Wallace, a Director of the Company.
SELLING SECURITY HOLDERS
The shares offered pursuant to this prospectus are being offered by the
selling shareholders.
Selling Shareholders
- --------------------
The table below includes information regarding ownership of our common
stock by the selling shareholders and the number of shares that they may sell
under this prospectus. There are no material relationships with the selling
shareholders other than those discussed herein.
17
Shares Percent
Beneficially Shares of Class
Owned Prior Shares Beneficially Owned
to the Offered Owned After After the
Selling Shareholders Offering Hereby the Offering(1) Offering(1)
- -------------------- ------------ -------- --------------- -----------
Glacier Partners 144,720 40,000 104,720 -0-
Meadowbrook Opportunity
Fund LLC 37,000 37,000 -0- -0-
3 Notch Capital Partners LP 50,000 50,000 -0- -0-
Hunter Global Investors
Fund II LP 4,750 4,750 -0- -0-
HG Holdings II Ltd. 20,500 20,500 -0- -0-
Hunter Global Investors
Fund I 79,250 79,250 -0- -0-
HG Holdings Ltd. 145,500 145,500 -0- -0-
Ironman Energy Capital LP 500,000 500,000 -0- -0-
Colonial Fund LLC 78,000 78,000 -0- -0-
Scudder Dreman Small Cap
Value Fund 336,000 336,000 -0- -0-
Scudder Dreman Small Cap
Value Portfolio 224,000 224,000 -0- -0-
Veredus Partners LP 273,700 100,000 173,700 -0-
North Sound Legacy Fund LLC 26,250 26,250 -0- -0-
North Sound Legacy Inter-
national Ltd. 560,000 560,000 -0- -0-
North Sound Legacy Inter-
national Fund LLC 288,750 288,750 -0- -0-
SDS Capital Group SPC Ltd. 225,000 225,000 -0- -0-
Sandor Capital Master Fund LP 40,000 40,000 -0- -0-
Straus Partners LP 73,800 43,800 30,000 -0-
Straus-Gept Partners LP 49,200 29,200 20,000 -0-
Pemigewasset Partners LP 50,000 30,000 20,000 -0-
Pemigewasset Offshore Ltd. 11,000 7,000 4,000 -0-
Dynamis Fund LP 100,000 100,000 -0- -0-
Goldman Sachs International
Limited 70,000 70,000 -0- -0-
Alydar Fund LP 6,251 6,251 -0- -0-
Alydar Q.P. Fund LP 52,915 52,915 -0- -0-
Alydar Fund Ltd. 35,834 35,834 -0- -0-
Peregrine Limited Partnership 36,600 36,600 -0- -0-
Merlin Limited Partnership 39,000 39,000 -0- -0-
Condor Limited Partnership 119,400 119,400 -0- -0-
Jayvee & Co. A/C AFNF0010002 171,400 171,400 -0- -0-
Royal Trust Corp. of Canada
Trust for Account 99480026 14,000 14,000 -0- -0-
Royal Trust Corp. of Canada
Trust for Account 99480071 31,600 31,600 -0- -0-
Jayvee & Co. Acct INVF0042002 32,500 32,500 -0- -0-
Jayvee & Co. Acct ITAF0013002 500 500 -0- -0-
BBT Fund 300,000 300,000 -0- -0-
Concentrated Alpha Partners 75,000 75,000 -0- -0-
GLG Partners LP 50,000 50,000 -0- -0-
--------- --------- ------- ---
Total 4,352,420 4,000,000 352,420 1.2%
________________
18
(1) Assumes that the selling shareholder will sell all of the shares of common stock
offered pursuant to this prospectus. We cannot assure you that the selling shareholder
will sell all or any of these shares.
PLAN OF DISTRIBUTION
The selling shareholders and their respective successors, which term
includes their transferees, pledgees or donees or their successors, may sell
the common stock directly to one or more purchasers (including pledgees) or
through brokers, dealers or underwriters who may act solely as agents or may
acquire common stock as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices
or at fixed prices, which may be changed. The selling shareholders may effect
the distribution of the common stock in one or more of the following methods:
- ordinary brokers' transactions, which may include long or short
sales;
- transactions involving cross or block trades or otherwise on the
open market;
- purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts under this
prospectus;
- "at the market" to or through market makers or into an existing
market for the common stock;
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents;
- through transactions in options, swaps or other derivatives
(whether exchange listed or otherwise); or
- any combination of the above, or by any other legally available
means.
In addition, the selling shareholders or their respective successors in
interest may enter into hedging transactions with broker-dealers who may
engage in short sales of common stock in the course of hedging the positions
they assume with the selling shareholders. The selling shareholders or their
respective successors in interest may also enter into option or other
transactions with broker-dealers that require delivery by such broker-dealers
of the common stock, which common stock may be resold thereafter under this
prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the common stock may receive compensation in the form of
discounts, concessions or commissions from the selling shareholders and/or the
purchasers of common stock for whom such broker-dealers may act as agent or to
whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be in excess of customary commissions).
Any securities covered by this prospectus that qualify for sale under
Rule 144 under the Securities Act may be sold under that Rule rather than
under this prospectus.
We cannot assure you that the selling shareholders will sell any or all
of the shares of common stock offered by the selling shareholders.
19
In order to comply with the securities laws of certain states, if
applicable, the selling shareholders will sell the common stock in
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states, the selling shareholders may not sell the common
stock unless the shares of common stock have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
DESCRIPTION OF SECURITIES TO BE REGISTERED
COMMON STOCK
- ------------
We are authorized to issue 300,000,000 shares of our $.01 par value
common stock, of which 30,320,000 shares were issued and outstanding as of
March 12, 2004. Holders of common stock are entitled to cast one vote for
each share held of record on all matters presented to shareholders.
Shareholders do not have cumulative rights; hence, the holders of more than
50% of the outstanding common stock can elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor
and, in the event of liquidation, to share pro rata in any distribution of our
assets after payment of all liabilities. We do not anticipate that any
dividends on common stock will be declared or paid in the foreseeable future.
Holders of common stock do not have any rights of redemption or conversion or
preemptive rights to subscribe to additional shares if issued by us. All of
the outstanding shares of our common stock are fully paid and nonassessable.
INTERESTS OF NAMED EXPERTS AND COUNSEL
EXPERTS
- -------
The Consolidated Financial Statements of Delta Petroleum Corporation as
of June 30, 2003 and 2002, and for each of the years in the three-year period
ended June 30, 2003 included in the Company's Annual Report on Form 10-K, and
the Consolidated Financial Statements of Castle Energy Corporation as of
September 30, 2001, which appear in the Form 8-K/A of Delta Petroleum
Corporation dated May 24, 2002, and filed on August 9, 2002, have been
incorporated herein by reference in reliance upon the reports of KPMG LLP,
independent accountants, upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
- -------------
The validity of the issuance of the common stock offered pursuant to this
prospectus will be passed upon for us by Krys Boyle, P.C., Denver, Colorado.
20
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the registrant according to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of the offering are estimated as follows:
Attorneys Fees $ 5,000.00
Accountants Fees $ 5,000.00
Registration Fees $ 4,495.32
Printing $ 200.00
Advertising $ 0
Other Expenses $ 0
-----------
TOTAL $ 14,695.32
===========
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado Business Corporation Act (the "Act") provides that a
Colorado corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability incurred in the
proceeding if (a) the person conducted himself or herself in good faith, and
(b) the person reasonably believed: (i) in the case of conduct in an official
capacity with the corporation, that his or her conduct was in the
corporation's best interests; and (ii) in all other cases, that his or her
conduct was at least not opposed to the corporation's best interests; and
(iii) in the case of any criminal proceeding, the person had no reasonable
cause to believe his or her conduct was unlawful. The termination of a
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent is not, of itself, determinative that the
director did not meet the standard of conduct described in the Act. The Act
also provides that a Colorado corporation is not permitted to indemnify a
director (a) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(b) in connection with any other proceeding charging that the director derived
an improper personal benefit, whether or not involving action in an official
capacity, in which proceeding the director was adjudged liable on the basis
that he or she derived an improper personal benefit. Indemnification
permitted under the Act in connection with a proceeding by or in the right of
the corporation is limited to reasonable expenses incurred in connection with
the proceeding.
Article X of our Articles of Incorporation provides as follows:
"ARTICLE X
INDEMNIFICATION
The corporation may:
(A) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee, or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
II-1
employee, or agent of another corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in the best interest of the corporation and, with
respect to any criminal action or proceeding, had reasonable cause to believe
his conduct was unlawful.
(B) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in the best interest of the
corporation; but no indemnification shall be made in respect of any claim,
issue, or matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnification for such expenses which such court
deems proper.
(C) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits in defense of any action, suit,
or proceeding referred to in (A) or (B) of this Article X or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(D) Any indemnification under (A) or (B) of this Article X (unless
ordered by a court) and as distinguished from (C) of this Article shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee, or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in (A) or (B) above. Such determination shall
be made by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding, or, if
such a quorum is not obtainable or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or by the shareholders.
(E) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit, or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit, or proceeding as
authorized in (C) or (D) of this Article X upon receipt of an undertaking by
or on behalf of the director, officer, employee, or agent to repay such amount
II-2
unless it is ultimately determined that he is entitled to be indemnified by
the corporation as authorized in this Article X.
(F) The indemnification provided by this Article X shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any applicable law, bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, and any procedure provided for by any of the
foregoing, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure
to the benefit of heirs, executors, and administrators of such a person.
(G) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation
or who is or was serving at the request of the corporation as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under provisions of this Article X."
In the event that a claim for indemnification against such liabilities
(other than the payment by Delta of expenses incurred or paid by a director,
officer or controlling person of Delta 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, Delta
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.
INDEX TO EXHIBITS.
Exhibit
No. Description
- ------- -----------
3.1 Articles of Incorporation of Delta Petroleum Corporation
(incorporated by reference to Exhibit 3.1 to the Company's
Form 10 filed September 9, 1987 with the Securities and
Exchange Commission)(1)
3.2 Amendment to Articles of Incorporation of Delta Petroleum
Corporation filed on June 16, 2003(2)
3.3 By-laws of Delta Petroleum Corporation (incorporated by
reference to Exhibit 3.2 to the Company's Form 10 filed
September 9, 1987 with the Securities and Exchange
Commission) (1)
5.1 Opinion of Krys Boyle, P.C. regarding legality (2)
23.1 Consent of KPMG LLP (2)
23.2 Consent of Krys Boyle, P.C. **
- ------------------------
II-3
(1) Incorporated by reference.
(2) Filed herewith electronically.
** Contained in the legal opinion filed herewith as Exhibit 5.1.
Undertakings
The Company on behalf of itself hereby undertakes and commits as follows:
A. 1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement.
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
3. To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of Delta pursuant to the foregoing provisions, or
otherwise, Delta has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
C. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934(and, where applicable, each filing of an
employee benefits plan annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
D. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
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 on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver and State of Colorado on the 19th day
of March, 2004.
DELTA PETROLEUM CORPORATION
By: /s/ Roger A. Parker
---------------------------------
Roger A. Parker, Chief Executive
Officer
By: /s/ Kevin K. Nanke
---------------------------------
Kevin K. Nanke, Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this Form S-3
Registration Statement has been signed below by the following persons on our
behalf and in the capacities and on the dates indicated.
Signature and Title Date
-------------------- ----
/s/ Aleron H. Larson, Jr. March 19, 2004
- -----------------------------------
Aleron H. Larson, Jr., Director
/s/ Roger A. Parker March 19, 2004
- -----------------------------------
Roger A. Parker, Director
- -----------------------------------
James B. Wallace, Director
- -----------------------------------
Jerrie F. Eckelberger, Director
/s/ Joseph L. Castle II March 19, 2004
- -----------------------------------
Joseph L. Castle II, Director
/s/ Russell S. Lewis March 19, 2004
- -----------------------------------
Russell S. Lewis, Director
- -----------------------------------
John P. Keller, Director