As Filed With the Securities and Exchange Commission on December 1, 2004
Registration 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
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Common Stock,
$.01 par value 675,000 $15.06 $10,165,500 $1,287.97
=============================================================================
(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 November 29, 2004, which was $15.06 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 DECEMBER 1, 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 675,000 Shares
Delta Petroleum Corporation
Common Stock
----------------------------
The selling shareholders may use this prospectus in connection with sales
of up to 675,000 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.
- -----------------------------------------------------------------------------
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, 2004,
filed on September 13, 2004, Exchange Act reporting number 0-16203.
2. Annual Report on Form 10-K/A for the fiscal year ended June 30, 2004,
filed on October 28, 2004, Exchange Act reporting number 0-16203.
3. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004,
filed on November 9, 2004, Exchange Act reporting number 0-16203.
4. Current Report on Form 8-K, dated June 29, 2004, filed on July 8, 2004,
Exchange Act reporting number 0-16203.
5. Current Report on Form 8-K/A, dated June 29, 2004, filed on September
13, 2004, Exchange Act reporting number 0-16203.
6. Current Report on Form 8-K, dated August 6, 2004, filed on August 6,
2004, Exchange Act reporting number 0-16203.
7. Current Report on Form 8-K, dated August 25, 2004, filed on August 26,
2004, Exchange Act reporting number 0-16203.
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8. Current Report on Form 8-K, dated October 1, 2004, filed on October 1,
2004, Exchange Act reporting number 0-16203.
9. Current Report on Form 8-K, dated October 26, 2004, filed on October 29,
2004, Exchange Act reporting number 0-16203.
10. Current Report on Form 8-K, dated November 4, 2004, filed on November
10, 2004, Exchange Act reporting number 0-16203, except for information
disclosed under Item 2.02.
11. Current Report on Form 8-K, dated November 5, 2004, filed on November
12, 2004, Exchange Act reporting number 0-16203.
12. Current Report on Form 8-K, dated November 19, 2004, filed on November
19, 2004, Exchange Act reporting number 0-16203.
13. The description of our common stock contained in our Registration
Statement on Form 10 filed September 9, 1987, Exchange Act reporting
number 0-16203.
14. 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. Unless specifically stated to the contrary, none of the
information that we disclose under Items 2.02 or 7.01 of any Current Report on
Form 8-K that we may from time to time furnish to the SEC will be incorporated
by reference into, or otherwise included in, 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,"
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"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
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 and the effects of
acquisitions, dispositions and exploratory development activities 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 ....................................................... 18
Determination of Offering Price ....................................... 18
Recent Material Changes in our Business ............................... 19
Selling Shareholders .................................................. 19
Plan of Distribution .................................................. 19
Description of Securities ............................................. 21
Interests of Named Experts and Counsel ................................ 21
Commission Position on Indemnification for
Securities Act Liabilities ........................................... 21
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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, 2004, we had varying
interests in 554 gross (247.8 net) productive wells located in thirteen 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. At June 30,
2004, we estimated onshore proved reserves to be approximately 11,378,000
barrels of oil and 88.5 billion cubic feet of gas, of which approximately
6,240,000 barrels of oil and 55.8 billion cubic feet of gas were proved
developed reserves. At June 30, 2004, we estimated offshore proved reserves to
be approximately 1,827,000 barrels of oil, of which approximately 695,000
barrels 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 and the effects of
acquisitions, dispositions and exploratory development activities may have a
significant effect on the quantities and future values of our reserves.
The Offering
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Securities Offered Up to 675,000 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 40,026,449 shares (as of November 17, 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 articles of incorporation
authorize 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. Further, if we sell additional equity or convertible debt
securities, such sales could result in increased 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 November 1, 2004, our directors and executive officers and their
respective affiliates collectively and beneficially owned approximately 29% 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 at annual shareholder meetings. This concentration of voting
control gives our directors and executive officers and their respective
affiliates substantial influence over any matters that 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 acquirer 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 capital difficult.
Sales of a large number of shares of our common stock in the market or
the perception that sales may occur could adversely affect the trading price
of our common stock. As of November 17, 2004, 40,026,449 shares of our common
stock were outstanding, almost all of which currently are freely tradable,
subject to certain volume limitations and other requirements applicable to
affiliates. As of June 30, 2004, options to purchase up to a total of
approximately 4,758,272 shares of our common stock were outstanding.
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
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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. 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 credit facility prohibits us from paying any dividends until the loan
is retired.
6. The common stock is an unsecured equity interest in our Company.
As an equity interest, the common stock will not be secured by any of our
assets. Therefore, in the event we are liquidated, the holders of the common
stock will receive a distribution only after all of our secured and unsecured
creditors have been paid in full. There can be no assurance that we will have
sufficient assets after paying our secured and unsecured creditors to make any
distribution to the holders of the common stock.
7. 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 November 1, 2004, our directors and executive officers and
their respective affiliates collectively and beneficially owned approximately
29% of our outstanding common stock.
8. Our Articles of Incorporation have provisions that discourage corporate
takeovers and could prevent shareholders from realizing a premium on their
investment.
Certain provisions of our Articles of Incorporation and the provisions of
the Colorado Business Corporation Act may discourage persons from considering
unsolicited tender offers or other unilateral takeover proposals. Such persons
might choose to negotiate with our Board of Directors rather than pursue
non-negotiated takeover attempts. As a result, these provisions could have the
effect of preventing shareholders from realizing a premium on their
investment.
Our Articles of Incorporation authorize our Board of Directors to issue
preferred stock without shareholder approval and to set the rights,
preferences and other designations, including voting rights of those shares,
as the Board may determine. Additional provisions include restrictions on
business combinations and the availability of authorized but unissued common
stock. These provisions may discourage transactions involving actual or
potential changes of control, including transactions that otherwise could
involve payment of a premium over prevailing market prices to
shareholders for their common stock.
8
RISKS RELATED TO OUR COMPANY
1. We have substantial debt obligations, and shortages of funding could hurt
our future operations.
On November 5, 2004 we entered into a new $200 million credit facility
with Bank One, NA; Bank of Oklahoma, N.A.; U.S. Bank National Association and
Hibernia National Bank. The new credit facility replaces our previous $100
million credit facility with Bank of Oklahoma, U.S. Bank and Hibernia Bank.
In order to obtain this facility, we granted first and prior liens to the
lending banks on most of our oil and gas properties and the related equipment,
inventory, accounts and proceeds. The credit facility has variable interest
rates of the prime rate and/or an adjusted LIBOR rate, plus 0.25% to 1.0%
based on the total debt outstanding. The loan matures on November 5, 2008.
Our borrowing base, which determines the amounts that we are allowed to
borrow or have outstanding under the new credit facility, has been initially
set at $75 million. Subsequent determinations of our borrowing base will be
made by the lending banks at least semi-annually on February 15 and August 31
of each year or as special redeterminations. If, as a result of any such
reduction in the amount of our borrowing base, the total amount of our
outstanding debt were to exceed the amount of the borrowing base then in
effect, then, within 30 days after we are notified of the borrowing base
deficiency, we would be required to make a mandatory payment 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.
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, we would be in default
under our credit facility. 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.
In order to obtain our existing credit facility, we granted first and
prior liens to the lending banks on most of our oil and gas properties and the
related equipment, inventory, accounts and proceeds. Our credit facility
includes terms and covenants that place limitations on certain types of
activities, including restrictions or requirements with respect to additional
debt, liens, asset sales, hedging activities, investments, dividends, mergers
and acquisitions, and also includes financial covenants.
Under certain conditions amounts outstanding under our credit facility
may be accelerated. Bankruptcy and insolvency events with respect to us or
certain of our subsidiaries will result in an automatic acceleration of the
indebtedness under the credit facility. Subject to notice and cure periods in
certain cases, other events of default under the credit facility will result
in acceleration of the indebtedness at the option of the lending banks. Such
other events of default include non-payment, breach of warranty,
non-performance of obligations under the credit facility (including financial
covenants), default on other indebtedness, certain pension plan events,
certain adverse judgments, change of control, and a failure of the liens
9
securing the credit facility. Any of these events could potentially cause us
to lose substantially all of our properties.
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
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 readers
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. 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. These properties have a
cost basis of $10.8 million. 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, which could
impact the ultimate realization of this investment. The estimates discussed
above may differ significantly from actual results.
4. We may not be permitted to develop some of our offshore California
properties.
The development of our offshore California properties is subject to
extensive regulation and is currently the subject of litigation. Pursuant to a
ruling in California v. Norton, later affirmed by the 9th Circuit Court of
Appeals, the U.S. Government is required to make a consistency determination
relating to the 1999 lease suspension requests under a 1990 amendment to the
Coastal Zone Management Act. In the event that there is some future adverse
ruling under the Coastal Zone Management Act that we decide not to appeal or
that we appeal without success, it is likely that some or all of our interests
10
in these leases would become impaired and written off at that time. It is also
possible that other events could occur during the Coastal Zone Management Act
review or appellate process that would cause our interests in the leases to
become impaired, and we will continuously evaluate those factors as they
occur.
5. There is currently a shortage of available drilling rigs and equipment
which could cause us to experience higher costs and delays that could
adversely affect our operations.
Although equipment and supplies used in our business are usually
available from multiple sources, there is currently a general shortage of
drilling equipment and supplies. We believe that these shortages are likely to
intensify. The costs and delivery times of equipment and supplies are
substantially greater now than in prior periods and are currently escalating.
In partial response to this trend, we recently acquired a fifty percent
interest in a small drilling company and a fifty percent interest in a small
trucking company that are both currently managed by Edward Mike Davis.
Although Mr. Davis and his affiliated entities are not currently deemed to be
affiliates of Delta, we have recently acquired several properties from Mr.
Davis and entities that are controlled by him. We also currently have areas of
mutual interest and joint ventures with Mr. Davis and his related entities,
and we have substantial drilling commitments that are related to those
ventures. We believe that our ownership interest in the drilling company will
allow us to have priority access to at least two large drilling rigs. The
initial purpose of our investment in the trucking company is to allow these
drilling rigs to be moved to new drilling locations as necessary. We are also
attempting to establish arrangements with others to assure adequate
availability of certain other necessary drilling equipment and supplies on
satisfactory terms, but there can be no assurance that we will be able to do
so. Accordingly, there can be no assurance that we will not experience
shortages of, or material price increases in, drilling equipment and supplies,
including drill pipe, in the future. Any such shortages could delay and
adversely affect our ability to meet our drilling commitments.
6. 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.
7. Our business is not diversified.
Since all of our resources are devoted to one industry, owners of our
common stock are risking essentially their entire investment in a company that
is focused only on oil and gas activities.
8. 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 R. 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.
11
RISKS RELATED TO OUR BUSINESS
1. Oil and natural gas prices are volatile and a decrease could adversely
affect our revenues, cash flows and profitability.
Our revenues, profitability and future rate of growth depend
substantially upon the market prices of oil and natural gas, which fluctuate
widely. Sustained declines in oil and gas prices may adversely affect our
financial condition, liquidity and results of operations. Factors that can
cause market prices of oil and natural gas to fluctuate include: relatively
minor changes in the supply of and demand for oil and natural gas; market
uncertainty; the level of consumer product demands; weather conditions; U.S.
and foreign governmental regulations; the price and availability of
alternative fuels; political and economic conditions in oil producing
countries, particularly those in the Middle East; the foreign supply of oil
and natural gas; the price of oil and gas imports; and overall U.S. and
foreign economic conditions.
We are not able to predict future natural gas or oil prices. At various
times, excess domestic and imported supplies have depressed oil and gas
prices. Lower prices may reduce the amount of oil and natural gas that we can
produce economically and may also require us to write down the carrying value
of our oil and gas properties. Substantially all of our oil and natural gas
sales are made in the spot market or pursuant to contracts based on spot
market prices, not long-term fixed price contracts.
In an attempt to reduce price risk, we periodically enter into hedging
transactions with respect to a portion of our expected future production. Such
transactions may not reduce the risk or minimize the effect of any decline in
natural gas or oil prices. Any substantial or extended decline in the prices
of or demand for oil or natural gas would have a material adverse effect on
our financial condition and results of operations.
2. If oil or natural gas prices decrease or exploration and development
efforts are unsuccessful, we may be required to take write downs.
There is a risk that we will be required to write down the carrying value
of our oil and gas properties, which would reduce our earnings and
stockholders' equity. A write down could occur when oil and gas prices are low
or if we have substantial downward adjustments to our estimated proved
reserves, increases in our estimates of development costs or deterioration in
our exploration and development results.
We account for our natural gas and crude oil exploration and development
activities utilizing the successful efforts method of accounting. Under this
method, costs of productive exploratory wells, development dry holes and
productive wells and undeveloped leases are capitalized. Oil and gas lease
acquisition costs are also capitalized. Exploration costs, including personnel
costs, certain geological and geophysical expenses and delay rentals for oil
and gas leases, are charged to expense as incurred. Exploratory drilling costs
are initially capitalized, but charged to expense if and when the well is
determined not to have found reserves in commercial quantities. The
capitalized costs of our oil and gas properties may not exceed the estimated
future net cash flows from our properties. If capitalized costs exceed future
net revenues, we must write down the costs of the properties to our estimate
of fair market value. Any such charge will not affect our cash flow from
operating activities, but it will reduce our earnings and stockholders'
equity.
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The application of the successful efforts method of accounting requires
managerial judgment to determine the proper classification of wells designated
as developmental or exploratory, which will ultimately determine the proper
accounting treatment of the costs incurred. The results from a drilling
operation can take considerable time to analyze, and the determination that
commercial reserves have been discovered requires both judgment and industry
experience. Wells may be completed that are assumed to be productive and
actually deliver oil and gas in quantities insufficient to be economic, which
may result in the abandonment of the wells at a later date. Wells are drilled
that have targeted geologic structures that are developmental in nature and an
allocation of costs is required to properly account for the results. The
evaluation of oil and gas leasehold acquisition costs requires judgment to
estimate the fair value of these costs with reference to drilling activity in
a given area. Drilling activities in an area by other companies may also
effectively condemn leasehold positions.
We review our oil and gas properties for impairment whenever events and
circumstances indicate a decline in the recoverability of their carrying
value. Once incurred, a write down of oil and gas properties is not reversible
at a later date even if gas or oil prices increase. Given the complexities
associated with oil and gas reserve estimates and the history of price
volatility in the oil and gas markets, events may arise that would require us
to record an impairment of the recorded book values associated with our oil
and gas properties.
3. The marketability of our production depends mostly upon the availability,
proximity and capacity of gas gathering systems, pipelines and processing
facilities.
The marketability of our production depends upon the availability,
operation and capacity of gas gathering systems, pipelines and processing
facilities. The unavailability or lack of capacity of these systems and
facilities could result in the shut-in of producing wells or the delay or
discontinuance of development plans for properties. We currently own several
wells that are capable of producing but are currently shut-in pending the
construction of gas gathering systems, pipelines and processing facilities.
This is particularly true in Washington County, Colorado, where we are
continuing to actively drill gas wells that will be shut-in until early 2005
when we expect a third party to complete construction of a pipeline system
that will carry the gas to market. United States federal, state and foreign
regulation of oil and gas production and transportation, general economic
conditions and changes in supply and demand could adversely affect our ability
to produce and market oil and natural gas. If market factors changed
dramatically, the financial impact on us could be substantial. The
availability of markets and the volatility of product prices are beyond our
control and represent a significant risk.
4. We may not receive payment for a portion of our future production.
Our revenues are derived principally from uncollateralized sales to
customers in the oil and gas industry. The concentration of credit risk in a
single industry affects our overall exposure to credit risk because customers
may be similarly affected by changes in economic and other conditions. We
generally do not attempt to obtain credit protections such as letters of
credit, guarantees or prepayments from our purchasers. We are unable to
predict, however, what impact the financial difficulties of any of our
purchasers may have on our future results of operations and liquidity.
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5. We may not be able to obtain adequate financing to execute our operating
strategy.
We have historically addressed our short and long-term liquidity needs
through the use of cash flow provided by operating activities, the use of bank
credit facilities and the issuance of equity securities. Without adequate
financing, we may not be able to successfully execute our operating strategy,
particularly with respect to our offshore California properties. We continue
to examine the following alternative sources of capital:
* bank borrowings or the issuance of debt securities;
* the issuance of common stock, preferred stock or other equity
securities; and
* joint venture financing.
The availability of these sources of capital will depend upon a number of
factors, some of which are beyond our control. These factors include general
economic and financial market conditions, oil and natural gas prices and our
market value and operating performance. We may be unable to execute our
operating strategy if we cannot obtain adequate capital.
6. We may not be able to fund our planned capital expenditures.
We spend and will continue to spend a substantial amount of capital for
the acquisition, exploration, exploitation, development and production of oil
and gas reserves. Our exploration and development capital budget ranges from
$60 to $80 million for fiscal 2005. If low oil and natural gas prices, lack of
adequate gathering or transportation facilities, operating difficulties or
other factors, many of which are beyond our control, cause our revenues and
cash flows from operating activities to decrease, we may be limited in our
ability to spend the capital necessary to complete our capital expenditures
program. In addition, if our borrowing base under our credit facility is
re-determined to a lower amount, this could adversely affect our ability to
fund our planned capital expenditures. After utilizing our available sources
of financing, we may be forced to raise additional equity or debt proceeds to
fund such expenditures. Additional equity or debt financing or cash flow
provided by operations may not be available to meet our capital expenditures
requirements.
7. We may not be able to replace production with new reserves.
Our reserves will decline as they are produced unless we acquire
properties with proved reserves or conduct successful development and
exploration drilling activities. Our future oil and natural gas production is
highly dependent upon our level of success in finding or acquiring additional
reserves and developing existing proved reserves, which we may not be
successful in doing.
The successful acquisition of producing properties requires an assessment
of a number of factors, many of which are beyond our control. These factors
include recoverable reserves, future oil and gas prices, operating costs and
potential environmental and other liabilities, title issues and other factors.
Such assessments are inexact and their accuracy is inherently uncertain. In
connection with such assessments, we perform a review of the subject
properties, which we believe is generally consistent with industry practices.
However, such a review will not reveal all existing or potential problems. In
addition, the review will not permit a buyer to become sufficiently familiar
14
with the properties to fully assess their deficiencies and capabilities. We
may not be able to acquire properties at acceptable prices because the
competition for producing oil and gas properties is intense and many of our
competitors have financial and other resources that are substantially greater
than those available to us.
8. 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. As of June 30, 2004, 42% of our proved reserves were undeveloped and
had a book value of $86.7 million. The cost to develop these reserves is
estimated to be approximately $67 million. In addition, we have $49 million of
capitalized costs on properties with no proved reserves. 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.
9. 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 our 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 report.
15
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.
10. Our operations are subject to numerous risks of oil and gas drilling and
production activities.
Oil and gas drilling and production activities are subject to numerous
risks, including the risk that no commercially productive natural gas or oil
reservoirs will be found. Oil and gas drilling and production activities may
be shortened, delayed or canceled as a result of a variety of factors, many of
which are beyond our control. These factors include:
* unexpected drilling conditions;
* pressure or irregularities in formations;
* equipment failures or accidents;
* weather conditions;
* shortages in experienced labor; and
* shortages or delays in the delivery of equipment.
The prevailing prices of oil and natural gas also affect the cost of and the
demand for drilling rigs, production equipment and related services.
New wells that we drill may not be productive and we may not recover all
or any portion of our investment. The cost of drilling and completing wells is
often uncertain. Drilling for oil and natural gas may be unprofitable.
Drilling activities can result in dry wells and wells that are productive but
do not produce sufficient net revenues after operating and other costs to
recoup drilling costs.
11. Our industry experiences numerous operating risks.
The exploration, development and operation of oil and gas properties also
involve a variety of operating risks including the risk of fire, explosions,
blowouts, pipe failure, abnormally pressured formations and environmental
hazards, including oil spills, gas leaks, pipeline ruptures or discharges of
toxic gases. If any of these industry-operating risks occur, we could have
substantial losses. Substantial losses may be caused by injury or loss of
life, severe damage to or destruction of property, natural resources and
equipment, pollution or other environmental damage, clean-up responsibilities,
regulatory investigation and penalties, and suspension of operations.
We maintain insurance against some, but not all, of the risks described
above. Such insurance may not be adequate to cover losses or liabilities.
Also, we cannot predict the continued availability of insurance at premium
levels that justify its purchase. The terrorist attacks on September 11, 2001
and the changes in the insurance markets attributable to those attacks may
make some types of insurance more difficult to obtain. We may be unable to
secure the level and types of insurance we would otherwise have secured prior
to the terrorist attacks. We may not be able to maintain insurance in the
future at rates we consider reasonable. The occurrence of a significant event,
not fully insured or indemnified against, could materially and adversely
affect our financial condition and operations.
16
12. Terrorist attacks aimed at our facilities could adversely affect our
business.
The United States has been the target of terrorist attacks of
unprecedented scale. The U.S. government has issued warnings that U.S. energy
assets may be the future targets of terrorist organizations. These
developments have subjected our operations to increased risks. Any future
terrorist attack at our facilities, or those of our purchasers, could have a
material adverse effect on our business.
13. 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 our properties 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.
14. Hedging transactions may limit our potential gains.
In order to manage our exposure to price risks in the marketing of oil and
gas, we periodically enter into oil and gas price hedging arrangements, such
as commodity swap agreements, forward sale contracts, commodity futures,
options and similar agreements, with respect to a portion of our expected
production. While intended to reduce the effects of volatile oil and gas
prices, such transactions, depending on the hedging instrument used, may limit
our potential gains if oil and gas prices were to rise substantially over the
price established by the hedge. In addition, such transactions may expose us
to the risk of financial loss in certain circumstances, including instances in
which:
* production is substantially less than expected;
* the counterparties to our futures contracts fail to perform under the
contracts; or
* a sudden, unexpected event materially impacts gas or oil prices.
15. We may incur substantial costs to comply with the various U.S. federal,
state and local environmental laws and regulations that affect our oil and gas
operations.
Our oil and gas operations are subject to stringent U.S. federal, state
and local laws and regulations relating to the release or disposal of
materials into the environment or otherwise relating to environmental
protection. Failure to comply with these laws and regulations may result in
the assessment of administrative, civil and criminal penalties, the incurrence
of investigatory or remedial obligations, or the imposition of injunctive
relief.
The environmental laws and regulations to which we are subject may:
* require the acquisition of a permit before drilling commences;
17
* restrict the types, quantities and concentration of substances that
can be released into the environment in connection with drilling and
production activities;
* limit or prohibit drilling activities on certain lands lying within
wilderness, wetlands and other protected areas; and
* impose substantial liabilities for pollution resulting from our
operations.
Changes in environmental laws and regulations occur frequently, and any
changes that result in more stringent or costly waste handling, storage,
transport, disposal or cleanup requirements could require us to make
significant expenditures to maintain compliance, and may otherwise have a
material adverse effect on our earnings, results of operations, competitive
position or financial condition. Over the years, we have owned or leased
numerous properties for oil and gas activities upon which petroleum
hydrocarbons or other materials may have been released by us or by predecessor
property owners or lessees who were not under our control. Under applicable
environmental laws and regulations, including CERCLA, RCRA and analogous state
laws, we could be held strictly liable for the removal or remediation of
previously released materials or property contamination at such locations
regardless of whether we were responsible for the release or if our operations
were standard in the industry at the time they were performed.
16. We are exposed to additional risks through our drilling business.
We own a fifty percent interest in a drilling business. Our operations
through that entity will subject us to many additional hazards that are
inherent to the drilling business, including, for example, blowouts,
cratering, fires, explosions, loss of well control, loss of hole, damaged or
lost drill strings and damage or loss from inclement weather. Although we
believe that our drilling business is adequately insured for public liability
and property damage to others and injury or death to persons in accordance
with industry standards with respect to its operations, no assurance can be
given that such insurance will be sufficient to protect it against liability
for all consequences of well disasters, personal injury, extensive fire damage
or damage to the environment. No assurance can be given that our drilling
business will be able to maintain adequate insurance in the future at rates it
considers reasonable or that any particular types of coverage will be
available. The occurrence of events, including any of the above-mentioned
risks and hazards, that are not fully insured could subject our drilling
business to significant liability. It is also possible that we might sustain
significant losses through the operation of the drilling business even if none
of such events occurs.
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
18
under the symbol "DPTR." On November 29, 2004, the reported closing price for
our common stock on the Nasdaq National Market System was $15.06.
RECENT MATERIAL CHANGES IN OUR BUSINESS
There have been no material changes in our business since June 30, 2004
that have not been reported in our reports on Forms 10-Q and 8-K.
SELLING SHAREHOLDERS
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 may be sold
under this prospectus. There are no material relationships with the selling
shareholders other than those discussed herein.
Shares Shares
Beneficially Owned Beneficially Owned
Prior to the Offering After the Offering(1)
---------------------- Shares -----------------------
Percent Offered Percent
Selling Shareholders Number(2) of Class Hereby Number(2) of Class
- -------------------- ------------ -------- --------- ------------- --------
EMD Colorado One, Inc.(2) 2,496,232 6.2% 525,000 1,821,232 4.6%
Spottie, Inc.(2) 2,496,232 6.2% 125,000 1,821,232 4.6%
Edward Mike Davis(2) 2,496,232 6.2% 25,000 1,821,232 4.6%
(1) Assumes that the selling shareholders will sell all of the shares of common stock
offered pursuant to this prospectus. We cannot assure you that the selling
shareholders will sell all or any of these shares.
(2) EMD Colorado One, Inc. and Spottie, Inc. are entities that are owned and controlled
solely by Edward Mike Davis. The number of shares shown as beneficially owned
includes all shares beneficially owned by Mr. Davis.
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:
19
- 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.
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.
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DESCRIPTION OF SECURITIES
COMMON STOCK
- ------------
We are authorized to issue 300,000,000 shares of our $.01 par value
common stock, of which 40,026,449 shares were issued and outstanding as of
November 17, 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 balance sheets of Delta Petroleum Corporation as of June
30, 2004 and 2003, and the related consolidated statements of operations,
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended June 30, 2004, which appear in the June
30, 2004 annual report on Form 10-K of Delta Petroleum Corporation have been
incorporated herein by reference in reliance upon the reports of KPMG LLP, an
independent registered public accounting firm, upon the authority of said firm
as experts in accounting and auditing.
The audit report covering the June 30, 2004 Consolidated Financial
Statements of Delta Petroleum Corporation refers to the adoption of Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations, as of July 1, 2002.
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.
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
Accountants' Fees $ 5,000
Registration Fees $ 1,288
Printing $ 100
Advertising $ 0
Other Expenses $ 112
-------
TOTAL $11,500
=======
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
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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 and Articles of Amendment to Articles of
Incorporation of Delta Petroleum Corporation (incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended June 30, 2004, filed September 9,
1987 with the Securities and Exchange Commission)(1)
3.2 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. **
- ------------------------
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(1) Incorporated by reference.
(2) Filed herewith electronically.
** Contained in the legal opinion filed 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.
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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 1st day of
December, 2004.
DELTA PETROLEUM CORPORATION
By: /s/ Roger A. Parker
Roger A. Parker, Chief Executive
Officer
By: /s/ Kevin K. Nanke 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. December 1, 2004
Aleron H. Larson, Jr., Director
/s/ Roger A. Parker December 1, 2004
Roger A. Parker, Director
/s/ James B. Wallace December 1, 2004
James B. Wallace, Director
- -----------------------------------
Jerrie F. Eckelberger, Director
/s/ Joseph L. Castle II December 1, 2004
Joseph L. Castle II, Director
- -----------------------------------
Russell S. Lewis, Director
- -----------------------------------
John P. Keller, Director
- -----------------------------------
Jordan R. Smith, Director
/s/ Neal A. Stanley December 1, 2004
Neal A. Stanley, Director