Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-127653
_____________________________________________________________________________
Up to 50,000 Shares
Delta Petroleum Corporation
Common Stock
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The selling shareholder may use this prospectus in connection with sales
of up to 50,000 shares of our common stock.
Trading Symbol
NASDAQ National Market
"DPTR"
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Consider carefully the risk factors beginning on page 8 of this prospectus.
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The selling shareholder 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
shareholder.
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 August 24, 2005.
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 100 F Street, NE, Washington, D.C.
20549. Requests for copies should be directed to the Commission's Public
Reference Section, 100 F Street, NE, 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. Amendment No. 1 to Annual Report on Form 10-K for fiscal year ended
June 30, 2004, filed on Form 10-K/A on October 28, 2004, Exchange Act
reporting number 0-16203.
3. Amendment No. 2 to Annual Report on Form 10-K for fiscal year ended
June 30, 2004, filed on Form 10-K/A on March 8, 2005, Exchange Act
reporting number 0-16203.
4. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004,
filed on November 9, 2004, Exchange Act reporting number 0-16203.
5. Quarterly Report on Form 10-Q for the quarter ended December 31, 2004,
filed on February 9, 2005, Exchange Act reporting number 0-16203.
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6. Quarterly Report on Form 10-Q for the quarter ended March 31, 2005,
filed on May 10, 2005, Exchange Act reporting number 0 16203.
7. Current Report on Form 8-K, dated August 9, 2005, filed on August 9,
2005, Exchange Act reporting number 0-16203.
8. Current Report on Form 8-K, dated June 29, 2005, filed on July 6, 2005,
Exchange Act reporting number 0-16203.
9. Current Report on Form 8-K, dated June 17, 2005, filed on June 22,
2005, Exchange Act reporting number 0-16203.
10. Current Report on Form 8-K, dated May 5, 2005, filed on May 11,
2005, Exchange Act reporting number 0-16203.
11. Current Report on Form 8-K/A, dated January 21, 2005 filed on April 6,
2005, Exchange Act reporting number 0-16203.
12. Current Report on Form 8-K, dated March 23, 2005, filed on March 29,
2005, Exchange Act reporting number 0-16203.
13. Current Report on Form 8-K, dated March 15, 2005, filed on March 21,
2005, Exchange Act reporting number 0-16203.
14. Current Report on Form 8-K, dated March 9, 2005 filed on March 15,
2005, Exchange Act reporting number 0-16203.
15. Current Report on Form 8-K, dated March 3, 2005, filed on March 4,
2005, Exchange Act reporting number 0-16203.
16. Current Report on Form 8-K, dated February 28, 2005 (reporting
Information under Items 8.01 and 9.01) filed on February 28, 2005,
Exchange Act reporting number 0-16203.
17. Current Report on Form 8-K, dated January 21, 2005, filed on January
24, 2005, Exchange Act reporting number 0-16203.
18. Current Report on Form 8-K, dated January 21, 2005, filed on January
21, 2005, Exchange Act reporting number 0-16203.
19. Current Report on Form 8-K, dated December 28, 2004, filed on December
28, 2004, Exchange Act reporting number 0-16203.
20. Current Report on Form 8-K, dated November 19, 2004, filed on November
19, 2004, Exchange Act reporting number 0-16203.
21. Definitive Proxy Materials on Schedule 14A, filed on November 22, 2004,
Exchange Act reporting number 0-16203.
22. Current Report on Form 8-K, dated November 5, 2004, filed on November
12, 2004, Exchange Act reporting number 0-16203.
23. 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.
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24. Current Report on Form 8-K, dated October 26, 2004, filed on October 29,
2004, Exchange Act reporting number 0-16203.
25. Current Report on Form 8-K, dated September 29, 2004, filed on October
1, 2004, Exchange Act reporting number 0-16203.
26. Current Report on Form 8-K, dated August 25, 2004, filed on August 26,
2004, Exchange Act reporting number 0-16203.
27. Current Report on Form 8-K, dated August 6, 2004, filed on August 6,
2004, Exchange Act reporting number 0-16203.
28. Current Report on Form 8-K/A, dated June 29, 2004, filed on September
13, 2004, Exchange Act reporting number 0-16203.
29. Current Report on Form 8-K, dated June 29, 2004, filed on July 8, 2004,
Exchange Act reporting number 0-16203.
30. The description of our common stock contained in our Registration
Statement on Form 10 filed September 9, 1987, Exchange Act reporting
number 0-16203.
31. 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 Kevin K. Nanke,
Delta Petroleum Corporation, Suite 4300, 370 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
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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 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
Page
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Prospectus Summary .................................................... 7
Risk Factors........................................................... 8
Use of Proceeds ....................................................... 20
Determination of Offering Price ....................................... 20
Recent Material Changes in our Business ............................... 20
Selling Shareholder. .................................................. 21
Plan of Distribution .................................................. 21
Description of Securities ............................................. 22
Interests of Named Experts and Counsel ................................ 23
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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 370 Seventeenth Street, Suite 4300, 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 50,000 shares of our common stock offered
by the selling shareholder.
Offering Price The shares being offered pursuant to this prospectus
are being offered by the selling shareholder from
time to time at the then current market price.
Common Stock 42,100,000 shares of common stock $.01 par value were
Outstanding outstanding as of as of July 31, 2005.
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 shareholder and we will
not receive any proceeds of the offering.
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RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information in this prospectus, the following:
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
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, including actions by the
Organization of Petroleum Exporting Countries;
- the foreign supply of oil and natural gas; and
- the price of oil and gas imports, consumer preferences and overall
U.S. and foreign economic conditions.
We are not able to predict future oil and natural gas 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. 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.
WE MAY NOT BE ABLE TO REPLACE PRODUCTION WITH NEW RESERVES.
Our reserves will decline significantly 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 that are economically feasible and developing existing proved
reserves, which we may not be successful in doing.
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IF OIL OR NATURAL GAS PRICES DECREASE OR EXPLORATION AND DEVELOPMENT EFFORTS
ARE UNSUCCESSFUL, WE MAY BE REQUIRED TO TAKE WRITE DOWNS.
In the past, we have been required to write down the carrying value of our oil
and gas properties, and there is a risk that we will be required to take
additional writedowns in the future 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 crude oil and natural gas 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. 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. If the carrying
amount of our oil and gas properties exceeds the estimated undiscounted future
net cash flows, we will adjust the carrying amount of the oil and gas
properties to their fair value.
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 carrying values associated with our oil
and gas properties. As a result of our review, we recognized an impairment of
$1.5 million for fiscal 2002. Any such future charge will reduce our earnings
and stockholders' equity.
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 $60.0
to $80.0 million for fiscal 2005 and we anticipate spending approximately $110
million during fiscal 2006. 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 senior 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 expenditure requirements.
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,
9
and thus a substantial risk of investment loss that even a combination of
experience, knowledge and careful evaluation may not be able to overcome. 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.
As of June 30, 2004, approximately 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 $67.0 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.
OUR INDUSTRY EXPERIENCES NUMEROUS OPERATING HAZARDS THAT COULD RESULT IN
SUBSTANTIAL LOSSES.
The exploration, development and operation of oil and gas properties also
involve a variety of operating risks including the risk of fire, explosions,
blowouts, cratering, pipe failure, abnormally pressured formations, natural
disasters, acts of terrorism or vandalism, and environmental hazards, including
oil spills, gas leaks, pipeline ruptures or discharges of toxic gases. These
industry-operating risks can result in 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 which could result in substantial
losses.
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
10
justify its purchase. The terrorist attacks on September 11, 2001 and the
changes in the insurance markets attributable to those attacks have made some
types of insurance more difficult to obtain. We have been 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 that is not
fully insured or indemnified against could materially and adversely affect our
financial condition and operations.
OUR LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR ABILITY TO RAISE
ADDITIONAL CAPITAL TO FUND OUR OPERATIONS, LIMIT OUR ABILITY TO REACT TO
CHANGES IN THE ECONOMY OR OUR INDUSTRY AND PREVENT US FROM MEETING OUR
OBLIGATIONS UNDER OUR SENIOR UNSECURED NOTES.
As of March 31, 2005, our total outstanding long term liabilities were
$182,592,000. Our degree of leverage could have important consequences for
you, including the following:
- it may limit our ability to obtain additional debt or equity
financing for working capital, capital expenditures, further
exploration, debt service requirements, acquisitions and general
corporate or other purposes;
- a substantial portion of our cash flows from operations will be
dedicated to the payment of principal and interest on our
indebtedness and will not be available for other purposes,
including our operations, capital expenditures and future business
opportunities;
- the debt service requirements of other indebtedness in the future
could make it more difficult for us to satisfy our financial
obligations;
- certain of our borrowings, including borrowings under our senior
credit facility, are at variable rates of interest, exposing us to
the risk of increased interest rates;
- it may limit our ability to adjust to changing market conditions
and place us at a competitive disadvantage compared to our
competitors that have less debt; and
- we may be vulnerable in a downturn in general economic conditions
or in our business, or we may be unable to carry out capital
spending and exploration activities that are important to our
growth.
We may be able to incur substantially more debt in the future, which may
intensify the risks described in this prospectus. The indenture governing our
7% senior notes and our senior credit facility do not prohibit us from doing
so. As of March 31, 2005, we had approximately $27 million outstanding under
our senior credit facility and additional availability of approximately $33
million.
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A DEFAULT UNDER OUR SENIOR CREDIT FACILITY COULD CAUSE US TO LOSE OUR
PROPERTIES.
In order to obtain our senior credit facility, we granted first priority liens
to the lending banks on most of our oil and gas properties and the related
equipment, inventory, accounts and proceeds. Our senior 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 senior 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 senior credit facility. Subject to notice and cure
periods in certain cases, other events of default under the senior credit
facility will result in acceleration of the indebtedness at the option of the
lending banks. Such other events of default include, among other things, non-
payment, breach of warranty, non-performance of obligations under the senior
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 securing the senior 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, 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 senior credit facility, the entire principal amount due under it, all
accrued interest and any other liabilities that we might have to the lending
banks under the senior credit facility 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.
ACQUISITIONS ARE A PART OF OUR BUSINESS STRATEGY AND ARE SUBJECT TO THE RISKS
AND UNCERTAINTIES OF EVALUATING RECOVERABLE RESERVES AND POTENTIAL LIABILITIES.
We could be subject to significant liabilities related to acquisitions by us.
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. It
generally is not feasible to review in detail every individual property
included in an acquisition. Ordinarily, a review is focused on higher valued
properties. Further, even a detailed review of all properties and records may
not reveal existing or potential problems, nor will it permit us to become
sufficiently familiar with the properties to assess fully their deficiencies
and capabilities. We do not always inspect every well we acquire, and
environmental problems, such as groundwater contamination, are not necessarily
observable even when an inspection is performed. We cannot assure you that our
recent and/or future acquisition activity will not result in disappointing
results.
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In addition, there is intense competition for acquisition opportunities in our
industry. Competition for acquisitions may increase the cost of, or cause us to
refrain from, completing acquisitions. Our strategy of completing acquisitions
is dependent upon, among other things, our ability to obtain debt and equity
financing and, in some cases, regulatory approvals. Our ability to pursue our
acquisition strategy may be hindered if we are not able to obtain financing or
regulatory approvals.
Acquisitions often pose integration risks and difficulties. In connection with
recent and future acquisitions, the process of integrating acquired operations
into our existing operations may result in unforeseen operating difficulties
and may require significant management attention and financial resources that
would otherwise be available for the ongoing development or expansion of
existing operations. Possible future acquisitions could result in our incurring
additional debt, contingent liabilities and expenses, all of which could have a
material adverse effect on our financial condition and operating results.
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. We continue
to examine the following alternative sources of capital:
- bank borrowings or the issuance of debt securities; and
- the issuance of common stock, preferred stock or other equity
securities.
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.
WE DEPEND ON KEY PERSONNEL.
We currently have only three employees that serve in senior 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 and Kevin K. Nanke is our chief financial
officer. We do not have key man insurance on the lives of any of these
individuals. Furthermore, competition for experienced personnel is intense. If
we cannot retain our current personnel or attract additional experienced
personnel, our ability to compete could be adversely affected.
WE MAY NOT BE PERMITTED TO DEVELOP SOME OF OUR OFFSHORE CALIFORNIA PROPERTIES
OR, IF WE ARE PERMITTED, THE SUBSTANTIAL COST TO DEVELOP THESE 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 100.00%, 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
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of approximately $10.9 million. The development of these 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 Ninth Circuit Court of
Appeals, the U.S. Government was 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
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.
In addition, the cost to develop these properties will be 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.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON RESERVE INFORMATION BECAUSE IT IS ONLY
AN ESTIMATE.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and cash flows from such reserves, including factors beyond our
control and the control of our independent reserve engineers, Ralph E. Davis
Associates, Inc. and Mannon Associates. 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, oil and gas
prices and regulatory changes. 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 our assumptions and estimates. In addition, reserve engineers may make
different estimates of reserves and cash flows based on the same available
data.
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The estimated quantities of proved reserves and the discounted present value of
future net cash flows attributable to those reserves for the fiscal years ended
June 30, 2002, 2003 and 2004 included in our periodic reports filed with the
SEC were prepared by our reserve engineers in accordance with the rules of the
SEC, and are not intended to represent the fair market value of such reserves.
As required by the SEC, the estimated discounted present value of future net
cash flows from proved reserves is generally based on prices and costs as of
the date of the estimate, while actual future prices and costs may be
materially higher or lower. In addition, the 10% discount factor, which the SEC
requires to be used to calculate discounted future net revenues for reporting
purposes, is not necessarily the most appropriate discount factor based on the
cost of capital in effect from time to time and risks associated with our
business and the oil and gas industry in general.
WE ARE EXPOSED TO ADDITIONAL RISKS THROUGH OUR DRILLING BUSINESS.
We currently have ownership control of 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. No assurance can be given
that our insurance will be sufficient to protect us 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.
HEDGING TRANSACTIONS MAY LIMIT OUR POTENTIAL GAINS or cause us to lose money.
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, typically
costless collars. 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.
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 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
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the financial difficulties of any of our purchasers may have on our future
results of operations and liquidity.
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 or entities 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.
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 have acquired a controlling interest in a drilling company to
allow us to have priority access to drilling rigs. We believe that our
ownership interest in the drilling company will allow us to have priority
access to several large drilling rigs. 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.
THE MARKETABILITY OF OUR PRODUCTION DEPENDS MOSTLY UPON THE AVAILABILITY,
PROXIMITY AND CAPACITY OF GAS GATHERING SYSTEMS, PIPELINES AND PROCESSING
FACILITIES, WHICH ARE OWNED BY THIRD PARTIES.
The marketability of our production depends upon the availability, operation
and capacity of gas gathering systems, pipelines and processing facilities,
which are owned by third parties. 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. United States federal, state and foreign regulation of oil and gas
production and transportation, tax and energy policies, damage to or
destruction of pipelines, 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.
OUR INDUSTRY IS HIGHLY COMPETITIVE, MAKING OUR RESULTS UNCERTAIN.
We operate in the highly competitive areas of oil and gas exploration,
development and production. We compete for the purchase of leases from the U.S.
government and from other oil and gas companies. These leases include
16
exploration prospects as well as properties with proved reserves. We face
competition in every aspect of our business, including, but not limited to:
- acquiring reserves and leases;
- obtaining goods, services and employees needed to operate and
manage our business;
- access to the capital necessary to drill wells and acquire
properties; and
- marketing oil and natural gas.
Competitors include multinational oil companies, independent production
companies and individual producers and operators. Many of our competitors have
greater financial, technological and other resources than we do.
NEW TECHNOLOGIES MAY CAUSE OUR CURRENT EXPLORATION AND DRILLING METHODS TO
BECOME OBSOLETE, RESULTING IN AN ADVERSE EFFECT ON OUR PRODUCTION.
The oil and natural gas industry is subject to rapid and significant
advancements in technology, including the introduction of new products and
services using new technologies. As competitors use or develop new
technologies, we may be placed at a competitive disadvantage, and competitive
pressures may force us to implement new technologies at a substantial cost. In
addition, competitors may have greater financial, technical and personnel
resources that allow them to enjoy technological advantages and may in the
future allow them to implement new technologies before we can. We cannot be
certain that we will be able to implement technologies on a timely basis or at
a cost that is acceptable to us. One or more of the technologies that we
currently use or that we may implement in the future may become obsolete, and
we may be adversely affected.
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.
WE MAY INCUR SUBSTANTIAL COSTS TO COMPLY WITH THE VARIOUS U.S. FEDERAL, STATE
AND LOCAL 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 or the
oil and gas industry generally. Legislation affecting the industry is under
constant review for amendment or expansion, frequently increasing our
regulatory burden. Compliance with such laws and regulations often increases
our cost of doing business and, in turn, decreases our profitability. 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.
17
The environmental laws and regulations to which we are subject may:
- require applying for and receiving a permit before drilling
commences;
- 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.
RISKS RELATED TO OUR STOCK
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.
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.
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 July 31, 2005, 42,100,000 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
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of June 30, 2005, options to purchase up to a total of approximately 3.5
million 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 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.
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.
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.
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 June 30, 2005, our directors and executive officers and their respective
affiliates collectively and beneficially owned approximately 24% of our
outstanding common stock.
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.
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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.
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 shareholder, 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 shareholder,
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 August 24, 2005, the reported closing price for common
stock on the Nasdaq National Market System was $17.61.
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, except as
follows:
Prior to March 21, 2005 we owned a fifty percent interest in Big Dog
Drilling Co., LLC ("Big Dog"), and Edward Mike Davis owned the remaining fifty
percent. On March 21, 2005 we purchased his ownership interest in Big Dog in
exchange for 100,000 shares of our common stock and our interest in Shark
Trucking Co., LLC. At the time of the transaction with Mr. Davis, Big Dog
owned two drilling rigs. On April 15, 2005, we contributed both of these rigs
to DHS Drilling Company ("DHS") in exchange for a 90% ownership interest in
that entity. On May 16, 2005, an unaffiliated oil and gas company made an
equity investment in DHS which resulted in our ownership interest being reduced
to 49.5%.
DHS currently has five drilling rigs in operation that have depth ratings
of approximately 7,500 to 18,000 feet. Five additional rigs are in the process
of being acquired or assembled by DHS and are currently expected to become
operational during the summer and fall of 2005. We have the right to use all
of the rigs on a priority basis, although approximately half will initially
work for third party operators. At the outset, all of the rigs will operate in
the Rocky Mountain basins.
The officers of DHS include Bill Sauer, Jr., Harold Hastings and certain
officers of Delta. Bill Sauer, Jr. and Harold Hastings were most recently with
Sauer Drilling Company ("Sauer") during which time Sauer was primarily owned by
Tom Brown, Inc.
DHS operates out of Casper, Wyoming and its principal office is located at
675 N. 3rd Avenue in Casper, Wyoming.
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SELLING SHAREHOLDER
The shares offered pursuant to this prospectus are being offered by the
selling shareholder.
Selling Shareholder
- --------------------
The table below includes information regarding ownership of our common
stock by the selling shareholder and the number of shares that may be sold
under this prospectus. There are no material relationships with the selling
shareholder other than those discussed herein.
Shares Shares
Beneficially Owned Beneficially Owned
Prior to the Offering After the Offering(1)
---------------------- Shares -----------------------
Percent Offered Percent
Selling Shareholder Number of Class Hereby Number of Class
- ------------------ ------- --------- ------- ------ --------
Joy Susan Bell 50,000 0.1% 50,000 -0- --
- ------------------------
(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 shareholder and her respective successors, which term includes
her 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 shareholder 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;
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- 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 shareholder or her 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 shareholder. The selling shareholder or her 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 shareholder 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 shareholder will sell any or all of
the shares of common stock offered by the selling shareholder.
In order to comply with the securities laws of certain states, if
applicable, the selling shareholder will sell the common stock in jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states, the selling shareholder 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
COMMON STOCK
- ------------
We are authorized to issue 300,000,000 shares of our $.01 par value common
stock, of which 42,100,000 shares were issued and outstanding as of July 31,
2005. 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
22
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; the statement of oil and
gas revenue and direct lease operating expenses of the Alpine assets for the
fiscal years ended June 30, 2004, 2003 and 2002; and the statement of oil and
gas revenue and direct lease operating expenses of the Manti assets for the
fiscal years ended June 30, 2004, 2003 and 2002, incorporated herein by
reference, have been incorporated herein 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.
Shareholders and employees of Krys Boyle, P.C. own an aggregate of 3,600 shares
of Delta common stock that were purchased on the open market for cash at
prevailing prices.
RESERVE ENGINEERS
- -----------------
Certain information incorporated by reference in this prospectus regarding
estimated quantities of oil and natural gas reserves associated with our oil
and gas properties, the future net revenues from those reserves and their
present value is based on estimates of the reserves and present values prepared
by or derived from estimates prepared by Ralph E. Davis Associates, Inc. or
Mannon Associates, independent reserve engineers. The reserve information is
incorporated by reference herein in reliance upon the authority of said firms
as experts with respect to such reports.
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