-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UIQNNT8GDRZQ6nXB/aTbqEEYef0QnDOufs5bNAQb4JGDzgeTSs67AGT4UC0r6m10 jkg5gwpTTP5aylG5HpvMrA== 0001125282-04-001371.txt : 20040330 0001125282-04-001371.hdr.sgml : 20040330 20040330170740 ACCESSION NUMBER: 0001125282-04-001371 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILSHIRE OIL CO OF TEXAS CENTRAL INDEX KEY: 0000107454 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 840513668 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04673 FILM NUMBER: 04702306 BUSINESS ADDRESS: STREET 1: 921 BERGEN AVE CITY: JERSEY CITY STATE: NJ ZIP: 07306-4204 BUSINESS PHONE: 2014202796 MAIL ADDRESS: STREET 1: 921 BERGEN AVENUE CITY: JERSEY CITY STATE: NJ ZIP: 07306 10-K 1 b331035_10k.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934 For the transition period from _____________ to ______________ Commission File Number 1-4673 Wilshire Enterprises, Inc. -------------------------- (exact name of registrant as specified in its charter) Delaware 84-0513668 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 921 Bergen Avenue Jersey City, New Jersey 07306 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (201) 420-2796 --------------- Securities registered pursuant to Section 12 (b) of the Act: Name of each exchange (Title of each class) On which registered --------------------- ------------------- Common Stock, $1 par value American Stock Exchange - -------------------------------------------------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No x --- --- The aggregate market value of the shares of the voting common equity of the registrant held by non-affiliates (for this purpose, persons and entities other than executive officers, directors, and 5% or more shareholders) of the registrant, as of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2003), was $25,154,919. The number of shares of the Registrant's $1 par value common stock outstanding as of March 26, 2004 was 7,802,831. Documents Incorporated by Reference Registrant's Proxy Statement for its 2004 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A on or before April 29, 2004 (Part III) ================================================================================ WILSHIRE ENTERPRISES, INC. FORM 10-K For The Fiscal Year Ended December 31, 2003 INDEX
Part I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Part II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition Item 7A. Quantitative and Qualitative Disclosures about Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Item 9A. Controls and Procedures Part III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions Item 14 Principal Accountant Fees and Services Part IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Signatures
PART I Item 1. BUSINESS BACKGROUND Wilshire Enterprises, Inc. (the "Company", "Registrant" or "Wilshire") was incorporated under the laws of the State of Delaware on December 7, 1951. The Company changed its name from Wilshire Oil Company of Texas to Wilshire Enterprises, Inc. on June 30, 2003. The Company's principal executive offices are located at 921 Bergen Avenue, Jersey City, New Jersey 07306, (201) 420-2796. The Company is engaged in the ownership and management of real estate properties in Arizona, Florida, Georgia, New Jersey and Texas and in the exploration and development of oil and gas, both in its own name in and through wholly owned subsidiaries in the United States and Canada. In July 2003 the Company committed to the sale of its oil and gas operations and to either reinvest the net proceeds in its ongoing real estate business or otherwise utilize the proceeds in a manner designed to maximize shareholder value. While subsequent to July 2003 representatives of the Company have communicated with third parties that have expressed an interest in acquiring the entire Company, to date those communication have not resulted in an agreement to sell the entire company. On March 17, 2004 the Company was pleased to announce that it entered into a definitive agreement to sell its U.S. oil and gas business, effective as of March 1, 2004 for $13.7 million in gross proceeds. This transaction, which is subject to due diligence review by the purchaser and other contractual conditions, is expected to close in April 2004. In addition, the Company announced that it is currently in negotiations with potential purchasers of its Canadian oil and gas assets and believes these efforts will culminate in an agreement to sell its Canadian oil and gas business in the near future. See Note 14 of the Notes to the Company's Consolidated Financial Statements. Until these sales are consummated, the Company will continue to participate in oil and gas prospects. As a result of the Company's determination in July 2003 to sell its oil and gas operations, the Company is required to report the results of such operations as a discontinued business. Furthermore, the Company is required to write-off the amount, if any, by which the carrying value of its oil and gas assets exceeds the market value of those assets. In analyzing the carrying value and market value of its Canadian oil and gas business as of December 31, 2003, the Company has determined that it must recognize a non-cash charge to earnings of $4.4 million, net of taxes, to eliminate a difference between the carrying value and estimated market value of its Canadian oil and gas business. This $4.4 million charge is primarily attributable to two factors: o Because the Company has been involved in the process of obtaining bids from one or more prospective purchasers, the Company is required to base its estimate of market value on the results of that process. o The carrying value of the Canadian oil and gas business must be translated from Canadian currency to U.S. currency. The historical changes in the currency exchange rate had a negative impact on the Company's carrying value of the Canadian oil and gas business The Company remains committed to maximizing shareholder value and intends to continue to explore all possible alternatives to accomplish this goal. The Company remains receptive to negotiating acceptable bids to acquire the entire Company, while at the same time is prepared to pursue the expansion of its real estate portfolio, by merger or otherwise. In the interim, the Company's goal is to increase the value of its real estate business, through improvements of its existing properties as well as the potential acquisition of new income generating assets and the potential opportunistic divestiture of select real estate assets. The Company cannot assure investors of any actions or of the timing of potential actions. The timing of any such acquisitions or divestitures will depend on, among other things, economic conditions and the favorable evaluation of specific opportunities presented to the Company. 1 This Annual Report on Form 10-K for the year ended December 31, 2003 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in such forward-looking statements. Certain factors which could materially affect such results and the future performance of the Company are described herein under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS For financial segment information, see Note 9 of the Notes to the Company's Consolidated Financial Statements presented elsewhere herein. The Company has no export sales or sales to affiliated customers. DESCRIPTION OF BUSINESS REAL ESTATE OPERATIONS The Company's real estate operations are conducted, both in its own name and through several wholly owned subsidiaries, in the states of Arizona, Texas, Florida, Georgia and New Jersey. They are not seasonal in nature. The Company's Arizona properties include the following: 378 unit garden apartment complex 340 unit garden apartment complex 70 unit midrise apartment building 53,000 sq. ft. multi-tenant two story office building 65,000 sq. ft. retail/medical use complex The Texas properties includes a 228 and 180 unit apartment complex in San Antonio. The Company's operations in Florida consists of two office buildings having a combined area of 28,000 square feet. The Georgia property is a 72 unit apartment complex. The Company's properties in New Jersey consists of apartment properties having 481 units. In addition, the Company holds various commercial/retail properties, including a 75,000 sq. ft. office building, triple net 25 year leases with an experienced operator for its 65,000 square foot banquet and conference center and 89 room five star hotel in New Jersey and other undeveloped investment properties. The Company utilizes property management companies to assist in the management of its properties. Expenses incurred in operating the properties include, among other things, administrative costs, utilities, repairs and maintenance and property taxes. During the twelve months ended December 31, 2003, the Company did not acquire any properties. However, the Company sold three apartment complexes in Florida consisting of 62 units for $3.2 million and recognized a pre-tax gain on sale of $1.67 million. At December 31, 2003, the Company had 17 New Jersey properties, representing 260 units held for sale of which 14 properties were under contract to close during 2004, although there is no assurance that all of these contracts will be consummated. The estimated net selling price after closing costs of the 14 properties under contract for sale amounts to approximately $17.9 million, against a net book value of $12.0 million. A total of 11 of such properties are covered by a single contract providing for a purchase price of $11 million, against a net book value of $6.1 million. The Company has closed on the sale of one of such properties and expects to close on the remaining 10 properties covered by this contract on or about March 31, 2004. After payment of taxes and the payoff of related long-term debt, the sale of these 11 properties is expected to provide $5.6 million in capital resources. 2 The Company explores other real estate acquisitions as they arise. The timing of any such acquisition depends on, among other things, economic conditions and the favorable evaluation of specific opportunities presented to the Company. While the Company anticipates that it will actively explore these and other real estate acquisition opportunities and the disposition of certain properties, no assurance can be given that any such acquisition or sale will occur. The real estate industry is intensely competitive in nature. The Company competes with many local, regional and national real estate operators and is not a significant factor in the markets in which it opeates. The Company's real estate operations are subject to existing federal and state laws regarding environmental quality and pollution control. Environmental regulations had no materially adverse effect on the Company's real estate operations during 2003, but no assurance can be given that environmental regulations will not, in the future, have a materially adverse effect on the Company's operations. Please see Note 14, Subsequent Events, Real Estate, in the Company's Consolidated Financial Statements presented elsewhere herein regarding post year end real estate transactions. OIL AND GAS OPERATIONS NOTE: As previously announced, the Company has entered into an agreement to sell its U. S. oil and gas business and is currently negotiating the sale of its Canadian oil and gas business. As is customary in agreements of this nature, the Company's ability to operate its oil and gas businesses are or will be restricted by the terms of its sale agreements. The description below of the Company's oil and gas businesses does not give effect to these agreements except where expressly noted to the contrary. For a glossary of oil and gas terms, see "Properties - Oil and Gas Properties - Glossary." The Company conducts its oil and gas operations on the North American continent. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. As of December 31, 2003, eight employees are directly engaged in the oil and gas operations. In addition, the Company also has four consultants. Prospects for lease acquisitions are developed by various co-venturers and/or consultants. Once a property is acquired, the Company subcontracts for surveying and drilling operations. Many of the Company's present producing oil and gas properties are operated by independent contractors or under operating agreements with other companies pursuant to which the Company pays a proportionate share of operating expenses based upon its interests. The Company also acts as operator of various properties, charging joint venture partners for their proportionate share of expenses. The Company does not engage in the refining of crude oil or the distribution of petroleum products. Crude oil and natural gas productions are sold to oil refineries and natural gas pipeline companies. The Company participated in the drilling of 9 wells (.4 net) in 2003 compared to 218 (62.2 net) in 2002. The United States program in 2003 consisted of the drilling of 8 development wells ( .3 net) which were all successful. The Canadian drilling program in 2003 consisted of the drilling of 1 development well (.1 net), which was successfully completed as an oil well. Overall, the Company's drilling program had a success ratio of 100% in 2003. The Company's crude oil and condensate production is sold at posted field prices, primarily to major crude oil and condensate purchasers. For average posted field prices, for both oil and gas, see "Properties - Oil and Gas Properties - Production." The Company has no one purchaser that purchased in excess of 10% of its 2003 consolidated oil and gas revenues. The loss of any one customer in the domestic hydrocarbon market is not considered material. The Company is not dependent on any patent, trademark or license. 3 The Company's oil and gas business is subject to all of the operating risks normally associated with the exploration for and production of oil and gas. In accordance with customary industry practices, the Company maintains insurance coverage limiting financial loss resulting from certain of these operating hazards. Competition The oil and gas industry is intensely competitive and competes with other industries in supplying the energy and fuel requirements of industrial, commercial and individual customers. The principal method of competition in the production of oil and gas is the successful location and acquisition of properties which produce commercially profitable quantities of oil and gas. The Company competes with many other companies in the search for and acquisition of oil and gas properties and leases for exploration and development. Many of these companies have substantially greater financial, technical and other resources than the Company. Competition among petroleum companies for favorable oil and gas prospects can be expected to continue. The Company is not a significant factor in the oil and gas industry. The principal raw materials and resources necessary for the exploration for, and the acquisition, development, production and sale of, crude oil and natural gas are: leasehold or freehold prospects under which oil and gas reserves may be discovered, drilling rigs and related equipment to explore for and develop such reserves, casing and other capital assets required for the development and production of the reserves and knowledgeable personnel to conduct all phases of oil and gas operations. The Company must compete for such raw materials and resources with both major oil companies and independent operators and also with other industries for certain personnel and materials. Although the Company believes its current inventories of raw materials and resources are adequate to preclude any significant disruption of operations in the immediate future, the continued availability of such materials and resources to the Company cannot be assured. Seasonality The oil business is generally not seasonal in nature. Gas demand and prices paid for gas have become seasonal, showing a decrease during the summer and fall. Environmental Matters The petroleum industry is subject to numerous federal, state and provincial environmental statutes, regulations and other pollution controls in both the United States and Canada. In general, the Company is and will continue to be subject to present and future environmental statutes and regulations. The Company's expenses relating to preserving the environment during 2003 were not significant in relation to operating costs and the Company expects no material changes in 2004. Environmental regulations have had no materially adverse effect on the Company's petroleum operations to date, but no assurance can be given that environmental regulations will not, in the future, result in a curtailment of production or otherwise have materially adverse effects on the Company's operations or financial condition. Regulation - United States Operations The Company's operations are affected from time to time, in varying degrees, by political developments, laws and regulations. In particular, oil and gas production operations are affected by changes in taxes and other laws relating to the petroleum industry and by constantly changing administrative regulations. The long-term effects of all the federal enactments and programs, whether beneficial or detrimental to the future operations and income of the Company, cannot be predicted at this time. Rates of production of oil and gas have for many years been subject to conservation laws and regulations. State regulatory agencies set allowable rates of production and limit the number of days a month a well can produce. The petroleum industry has also been subject to tax laws dealing specifically with it, such as the Crude Oil Windfall Profit Tax Act. In addition, oil and gas operations are subject to extensive regulation or termination by government authorities on account of ecological and other considerations. All of the jurisdictions in which the Company operates have statutes and administrative regulations governing the drilling and production of oil and gas. 4 Regulation - Canadian Operations The Company's Canadian subsidiary, Wilshire Oil of Canada Co., operates primarily in the Province of Alberta, with some activity in the Province of British Columbia and Saskatchewan. The petroleum and natural gas industry operates under federal and provincial legislation and regulations which govern land tenure, royalties, production rates, environmental protection, exports and other matters. Federal legislation monitors the price of oil and gas in export trade and the quantities of such products exportable from Canada. Provincial legislation has been enacted for the purpose of regulating operations in the Provinces. Oil and Gas Prices Oil prices actually being paid by purchasers in the United States are publicly announced throughout the country and vary depending on locality and qualitative specifications of the crude oil. Gas prices are tied to spot prices, modified by transportation costs and processing costs which vary form region to region. INVESTMENT IN MARKETABLE SECURITIES The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. The Company over the years has decreased its holdings in marketable securities and focused its resources in the oil & gas and real estate divisions. In 2003 the Company sold most of its security holdings. ITEM 2. PROPERTIES Offices The executive and administrative office of the Company consists of approximately 2,000 square feet, located at 921 Bergen Avenue, Jersey City, New Jersey. This office is leased at a monthly rental of $2,683. The Company maintains its principal office for the United States oil and gas operations in Oklahoma City, Oklahoma, leasing 3,618 square feet, at a monthly cost of $2,345. The Company is currently under a month to month lease. The Company's Canadian subsidiary maintains an exploration office in Calgary, Alberta, Canada. The Company leases 1,583 square feet at a monthly rental of $3,408 Canadian. The Company is currently under a month to month lease. Oil and Gas Properties GLOSSARY The terms defined in this section are used throughout this report. Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, usually used herein in reference to crude oil or other liquid hydrocarbons. BOE. Equivalent barrels of oil in reference to natural gas. Natural gas equivalents are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids. Developed Acreage. The number of acres which are allocated or assignable to producing wells or wells capable of production. Development Well. A well drilled as an additional well to the same reservoir as other producing wells on a lease, or drilled on an offset Lease not more than one location away from a well producing from the same reservoir. Exploratory Well. A well drilled in search of a new undiscovered pool of oil or gas, or to extend the known limits of a field under development. Gross Acres or Wells. The total acres or wells, as the case may be, in which an entity has an interest, either directly or through an affiliate. 5 Lease. Full or partial interests in an oil and gas lease, oil and gas mineral rights, fee rights or other rights, authorizing the owner thereof to drill for, reduce to possession and produce oil and gas upon payment of rentals, bonuses and/or royalties. Oil and gas leases are generally acquired from private landowners and federal, provincial and state governments. Mcf. One thousand cubic feet. Expressed, where gas sales contracts are in effect, in terms of contractual temperature and pressure bases and, where contracts are nonexistent, at 60 degrees Fahrenheit and 14.65 pounds per square inch absolute. MMcf. One million cubic feet. Expressed, where gas sales contracts are in effect, in terms of contractual temperature and pressure bases and, where contracts are nonexistent, at 60 degrees Fahrenheit and 14.65 pounds per square inch absolute. Net Acres or Wells. A party's interest in acres or a well calculated by multiplying the number of gross acres or gross wells in which such party has an interest by the fractional interest of such party in such acres or wells. Production Costs. The expenses of producing oil or gas from a formation, consisting of the costs incurred to operate and maintain wells and related equipment and facilities, including labor costs, repair and maintenance, supplies, insurance, production, severance and other production excise taxes. Producing Property. A property (or interest therein) producing oil and gas in commercial quantities or that is shut-in but capable of producing oil and gas in commercial quantities, to which Producing Reserves have been assigned by an independent petroleum engineer. Interests in a property may include working interests, production payments, royalty interests and other nonworking interests. Producing Reserves. Proved Developed reserves expected to be produced from existing completion intervals open for production in existing wells. Prospect. An area in which a party owns or intends to acquire one or more oil and gas interests, which is geographically defined on the basis of geological data and which is reasonably anticipated to contain at least one reservoir of oil, gas or other hydrocarbons. Proved Developed Reserves. Proved Reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Proved Reserves. The estimated quantities of crude oil, natural gas and other hydrocarbons which, based upon geological and engineering data, are expected to be produced from known oil and gas reservoirs under existing economic and operating conditions, and the estimated present value thereof based upon the prices and costs on the date that the estimate is made and any price changes provided for by existing conditions. Proved Undeveloped Reserves. Proved Reserves which can be expected to be recovered from new wells on undeveloped acreage or from existing wells where a relatively major expenditure is required for recompletion. Undeveloped Acres. Oil and gas acreage (including, in applicable instances, rights in one or more horizons which may be penetrated by existing well bores, but which have not been tested) to which proved reserves have not been assigned by independent petroleum engineers. Working Interest. The operating interest under a lease gives the owner the rights to drill, produce and conduct operating activities on the property and a share of production, subject to all royalty interests and other burdens and to all costs of exploration, development and operations and all risks in connection therewith. * * * Following are certain tables and other statistical data concerning the Company's reserves, production, acreage and other information with regard to the Company's oil and gas properties and operations. In reviewing these tables and other statistical data, investors should bear in mind that subsequent to December 31, 2003, the Company has entered into an agreement to sell its U.S. oil and gas business and is currently negotiating for the sale of its Canadian oil and gas business. See Item 1, "Business - Background" and Note 14 of the Notes to the Company's Consolidated Financial Statements. 6 For information regarding costs incurred in 2003, see "Segment Information" in Note 9 of the Notes to Consolidated Financial Statements, presented elsewhere herein. For information regarding capitalized costs relating to oil and gas producing activities, see Note 11 of the Notes to Consolidated Financial Statements, presented elsewhere herein. Future revenues, net of development and production expenditures (Net Revenues), from estimated production of proved and proved developed reserves, based on existing economic conditions for each of the next three succeeding years, are estimated as follows:
United States Canada (000's Omitted) (000's Omitted) ---------------- --------------- Proved Proved Proved Proved Reserves Developed Reserves Reserves Developed Reserves -------- ------------------ -------- ------------------ 2004 $3,649 $4,169 $4,013 $4,005 2005 $4,720 $3,836 $3,486 $3,411 2006 $3,437 $3,198 $3,027 $2,958 Remainder $29,853 $27,853 $27,575 $27,367
7 Reserves The quantities of natural gas and crude oil Proved and Proved Developed Reserves presented herein include only those amounts which the Company reasonably expects to recover in the future from known oil and gas reservoirs under existing economic and operating conditions. Therefore, Proved and Proved Developed Reserves are limited to those quantities which are recoverable commercially at current prices and costs, under existing technology. Accordingly, any changes in the future oil and gas prices, operating and development costs, regulations, technology and other factors could significantly increase or decrease estimates of Proved and Proved Developed Reserves. For the year ended December 31, 2003, the Company engaged Ryder Scott Company to perform an engineering reserve study of the Company's entire reserves. For the year ended December 31, 2002, Ryder Scott was engaged to evaluate all the Company's reserves other than the Hilda field in Canada, which was separately evaluated by Citadel Engineering, Ltd. Set forth below are estimates of the Company's Proved and Proved Developed Reserves and the present value of estimated future net revenues from such reserves based upon the standardized measure of discounted future net cash flows relating to proved oil and gas reserves in accordance with the provisions of Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities" (SFAS No. 69). The standardized measure of discounted future net cash flows is determined by using estimated quantities of Proved Reserves and the periods in which they are expected to be developed and produced based on period-end economic conditions. The estimated future production is priced at period-end prices, except where fixed and determinable price escalations are provided by contract. The resulting estimated future cash inflows are reduced further by estimated future costs to develop and produce reserves based on period-end cost levels. No deduction has been made for depletion, depreciation or income taxes or for indirect costs, such as general corporate overhead. Present values were computed by discounting future net revenues by 10 percent per annum. The following table sets forth summary information with respect to the estimates of the Company's Proved and Proved Developed Reserves at December 31 of the years indicated:
United States Canada ------------------------ ------------------------ Proved Proved Proved Developed Proved Developed -------- --------- -------- --------- (000's Omitted) (000's Omitted) 2003 Oil (Bbls) 590 446 144 144 Gas (Mcf) 8,747 8,631 9,222 9,133 Net present value @ 10% $21,342 $20,314 $19,437 $19,196 2002 Oil (Bbls) 569 426 127 127 Gas (Mcf) 8,597 8,464 15,281 15,281 Net present value @ 10% $16,866 $15,250 $25,031 $25,031 2001 Oil (Bbls) 1,122 396 786 464 Gas (Mcf) 6,976 6,976 31,832 25,912 Net present value @ 10% $11,724 $6,624 $33,590 $25,493
The determination of oil and gas reserves is a complex and interpretive process, which is subject to continued revisions as additional information becomes available The reserve data presented herein should not be construed as being exact. Any reserve estimate depends in part on the quality of available data, engineering and geologic interpretation and judgment, and thus, represents only an informed professional judgment. Subsequent reservoir performance may justify upward or downward revision of the estimate. The reduction in Canadian proved reserves from December 31, 2002 to December 31, 2003 reflects, in substantial part, a decline in production rates at certain properties, price changes, a reduction in gas quantities and a modification in the manner of calculating proved reserves that excludes in 2003 (but not in 2002) income from the processing of gas resources. Capitalized costs are subject to a "ceiling" test that limits such costs to the aggregate of the estimated present value, using a discount rate of 10%, of the future net revenues of proved reserves and the lower of cost or fair value of unproved properties. Management is of the opinion that, based on reserve reports of petroleum engineers and geologists available to the Company at the time the Company prepared its 2002 Financial Statements, the fair value of the estimated recoverable oil and gas reserves exceeded the unamortized cost of oil and gas properties at December 31, 2002. 8 Because the Company's oil and gas business has been accounted for as a discontinued operation as of December 31, 2003, no ceiling test was conducted as of December 31, 2003. See Item 1, "Business - Background" for information regarding a $4.4 million, net of taxes, non-cash charge taken by the Company in connection with the preparation of its 2003 Consolidated Financial Statements. The Company currently operates 3.6% of the total wells it participates in. No Proved or Proved Developed Reserve estimates for oil and gas were filed with or included in reports to any other federal or foreign governmental authority or agency since the beginning of fiscal 2003 other than with the Securities and Exchange Commission. Production Wells The following tabulations indicate the number of productive wells (gross and net) as of December 31, 2003:
Gas Oil Developed Acreage ---------------- ------------- ------------------------- Gross Net Gross Net Gross Net ----- --- ----- --- ----- --- United States 438 73.5 419 71.6 49,127 19,899 Canada 527 132.0 15 2.0 168,540 26,909
Production The following table shows the Company's net production in barrels ("Bbls") of crude oil and in thousands of cubic feet ("Mcf") of natural gas (computed after deducting all outstanding interests, including basic royalties and overriding royalties) for the past three years (note - all $ dollar amounts presented are in U.S. dollars).
Oil and Condensate (Bbls) Gas (Mcf) ------------------------------- --------------------------------- United States Canada United Sates Canada ------------- ------ ------------ ------ 2003 47,000 27,000 873,000 1,043,000 2002 49,000 29,000 1,021,000 584,000 2001 56,000 53,000 1,437,000 750,000
Average sales price per unit of oil or gas produced:
Oil Gas ----------------------------- ---------------------------- U.S. Canada U.S. Canada ---- ------ ---- ------ 2003 $ 29.46 $ 26.20 $ 4.17 $ 4.44 2002 $ 22.80 $ 18.85 $ 2.70 $ 2.32 2001 $ 22.82 $ 19.01 $ 2.26 $ 3.67
Production as shown in the Table, which is net after royalty interests due others, is determined by multiplying the gross production volume of properties in which the Company has an interest by the percentage of the leasehold or other property interest owned by the Company. The relative energy content of oil and gas (six Mcf of gas equals one barrel of oil) was used to obtain a conversion factor to convert natural gas production into equivalent barrels of oils. There are no agreements with foreign governments. Average Production Cost Per Equivalent Barrel of Oil in the United States and Canada: 2003 2002 2001 ---- ---- ---- United States.................... $8.25 $7.78 $6.25 Canada............................ $5.26 $4.48 $3.57 9 Unit cost is computed on equivalent barrels of oil equating gas to oil based on BTU content. This method is appropriate for the Company since several properties produce both oil and gas and production costs are not segregated. The components of production costs may vary substantially among wells depending on the methods of recovery employed and other factors, but generally include severance taxes, administrative overhead, maintenance and repair, labor and utilities. Oil and Gas Leases The following tabulation indicates the undeveloped acreage leased by the Company as of December 31 of the years indicated: 2003 2002 ---- ---- Undeveloped Acres Undeveloped Acres ----------------- ------------------ Gross Net Gross Net United States 19,809 3,814 20,072 5,977 Canada 21,768 3,784 21,768 3,784 A "gross" acre is an acre in which the Company owns a working interest. A "net" acre is deemed to exist when the sum of the fractional working interests owned by the Company in gross acres equals one. Drilling The following table sets forth the results of the Company's drilling programs for the years covered:
Exploratory Wells Development Wells ------------------------------------------- ------------------------------------------- Net Productive Net Dry Net Productive Net Dry ------------------ ------------------- ------------------ ------------------ U.S. Canada U.S. Canada U.S. Canada U.S. Canada ---- ------ ---- ------ ---- ------ ---- ------ 2003 - - - - .3 .1 - - 2002 - - - .3 .3 61.6 - - 2001 - - .7 - .2 .3 - .3 2000 - - - - 0.5 2.6 - - 1999 - - 1.5 - - 3.9 - -
A dry hole is an exploratory or development well which is found to be incapable of producing oil or gas in sufficient quantities to justify completion. A productive well is an exploratory or development well that is capable of commercial production. The number of wells drilled refers to the number of wells completed during the fiscal year, regardless of when drilling was initiated. 10 Real Estate Properties The following table sets forth the location and general character of the principal physical properties owned by the Company as part of its real estate operations. Most of the properties are subject to mortgages. For further information with respect to these properties, see "Business - Real Estate Operations." Location General Character - -------- ----------------- Arizona 378 Unit Apartment Complex Arizona 340 Unit Apartment Complex Arizona 70 Unit Apartment Building Arizona 53,000 Sq. ft. Office Building Arizona 65,000 Sq. ft. Retail/Medical use Complex Texas 228 Unit Apartment Complex Texas 180 Unit Apartment Complex Florida 28,000 Sq. ft. Office Building Georgia 72 Unit Apartment Complex New Jersey Apartment Properties (473 units), including a 132 unit apartment complex New Jersey Commercial/Retail Properties, including a 75,000 sq. ft. office building New Jersey Other undeveloped investment properties The Company considers all of its properties both owned and leased, together with the related furniture, fixtures and equipment contained therein, to be well maintained, in good operating condition, and adequate for its present and foreseeable future needs. The Company has entered into contracts to sell certain of its Jersey City, New Jersey real estate properties. See Item 1, "Business - Real Estate Operations" and Note 14 of the Notes to the Company's Consolidated Financial Statements. ITEM 3. LEGAL PROCEEDINGS At December 31, 2003, the Company was not a party to any actions or proceedings which management believes are reasonably likely to have a material adverse effect upon the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2003 11 PART II ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the American Stock Exchange. The following table indicates the high and low sales prices of the Company's common stock for the quarters indicated during the past two years: (All in ($) Dollars) Quarter 1 Quarter 2 Quarter 3 Quarter 4 --------- --------- --------- --------- High - Low High - Low High - Low High - Low ------------- ------------- ------------ ------------- 2003 4.00 - 3.51 5.00 - 3.37 5.95 - 4.50 7.09 - 5.31 2002 3.90 - 3.05 5.09 - 3.00 4.00 - 3.25 3.75 - 2.90 As of March 26, 2004 there were 6,510 common shareholders of record. The Company has not paid any dividends to shareholders during the past two years, as it has invested approximately $2.5 million each year in capital improvements to enhance its real estate portfolio and remain competitive in the market place. Additionally, the Company entered into a major drilling program in Canada for which it obtained a revolving loan of up to $5,088,000 to fund its participation. The loan requires the Company to repay the outstanding debt solely from available cash generated from its Canadian operations until the debt is paid in full. The Company's Canadian subsidiary is precluded from paying dividends to the Company until this loan is paid in full. As of December 31, 2003, approximately $2.0 million remained outstanding. If the sale of the Canadian assets are consummated, this loan will be repaid. The Board of Directors will consider the payment of dividends from time to time in the future based on the Company's results of operations and capital requirements. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth our selected financial data and should be read in conjunction with our Consolidated Financial Statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-K. In connection with this Annual Report on Form 10-K, we are restating our Audited Consolidated Financial Statements as a result of Statement of Financial Accounting Standard No. 144 or SAS 144. "Accounting for the Impairment of Disposal of Long-Lived Assets. Pursuant to SAS 144, we have classified our oil and gas properties and certain real estate properties as held for sale in compliance with SAS 144, and have reported revenue and expenses from our oil and gas operations and such real estate properties as Discontinued Operations, Net of Tax for each period presented in our Annual Report on Form 10-K. This reclassification had no effect on our reported net income. The selected financial information, set forth below reflects the prior period reclassification of oil and gas operations as Discontinued Operations and certain real estate properties classified as held for sale during 2003. FINANCIAL HIGHLIGHTS (In thousands of dollars except per share amounts)
For the Year Ended December 31 ------------------------------------------------------------------------ 2003 2002 2001 2000 1999 ------------ ------------ ------------ ------------ -------------- STATEMENT OF INCOME Real Estate Revenues $ 12,137 $ 12,102 $ 11,602 $ 10,522 $ 10,237 Gross Profit (a) $ 108 $ 1,489 $ 1,986 $ 1,923 $ 2,302 Net Income (Loss) Continuing Operations $ 908 $ 6 $ (1,883) $ (1,000) $ (564) Net Income (Loss)Discontinued Operations - Real Estate, Net of taxes $ 897 $ 62 $ 494 $ (170) $ 249 Net Income (Loss) Discontinued Operations - Oil & Gas, Net of taxes $ (3,178)(b) $ 1,008 $ 1,841 $ 2,394 $ 929 Net Income (Loss) $ (1,373) $ 1,076 $ 452 $ 1,224 $ 614 Basic earnings (Loss)per share from Continuing Operations $ 0.12 $ 0.00 $ (0.30) $ (0.12) $ (0.07) Basic earnings (Loss) per share from Discontinued Operations $ (0.29) $ 0.14 $ 0.36 $ 0.27 $ 0.14 Total basic earnings (Loss) per share $ (0.17) $ 0.14 $ 0.06 $ 0.15 $ 0.07 Diluted earnings (Loss) per share from Continuing Operations $ 0.12 $ 0.00 $ (0.30) $ (0.12) $ (0.07) Diluted earnings (Loss )per share from Discontinued Operations $ (0.29) $ 0.14 $ 0.36 $ 0.27 $ 0.14 Total diluted earnings (Loss) per share $ (0.17) $ 0.14 $ 0.06 $ 0.15 $ 0.07 BALANCE SHEET Total assets at year end $ 98,997 $ 107,920 $ 107,903 $ 98,541 $ 90,527 Long term obligations $ 51,698 $ 53,791 $ 60,661 $ 46,701 $ 46,935 Stockholders' Equity $ 24,527 $ 24,239 $ 26,693 $ 21,428 $ 23,968
(a)Gross profit relating to real estate represents total real estate revenues less real estate operating costs and related depreciation. (b)Reflects a $4.4 million, net of taxes, non-cash charge to earnings resulting from a disparity between the carrying value and market value of the Company's Canadian oil and gas business. See Item 1, "Business - Background" and Note 14 of the Notes to the Company's Consolidated Financial Statements. 12 QUARTERLY FINANCIAL DATA (Unaudited) (In thousands of dollars except per share amounts)
2003 ---- 1st(a) 2nd 3rd 4th Year ------- -------- ------- -------- --------- Total Real Estate Revenues $2,972 $ 3,042 $3,022 $ 3,101 $ 12,137 ------- -------- ------- -------- --------- Gross Profit Real Estate (a) $ 230 $ 393 $ 204 $ 148 $ 975 ------- -------- ------- -------- --------- Net Income (Loss) from Continuing Operations $ 486 $ (187) $1,045 $ (436)(b) $ 908 Discontinued Operations - Real Estate, Net of Taxes( c) (119) (4) 624 396 897 Discontinued Operations - Oil & Gas, Net of Taxes (d) 646 457 78 (4,359) (3,178) ------- -------- ------- -------- --------- Net Income (Loss) $1,013 $ 266 $1,747 $(4,399) $ (1,373) ------- -------- ------- -------- --------- Basic Net Income (Loss) Per Share: Continuing Operations $ 0.06 $ (0.02) $ 0.13 $ (0.05) $ 0.12 Discontinued Operations $ 0.07 $ 0.06 $ 0.09 $ (0.51) $ (0.29) ------- -------- ------- -------- --------- Basic Total Net Income (Loss) Per Share $ 0.13 $ 0.04 $ 0.22 $ (0.56) $ (0.17) ------- -------- ------- -------- ---------
(a) - Net income for the first quarter of 2003 as previously reported has been reduced by $78,000 to record the under-accrual of certain General and Administrative expenses. Such change adjusted net income per share for the first quarter 2003 from $0.14 to $0.13. (b) - Adjustments have been made with respect to fourth quarter results that relate to previous quarters. The quarterly data set forth above reflects these adjustments. Fourth quarter results include a charge of $154,000, net of taxes, related to professional fees and other expenses associated with the Company's efforts to explore alternatives to maximize shareholder value. (c ) - Gross profit and discontinued operations relating to real estate represent total real estate revenues less real estate operating costs and related depreciation. See Note 13 of the Notes to the Company's Consolidated Financial Statements. (d) - Discontinued Operations relating to oil and gas represents oil and gas revenues less production costs and related depreciation, depletion and amortization. In addition, fourth quarter results reflect the above-mentioned $4.4 million non-cash charge. See Item 1, "Business-Background" and Note 14 of the Notes to the Company's Consolidated Financial Statements. QUARTERLY FINANCIAL DATA (Unaudited) (In thousands of dollars except per share amounts)
2002 ---- 1st 2nd 3rd 4th Year ---------- -------- ----------- ----------- ----------- Total Real Estate Revenues $3,111 $2,878 $3,046 $ 3,067 $12,102 ---------- -------- ----------- ----------- ----------- Gross Profit Real Estate (a) $ 818 $ 545 $ 494 $ 287 $ 2,144 ---------- -------- ----------- ----------- ----------- Net Income (Loss) from Continuing Operations $ 390 $ 115 $ (209) $ (290) $ 6 Discontinued Operations - Real Estate, Net of Taxes (a) (87) 48 154 (53) 62 Discontinued Operations - Oil & Gas, Net of Taxes (b) 147 44 124 693 1,008 ---------- -------- ----------- ----------- ----------- Net Income $ 450 $ 207 $ 69 $ 350 $ 1,076 ---------- -------- ----------- ----------- ----------- Net Income (Loss) Per Share: Continuing Operations $ 0.05 $ 0.02 $(0.03) $ (0.04) $ 0.00 Discontinued Operations $ 0.01 $ 0.01 $ 0.04 $ 0.08 $ 0.14 ---------- -------- ----------- ----------- ----------- Total Net Income Per Share $ 0.06 $ 0.03 $ 0.01 $ 0.04 $ 0.14 ---------- -------- ----------- ----------- -----------
(a) - Gross profit and discontinued operations relating to real estate represents total real estate revenues less real estate operating costs and related depreciation. (b) - Discontinued Operations relating to oil and gas represents oil and gas revenues less production costs and related depreciation, depletion and amortization. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company owns and manages residential and commercial real estate in several states across the United States. The Company is also engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. Real Estate - The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consist of apartment complexes as well as commercial and retail properties. The Company has contracted to sell 14 properties located in Jersey City, New Jersey and during 2003 sold three buildings located in Florida. The financial results of the properties sold in 2003 and held for sale have been reported as Discontinued Operations in the Company's Consolidated Financial Statements. See Item 1, "Business - Real Estate Operations" and Notes 13 and 14 of the Notes to the Company's Consolidated Financial Statements. Oil and Gas - The Company conducts its oil and gas operations in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Nebraska, Ohio, Oklahoma, Pennsylvania, Texas, Wyoming, and Utah. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. NOTE: As previously announced, the Company has entered into an agreement to sell its U. S. oil and gas business and is currently negotiating the sale of its Canadian oil and gas business. As a result of the Company's determination to sell its oil and gas business the financial results of these businesses have been reported as Discontinued Operations in the Company's Consolidated Financial Statements. See Item 1, "Business - Background" and Notes 13 and 14 of the Notes to the Company's Consolidated Financial Statements. Corporate - The Company holds passive investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. Over the years, the Company has decreased its holdings in marketable securities and focused its resources in its oil and gas and real estate divisions. In 2003 the Company sold most of its remaining securities holdings. General - Oil and Gas The Company's oil and gas operating performance is influenced by several factors. The most significant are the prices received for the sale of oil and gas and the sales volume. For 2003, the average price of oil that the Company received was $28.27 compared to $21.35 for 2002. The average price of gas for 2003 was $4.32 compared to $2.56 for 2002. The following table reflects the average prices received by the Company for oil and gas, the average production cost per BOE, and the amount of the Company's oil and gas production for the fiscal years presented: Fiscal Year Ended December 31 ---------------------------------- Crude Oil and Natural Gas Production: 2003 2002 2001 ---- ---- ---- Oil (Bbls) . . . . . . . . . . . 74,000 78,000 109,000 Gas (Mcf) . . . . . . . . . . . . 1,916,000 1,605,000 2,187,000 Average sales prices: Oil (per Bbl) . . . . . . . . . $28.27 $21.35 $20.97 Gas (per Mfc) . . . . . . . . . . $4.32 $2.56 $2.89 Average production costs per BOE: $6.72 $6.58 $5.24 Sales prices received by the Company for oil and gas have fluctuated significantly from period to period. The fluctuations in oil prices during these periods primarily reflected market uncertainty regarding the inability of the Organization of Petroleum Exporting Countries ("OPEC") to control the production of its member countries, as well as concerns related to global supply and demand for crude oil. Gas prices received by the Company fluctuate generally with changes in the spot market price for gas. It is impossible to predict future price movements with certainty. 14 Critical Accounting Policies Wilshire's discussion and analysis of its financial condition and results of operations are based upon Wilshire's consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Wilshire to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Wilshire bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Oil and Gas Properties The Company follows the accounting policy, generally known in the oil and gas industry as "full cost accounting". Under full cost accounting, the Company capitalizes all costs, including interest costs, relating to the exploration for and development of its mineral resources. Under this method, all costs incurred in the United States and Canada are accumulated in separate cost centers and are amortized using the gross revenue method based on total future estimated recoverable oil and gas reserves. The determination of oil and gas reserves is a complex and interpretive process, which is subject to continued revisions as additional information becomes available. Therefore, the reserve data presented herein should not be construed as being exact. Any reserve estimate depends in part on the quality of available data, engineering and geologic interpretation and judgment, and thus, represents only an informed professional judgment. Subsequent reservoir performance may justify upward or downward revision of the estimate. Capitalized costs are subject to a "ceiling" test that limits such costs to the aggregate of the estimated present value, using a discount rate of 10% of the future net revenues of proved reserves and the lower of cost or fair value of unproved properties. Management is of the opinion that, based on reserve reports of petroleum engineers and geologists, the fair value of the estimated recoverable oil and gas reserves exceeds the unamortized cost of oil and gas properties at December 31, 2002. No ceiling test was performed as of December 31, 2003, as the Company's oil and gas businesses have been reported as discontinued operations. See Item 1, "Business - Oil and Gas Properties - Reserves. The Company recognized a non-cash charge of $4.4 million, net of taxes, in its 2003 income statement as a result of a difference between the carrying value of its Canadian oil and gas business and the estimated market value of that business. In estimating the market value of that business, the Company relied upon the estimated gross proceeds anticipated from the proposed sale of the Company's Canadian oil and gas properties. Impairment of Property and Equipment In October 2001, the FASB issued Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues as originally described in SFAS 121. SFAS 144, among other things, will require the Company to classify the operations and cash flow of properties to be disposed of as Discontinued Operations. The Company adopted this pronouncement on January 1, 2002. This adoption had no impact on the Company's results of operations or financial position. On a periodic basis, management assesses whether there are any indicators that the value of the real estate properties may be impaired. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. Management does not believe at December 31, 2003 and 2002 that the value of any of its rental properties is impaired. 15 Revenue Recognition Revenue from oil and gas properties is recognized at the time these products are delivered to third party purchasers. Revenue from real estate properties is recognized during the period in which the premises are occupied and rent is due from tenant. Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in accounts receivable. An allowance for uncollectible accounts is maintained based on the Company's estimate of the inability of its joint interest partners in the oil and gas division and its tenants in the real estate division to make required payments. Foreign Operations The assets and liabilities of the Company's Canadian subsidiary have been translated at year-end exchange rates. The related revenues and expenses have been translated at average annual exchange rates. The aggregate effect of translation losses are reflected as a component of accumulated other comprehensive income (loss) until the sale or liquidation of the underlying foreign investment. As a result of the anticipated sale of the Canadian oil and gas assets and the ultimate distribution of net proceeds to the United States parent company, the Company has provided $1.4 million of United States deferred taxes that are expected to be incurred upon such remittance. See Note 14 of the Notes to the Company's Consolidated Financial Statements. Accounting for Stock-Based Compensation The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). Recently Issued Pronouncements In May 2002, the FASB issued SFAS No. 145, "Reporting Gains and Losses from Extinguishment of Debt", which rescinded SFAS No. 4, No. 44 and No. 64 and amended SFAS No. 13. The new standard addresses the income statement classification of gains or losses from the extinguishments of debt and criteria for classification as extraordinary items. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (effective January 1, 2003). SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The adoption of this pronouncement in 2003 resulted in a financial statement charge, net of taxes, of $ 467,000 to Discontinued Operations - Oil & Gas, Net of Taxes. In November of 2002, the FASB issued Interpretation No. 45, "Guarantors' Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." The Interpretation elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. This Interpretation does not prescribe a specific approach for subsequently measuring the guarantor's recognized liability over the term of the related guarantee. The disclosure provisions of this Interpretation are effective for the Company's December 31, 2002 financial statements. The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation Transition and Disclosure," which provides guidance on how to transition from the intrinsic method of accounting for stock-based employee compensation under APB No. 25 to SFAS No. 123 for the fair value method of accounting, if a company so elects. The Company has adopted the disclosure only provisions of this pronouncement. 16 In January of 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. This Interpretation clarifies the application of existing accounting pronouncements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of the Interpretation will be immediately effective for all variable interests in variable interest entities created after January 31, 2003. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. Results of Operations Year ended December 31, 2003 ("2003") Compared with Year Ended December 31, 2002("2002") Continuing Operations: Revenue increased from $12,102,000 in 2002 to $12,137,000 in 2003, an increase of $35,000. Occupancy rates have been static from period to period. Low mortgage rates have made the purchase of residences attractive to persons who might otherwise have rented apartments in the Company's properties. Further, the Company did not add new rental properties during 2003. Real Estate operating expenses increased from $7,034,000 in 2002 to $7,303,000 in 2003, an increase of $269,000 or 3.8%. This increase was due primarily to higher utility, maintenance and insurance expenses. Energy costs have increased substantially in the Southwest. Depreciation and amortization increased from $1,987,000 in 2002 to $2,443,000 in 2003. This increase includes $383,000 of amortization expense applicable to a write-off of unamortized mortgage costs associated with approximately $31.5 million of debt that was refinanced and additional depreciation applicable to 2003 and 2002 capital improvements. General and administrative expenses increased from $1,592,000 in 2002 to $2,283,000 in 2003. This increase was primarily due to higher salary and benefit costs, corporate insurance expenses and legal and accounting fees. The increase in salary and benefit costs reflects the addition of a senior executive officer for a full year in 2003 and bonuses paid in 2003 for performance through June 30, 2003. Income from operations decreased from $1,489,000 in 2002 to $108,000 in 2003. This decrease was due to relatively flat revenues from 2002 to 2003 and increased expenses in 2003 as noted above. Other income increased from $2,097,000 in 2002 to $4,547,000 in 2003. This increase includes $1,000,000 received by the Company in 2003 as a beneficiary of life insurance policies on the life of the Company's former Chairman and President Siggi B. Wilzig, who had been serving as its Senior Consultant up to his death on January 7, 2003. The receipt of these funds are not taxable to the Company. Also included in other income for 2003 are gains from the sale of securities of $2,621,000, exceeding gains from 2002 by $1,910,000. Interest expense increased from $3,806,000 in 2002 to $3,955,000 in 2003. Interest expense in 2003 includes a one time prepayment penalty of $469,000 to secure the refinancing of certain real estate properties. This refinancing of the mortgage notes payable reduced the effective rate paid by the Company from 7.36% to 6.22% and extended its maturity and terms. During the next ten years, the Company's annual interest expense related to its current debt should decrease by approximately $550,000 as a result of this refinancing. Net income from Continuing Operation's increased from $6,000 in 2002 to $908,000 in 2003. Earnings per share from continuing operations increased from $0.00 in 2002 to $0.12 in 2003. This increase is primarily due to the increase in other income reduced by a reduction in income from operations as previously discussed. Discontinued Operations: Real Estate Discontinued Operations - Real Estate, Net of Taxes reflects the gain from the sale of the three real estate properties sold in 2003 of $1,097,000, offset in part by a $200,000 net loss from the operation of such properties and other properties held for sale. 17 Oil and Gas Oil and gas revenues increased from $5,729,000 in 2002 to $10,409,000 in 2003. This increase was mainly due to increased natural gas production from the Medicine Hat-Hilda drilling program in Canada and increased prices in 2003. Average prices received for oil in 2003 was $28.27 per barrel compared to $21.35 in 2002. The average price received for natural gas in 2003 was $4.32 per MCF compared to $2.56 in 2002. Production of oil in 2003 was 74,000 BBls compared to 78,000 BBls in 2002. Production of natural gas was 1,916,000 MCF in 2003 compared to 1,605,000 MCF in 2002. The increase in average price received, combined with the increased production of natural gas, resulted in the higher revenues in 2003. Production expense increased from $2,298,000 in 2002 to $2,745,000 in 2003. This increase was due to increased production in 2003. Depletion expense increased from $1,416,000 in 2002 to $3,303,000 in 2003. This increase was due to greater production, increased prices and a reduction in the quantity of Canadian gas reserves attributable to the Medicine Hat-Hilda project. Income from discontinued operations associated with the Company's oil and gas properties declined from earnings of $1,070,000 during 2002 to a loss of $2,281,000 during 2003. This decline was primarily attributable to the Company's $4.4 million, net of taxes, non-cash charge resulting from the difference between the carrying value and estimated market value of the Company's Canadian oil and gas properties. See Item 1, `Business-Background" and Notes 13 and 14 of the Notes to the Company's Consolidated Financial Statements. Year ended December 31, 2002 ("2002") Compared with Year Ended December 31, 2001 ("2001") Continuing Operations: Revenue increased from $11,602,000 in 2001 to $12,102,000 in 2002, an increase of $500,000. The increase reflects (i) the full year of operation in 2002 of a property acquired on March 29, 2001 and (ii) additional rent paid to the Company on one property for which there was a parallel increase in the Company's real estate operating expenses. Real estate operating expenses increased from $6,469,000 in 2001 to $7,034,000 in 2002, an increase of $565,000, reflecting higher maintenance and insurance costs and additional real estate tax expenses offsetting the additional rent referred to above. Deprecation and amortization increased slightly from $1,819,000 in 2001 to $1,987,000 in 2002. This increase was due primarily to additional depreciation on capital improvements to the properties in 2002. General and Administrative expense increased from $1,328,000 in 2001 to $1,592,000 in 2002, an increase of $264,000. This increase was due primarily to higher insurance, legal and salary and benefit expense in 2002. Insurance in particular was much higher in 2002 than in 2001 due to post 9/11 increases. Income from Operations decreased from $1,986,000 in 2001 to $1,489,000 in 2002. This decrease was due primarily to increased expenses noted above. Other Income (loss) increased in 2002, compared to 2001. In 2002 there were $711,000 of securities gains, while there were none in 2001. In addition in 2001, the Company had to write down certain of its marketable securities in the amount of $1,684,000. Interest Expense decreased from $4,069,000 in 2001 to $3,806,000 in 2002. This decrease was attributable to a reduction in debt during most of 2002 and declining interest rates. Net income from continuing operations was $6,000 in 2002, compared to a loss of ($1,883,000) in 2001. 18 Discontinued Operations: Real Estate Discontinued Operations - Real Estate, net of taxes, decreased from $494,000 in 2001 to $62,000 in 2002. This decrease of $432,000 principally relates to a 2001 gain on the sale of property in Arizona for $720,000 reduced by higher operating losses for other properties held for sale in 2001. Oil and Gas Oil and Gas income, net of taxes, decreased from $1,841,000 in 2001 to $1,008,000 in 2002. Oil and Gas revenue decreased to $5,729,000 in 2002 from $8,534,000 in 2001. This decrease was primarily attributable to lower production of oil and gas in 2002. Oil production decreased to 78,000 BBL in 2002 from 109,000 BBL in 2001. Gas production decreased to 1,605,000 MCF in 2002 from 2,187,000 MCF in 2001. Oil and Gas production expense was lower in 2002 than in 2001. Oil and gas production expense amounted to $2,298,000 in 2002 and $2,555,000 in 2001. The decrease in 2002 expense was primarily the result of lower production in 2002. Average production costs per BOE increased to $6.58 in 2002 from $5.24 in 2001, but were offset by the decrease in production in 2002. Depreciation, depletion and amortization of oil and gas assets amounted to $1,416,000 in 2002 compared to $2,894,000 in 2001. This decrease resulted from lower depletion expense due to an increase in the value of the Company United States reserves as a result of higher oil and gas prices at December 31, 2002 versus December 31, 2001. In Canada, while the dollar value of reserves decreased, its effect on depletion was not significant. Effects of Inflation The effects of inflation on the Company's financial condition are not considered to be material by management. Liquidity and Capital Resources At December 31, 2003 the Company had approximately $1.8 million in marketable securities at cost, with a market value of approximately $2.0 million. The current ratio was 1.3 to 1 and the Company's working capital was $3.2 million. Management considers these amounts adequate for the Company's current business. The Company has entered into an agreement to sell its U. S. oil and gas properties and anticipates entering into an agreement to sell its Canadian oil and gas properties. See Note 14 of the Notes to the Company's Consolidated Financial Statements. If the contemplated sales of the Company's oil and gas operations are not consummated, the Company anticipates that cash provided by operating activities and investing activities will be sufficient to meet its capital requirements to drill and evaluate its oil and gas properties. In that case, the level of oil and gas capital expenditures will vary in future periods depending on market conditions, including the price of oil and the demand for natural gas, and other related factors. As the Company has no material long-term commitments with respect to its oil and gas capital expenditure plans, the Company has a significant degree of flexibility to adjust the level of its expenditures as circumstances warrant. If the contemplated sales are consummated, the Company's goal, at least on an interim basis, is to increase the value of its real estate business, through improvements of its existing properties as well as the potential acquisition of new income generating assets and the potential opportunistic divestituture of select real estate assets. However, while the Company anticipates that it will actively explore these and other real estate acquisition opportunities, no assurance can be given that any such acquisition or disposition will occur. On March 1, 2003 the Company finalized the refinancing of the majority of its long-term debt of approximately $50 million. This refinancing reduced the effective rate paid by the Company from 7.36% to 6.22% and extended its maturity and terms. The proceeds of these loans were used to pay off existing debt. See Note 3 of the Notes to the Company's Consolidated Financial Statements for information regarding this refinancing. 19 Net cash provided by operating activities was $7,498,000, $4,888,000 and $6,953,000 in 2003, 2002 and 2001, respectively. The cash provided in 2003 principally reflects the fact that two substantial 2003 charges-depreciation, depletion and amortization and the charge associated with the impairment of the Canadian oil and gas properties - were non-cash charges. Net cash provided (used) in investing activities was $2,012,000, ($3,223,000) and ($11,200,000) in 2003, 2002, and 2001, respectively. The Company received $9,657,000 and did not purchase any investment securities during 2003. Proceeds from the sale of real estate properties was $3,107,000 in 2003. Net cash provided by (used in) financing activities was ($7,712,000), ($2,618,000), and $6,376,000 in 2003, 2002 and 2001, respectively. During 2003, the Company made principal payments of $47,868,000 on long-term debt, against which it borrowed $40,656,000 as part of a refinancing. See Note 3 of Notes to Consolidated Financial Statements for a schedule of long-term debt. If the contemplated sale of the U.S. oil and gas operations is consummated, the Company will receive $13.7 million in gross proceeds. After taxes, this transaction is expected to provide approximately $8.5 million in capital resources. If the contemplated sale of the Canadian oil and gas operations is consummated, this transaction is expected to generate approximately $8 million in additional capital resources after the extinguishments of related debt associated with those assets. On March 15, 2004 the Company sold for $800,000 a building in Jersey City, New Jersey which was included in an overall contract totaling $11,000,000 and realized a net book gain of $180,000. On March 31, 2004 the Company anticipates closing on the remainder of this contract to sell all of its remaining residential properties in Jersey City for $10,200,000, realizing a net book gain of $4.7 million. After taxes and the payoff of related long-term debt, these transactions will provide approximately $5.6 million in capital resources. The Company believes it has adequate capital resources to fund operations for the foreseeable future. As of December 31, 2003, the Company's principal commitments consisted of Mortgage obligations. See Note 3 of the Notes to the Company's Consolidated Financial Statements for information regarding the maturity distribution of the Company's long-term debt. As of December 31, 2003, the Company did not have material capital lease obligations or operating lease obligation. Forward-Looking Statements This Report on Form 10-K for 2003 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included herein other than statements of historical fact are forward-looking statements. Although the Company believes that the underlying assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's business and prospects are subject to a number of risks which could cause actual results to differ materially from those reflected in such forward-looking statements, including the potential sale of its oil and gas operations, volatility of oil and gas prices and the United States to Canada foreign exchange rate, the need to develop and replace reserves, risks involved in exploration and drilling, uncertainties about estimates of reserves, environmental risks relating to the Company's oil and gas and real estate properties, competition, the substantial capital expenditures required to fund the Company's oil and gas and real estate operations, market and economic changes in areas where the Company holds real estate properties, interest rate fluctuations, government regulation, and the ability of the Company to implement its business strategy. 20 ITEM 7a. QUALITATIVE AND QUANTATIVE DISCLOSURE ABOUT MARKET RISK The Company has investments in domestic equity securities for which the Company has exposure to the risk of market loss. See Note 2 of the Notes to the Consolidated Financial Statements. - Summary of Significant Accounting Policies - - Marketable Securities, Available-for-Sale. The Company is exposed to changes in interest rates from its floating rate debt arrangements. At December 31, 2003, the Company had $58,494,000 of debt outstanding of which $56,524,000 bears interest at fixed rates. See Note 3 of the Notes to the Consolidated Financial Statements. The interest rate on the Company's revolving credit lines, under which $1,970,000 was outstanding at December 31, 2003, is variable at a rate of prime for US borrowings and prime plus .25% for its Canadian revolving demand loan. A hypothetical 100 basis point adverse move (increase) on short-term interest rates on the floating rate debt outstanding at December 31, 2003 would adversely affect the Company's annual interest cost by approximately $20,000 assuming borrowed amounts under the revolving credit lines remained at $1,970,000. SUMMARY OF INDEBTNESS Long-term debt as of December 31 consists of the following - 2003 2002 ------------------ --------------- Mortgage notes payable $18,467,000 $24,800,000 Mortgage notes payable 31,195,000 26,231,000 Mortgage notes payable 4,162,000 4,205,000 Note payable 2,700,000 5,475,000 Revolving line of credit -0- 2,000,000 Revolving line of credit -0- 2,100,000 Revolving demand loan 1,970,000 895,000 ------------------ --------------- Total 58,494,000 65,706,000 Less-Current portion 6,989,000 7,314,000 ------------------ --------------- Long term portion $51,505,000 $58,392,000 ================== =============== The aggregate maturities of the long-term debt in each of the five years subsequent to 2003 and thereafter are - 2004 $6,989,000 2005 801,000 2006 853,000 2007 907,000 2008 960,000 Thereafter 47,984,000 ------------------ $ 58,494,000 ================== See Note 3 of the Notes to the Consolidate Financial Statements for a discussion of interest rates. 21 Financial Accounting Standards Board Statement No. 69 Disclosures The following disclosures are those required to be made by publicly traded enterprises under Financial Accounting Standards Board Statement No. 69, Disclosures About Oil and Gas Producing Activities. For information regarding the Company's efforts to sell its oil and gas properties, see Notes 13 and 14 of the Notes to the Company's Consolidated Financial Statements. The SEC defines proved oil and gas reserves as those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are those that can be recovered through existing wells with existing equipment and operating methods. Estimated quantities of proved oil and gas reserves are as follows: Disclosures of Oil and Gas Producing Activities as Required by Financial Accounting Standards Board Statement No. 69 (000's Omitted)
Crude Oil, Condensate and Natural Gas Liquids (Barrels) United States Canada - ------------------------------------------------------------------------------------------------------------------------ 2003 2002 2001 2003 2002 2001 ---- ---- ---- ---- ---- ---- Proved Reserves-Beginning of Year 569 1,122 1,268 127 786 870 Revisions of previous estimates 50 (505) (90) 42 (630) (32) Sales of minerals in place - - - - - - Extensions and discoveries 18 1 - 2 - 1 Production (47) (49) (56) (27) (29) (53) ----------- ----------- ------------- ---------- ----------- ------------- Proved Reserves-End of Year 590 569 1,122 144 127 786 ----------- ----------- ------------- ---------- ----------- ------------- Proved Developed Reserves- Beginning of Year 426 396 482 127 464 552 ----------- ----------- ------------- ---------- ----------- ------------- End of Year 446 426 396 144 127 464 =========== =========== ============= ========== =========== =============
Natural Gas (MFC) United States Canada 2003 2002 2001 2003 2002 2001 ---- ---- ---- ---- ---- ---- Proved Reserves-Beginning of Year 8,597 6,976 9,592 15,281 31,832 28,900 Revisions of previous estimates 910 2,516 (1,325) (5,016) (18,633) 3,437 Sales of minerals in place - - - - - - Extensions and discoveries 113 126 146 - 2,666 245 Production (873) (1,021) (1,437) (1,043) (584) (750) ---------- ----------- ------------- ---------- ----------- ------------- Proved Reserves-End of Year 8,747 8,597 6,976 9,222 15,281 31,832 ---------- ----------- ------------- ---------- ----------- ------------- Proved Developed Reserves- Beginning of Year 8,464 6,976 9,592 15,281 25,912 23,075 ---------- ----------- ------------- ---------- ----------- ------------- End of Year 8,631 8,464 6,976 9,133 15,281 25,912 ========== =========== ============= ========== =========== =============
22 Standardized Measure of Discounted Future Net Cash Flows Related to Proved Oil and Gas Reserves For The Years Ended December 31 (000's Omitted)
United States Canada 2003 2002 2003 2002 ---- ---- ---- ---- Future cash flows $65,053 $52,088 $50,735 $67,278 ------------- ----------- ------------- ----------- Future costs: Production 22,105 19,478 12,622 7,825 Development, dismantlement & abandonment 1,289 910 12 63 ------------- ----------- ------------- ----------- Total Future Costs 23,394 20,388 12,634 7,888 ------------- ----------- ------------- ----------- Future net inflows- Before income tax 41,659 31,700 38,101 59,390 Future income taxes 10,634 7,849 12,282 19,243 ------------- ----------- ------------- ----------- Future net cash flows 31,025 23,851 25,819 40,147 10% Discount factor 15,131 11,162 12,625 23,229 ------------- ----------- ------------- ----------- Standardized measure of discounted future net cash flows $15,894 $12,689 $13,194 $16,918 ============= =========== ============= ===========
Estimated future cash inflows are computed by applying year-end prices of oil and gas to year-end quantities of proved reserves. Future price changes are considered only to the extent provided by contractual arrangements. Estimated future development and production costs are determined by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. Estimated future income tax expenses are calculated by applying year-end statutory tax rates (adjusted for permanent differences and tax credits) to estimated future pretax net cash flows related to proved oil and gas reserves, less the tax basis of the properties involved. These estimates are furnished and calculated in accordance with requirements of the Financial Accounting Standards Board and the SEC. Due to unpredictable variances in expenses and capital forecasts, crude oil and natural gas price changes and the fact that the basis for such estimates vary significantly, management believes the usefulness of these projections is limited. Estimates of future net cash flows do not represent management's assessment of future profitability or future cash flow to the Company. Management's investment and operating decisions are based upon reserve estimates that include proved reserves prescribed by the SEC as well as probable reserves, and upon different price and cost assumptions from those used here. It should be recognized that applying current costs and prices at a 10 percent standard discount rate allows for comparability but does not convey absolute value. The discounted amounts arrived at are only one measure of financial quantification of proved reserves. For additional information relating to the Company's oil and gas operations, see Note 14 of the Notes to the Company's Consolidated Financial Statements. There were no oil and gas estimates filed with or included in reports to any other federal or foreign governmental authority or agency within the last twelve months. Reserves in the United States and Canada were estimated by Ryder Scott Company for 2003. For 2002, reserves in the United States were estimated by Ryder Scott Company and the Company and the reserves in Canada represent combined estimates performed by both Ryder Scott Company and Citadel Engineering, Ltd. "Total Costs Both Capitalized and Expensed, Incurred in Oil and Gas Producing Activities" (including capitalized interest), "Cost Incurred in Property Acquisition, Exploration and Development Activities" and "Results of Operations from Oil and Gas Producing Activities" during the three years ended December 31, 2003, 2002 and 2001 are included in Notes 9 and 11 of the Notes to Company's Consolidated Financial Statements. 23 The standardized measure of discounted estimated future net cash flows and changes therein related to proved oil and gas reserves is as follows: Changes in Standardized Measure of Discounted Future Net Cash Flow from Proved Reserve Quantities (000's Omitted)
2003 2002 2001 ---- ---- ---- Standardized Measure - Beginning of Year $29,607 $30,374 $95,255 Sales and transfers - Net of Production Costs (7,735) (3,431) (6,055) Extensions and discoveries 830 10,781 700 Net change in sales price 15,794 39,074 (26,255) Revision of quantity estimates (17,605) (66,302) 1,510 Proceeds from sales of Minerals in Place -0- -0- -0- Accretion of discount 4,267 3,610 11,716 Net change in income taxes (4,176) (2,527) 31,894 Change in production rates- Other 8,106 18,028 (78,391) ------------- ------------- ----------- Standardized measure -End of year $29,088 $29,607 $30,374 ============= ============= ===========
24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMTAL DATA Report of Independent Auditors The Board of Directors and Shareholders of Wilshire Enterprises, Inc. We have audited the accompanying consolidated balance sheets of Wilshire Enterprises, Inc. and subsidiaries as of December 31, 2003 and 2002 and the related consolidated statements of operations, shareholders' equity, and cash flows each of the three years in the period ended December 31, 2003. Our audit also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2003 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wilshire Enterprises, Inc. and subsidiaries at December 31, 2003 and 2002 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. New York, New York /s/Ernst & Young LLP March 26, 2004 25 WILSHIRE ENTERPRISES, INC. CONSOLIDATE BALANCE SHEETS As of December 31, 2003 and 2002
ASSETS 2003 2002 ---------------- ----------------- CURRENT ASSETS: Cash and cash equivalents (Note 2) $7,763,000 $ 3,759,000 Restricted cash (Note 2) 327,000 405,000 Marketable securities, available-for-sale, at fair value (Notes 2 and 3) 1,996,000 9,860,000 Accounts receivable net of allowance of $65,000 and $77,000 in 2003 and 2002, respectively 1,802,000 1,094,000 Prepaid expenses and other current assets 1,870,000 2,303,000 ---------------- ----------------- Total current assets 13,758,000 17,421,000 ---------------- ----------------- NONCURRENT ASSETS Mortgage notes receivable (Note 4) 2,504,000 3,035,000 Other noncurrent 860,000 375,000 PROPERTY AND EQUIPMENT (Notes 3, 9 and 10): Oil and gas properties, using the full cost method of accounting- Held for sale 143,601,000 141,609,000 Real estate properties 54,669,000 52,666,000 Real estate properties - Held for sale 17,400,000 18,689,000 ---------------- ----------------- 215,670,000 212,964,000 Less: Accumulated depreciation and amortization 14,843,000 12,784,000 Accumulated depreciation, depletion and amortization- Property held for sale 118,952,000 113,091,000 ---------------- ----------------- 81,875,000 87,089,000 ---------------- ----------------- TOTAL ASSETS $98,997,000 $107,920,000 ================ ================= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt (Note 3) $ 3,645,000 $6,319,000 Loan payable to shareholder (Note 5) - 500,000 Accounts payable 1,911,000 3,065,000 Income taxes payable 154,000 35,000 Deferred income taxes (Note 7) 89,000 535,000 Accrued liabilities 800,000 119,000 Deferred income 419,000 449,000 Current liabilities associated with discontinued operations 3,503,000 1,230,000 ---------------- ----------------- Total current liabilities 10,521,000 12,252,000 NONCURRENT LIABILITIES Long-term debt, less current portion (Note 3) 48,053,000 48,228,000 Deferred income taxes (Note 7) 11,458,000 12,051,000 Deferred income 727,000 1,146,000 Other Long-term liabilities 227,000 75,000 Non current liabilities associated with discontinued operations 3,484,000 9,929,000 ---------------- ----------------- Total liabilities 74,470,000 83,681,000 ---------------- ----------------- COMMITMENTS AND CONTINGENCIES (Note 8) SHAREHOLDERS' EQUITY (Note 8) Preferred stock, $1 par value, 1,000,000 shares authorized; none issued and outstanding in 2003 and 2002 - Common stock, $1 par value, 15,000,000 shares authorized; issued 10,013,544 shares in 2003 and 2002 10,014,000 10,014,000 Capital in excess of par value 9,029,000 9,029,000 Treasury stock, 2,210,713 and 2,210,713 shares at December 31, 2003 and December 31, 2002, respectively, at cost (10,355,000) (10,355,000) Retained earnings 17,267,000 18,640,000 Accumulated other comprehensive loss (1,428,000) (3,089,000) ---------------- ----------------- Total shareholders' equity 24,527,000 24,239,000 ---------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $98,997,000 $107,920,000 ================ =================
The accompanying notes to consolidated financial statements are an integral part of these financial statements. 26 WILSHIRE ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2003, 2002 and 2001
2003 2002 2001 -------------------- ------------------ ------------------ Revenues (Notes 9 and 10): Real estate $ 12,137,000 $ 12,102,000 $11,602,000 -------------------- ------------------ ------------------ Total revenues 12,137,000 12,102,000 11,602,000 -------------------- ------------------ ------------------ Cost and Expenses (Notes 9 and 10): Real estate operating expenses 7,303,000 7,034,000 6,469,000 Depreciation and amortization 2,443,000 1,987,000 1,819,000 General and administrative 2,283,000 1,592,000 1,328,000 -------------------- ------------------ ------------------ Total costs and expenses 12,029,000 10,613,000 9,616,000 -------------------- ------------------ ------------------ Income from Operations 108,000 1,489,000 1,986,000 Other Income (loss) Dividend and interest income 743,000 877,000 861,000 Gain on sale of securities 2,621,000 711,000 - Write-down of marketable securities (Note 2) - - (1,684,000) Insurance proceeds 1,000,000 - - Other Income and expenses 183,000 509,000 - Interest Expense (Note 3) (3,955,000) (3,806,000) (4,069,000) -------------------- ------------------ ------------------ Income (loss) before provision for income taxes 700,000 (220,000) (2,906,000) Provision (Benefit ) for Income Taxes (Note 7) (208,000) (226,000) (1,023,000) -------------------- ------------------ ------------------ Net Income (loss) from Continuing Operations 908,000 6,000 (1,883,000) Discontinued Operations - Real Estate, Net of Taxes 897,000 62,000 494,000 Discontinued Operations - Oil & Gas, Net of Taxes (3,178,000) 1,008,000 1,841,000 -------------------- ------------------ ------------------ Net Income (loss) $ (1,373,000) $ 1,076,000 $ 452,000 ==================== ================== ================== Basic earnings per share: Earnings (loss) from continuing operations $ 0.12 $ 0.00 ($0.30) Earnings (loss) from discontinued operations (0.29) 0.14 0.36 -------------------- ------------------ ------------------ Net earnings (loss) per share $ (0.17) $ 0.14 $ 0.06 ==================== ================== ================== Diluted earnings per share: Earnings (loss) from continuing operations $ 0.12 $ 0.00 $ (0.30) Earnings (loss) from discontinued operations (0.29) 0.14 0.36 -------------------- ------------------ ------------------ Net earnings (loss) per share $ (0.17) $ 0.14 $ 0.06 ==================== ================== ==================
The accompanying notes to consolidated financial statements are an integral part of these financial statements. 27 WILSHIRE ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY December 31, 2003, 2002 and 2001
Preferred Stock Common Stock Other Shares Shares Excess of Treasury Issued Amount Issued Amount Par Value Stock ---------- ------- ----------- ------------ -------------------------- BALANCE, December 31, 2000 - $ - 10,013,544 $10,014,000 $9,029,000 $ (9,850,000) Comprehensive income, year ended December 31, 2001 - Net income - - - - - - Other comprehensive income - Net translation adjustment - - - - - - Change in unrealized gain on marketable securities, net of income tax expense of $896,000 - - - - - - Comprehensive income - - - - - - Purchase of treasury stock - - - - - (329,000) ---------- ------- ----------- ------------ ----------- ------------ BALANCE, December 31, 2001 - - 10,013,544 10,014,000 9,029,000 (10,179,000) Comprehensive income, year ended December 31, 2002 - Net income - - - - - - Other comprehensive income - Net translation adjustment - - - - - - Change in unrealized loss on marketable securities, net of income tax benefit of $361,000 - Comprehensive income - - - - - - Purchase of treasury stock - - - - - (176,000) ---------- ------- ----------- ------------ ----------- ------------ BALANCE, December 31, 2002 10,013,544 10,014,000 9,029,000 (10,355,000) Comprehensive income, year ended December 31, 2003 - Net income (loss) - - - - - - Other comprehensive income - Net translation adjustment - - - - - - Change in unrealized loss on marketable securities, net of income tax benefit of $89,000 - Comprehensive income - - - - - - Purchase of treasury stock - - - - - ---------- ------- ----------- ------------ ----------- ------------ BALANCE, December 31, 2003 - $ - 10,013,544 $10,014,000 $9,029,000 $(10,355,000) ========== ======= =========== ============ =========== ============ Accumulated Other Comprehensive Retained Comprehensive Income (Loss) Earning Income(Loss) ------------------ --------------------------------- BALANCE, December 31, 2000 $ (4,877,000) $17,112,000 Comprehensive income, year ended December 31, 2001 - Net income - 452,000 $ 452,000 Other comprehensive income - Net translation adjustment (538,000) - (538,000) Change in unrealized gain on marketable securities, net of income tax expense of $896,000 2,680,000 - 2,680,000 --------------- Comprehensive income $ 2,594,000 =============== Purchase of treasury stock - - - ------------------ ------------- BALANCE, December 31, 2001 (2,735,000) 17,564,000 Comprehensive income, year ended December 31, 2002 - Net income - 1,076,000 $ 1,076,000 Other comprehensive income - Net translation adjustment 88,000 - 88,000 Change in unrealized loss on marketable securities, net of income tax benefit of $361,000 (442,000) - (442,000) --------------- Comprehensive income $ 722,000 =============== Purchase of treasury stock - - - ------------------ ------------- BALANCE, December 31, 2002 (3,089,000) 18,640,000 Comprehensive income, year ended December 31, 2003 - Net income (loss) - (1,373,000) (1,373,000) Other comprehensive income - Net translation adjustment 2,206,000 2,206,000 Change in unrealized loss on marketable securities, net of income tax benefit of $89,000 (545,000) (545,000) --------------- Comprehensive income $ 288,000 =============== Purchase of treasury stock ------------------ ------------- BALANCE, December 31, 2003 $(1,428,000) $17,267,000 ================== =============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. 28 WILSHIRE ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS December 31, 2003, 2002 and 2001
2003 2002 2001 ----------------- -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (1,373,000) $ 1,076,000 $ 452,000 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation, depletion and amortization 6,244,000 3,884,000 5,157,000 Write down of marketable securities - 1,684,000 Impairment loss on oil and gas assets 7,000,000 - - Deferred income tax (benefits) provision (594,000) 762,000 (738,000) Deferred income (445,000) 1,627,000 - Gain on sales of marketable securities (2,621,000) (711,000) - Gain on sales of real estate assets (1,693,000) (263,000) (1,559,000) Changes in operating assets and liabilities - Decrease (increase) in accounts receivable (897,000) (262,000) 1,411,000 Decrease (increase) in income taxes receivable 83,000 (626,000) - Decrease (Increase) in restricted cash 78,000 (45,000) (63,000) Decrease (increase) in prepaid expenses and other current assets 539,000 (462,000) 382,000 Increase in other liabilities 1,344,000 100,000 43,000 Increase (decrease) in accounts payable, accrued liabilities and taxes payable (167,000) (192,000) 184,000 ----------------- -------------- ------------- Net cash provided by operating activities 7,498,000 4,888,000 6,953,000 ----------------- -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net (11,120,000) (7,528,000) (11,897,000) Purchases of marketable securities (1,930,000) (5,000) Proceeds from sales and redemptions of marketable securities 9,494,000 2,336,000 - Purchase of mortgage notes receivable - (3,290,000) Proceeds on mortgage notes receivable 531,000 3,162,000 218,000 Proceeds from sales of real estate properties 3,107,000 737,000 3,774,000 ----------------- -------------- ------------- Net cash provided by (used in) investing activities 2,012,000 (3,223,000) (11,200,000) ----------------- -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of debt 40,656,000 9,158,000 13,370,000 Principal payments of long-term debt (47,868,000) (11,400,000) (6,965,000) Purchase of treasury stock - (176,000) (329,000) Loan payable to shareholder (500,000) (200,000) 300,000 ----------------- -------------- ------------- Net cash provided by (used in) financing activities (7,712,000) (2,618,000) 6,376,000 ----------------- -------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,206,000 88,000 (133,000) ----------------- -------------- ------------- Net increase (decrease) in cash and cash equivalents 4,004,000 (865,000) 1,996,000 CASH AND CASH EQUIVALENTS, beginning of year 3,759,000 4,624,000 2,628,000 ----------------- -------------- ------------- CASH AND CASH EQUIVALENTS, end of year $ 7,763,000 $ 3,759,000 $ 4,624,000 ================= ============== ============= SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS: Cash paid during the year for - Interest $ 4,716,000 $ 4,683,000 $ 4,824,000 ================= ================= ============= Income taxes, net $ 543,000 $ 352,000 $ 355,000 ================= ================= =============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. 29 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements 1. Description of Business Wilshire Enterprises, Inc. (the Company) is a diversified corporation primarily engaged in oil and gas exploration and production and real estate operations. The Company's oil and gas operations are conducted, both in its own name and through several wholly-owned subsidiaries, in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. Crude oil and natural gas production is sold to oil refineries and natural gas pipeline companies. The Company's real estate holdings are located in the states of Arizona, Florida, New Jersey, Georgia and Texas. The Company also maintains investments in marketable securities, which are available-for-sale. On March 17, 2004 the Company announced that it entered into a definitive agreement to sell its U.S. oil and gas business for $13.7 million in gross proceeds. The transaction, which is subject to due diligence review by the purchaser and other contractual conditions, is expected to close in April 2004. In addition, the Company announced that it is currently in negotiations with potential purchasers of the Canadian oil and gas business and believes these efforts will culminate in a successful outcome in the near future. Until these sales are consummated the Company will continue to participate in oil and gas prospects. Please see Note 14, Subsequent Events, Oil and Gas. 2. Summary of Significant Accounting Policies Significant accounting policies followed by the Company and its subsidiaries are as follows: Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany account balances and transactions have been eliminated in consolidation. Certain amounts in the 2002 and 2001 consolidated financial statements have been reclassified to conform to the 2003 presentation. Use of Estimates The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers cash and cash equivalents to include deposits with banks and highly liquid investments having a maturity of three months or less from date of purchase. Restricted cash represents residential tenant deposits for Company properties located in New Jersey, Georgia and Florida. Marketable Securities, Available-for-Sale As of December 31, 2003 and 2002, the marketable securities of the Company consist of equity securities, all of which are classified as available-for-sale. These securities are carried at fair value based upon quoted market prices. Unrealized gains and losses, representing differences between an investment's cost and its fair value, are charged (credited) directly to shareholders' equity, net of related income taxes, as a component of accumulated comprehensive income (loss). The cost of securities sold is determined on a specific identification basis. The Company periodically reviews available-for-sale securities for other than temporary impairment when the cost basis of a security exceeds the market value. In 2001, the Company wrote down a marketable security held as available-for-sale to fair value by $1,684,000 since the market value decline was determined to be other than temporary. No additional write down was required in 2002 or 2003. 30 WILSHIRE ENTERPRISES, INC. Notes to Consolidate Financial Statements- (Continued) Oil and Gas Properties The Company follows the accounting policy, generally known in the oil and gas industry as "full cost accounting". Under full cost accounting, the Company capitalizes all costs relating to the exploration for and development of its mineral resources. Under this method, all costs incurred in the United States and Canada are accumulated in separate cost centers and are amortized using the gross revenue method based on total future estimated recoverable oil and gas reserves. Capitalized costs are subject to a "ceiling" test that limits such costs to the aggregate of the estimated present value, using a discount rate of 10% of the future net revenues of proved reserves and the lower of cost or fair value of unproved properties. Management is of the opinion that, based on reserve reports of petroleum engineers and geologists, the fair value of the estimated recoverable oil and gas reserves exceeds the unamortized cost of oil and gas properties at December 31, 2002. However, based on the anticipated gross proceeds from the sale of the Company's Canadian oil and gas assets and the net book value of such assets, the Company has recorded a non cash charge to Discontinued Operations, Oil and Gas - Net of Taxes $4.4 million. Please see Note 14, Subsequent Events, presented elsewhere herein. As of December 31, 2003 and 2002, oil and gas properties totaled $143,601,000 and $141,609,000 and accumulated depletion was $116,064,000 and $110,031,000, respectively. Real Estate and Other Properties Real estate properties and other property and equipment are stated at cost. Depreciation is provided on the straight-line method using an estimated useful life of 30 to 35 years for real estate buildings and at various rates based upon the estimated useful lives of the other property and equipment. As of December 31, 2003 and 2002, real estate properties consist of land with an aggregate cost of $15,682,000 and $15,883,000, buildings with an aggregate cost of $45,720,000 and $45,565,000 and furniture and fixtures with an aggregate cost of $10,667,000 and $9,907,000, respectively, of which $17,400,000 was held for sale at December 31, 2003. Accumulated depreciation and amortization was $17,731,000 and $15,504,000 for 2003 and 2002, respectively. Impairment of Property and Equipment In October 2001, the FASB issued Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues as originally described in SFAS 121. SFAS 144, among other things, will require the Company to classify the operations and cash flow of properties to be disposed of as discontinued operations. The Company adopted this pronouncement on January 1, 2002. This adoption had no impact on the Company's results of operations or financial position. On a periodic basis, management assesses whether there are any indicators that the value of the real estate properties may be impaired. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. Management does not believe at December 31, 2003 and 2002 that the value of any of its rental properties is impaired. See Note 14, Subsequent Events, presented elsewhere herein for discussion of impairment relating to oil and gas properties Revenue Recognition Revenue from oil and gas properties is recognized at the time these products are delivered to third party purchasers. Revenue from real estate properties is recognized during the period in which the premises are occupied and rent is due from tenant. Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in accounts receivable on the accompanying balance sheet. An allowance for uncollectible accounts is maintained based on the Company's estimate of the inability of its joint interest partners in the oil and gas division and its tenants in the real estate division to make required payments. The Company is the lessor of both commercial and residential properties. The majority of the leases have terms which are on month to month or year to year basis. 31 Income Taxes The Company accounts for income taxes using Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, deferred taxes are provided for the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The primary temporary differences are those related to tax over book depreciation, depletion and amortization and unrealized gains and losses on marketable securities (see Note 7). Foreign Operations The assets and liabilities of the Company's Canadian subsidiary have been translated at year-end exchange rates. The related revenues and expenses have been translated at average annual exchange rates. The aggregate effect of translation losses are reflected as a component of accumulated other comprehensive income (loss) until the sale or liquidation of the underlying foreign investment. There is a foreign exchange gain (loss) of ($179,000) and $29,000 net of taxes in 2003 and 2002, respectively, related to the conversion of the proceeds of maturing U. S. dollar denominated Certificate of Deposit accounts to Canadian dollars. These amounts are included in Discontinued Operations - Oil and Gas. As a result of the anticipate sale of the Canadian oil and gas assets and the ultimate distribution of net proceeds to the United States parent company, the Company has provided $1.4 million of United States deferred taxes that will be incurred upon such remittance. Please see Note 14, Subsequent Events, in the Company's Consolidated Financial Statements presented elsewhere herein. Acounting for Stock-Based Compensation In December 2002, the Financial Accounting Standards Board issued Statement No. 148 to amend alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, Statement No. 148 amends the disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. However, the Company has continued to account for options in accordance with the provision of APB Opinion No. 25, "Accounting for Stock Issues to Employees" and related interpretations. Accordingly, no compensation expense has been recognized for stock option plans (See Note 6). The following table sets forth the Company's pro forma information for its common stockholders for the years ended December 31 ( in thousands except earnings per share data):
2003 2002 2001 Net income (loss) as reported $ (1,373) $ 1,076 $452 Add: Stock option expense included in net income (loss) - - - Less: Stock option expense determined under fair value recognition method for all awards (94) (27) - -------------- ------------ ------------ Pro forma net income (loss) $ (1,467) $ 1,049 $452 ============== ============ ============ Net income (loss) per share as reported: Basic $ (0.17) $0.14 $0.06 ============== ============ ============ Diluted $ (0.17) $0.14 $0.06 ============== ============ ============ Pro forma net income (loss) per share Basic $ ( 0.19) $ 0.13 $0.06 ============== ============ ============ Diluted $ (0.19) $ 0.13 $0.06 ============== ============ ============
The fair value was estimated using the Black-Scholes option-pricing model based on the weighted average market price at grant date of $3.32 per share in 2002 and $3.60 in 2003 and the following weighted average assumptions; risk-free interest rate of 3.87% for 2002 and 3.00% for 2003, volatility of 33.1% for 2002 and 2003, no dividend yield for 2001, 2002 or 2003, and an expected option life of 5 years. 32 WILSHIRE ENTERPRISES, INC. Notes to Consolidate Financial Statements- (Continued) Net Income Per Common Share Basic earnings per share are calculated based on the total weighted average number of shares of common stock outstanding during the period and excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share gives effect to all potentially dilutive common shares that were outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share -
2003 2002 2001 ---------------- --------------- ---------------- Numerator- Net (Loss) income - Basic and Diluted $(1,373,000) $ 1,076,000 $452,000 ================ =============== ================ Denominator - Weighted average common shares outstanding - Basic 7,809,680 7,831,817 7,914,135 Incremental shares from assumed conversions of stock options 120,738 234 - ---------------- --------------- ---------------- Weighted average common shares outstanding - Diluted 7,930,418 7,832,051 7,914,135 ================ =============== ================ Basic earnings (loss) per share $ (0.17) $ 0.14 $ 0.06 ================ =============== ================ Diluted earnings (loss) per shares $ (0.17) $ 0.14 $ 0.06 ================ =============== ================
Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) includes net (loss) income, unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments. Changes in the components of Accumulated Other Comprehensive Income (Loss) for the years 2001, 2002 and 2003 are as follows -
Unrealized Gains Cumulative Accumulated (Losses) on Foreign Currency Other Available-for-Sale Translation Comprehensive Securities Adjustment Income(Loss) --------------------- ---------------------- --------------------- BALANCE, December 31, 2000 $(1,585,000) $(3,292,000) $(4,877,000) Change for the year 2001 2,680,000 (538,000) 2,142,000 --------------------- ---------------------- --------------------- BALANCE, December 31, 2001 1,095,000 (3,830,000) (2,735,000) Change for the year 2002 (442,000) 88,000 (354,000) --------------------- ---------------------- --------------------- BALANCE, December 31, 2002 $ 653,000 $(3,742,000) $(3,089,000) Change for the year 2003 (545,000) 2,206,000 1,661,000 --------------------- ---------------------- --------------------- BALANCE, December 31, 2003 $ 108,000 $(1,536,000) $(1,428,000) ===================== ====================== =====================
The change in unrealized gains (losses) includes a transfer to realized gain of $822,000. 33 Recently Issued Pronouncements In May 2002, the FASB issued SFAS No. 145, "Reporting Gains and Losses from Extinguishment of Debt", which rescinded SFAS No. 4, No. 44 and No. 64 and amended SFAS No. 13. The new standard addresses the income statement classification of gains or losses from the extinguishments of debt and criteria for classification as extraordinary items. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (effective January 1, 2003). SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. In November of 2002, the FASB issued Interpretation No. 45, "Guarantors' Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." The Interpretation elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. This Interpretation does not prescribe a specific approach for subsequently measuring the guarantor's recognized liability over the term of the related guarantee. The disclosure provisions of this Interpretation are effective for the Company's December 31, 2002 financial statements. The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation Transition and Disclosure," which provides guidance on how to transition from the intrinsic method of accounting for stock-based employee compensation under APB No. 25 to SFAS No. 123's for the fair value method of accounting, if a company so elects. The Company has not elected to adopt the fair value method of accounting for stock based employee compensation. In January of 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. This Interpretation clarifies the application of existing accounting pronouncements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of the Interpretation were immediately effective for all variable interests in variable interest entities created after January 31, 2003. The adoption of this pronouncement did not have a material impact on the Company's results of operations or financial position. 34 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) 3. Long-term Debt Long-term debt as of December 31 consists of the following - 2003 2002 ------------ ------------ Mortgage notes payable(a) $18,467,000 $24,800,000 Mortgage notes payable(b) 31,195,000 26,231,000 Mortgage notes payable (c) 4,162,000 4,205,000 Note payable (d) 2,700,000 5,475,000 Revolving line of credit (e) -0- 2,000,000 Revolving line of credit (f) -0- 2,100,000 Revolving demand loan (g) 1,970,000 895,000 ------------ ------------ Total 58,494,000 65,706,000 Less-Current portion 6,989,000 7,314,000 ------------ ------------ Long term portion $51,505,000 $58,392,000 ============ ============ The total acquisition cost of the collateral securing such total debt was $ 67,382,000 and $81,607,000 in 2003 and 2002, respectively. The aggregate maturities of the long-term debt in each of the five years subsequent to 2003 and thereafter are - 2004 $ 6,989,000 2005 801,000 2006 853,000 2007 907,000 2008 960,000 Thereafter 47,984,000 ------------------ $ 58,494,000 ================== (a) At December 31, 2002, the Company had mortgage notes payable to The Trust Company of New Jersey (The Trust Company) payable in monthly and quarterly installments, bearing interest at a weighted average effective interest rate of 7.53%. These mortgage notes were secured by a first mortgage interest in the related real estate properties and mature at various dates through 2010. On March 1, 2003 the notes were modified to reflect an effective interest rate of 6.375% for the next five years and a revised maturity of February 2013. (b) At December 31, 2002, the Company had two mortgage notes payable to GMAC Commercial Mortgage Corporation. The notes were payable in monthly installments, bore interest at a rate of 7.48% and matured in November 2007. In addition, the Company had a mortgage note payable to Columbia Savings Bank at December 31, 2002. The mortgage note was payable in monthly installments, bore an interest at a rate of 8.00%, matured in January 2011 and was secured by the property. Also the Company had three mortgage notes payable to Orix Real Estate Capital Markets, LLC (ORIX) at December 31, 2002. Two of the Orix notes were payable in monthly installments, bore a weighted average effective interest rate of 7.05% and matured in July 2008. On February 27, 2003, all five mortgages were refinanced through Merrill Lynch. The new mortgage notes are secured by a first mortgage interest in the related real estate properties, have an effective rate of 5.75 %, a 30 year amortization and a ten year term, maturing in March 2013. (c) In March 2001, the Company obtained a mortgage note payable from Orix Real Estate Capital Markets in the amount of $4,270,000. The mortgage note is payable in monthly installments, bears interest at 7.9%, matures in June, 2009 and is secured by the property. (d) During 2002 the Company had an outstanding note payable for $1,975,000 to The Trust Company. This note bore interest at the prime lending rate (4.25% at December 31, 2002) and was secured by certain marketable securities. This note was paid off in 2003. In addition, the Company also obtained a note payable for $3,500,000 in December 2002 to The Trust Company. This loan bore interest at the prime lending rate, matured in March 2003 and was secured by a certificate of deposit. The amount was paid in full in 2003. During December 2003, the Company obtained a note payable of $2,700,000 to the Trust Company. This loan bore interest at prime, matured in March 2004 and was paid in full. It was secured by a certificate of deposit in the same amount. 35 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) (e) In August 2001, the Company renewed an unsecured $2,000,000 revolving line of credit from The Trust Company. This loan bore interest at the prime lending rate and matured in August 2002. Since August 2002, the line of credit was extended several times and matures in January 2005. This note was paid off in 2003. (f) In June 2001, the Company extended a revolving line of credit from the Provident Savings Bank for $2,600,000. The loan bore interest at the prime lending rate of 4.75% at December 31, 2001 and matured in July 2002. During May 2002, the line was paid down by $500,000. In July 2002, the line of credit was extended, bearing interest at the prime lending rate of 4.25% at December 31, 2002 and matured in July 2003. This note was paid off in 2003. (g) In August 2002, the Company's Canadian subsidiary entered into a maximum $5,088,000 ($8,000,000 Canadian) revolving operating demand loan with the National Bank of Canada, (Bank). The loan bears interest at the Bank's prime lending rate (4.50% at December 31, 2003), plus .25%, and is paid monthly. The loan was obtained to fund the Company's capital requirements with respect to the drilling of 211 development wells in Canada. The loan provision requires the Company to repay the outstanding debt solely form available cash generated from its Canadian operations until the debt is paid in full. At December 31, 2003, the Company owed the Bank $1,970,000 ($2,550,000 Canadian) under the loan. 4. Mortgage Notes Receivable During June 2000, the Company acquired mortgage notes receivable secured by underlying property from The Trust Company for $3,500,000. The Company subsequently advanced the borrower an additional $2,790,000. The mortgage notes receivable and subsequent advances are due 2007 and bear interest at 9.75%. The cost of the original mortgage note and the subsequent advance were partially funded by a $5,300,000 mortgage provided by The Trust Company (see Note 3a). In connection with the mortgage note receivable the Company will earn a $2,500,000 financing fee. The fee is being recognized by the effective interest method over the term of the mortgage receivable. Under this agreement, the Company has the right to receive proceeds from the sale of the underlying property. During the years 2003 and 2002, the Company received amortization and financing fees in the amount of $650,000 and $4,946,000, respectively, and paid down $482,000 and $3,709,000, respectively, of the related mortgage payable to The Trust Company. 5. Loan Payable to Shareholders In 2001, a shareholder had loaned the Company $700,000, payable on demand at the prime lending rate. The Company repaid $200,000 to the shareholder in January 2002 and the balance of $500,000 in 2003. 6. Stock Options Under various stock option plans adopted prior to 1995, stock options to purchase an aggregate of 26,764 shares of common stock were outstanding to officers, key consultants and employees at December 31, 2001. All of the options expired in 2002, unexercised. In June 1995, the Company adopted two new stock-based compensation plans (1995 Stock Option and Incentive Plan "Incentive Plan"; and 1995 Non-employee Director Stock Option Plan "Director Plan") under which, up to 450,000 and 150,000 shares, respectively, are available for grant. No options were granted under either plan during 2001. At December 31, 2001, 3,090 and 82,100 options were outstanding under the Incentive Plan and Director Plan, respectively. In 2002, 41,200 options under the Director Plan expired unexercised. In 2002, 339,750 options were granted under the Incentive Plan. No options were granted under the Director Plan in 2002. In 2003, 50,000 options were granted under the Incentive Plan and 5,000 options were granted under the Director Plan. At December 31, 2003, 392,840 options were outstanding under the Incentive Plan and 45,900 options were outstanding under the Director Plan. The number and terms of the options granted under these plans are determined by the Company's Stock Option Committee (the Committee) based on the fair market value of the Company's common stock on the date of grant. The period during which an option may be exercised varies, but no option may be exercised after ten years from the date of grant. 36 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) The following table summarizes stock option activity for 2003, 2002 and 2001-
2003 2002 2001 ---- ---- ---- Price Price Price Shares Low-High Shares Low-High Shares Low-High ----------- -------------- ----------- ------------ ------------- ------------ Options outstanding at beginning of year 383,740 $3.32-6.12 111,954 $3.94-6.51 174,372 $1.00-6.51 Options granted 55,000 3.51-4.55 339,750 3.32 - - Options exercised - - - - - - Options terminated and expired - - (67,964) 5.53-6.51 (62,418) 5.09-9.51 ----------- -------------- ----------- ------------ ------------- ------------ Options outstanding at end of year 438,740 $3.32-6.12 383,740 $3.32-6.12 111,594 $3.94-6.51 =========== ============== =========== ============ ============= ============ Options exercisable at end of year 185,940 $3.32-6.12 40,990 $3.94-6.12 106,954 $3.94-6.51 =========== ============== =========== ============ ============= ============
The weighted average fair value of the options granted during the year was $68,000. The remaining weighted average contractual life of the options was 7.0 years. 37 7. Income Taxes Provision (benefit) for income taxes consist of the following -
2003 2002 2001 -------------------- ----------------- ---------------------- Continuing Operations Federal Current $ (864,000) $(162,000) $ (656,000) Deferred 656,000 (64,000) (367,000) -------------------- ----------------- ---------------------- $ (208,000) $(226,000) $ (1,023,000) -------------------- ----------------- ---------------------- State - - - -------------------- ----------------- ---------------------- Total Continuing $ (208,000) $(226,000) $(1,023,000) ==================== ================= ====================== Discontinued Operations Real Estate Federal Current $ 478,000 $32,000 $254,000 Deferred (16,000) - - -------------------- ----------------- ---------------------- 462,000 32,000 254,000 -------------------- ----------------- ---------------------- State - - - -------------------- ----------------- ---------------------- Total Real Estate $462,000 $32,000 $254,000 -------------------- ----------------- ---------------------- Oil and Gas Federal Current $ 68,000 $161,000 $474,000 Deferred (569,000) 326,000 (268,000) -------------------- ----------------- ---------------------- (501,000) 487,000 206,000 -------------------- ----------------- ---------------------- Foreign Current 635,000 (501,000) 933,000 Deferred (1,987,000) 500,000 (103,000) -------------------- ----------------- ---------------------- (1,352,000) (1,000) 830,000 -------------------- ----------------- ---------------------- State 42,000 38,000 (60,000) -------------------- ----------------- ---------------------- Total Oil and Gas $ (1,811,000) $524,000 $976,000 -------------------- ----------------- ---------------------- Total Discontinued (1,349,000) $556,000 $1,230,000 ==================== ================= ====================== Total $ (1,557,000) $330,000 $207,000 ==================== ================= ======================
A reconciliation of the differences between the effective tax rate and the statutory U.S. income tax rate is as follows-
2003 2002 2001 --------------- ----------------- ----------------- Federal income tax provision (benefit) at statutory rate $ (1,026,000) $ 478,000 $ 224,000 State income tax net of Federal impact 27,000 25,000 (40,000) Impact of foreign operations 117,000 (87,000) 119,000 Dividend exclusion (91,000) (86,000) (96,000) Life Insurance Proceeds (350,000) - - --------------- ----------------- ----------------- $ (1,557,000) $ 330,000 $ 207,000 =============== ================= ================= Effective tax rate (benefit) (53.1%) 23.5% 31.4% =============== ================= =================
38 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) Significant components of deferred tax liabilities as of December 31, 2003 and 2002 were as follows-
2003 2002 ---------------- ----------------- Tax over book depreciation, depletion and amortization- Oil and gas and real estate properties - U.S. $ 6,022,000 $ 6,957,000 Oil and gas properties - Canada 5,436,000 4,862,000 Unrealized gain (loss) on marketable securities 89,000 535,000 ---------------- ----------------- Net deferred tax liability 11,547,000 12,354,000 Deferred tax liability reclassified to current (89,000) (535,000) ---------------- ----------------- Noncurrent deferred tax liability $11,458,000 $ 11,819,000 ================ =================
8. Commitments and Contingencies In June 1996 the Company's Board of Directors adopted the Stockholder Protection Rights Plan (the Rights Plan). The Rights Plan provides for issuance of one Right for each share of common stock outstanding as of July 6, 1996. The Rights are separable from and exercisable upon the occurrence of certain triggering events involving the acquisition of at least 15% (or, in the case of certain existing stockholders, 25%) of the Company's common stock by an individual or group, as defined in the Rights Plan (an Acquiring Person) and may be redeemed by the Board of Directors at a redemption price of $0.01 per Right at any time prior to the announcement by the Company that a person or group has become an Acquiring Person. On and after the tenth day following such triggering events, each Right would entitle the holder (other than the Acquiring Person) to purchase $50 in market value of the Company's Common Stock for $25. In addition, if there is a business combination between the Company and an Acquiring Person, or in certain other circumstances, each Right (if not previously exercised) would entitle the holder (other than the Acquiring Person) to purchase $50 in market value of the common stock of the Acquiring Person for $25. As of December 31, 2003 and 2002, 7,802,831 and 7,809,834, respectively, of Rights were outstanding. Each Right entitles the holder to purchase, for an exercise price of $25, one one-hundredth of a share of Series A Participating Preferred Stock. Each one one-hundredth share of Series A Participating Preferred Stock is designed to have economic terms similar to those of one share of common stock but will have one one-hundredth of a vote. Because the Rights are only exercisable under certain conditions, none of which were in effect as of December 31, 2003 and 2002, the outstanding Rights are not considered in the computation of basic and diluted earnings per share. The Company does not have significant lease commitments or post retirement benefits. 9. Segment Information The Company conducts real estate operations throughout the United States. The Company also is engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. Real Estate The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consist of apartment complexes, as well as commercial and retail properties. Oil and Gas The Company conducts its oil and gas operations in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. As noted above the Company is in the process of selling its oil and gas operations. The oil and gas operations and certain real estate properties held for sale at December 31, 2003 are presented as Discontinued Operations in the accompanying financial statements. Corporate The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open markets. Over the years, the Company has focused its resources in the oil and gas and real estate divisions. 39 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) The following segment data is presented based on the Company's internal management reporting system-
2003 2002 2001 ------------------ ------------------ ------------------ Gross revenues Oil and gas - United States $ 5,013,000 $ 3,767,000 $ 4,796,000 Oil and gas - Canada 5,552,000 1,962,000 3,738,000 Real estate 14,789,000 14,739,000 14,095,000 ------------------ ------------------ ------------------ $25,354,000 $ 20,468,000 $ 22,629,000 ================== ================== ================== Income (loss) from operations- Oil and gas - United States (a) $ 406,000 $ 718,000 $ (348,000) Oil and gas - Canada (a) (5,395,000) 508,000 2,078,000 Real estate (a) 1,082,000 3,380,000 3,326,000 Corporate (a) (868,000) (1,282,000) (334,000) ------------------ ------------------ ------------------ $ (4,775,000) $ 3,324,000 $ 4,722,000 ================== ================== ================== Depreciation, depletion and amortization - Oil and gas - United States $ 1,120,000 $ 932,000 $ 1,969,000 Oil and gas - Canada 2,183,000 484,000 925,000 Real estate 2,941,000 2,468,000 2,263,000 Corporate - - - ------------------ ------------------ ------------------ $ 6,244,000 $ 3,884,000 $ 5,157,000 ================== ================== ================== Identifiable assets - Oil and gas - United States $ 15,106,000 $ 18,842,000 $ 14,993,000 Oil and gas - Canada 17,644,000 17,497,000 13,758,000 Real estate 58,029,000 58,515,000 58,344,000 Corporate 8,218,000 13,066,000 20,808,000 ------------------ ------------------ ------------------ $ 98,997,000 $ 107,920,000 $ 107,903,000 ================== ================== ================== Capital expenditures- Oil and gas - United States $ 886,000 $ 881,000 $ 980,000 Oil and gas - Canada 8,066,000 3,807,000 948,000 Real estate 2,168,000 2,668,000 10,140,000 Corporate -0- 172,000 112,000 ------------------ ------------------ ------------------ $ 11,120,000 $ 7,528,000 $ 12,180,000 ================== ================== ==================
(a) Represents revenues less all operating costs, including depreciation, depletion and amortization. 40 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) 10. Geographic Information The following is a description by geographic location-
2003 2002 2001 ------------------ ------------------ ----------------- Gross revenues - United States $19,802,000 $18,506,000 $18,891,000 Canada 5,552,000 1,962,000 3,738,000 ------------------ ------------------ ----------------- $25,354,000 $20,468,000 $22,629,000 ================== ================== ================= Income (loss) from operations - United States $ 620,000 $ 2,816,000 $ 2,644,000 Canada (5,395,000) 508,000 2,078,000 ------------------ ------------------ ----------------- $ (4,775,000) $ 3,324,000 $ 4,722,000 ================== ================== ================= Depreciation, depletion and amortization United States $ 4,061,000 $ 3,400,000 $ 4,232,000 Canada 2,183,000 484,000 925,000 ------------------ ------------------ ----------------- $ 6,244,000 $ 3,884,000 $ 5,157,000 ================== ================== ================= Identifiable assets- United States $81,353,000 $90,423,000 $94,145,000 Canada 17,644,000 17,497,000 13,758,000 ------------------ ------------------ ----------------- $98,997,000 $107,920,000 $107,903,000 ================== ================== ================= Capital expenditures United States $ 3,054,000 $ 3,721,000 $11,232,000 Canada 8,066,000 3,807,000 948,000 ------------------ ------------------ ----------------- $11,120,000 $ 7,528,000 $12,180,000 ================== ================== =================
11. Oil and Gas Producing Activities The following data represents the Company's oil and gas producing activities for 2003 and 2002-
2003 2002 ------------------ ------------------ Capitalized costs (all being amortized)- Productive and nonproductive properties $139,585,000 $136,429,000 Unevaluated properties 4,016,000 4,814,000 ------------------ ------------------ Total capitalized costs being amortized 143,601,000 141,243,000 Less-Accumulated depreciation, depletion and amortization 116,064,000 110,031,000 ------------------ ------------------ Net capitalized costs $ 27,537,000 $ 31,212,000 ================== ==================
41 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) The following data summarizes the costs incurred in property acquisition, exploration and development activities and the results of operations from oil and gas producing activities-
United States Canada --------------------------------------- -------------------------------------------------- 2003 2002 2001 2003 2002 2001 ------------ ------------- ------------ ----------------- --------------- ---------------- Acquisition of unproved Properties $ 32,000 $ 40,000 $ 102,000 $ - $ - $ 91,000 Exploration 397,000 525,000 554,000 143,000 158,000 113,000 Development 556,000 316,000 681,000 2,354,000 3,649,000 995,000 ------------ ------------- ------------ ----------------- --------------- ---------------- Total costs incurred $ 985,000 $ 881,000 $ 1,337,000 $ 2,497,000 $ 3,807,000 $ 1,199,000 ============ ============= ============ ================= =============== ================ Revenues from oil and gas producing activities $ 5,013,000 $ 3,767,000 $ 4,796,000 $ 5,552,000 $ 1,962,000 $ 3,738,000 ------------ ------------- ------------ ----------------- --------------- ---------------- Production costs 1,606,000 1,709,000 1,905,000 1,139,000 589,000 651,000 Technical support and other 1,881,000 356,000 183,000 625,000 125,000 84,000 Depreciation, depletion and amortization 1,120,000 932,000 1,969,000 2,183,000 487,000 925,000 Impairment Loss - - - 7,000,000 - - ------------ ------------- ------------ ----------------- --------------- ---------------- Total expenses 4,607,000 2,997,000 4,057,000 10,947,000 1,201,000 1,660,000 ------------ ------------- ------------ ----------------- --------------- ---------------- Pretax income (loss) from oil and gas producing Activities 406,000 770,000 739,000 (5,395,000) 761,000 2,078,000 Income tax (provision) benefit (459,000) 276,000 255,000 (1,352,000) 247,000 (721,000) ------------ ------------- ------------ ----------------- --------------- ---------------- Income (loss) from oil and gas producing activities $ 865,000 $ 494,000 $ 484,000 ($4,043,000) $ 514,000 $ 1,357,000 ============ ============= ============ ================= =============== ================
12. Fair Value of Financial Instruments The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash equivalents, accounts receivable, accounts payable, and revolving credit facilities balances reasonably approximate their fair values due to the short maturities of these items. Mortgage notes payable have an estimated fair value based on discounted cash flow models of approximately $59.9 million, which exceeds the carrying value by $1.4 million. Payments on the mortgage receivable are based on the sales of units in the underlying properties. Because the payments are inconsistent, it is impractical to calculate the fair value of the receivable. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2003. Although management is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein. 42 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) 13. Discontinued Operations Real Estate Year - 2003 At December 31, 2003, the Company had 17 New Jersey properties held for sale, of which 14 were committed to close during 2004 under four separate contracts, although there is no assurance that the closings under all of these contracts will be consummated. The properties held for sale consisted of 10 residential apartment complexes, two commercial office buildings and five tracts of land formerly held for development. It is anticipated that the first sales contract, with an aggregate purchase price of $11 million for all 10 residential apartment complexes and one office building, will close on or about March 31, 2004. The second contract in the amount of $2.5 million for undeveloped land is expected to close during the second quarter of 2004. The third contract in the amount of $630,000 for undeveloped land is scheduled to close during the third quarter of 2004. The fourth and final contract in the amount of $3.95 million for undeveloped land is expected to close by year end. The remaining three properties held for sale, consisting of an office building and two tracts of unimproved land are being marketed through the brokerage community for ultimate sale. During the second and third quarters of 2003, the Company sold three residential apartment buildings in Florida and recognized a gain, net of taxes, in the amount of $1,097,000. The financial results of the properties sold during 2003 and the properties held for sale have been reported as Discontinued Operations, Real Estate, Net of Taxes, in the Consolidated Balance Sheets and Consolidated Statements of Income at and for the year ended December 31, 2003. Year - 2002 During the second quarter, 2002, the Company sold two New Jersey condominium units held for sale and recognized a gain, net of taxes, in the amount of $111,000. In the third quarter, 2002, the Company sold an unimproved parcel of land in New Jersey for a gain, net of taxes, in the amount of $56,000. The aforementioned gains together with the operating results related to the properties held for sale have been reported as Discontinued Operations, Real Estate, Net of Taxes, in the Consolidated Balance Sheets and Consolidated Statements of Income at and for the year ended December 31, 2002. Year - 2001 During the third quarter, 2001, the Company sold a vacant parcel of land in Arizona and a residential home in New Jersey. The Company recognized gains, net of taxes, in the amounts of $720,000 and $214,000, respectively. During the fourth quarter, 2001, the Company sold 1 New Jersey condominium and recognized a gain, net of taxes, in the amount of $44,000. The aforementioned gains together with the operating results related to the properties held for sale have been reported as Discontinued Operations, Real Estate, Net of Taxes, in the Consolidated Statements of Income for the year ended December 31, 2001. Oil and Gas In July 2003 the Company committed to the sale of its oil and gas operations and to reinvest the net proceeds in the ongoing real estate business or otherwise utilize the proceeds in a manner designed to maximize shareholders value. As a result of this decision, the Company's oil and gas operations are shown as Discontinued Operations - Oil and Gas, Net of Taxes. 14. Subsequent Events Oil and Gas On March 17, 2004 the Company announced that it entered into a definitive agreement to sell its U.S. oil and gas business, effective as of March 1, 2004, for $13.7 million in gross proceeds. The transaction, which is subject to due diligence review by the purchaser and other contractual conditions, is expected to close in April 2004. In addition, the Company announced that it is currently in negotiations with potential purchasers of its Canadian oil and gas business and believes these efforts will culminate in the execution of an agreement to sell its Canadian oil and gas business during the second quarter of 2004. The anticipated effective date of this transaction is also as of March 1, 2004. 43 WILSHIRE ENTERPRISES, INC. Notes to Consolidated Financial Statements - (Continued) Until these sales are consummated the Company will continue to participate in oil and gas prospects. The net book value of the Canadian assets being disposed of is higher than the gross proceeds anticipated from the sale. Therefore, the Company has recorded in the fourth quarter of 2003 non-cash after tax charge to earnings of $4.4 million to Discontinued Operations - Oil and Gas, Net Taxes. If the contemplated sale of the U.S. oil and gas operations is consummated, the Company will receive $13.7 million in gross proceeds. After taxes, this transaction will provide approximately $8.5 million in capital resources. If the contemplated sale of the Canadian oil and gas operations is consummated at the price currently proposed by a third party purchaser, the transaction is expected to generate approximately $8 million in additional capital resources after taxes and the extinguishment of related debt associated with the assets being sold. Real Estate On March 15, 2004 the Company sold for $800,000 a building in Jersey City, New Jersey which was included in an overall contract totaling $11,000,000 and realized a net book gain of $180,000. The Company anticipates closing on or about March 31, 2004 on the remainder of this contract to sell all of its residential properties in Jersey City for $10,200,000, realizing a net book gain of $4.7 million. After taxes and the payoff of related long-term debt, this transaction is expected to provide approximately $5.6 million in capital resources. 44 Wilshire Enterprises, Inc. Schedule III-Real Estate And Accumulated Depreciation December 31, 2003 (Dollars in thousands)
Column D Column E Column C Cost Capitalized Subsequent Gross Amount At Which Carried Column A Column B Initial Cost To Acquisition as of December 31, 2003 - -------- ------------- ---------------------- --------------------------- ------------------------------ Building & Building & Building & Description Encumbrances Land Improvements Land Improvements Land Improvements Total - ----------- ------------ --------- ------------ ------ ------------- ------ ------------ ----- Arizona 378 unit garden apt complex $ 9,210 $ 600 $ 4,050 $ - $ 2,930 $ 600 $ 6,980 $ 7,580 340 unit garden apt complex 10,596 800 5,600 - 2,630 800 8,230 9,030 53,000 sq ft office bldg 3,962 316 2,384 (3) 1,424 313 3,808 4,121 Texas 228 unit apt complex 4,357 625 3,015 (5) 2,464 620 5,479 6,099 180 unit apt complex 4,162 805 4,450 - 450 805 4,900 5,705 New Jersey 135 unit apt complex 2,278 360 2,640 - 1,211 360 3,851 4,211 132 unit apt complex 4,952 480 3,541 - 482 480 4,023 4,503 Hotel & banquet facility 3,481 2,600 1,031 457 1,276 3,057 2,307 5,364 Other residential 7,510 2,665 8,707 88 2,614 2,753 11,321 14,074 Other office/retail 1,092 838 3,544 474 1,944 1,312 5,488 6,800 Land held for development 1,278 4,512 - 70 - 4,582 - 4,582 --------- -------- -------- ------ --------- ------- -------- --------- $ 52,878 $ 14,601 $ 38,962 $1,081 $ 17,425 $15,682 $ 56,387 $ 72,069 ========= ======== ======== ====== ========= ======= ======== ========= Column I Column F Column H Life on Which Accumulated Date Depreciation is Description Depreciation Acquired Computed - ----------- ------------ --------- ---------------- Arizona 378 unit garden apt complex $ 2,696 1,992 Various 340 unit garden apt complex 3,273 1,992 Various 53,000 sq ft office bldg 1,643 1,992 Various Texas 228 unit apt complex 2,142 1,992 Various 180 unit apt complex 405 2,001 Various New Jersey 135 unit apt complex 1,321 1,993 Various 132 unit apt complex 946 1,997 Various Hotel & banquet facility 397 1,997 Various Other residential 3,223 Various Various Other office/retail 1,685 Various Various Land held for development - Various - --------- $ 17,731 =========
45 Wilshire Enterprises, Inc. Schedule III-Real Estate And Accumulated Depreciation December 31, 2003 (Dollars in thousands) The changes in real estate for the three years ended December 31, 2003, are as follows: 2003 2002 2001 --------- --------- ---------- Balance at beginning of year $ 71,355 $ 69,161 $ 61,402 Property acquisitions - - 8,199 Improvements 2,415 2,679 1,942 Retirements/disposals (1701) (485) (2,382) --------- --------- ---------- Balance at end of year $ 72,069 $ 71,355 $ 69,161 ========= ========= ========== The aggregate cost of land, buildings and improvements, before depreciation, for Federal income tax purposes at December 31, 2003 was approximately $70,978. The changes in accumulated depreciation, exclusive of amounts relating to equipment, autos, and furniture and fixtures, for the three years ended December 31, 2003, are as follows: 2003 2002 2001 ----------- ----------- --------- Balance at beginning of year $ 15,504 $ 13,108 $ 11,122 Depreciation for year 2,547 2,410 2,126 Retirements/disposals (320) (14) (140) ----------- ----------- --------- Balance at end of year $ 17,731 $ 15,504 $ 13,108 =========== =========== ========= ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 46 ITEM 9A. CONTROLS AND PROCEDURES (a) Disclosure controls and procedures. As of the end of the Company's most recently completed fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective as of December 31, 2003 in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple acts of some persons or by collusion of two or more people. The Company's controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met. (b) Changes in internal controls over financial reporting. There have been no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 47 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Registrant incorporates by reference herein information to be set forth in its definitive proxy statement for its 2004 Annual Meeting of shareholders that is responsive to the information required with respect to this item. The Registrant has adopted a Code of Conduct for its officers and employees. A copy of the Code of Conduct is available on the Company's website (http://www.wilshireenterprises.com) under the caption "Corporate Policies." ITEM 11. EXECUTIVE COMPENSATION The Registrant incorporates by reference herein information to be set forth in its definitive proxy statement for its 2004 Annual Meeting of shareholders that is responsive to the information required with respect to this item. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS The Registrant incorporates by reference herein information to be set forth in its definitive proxy statement for its 2004 Annual Meeting of shareholders that is responsive to the information required with respect to this item. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Registrant incorporates by reference herein information to be set forth in its definitive proxy statement for its 2004 Annual Meeting of shareholders that is responsive to the information required with respect to this item. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Registrant incorporates by reference herein information to be set forth in its definitive proxy statement for its 2004 Annual Meeting of shareholders that is responsive to the information required with respect to this item. 48 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this report:
( 1.) Consolidated Financial Statements Report of Independent Auditors 25 Consolidated Balance Sheets as of December 31, 2003 and 2002 26 Consolidated Statements of Operations for the years ended December 31, 2003, 2002, and 2001 27 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001 28 Consolidated Statements of Cash flows for the years ended December 31, 2003, 2002, and 2001 29 Notes to Consolidated Financial Statements 30 (2). Financial Statement Schedules Schedule III - Real Estate and Accumulated Depreciation All other schedules are omitted because they are not required, inapplicable or the information is otherwise shown in the financial statements or notes thereto. (3) See Exhibits and Index to Exhibits, below.
(b) On November 14, 2003 the Company submitted to the Securities and Exchange Commission a Current Report on Form 8-K reporting (under Item 9) its public announcement of its earnings results for the third quarter ended September 30, 2003. (c ) Exhibits and Index to Exhibits: Exhibits Number Description 3.1 Restated Certificate of Incorporation of Wilshire Enterprises, Inc., as amended. (Incorporated by reference to Exhibit 3.1 of Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 3.2 Amended By-Laws, as of June 11, 1998, of Wilshire Enterprises, Inc. (Incorporated by reference to Exhibit 3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998). 4.1 Stockholder Protection Rights Agreement, dated as of June 21, 1996, between Wilshire Enterprises, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (Incorporated by reference to Exhibit 1 to the Company's current report on Form 8-K dated June 21, 1996). 4.2 Reference is made to Exhibits 10.70 through 10.90 4.3 The Company agrees to furnish the Commission upon request any agreements with respect to long-term debt not referenced herein. 10.1 General Assignments and Assignments of Leases dated March 31, 1992 with respect to the purchase of income producing real estate properties (Incorporated by reference to Exhibit 1 and 2 of Form 8 dated December 9, 1992, filed with the Commission). 10.2 General Assignments, Assignments of Leases, and Escrow Agreements and Early Possession Agreements with respect to the purchase of four income producing real estate properties, (Incorporated by reference to Exhibits 1 (a) through 4(c) on the Company's Form 8-K dated December 31, 1992 filed with the Commission). 10.4 Wilshire Enterprises, Inc. 1984 Stock Option Plan. (Incorporated by reference to Exhibit 10.5 of Item 14 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 10.5 Wilshire Enterprises, Inc. 1995 Stock Option and Incentive Plan. (Incorporated by reference to Exhibit A of the Registrant's Definitive Proxy Statement for its 1995 Annual Meeting of Stockholders). 49 10.6 Wilshire Enterprises, Inc. 1995 Non-Employee Director Stock Option Plan. ( Incorporated by reference to Exhibit B of the Registrant's Definitive Proxy Statement for its 1995 Annual Meeting of Stockholders). 10.70 Environmental Indemnity Agreement between Biltmore Club Apartments, L.L.C., a subsidiary Wilshire Enterprises, Inc. and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.71 Promissory Note given by Biltmore Club Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.72 Indemnity and Guaranty Agreement between Biltmore Club Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.73 Multifamily Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing between Biltmore Club Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.74 Promissory Note given by Alpine Village Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 28, 2003.* 10.75 Environmental Indemnity Agreement between Alpine Village Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 28, 2003.* 10.76 Indemnity and Guaranty Agreement between Alpine Village Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 28, 2003.* 10.77 Multifamily Mortgage, Security Agreement, Assignment of Rents and Fixture Filing between Alpine Village Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 28, 2003.* 10.78 Promissory Note given by Sunrise Ridge, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.79 Environmental Indemnity Agreement between Sunrise Ridge, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.80 Indemnity and Guaranty Agreement between Sunrise Ridge, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.81 Multifamily Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing between Sunrise Ridge, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.82 Promissory Note given by Van Buren, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.83 Environmental Indemnity Agreement between Van Buren, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.84 Indemnity and Guaranty Agreement between Van Buren, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.85 Multifamily Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing between Van Buren, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.86 Promissory Note given by Wellington Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 50 10.87 Environmental Indemnity Agreement between Wellington Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.88 Indemnity and Guaranty Agreement between Wellington Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.89 Multifamily Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing between Wellington Apartments, L.L.C., a subsidiary of Wilshire Enterprises, Inc., and Merrill Lynch Mortgage Lending, Inc. dated February 27, 2003.* 10.90 The Company agrees to furnish to the Commission upon request any other agreements with respect to long term debt. 10.91 Agreement dated March 17, 2004 between Wilshire Enterprises, Inc. and Crow Creek Enegry L.L.C. to sell the U. S. Oil and gas business. 10.92 Contract of sale dated January 23, 2004 between Wilshire Enterprises, Inc. and Economic Properties 2004 L.L. C. for the sale of eleven properties in Jersey City, New Jersey. 10.93 Employment agreement between the Company and Philip Kupperman dated as of July 1, 2002 is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated September 4, 2002. 10.94 Severance Letter Agreement between the Company and Sherry Wilzig Izak dated as of March 29, 2004. 21. List of significant subsidiaries of the Registrant 23. Consent of Ernst & Young, LLP 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * Incorporated by reference to the similarly numbered exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2002 51 Exhibit 21 - List of Subsidiaries Jurisdiction of Incorporation ------------- 1022778 Alberta Ltd. Alberta, Canada Calgary, Alberta, Canada Wilshire Oil of Canada Co. Nova Scotia, Canada Calgary, Alberta, Canada San Francisco Oil State of California Rockland Resources State of Oklahoma Britalta Venezolano, Ltd. Alberta, Canada Calgary, Alberta, Canada Sunrise Ridge Holding, Inc. State of Delaware Jersey City, NJ Sunrise Ridge, L. L. C. State of Delaware Jersey City, NJ Biltmore Club Holding, Inc. State of Delaware Jersey City, NJ Biltmore Club Apartments, L. L. C. State of Delaware Jersey City, NJ 350 Pleasant Valley Corp State of New Jersey Jersey City, NJ Global Equities Management Corp. State of Delaware Jersey City, NJ Wellington Holding, Inc. State of Delaware Jersey City, NJ Wellington Apartments, L.L.C. State of Delaware Jersey City, NJ Van Buren Holding, Inc. State of Delaware Jersey City, NJ Van Buren, L.L.C. State of Delaware Jersey City, NJ Belair Drive, LLC State of Delaware Jersey City, NJ Alpine Village Holding, Inc. State of Delaware Jersey City, NJ Alpine Village Apartments, L.L.C. State of Delaware Jersey City, NJ Galsworthy Arms Holding, Inc. State of Delaware Jersey City, NJ Galsworthy Arms Apartments, L.L.C. State of Delaware Jersey City, NJ 52 S I G N A T U R E S Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized this 30th day of March 2004. WILSHIRE ENTERPRISES, INC. (Registrant) Directors: By: /s/ Miles Berger --------------------------------------- Miles Berger By: /s/ Milton Donnenberg --------------------------------------- Milton Donnenberg By: /s/ S. Wilzig Izak. --------------------------------------- S. Wilzig Izak By: /s/ Eric J. Schmertz, Esq. --------------------------------------- Eric J. Schmertz, Esq. By: /s/ Ernest Wachtel --------------------------------------- Ernest Wachtel By: /s/ Martin Willschick. --------------------------------------- Martin Willschick Officers: By: /s/ S. Wilzig Izak --------------------------------------- S. Wilzig Izak Chairman of the Board and Chief Executive Officer By: /s/ Philip G. Kupperman --------------------------------------- Philip G. Kupperman President, Chief Operating Officer And Chief Financial Officer EX-10.91 3 b331035_ex10-91.txt PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT BY AND AMONG WILSHIRE ENTERPRISES, INC. a Delaware Corporation, SAN FRANCISCO OIL COMPANY a California Corporation, ROCKLAND RESOURCES, CO., an Oklahoma corporation and BRITALTA VENEZOLANO, LTD. an Alberta private corporation as Sellers and CROW CREEK ENERGY L.L.C. as Purchaser DATED March 17, 2004 TABLE OF CONTENTS ARTICLE 1 INTERPRETATION....................................................1 1.1 Definitions.....................................................1 1.2 Plurality and Gender............................................7 1.3 References......................................................7 1.4 Currency........................................................8 1.5 Headings........................................................8 1.6 Knowledge or Awareness..........................................8 1.7 Schedules.......................................................8 ARTICLE 2 PURCHASE AND SALE.................................................9 2.1 Purchase and Sale...............................................9 2.2 Purchase Price..................................................9 2.3 Allocation of Base Price........................................9 2.4 Deposit........................................................10 2.5 Payment of Purchase Price......................................10 2.6 Holdback.......................................................10 ARTICLE 3 CLOSING..........................................................11 3.1 Place of Closing...............................................11 3.2 Effective Time of Transfer of Title............................11 3.3 Deliveries at Closing..........................................11 3.4 Delivery of Data...............................................12 3.5 Fees, Expenses, Taxes and Recording............................12 ARTICLE 4 ADJUSTMENTS......................................................12 4.1 Costs and Revenues to be Apportioned...........................12 4.2 Imbalances, Prepayments and Refunds............................14 4.3 Suspense Accounts..............................................15 4.4 Adjustments to Account.........................................15 4.5 Limitation on Adjustments......................................15 ARTICLE 5 CONDITIONS OF CLOSING............................................16 5.1 Purchaser's Conditions.........................................16 5.2 Sellers' Conditions............................................16 5.3 Efforts to Fulfill Conditions Precedent........................16 5.4 Failure of a Condition Due to a Breach.........................16 ARTICLE 6 REPRESENTATIONS AND WARRANTIES...................................16 6.1 Representations and Warranties of Sellers......................16 6.2 Negation of Other Representations..............................20 6.3 Representations and Warranties of Purchaser....................21 6.4 Limitation.....................................................22 ARTICLE 7 INDEMNITIES......................................................22 7.1 Sellers' Limited Indemnity.....................................22 7.2 General Purchaser Indemnity....................................23 7.3 Environmental and Related Obligations..........................23 7.4 Limitation.....................................................23 7.5 No Incidental or Consequential Damages.........................23 ARTICLE 8 MAINTENANCE OF ASSETS............................................24 8.1 Maintenance of Assets Prior to Closing.........................24 8.2 Consent of Purchaser...........................................24 ARTICLE 9 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS........................25 9.1 Preferential Purchase Rights...................................25 9.2 Effect of Exercise of Preferential Rights......................25 ARTICLE 10 TITLE REVIEW AND ENVIRONMENTAL REVIEW...........................25 10.1 Title Review...................................................25 10.2 Environmental Review...........................................25 10.3 Valuation Resulting from Review................................25 10.4 Inspection and Testing.........................................28 ARTICLE 11 ARBITRATION.....................................................28 11.1 Selection......................................................28 11.2 Location.......................................................29 11.3 Rules..........................................................29 11.4 Time...........................................................29 11.5 Replacement....................................................29 ARTICLE 12 OPERATORSHIP....................................................29 12.1 Transfer of Operatorship.......................................29 12.2 Removal of Signs...............................................30 ARTICLE 13 TERMINATION.....................................................30 13.1 Causes of Termination..........................................30 13.2 Effect of Termination..........................................30 ARTICLE 14 GENERAL.........................................................31 14.1 Further Assurances.............................................31 14.2 No Merger......................................................31 14.3 Entire Agreement...............................................31 14.4 Governing Law..................................................31 ii 14.5 Assignment.....................................................31 14.6 Time of Essence................................................31 14.7 Notices........................................................32 14.8 Invalidity of Provisions.......................................33 14.9 Waiver.........................................................33 14.10 Remedies Generally.............................................33 14.11 Amendment......................................................33 14.12 Public Announcements...........................................33 14.13 Counterpart Execution..........................................33 14.14 Express Negligence Rule........................................34 14.15 Waiver of Deceptive Trade Practices Acts.......................34 14.16 Appointment of WEI as Nominee..................................34 iii PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT is entered into as of the 17th day of March, 2004, by and among WILSHIRE ENTERPRISES, INC., a Delaware corporation ("WEI"), ROCKLAND RESOURCES, CO., an Oklahoma corporation ("RRC"), BRITALTA VENEZOLANO, LTD., an Alberta private corporation ("BV") and SAN FRANCISCO OIL COMPANY, a California corporation ("SFO", which together with WEI, RRC and BV may be collectively referred to herein as the "Sellers") and CROW CREEK ENERGY L.L.C., a Delaware limited liability company ("Purchaser"). R E C I T A L S A. Sellers own the Assets. B. Sellers desire to sell the Assets and Purchaser desires to purchase the Assets subject to and in accordance with the terms and conditions hereof. NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the Parties covenant and agree as follows: ARTICLE 1 INTERPRETATION 1.1 Definitions In this Agreement, including the recitals and the Schedules the following terms still have the following meanings: "Abandonment and Reclamation Obligations" means all obligations to abandon the Wells and restore and reclaim the sites thereof, to decommission and remove the facilities and equipment comprised in the Tangibles and restore and reclaim the sites thereof and to reclaim and restore the lands to which the Surface Rights relate, including such obligations relating to Wells that were abandoned prior to the Effective Time. "AFEs" means authorities for expenditure, cash calls or any other similar requests for approval received by the Sellers in relation to the Petroleum and Natural Gas Rights or the Tangibles, if any, set out in Schedule C. "Agreement", "herein", "hereto", "hereof" and similar expressions refer to this Purchase and Sale Agreement, as amended or modified from time to time by written instrument signed by Sellers and Purchaser. "Assets" means the Petroleum and Natural Gas Rights, the Tangibles and the Miscellaneous Interests. "Assignment" means the assignment in the form of Schedule E. "Base Price" means $13,700,000. "Base Price Allocation" means the allocation of the Base Price among the Assets as set forth in Schedule A. "Business Day" means any day which is not a Saturday, Sunday or statutory holiday in Houston, Texas. "Closing" means the transfer of legal ownership of the Assets from Sellers to Purchaser and the completion of other matters incidental thereto as herein provided for. "Closing Date" means April 23, 2004, or such other date as mutually agreed to by the Parties. "Closing Time" means 10:00 a.m. on the Closing Date, or such other time as may be agreed upon in writing by Sellers and Purchaser. "Code" has the meaning ascribed to such term in Section 2.3. "Data" means all records, data and information directly relating to the Petroleum and Natural Gas Rights or the Tangibles, including well files, lease files, agreement files and production records (including the Title and Operating Documents), but specifically excludes Proprietary Information. "Defensible Title" means, with respect to the Leases, Wells and Lands which comprise the Petroleum and Natural Gas Rights, such title held by Sellers that, subject to and except for Permitted Encumbrances: (i) entitles Sellers to receive not less than the NRI for such Lease, Well or Lands set forth on Schedule A; (ii) obligates Sellers to bear costs and expenses relating to the maintenance, development, operation and the production of Petroleum Substances from the Lease, Well or Lands in an amount not greater than the corresponding WI set forth in Schedule A; and (iii) is free and clear of encumbrances, liens and defects. "Deposit Escrow" has the meaning given to such term in Section 2.4. "Deposit Escrow Agreement" has the meaning given to such term in Section 2.4. "Due Diligence Reduction" has the meaning given to such term in Section 10.3(a). "Effective Time" means 7:00 A.M. on March 1, 2004, at the location of the Assets. 2 "Environmental Liabilities" means all environmental liabilities that relate to the Assets or that arise in connection with the ownership thereof or operations pertaining thereto, including, without limitation, liabilities related to or arising from: (i) transportation, storage, use or disposal of toxic or hazardous substances; (ii) release, spill, escape or emission of toxic or hazardous substances; or (iii) pollution or contamination of or damage to the environment; including, without limitation, liabilities to compensate Third Parties for damages and losses resulting from the items described in items (i), (ii) and (iii) above (including, without limitation, damage to property, personal injury and death) and obligations to take action to prevent or rectify damage to or otherwise protect the environment and, for purposes of this Agreement, "the environment" includes, without limitation, the air, the surface and subsurface of the earth, bodies of water (including, without limitation, rivers, streams, lakes and aquifers) and plant, human and animal life; "Facilities" means Sellers' interest in the tangible property, apparatus, plant, equipment, machinery and facilities related to the Petroleum and Natural Gas Rights. "Final Settlement Date" means July 22, 2004, or such other date as mutually agreed to by the Parties. "Holdback Amount" has the meaning given to such term in Section 2.6. "Holdback Escrow Account" has the meaning give to such term in Section 2.6. "Holdback Escrow Agreement" has the meaning given to such term in Section 2.6. "Lands" means the Petroleum Substances within, under or upon all lands located anywhere in United States in which the Sellers hold any, interest, right or entitlement, including, without limitation, the lands described in the Land Schedule or lands unitized therewith. "Land Schedule" means Schedule A, which shall include a description of the interests of Sellers relating to the Lands. "Leases" means the oil and gas leases, licenses, permits, pooling orders, farmout agreements and similar documents of title by virtue of which the holder thereof is entitled to drill for, take, own or remove Petroleum Substances within, upon or under the Lands and includes, if applicable, all renewals and extensions of such documents and all documents entered or granted in substitution therefor. "Losses and Liabilities" means, in relation to a Party, losses, costs, damages and expenses which such Party suffers, sustains, pays or incurs including attorneys' fees and expenses. 3 "Miscellaneous Interests" means Sellers' interests in all property, assets, interests and rights (other than the Petroleum and Natural Gas Rights and the Tangibles) related to the Petroleum and Natural Gas Rights or the Tangibles, including without limitation any and all of the following: (i) contracts and agreements related to the Petroleum and Natural Gas Rights or the Tangibles including, without limitation, the Title and Operating Documents; (ii) the Surface Rights; (iii) the Seismic Data and Data; and (iv) the Wells, including well bores and casing, but specifically excludes (a) Proprietary Information; (b) Petroleum Substances produced prior to the Effective Time; and (c) accounts receivable accruing prior to the Effective Time. "NRI" means net revenue interest. "Parties" means the parties to this Agreement and "Party" means Purchaser or the Sellers. "Pending Claims" has the meaning ascribed thereto in Section 6.1(g). "Permitted Encumbrances" means: (i) liens for taxes, assessments and governmental charges for which payment is not due; (ii) liens incurred or created in the ordinary course of business as security in favor of the person who is conducting the development or operation of the property to which such liens relate for Sellers' proportionate share of costs and expenses of such development or operation for which payment is not due including pursuant to any Operating Documents; (iii) mechanics', builders' and materialmen's liens in respect of services rendered or goods supplied for which payment is not due; (iv) easements, rights of way, servitudes and other similar rights in land (including, without limitation, rights of way and servitudes for roads, railways, sewers, drains, gas and oil pipelines, gas and water mains and electric light, power, telephone, telegraph and cable television conduits, poles, wires and cables); (v) the right reserved to or vested in any municipality or government or other public authority by the terms of any lease, license, franchise, grant or permit or by any statutory provision, to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof; 4 (vi) rights of general application reserved to or vested in any governmental authority to levy taxes on Petroleum Substances or any of them or the income therefrom, and governmental requirements and limitations of general application; (vii) royalty burdens, reductions in interests, rights of first refusal, and other encumbrances set out in the Land Schedule; (viii) required Party consents to assignments and similar rights held by third parties with respect to which (a) prior to Closing waivers or consents are obtained from the appropriate parties, or (b) consents need not be obtained prior to an assignment and/or are routinely obtained after Closing; (ix) the terms and conditions of the Leases and the Title and Operating Documents; (x) such Title Defects as Purchaser may have expressly waived in writing; (xi) imperfections of title which do not materially interfere with the use, operation and possession of any particular Assets or which do not cause Sellers' title to be less than Defensible Title; and (xii) liens and security interests which are released at or prior to Closing. "Person" means any partnership, corporation, trust, unincorporated organization, union, government, governmental department or agency, individual or any heir, executor, administrator or other legal representative of an individual other than a Party. "Petroleum and Natural Gas Rights" means the entire interest of the Sellers in and to the Lands, including, without limitation, all leasehold interests, mineral interests, royalty interests and overriding royalty interests therein, and, insofar as they pertain to the Lands, the Leases and Wells. "Petroleum Substances" means crude oil, petroleum, natural gas, coal seam gas, casinghead gas, natural gas liquids, and other related hydrocarbons and any and all other substances whether liquid, solid or gaseous and whether hydrocarbons or not, produced in association therewith, the rights to which are granted pursuant to the Leases. "Preferential Purchase Right" means a right of first refusal, preemptive right of purchase or similar right whereby a Party has the right to acquire or purchase a portion of the Assets as a consequence of Sellers having agreed to sell the Assets to Purchaser in accordance herewith. 5 "Prime Rate" means the rate of interest, expressed as a rate per annum, designated by Bank of Oklahoma, N.A., as the reference rate used by it to determine rates of interest charged by it on commercial loans made and which is announced by such bank, from time to time, as its prime rate, provided that whenever such bank announces a change in such reference rate, the "Prime Rate" shall correspondingly change effective on the date the change in such reference rate is effective. "Proprietary Information" means (i) Sellers' independent valuations of the Assets, (ii) seismic data that is subject to contractual restrictions against assignment and maps and interpretations made therefrom and (iii) all corporate income tax and financial information. "Purchase Price" has the meaning ascribed thereto in Section 2.2. "Sale, Processing and Transportation Agreements" means agreements for the sale of Petroleum Substances produced from the Lands or lands pooled or unitized therewith and agreements providing for the gathering, transportation, compression, processing, treatment or storage of Petroleum Substances produced from the Lands or lands pooled or unitized therewith. "Seismic Data" means seismic data owned solely by the Sellers, including surveyors' ground elevation records, shot point maps, drillers' logs, shooters' records, seismograph records, seismograph magnetic tapes, monitor records, field records and record sections, excluding maps and interpretations made therefrom. "Specific Conveyances" means all conveyances, assignments, transfers, novations and other documents or instruments that are reasonably required or desirable, in accordance with normal oil and gas industry practices, to convey, assign and transfer the Assets to Purchaser and to novate Purchaser into the Title and Operating Documents in the place and stead of Sellers with respect to the Assets. "Surface Rights" means all rights to use or occupy the surface of lands (including, but not limited to, the Lands) which are used or held for use in connection with the Petroleum and Natural Gas Rights or the Tangibles, including rights to enter upon and occupy the surface of lands on which the Tangibles and the Wells are located and rights to use the surface of lands to gain access thereto. "Take or Pay Obligations" means take or pay and similar obligations related to the Assets arising after the Effective Time as a result of payments made prior to the Effective Time by or on behalf of buyers of Petroleum Substances in lieu of or in satisfaction of their obligations to buy Petroleum Substances, including obligations to sell or deliver Petroleum Substances or any of them to a Party after the Effective Time without being entitled in due course to receive and retain full payment for such Petroleum Substances and obligations to repay such payments and\or interest thereon. 6 "Tangibles" means (i) the interest of Sellers in the Facilities and (ii) the interests of Sellers that are directly related to the Petroleum and Natural Gas Rights in all other tangible depreciable property and assets used or intended to be used in producing, processing, gathering, treating, storing, measuring or injecting Petroleum Substances or any of them from the Lands or lands pooled or unitized therewith or in connection with water injection or removal operations that pertain to the Petroleum and Natural Gas Rights, including, without limitation, gas plants, oil batteries, production equipment, pipelines, pipeline connections, meters, dehydrators, motors, compressors, treaters, dehydrators, scrubbers, separators, pumps, tanks, boilers and communication equipment. "Termination Amount" has the meaning ascribed therein in Section 13.1(c). "Title Defect" means any lien, encumbrance, adverse claim (including without limitation, Pending Claims), encroachment, irregularity, cloud or uncertainty, defect and/or objection to real property title, excluding Permitted Encumbrances, that alone or in combination with other defects renders Sellers' title less than Defensible Title. "Title and Operating Documents" means, to the extent related to the Petroleum and Natural Gas Rights or the Tangibles, (i) the Leases, (ii) unit agreements, assignments, trust declarations, operating agreements, royalty agreements, overriding royalty agreements, gross overriding agreements, participation agreements, farm-in and farmout agreements, sale and purchase agreements, pooling agreements, common stream agreements, easements, surface leases and pipeline crossing agreements, (iii) Sale, Processing and Transportation Agreements; (iv) agreements for construction, ownership and operation of gas plants, gas gathering systems and other facilities, (v) permits, licenses and approvals and (vi) other agreements which relate to the Petroleum and Natural Gas Rights, the Tangibles, the Miscellaneous Interests or the ownership, operation or exploitation thereof. "Sellers' Counsel" means Porter & Hedges, L.L.P., 700 Louisiana, Suite 3500, Houston, Texas, 77002. "Wells" means those wells set forth in Schedule A and all wells (including without limitation producing, shut-in, suspended, capped, abandoned, injection and disposal wells), located on the Lands or lands pooled or unitized therewith. "WI" means working interest. 1.2 Plurality and Gender Unless otherwise expressly stated, words importing the singular number shall, where the context permits, include the plural and vice versa, and words suggesting one gender shall be construed as suggesting other genders. 1.3 References Unless otherwise expressly stated: 7 (a) references to "herein", "hereto", "hereby", "hereunder", "hereof" and similar expressions are references to this Agreement and not to any particular Article, Section, subsection or Schedule. (b) references to "including" means including without limitation, and "includes" or other derivatives thereof shall have corresponding meanings. (c) references to an "Article", "Section", "subsection", "paragraph" or "Schedule" are references to an Article, Section, subsection, paragraph or Schedule of or to this Agreement. (d) any reference herein to any agreement, statute, instrument, published data, or published information, including this Agreement, is a reference to it as varied, amended, modified, supplemented or replaced from time to time, and a reference to any legislation or regulation is a reference to it as re-enacted, varied, amended, modified, supplemented or replaced from time to time. 1.4 Currency Unless otherwise stated, any reference to dollars means currency of the United States of America. 1.5 Headings The use of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation of this Agreement. 1.6 Knowledge or Awareness Where in this Agreement a representation or warranty is limited to the knowledge or awareness of Sellers, such knowledge or awareness shall mean that which is known or understood or should have been known or understood on the part of the person having supervising management authority over the matters to which such representation or warranty pertains, after reasonable investigation. 1.7 Schedules The following Schedules are attached to and form a part of this Agreement for all purposes: Schedule A - Land Schedule, Represented Interests and Base Price Allocations Schedule B - Sale, Processing and Transportation Agreements Schedule C - Authorizations for Expenditures Schedule D - Lawsuits and Claims Schedule E - Assignment, Conveyance and Bill of Sale 8 Schedule F - Intentionally Omitted Schedule G - Gas Imbalances Schedule H - Intentionally Omitted Schedule I - Preferential Purchase Rights Schedule J - Deposit Escrow Agreement Schedule K - Holdback Escrow Agreement Wherever any term or condition, express or implied, of such Schedules conflicts or is at variance with any term or condition in the body of this Agreement, such term or condition in the body of this Agreement shall prevail. ARTICLE 2 PURCHASE AND SALE 2.1 Purchase and Sale Sellers hereby agree to sell the Assets to Purchaser and Purchaser hereby agrees to purchase the Assets from Sellers, subject to and in accordance with this Agreement. 2.2 Purchase Price The purchase price to be paid by Purchaser to Sellers for the Assets (the "Purchase Price") will be the Base Price plus or minus (as applicable) the net amount of the adjustments made pursuant to Article 4. 2.3 Allocation of Base Price Subject to the adjustments made pursuant to Article 4, the Base Price shall be allocated among the Assets as set forth in Schedule A . For the purpose of making the requisite filings under Section 1060 of Internal Revenue Code of 1986, as amended, (the "Code") and the regulations thereunder the Parties shall utilize the Base Price allocation as adjusted pursuant to Article 4. Sellers and Purchaser each agree to report the federal, state and local income and other Tax consequences of the transactions contemplated herein, and in particular to report the information required by Section 1060(b) of the Code, and to jointly prepare Form 8594 (Asset Acquisition Statement under Section 1060) in a manner consistent with the Base Price Allocation (as herein adjusted) and shall not take any position inconsistent therewith upon examination of any tax return, in any refund claim, in any litigation, investigation or otherwise. Sellers and Purchaser agree that each shall furnish the other a copy of Form 8594 (Asset Acquisition Statement under Section 1060) proposed to be filed with the Internal Revenue Service by such Party or any affiliate thereof within ten (10) days prior to the filing of such form with the Internal Revenue Service. The value allocated to an Asset as set forth in Schedule A is referred to as the "Allocated Value" for that Asset for purposes of seeking adjustments to the Purchase Price pursuant to Article 10 below. 9 2.4 Deposit Purchaser has paid to Sellers a performance guarantee deposit (the "Deposit") in an amount equal to One Million Dollars ($1,000,000), which Deposit has been deposited contemporaneously herewith in an interest-bearing escrow account with Bank of Oklahoma, N.A. (the "Deposit Escrow") pursuant to an escrow agreement in the form attached hereto as Exhibit J (the "Deposit Escrow Agreement"). If Closing occurs, (i) the Deposit Escrow shall be terminated, and (ii) the Deposit, together with interest earned thereon, shall be delivered into a separate escrow account with Bank of Oklahoma, N.A. pursuant to Section 2.6 below to serve as the Holdback Amount. If this Agreement is terminated, the Deposit, together with interest thereon, shall be handled as provided in Section 2.5 below. 2.5 Payment of Purchase Price (a) If Closing does not occur due to a breach of this Agreement by Purchaser which remains uncured ten (10) days after Purchaser has received written notice of breach from Sellers, the Deposit together with all interest earned thereon shall be forfeited to and retained by Sellers as liquidated damages, which forfeiture shall be Sellers' sole remedy at law and in equity. The parties agree that the damages that would be suffered by Sellers as a result of Purchaser's breach would be difficult to estimate and that the liquidated damages described herein represent a reasonable estimation of such damages and do not constitute a penalty. (b) If Closing does not occur for any reason or circumstance other than that described in Section 2.5(a), the Deposit together with all interest earned thereon shall be returned to the Purchaser. (c) At Closing, Purchaser shall pay to Sellers or as directed by Sellers by wire transfer the Purchase Price, adjusted as provided in Article 4 below and less and except the Deposit (together with interest earned thereon) to the account or accounts designated by Sellers. 2.6 Holdback At Closing, the Deposit Escrow shall be terminated and the Deposit, together with interest earned thereon (the "Holdback Amount"), shall be deposited into an escrow account with Bank of Oklahoma, N.A. (the "Holdback Escrow Account") and held pursuant to an escrow agreement in the form attached hereto as Exhibit K to be executed at Closing ("Holdback Escrow Agreement") for a period expiring ninety (90) days after the Closing Date (unless extended pursuant to Sections 10.1 and/or 10.2 below), for the purpose of securing (i) Purchaser's rights post-Closing to seek a Due Diligence Reduction pursuant to Section 10.3 below, and (ii) the limited indemnity obligations of Sellers as set forth in Section 7.1 below. All portions of the Holdback Amount with respect to which no claim has been made by Purchaser on or before the Final Settlement Date (or such later date, if the escrow is extended pursuant to Sections 10.1 and/or 10.2 below) shall be promptly released to Sellers pursuant to the Holdback Escrow Agreement. 10 ARTICLE 3 CLOSING 3.1 Place of Closing Unless otherwise agreed to in writing by the Parties, Closing shall take place at the Closing Time on the Closing Date at the offices of Seller's Counsel. 3.2 Effective Time of Transfer of Title The transfer and assignment of the Assets from Sellers to Purchaser shall be effective as of the Effective Time. However, possession and title to the Assets shall not pass to Purchaser until Closing. 3.3 Deliveries at Closing (a) At Closing, Sellers shall deliver the following: (i) the Assignment (whether one or more) fully executed and acknowledged by Sellers; (ii) all required Specific Conveyances fully executed and, if necessary, acknowledged by Sellers; (iii) copies of all consents to disposition and waivers of Preferential Purchase Right obtained by Sellers with respect to the sale of the Assets to Purchaser; (iv) affidavits of non-foreign status and no requirement for withholding under Section 1445 of the Code; (v) a termination of the Deposit Escrow agreement; and (vi) such other items as may be specifically required hereunder. (b) At Closing, Purchaser shall deliver the following: (i) the Purchase Price, adjusted as provided in Article 4 below and less and except the Deposit; --------- (ii) counterpart originals of the Holdback Escrow Agreement to be executed by Sellers and Purchaser; and (iii) such other items as may be specifically required hereunder. 11 In addition, Purchaser will execute the Assignment and the Specific Conveyances delivered by Seller. 3.4 Delivery of Data Sellers shall, within ten (10) Business Days after Closing, make available to Purchaser original copies of the Data which it has in its possession. If reasonably required by Sellers after Closing for the completion of tax returns or dealing with tax matters, Purchaser shall make original copies of Data available to Sellers, at Sellers' sole cost and expense. 3.5 Fees, Expenses, Taxes and Recording (a) Each Party shall be solely responsible for all costs and expenses incurred by it in connection with this transaction (including, but not limited to fees and expenses of its counsel and accountants) and shall not be entitled to any reimbursements from the other Party, except as otherwise provided in this Agreement. (b) Purchaser shall file all necessary tax returns and other documents with respect to all transfer, documentary, sales, use, stamp, registration and other similar taxes and fees, and, if required by applicable law, Sellers shall join in the execution of any such tax returns and other documentation. Notwithstanding anything set forth in this Agreement to the contrary, Purchaser shall pay any transfer, documentary, sales, use, stamp, registration and other similar taxes and fees incurred in connection with this Agreement and the transactions contemplated hereby. (c) Purchaser shall, at its own cost, immediately record all instruments of conveyance and sale in the appropriate office of the state and county in which the lands covered by such instrument are located. Purchaser shall immediately file for and obtain the necessary approval of all federal, Indian, tribal or state government agencies to the assignment of the Assets. The assignment of any state, federal or Indian tribal oil and gas leases shall be filed in the appropriate governmental offices on a form required and in compliance with the applicable rules of the applicable government agencies. If requested in writing by Sellers, Purchaser shall supply Sellers, at Sellers' expense, with true and accurate photocopies reflecting the recording information of all the recorded and filed assignments within a reasonable period of time after their recording and filing. ARTICLE 4 ADJUSTMENTS 4.1 Costs and Revenues to be Apportioned (a) The transfer and assignment of the Assets by Sellers to Purchaser shall occur at the Closing Time and be effective as of the Effective Time. SUBJECT ALWAYS TO SECTION 4.5, Sellers will be responsible for and cause the payment of all costs, and take the benefit of all revenues incurred in relation to the Assets prior to the Effective Time and Purchaser will be responsible for and cause payment of all costs, and take the benefit of all revenues relating to the Assets incurred from and subsequent to the Effective Time. Except as otherwise provided in this Agreement, all costs and expenses relating to the Assets (including, without limitation, maintenance, development, capital and operating costs) and all revenues relating to the Assets (including, without limitation, proceeds from the sale of production and fees from processing, treating or transporting Petroleum Substances on behalf of Third Parties) shall be apportioned as of the Effective Time between Sellers and Purchaser on an accrual basis in accordance with generally accepted accounting principles, provided that: 12 (i) advances made by Sellers in respect of the costs of operations on the Lands or lands pooled or unitized therewith or facilities interests included in the Assets which are attributable to periods of ownership or operation from and after the Effective Time will be transferred to Purchaser and an adjustment will be made in favor of Sellers equal to the amount of the advance transferred; (ii) Sellers will be reimbursed expenses related to the continued operations of the Assets (including personnel and general and administrative expenses) for periods after the Closing Date at a rate equal to $1,325 per day. Sellers shall be given at least fifteen (15) days' notice of the date Purchaser shall take over operations of the Assets. (iii) deposits made by Sellers relative to operations on the Lands and attributable to periods of ownership or operation from and after the Effective Time, other than as referred to in Section 4.1(a)(i), shall be returned to Sellers; (iv) costs and expenses of work done, services provided and goods supplied shall be deemed to accrue for the purposes of this Article when the work is done or the goods or services are provided, regardless of when such costs and expenses become payable; (v) revenues from the sale of Petroleum Substances will be deemed to accrue when the Petroleum Substances are produced; (vi) all rentals and similar payments in respect of the Leases or Surface Rights comprised in the Assets and all taxes (other than income taxes) levied with respect to the Assets or operations in respect thereof shall be apportioned between Sellers and Purchaser on a per diem basis as of the Effective Time; and (vii) the Purchase Price shall be reduced by any Due Diligence Reduction to be made prior to Closing pursuant to Section 10.3. (b) SUBJECT ALWAYS TO SECTION 4.5, Petroleum Substances that were produced, but not sold, as of the Effective Time shall be retained by Sellers and Sellers shall be responsible for all royalties or other encumbrances thereon and all processing, treating and transportation expenses pertaining thereto. Petroleum Substances will be deemed to be sold on a first in, first out basis. For purposes of this Section 4.1(b), Sellers will cause the merchantable oil in oil storage facilities above the load lines which comprise a portion of the Petroleum Substances to be gauged or strapped as of the Effective Time. The oil in such storage facilities above the load lines after the Effective Time and retained by Sellers shall be deemed sold at the per-barrel price of $30.83, and such proceeds shall be provided to the Seller pursuant to the terms herein. 13 4.2 Imbalances, Prepayments and Refunds The Parties recognize that as of the Effective Time there may be (i) gas imbalances ("Imbalances") with respect to production from or attributable to certain of the Assets, whether such Imbalances be instances of overproduction ("Imbalance Obligations") or underproduction ("Imbalance Entitlements"), and including, without limitation, the imbalances set forth in Schedule G), (ii) prepayment obligations due to monies received by Sellers under production sales contracts or similar agreements containing "take-or-pay" clauses (or similar arrangements), whereby Sellers are obligated to deliver oil or gas produced after the Effective Time with respect to an Asset without receiving payment therefor in the ordinary course of business ("Prepayment Obligations"), or (iii) refund obligations arising from Sellers' sale of oil or gas produced from an Asset prior to the Effective Time at prices exceeding the applicable maximum lawful prices ("Refund Obligations"). The Parties agree that, from and after the date of this Agreement, they shall jointly attempt to ascertain prior to Closing all Imbalances, Prepayment Obligations and Refund Obligations affecting the Assets as of the Effective Time. The Parties further agree that they shall adjust the Purchase Price at Closing for all discovered Imbalances, Prepayment Obligations and Refund Obligations in accordance with the following procedures: (a) Imbalances. The value of discovered Imbalances (including, without limitation, those set forth in Schedule G existing as of the Effective Time shall be calculated by multiplying the overproduced or underproduced volumes by $1.05 per Mcf. At Closing or on the Final Settlement Date, as the case may be, the Purchase Price shall be adjusted upward for the aggregate value of all Imbalance Entitlements and downward for the aggregate value of all Imbalance Obligations. Respecting Imbalances discovered after the Final Settlement Date, Purchaser shall bear all obligations with respect to any overproduction liability and shall receive the benefit of and be credited with any underproduction credit, including overproduction and underproduction attributable to periods of time prior to the Effective Time. (b) Prepayment Obligations. At Closing or on the Final Settlement Date, as the case may be, the Purchase Price shall be adjusted downward by all amounts received by Sellers prior to the Closing with respect to Prepayment Obligations. (c) Refund Obligations. At Closing or on the Final Settlement Date, as the case may be, the Purchase Price shall be adjusted downward by all amounts received by Sellers prior to the Closing with respect to Refund Obligations. 14 4.3 Suspense Accounts The parties agree that all suspended royalties and other proceeds which are held by Sellers (or by a third-party designee on behalf of Sellers) in suspense for third parties attributable to production from the Assets shall be transferred to Purchaser at the Closing. As of February 28, 2004, the aggregate amount of such suspended royalties is $124,766.00. Purchaser shall and does hereby assume responsibility for the payment of all suspended revenues to third parties entitled to the same and shall and does hereby hold Sellers harmless from and against any loss, liability, cost or expense (other than those that may be attributed to Sellers' improper placement of such revenues in suspense) which might arise from claims of third parties asserted following Sellers' transfer to Purchaser of the suspended revenues pursuant to this Section 4.3. 4.4 Adjustments to Account (a) An interim accounting of the adjustments pursuant to Sections 4.1 and 4.2 shall be made at Closing, based on (i) Sellers' good faith estimate and Purchaser's verification of the costs and expenses paid by Sellers prior to Closing and the revenues received by Sellers prior to Closing, and (ii) the quantification of Imbalances, Prepayments and Refunds existing as of the Effective Time and confirmed by the Parties pursuant to Section 4.2 above. Sellers shall provide a statement setting forth the adjustments to be made at Closing not later than three (3) Business Days prior to Closing and shall assist Purchaser in verifying the amounts set forth in such statement. A further accounting of the adjustments pursuant to Sections 4.1 and 4.2 shall be conducted on or before the Final Settlement Date. Any adjustment due from a Party for which such Party has received written notice not later than the Final Settlement Date, shall be settled by payment by such Party required to make payment hereunder within 15 days of being notified of the determination of the amount owing. (b) During the 90 day period following the Closing Date, Purchaser may audit the books, records and accounts of Sellers respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to Sellers at Sellers' offices during Sellers' normal business hours, and shall be conducted at the sole expense of Purchaser; provided, that Sellers shall supply such documentation as Purchaser reasonably requests to support Sellers' proposed final accounting. (c) All adjustments provided for in this Article 4 shall be adjustments to the Base Price. 4.5 Limitation on Adjustments NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER PARTY SHALL BE ENTITLED TO, OR LIABLE FOR, ANY ADJUSTMENTS PURSUANT TO THIS AGREEMENT (INCLUDING THIS ARTICLE 4) UNLESS WRITTEN NOTICE OF SUCH ADJUSTMENT HAS BEEN RECEIVED BY THE PARTY LIABLE TO MAKE PAYMENT (OR NET PAYMENT) IN RESPECT OF SUCH ADJUSTMENT(S) NOT LATER THAN THE FINAL SETTLEMENT DATE. 15 ARTICLE 5 CONDITIONS OF CLOSING 5.1 Purchaser's Conditions The obligation of Purchaser to purchase the Assets pursuant hereto is subject to the satisfaction at or prior to the Closing Date of the following conditions, which are for the exclusive benefit of Purchaser and may be waived by Purchaser: (a) Representations and Warranties. The representations and warranties of Sellers herein contained shall be true in all material respects when made and as of the Closing Date; (b) Obligations. All obligations of Sellers contained in this Agreement to be performed prior to or at Closing shall have been timely performed in all material respects; and (c) No Material Damage. There having been no physical damage to, or other alteration in or to the Assets between the date hereof and the Closing Time which materially and adversely affects the value of the Assets. If any of the foregoing conditions has not been complied with, or waived by Purchaser at or before the Closing Date, Purchaser may, in addition to any other remedies which it may have available to it, terminate its obligations to purchase the Assets by written notice to Sellers specifying what conditions have not been satisfied and, in such event, Purchaser and Sellers shall be released and discharged from all obligations hereunder except as provided in Section 5.4. The Purchaser's decision to cause Closing to occur shall be deemed its agreement and acknowledgment that the foregoing conditions have been complied with to Purchaser's satisfaction or waived by Purchaser. 5.2 Sellers' Conditions The obligation of Sellers to sell the Assets pursuant hereto is subject to the satisfaction at or prior to the Closing Date of the following conditions, which are for the exclusive benefit of Sellers and may be waived by Sellers: (a) Representations and Warranties. The representations and warranties of Purchaser herein contained shall be true in all material respects when made and as of the Closing Date; (b) Obligations. All obligations of Purchaser contained in this Agreement to be performed prior to or at Closing shall have been timely performed in all material respects; and 16 (c) Payment. All amounts to be paid by Purchaser to Sellers at Closing pursuant to this Agreement hereto shall have been paid to Sellers by Purchaser in the form stipulated in this Agreement. If any of the foregoing conditions precedent has not been complied with, or waived by Sellers at or before the Closing Date, Sellers may, in addition to any other remedies which it may have available to it, terminate its obligations to sell the Assets to Purchaser by written notice to Purchaser specifying what conditions have not been satisfied and, in such event, Purchaser and Sellers shall be released and discharged from all obligations hereunder except as provided in Section 5.4. The Sellers' decision to cause Closing to occur shall be deemed its agreement and acknowledgment that the foregoing conditions have been complied with to Sellers' satisfaction or waived by Purchaser. 5.3 Efforts to Fulfill Conditions Precedent Purchaser and Sellers shall proceed diligently and in good faith and use all commercially reasonable efforts to fulfill and assist in the fulfillment of the conditions precedent. 5.4 Failure of a Condition Due to a Breach If a condition set forth in Section 5.1 or 5.2 is not satisfied as a result of a breach by a Party of its obligations hereunder, the following shall occur: (a) Purchaser's Breach. If Closing does not occur because Purchaser wrongfully fails to tender performance at Closing or otherwise breaches this Agreement prior to Closing, Seller shall be entitled to the Deposit, and all earned interest thereon, as liquidated damages and Sellers' sole remedy at law and in equity, as more particularly provided in Section 2.5(a) above. (b) Sellers' Breach. If Closing does not occur because Sellers wrongfully fail to tender performance at Closing or otherwise breaches this Agreement, Purchaser shall be entitled to receive the Deposit, and all earned interest thereon, immediately after the determination that the Closing will not occur, and Purchaser shall retain any legal or equitable remedies for Sellers' breach of this Agreement including, without limitation, specific performance subject to the terms and conditions of this Agreement (including payment in full of the Purchase Price as set forth herein). ARTICLE 6 REPRESENTATIONS AND WARRANTIES 6.1 Representations and Warranties of Sellers Sellers represents and warrants to Purchaser that: (a) Standing. Each Seller is a corporation, duly organized and validly existing under the laws of the state of its formation, is authorized to carry on business in all jurisdictions in which the Assets are located, and now has all the requisite corporate power and authority to sell, assign, transfer and convey the Assets to Purchaser in accordance with this Agreement; 17 (b) No Conflicts. The consummation of the transactions contemplated herein will not violate, nor be in conflict with, any of the controlling documents, by-laws or governing documents of Sellers or any judgment, decree, order, law, statute, rule or regulation applicable to Sellers; (c) Execution of Documents. This Agreement has been duly executed and delivered by Sellers and all other documents (including the Assignments and the Specific Conveyances) executed and delivered by Sellers pursuant hereto will be duly executed and delivered by Sellers, and this Agreement does, and such documents will, constitute legal, valid and binding obligations of Sellers enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, preference, reorganization, moratorium and other similar laws affecting creditors' rights generally and the discretion of courts with respect to equitable or discretionary remedies and defenses; (d) Finders' Fees. Sellers have not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees in respect of this transaction for which Purchaser shall have any obligation or liability; (e) No Authorizations. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body exercising jurisdiction over the Assets or Sellers are required for the due execution, delivery and performance by Sellers of this Agreement, other than authorizations, approvals or exemptions previously obtained and currently in force; (f) Title. Except for the Permitted Encumbrances, the Assets are free and clear of all liens, mortgages, royalties, encumbrances and adverse claims created by, through or under Sellers; (g) No Lawsuits or Claims. There are no judgments and no claims, proceedings, actions or lawsuits pending or, to Sellers' knowledge, contemplated or threatened against or with respect to the Assets or the interests of Sellers therein other than as disclosed in Schedule D (the "Pending Claims"); (h) Good Standing under Agreements. To Sellers' knowledge, Sellers are not in material breach of any term or provision of any of the Title and Operating Documents; (i) AFEs. As of the Effective Time, there are no AFEs, unit budget or similar financial commitments pursuant to which expenditures in respect of the Assets (in excess of $50,000 net to Sellers) other than ordinary course operating costs are or may be required after the Effective Time other than as described in Schedule C and as permitted by Section 8.2; 18 (j) Assessments. To Sellers' knowledge, all ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of property or the production of Petroleum Substances or the receipt of proceeds therefrom in respect of the Assets which have become due and payable prior to the Effective Time (including all prior years) have been properly and fully paid and discharged; (k) Preferential Purchase Right. Except as set forth in Schedule I, the sale of the Assets pursuant hereto is not subject to any Preferential Purchase Right created by, through or under Sellers; (l) Sale, Processing and Transportation Agreements; No Hedging. Schedule B includes all Sale, Processing and Transportation Agreements to which Sellers is a party or is bound and to be assumed by Purchaser that cannot be terminated without penalty on notice from Sellers of 30 days or less. Sellers have entered no hedging arrangements for the sale of Petroleum Substances which would affect the Properties (or the sale or marketing of Petroleum Substances therefrom) for periods from and after the Effective Time; (m) Imbalances; Take or Pay. To Sellers' knowledge, (i) the Imbalances affecting the Assets as of the Effective Time and reflected on Schedule G are true and correct in all material respects, and (ii) there are no Assets which are subject to gas balancing agreements containing a provision that would require cash balancing upon the transfer of the affected Lease or Well through a transaction of the nature contemplated in this Agreement. There are no Take or Pay Obligations related to the Assets; (n) Environmental Matters. To Sellers' knowledge, Sellers have given Purchaser access to all written information in its possession relating to Environmental Liabilities and Abandonment and Reclamation Obligations and, except as otherwise disclosed in writing to the Purchaser prior to the execution of this Agreement, Sellers have not received actual notice, written or oral, received by any officer of the Sellers, of: (i) any material non-compliance in relation to the Assets of which Sellers is the operator with any law intended to protect the environment which has not been remedied in all material respects; or (ii) any claim in relation to the Assets by any Party of material Environmental Liabilities (including pollution) (or material Abandonment and Reclamation Obligations). (o) Affiliate Agreements. Sellers are not subject to any agreement (other than agreements relating to assets that are unrelated to the Assets purchased herein) with an Affiliate of any of the Sellers that cannot be terminated by Purchaser after Closing without penalty, cost or liability. For purposes hereof, "Affiliate" shall mean (i) any person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of any Seller or shareholder of any Seller, (ii) any person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by any Seller or shareholder of any Seller, (iii) any person directly or indirectly controlling, controlled by or under common control with any Seller or shareholder of any Seller, (iv) any officer, director, member, manager or partner of any Seller or any shareholder of Seller, or (v) any person described in clause (i), (ii), (iii) or (iv) of this Section 6.1(o). 19 6.2 Negation of Other Representations (a) SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES (EXPRESS, IMPLIED OR STATUTORY AND WHETHER IN CONTRACT OR IN TORT) EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 6.1 AND, IN PARTICULAR, AND WITHOUT LIMITATION, SELLERS HEREBY EXPRESSLY NEGATE AND DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED BY THEM, WHETHER CONTAINED IN ANY INFORMATION MEMORANDUM OR OTHERWISE, WITH RESPECT TO: (i) ANY DATA OR INFORMATION SUPPLIED BY SELLERS TO PURCHASER OR ITS REPRESENTATIVES; (ii) THE QUALITY, QUANTITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES WITHIN OR UNDER THE LANDS OR ANY LANDS POOLED OR UNITIZED THEREWITH; (iii) THE VALUE OF THE ASSETS OR THE FUTURE CASHFLOW THEREFROM; OR (iv) THE QUALITY, CONDITION, FITNESS OR MERCHANTABILITY OF ANY TANGIBLE DEPRECIABLE EQUIPMENT OR PROPERTY INTERESTS WHICH COMPRISE ALL OR PART OF THE ASSETS. PURCHASER ACKNOWLEDGES AND CONFIRMS THAT IT HAS NOT RELIED ON ANY DATA, INFORMATION OR ADVICE FROM SELLERS WITH RESPECT TO ANY OR ALL OF THE MATTERS SPECIFICALLY ENUMERATED IN THIS PARAGRAPH IN CONNECTION WITH THE PURCHASE OF THE ASSETS PURSUANT HERETO, BUT HAS RELIED SOLELY UPON SELLERS' REPRESENTATIONS SET FORTH IN SECTION 6.1 ABOVE. PURCHASER FURTHER ACKNOWLEDGES THAT, SUBJECT TO SELLERS' LIMITED INDEMNITY PURSUANT TO SECTION 7.1 BELOW AND PURCHASER'S RIGHTS TO SEEK DUE DILIGENCE REDUCTIONS PURSUANT TO SECTION 10.3 BELOW ON OR BEFORE THE FINAL SETTLEMENT DATE, PURCHASER IS PURCHASING THE ASSETS PURSUANT HERETO ON A "AS IS, WHERE IS" BASIS WITH ALL FAULTS AND DEFECTS. PURCHASER CONFIRMS THAT IT HAS NOT RELIED ON ANY COVENANTS, REPRESENTATIONS OR WARRANTIES OUTSIDE THIS AGREEMENT (WHETHER IN CONTRACT OR IN TORT). PURCHASER ACKNOWLEDGES AND CONFIRMS THAT IT HAS PERFORMED OR SHALL PERFORM PRIOR TO THE FINAL SETTLEMENT DATE ITS OWN DUE DILIGENCE AND WILL CONTINUE TO RELY UPON ITS OWN DUE DILIGENCE, EVALUATIONS AND PROJECTIONS AS THE SAME RELATE TO THE ASSETS, INCLUDING WITHOUT LIMITATION, ENVIRONMENTAL DUE DILIGENCE. 20 (b) PURCHASER FOREVER RELEASES AND DISCHARGES SELLERS AND ITS SHAREHOLDERS, DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM ANY CLAIMS AND ALL LIABILITY (WHETHER IN CONTRACT OR IN TORT) TO THE PURCHASER OR PURCHASER'S REPRESENTATIVES, ASSIGNS AND SUCCESSORS, AS A RESULT OF THE USE OR RELIANCE UPON ADVICE, INFORMATION, STATEMENTS, OPINIONS OR MATERIALS PERTAINING TO THE ASSETS WHICH WAS OR WERE DELIVERED OR MADE AVAILABLE TO PURCHASER BY SELLERS OR ANY OF ITS DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES. 6.3 Representations and Warranties of Purchaser Purchaser represents and warrants to Sellers, that: (a) Standing. Purchaser is a limited liability company, duly organized and validly existing under the laws of Delaware, is authorized to carry on business in all jurisdictions in which the Assets are located, and now has the requisite power and authority to purchase and pay for the Assets in accordance with this Agreement; (b) No Conflicts. The consummation of the transactions contemplated by this Agreement will not violate, nor be in conflict with, the controlling documents, by-laws or governing documents of Purchaser or any judgment, decree, order, law, statute, rule or regulation applicable to Purchaser; (c) Execution of Documents. This Agreement has been duly executed and delivered by Purchaser and all other documents (including the Assignment and the Specific Conveyances) executed and delivered by Purchaser pursuant hereto will be duly executed and delivered by Purchaser, and this Agreement does, and such documents will, constitute legal, valid and binding obligations of Purchaser enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, preference, reorganization, moratorium and other similar laws affecting creditors' rights generally and the discretion of the courts with respect to equitable or discretionary remedies and defenses; (d) Finders' Fees. Purchaser has not incurred any liability, contingent or otherwise, for brokers' or finders' fees in respect of this transaction for which Sellers shall have any obligation or liability; 21 (e) Purchase Price. Purchaser either now has or will have at Closing all money that Purchaser will need to pay to Sellers upon Closing or Purchaser has a contractual right to receive all money that Purchaser will need to pay to Sellers and such money will be available to Purchaser for payment to Sellers at Closing; and (f) No Authorizations. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body exercising jurisdiction over the Assets or Purchaser is required for the due execution, delivery and performance by Purchaser of this Agreement, other than authorizations, approvals or exemptions previously obtained and currently in force. 6.4 Limitation If Closing occurs: no claim for a breach of a representation or warranty contained in Sections 6.1(a) through (o), or Section 6.3 shall be made or be enforceable by a Party unless written notice of such claim, with reasonable particulars, is given by such Party to the Party against whom the claim is made on or before the Final Settlement Date. No claim shall be made by a Party in respect of the representations and warranties made by the other Party in this Agreement except pursuant to this Article 6. ARTICLE 7 INDEMNITIES 7.1 Sellers' Limited Indemnity (a) Subject to the limitations set forth in subparagraph (b) below, if the Closing occurs, Sellers agree, jointly and severally, to indemnify, defend and hold harmless the Purchaser Indemnified Persons from and against all Losses and Liabilities that arise out of (i) any breach by Sellers, or any of them, of any representation, warranty, covenant or agreement hereunder, and (ii) the ownership and/or operation of the Assets for periods prior to the Effective Time during which Sellers owned the Assets. "Purchaser Indemnified Persons" means Purchaser and its members, managers, officers, directors, agents and employees. (b) Sellers' indemnification obligations set forth in subparagraph (a) above are subject to the following limitations: (i) Sellers' indemnification obligations shall only extend to and cover claims made by an Purchaser Indemnified Person on or before the Final Settlement Date, and all other claims shall be deemed waived and forever barred, (ii) Sellers' aggregate liability to Purchaser shall be limited to the Holdback Amount (and interest earned thereon), (iii) Sellers' indemnification obligations shall not apply to (A) any amount which is attributed to an issue that was taken into account as an adjustment to the Purchase Price at Closing (including any such amounts deemed to be waived under Section 10.3(b)), or (B) either Party's costs and expenses with respect to the negotiation and consummation of this Agreement and the purchase and sale of the Assets. 22 7.2 General Purchaser Indemnity Except as otherwise provided in this Article 7 or in Article 4, Purchaser shall, from and after Closing, be liable for and indemnify Sellers and its shareholders, directors, officers, agents and employees (collectively the "Sellers Indemnified Persons") from and against all of Sellers' Losses and Liabilities in respect of, any claim arising directly from the ownership and/or operation of the Assets (whether valid or invalid) made by a Person claiming liabilities of any Sellers Indemnified Person as a consequence of any acts or omissions which occurred or are alleged by the Person to have occurred and which directly relate to the Assets, regardless of when such acts or omissions occurred or are alleged to have occurred, subject only to Section 7.1 above and the adjustments permitted pursuant to Article 4 (and restricted by Section 4.5). 7.3 Environmental and Related Obligations Subject to Section 7.1 and Purchaser's rights under Section 10.3 with respect to Environmental Liabilities asserted prior to the Final Settlement Date, Purchaser shall be liable for and indemnify and save harmless all Sellers Indemnified Persons from and against all Losses and Liabilities of Sellers in respect of, all Environmental Liabilities howsoever and by whomsoever caused and whether they occur or arise in whole or in part prior to, on or subsequent to the Closing Date and all Abandonment and Reclamation Obligations; provided, however, that Purchaser's indemnification is expressly limited pursuant to Section 7.5 below. Subject to Section 7.1 above and Purchaser's rights to assert Environmental Liabilities pursuant to Section 10.3 below prior to the Final Settlement Date, Purchaser shall not be entitled to exercise and hereby waives any rights or remedies Purchaser may now or in the future have against any Sellers Indemnified Person in respect of such Environmental Liabilities or the Abandonment and Reclamation Obligations, whether such rights and remedies are pursuant to the common law or statute or otherwise, including without limitation, the right to name any Sellers Indemnified Person as a Party to any action commenced by any Person against Purchaser. 7.4 Limitation The indemnities provided for in this Article 7 apply only if Closing occurs. 7.5 No Incidental or Consequential Damages NEITHER PARTY SHALL BE LIABLE PURSUANT TO THIS AGREEMENT FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, ECONOMIC LOSS OR LOSS OR DEFERRAL OF PROFITS) SUFFERED BY THE OTHER PARTY OR ITS SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, WHETHER BASED UPON BREACH OF CONTRACT (FUNDAMENTAL OR OTHERWISE), TORT (INCLUDING NEGLIGENCE), OFFENCES AND QUASI-OFFENCES, STRICT LIABILITY OR ANY OTHER THEORY OF LAW. 23 ARTICLE 8 MAINTENANCE OF ASSETS 8.1 Maintenance of Assets Prior to Closing From the date hereof until the Closing Date, Sellers shall, to the extent that the nature of its interest permits, and subject to the Title and Operating Documents and any other agreements and documents to which the Assets are subject: (a) maintain and operate (to the extent Sellers serve as operator of Leases or Wells) the Assets in a proper and prudent manner in accordance with good oil and gas industry practices, including maintaining adequate insurance, in material compliance with all applicable laws, rules, regulations, orders and directions of governmental and other competent authorities; (b) pay or cause to be paid all costs and expenses relating to the Assets which become due from the date hereof to the Closing Date; (c) perform and comply with all covenants and conditions contained in the Title and Operating Documents and any other agreements and documents to which the Assets are subject; and (d) utilize its best efforts to settle, pay or otherwise resolve the Pending Claims. 8.2 Consent of Purchaser Notwithstanding Section 8.1, from the date hereof until the Closing Date, Sellers shall not, without the written consent of Purchaser, which consent shall not be unreasonably withheld by Purchaser and which, if provided, will be provided in a timely manner: (a) make any commitment or propose, initiate or authorize any capital expenditure with respect to the Assets of which Sellers' share is in excess of $50,000, except in case of an emergency or in respect of amounts which Sellers is committed to expend or is deemed to authorize without its specific authorization or approval; (b) surrender or abandon any of the Assets; (c) amend or terminate any Title and Operating Documents or enter into any new agreement or commitment relating to the Assets; or (d) sell, encumber or otherwise dispose of any of the Assets or any part or portion thereof, except sales of Petroleum Substances in the normal course of business. 24 ARTICLE 9 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS 9.1 Preferential Purchase Rights Within five (5) Business Days after the date of this Agreement, each Seller shall promptly provide to each Person that possesses a Preferential Purchase Right any notice that is required in respect of the transaction contemplated hereby, and each Seller shall use its commercially reasonable efforts to secure the consent of any party whose consent is required to effect any sale and purchase herein provided. No Seller shall have liability to Purchaser for its failure for any reason to obtain such a consent or for any error in good faith made in any notice so given. 9.2 Effect of Exercise of Preferential Rights If a Person that possesses a Preferential Purchase Right exercises such right with respect to a particular Asset, the particular Asset as to which such Preferential Purchase Right exercised shall be excluded from the sale and the Base Price shall be reduced by the Allocated Value for such excluded Asset. An Asset which is excluded from the Assets as the result of this Section 9.2 shall not be used in calculating the Termination Amount and the Termination Amount shall be calculated utilizing such reduced Base Price. In the event a Person elects to exercise its Preferential Purchase Right to purchase a Asset but such sale has not been consummated prior to the Closing under this Agreement, Purchaser shall pay Sellers the Allocated Value of such Asset and Seller shall assign to Purchaser the Asset and Purchaser shall take the Asset subject to the Preferential Purchase Right and will have the right to receive the proceeds from the Preferential Purchase Right sale. ARTICLE 10 TITLE REVIEW AND ENVIRONMENTAL REVIEW 10.1 Title Review Between the execution of this Agreement and the Closing, subject to contractual and fiduciary obligations and limits, Sellers shall make available to Purchaser and its representatives all title documents (including contracts, correspondence, files and prior title opinions) in its possession pertaining to the Assets for purposes of permitting Purchaser to review Seller's title to the Assets. Purchaser shall conduct its review of Seller's title to the Assets with reasonable diligence. If there are Title Defects affecting the Assets, Purchaser shall give written notice of such Title Defects to Sellers and Sellers shall use reasonable efforts to cure such Title Defects prior to Closing. Such notice shall specify such Title Defects in reasonable detail, the Assets directly affected thereby and Purchaser's reasonable requirements for rectification or curing thereof, including the proposed adjustment to the Base Price based, in large part, upon the Allocated Value for each such Asset. In no event shall the adjustment to the Base Price for any particular Asset resulting from a Title Defect exceed the Allocated Value for such Asset. Purchaser's title review shall continue after Closing and Purchaser shall have a continuing right to assert Title Defects until the Final 25 Settlement Date, provided that (i) Title Defects asserted by Purchaser after Closing and agreed to by Sellers shall be handled between the Parties through the post-Closing accounting pursuant to Section 4.4(a) above, (ii) Title Defects asserted by Purchaser prior to the Final Settlement Date, but not agreed to by Sellers, will be subject to arbitration pursuant to Article 11 below, and (iii) the Holdback Escrow will be extended beyond the Final Settlement Date to the extent necessary to accommodate any arbitration initiated by a Party, except that those portions of the Holdback Amount remaining in escrow on the Final Settlement Date which are not at issue in the arbitration shall be released to Sellers. For all purposes, Purchaser shall be deemed to have asserted Title Defects as to any and all Pending Claims that have not been finally settled or otherwise resolved by Sellers prior to Closing. 10.2 Environmental Review Between the execution of this Agreement and the Closing, subject to contractual and fiduciary obligations and limits, Sellers shall make available to Purchaser and its representatives all documents (including contracts, correspondence and files) in its possession relating to the Assets and will allow Purchaser site access reasonably necessary for purposes of permitting Purchaser to evaluate the potential for existence of any Environmental Liabilities. Purchaser shall conduct its environmental review with reasonable diligence. If there are potential Environmental Liabilities, Purchaser shall give written notice of such potential Environmental Liabilities to Sellers. Such notice shall specify the Asset and the potential Environmental Liabilities in reasonable detail. Purchaser shall have the right to continue its environmental review after Closing and until the Final Settlement Date, provided that (i) Environmental Liabilities asserted by Purchaser after Closing and agreed to by Sellers shall be handled between the Parties through the post-Closing accounting pursuant to Section 4.4(a) above, (ii) Environmental Liabilities asserted by Purchaser prior to the Final Settlement Date, but not agreed to by Sellers, will be subject to arbitration pursuant to Article 11 below, and (iii) the Holdback Escrow will be extended beyond the Final Settlement Date to the extent necessary to accommodate any arbitration initiated by a Party, except that those portions of the Holdback Amount remaining in escrow on the Final Settlement Date which are not at issue in the arbitration shall be released to Sellers. 10.3 Valuation Resulting from Review (a) Purchaser shall, acting reasonably, make a valuation of: (i) the amount by which the value of the Assets is reduced by Title Defects identified in the notice contemplated in Section 10.1 that have not been cured to Purchaser's reasonable satisfaction; and (ii) the estimated reduction in the value of the Assets associated with the Environmental Liabilities in Section 10.2, provided that, when determining the value impact of Environmental Liabilities: (A) the costs associated with ordinary course Abandonment and Reclamation Obligations relating to the Wells and the Tangibles shall not be considered except, and only to the extent that, such costs are forecast to be materially higher than a prudent purchaser would have expected them to be prior to conducting its due diligence; and 26 (B) where the particular Environmental Liabilities relate to matters which a prudent operator in the United States upstream oil and gas industry would, if aware of such Environmental Liabilities, not be legally required to commence remediation operations in respect thereof within twelve (12) months of the Closing Date, such Environmental Liabilities shall be deemed to have no adverse impact on the value of the Assets. and shall provide notice of such valuation to Sellers not later than ten (7) days before the Closing Date, or Final Settlement Date, as applicable. If Sellers do not agree with the Purchaser's valuations of the amounts contemplated in paragraphs 10.3(a)(i) and (ii), Sellers may submit the matter to arbitration in accordance with Article 11. The arbitration amount shall be the differential amount between the valuation determined by the Sellers and the valuation determined by the Purchaser. The aggregate amount ultimately agreed by the Parties or determined by arbitration shall be referred to herein as the "Due Diligence Reduction". If the Parties cannot agree on the value of the Due Diligence Reduction prior to Closing but both of them agree (acting reasonably) that it is less than ten percent (10%) of the Base Price, and all other conditions precedent to Closing have been satisfied, then the Purchase Price payable by Purchaser to Sellers at Closing shall reflect the Due Diligence Reduction as calculated by Sellers; and, after Closing, the Holdback Amount held in escrow shall serve to secure Purchaser's potential entitlement to the difference between Purchaser's valuation of the Due Diligence Reduction and Sellers' valuation of the Due Diligence Reduction. The Parties' respective entitlements to such disputed funds shall be resolved by arbitration pursuant to Article 11, and the escrowed funds comprising the Holdback Amount shall be paid from the escrow account as directed by the arbitrator or as otherwise agreed by the Parties. (b) If the Due Diligence Reduction is, in the aggregate, less than one and one-half percent (1.5%) of the Base Price, Purchaser shall be deemed to have waived such Title Defects and accepted such Environmental Liabilities; provided, however, that such 1.5% monetary threshold shall not be applicable to Title Defects that are Pending Claims. (c) If the Due Diligence Reduction is equal to or greater than one and one-half percent (1.5%) of the Base Price but less than ten percent (10%) of the Base Price, the Base Price shall be reduced by the amount of such Due Diligence Reduction. If the Due Diligence Reduction is (i) quantified and sought by Purchaser prior to Closing, and (ii) equal to or greater than ten percent (10%) of the Base Price, the Base Price shall be reduced by the amount of such Due Diligence Reduction, provided that either Sellers or Purchaser will then have the right to terminate this Agreement such that Closing shall not occur. If both Parties nevertheless agree to proceed to Closing, the Base Price shall be 27 reduced by the amount of such Due Diligence Reduction. If the Parties cannot agree on the value of the Due Diligence Reduction and at least one of them values it (acting reasonably) at ten percent (10%) of the Base Price or more and the Parties agree to proceed to Closing, the Purchase Price payable to by Purchaser to Sellers at Closing shall reflect the Due Diligence Reduction as calculated by Sellers; and, after Closing, the Holdback Amount held in escrow shall serve to secure Purchaser's potential entitlement to the difference between Purchaser's valuation of the Due Diligence Reduction and Sellers' valuation of the Due Diligence Reduction. The Parties' respective entitlements to such disputed funds shall be resolved by arbitration pursuant to Article 11, and the escrowed funds comprising the Holdback Amount (and any interest that has accrued thereon) shall be paid as directed by the arbitrator or as otherwise agreed by the Parties. Absent agreement of the Parties to proceed to Closing as a result of only one of them valuing the Due Diligence Reduction at an amount equal to or greater than ten percent (10%) of the Base Price, the other Party may refer the matter of the value of the Due Diligence Reduction to arbitration pursuant to Article 11. (d) For the avoidance of doubt, any Due Diligence Reduction on the Final Settlement Date is expressly limited to the lesser of (i) the Holdback Amount, or (ii) the amount which, when combined with the sum of the Due Diligence Reductions made at Closing, is equal to the Termination Amount. 10.4 Inspection and Testing Purchaser waives and releases all claims against Sellers, and each of their respective directors, officers, employees, agents and other representatives and their successor and assigns for injury to or death of persons, or damage to property, arising in any way from the exercise of rights granted to Purchaser hereby or the activities of Purchaser or its employees, agents or contractors on the Assets. PURCHASER SHALL INDEMNIFY THE SELLERS AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICER, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES AND THEIR SUCCESSORS AND ASSIGNS AGAINST AND HOLD EACH AND ALL OF SAID INDEMNITEES HARMLESS FROM ANY AND ALL LOSSES WHATSOEVER ARISING OUT OF (I) ANY AND ALL STATUTORY OR COMMON LAW LIENS OR OTHER ENCUMBRANCES FOR LABOR OR MATERIALS FURNISHED IN CONNECTION WITH SUCH TESTS, SAMPLINGS, STUDIES OR SURVEYS AS BUYER MAY CONDUCT WITH RESPECT TO THE ASSETS; AND (II) ANY INJURY TO OR DEATH OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON OR ABOUT THE ASSETS AS A RESULT OF SUCH EXERCISE OR ACTIVITIES. ARTICLE 11 ARBITRATION 11.1 Selection Any disagreement, difference or dispute between Sellers and Purchaser under this Agreement shall be resolved by arbitration in accordance with this Article 11. In the event arbitration to resolve a dispute is necessary, Sellers and Purchaser agree to jointly select, an individual who (i) is acknowledged by the Parties as being an expert with respect to the oil and gas, land and legal issues and/or environmental issues, as applicable, (ii) who has at least ten (10) years experience in the oil and gas industry, and (iii) is independent of the Parties and/or their counsel, which individual shall be the sole arbitrator to hear and decide all matters that are subject to arbitration pursuant to this Article 11. If Sellers and Purchaser are unable to mutually agree on such individual, then the Sellers and Purchaser shall each select an individual who qualifies as an arbitrator and who will in turn select an individual to act as arbitrator. 28 11.2 Location. Any arbitration hearing shall be held in Houston, Texas or at such other location as mutually agreed by the Parties. 11.3 Rules. The arbitrator shall settle all disputes in accordance with the Rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding on the Parties, and, if necessary, enforced in any court of competent jurisdiction. Sellers and Purchaser, respectively, shall bear their own legal fees and other costs incurred in presenting their respective cases to the arbitrator. The charges and expenses of the arbitrator shall be shared equally by Sellers and Purchaser. 11.4 Time. The arbitration shall commence within ten (10) days after selection of the arbitrator. In the case of a dispute over a Due Diligence Reduction the arbitrator shall be selected in accordance with Section 11.1 within five (5) days after Closing or the Final Settlement Date, as applicable. Each Party shall have five (5) days to present its position on the issues being arbitrated. In fulfilling his duties, the arbitrator shall be bound by the terms and provisions contained herein but may consider such other matters as in the opinion of the arbitrator are necessary or helpful to make a proper determination. Additionally, the arbitrator may consult with and engage disinterested Party experts to advise the arbitrator, including without limitation, petroleum engineers and consultants. The arbitrator shall issue its final determination of all issues on or before thirty (30) days after the Parties have completed their presentation of the issues. 11.5 Replacement. If any arbitrator selected hereunder should die, resign or otherwise be unable to perform his or her duties hereunder, the procedure set forth in this Article 11 shall be used to select a replacement arbitrator. ARTICLE 12 OPERATORSHIP 12.1 Transfer of Operatorship Purchaser acknowledges that Sellers may not be able to transfer operatorship of some or all of the Assets to Purchaser at or after Closing. Sellers covenants with Purchaser that Sellers shall do such reasonable things as Purchaser may request in order to obtain the appropriate consents and approvals for the assignment and transfer to Purchaser of operatorship of those of the Assets which Sellers currently operates. 29 12.2 Removal of Signs From and after Closing and upon written notice to Purchaser, Sellers may remove any signs which indicate its ownership or operation of the Assets. Purchaser will be responsible to erect or install signs required by governmental agencies to indicate that Purchaser is the operator of the Assets and to notify other working interest owners, gas purchasers, suppliers, contractors, governmental agencies and other Third Parties of Purchaser's interest in the Assets on and after Closing. ARTICLE 13 TERMINATION 13.1 Causes of Termination This Agreement and the transactions contemplated herein may be terminated: (a) At any time by mutual consent of the Parties; (b) By Purchaser and Sellers, if the Closing shall not have occurred by April 30, 2004, despite the good faith reasonable efforts of the Parties, and if the Party desiring to terminate is not in breach of this Agreement; (c) By either Party, if the Due Diligence Reduction quantifiable by Closing is equal to or exceeds ten percent (10%) of the Base Price (the "Termination Amount"); (d) By Buyer if, on the Closing Date, any of the conditions set forth in Section 5.1 shall not have been satisfied or waived; or (e) By Seller if, on the Closing Date, any of the conditions set forth in Section 5.2 shall not have been satisfied or waived. 13.2 Effect of Termination In the event of the termination of this Agreement pursuant to the provisions of this Article 13 or elsewhere in this Agreement, this Agreement shall become void and have no further force and effect and, except for the indemnities provided for in Section 10.4, any breach of this Agreement prior to such termination and any continuing confidentiality requirement, no Party shall have any further right, duty or liability to the other hereunder. Upon termination, Purchaser agrees to use its best efforts to return to Seller or destroy, all materials, documents and copies thereof provided, obtained or discovered in the course of any due diligence investigations. 30 ARTICLE 14 GENERAL 14.1 Further Assurances Each Party will, from time to time and at all times after Closing, without further consideration, do such further acts and deliver all such further assurances, deeds and documents as shall be reasonably required in order to fully perform and carry out the terms of this Agreement. 14.2 No Merger Subject to the limitations set forth herein, the covenants, representations, warranties and indemnities contained in this Agreement shall not merge in any assignments, conveyances, transfers or other documents executed and delivered at or after Closing, notwithstanding any rule of law, equity or statute to the contrary and such rules are hereby waived. 14.3 Entire Agreement The provisions contained in any and all documents and agreements collateral hereto shall at all times be read subject to the provisions of this Agreement and, in the event of conflict, the provisions of this Agreement shall prevail. This Agreement supersedes all other agreements, documents, writings and verbal understanding among the Parties relating to the subject matter hereof. 14.4 Governing Law THIS AGREEMENT, ALL DOCUMENTS DELIVERED PURSUANT HERETO AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICTS OF LAWS. THE VALIDITY OF THE VARIOUS CONVEYANCES AFFECTING TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH THE PARTICULAR ASSETS ARE LOCATED. 14.5 Assignment This Agreement may not be assigned by a Party without the prior written consent of the other Party. This Agreement shall be binding upon and shall enure to the benefit of the Parties and their respective administrators, trustees, receivers, successors and permitted assigns. 14.6 Time of Essence Time shall be of the essence in this Agreement. 31 14.7 Notices The addresses and fax number of each Party for notices shall be as follows: Sellers: Wilshire Enterprises, Inc. 921 Bergen Avenue Jersey City, New Jersey 07306 U.S.A. Fax: (201) 420-6012 Attention: Philip Kupperman with Copies to: White Stone Energy, LLC 3838 N. Sam Houston Pkwy E. Suite 395 Houston, Texas 77032 U.S.A. Attention: Burt Williams Fax: (281) 219-4122 and: Porter & Hedges, L.L.P. 700 Louisiana, Suite 3500 Houston, Texas 77002-2764 U.S.A. Attention: Douglas C. Atnipp Fax: (713) 226-0264 Purchaser: Crow Creek Energy L.L.C. 2100 South Utica, Suite 200 Tulsa, Oklahoma 74114 Attn: Maurice Storm [Fax: (918) 745-1701] Any notice, communication or statement (a "notice") required, permitted or contemplated hereunder shall be in writing and shall be delivered as follows: (a) by delivery to a Party between 8:00 a.m. and 5:00 p.m. on a Business Day at the address of such Party for notices, in which case the notice shall be deemed to have been received by that Party when it is delivered; or (b) by fax to a Party to the fax number of such Party for notices, in which case, if the notice was faxed prior to 5:00 p.m. on a Business Day the notice shall be deemed to have been received by that Party when it was faxed and if it was faxed on a day which is not a Business Day or is faxed after 5:00 p.m. on a Business Day, it shall be deemed to have been received on the next following Business Day. 32 A Party may from time to time change its address for service or its fax number for service by giving written notice of such change to the other Party. 14.8 Invalidity of Provisions In case any of the provisions of this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining, provisions contained herein shall not in any way be affected or impaired thereby. 14.9 Waiver No waiver by any Party of any breach (whether actual or anticipated) of any of the terms, conditions, representations or warranties contained herein shall take effect or be binding upon that Party unless the waiver is expressed in writing under the authority of that Party. Any waiver so given shall extend only to the particular breach so waived and shall not limit or affect any rights with respect to any other or future breach. 14.10 Remedies Generally No failure on the part of any Party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy in law or in equity or by statute or otherwise conferred. 14.11 Amendment This Agreement shall not be varied in its terms or amended by oral agreement or by representations or otherwise other than by an instrument in writing dated subsequent to the date hereof, executed by a duly authorized representative of each Party. 14.12 Public Announcements Until Closing has occurred, no Party shall release any information concerning this Agreement and the transactions herein provided for without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Nothing contained herein shall prevent a Party at any time from furnishing information (i) to any governmental agency or regulatory authority including applicable recognized stock exchanges and securities commissions, or to the public if required by applicable law, provided that the Parties shall advise each other in advance of any public statement which they propose to make, or (ii) in connection with obtaining consents or complying with Preferential Purchase Rights. 14.13 Counterpart Execution This Agreement may be executed in counterpart and all executed counterparts together shall constitute one agreement. 33 14.14 Express Negligence Rule ALL INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS CONTAINED IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED PARTY (EXCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT). PURCHASER AND EACH SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS. 14.15 Waiver of Deceptive Trade Practices Acts PURCHASER WAIVES ITS RIGHTS UNDER DECEPTIVE TRADE PRACTICES ACT SECTION 17.41 et seq., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS, AND UNDER SIMILAR STATUTES ADOPTED IN OTHER STATES, TO THE EXTENT THEY HAVE APPLICABILITY TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. AFTER CONSULTATION WITH AN ATTORNEY OF ITS SELECTION, BUYER CONSENTS TO THIS WAIVER. 14.16 Appointment of WEI as Nominee SFO, RRC and BV each hereby appoints WEI as its nominee and authorizes WEI to act on its behalf (i) for purposes of receiving notices due Sellers hereunder, and (ii) for purposes of executing and acting under the Deposit Escrow Agreement and Holdback Escrow Agreement. 34 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written. SELLERS: WILSHIRE ENTERPRISES, INC. By:_________________________________________ Printed Name: ______________________________ Title: ________________ President SAN FRANCISCO OIL COMPANY By:_________________________________________ Printed Name: ______________________________ Title: ________________ President ROCKLAND RESOURCES, CO. By:_________________________________________ Printed Name: ______________________________ Title: ________________ President BRITALTA VENEZOLANO, LTD. By:_________________________________________ Printed Name: ______________________________ Title: ________________ President This is the execution page to a Purchase and Sale Agreement dated March 17, 2004 among Wilshire Enterprises, Inc., San Francisco Oil Company, Rockland Resources, Co. and Britalta Venezolano, Ltd., as Sellers, and Crow Creek Energy L.L.C., as Purchaser. PURCHASER: CROW CREEK ENERGY L.L.C. By:_______________________________________ Printed Name:_____________________________ Title: Manager This is the execution page to a Purchase and Sale Agreement dated March 17, 2004 among Wilshire Enterprises, Inc., San Francisco Oil Company, Rockland Resources, Co., and Britalta Venezolano, Ltd., as Sellers, and Crow Creek Energy L.L.C., as Purchaser. 35 SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- AR Properties CECIL Field - ----------------------------------------------------------------------------------------------------------------------------------- FORD C B 2-31 09N-27W-31 DUNN A Proved Producing XTO ENERGY INCORPORATED FRANKLIN - ----------------------------------------------------------------------------------------------------------------------------------- CA Properties MOUNT POSO Field - ----------------------------------------------------------------------------------------------------------------------------------- LEWIS-USL 1 26S-28EMD-34 VEDDER Proved Producing SAN JOAQUIN FACILITIES MGMT KERN LEWIS-USL 4 26S-28EMD-34 VEDDER Proved Producing SAN JOAQUIN FACILITIES MGMT KERN - ----------------------------------------------------------------------------------------------------------------------------------- RICHFIELD Field - ----------------------------------------------------------------------------------------------------------------------------------- RICHFIELD EAST DOME UNIT Proved Producing GREKA SMV INCORPORATED ORANGE - ----------------------------------------------------------------------------------------------------------------------------------- KS Properties CONNIE SUE Field - ----------------------------------------------------------------------------------------------------------------------------------- OSBORNE 1 32S-06W-32 MISSISSIPPI LIME Proved Producing GLB EXPLORATION, INC. HARPER - ----------------------------------------------------------------------------------------------------------------------------------- OH Properties VARIOUS Field - ----------------------------------------------------------------------------------------------------------------------------------- 1979 LP Proved Producing VARIOUS 1980 LP Proved Producing VARIOUS 1981 LP Proved Producing VARIOUS 1982 LP Proved Producing VARIOUS 1983 LP Proved Producing VARIOUS 1984 LP Proved Producing VARIOUS 1985 LP Proved Producing VARIOUS 1986 LP Proved Producing VARIOUS 1987 LP Proved Producing VARIOUS 1988 LP Proved Producing VARIOUS 1989 LP Proved Producing VARIOUS 1989F LP Proved Producing VARIOUS 1989I LP Proved Producing VARIOUS 1989J LP Proved Producing VARIOUS 1990 LP Proved Producing VARIOUS 1991 LP Proved Producing VARIOUS 1992 LP Proved Producing VARIOUS 1993 LP Proved Producing VARIOUS - ----------------------------------------------------------------------------------------------------------------------------------- OK Properties ALEDO SOUTHEAST Field - ----------------------------------------------------------------------------------------------------------------------------------- CORDES 1-15 15N-18W-15 ATOKA Proved Producing DOMINION OKLAHOMA TEXAS E&P CUSTER EDGAR 15N-18W-13 MARCHAND Proved Producing DOMINION OKLAHOMA TEXAS E&P CUSTER WALKER 1-10 15N-18W-10 CHEROKEE Proved Producing DUNCAN OIL PROPERTIES INC. CUSTER JUDITH 15N-18W-02 ATOKA & CHEROKEE Proved Shut-In HARDING & SHELTON INCORPORATED CUSTER SMITH 1-A 15N-18W-14 MORROW Proved Shut-In GEYER BROS EQUIPMENT COMPANY CUSTER - ----------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- FORD C B 2-31 0.0096950 0.0084830 0.0096950 0.0084830 3047105850000 10.017 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- LEWIS-USL 1 0.0000000 0.0277778 0.0000000 0.0277778 4029122930000 6.314 LEWIS-USL 4 0.0000000 0.0277778 0.0000000 0.0277778 4029558130000 9.167 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- RICHFIELD EAST DOME UNIT 0.0020591 0.0016682 0.0020591 0.0016682 11.141 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- OSBORNE 1 0.2000000 0.1600000 0.2000000 0.1600000 15077214240000 0.000 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- 1979 LP 0.0300000 0.0243750 0.0300000 0.0243750 1.010 1980 LP 0.0400000 0.0325000 0.0400000 0.0325000 4.431 1981 LP 0.1149000 0.0934000 0.1149000 0.0934000 12.276 1982 LP 0.0430000 0.0350000 0.0430000 0.0350000 3.854 1983 LP 0.0286806 0.0233030 0.0286806 0.0233030 3.015 1984 LP 0.0370000 0.0301000 0.0370000 0.0301000 5.054 1985 LP 0.0161000 0.0131000 0.0161000 0.0131000 21.057 1986 LP 0.0185000 0.0150000 0.0185000 0.0150000 5.750 1987 LP 0.0408000 0.0331000 0.0408000 0.0331000 1.614 1988 LP 0.0258000 0.0209000 0.0258000 0.0209000 6.367 1989 LP 0.0182000 0.0148000 0.0182000 0.0148000 13.122 1989F LP 0.0003000 0.0002000 0.0003000 0.0002000 0.000 1989I LP 0.0119000 0.0097000 0.0119000 0.0097000 0.000 1989J LP 0.0007000 0.0006000 0.0007000 0.0006000 0.000 1990 LP 0.0288150 0.0234093 0.0288150 0.0234093 1.439 1991 LP 0.0053000 0.0043000 0.0053000 0.0043000 1.241 1992 LP 0.0075825 0.0061607 0.0075825 0.0061607 0.655 1993 LP 0.0227273 0.0184659 0.0227273 0.0184659 0.039 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- CORDES 1-15 0.0000000 0.0228256 0.0000000 0.0228256 35039219570000 49.842 EDGAR 0.1855469 0.1522066 0.1855469 0.1522066 35039200990000 2.160 WALKER 1-10 0.0000000 0.0001221 0.0000000 0.0001221 35039218880000 0.021 JUDITH 0.0000000 0.0197550 0.0000000 0.0197550 35039212660000 0.000 SMITH 1-A 0.0000000 0.0000000 0.0000000 0.0000000 35039201300000 0.000 - -----------------------------------------------------------------------------------------------------------------
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- ALLEN Field - ----------------------------------------------------------------------------------------------------------------------------------- BOND ALLEN SAND UNIT 05N-08E-14&15 ALLEN Proved Producing WILSHIRE OIL COMPANY OF TEXAS HUGHES BOND BOOCH UPPER SAND UNIT 05N-08E-11,12,14&15 BOOCH & ALLEN Proved Producing WILSHIRE OIL COMPANY OF TEXAS HUGHES - ----------------------------------------------------------------------------------------------------------------------------------- ANTHON NORTHWEST Field - ----------------------------------------------------------------------------------------------------------------------------------- EDGAR 1-11 15N-18W-11 SPRINGER Proved Producing DOMINION OKLAHOMA TEXAS E&P CUSTER WATT SE 4 1 15N-18W-02 SPRINGER Proved Producing DOMINION OKLAHOMA TEXAS E&P CUSTER - ----------------------------------------------------------------------------------------------------------------------------------- APACHE EAST Field - ----------------------------------------------------------------------------------------------------------------------------------- YATES 1-31 05N-10W-31 MORROW Proved Producing KAISER FRANCIS CADDO - ----------------------------------------------------------------------------------------------------------------------------------- BROOKEN Field - ----------------------------------------------------------------------------------------------------------------------------------- HARPER 1 07N-18E-05 HARTSHORNE Proved Producing QUANAH COMPANY PITTSBURG - ----------------------------------------------------------------------------------------------------------------------------------- CARPENTER NORTHEAST Field - ----------------------------------------------------------------------------------------------------------------------------------- SHEPARD 1-15 15N-18W-15 MORROW Proved Producing DOMINION OKLAHOMA TEXAS E&P CUSTER - ----------------------------------------------------------------------------------------------------------------------------------- CEDARS Field - ----------------------------------------------------------------------------------------------------------------------------------- FRAZIER 1 09N-26E-16 SPIRO Proved Producing QUALITY PRODUCTION SERVICE L L LE FLORE HICKMAN 1 SE NW SE 10N-27E-32 SPIRO Proved Producing FAULCONER VERNON E INC. LE FLORE DAVIS 1 09N-26E-16 ATOKA Proved Shut-In QUALITY PRODUCTION SERVICE L L LE FLORE - ----------------------------------------------------------------------------------------------------------------------------------- CRUCE NORTH Field - ----------------------------------------------------------------------------------------------------------------------------------- REEDER L D 01N-06W-14 DEESE Proved Shut-In WESTPORT OIL & GAS COMPANY INC STEPHENS - ----------------------------------------------------------------------------------------------------------------------------------- EDMOND Field - ----------------------------------------------------------------------------------------------------------------------------------- ARROWHEAD 1-A 13N-02W-05 PRUE Proved Producing SHIELDS OPERATING, INC OKLAHOMA - ----------------------------------------------------------------------------------------------------------------------------------- EDMOND WEST Field - ----------------------------------------------------------------------------------------------------------------------------------- CAROL 15N-04W-16 MISSISSIPPIAN Proved Producing CORDILLERA ENERGY PARTNERS LLC LOGAN GWYN 15N-04W-22 MISSISSIPPIAN Proved Producing SAMSON RESOURCES COMPANY LOGAN IMA 15N-04W-09 MISSISSIPPIAN Proved Producing HIMCO OIL & GAS INCORPORATED LOGAN ISABELLE 15N-04W-04 MISSISSIPPIAN Proved Producing CORDILLERA ENERGY PARTNERS LLC LOGAN KRANNING 15N-04W-15 MISSISSIPPIAN Proved Producing WILSHIRE OIL COMPANY OF TEXAS LOGAN LYNN 15N-04W-10 MISSISSIPPIAN Proved Producing CORDILLERA ENERGY PARTNERS LLC LOGAN MAXINE 15N-04W-04 MISSISSIPPIAN Proved Producing MARJO OPERATING COMPANY INC. LOGAN RUTH 15N-04W-22 MISSISSIPPIAN Proved Producing WILSHIRE OIL COMPANY OF TEXAS LOGAN SUE; COOLEY 15N-04W-09 MISSISSIPPIAN Proved Producing CORDILLERA ENERGY PARTNERS LLC LOGAN WANDA 15N-04W-15 PRUE/MISS Proved Producing SAMSON RESOURCES COMPANY LOGAN RUTH (Hogshooter BP) 15N-04W-22 HOGSHOOTER/LAYTON Probable Behind Pipe WILSHIRE OIL COMPANY OF TEXAS LOGAN RUTH Location (Hogshooter BP) 15N-04W-22 HOGSHOOTER/LAYTON Possible Behind Pipe WILSHIRE OIL COMPANY OF TEXAS LOGAN CAROL Location 15N-04W-16 MISSISSIPPIAN Possible Undeveloped CORDILLERA ENERGY PARTNERS LLC LOGAN Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- BOND ALLEN SAND UNIT 1.0000000 0.8203125 1.0000000 0.8203125 7.648 BOND BOOCH UPPER SAND UNIT 1.0000000 0.8296130 1.0000000 0.8296130 35063204060000 137.548 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- EDGAR 1-11 0.2343750 0.1903077 0.2343750 0.1903077 35039200880000 81.305 WATT SE 4 1 0.1658353 0.1441284 0.1658353 0.1441284 35039201620000 24.709 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- YATES 1-31 0.0019557 0.0014669 0.0019557 0.0014669 35015214970000 1.831 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- HARPER 1 0.2187500 0.1914062 0.2187500 0.1914062 35121600860001 2.234 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- SHEPARD 1-15 0.0000000 0.0000000 0.0000000 0.0000000 35039201420000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- FRAZIER 1 0.0032179 0.0028158 0.0032179 0.0028158 35079204000000 0.017 HICKMAN 1 SE NW SE 0.0664063 0.0581052 0.0664063 0.0581052 35079200200000 3.844 DAVIS 1 0.0032179 0.0028158 0.0032179 0.0028158 35079203720000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- REEDER L D 0.2493688 0.1870313 0.2493688 0.1870313 35137238120000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- ARROWHEAD 1-A 0.0500000 0.0395000 0.0500000 0.0395000 35109221150000 7.514 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- CAROL 0.2250000 0.1845703 0.2250000 0.1845703 35083500250000 88.472 GWYN 0.4500000 0.3691406 0.4500000 0.3691406 35083500310000 153.767 IMA 0.1406250 0.1098633 0.1406250 0.1098633 35083300220000 0.000 ISABELLE 0.4500000 0.3691407 0.4500000 0.3691407 35083500100000 110.498 KRANNING 0.7500000 0.6152344 0.7500000 0.6152344 35083353630002 252.366 LYNN 0.2250000 0.1844910 0.2250000 0.1844910 35083500160000 7.421 MAXINE 0.2250000 0.1845703 0.2250000 0.1845703 35083301200000 47.182 RUTH 0.4500000 0.3709863 0.4500000 0.3709863 35083300380000 82.030 SUE; COOLEY 0.0000000 0.0000000 0.0000000 0.0000000 35083500150000 0.000 WANDA 0.4500000 0.3689010 0.4500000 0.3689010 35083500210000 100.590 RUTH (Hogshooter BP) 0.4500000 0.3709863 0.4500000 0.3709863 35083300380000 0.000 RUTH Location (Hogshooter BP) 0.4500000 0.3709863 0.4500000 0.3709863 35083300380000 0.000 CAROL Location 0.2250000 0.1845703 0.2250000 0.1845703 0.000
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- GWYN Location 15N-04W-22 MISSISSIPPIAN Possible Undeveloped SAMSON RESOURCES COMPANY LOGAN ISABELLE Location 15N-04W-04 MISSISSIPPIAN Possible Undeveloped CORDILLERA ENERGY PARTNERS LLC LOGAN KRANNING Location 15N-04W-15 MISSISSIPPIAN Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LOGAN LYNN Location 15N-04W-10 MISSISSIPPIAN Possible Undeveloped CORDILLERA ENERGY PARTNERS LLC LOGAN Maxine Location 15N-04W-04 MISSISSIPPIAN Possible Undeveloped CORDILLERA ENERGY PARTNERS LLC LOGAN RUTH Location 15N-04W-22 MISSISSIPPIAN Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LOGAN - ----------------------------------------------------------------------------------------------------------------------------------- ELMWOOD SOUTH Field - ----------------------------------------------------------------------------------------------------------------------------------- ELMWOOD SOUTH UNIT 01N-23&24ECM-36+ MORROW Proved Producing WILLIFORD ENERGY COMPANY BEAVER - ----------------------------------------------------------------------------------------------------------------------------------- GOLDEN TREND Field - ----------------------------------------------------------------------------------------------------------------------------------- ELLITHORPE 04N-03W-29 BOIS D ARC & CHIMNEY Proved Producing SAMSON RESOURCES COMPANY GARVIN HILDERBRANDT A 1 1A 04N-03W-30 SYCAMORE Proved Producing WARD PETROLEUM CORPORATION GARVIN LEON 04N-03W-29 VIOLA SYCAMORE & HUN Proved Producing CASILLAS PETROLEUM CORPORATION GARVIN SIMPSON 04N-03W-29 HUNTON Proved Producing WESTPORT OIL & GAS COMPANY INC GARVIN WORK A-1 04N-03W-32 BOIS D ARC CHIMNEY YHI Proved Producing ANADARKO PETROLEUM CORPORATION GARVIN WORK B-1 04N-03W-29 BOIS D ARC CHIMNEY YHI Proved Producing WARD PETROLEUM CORPORATION GARVIN - ----------------------------------------------------------------------------------------------------------------------------------- GREENFIELD NORTHWEST Field - ----------------------------------------------------------------------------------------------------------------------------------- PRICE 17-3 15N-11W-17 MORROW Proved Producing BRIGHAM OIL & GAS L P BLAINE PRICE 17-1 15N-11W-17 CUNNINGHAM Proved Shut-In BRIGHAM OIL & GAS L P BLAINE - ----------------------------------------------------------------------------------------------------------------------------------- HARMON EAST Field - ----------------------------------------------------------------------------------------------------------------------------------- HAMILTON 1-27 20N-21W-27 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 1-28 20N-21W-28 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 2-27 20N-21W-27 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 2-28 20N-21W-28 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 3-27 20N-21W-27 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 4-27 20N-21W-27 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 4-28 20N-21W-28 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD HAMILTON 5-28 20N-21W-28 MORROW Proved Producing CRAWLEY PETROLEUM CORPORATION WOODWARD - ----------------------------------------------------------------------------------------------------------------------------------- HASKELL Field - ----------------------------------------------------------------------------------------------------------------------------------- CRAFT 1-33H 08N-21E-33 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL CRAFT 3-33 08N-21E-33 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL CRAFT 4-33 08N-21E-33 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL ROYE 2-31 08N-21E-31 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL - ----------------------------------------------------------------------------------------------------------------------------------- HOLDENVILLE Field - ----------------------------------------------------------------------------------------------------------------------------------- MILLER J 07N-09E-08 BOOCH Proved Producing WILSHIRE OIL COMPANY OF TEXAS HUGHES - ----------------------------------------------------------------------------------------------------------------------------------- KINTA Field - ----------------------------------------------------------------------------------------------------------------------------------- ADAMS 1 08N-19E-36 HARTSHORNE Proved Producing BEAR PRODUCTION INCORPORATED HASKELL BRANHAM 3-4 07N-20E-04 HARTSHORNE Proved Producing REDWINE RESC INCORPORATED HASKELL Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------- GWYN Location 0.4500000 0.3691406 0.4500000 0.3691406 0.000 ISABELLE Location 0.4500000 0.3691407 0.4500000 0.3691407 0.000 KRANNING Location 0.7500000 0.6152344 0.7500000 0.6152344 0.000 LYNN Location 0.2250000 0.1844910 0.2250000 0.1844910 0.000 Maxine Location 0.2250000 0.1845703 0.2250000 0.1845703 0.000 RUTH Location 0.4500000 0.3709863 0.4500000 0.3709863 0.000 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- ELMWOOD SOUTH UNIT 0.1248940 0.0975734 0.1248940 0.0975734 35007236410000 300.625 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- ELLITHORPE 0.2500000 0.1898494 0.1875000 0.1423871 35049232580000 104.677 HILDERBRANDT A 1 1A 0.1417545 0.1063160 0.1417545 0.1063160 35049234860000 31.213 LEON 0.0440703 0.0330528 0.0440703 0.0330528 35049220940000 6.255 SIMPSON 0.2496280 0.1897173 0.2496280 0.1897173 35049220320000 13.358 WORK A-1 0.0000000 0.0003255 0.0000000 0.0003255 35049227250000 0.245 WORK B-1 0.0000000 0.0020448 0.0000000 0.0020448 35049227160000 1.491 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- PRICE 17-3 0.0000000 0.0089533 0.0000000 0.0089533 35011228960000 1.151 PRICE 17-1 0.0000000 0.0089533 0.0000000 0.0089533 35011215520000 0.000 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- HAMILTON 1-27 0.0000000 0.0572916 0.0000000 0.0572916 35153209950000 87.690 HAMILTON 1-28 0.0156250 0.0136719 0.0156250 0.0136719 35153210720000 18.962 HAMILTON 2-27 0.4590436 0.4015744 0.4590436 0.4015744 35153216930000 497.969 HAMILTON 2-28 0.0156250 0.0136730 0.0156250 0.0136730 35153216870000 15.233 HAMILTON 3-27 0.1147609 0.1432291 0.1147609 0.1432291 35153220820000 164.395 HAMILTON 4-27 0.1147609 0.1432292 0.1147609 0.1432292 35153222760000 120.064 HAMILTON 4-28 0.0156250 0.0136719 0.0156250 0.0136719 35153222770000 21.702 HAMILTON 5-28 0.0156250 0.0136719 0.0156250 0.0136719 35153223770000 22.885 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- CRAFT 1-33H 0.0000000 0.0117190 0.0000000 0.0117190 35061216810000 5.526 CRAFT 3-33 0.0000000 0.0117190 0.0000000 0.0117190 35061217160000 0.000 CRAFT 4-33 0.0000000 0.0117188 0.0000000 0.0117188 35061217170000 4.903 ROYE 2-31 0.0000000 0.0103186 0.0000000 0.0103186 35061217130000 0.448 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- MILLER J 1.0000000 0.7500000 1.0000000 0.7500000 0.000 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- ADAMS 1 0.0000000 0.0009766 0.0000000 0.0009766 35061209210000 0.154 BRANHAM 3-4 0.0000000 0.0000000 0.0000000 0.0000000 35061216840000 0.000
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- BRANHAM 5-4 07N-20E-04 HARTSHORNE Proved Producing REDWINE RESC INCORPORATED HASKELL BRANHAM 7-4 07N-20E-04 HARTSHORNE Proved Producing REDWINE RESC INCORPORATED HASKELL BRANHAM 8-4 07N-20E-04 HARTSHORNE Proved Producing REDWINE RESC INCORPORATED HASKELL BRANHAM 9-4 07N-20E-04 HARTSHORNE Proved Producing REDWINE RESC INCORPORATED HASKELL BURGE 3 08N-21E-31 ATOKA Proved Producing STEPHENS PRODUCTION COMPANY HASKELL BURGE SW SW NE 1-U 08N-21E-31 SPIRO Proved Producing EXXON COMPANY U S A HASKELL COBLENTZ 1 07N-19E-27 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER COBLENTZ 2-27 07N-19E-27 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER COBLENTZ 4 07N-19E-27 HARTSHORNE Proved Producing OXLEY PETROLEUM COMPANY LATIMER COBLENTZ 5 07N-19E-27 HARTSHORNE Proved Producing OXLEY PETROLEUM COMPANY LATIMER COBLENTZ 6 07N-19E-27 HARTSHORNE Proved Producing OXLEY PETROLEUM COMPANY LATIMER COLLINS 1 06N-18E-09 RED OAK Proved Producing EXXON COMPANY U S A LATIMER CRAFT 2-33 08N-21E-33 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL DOBY 2 2-A 22-A 07N-20E-03 ATOK-HRSR Proved Producing GALAXY ENERGIES INCORPORATED HASKELL DONNA JO 1 07N-20E-03 SPIRO & CROMWELL Proved Producing SAMSON RESOURCES COMPANY HASKELL DONNA JO 2 07N-19E-23 HARTSHORNE Proved Producing OXLEY PETROLEUM COMPANY HASKELL DONNA JO 4 07N-19E-23 HARTSHORNE Proved Producing OXLEY PETROLEUM COMPANY HASKELL GLENN 1 06N-18E-02 ATOKA Proved Producing AMOCO PRODUCTION COMPANY LATIMER GLENN 2 06N-18E-02 ATOKA Proved Producing EXXON MOBIL CORPORATION LATIMER GLENN 2-5 06N-18E-02 ATOKA Proved Producing NEG OPERATING L L LATIMER GLENN 2-6 06N-18E-02 RED OAK Proved Producing BRG PETROLEUM CORPORATION LATIMER GLENN 2-7 06N-18E-02 MCALESTER Proved Producing BRAVO NATURAL RESOURCES INC. LATIMER GLENN 2-8 06N-18E-02 HARTSHORNE Proved Producing BRAVO NATURAL RESOURCES INC. LATIMER GLENN 2-9 06N-18E-02 HARTSHORNE Proved Producing SUMMIT ENERGY INCORPORATED LATIMER GLENN 3 06N-18E-02 HARTSHORNE Proved Producing OXLEY PETROLEUM COMPANY LATIMER GLENN 4 06N-18E-02 ATOKA Proved Producing AMOCO PRODUCTION COMPANY LATIMER GOVERNMENT 1A SE NW NW 06N-17E-07 RED OAK Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG GOVERNMENT 2 06N-17E-07 HARTSHORNE Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG GOVERNMENT 3A-7U 06N-17E-07 ATOKA Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG GOVERNMENT 4-7 06N-17E-07 HARTSHORNE Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG HIGHTOWER 1T 08N-21E-33 CROMWELL Proved Producing TEXACO EXPL & PROD HASKELL HIGHTOWER 2 08N-21E-33 ATOK-CRML Proved Producing OXLEY PETROLEUM COMPANY HASKELL HIGHTOWER 3 08N-21E-33 ATOKA BASAL Proved Producing BRAVO NATURAL RESOURCES INC HASKELL HIGHTOWER A-1 08N-21E-33 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL JAKE 1-20 08N-19E-20 HARTSHORNE Proved Producing WILLIAMS PRODUCTION MID-CON HASKELL JAKE 2-20 08N-19E-20 HARTSHORNE Proved Producing WILLIAMS PRODUCTION MID-CON HASKELL JAKE 3-20 08N-19E-20 HARTSHORNE Proved Producing WILLIAMS PRODUCTION MID-CON HASKELL JAKE 4-20 08N-19E-20 HARTSHORNE Proved Producing WILLIAMS PRODUCTION MID-CON HASKELL JOHNSON 1C SW NW SE 08N-19E-21 SPIRO Proved Producing WILLIFORD PETROLEUM LLC HASKELL JOHNSON 2C 08N-19E-21 SPIRO Proved Producing WILLIFORD PETROLEUM LLC HASKELL JONES-MILLER NE NW SE 1 08N-19E-20 SPIRO Proved Producing SAMSON RESOURCES COMPANY HASKELL JUDYANN 1-28 08N-19E-28 ATOKA Proved Producing SAMSON RESOURCES COMPANY HASKELL MCCRABB WILSON 1 06N-18E-09 RED OAK Proved Producing EXXON COMPANY U S A LATIMER MCCRABB WILSON 2 06N-18E-09 ATOKA Proved Producing EXXON COMPANY U S A LATIMER Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - --------------------------------------------------------------------------------------------------------------------- BRANHAM 5-4 0.0000000 0.0000000 0.0000000 0.0000000 35061216000000 0.000 BRANHAM 7-4 0.0000000 0.0000000 0.0000000 0.0000000 35061215980000 0.000 BRANHAM 8-4 0.0000000 0.0000000 0.0000000 0.0000000 35061216210000 0.000 BRANHAM 9-4 0.0000000 0.0000000 0.0000000 0.0000000 35061215970000 0.000 BURGE 3 0.0000000 0.0103186 0.0000000 0.0103186 35061212060000 0.547 BURGE SW SW NE 1-U 0.0928671 0.0799685 0.0928671 0.0799685 35061300350000 25.840 COBLENTZ 1 0.0078125 0.0068360 0.0078125 0.0068360 35077600790000 1.653 COBLENTZ 2-27 0.0090590 0.0079260 0.0090590 0.0079260 35077203770000 4.192 COBLENTZ 4 0.0000000 0.0007960 0.0000000 0.0007960 35077204280000 0.077 COBLENTZ 5 0.0082941 0.0072576 0.0082941 0.0072576 35077205150000 0.053 COBLENTZ 6 0.0000000 0.0000000 0.0000000 0.0000000 35077212540000 0.000 COLLINS 1 0.0175781 0.0153808 0.0175781 0.0153808 35077204030000 13.128 CRAFT 2-33 0.0000000 0.0117190 0.0000000 0.0117190 35061216260000 3.739 DOBY 2 2-A 22-A 0.0000000 0.0000000 0.0000000 0.0000000 35061212150000 0.000 DONNA JO 1 0.0019531 0.0017090 0.0019531 0.0017090 35061206390000 1.930 DONNA JO 2 0.0019801 0.0017327 0.0019531 0.0017091 35061208170000 0.656 DONNA JO 4 0.0039240 0.0034258 0.0039240 0.0034258 35061215940000 0.408 GLENN 1 0.0097895 0.0085658 0.0097895 0.0085658 35077300250000 7.847 GLENN 2 0.0098256 0.0085974 0.0098256 0.0085974 35077204140000 10.926 GLENN 2-5 0.0100829 0.0085580 0.0100829 0.0085580 35077209320000 3.865 GLENN 2-6 0.0099661 0.0087200 0.0099661 0.0087200 35077209970000 1.052 GLENN 2-7 0.0194478 0.0170168 0.0194478 0.0170168 35077210400000 0.794 GLENN 2-8 0.0194478 0.0170170 0.0194478 0.0170170 35077210650000 0.824 GLENN 2-9 0.0194478 0.0170170 0.0194478 0.0170170 35077210930000 3.110 GLENN 3 0.0194480 0.0170169 0.0194480 0.0170169 35077204410000 1.370 GLENN 4 0.0097895 0.0085658 0.0097895 0.0085658 35077207490000 28.953 GOVERNMENT 1A SE NW NW 0.0079780 0.0069810 0.0079780 0.0069810 35121201540000 2.505 GOVERNMENT 2 0.0092545 0.0080330 0.0092545 0.0080330 35121205650000 2.695 GOVERNMENT 3A-7U 0.0079780 0.0069810 0.0079780 0.0069810 35121214240000 1.063 GOVERNMENT 4-7 0.0092545 0.0080331 0.0092545 0.0080331 35121215960000 0.136 HIGHTOWER 1T 0.0937500 0.0820312 0.0937500 0.0820312 35061600790000 5.994 HIGHTOWER 2 0.0937500 0.0820312 0.0937500 0.0820312 35061207730000 10.538 HIGHTOWER 3 0.0937500 0.0820312 0.0937500 0.0820312 35061211280000 2.410 HIGHTOWER A-1 0.0000000 0.0000000 0.0000000 0.0000000 35061213390000 0.000 JAKE 1-20 0.0018312 0.0016022 0.0018312 0.0016022 35061215220000 0.212 JAKE 2-20 0.0018312 0.0016022 0.0018312 0.0016022 35061215260000 0.159 JAKE 3-20 0.0018312 0.0016022 0.0018312 0.0016022 35061215250000 0.462 JAKE 4-20 0.0018312 0.0016022 0.0018312 0.0016022 35061215210000 0.490 JOHNSON 1C SW NW SE 0.0139215 0.0121813 0.0139215 0.0121813 35061600510000 0.418 JOHNSON 2C 0.0198330 0.0173538 0.0198330 0.0173538 35061208640000 0.204 JONES-MILLER NE NW SE 1 0.0018312 0.0016023 0.0018312 0.0016023 35061600500000 0.464 JUDYANN 1-28 0.0024414 0.0021680 0.0024414 0.0021680 35061208480000 0.168 MCCRABB WILSON 1 0.0175781 0.0153808 0.0175781 0.0153808 35077200300000 13.492 MCCRABB WILSON 2 0.0205413 0.0179736 0.0205413 0.0179736 35077206250000 11.231
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ---------------------------------------------------------------------------------------------------------------------------------- MCCRABB WILSON 3 06N-18E-09 RED OAK Proved Producing CHESAPEAKE OPERATING INC. LATIMER MCMONIGLE 1 08N-21E-22 SPIRO & CROMWELL Proved Producing SAMSON RESOURCES COMPANY HASKELL MIDALEY 5-4 07N-20E-04 ATOKA Proved Producing BRAVO NATURAL RESOURCES INC. HASKELL MIDGLEY 1 07N-20E-04 SPIRO Proved Producing OXLEY PETROLEUM COMPANY HASKELL MIDGLEY 4 07N-20E-04 ATOKA Proved Producing OXLEY PETROLEUM COMPANY HASKELL RABON HEIRS 2 08N-19E-32 SPIRO Proved Producing AMOCO PRODUCTION COMPANY HASKELL ROYE 1-30 08N-21E-30 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL ROYE 1-31 08N-21E-31 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL ROYE CLAUDE 2 08N-21E-30 SPIRO Proved Producing EXXON COMPANY U S A HASKELL SHELTON 1-21H 08N-19E-21 HARTSHORNE Proved Producing EL PASO PRODUCTION COMPANY HASKELL SHELTON 1-A 07N-19E-21 CROMWELL Proved Producing QUESTAR EXPL. & PROD. HASKELL SHELTON 2 07N-19E-21 ATOKA Proved Producing OXLEY PETROLEUM COMPANY HASKELL SHELTON R E 1 07N-19E-21 ATOKA Proved Producing QUESTAR EXPL. & PROD. HASKELL SLOAN 1 07N-21E-06 SPIRO Proved Producing QUESTAR EXPL. & PROD. HASKELL SLOAN UNIT 2 07N-21E-06 HARTSHORNE Proved Producing H S RESOURCES INCORPORATED HASKELL SMITH-CARR SE SW NE 1 08N-19E-16 SPIRO Proved Producing XTO ENERGY INCORPORATED HASKELL STONE 1-13 07N-19E-13 ATOKA Proved Producing MUSTANG FUEL CORPORATION HASKELL STONE 1-13 07N-19E-13 ATOKA Proved Producing MUSTANG FUEL CORPORATION HASKELL STROUD 1 09N-24E-24 SPIRO Proved Producing STEPHENS PRODUCTION COMPANY LE FLORE TERRELL 1 08N-19E-36 SPIRO Proved Producing EXXON COMPANY U S A HASKELL TERRELL 2 08N-19E-36 ATOKA Proved Producing EXXON COMPANY U S A HASKELL TERRELL 4 08N-19E-36 SPIRO Proved Producing EXXON COMPANY U S A HASKELL WIMBERLY 1 08N-19E-28 SPIRO Proved Producing EXXON MOBIL CORPORATION HASKELL ABBATH NW NE SW 1 08N-21E-22 SPIRO Proved Shut-In QUALITY PRODUCTION SERVICE L L HASKELL COBLENTZ 2-27 07N-19E-27 CROMWELL Proved Shut-In AMOCO PRODUCTION COMPANY LATIMER DOBY 1 WM NW SE NW 07N-20E-03 SPIRO Proved Shut-In FAULCONER VERNON E INC. HASKELL SHAW 1-36 06N-19E-36 ATOKA Proved Shut-In CHESAPEAKE OPERATING INC. LATIMER SHELTON 1 07N-19E-21 SPIRO Proved Shut-In QUESTAR EXPL. & PROD. HASKELL SHELTON 1 SE NW SE 07N-19E-21 SPIRO & CROMWELL Proved Shut-In QUESTAR EXPL. & PROD. HASKELL SHELTON R E 1 07N-19E-21 CROMWELL Proved Shut-In ORYX ENERGY COMPANY HASKELL SLOAN UNIT 2 07N-21E-06 SPIRO Proved Shut-In H S RESOURCES INCORPORATED HASKELL SNOW C 1 07N-19E-13 SPIRO Proved Shut-In QUINTON RENTAL & REPAIR HASKELL TERRELL 1 W J SW SE 08N-19E-36 CROMWELL Proved Shut-In EXXON COMPANY U S A HASKELL - ---------------------------------------------------------------------------------------------------------------------------------- MILDER Field - ---------------------------------------------------------------------------------------------------------------------------------- WILHITE 1-35 23N-26W-35 MORROW Proved Producing ZINKE & TRUMBO INCORPORATED ELLIS - ---------------------------------------------------------------------------------------------------------------------------------- MOCANE-LAVERNE Field - ---------------------------------------------------------------------------------------------------------------------------------- LEHMAN 01N-24ECM-31 MORROW UPPER Proved Producing WILLIFORD ENERGY COMPANY BEAVER - ---------------------------------------------------------------------------------------------------------------------------------- MOORE WEST Field - ---------------------------------------------------------------------------------------------------------------------------------- STOTTS 10N-03W-30 WILCOX & HUNTON Proved Producing WILSHIRE OIL COMPANY OF TEXAS CLEVELAND PEGGY 10N-03W-30 OIL CREEK Proved Shut-In DEVON ENERGY CORPORATION CLEVELAND - ---------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - --------------------------------------------------------------------------------------------------------------------- MCCRABB WILSON 3 0.0240815 0.0209890 0.0240815 0.0209890 35077208180000 16.510 MCMONIGLE 1 0.0792955 0.0693836 0.0792955 0.0693836 35061207640000 30.511 MIDALEY 5-4 0.0000000 0.0000000 0.0000000 0.0000000 35061213550000 0.000 MIDGLEY 1 0.0496584 0.0386369 0.0496584 0.0386369 35061600120000 0.000 MIDGLEY 4 0.0535340 0.0416312 0.0535340 0.0416312 35061211570000 1.570 RABON HEIRS 2 0.0000000 0.0019191 0.0000000 0.0019191 35061203390000 0.494 ROYE 1-30 0.0321830 0.0277131 0.0321830 0.0277131 35061215520000 0.696 ROYE 1-31 0.0000000 0.0000000 0.0000000 0.0000000 35061216180000 0.000 ROYE CLAUDE 2 0.0321830 0.0277130 0.0321830 0.0277130 35061207750000 10.412 SHELTON 1-21H 0.0000000 0.0000000 0.0000000 0.0000000 35061217050000 0.000 SHELTON 1-A 0.0000000 0.0027161 0.0000000 0.0027161 35061210400000 1.169 SHELTON 2 0.0000000 0.0027161 0.0000000 0.0027161 35061207970000 1.272 SHELTON R E 1 0.0000000 0.0026855 0.0000000 0.0026855 35061300820000 0.000 SLOAN 1 0.0742003 0.0649250 0.0742003 0.0649250 35061300290000 30.610 SLOAN UNIT 2 0.1712158 0.1498140 0.1712158 0.1498140 35061207540000 47.436 SMITH-CARR SE SW NE 1 0.0107421 0.0093993 0.0107421 0.0093993 35061600470000 0.869 STONE 1-13 0.0000000 0.0009312 0.0000000 0.0009312 35061216620000 0.823 STONE 1-13 0.0000000 0.0000000 0.0000000 0.0000000 35061216620000 0.000 STROUD 1 0.0733875 0.0642104 0.0733875 0.0642104 35079201010000 1.613 TERRELL 1 0.0097025 0.0084733 0.0097025 0.0084733 35061600620000 0.537 TERRELL 2 0.0122863 0.0107505 0.0122863 0.0107505 35061204450000 0.380 TERRELL 4 0.0161119 0.0140979 0.0161119 0.0140979 35061208890000 1.473 WIMBERLY 1 0.0024415 0.0021363 0.0024415 0.0021363 35061000760000 0.136 ABBATH NW NE SW 1 0.0087891 0.0076904 0.0087891 0.0076904 35061301780000 0.000 COBLENTZ 2-27 0.0090590 0.0079260 0.0090590 0.0079260 35077203770000 0.000 DOBY 1 WM NW SE NW 0.0309943 0.0271200 0.0309943 0.0271200 35061600130000 0.000 SHAW 1-36 0.0000000 0.0216070 0.0000000 0.0216070 35077203010000 0.000 SHELTON 1 0.0000000 0.0026855 0.0000000 0.0026855 35061300820000 0.000 SHELTON 1 SE NW SE 0.0000000 0.0027161 0.0000000 0.0027161 35061300820000 0.000 SHELTON R E 1 0.0000000 0.0026855 0.0000000 0.0026855 35061300820000 0.000 SLOAN UNIT 2 0.1712158 0.1498140 0.1712158 0.1498140 35061207540000 0.000 SNOW C 1 0.0554066 0.0450179 0.0554066 0.0450179 35061301180000 0.000 TERRELL 1 W J SW SE 0.0097025 0.0084733 0.0097025 0.0084733 35061600620000 0.000 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- WILHITE 1-35 0.2500000 0.1927344 0.2500000 0.1927344 35045212250000 64.550 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- LEHMAN 0.1248940 0.0994468 0.1248940 0.0994468 35007235300000 40.567 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- STOTTS 1.0000000 0.8792970 1.0000000 0.8792970 35027354810000 462.305 PEGGY 0.0000000 0.0148450 0.0000000 0.0148450 35027202970000 0.000 - ----------------------------------------------------------------------------------------------------------------------
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- MUSTANG NORTH Field - ----------------------------------------------------------------------------------------------------------------------------------- BREASHEARS 10N-05W-02 HUNTON Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN DICKSON 1-11 10N-05W-11 SKINNER Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN JENKINS 2 10N-05W-11 PRUE Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 14-7 10N-05W-14 HUNTON Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 14-8 10N-05W-14 HUNTON Proved Producing DOMINION OKLAHOMA TEXAS E&P CANADIAN ROBBERSON 14-9 10N-05W-14 MAYES Proved Producing DOMINION OKLAHOMA TEXAS E&P CANADIAN ROBBERSON 6-11 10N-05W-11 PRUE HUNTON & SKINNER Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN SMITH 1-3 10N-05W-03 RED FORK & HUNTON Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN WEST SUZANNE #1-13 10N-05W-13 SKINNER & HUNTON Proved Producing WILSHIRE OIL COMPANY OF TEXAS CANADIAN BARBOUR 11N-05W-26 SKINNER Proved Shut-In RAVEN RESOURCES L L CANADIAN ROBBERSON 1- 3 10N-05W-03 HUNTON Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 2- 3 10N-05W-03 HUNTON Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 2-11 10N-05W-11 HUNTON Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 5-11 10N-05W-11 HUNTON Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 14-2 10N-05W-14 HUNTON Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 14-4 10N-05W-14 HUNTON Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 3-11 (Skinner BP) 10N-05W-11 SKINNER Probable Behind Pipe WILSHIRE OIL COMPANY OF TEXAS CANADIAN ROBBERSON 3-11 (BP Add) 10N-05W-11 SKINNER Possible Behind Pipe WILSHIRE OIL COMPANY OF TEXAS CANADIAN - ----------------------------------------------------------------------------------------------------------------------------------- NE ANTLERS Field - ----------------------------------------------------------------------------------------------------------------------------------- MORRIS 1-20 03S-17E-20 STANLEY Proved Shut-In ALPINE, INC. PUSHMATAHA UNDEVELOPED LOCATION 1 03S-17E-17 STANLEY Probable Undeveloped ALPINE, INC. PUSHMATAHA UNDEVELOPED LOCATION 2 03S-17E-16 STANLEY Probable Undeveloped ALPINE, INC. PUSHMATAHA - ----------------------------------------------------------------------------------------------------------------------------------- NOBLE NORTHWEST Field - ----------------------------------------------------------------------------------------------------------------------------------- FOSTER PAUL 08N-02W-04 VIOLA LIME Proved Producing WILSHIRE OIL COMPANY OF TEXAS CLEVELAND FOSTER PAUL (Hunton/Viola BP) 08N-02W-04 Hunton/Viola Probable Behind Pipe WILSHIRE OIL COMPANY OF TEXAS CLEVELAND FOSTER PAUL (BP ADD'L) 08N-02W-04 Hunton/Viola Possible Behind Pipe WILSHIRE OIL COMPANY OF TEXAS CLEVELAND - ----------------------------------------------------------------------------------------------------------------------------------- NOBSCOT NORTHWEST Field - ----------------------------------------------------------------------------------------------------------------------------------- MINTON 1 16N-15W-02 CHESTER Proved Producing KAISER FRANCIS DEWEY - ----------------------------------------------------------------------------------------------------------------------------------- NORMAN Field - ----------------------------------------------------------------------------------------------------------------------------------- POTTS 2-27 08N-02W-07 Proved Producing OKLAND OIL COMPANY CLEVELAND - ----------------------------------------------------------------------------------------------------------------------------------- PAWNEE SOUTH Field - ----------------------------------------------------------------------------------------------------------------------------------- FRED 21N-05E-20 RED FORK Proved Producing PERKINS ENERGY COMPANY PAWNEE - ----------------------------------------------------------------------------------------------------------------------------------- PAYNE Field - ----------------------------------------------------------------------------------------------------------------------------------- CLIMAX 05N-03W-18 DEESE Proved Producing SPARTAN RESOURCES MC CLAIN - ----------------------------------------------------------------------------------------------------------------------------------- PINE HOLLOW SOUTH Field - ----------------------------------------------------------------------------------------------------------------------------------- PATRICK 1 06N-14E-30 HARTSHORNE Proved Producing XAE CORPORATION PITTSBURG - ----------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- BREASHEARS 1.0000000 0.8750000 1.0000000 0.8750000 35017202490000 142.703 DICKSON 1-11 1.0000000 0.8125000 1.0000000 0.8125000 35017202780001 5.578 JENKINS 2 1.0000000 0.8750000 1.0000000 0.8750000 35017202400000 302.329 ROBBERSON 14-7 0.3618780 0.2836310 0.3618780 0.2836310 35017204900000 210.627 ROBBERSON 14-8 0.0000000 0.0054521 0.0000000 0.0054521 35017228440000 8.435 ROBBERSON 14-9 0.0000000 0.0054521 0.0000000 0.0054521 35017236310000 5.640 ROBBERSON 6-11 0.2000000 0.1625000 0.2000000 0.1625000 35017231370001 0.000 SMITH 1-3 1.0000000 0.8750000 1.0000000 0.8750000 35017202240002 250.215 WEST SUZANNE #1-13 0.7500000 0.6093750 0.7500000 0.6093750 35017203720001 84.204 BARBOUR 0.0000000 0.0094604 0.0000000 0.0094604 35017230170000 0.000 ROBBERSON 1- 3 0.7500000 0.6562500 0.7500000 0.6562500 35017202170000 0.000 ROBBERSON 2- 3 1.0000000 0.8750000 1.0000000 0.8750000 35017202520000 0.000 ROBBERSON 2-11 1.0000000 0.7500000 1.0000000 0.7500000 35017202620000 0.000 ROBBERSON 5-11 0.2000000 0.1625000 0.2000000 0.1625000 35017203650000 0.000 ROBBERSON 14-2 0.5659282 0.4650301 0.5659282 0.4650301 35017203360000 0.000 ROBBERSON 14-4 0.5613915 0.4613023 0.5613915 0.4613023 35017203700000 0.000 ROBBERSON 3-11 (Skinner BP) 0.2000000 0.1625000 0.2000000 0.1625000 35017204900000 0.000 ROBBERSON 3-11 (BP Add) 0.2000000 0.1625000 0.2000000 0.1625000 35017204900000 0.000 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- MORRIS 1-20 0.0250000 0.0195000 0.0200000 0.0156000 0.000 UNDEVELOPED LOCATION 1 0.0200000 0.0156000 0.0200000 0.0156000 0.000 UNDEVELOPED LOCATION 2 0.0200000 0.0156000 0.0200000 0.0156000 0.000 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- FOSTER PAUL 0.5645075 0.4831616 0.5645075 0.4831616 35027212740000 721.309 FOSTER PAUL (Hunton/Viola BP) 0.5645075 0.4831616 0.5645075 0.4831616 35027212740000 120.670 FOSTER PAUL (BP ADD'L) 0.5645075 0.4831616 0.5645075 0.4831616 35027212740000 120.670 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- MINTON 1 0.0642364 0.0521920 0.0642364 0.0521920 35043220640000 8.842 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- POTTS 2-27 0.1500000 0.1150227 0.1125000 0.0862670 250.442 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- FRED 0.2500000 0.2187500 0.2500000 0.2187500 35117208370000 6.219 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- CLIMAX 0.0000000 0.0150000 0.0000000 0.0150000 35087500920000 8.421 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- PATRICK 1 0.0000000 0.0043365 0.0000000 0.0043365 35121600460000 3.039 - --------------------------------------------------------------------------------------------------------------------
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ---------------------------------------------------------------------------------------------------------------------------------- POLO Field - ---------------------------------------------------------------------------------------------------------------------------------- POLO NORTHEAST SKINNER UNIT 22N-02W-17 SKINNER Proved Producing J O C OPERATING INCORPORATED NOBLE - ---------------------------------------------------------------------------------------------------------------------------------- PUTNAM Field - ---------------------------------------------------------------------------------------------------------------------------------- MERCER 1 18N-17W-10 OSWEGO Proved Producing UNIT PETROLEUM CORPORATION DEWEY MYERS RUTH NE 4 1 18N-17W-10 MORROW Proved Producing WILSHIRE OIL COMPANY OF TEXAS DEWEY PORTER 32-1 19N-16W-32 CSTR-MRRW Proved Shut-In QUESTAR EXPL. & PROD. DEWEY - ---------------------------------------------------------------------------------------------------------------------------------- REAMS NORTHWEST Field - ---------------------------------------------------------------------------------------------------------------------------------- BENJAMIN 1 07N-14E-28 CROMWELL Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG CROWDER 1 07N-15E-18 CROMWELL Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG HAMILTON 1-13 07N-14E-13 CROMWELL Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG HAMILTON 2-13 07N-14E-13 CROMWELL Proved Producing BROWER OIL & GAS COMPANY INC. PITTSBURG HAMILTON 3-13 07N-14E-13 CROMWELL Proved Producing XTO ENERGY INCORPORATED PITTSBURG MCBROOM 1 07N-14E-24 CROMWELL Proved Producing CHAPARRAL ENERGY INCORPORATED PITTSBURG MCBROOM 2-24 07N-14E-24 CROMWELL Proved Producing QUESTAR EXPL. & PROD. PITTSBURG MURRIN 1 07N-14E-23 CROMWELL Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG MURRIN B&W #1-23 07N-14E-23 CROMWELL Proved Producing CHAPARRAL ENERGY INCORPORATED PITTSBURG SANDERS 1-21 07N-14E-21 CROMWELL Proved Producing TUCKER RON & COMPANY PITTSBURG SANDERS 1-22 07N-14E-22 CROMWELL Proved Producing CHAPARRAL ENERGY INCORPORATED PITTSBURG SANDERS 2-22 07N-14E-22 CROMWELL Proved Producing CHAPARRAL ENERGY INCORPORATED PITTSBURG WARD B&W 1-28 07N-14E-28 CROMWELL Proved Producing CHAPARRAL ENERGY INCORPORATED PITTSBURG - ---------------------------------------------------------------------------------------------------------------------------------- REAMS SOUTHEAST Field - ---------------------------------------------------------------------------------------------------------------------------------- BERRYMAN 1 06N-15E-02 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG HAZELWOOD 1 06N-15E-02 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG HELMS 1 06N-16E-06 BOOCH Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG HENSON 1-10 06N-15E-10 BARTLESVILLE Proved Producing WYTEX PRODUCTION CORPORATION PITTSBURG LALMAN 1 06N-16E-06 HARTSHORNE Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG LALMAN 1-2 06N-15E-02 CRML-SPRO Proved Producing EBERLY & MEADE INCORPORATED PITTSBURG LALMAN 2 06N-16E-06 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG LALMAN 3 06N-16E-06 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG LALMAN 4 06N-15E-01 HARTSHORNE Proved Producing SPARTAN RESOURCES PITTSBURG LALMAN 5 06N-16E-07 HARTSHORNE Proved Producing QUENCH OIL & GAS INCORPORATED PITTSBURG LALMAN 5 06N-15E-01 HARTSHORNE Proved Producing SPARTAN RESOURCES PITTSBURG LALMAN 7 06N-15E-01 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG OLLER 1 06N-15E-11 HARTSHORNE Proved Producing SPARTAN RESOURCES PITTSBURG P S C 1 07N-16E-31 HARTSHORNE Proved Producing QUENCH OIL & GAS INCORPORATED PITTSBURG SCHUDEL 1 06N-15E-01 HARTSHORNE Proved Producing SPARTAN RESOURCES PITTSBURG SILVA 1 06N-15E-11 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG SILVA 3 06N-15E-12 HARTSHORNE Proved Producing QUENCH OIL & GAS INCORPORATED PITTSBURG WHITEACRE 1 06N-15E-12 HARTSHORNE Proved Producing WILSHIRE OIL COMPANY OF TEXAS PITTSBURG LALMAN 1 06N-16E-06 BOOCH Proved Shut-In EBERLY & MEADE INCORPORATED PITTSBURG LALMAN 6 06N-15E-01 HARTSHORNE Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS PITTSBURG - ---------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- POLO NORTHEAST SKINNER UNIT 0.1094270 0.0891876 0.1094270 0.0891876 35103226610001 0.967 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- MERCER 1 0.2460940 0.2002110 0.2460940 0.2002110 35043224930000 86.340 MYERS RUTH NE 4 1 0.9843750 0.7985012 0.9843750 0.7985012 35043207260000 0.000 PORTER 32-1 0.0625000 0.0507813 0.0625000 0.0507813 35043210170000 0.000 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- BENJAMIN 1 0.8081000 0.7005721 0.8081000 0.7005721 35121203220000 20.644 CROWDER 1 0.2347766 0.1985455 0.2347766 0.1985455 35121200870000 33.346 HAMILTON 1-13 0.2584688 0.2261602 0.2584688 0.2261602 35121200910000 71.720 HAMILTON 2-13 0.0000000 0.0000000 0.0000000 0.0000000 35121213260000 2.514 HAMILTON 3-13 0.0000000 0.0323086 0.0000000 0.0323086 35121222660000 8.633 MCBROOM 1 0.4635780 0.3741672 0.4635780 0.3741672 35121201920000 4.938 MCBROOM 2-24 0.0000000 0.0264837 0.0000000 0.0264837 35121216230000 13.099 MURRIN 1 0.5533000 0.4601524 0.5533000 0.4601524 35121201610000 32.335 MURRIN B&W #1-23 0.0000000 0.0460183 0.0000000 0.0460183 35121217690000 19.796 SANDERS 1-21 0.0000000 0.0688187 0.0000000 0.0688187 35121203990000 13.466 SANDERS 1-22 0.0000000 0.0688190 0.0000000 0.0688190 35121202130000 46.672 SANDERS 2-22 0.0000000 0.0688239 0.0000000 0.0688239 35121220120000 0.000 WARD B&W 1-28 0.0000000 0.0944760 0.0000000 0.0944760 35121217750000 9.981 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- BERRYMAN 1 0.3333333 0.2552000 0.3333333 0.2552000 35121601180000 8.369 HAZELWOOD 1 0.5639586 0.4393254 0.5639586 0.4393254 35121205570000 467.101 HELMS 1 0.0414570 0.0317420 0.0414570 0.0317420 35121203550000 9.774 HENSON 1-10 0.0000000 0.0157878 0.0000000 0.0157878 35121206090000 0.000 LALMAN 1 0.0833334 0.0638021 0.0833334 0.0638021 35121203400000 19.382 LALMAN 1-2 0.0000000 0.0100989 0.0000000 0.0100989 35121206410000 1.896 LALMAN 2 0.3333333 0.2552000 0.3333333 0.2552000 35121600520000 47.029 LALMAN 3 0.3333333 0.2552000 0.3333333 0.2552000 35121601200000 0.373 LALMAN 4 0.3333333 0.2552000 0.3333333 0.2552000 35121601150000 127.133 LALMAN 5 0.0607910 0.0531920 0.0607910 0.0531920 35121202680000 4.888 LALMAN 5 0.3333333 0.2552000 0.3333333 0.2552000 35121601160000 81.191 LALMAN 7 0.3333333 0.2552000 0.3333333 0.2552000 35121600470000 1.060 OLLER 1 0.3333333 0.2552000 0.3333333 0.2552000 35121601190000 25.581 P S C 1 0.0625000 0.0478515 0.0625000 0.0478515 35121202520000 27.989 SCHUDEL 1 0.3333333 0.2552000 0.3333333 0.2552000 35121001640000 164.374 SILVA 1 0.5212710 0.4116542 0.5212710 0.4116542 35121205580000 299.795 SILVA 3 0.2028450 0.1708980 0.2028450 0.1708980 35121203380000 17.103 WHITEACRE 1 0.3123855 0.2631880 0.3123855 0.2631880 35121600480000 19.142 LALMAN 1 0.0833334 0.0638021 0.0833334 0.0638021 35121203400000 0.000 LALMAN 6 0.3333333 0.2552000 0.3333333 0.2552000 35121601170000 0.000 - -------------------------------------------------------------------------------------------------------------------
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- ROCKY POINT NORTHWEST Field - ----------------------------------------------------------------------------------------------------------------------------------- MOSES 08N-02W-13 BARTLESVILLE Proved Producing GREEN RIVER RESOURCES CLEVELAND - ----------------------------------------------------------------------------------------------------------------------------------- SOONER TREND Field - ----------------------------------------------------------------------------------------------------------------------------------- LUCILLE 16N-04W-33 PRUE Proved Producing WILSHIRE OIL COMPANY OF TEXAS LOGAN SANDY 16N-04W-34 PRUE Proved Producing WILSHIRE OIL COMPANY OF TEXAS LOGAN VILHAUER 18N-09W-22 CHESTER & INOLA Proved Producing WILSHIRE OIL COMPANY OF TEXAS KINGFISHER LUCILLE Location 16N-04W-33 MISSISSIPPIAN Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LOGAN SANDY Location 16N-04W-34 MISSISSIPPIAN Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LOGAN - ----------------------------------------------------------------------------------------------------------------------------------- TUTTLE EAST Field - ----------------------------------------------------------------------------------------------------------------------------------- SCHROEDER 10N-05W-23 HUNTON Proved Producing DOMINION OKLAHOMA TEXAS E&P GRADY - ----------------------------------------------------------------------------------------------------------------------------------- WATONGA-CHICKASHA TREND Field - ----------------------------------------------------------------------------------------------------------------------------------- ICE B 1-6 14N-10W-06 MORROW Proved Producing MARATHON OIL COMPANY CANADIAN PRICE 17-2 15N-11W-17 ATOKA Proved Producing BRIGHAM OIL & GAS L P BLAINE - ----------------------------------------------------------------------------------------------------------------------------------- WILBURTON Field - ----------------------------------------------------------------------------------------------------------------------------------- ADAMS C 1 06N-19E-33 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER ADAMS C 2 06N-19E-33 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER ARKANSAS KRAFT 1-25 06N-19E-25 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER ARKANSAS KRAFT 1-35 06N-19E-35 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER BENNETT STATE 1 NE NW SE 05N-18E-19 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER BENNETT STATE 2-19 05N-18E-19 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER BENNETT STATE 3-U 05N-18E-19 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER BENNETT STATE 4-19 05N-18E-19 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER BENNETT STATE 4-U 05N-18E-19 ATOKA Proved Producing AMOCO PRODUCTION COMPANY LATIMER BENNETT STATE 5 05N-18E-19 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER BENNETT STATE 6 05N-18E-19 SIMPSON Proved Producing AMOCO PRODUCTION COMPANY LATIMER BOWMAN P D 1 NE 05N-17E-29 SPIRO Proved Producing AMOCO PRODUCTION COMPANY PITTSBURG BOWMAN P D 2 05N-17E-29 SPIRO Proved Producing AMOCO PRODUCTION COMPANY PITTSBURG BOWMAN P D 4 05N-17E-29 SPIRO Proved Producing AMOCO PRODUCTION COMPANY PITTSBURG BOWMAN P D 5-29 05N-17E-29 SPIRO Proved Producing AMOCO PRODUCTION COMPANY PITTSBURG DEGNAN 1 06N-19E-28 SPIRO & CROMWELL Proved Producing SAMSON RESOURCES COMPANY LATIMER DIAMOND 1 05N-19E-30 PANOLA Proved Producing QUESTAR EXPL. & PROD. LATIMER DIAMOND 2 05N-19E-30 SPIRO Proved Producing KERR-MCGEE OIL & GAS ONSHORE LATIMER DUNAGAN 1-A A SE 05N-17E-13 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER DUNAGAN 2-A 05N-17E-13 SPIRO & WAPANUCKA Proved Producing AMOCO PRODUCTION COMPANY LATIMER DUNAGAN 3-A 05N-17E-13 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER FAZEKAS STEVE 2 05N-18E-17 ARBUCKLE Proved Producing AMOCO PRODUCTION COMPANY LATIMER FAZEKAS STEVE 3-L 05N-18E-17 WAPANUCKA Proved Producing AMOCO PRODUCTION COMPANY LATIMER FAZEKAS STEVE 4-L 05N-18E-17 CRML-SPRO-WPCK Proved Producing AMOCO PRODUCTION COMPANY LATIMER Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------------ - ---------------------------------------------------------------------------------------------------------------------- MOSES 0.2000000 0.1538875 0.2000000 0.1538875 35027208410000 2.640 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- LUCILLE 0.3375000 0.2768555 0.3375000 0.2768555 35083300510000 43.887 SANDY 0.4500000 0.3691410 0.4500000 0.3691410 35083300020000 34.128 VILHAUER 0.4500000 0.3691410 0.4500000 0.3691410 35073356060000 63.116 LUCILLE Location 0.3375000 0.2768555 0.3375000 0.2768555 0.000 SANDY Location 0.4500000 0.3691410 0.4500000 0.3691410 0.000 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- SCHROEDER 0.1242714 0.0980678 0.1242714 0.0980678 35051204600000 60.765 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- ICE B 1-6 0.1994510 0.1474511 0.1994510 0.1474511 35017225430000 96.881 PRICE 17-2 0.0000000 0.0089533 0.0000000 0.0089533 35011228360000 9.998 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- ADAMS C 1 0.0625000 0.0549320 0.0625000 0.0549320 35077300520000 0.341 ADAMS C 2 0.0667014 0.0586070 0.0667014 0.0586070 35077203140000 35.848 ARKANSAS KRAFT 1-25 0.0000000 0.0234380 0.0000000 0.0234380 35077202920000 9.753 ARKANSAS KRAFT 1-35 0.0000000 0.0175780 0.0000000 0.0175780 35077202860000 11.851 BENNETT STATE 1 NE NW SE 0.0339570 0.0297120 0.0339570 0.0297120 35077600190000 87.579 BENNETT STATE 2-19 0.0339570 0.0297120 0.0339570 0.0297120 35077204810000 0.000 BENNETT STATE 3-U 0.0339570 0.0297120 0.0339570 0.0297120 35077205040000 59.547 BENNETT STATE 4-19 0.0406560 0.0355740 0.0406560 0.0355740 35077209210000 9.379 BENNETT STATE 4-U 0.0339570 0.0297120 0.0339570 0.0297120 35077209210000 23.588 BENNETT STATE 5 0.0000000 0.0000000 0.0000000 0.0000000 35077210960000 0.000 BENNETT STATE 6 0.0000000 0.0000000 0.0339568 0.0297122 35077213110000 180.753 BOWMAN P D 1 NE 0.0087891 0.0074234 0.0087891 0.0074234 35121200270000 8.334 BOWMAN P D 2 0.0124048 0.0105871 0.0124048 0.0105871 35121214150000 2.847 BOWMAN P D 4 0.0000000 0.0008317 0.0000000 0.0008317 35121218060000 1.683 BOWMAN P D 5-29 0.0000000 0.0008317 0.0000000 0.0012711 35121218510000 0.679 DEGNAN 1 0.0000000 0.0156250 0.0000000 0.0156250 35077203920000 1.251 DIAMOND 1 0.0624219 0.0546193 0.0624219 0.0546193 35077200170000 47.498 DIAMOND 2 0.0156055 0.0135484 0.0156055 0.0135484 35077204890000 27.712 DUNAGAN 1-A A SE 0.0032710 0.0028621 0.0032710 0.0028621 35077600000000 3.764 DUNAGAN 2-A 0.0060630 0.0049800 0.0060630 0.0049800 35077204930000 1.072 DUNAGAN 3-A 0.0033900 0.0029660 0.0033900 0.0029660 35077208910000 1.201 FAZEKAS STEVE 2 0.0019531 0.0016020 0.0019531 0.0016020 35077204320000 5.856 FAZEKAS STEVE 3-L 0.0019530 0.0016020 0.0019530 0.0016020 35077208200000 2.785 FAZEKAS STEVE 4-L 0.0019530 0.0016020 0.0019530 0.0016020 35077208620000 2.350
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- FAZEKAS STEVE 4-U 05N-18E-17 WAPANUCKA & CROMWELL Proved Producing VASTAR RESOURCES INCORPORATED LATIMER FAZEKAS STEVE 6-17 05N-18E-17 BROMIDE Proved Producing AMOCO PRODUCTION COMPANY LATIMER GOLDIE SIVIL 2-22C 05N-17E-22 SPIRO Proved Producing MARATHON OIL COMPANY LATIMER GOLDIE SIVIL 2-22T 05N-17E-22 CROMWELL Proved Producing MARATHON OIL COMPANY LATIMER MALITZ 1-25 05N-18E-25 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER MALITZ 1-25 05N-18E-25 PANOLA Proved Producing AMOCO PRODUCTION COMPANY LATIMER MCKEOWN 1 05N-19E-20&29 PANOLA Proved Producing QUESTAR EXPL. & PROD. LATIMER QUAID NE SE NW 1 05N-19E-07 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER RAY J A 150 NE OF C NW 05N-19E-20 SPIRO Proved Producing EXXON COMPANY U S A LATIMER ROBINSON 1 SW NW 05N-18E-12 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER ROBINSON 2 05N-18E-12 ATOKA & SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER ROBINSON 3-12 05N-18E-12 FANSHAWE Proved Producing AMOCO PRODUCTION COMPANY LATIMER SAMS 1-22 05N-17E-22 UNION VALLEY Proved Producing SAMSON RESOURCES COMPANY LATIMER SHAW 1-36 06N-19E-36 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER SIVIL 3 05N-17E-22 WAPANUCKA Proved Producing MARATHON OIL COMPANY LATIMER SIVIL 4-12 05N-17E-22 WAPANUCKA Proved Producing MARATHON OIL COMPANY LATIMER UAS MCTIERNAN J W SE NW 1 05N-19E-06 SPIRO Proved Producing CHESAPEAKE OPERATING INC. LATIMER VARNUM GUY 2-25 05N-18E-25 SPIRO Proved Producing SAMSON RESOURCES COMPANY LATIMER VARNUM GUY 3-25 05N-18E-25 SPIRO Proved Producing SAMSON RESOURCES COMPANY LATIMER VARNUM GUY 4-25 05N-18E-25 SPIRO Proved Producing AMOCO PRODUCTION COMPANY LATIMER YOUNG 1 06N-19E-34 SPIRO Proved Producing WILLIFORD PETROLEUM LLC LATIMER YOUNG 2-34 06N-19E-34 SPIRO Proved Producing QUINTON RENTAL & REPAIR LATIMER YOUNG RANCH 1-27 06N-19E-27 SPIRO Proved Producing QUINTON RENTAL & REPAIR LATIMER YOUNG RANCH 1-28 06N-19E-28 SPIRO Proved Producing SAMSON RESOURCES COMPANY LATIMER YOUNG RANCH 2-27 06N-19E-27 SPIRO Proved Producing SAMSON RESOURCES COMPANY LATIMER BENNETT STATE 2-19 05N-18E-19 ARBUCKLE Proved Shut-In VASTAR RESOURCES INCORPORATED LATIMER BENNETT STATE 3 05N-18E-19 MRRW-SPRO Proved Shut-In VASTAR RESOURCES INCORPORATED LATIMER BENNETT STATE 3-U 05N-18E-19 SPIRO Proved Shut-In ARCO PERMIAN LATIMER FAZEKAS STEVE 3-U 05N-18E-17 SPIRO Proved Shut-In VASTAR RESOURCES INCORPORATED LATIMER FAZEKAS STEVE 5 05N-18E-17 ATOKA Proved Shut-In AMOCO PRODUCTION COMPANY LATIMER FEDERAL CHURCH 2 06N-18E-36 SPIRO Proved Shut-In JMC EXPLORATION INCORPORATED LATIMER VARNUM GUY 1 C NE 05N-18E-25 SPIRO Proved Shut-In SAMSON RESOURCES COMPANY LATIMER - ----------------------------------------------------------------------------------------------------------------------------------- PA Properties INDIANA Field - ----------------------------------------------------------------------------------------------------------------------------------- GLASSER #1 (PNG #5264) INDIANA Proved Producing DOMINION INDIANA GLASSER #4 (PNG #5267) INDIANA Proved Producing DOMINION INDIANA LIGHTCAP #5 (PNG #5286) INDIANA Proved Producing DOMINION INDIANA - ----------------------------------------------------------------------------------------------------------------------------------- MAYFIELD Field - ----------------------------------------------------------------------------------------------------------------------------------- BRAUGHLER #1 (PNG #5363) DERRY Proved Producing DOMINION WESTMORELAND MORLET, G.E. #1 (PNG#5371 DERRY Proved Producing DOMINION WESTMORELAND POUNDS #3 (PNG #5184) DERRY Proved Producing DOMINION WESTMORELAND - ----------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - --------------------------------------------------------------------------------------------------------------------- FAZEKAS STEVE 4-U 0.0019530 0.0016020 0.0019530 0.0016020 35077208620000 0.000 FAZEKAS STEVE 6-17 0.0000000 0.0000286 0.0019530 0.0016020 35077212040000 4.225 GOLDIE SIVIL 2-22C 0.0117190 0.0102540 0.0117190 0.0102540 35077208340000 6.441 GOLDIE SIVIL 2-22T 0.0117190 0.0102540 0.0117190 0.0102540 35077208340000 6.049 MALITZ 1-25 0.0000000 0.0016403 0.0000000 0.0016403 35077203480000 9.345 MALITZ 1-25 0.0000000 0.0016403 0.0048828 0.0042725 35077203480000 3.761 MCKEOWN 1 0.0000000 0.0005792 0.0000000 0.0005792 35077201110000 0.111 QUAID NE SE NW 1 0.0393322 0.0343768 0.0393322 0.0343768 35077300010000 21.103 RAY J A 150 NE OF C NW 0.0138887 0.0114820 0.0138887 0.0114820 35077300070000 15.490 ROBINSON 1 SW NW 0.0052110 0.0045596 0.0052110 0.0045596 35077600120000 2.632 ROBINSON 2 0.0053393 0.0046722 0.0053393 0.0046722 35077209560000 0.112 ROBINSON 3-12 0.0052083 0.0045600 0.0052083 0.0045600 35077210050000 0.035 SAMS 1-22 0.0398631 0.0337281 0.0398631 0.0337281 35077203520000 12.279 SHAW 1-36 0.0000000 0.0216070 0.0000000 0.0216070 35077203010000 16.605 SIVIL 3 0.0121940 0.0106570 0.0121940 0.0106570 35077209930000 7.012 SIVIL 4-12 0.0172267 0.0148579 0.0172267 0.0148579 35077210530000 12.909 UAS MCTIERNAN J W SE NW 1 0.0040059 0.0035052 0.0040059 0.0035052 35077301460000 2.874 VARNUM GUY 2-25 0.0000000 0.0020408 0.0000000 0.0020408 35077211050000 10.245 VARNUM GUY 3-25 0.0000000 0.0020408 0.0000000 0.0020408 35077211180000 13.079 VARNUM GUY 4-25 0.0000000 0.0020408 0.0000000 0.0020408 35077211950000 5.513 YOUNG 1 0.0000000 0.0136719 0.0000000 0.0136719 35077300060000 1.960 YOUNG 2-34 0.0000000 0.0324707 0.0000000 0.0324707 35077202630000 0.000 YOUNG RANCH 1-27 0.3911695 0.3578983 0.3911695 0.3578983 35077300080000 56.637 YOUNG RANCH 1-28 0.2580645 0.2414314 0.2580645 0.2414314 35077300240000 59.872 YOUNG RANCH 2-27 0.2500000 0.2343750 0.2500000 0.2343750 35077203530000 666.135 BENNETT STATE 2-19 0.0339570 0.0297120 0.0339570 0.0297120 35077204810000 0.000 BENNETT STATE 3 0.0339570 0.0297120 0.0339570 0.0297120 35077205040000 0.000 BENNETT STATE 3-U 0.0339570 0.0297120 0.0339570 0.0297120 35077205040000 0.000 FAZEKAS STEVE 3-U 0.0019530 0.0016020 0.0019530 0.0016020 35077208200000 0.000 FAZEKAS STEVE 5 0.0019530 0.0016020 0.0019530 0.0016020 35077209010000 2.037 FEDERAL CHURCH 2 0.0071800 0.0062822 0.0071800 0.0062822 35077204990000 0.000 VARNUM GUY 1 C NE 0.0195312 0.0166893 0.0195312 0.0166893 35077300270000 38.876 - ------------------------------------------------------------------------------------------------------------------- PA Properties - ------------------------------------------------------------------------------------------------------------------- GLASSER #1 (PNG #5264) 0.0391477 0.0342542 0.0391477 0.0342542 370632413 0.801 GLASSER #4 (PNG #5267) 0.0391477 0.0342542 0.0391477 0.0342542 370632413 0.389 LIGHTCAP #5 (PNG #5286) 0.0391477 0.0342542 0.0391477 0.0342542 370632422 2.645 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- BRAUGHLER #1 (PNG #5363) 0.0493132 0.0419162 0.0493132 0.0419162 371292141 1.609 MORLET, G.E. #1 (PNG#5371 0.0493132 0.0419162 0.0493132 0.0419162 371292146 2.421 POUNDS #3 (PNG #5184) 0.0391477 0.0342542 0.0391477 0.0342542 371292121 1.367 - -------------------------------------------------------------------------------------------------------------------
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- VARIOUS Field - ----------------------------------------------------------------------------------------------------------------------------------- 1975 PROGRAM HOMER CITY Proved Producing DOMINION INDIANA 1976 PROGRAM VARIOUS Proved Producing DOMINION INDIANA/WESTMORELAND 1977 PROGRAM VARIOUS Proved Producing DOMINION INDIANA/WESTMORELAND 1978 PROGRAM VARIOUS Proved Producing DOMINION VARIOUS 1979 PROGRAM VARIOUS Proved Producing DOMINION VARIOUS - ----------------------------------------------------------------------------------------------------------------------------------- WHITESBURG Field - ----------------------------------------------------------------------------------------------------------------------------------- ALCORN, J.N. #1 (PNG#5375 DERRY Proved Producing DOMINION WESTMORELAND WILLARD #3 (PNG #5370) DERRY Proved Producing DOMINION WESTMORELAND - ----------------------------------------------------------------------------------------------------------------------------------- TX Properties BROOKS Field - ----------------------------------------------------------------------------------------------------------------------------------- BROOKS L D GAS UNIT 1 H&TCRR-Blk 03-15 CANYON-GAS Proved Producing TXP INCORPORATED IRION BROOKS #2 H&TCRR-Blk 03-21 UNKNOWN Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS IRION BROOKS D H&TCRR-Blk 03-15 LEONARD Proved Shut-In GRACE PETROLEUM CORPORATION IRION - ----------------------------------------------------------------------------------------------------------------------------------- FARNSWORTH-CONNER Field - ----------------------------------------------------------------------------------------------------------------------------------- EDWARDS 3 H&GN--Sec 12&pt 5 DES MOINES Proved Producing BRACKEN OPERATING L L C OCHILTREE EDWARDS A 4 H&GN-958-E2Sec12& DES MOINES Proved Producing BRACKEN OPERATING L L C OCHILTREE EDWARDS B 5 -Blk 12-PtSec 12 DES MOINES Proved Producing BRACKEN OPERATING L L C OCHILTREE - ----------------------------------------------------------------------------------------------------------------------------------- GLAZIER Field - ----------------------------------------------------------------------------------------------------------------------------------- URSCHEL L B 1 Johnson JF, Abs 1325-Blk 42-Sec 64 MORROWAN UPPER Proved Producing CHAPARRAL ENERGY L L HEMPHILL URSCHEL L B 1 Johnson JF, Abs 1325-Blk 42-Sec 64 MORROWAN UPPER Proved Shut-In CHAPARRAL ENERGY L L HEMPHILL - ----------------------------------------------------------------------------------------------------------------------------------- GLAZIER NORTHWEST Field - ----------------------------------------------------------------------------------------------------------------------------------- URSCHEL L B 1 Johnson JF, Abs 1325-Blk 42-Sec 64 MORROW UPPER Proved Shut-In SLAWSON DONALD C HEMPHILL - ----------------------------------------------------------------------------------------------------------------------------------- HELUMA Field - ----------------------------------------------------------------------------------------------------------------------------------- JACOBS LIVESTOCK B 1 Patterson W-A1270-Sec 98 DEVONIAN Proved Producing WILSHIRE OIL COMPANY OF TEXAS UPTON JACOBS LIVESTOCK C 1 Patterson W-A1270-Sec 98 ELLENBURGER Proved Producing ENDEAVOR ENERGY RESOURCES UPTON JACOBS LIVESTOCK 3498 Patterson Wm-A1270-Sec 98 ELLENBURGER Proved Shut-In ENDEAVOR ENERGY RESOURCES UPTON JACOBS LIVESTOCK 3498 Patterson Wm-A1270-Sec 98 DEVONIAN Proved Shut-In TXO PRODUCTION CORPORATION UPTON JACOBS LIVESTOCK MULTI Patterson Wm-A1270-Sec 98 ELLENBURGER Proved Shut-In WILSHIRE OIL COMPANY OF TEXAS UPTON JACOBS LIVESTOCK SUNILAND lL Patterson W-A1270-Sec 98 DEVONIAN Proved Shut-In EP OPERATING COMPANY UPTON - ----------------------------------------------------------------------------------------------------------------------------------- HELUMA EAST Field - ----------------------------------------------------------------------------------------------------------------------------------- JACOBS LIVESTOCK C 2 Patterson W-A1270-Sec 98 DEVONIAN Proved Producing ENDEAVOR ENERGY RESOURCES UPTON JACOBS LIVESTOCK D 1 Patterson W-A1270-Sec 98 DEVONIAN Proved Producing WILSHIRE OIL COMPANY OF TEXAS UPTON - ----------------------------------------------------------------------------------------------------------------------------------- HELUMA SOUTHEAST Field - ----------------------------------------------------------------------------------------------------------------------------------- GUTHRIE-DUNBAR A UNIT 1 Smith Mary-Blk 2-Sec 08 DEVONIAN Proved Producing SAMSON LONE STAR LP UPTON GUTHRIE-DUNBAR UNIT 1 Smith Mary-Blk 2-Sec 08 DEVONIAN Proved Producing SAMSON LONE STAR LP UPTON - ----------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------ - ---------------------------------------------------------------------------------------------------------------- 1975 PROGRAM 0.5000000 0.4375000 0.5000000 0.4375000 157.781 1976 PROGRAM 0.5000000 0.4375000 0.5000000 0.4375000 136.369 1977 PROGRAM 0.5000000 0.4375000 0.5000000 0.4375000 546.934 1978 PROGRAM 0.3208828 0.2807725 0.3208828 0.2807725 1380.719 1979 PROGRAM 0.1890000 0.1653750 0.1890000 0.1653750 191.170 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- ALCORN, J.N. #1 (PNG#5375 0.0493132 0.0419162 0.0493132 0.0419162 371292150 0.000 WILLARD #3 (PNG #5370) 0.0391477 0.0342542 0.0391477 0.0342542 371292144 0.161 - ---------------------------------------------------------------------------------------------------------------- TX Properties - ---------------------------------------------------------------------------------------------------------------- BROOKS L D GAS UNIT 1 0.0000000 0.0042190 0.0000000 0.0042190 42235005360000 0.569 BROOKS #2 0.0000000 0.0112490 0.0000000 0.0112490 42235005930000 0.000 BROOKS D 0.0000000 0.0112500 0.0000000 0.0112500 42235005360000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- EDWARDS 3 0.5000000 0.4000000 0.5000000 0.4000000 42357321770000 74.686 EDWARDS A 4 0.2500000 0.1875000 0.2500000 0.1875000 42357322240000 1.780 EDWARDS B 5 0.0703126 0.0562504 0.0703126 0.0562504 42357323070000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- URSCHEL L B 1 0.1500000 0.1095000 0.1500000 0.1095000 42211317170000 0.026 URSCHEL L B 1 0.1500000 0.1095000 0.1500000 0.1095000 42211317170000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- URSCHEL L B 1 0.1500000 0.1095000 0.1500000 0.1095000 42211317170000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- JACOBS LIVESTOCK B 1 1.0000000 0.8333000 1.0000000 0.8333000 42461320120000 61.365 JACOBS LIVESTOCK C 1 0.1666600 0.1458275 0.1666600 0.1458275 42461301550000 41.115 JACOBS LIVESTOCK 3498 0.0000000 0.0546853 0.0000000 0.0546853 42461034520000 0.000 JACOBS LIVESTOCK 3498 0.0000000 0.0546853 0.0000000 0.0546853 42461034520000 0.000 JACOBS LIVESTOCK MULTI 0.0000000 0.0546853 0.0000000 0.0546853 42461034520000 0.000 JACOBS LIVESTOCK SUNILAND 1 L 0.0000000 0.0546853 0.0000000 0.0546853 42461043010000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- JACOBS LIVESTOCK C 2 0.4999800 0.4374825 0.4999800 0.4374825 42461301550000 407.675 JACOBS LIVESTOCK D 1 0.6666400 0.5833100 0.6666400 0.5833100 42461312620000 113.424 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- GUTHRIE-DUNBAR A UNIT 1 0.0658181 0.0474397 0.0658181 0.0474397 42461322410000 3.616 GUTHRIE-DUNBAR UNIT 1 0.0650000 0.0468000 0.0650000 0.0468000 42461319910000 3.724 - ----------------------------------------------------------------------------------------------------------------
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- KIOWA CREEK Field - ----------------------------------------------------------------------------------------------------------------------------------- SCHOENHALS 1937 H&TCRR-Blk 43-Sec 937 MARMATON Proved Producing H & L OPERATING COMPANY LLP OCHILTREE SCHOENHALS 1937 H&TCRR-Blk 43-Sec 937 MORROWAN UPPER Proved Shut-In SAMSON RESOURCES COMPANY OCHILTREE - ----------------------------------------------------------------------------------------------------------------------------------- PERRYTON WEST Field - ----------------------------------------------------------------------------------------------------------------------------------- LANCE 1011 H&GN-112- MORROWAN MIDDLE Proved Producing BRACKEN OPERATING L L C OCHILTREE - ----------------------------------------------------------------------------------------------------------------------------------- SELL Field - ----------------------------------------------------------------------------------------------------------------------------------- SELL UNIT 1005 Multiple-Sell Unit-- MORROW UPPER Proved Producing WILLIFORD ENERGY COMPANY LIPSCOMB - ----------------------------------------------------------------------------------------------------------------------------------- SPRABERRY Field - ----------------------------------------------------------------------------------------------------------------------------------- NORTH PEMBROOK SPRABERRY UNIT EL&RR-Blk D-Sec 21 TREND AREA Proved Producing PIONEER NATURAL RESOURCES USA UPTON - ----------------------------------------------------------------------------------------------------------------------------------- UT Properties CANE CREEK Field - ----------------------------------------------------------------------------------------------------------------------------------- CHEVRON FEDERAL #1 29S-23E SLM-24 CANE CREEK Proved Producing MILLER, DYER SAN JUAN - ----------------------------------------------------------------------------------------------------------------------------------- WY Properties NITCHIE GULCH Field - ----------------------------------------------------------------------------------------------------------------------------------- FED 14-08-0001-8247 1-17 23N-103W-17 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 11-9 23N-103W-09 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 4-17 23N-103W-17 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 4-17 23N-103W-17 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 6-7 23N-103W-07 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 7-8 23N-103W-08 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 8-18 23N-103W-18 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER NICHIE GULCH STATE UNIT 17-16 23N-103W-16 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER NICHIE GULCH STATE UNIT 17-16 23N-103W-16 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH FEDERAL 16 23N-103W-28 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH FEDERAL 16 23N-103W-28 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 3-21 23N-103W-21 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 13-20 23N-103W-20 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 18 23N-103W-29 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 19-7 23N-103W-07 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 21-21D 23N-103W-21 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 21-21F 23N-103W-21 FRONTIER Proved Producing BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 22-8 23N-103W-07 DAKOTA Proved Producing BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 1-17 23N-103W-17 FRONTIER Proved Shut-In BERCO RESOURCES SWEETWATER FED 14-08-0001-8247 5-19 23N-103W-19 FRONTIER Proved Shut-In PACIFIC ENTERPRISES ROYALTY SWEETWATER FED 14-08-0001-8247 7-8 23N-103W-08 DAKOTA Proved Shut-In HUNT OIL COMPANY SWEETWATER NITCHIE GULCH UNIT 2-20 23N-103W-20 DAKOTA Proved Shut-In PACIFIC ENTERPRISES ROYALTY SWEETWATER NITCHIE GULCH UNIT 2-20 23N-103W-20 FRONTIER Proved Shut-In PACIFIC ENTERPRISES ROYALTY SWEETWATER NITCHIE GULCH UNIT 12-18 23N-103W-18 FRONTIER Proved Shut-In BERCO RESOURCES SWEETWATER Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- SCHOENHALS 1937 0.1350000 0.1012500 0.1350000 0.1012500 42357315650000 2.504 SCHOENHALS 1937 0.0000000 0.0038218 0.0000000 0.0038218 42357317230000 0.000 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- LANCE 1011 0.0703125 0.0527344 0.0703125 0.0527344 42357323400000 7.492 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- SELL UNIT 1005 0.0801272 0.0617609 0.0801272 0.0617609 42295322670000 232.197 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- NORTH PEMBROOK SPRABERRY UNIT 0.0099522 0.0087080 0.0099522 0.0087080 42461016890000 451.713 - ----------------------------------------------------------------------------------------------------------------- UT Properties - ----------------------------------------------------------------------------------------------------------------- CHEVRON FEDERAL #1 0.0600000 0.0561427 0.0800000 0.0723927 0.000 - ----------------------------------------------------------------------------------------------------------------- WY Properties - ----------------------------------------------------------------------------------------------------------------- FED 14-08-0001-8247 1-17 0.0345460 0.0296601 0.0345460 0.0296601 49037059110000 10.268 FED 14-08-0001-8247 11-9 0.0283079 0.0243040 0.0283079 0.0243040 49037200980000 9.227 FED 14-08-0001-8247 4-17 0.0283079 0.0243040 0.0283079 0.0243040 49037059140000 26.440 FED 14-08-0001-8247 4-17 0.0345460 0.0296601 0.0345460 0.0296601 49037059140000 0.000 FED 14-08-0001-8247 6-7 0.0283079 0.0243040 0.0283079 0.0243040 49037059210000 30.138 FED 14-08-0001-8247 7-8 0.0283079 0.0243040 0.0283079 0.0243040 49037063460000 0.000 FED 14-08-0001-8247 8-18 0.0283079 0.0243040 0.0283079 0.0243040 49037063600000 24.252 NICHIE GULCH STATE UNIT 17-16 0.0283079 0.0243040 0.0283079 0.0243040 49037224210000 0.000 NICHIE GULCH STATE UNIT 17-16 0.0345460 0.0296594 0.0345460 0.0296594 49037224210000 53.097 NITCHIE GULCH FEDERAL 16 0.0345460 0.0296601 0.0345460 0.0296601 49037224150000 0.572 NITCHIE GULCH FEDERAL 16 0.0283079 0.0243040 0.0283079 0.0243040 49037224150000 1.100 NITCHIE GULCH UNIT 3-21 0.0345446 0.0296601 0.0345446 0.0296601 49037200320000 3.566 NITCHIE GULCH UNIT 13-20 0.0283079 0.0243040 0.0283079 0.0243040 49037222710000 9.188 NITCHIE GULCH UNIT 18 0.0283079 0.0243040 0.0283079 0.0243040 49037224440000 8.967 NITCHIE GULCH UNIT 19-7 0.0345460 0.0296601 0.0345460 0.0296601 49037225900000 9.384 NITCHIE GULCH UNIT 21-21D 0.0345460 0.0296601 0.0345460 0.0296601 49037226650000 5.623 NITCHIE GULCH UNIT 21-21F 0.0331305 0.0283435 0.0331305 0.0283435 49037226650000 0.104 NITCHIE GULCH UNIT 22-8 0.0347273 0.0298150 0.0347273 0.0298150 49037226940000 25.883 FED 14-08-0001-8247 1-17 0.0283079 0.0243040 0.0283079 0.0243040 49037059110000 0.000 FED 14-08-0001-8247 5-19 0.0283079 0.0243040 0.0283079 0.0243040 49037059070000 0.000 FED 14-08-0001-8247 7-8 0.0283079 0.0243040 0.0283079 0.0243040 49037063460000 0.000 NITCHIE GULCH UNIT 2-20 0.0283079 0.0243040 0.0283079 0.0243040 49037059050000 0.000 NITCHIE GULCH UNIT 2-20 0.0283079 0.0243040 0.0283079 0.0243040 49037059050000 0.000 NITCHIE GULCH UNIT 12-18 0.0283079 0.0243040 0.0283079 0.0243040 49037222720000 0.000
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- NITCHIE GULCH UNIT 14-7 23N-103W-07 FRONTIER Proved Shut-In BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 15-8X 23N-103W-08 FRONTIER Proved Shut-In BERCO RESOURCES SWEETWATER NITCHIE GULCH UNIT 20-19 23N-103W-19 FRONTIER Proved Shut-In BERCO RESOURCES SWEETWATER - ----------------------------------------------------------------------------------------------------------------------------------- NITCHIE GULCH UNIT Field - ----------------------------------------------------------------------------------------------------------------------------------- FED 14-08-0001-8247 23N-103W-20 DAKOTA Proved Shut-In HUNT OIL COMPANY SWEETWATER - ----------------------------------------------------------------------------------------------------------------------------------- PINE CANYON Field - ----------------------------------------------------------------------------------------------------------------------------------- FEDERAL 1-28 23N-103W-28 FRONTIER Proved Producing SAMSON RESOURCES COMPANY SWEETWATER FEDERAL 1-28 23N-103W-28 DAKOTA Proved Producing XTO ENERGY INCORPORATED SWEETWATER PINE CANYON UNIT 1-32 23N-103W-32 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 3-32 23N-103W-32 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 3-32 23N-103W-32 FRONTIER Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 6-32 23N-103W-32 FRONTIER Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 6-32 23N-103W-32 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 8-28 23N-103W-28 FRONTIER Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 8-28 23N-103W-28 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 9-32 23N-103W-32 FRONTIER Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 10-29 23N-103W-29 FRONTIER Proved Producing ENERVEST OPERATING L L C SWEETWATER PINE CANYON UNIT 10-29 23N-103W-29 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER U P R R 1-33 23N-103W-33 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER U P R R 3-33 23N-103W-33 DAKOTA Proved Producing ENERVEST OPERATING L L C SWEETWATER U P R R 3-33 23N-103W-33 FRONTIER Proved Producing ENERVEST OPERATING L L C SWEETWATER WEST PINE CANYON 10 22N-103W-05 DAKOTA Proved Producing SAMSON RESOURCES COMPANY SWEETWATER PINE CANYON UNIT 4-29 23N-103W-29 DAKOTA Proved Shut-In XTO ENERGY INCORPORATED SWEETWATER PINE CANYON UNIT 9-32 23N-103W-32 DAKOTA Proved Shut-In XTO ENERGY INCORPORATED SWEETWATER - ----------------------------------------------------------------------------------------------------------------------------------- SEMLEK Field - ----------------------------------------------------------------------------------------------------------------------------------- SEMLEK WEST UNIT 28-7 52N-68W-28 MINNELUSA Proved Shut-In CITATION OIL & GAS CORPORATION CROOK - ----------------------------------------------------------------------------------------------------------------------------------- SEMLEK WEST Field - ----------------------------------------------------------------------------------------------------------------------------------- DUNNING GOVT 28-1 52N-68W-28 MINNELUSA Proved Producing CITATION OIL & GAS CORPORATION CROOK SEMLEK WEST UNIT 28-4B 52N-68W-28 MINNELUSA Proved Producing CITATION OIL & GAS CORPORATION CROOK DUNNING GOVT 28-3 52N-68W-28 MINNELUSA Proved Shut-In CITATION OIL & GAS CORPORATION CROOK SEMLEK WEST UNIT 28-2 52N-68W-28 MINNELUSA Proved Shut-In CITATION OIL & GAS CORPORATION CROOK SEMLEK WEST UNIT 28-8 52N-68W-28 MINNELUSA Proved Shut-In HUNT OIL COMPANY CROOK SEMLEK WEST UNIT 28-9 52N-68W-28 MINNELUSA Proved Shut-In CITATION OIL & GAS CORPORATION CROOK - ----------------------------------------------------------------------------------------------------------------------------------- SILO Field - ----------------------------------------------------------------------------------------------------------------------------------- LEROY 41-33 1-H 16N-64W-33 NIOBRARA Proved Producing PALADIN ENERGY PARTNERS LLC LARAMIE MCCONNAUGHEY 1-23H 16N-65W-23 NIOBRARA C Proved Producing WILSHIRE OIL COMPANY OF TEXAS LARAMIE MCCONNAUGHEY 1-26H 16N-65W-26 NIOBRARA Proved Producing WILSHIRE OIL COMPANY OF TEXAS LARAMIE MCCONNAUGHEY 1-27H 16N-65W-27 NIOBRARA Proved Producing PALADIN ENERGY PARTNERS LLC LARAMIE MESSENGER 1-3H 15N-65W-03 NIOBRARA Proved Producing WILSHIRE OIL COMPANY OF TEXAS LARAMIE Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------ NITCHIE GULCH UNIT 14-7 0.0283079 0.0243040 0.0283079 0.0243040 49037223380000 0.000 NITCHIE GULCH UNIT 15-8X 0.0283079 0.0243040 0.0283079 0.0243040 49037223540000 0.000 NITCHIE GULCH UNIT 20-19 0.0283079 0.0243040 0.0283079 0.0243040 49037226160000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- FED 14-08-0001-8247 0.0283079 0.0243040 0.0283079 0.0243040 49037225900000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- FEDERAL 1-28 0.0077897 0.0066730 0.0077897 0.0066730 49037226130000 0.513 FEDERAL 1-28 0.0094130 0.0080630 0.0094130 0.0080630 49037226130000 1.222 PINE CANYON UNIT 1-32 0.0813216 0.0703432 0.0813216 0.0703432 49037058980000 4.219 PINE CANYON UNIT 3-32 0.0813216 0.0703432 0.0813216 0.0703432 49037242790000 1.316 PINE CANYON UNIT 3-32 0.0889520 0.0769435 0.0889520 0.0769435 49037242790000 1.675 PINE CANYON UNIT 6-32 0.0889520 0.0769435 0.0889520 0.0769435 49037225750000 12.240 PINE CANYON UNIT 6-32 0.0813216 0.0703432 0.0813216 0.0703432 49037225750000 0.980 PINE CANYON UNIT 8-28 0.0902708 0.0780843 0.0902708 0.0780843 49037225850000 0.000 PINE CANYON UNIT 8-28 0.0813216 0.0703432 0.0813216 0.0703432 49037225850000 15.913 PINE CANYON UNIT 9-32 0.0813216 0.0703432 0.0813216 0.0703432 49037226050000 16.255 PINE CANYON UNIT 10-29 0.0902708 0.0780843 0.0902708 0.0780843 49037226060000 0.000 PINE CANYON UNIT 10-29 0.0822610 0.0711619 0.0822610 0.0711619 49037226060000 7.599 U P R R 1-33 0.0406608 0.0351716 0.0406608 0.0351716 49037225080000 9.825 U P R R 3-33 0.0406608 0.0351716 0.0406608 0.0351716 49037226120000 15.211 U P R R 3-33 0.0406608 0.0351716 0.0406608 0.0351716 49037226120000 0.000 WEST PINE CANYON 10 0.0305480 0.0264237 0.0305480 0.0264237 49037224740000 0.000 PINE CANYON UNIT 4-29 0.1739067 0.1504293 0.1739067 0.1504293 49037224280000 0.000 PINE CANYON UNIT 9-32 0.0824249 0.0712955 0.0824249 0.0712955 49037226050000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- SEMLEK WEST UNIT 28-7 0.0396736 0.0375697 0.0396736 0.0375697 49011204210000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- DUNNING GOVT 28-1 0.1001200 0.0866038 0.1001200 0.0866038 49011058990000 24.021 SEMLEK WEST UNIT 28-4B 0.0396736 0.0375697 0.0396736 0.0375697 49011214510000 14.284 DUNNING GOVT 28-3 0.0396736 0.0375697 0.0396736 0.0375697 49011059120000 0.000 SEMLEK WEST UNIT 28-2 0.0396736 0.0375697 0.0396736 0.0375697 49011059210000 0.000 SEMLEK WEST UNIT 28-8 0.0392632 0.0000000 0.0392632 0.0000000 49011205820000 0.000 SEMLEK WEST UNIT 28-9 0.0396736 0.0375697 0.0396736 0.0375697 49011218320000 0.000 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- LEROY 41-33 1-H 0.2500000 0.2125000 0.2500000 0.2125000 49021204630000 18.024 MCCONNAUGHEY 1-23H 0.5000000 0.4025625 0.5000000 0.4025625 49021204670000 24.388 MCCONNAUGHEY 1-26H 0.5000000 0.4013750 0.5000000 0.4013750 49021204530000 79.206 MCCONNAUGHEY 1-27H 0.1250000 0.0995625 0.1250000 0.0995625 49021204450000 33.913 MESSENGER 1-3H 0.3205326 0.2644395 0.3205326 0.2644395 49021205170000 53.473
SCHEDULE A - Land Schedule
Lease Name Twn-Rng-Sec Reservoir Status Operator County - ----------------------------------------------------------------------------------------------------------------------------------- SUNLIGHT 4-20 1 15N-64W-20 NIOBRARA Proved Producing PALADIN ENERGY PARTNERS LLC LARAMIE STATE 101-H 15N-64W-10 NIOBRARA Proved Shut-In PALADIN ENERGY PARTNERS LLC LARAMIE Loc 13 1-H 16N-65W-13 NIOBRARA C Proved Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE Loc 14 1-H 16N-65W-14 NIOBRARA C Proved Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE MCCONNAUGHEY 1-26H (BP) 16N-65W-26 NIOBRARA Proved Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE GOERTZ # 1-H (B-5 Zone) 15N-65W-01 NIOBRARA B-5 Probable Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE GOERTZ # 1-H (C Zone) 15N-65W-01 NIOBRARA C Probable Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE LEROY 41-33 1-H (C BP Zone) 16N-64W-33 NIOBRARA C Probable Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE MCCONNAUGHEY 1-27H (BP) 16N-65W-27 NIOBRARA Probable Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE GOERTZ # 1-H (B-4 Zone) 15N-65W-01 NIOBRARA B-4 Possible Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE LEROY 41-33 1-H (B-4 BP Zone) 16N-64W-33 NIOBRARA B-4 Possible Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE Loc 13 1-H (B-4 Zone) 16N-65W-13 NIOBRARA B-4 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE Loc 13 1-H (B-5 Zone) 16N-65W-13 NIOBRARA B-5 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE Loc 14 1-H (B-4 Zone) 16N-65W-14 NIOBRARA B-4 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE Loc 14 1-H (B-5 Zone) 16N-65W-14 NIOBRARA B-5 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE Loc 20 1-H (B-4 Zone) 15N-64W-20 NIOBRARA B-4 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE Loc 20 1-H (B-5 Zone) 15N-64W-20 NIOBRARA B-5 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE MCCONNAUGHEY 1-23H (BP) 16N-65W-23 NIOBRARA B-4 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE MCCONNAUGHEY 1-26H (BP) 16N-65W-26 NIOBRARA B-4 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE MCCONNAUGHEY 1-27H (BP) 16N-65W-27 NIOBRARA B-4 Possible Undeveloped PALADIN ENERGY PARTNERS LLC LARAMIE MESSENGER 1-3H (B-4 BP) 15N-65W-03 NIOBRARA B-4 Possible Undeveloped WILSHIRE OIL COMPANY OF TEXAS LARAMIE - ----------------------------------------------------------------------------------------------------------------------------------- Initial Interest Final Interest Allocated Lease Name WI NRI WI NRI API Number Value(M$) - ------------------------------------------------------------------------------------------------------------------------ SUNLIGHT 4-20 1 0.0039063 0.0031250 0.0039063 0.0031250 49021205140000 0.219 STATE 101-H 0.2500000 0.1940495 0.2500000 0.1940495 49021204270000 0.000 Loc 13 1-H 0.6666667 0.5807675 0.6666667 0.5656633 0.000 Loc 14 1-H 1.0000000 0.8750000 1.0000000 0.8750000 0.000 MCCONNAUGHEY 1-26H (BP) 0.5000000 0.4013750 0.5000000 0.4013750 49021204530000 0.000 GOERTZ # 1-H (B-5 Zone) 0.2328822 0.1723300 0.2328822 0.1723300 0.000 GOERTZ # 1-H (C Zone) 0.2328822 0.1723300 0.2328822 0.1723300 0.000 LEROY 41-33 1-H (C BP Zone) 0.2500000 0.2125000 0.2500000 0.2125000 49021204630000 0.000 MCCONNAUGHEY 1-27H (BP) 0.1250000 0.0995625 0.1250000 0.0995625 49021204450000 0.000 GOERTZ # 1-H (B-4 Zone) 0.2328822 0.1723300 0.2328822 0.1723300 0.000 LEROY 41-33 1-H (B-4 BP Zone) 0.2500000 0.2125000 0.2500000 0.2125000 49021204630000 0.000 Loc 13 1-H (B-4 Zone) 0.6666667 0.5656633 0.6666667 0.5656633 0.000 Loc 13 1-H (B-5 Zone) 0.6666667 0.5656633 0.6666667 0.5656633 0.000 Loc 14 1-H (B-4 Zone) 1.0000000 0.8500000 1.0000000 0.8500000 0.000 Loc 14 1-H (B-5 Zone) 1.0000000 0.8500000 1.0000000 0.8500000 0.000 Loc 20 1-H (B-4 Zone) 0.0039060 0.0031250 0.0039060 0.0031250 0.000 Loc 20 1-H (B-5 Zone) 0.0039060 0.0031250 0.0039060 0.0031250 0.000 MCCONNAUGHEY 1-23H (BP) 0.5000000 0.4025625 0.5000000 0.4025625 49021204670000 0.000 MCCONNAUGHEY 1-26H (BP) 0.5000000 0.4013750 0.5000000 0.4013750 49021204530000 0.000 MCCONNAUGHEY 1-27H (BP) 0.1250000 0.0995625 0.1250000 0.0995625 49021204450000 0.000 MESSENGER 1-3H (B-4 BP) 0.3205326 0.2644395 0.3205326 0.2644395 49021205170000 0.000 - ---------------------------------------------------------------------------------------------------------------------- $13,700.000
Schedule "B" Sale, Processing and Transportation Agreements Oil - None Gas A. Contract dated 02-02-94; terminable annually on thirty days notice prior to May 1. 0.2.471.2A 1. Lucille 2. Wanda 3. Sandy 4. Maxine 5. Gwyn 6. Carol 7. Ima 8. Ruth 9. Krannig #2 B. Contract dated 08-03-88; terminable annually on thirty days notice prior to August 3. 0.2.471.18A 1. Vilhauer C. Contract dated 09-06-78; terminable annually on sixty days notice prior to March 1. 0.2.538.2A 1. Government #2 D. Contract dated 03-01-71; area rate clause; terminable annually on thirty days notice prior to September 30 if price not agreed upon by March 15. 0.2.538.2A 1. White "E" E. Contract dated 08-03-88; terminable annually on thirty days notice prior to August 3. 0.2.600.13 1. Jenkins #2 F. Contract effective 06-01-98; terminable on sixty days notice. 0.2.1097.3 1. Stotts #1 and #3 2. Breshears #1 and #2 3. Dickson #1 4. Smith #1-3 5. Suzy West #1-13 6. Paul Foster #1-4 G. Contract dated 05-16-78; GPC2545A; expires in May of 2004. 0.2.655.1 1. PA 1978 Program H. Contract dated 04-17-79; GPC2581A; 18.9% WI expires around May of 2005; 13.3% expires January of 2007. 0.2.655.1 1. PA 1979 Program I. Contract dated 03-12-98; term not known; no copy. 0.2.893(D). 1. Simpson #1-29 J. Contract dated 12-22-87; terminable annually on thirty days notice prior to December 12. 0.2.893.G (A). 1. Ellithorpe #1-29 (but possibly covered under contract J. above). K. Contract dated 09-16-94; terminable annually on thirty days notice prior to September 16. 0.2.1121(B) 1 1. McConnaughey #1-23-H 2. McConnaughey #1-26H 3. Leroy #41-33 4. McConnaughey #1-13H if redrilled 5. McConnaughey #1-14H if redrilled L. Contract dated 02-09-01; contract terminable annually on sixty days notice prior to January 1. 0.2.1177.2 1. Edward #3-12 2. Edwards #5-12 3. Lance #1-11 M. Contract dated 02-24-97; five year primary term; no copy of contract in files. 0.2.1177.1 1. Edwards #4-11 END Schedule C Authorizations for Expenditures None Schedule "D" Pending or Threatened Lawsuits and Claims 1. BIA-BLM Roye #1, Roye #2, Burge #1. Sections 30 and 31, Township 8 North, Range 21 East, Haskell County, Oklahoma. Wilshire had not paid gas royalties or had underpaid them on these wells from July 1993 through 2003. The principal already paid is $17,315.33. Penalty and interest will eventually be demanded by the MMS. MC5253A 2. ONEOK Energy Resources. Wilhite #1-35. Section 35-23N-26W, Ellis County, Oklahoma. There was an allocation problem on a central point meter into which the Wilhite and an offsetting well were producing. The problem related back to January of 1999. ONEOK has stated that Wilshire was overpaid for 123,705 mcf. Settlement talks are ongoing. No lawsuit has been filed to date. 0.2.939.5 3. Greka Energy. Richfield East Dome Unit, Orange County, California. Greka has failed and refused to pay Wilshire (San Francisco Oil Company) for oil and gas production from January of 2000 through September of 2002. Average monthly revenue received from October of 2002 through May of 2002 was approximately $750.00 per month. 0.2.583.1 4. W. Plack Carr. Dunagan "A" #1. Ongoing claim for cash balancing by underproduced royalty owner. Wilshire offered interim cash balancing in 1997 for $3,339.02 which was rejected by Mr. Carr. He has been calling since mid- 2003 to see if Wilshire has been sold. 0.2.431 5. Coowners. Cestos Prospect, Dewey County, Oklahoma. Wilshire needs to provide updated over-and-short reports on the Blaine #1-29, the Blaine #2-29, and the Hill Pickering #2-32 wells. There have been no demand on these in five years. 0.2.741.27 6. Axis Energy. Murrin #1-23, Section 23-7N-14E, Pittsburg County, Oklahoma. Wilshire filed suit for $22,962.12. A settlement offer from Axis is under review and will probably be acceptable. 0.2.594 7. Wyoming Oil and Gas Commission. Routine oil and gas site cleanup request. Some equipment needs to be removed and a very small oil leak fixed. 0.2.1121 END SCHEDULE "E" RETURN TO: [Name] STATE OF _________________) [Company] ) ss. [Address] COUNTY OF _______________ ) [City, State, Zip] ASSIGNMENT, CONVEYANCE AND BILL OF SALE WILSHIRE ENTERPRISES, INC., a Delaware corporation, SAN FRANCISCO OIL COMPANY, a California corporation, ROCKLAND RESOURCES, CO., an Oklahoma corporation, and BRITALTA VENEZOLANO, LTD., an Alberta private corporation (herein collectively called "Assignor"), for Ten Dollars and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER and DELIVER unto CROW CREEK ENERGY L.L.C., a Delaware limited liability company (herein called "Assignee"), as of the Effective Date (hereinafter defined), all of Assignor's right, title and interest in and to the following: (a) The oil, gas and/or mineral leases (and interests therein, including overriding royalty interests), whether producing or non-producing, which are referenced in and/or described on Exhibit A attached hereto or which otherwise cover and affect the lands covered by the leases referenced in and/or described on Exhibit A, and whether or not fully or accurately set forth on Exhibit A (hereinafter called the "Leases"), including all seismic and geological information specific thereto; (b) The fee mineral interests, term mineral interests and any other interest in the oil, gas and other minerals in and/or under and that may be produced from all or any portion of the lands referenced in and/or described on Exhibit A, and whether or not fully or accurately set forth on Exhibit A (hereinafter called the "Mineral Interests"), together with all of Assignor's rights, if any, of ingress and egress, and rights to explore for and develop (or at the option of the holder thereof, to grant oil and gas leases authorizing other parties to explore for and develop) the minerals in, on or under such lands, including both producing and non-producing lands; (c) The lands and other rights described (in whole or in part) in the Leases or encompassed (in whole or in part) by the Mineral Interests ("Lands"); (d) The oil, condensate or natural gas wells, water source wells, and water and other types of injection wells (hereinafter called the "Subject Wells") and associated materials and other personal property situated on the Lands; (e) All other properties and rights used or held for use directly and exclusively in connection with the production, storage, gathering, processing and treating of oil, gas and other liquid and gaseous hydrocarbons from, and the disposal of salt water produced from, the Leases and the Subject Wells, including, without limitation, all materials, equipment, personal property and fixtures located thereon or used in connection therewith; (f) All easements, servitudes, rights-of-way, surface leases and other surface rights affecting the Lands; and (g) All leases, options, rights of first refusal, rights arising under forced pooling and other similar regulatory orders, contracts, operating agreements or other agreements (including specifically, but without limitation, all salt water disposal surface leases or agreements) and instruments to the extent that the same relate, appertain, belong to or are incidental to the Leases, Lands or Subject Wells. The interests described in paragraphs (a) through (g) above are hereinafter collectively called the "Subject Interests." TO HAVE AND TO HOLD the Subject Interests unto Assignee, its successors and assigns, forever. This Assignment, Conveyance and Bill of Sale (the "Assignment") is made without warranty of title, either express or implied. This Assignment is made without warranty of title, express, implied or statutory, even as to the return of the purchase price paid therefor. Any covenants implied by statute or law by the use of the word "Grant" or other similar words in this Assignment are hereby expressly restrained, disclaimed, waived and negated. This Assignment is made with full substitution and subrogation of Assignee and all persons claiming by, through, or under Assignee, to the extent assignable, in and to all representations and warranties of title heretofore given or made by Assignor's predecessors in title with respect to the Subject Interests. Assignor and Assignee agree that, to the extent required by applicable law to be operative, the disclaimers of certain warranties contained in this paragraph are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. WITHOUT LIMITATION OF THE GENERALITY OF THE PRECEDING SENTENCE, ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AS TO THOSE PORTIONS OF THE SUBJECT INTERESTS CONSTITUTING PERSONAL PROPERTY, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO THE CONDITION OF THE SUBJECT INTERESTS (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS). Assignor agrees to execute such further assurances as may be reasonably requested or required to allow Assignee full use and enjoyment of the Subject Interests conveyed by this Assignment. 2 This Assignment is expressly made and accepted subject to the terms and conditions of the Leases and all contracts relating to the purchase or sale of production therefrom, to all operating agreements, permits, rights of way, licenses, easements, options, orders and any other agreements or contracts comprising or attributable to and affecting the Subject Interests and to all reservations, exceptions, limitations or other burdens applicable thereto and which are valid, subsisting, enforceable and of record and of which Assignee has actual or constructive notice. This Assignment is made expressly subject to the terms and provisions of that Purchase and Sale Agreement by and between Assignor and Assignee, dated effective as of March 1, 2004. IN WITNESS WHEREOF, this Assignment has been executed and delivered on April _____, 2004, effective as to runs of oil and deliveries of gas, and for all other purposes as of 7:00 a.m. local time at the locations of the Subject Interests, respectively, on March 1, 2004 (the "Effective Date"). ASSIGNORS: WILSHIRE ENTERPRISES, INC. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ SAN FRANCISCO OIL COMPANY By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ ROCKLAND RESOURCES, CO. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ BRITALTA VENEZOLANO, LTD. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ 3 ASSIGNEE: CROW CREEK ENERGY L.L.C. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ 4 STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Wilshire Enterprises, Inc. to the foregoing instrument as its ____________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of San Francisco Oil Company to the foregoing instrument as its _________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ 5 STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Rockland Resources, Co. to the foregoing instrument as its _________________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Britalta Venezolano, Ltd. to the foregoing instrument as its __________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ 6 STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Crow Creek Energy L.L.C. to the foregoing instrument as its Manager, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such limited liability company, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ 7 Exhibit A TO ASSIGNMENT Schedule of Leases 8
Text98 Text97 Lease Name SortLegal ZONE Status AR CECIL FORD C B 2-31 09N-27W-31 DUNN A Proved Producing OK ANTHON NORTHWEST EDGAR 1-11 15N-18W-11 SPRINGER Proved Producing WATT SE 4 1 15N-18W-02 SPRINGER Proved Producing APACHE EAST YATES 1-31 05N-10W-31 MORROW Proved Producing CARPENTER NORTHEAST SHEPARD 1-15 15N-18W-15 MORROW Proved Producing EDMOND WEST GWYN 15N-04W-22 MISSISSIPPIAN Proved Producing WANDA 15N-04W-15 PRUE/MISS Proved Producing KINTA BURGE SW SW NE 1-U 08N-21E-31 SPIRO Proved Producing COBLENTZ 1 07N-19E-27 SPIRO Proved Producing COBLENTZ 2-27 07N-19E-27 SPIRO Proved Producing COBLENTZ 5 07N-19E-27 HARTSHORNE Proved Producing COLLINS 1 06N-18E-09 RED OAK Proved Producing DONNA JO 1 07N-20E-03 SPIRO & CROMWELL Proved Producing DONNA JO 2 07N-19E-23 HARTSHORNE Proved Producing GLENN 1 06N-18E-02 ATOKA Proved Producing GLENN 3 06N-18E-02 HARTSHORNE Proved Producing GLENN 4 06N-18E-02 ATOKA Proved Producing GOVERNMENT 3A-7U 06N-17E-07 ATOKA Proved Producing HIGHTOWER 1T 08N-21E-33 CROMWELL Proved Producing HIGHTOWER 2 08N-21E-33 ATOK-CRML Proved Producing HIGHTOWER 3 08N-21E-33 ATOKA BASAL Proved Producing JONES-MILLER NE NW SE 1 08N-19E-20 SPIRO Proved Producing JUDYANN 1-28 08N-19E-28 ATOKA Proved Producing MCCRABB WILSON 1 06N-18E-09 RED OAK Proved Producing MCCRABB WILSON 3 06N-18E-09 RED OAK Proved Producing MCMONIGLE 1 08N-21E-22 SPIRO & CROMWELL Proved Producing MIDGLEY 1 07N-20E-04 SPIRO Proved Producing ROYE 1-30 08N-21E-30 HARTSHORNE Proved Producing SLOAN 1 07N-21E-06 SPIRO Proved Producing SLOAN UNIT 2 07N-21E-06 HARTSHORNE Proved Producing SMITH-CARR SE SW NE 1 08N-19E-16 SPIRO Proved Producing STROUD 1 09N-24E-24 SPIRO Proved Producing TERRELL 1 08N-19E-36 SPIRO Proved Producing TERRELL 2 08N-19E-36 ATOKA Proved Producing Text98 Text97 Operator County WI NRI Fin_Wrk Fin_Rev Rev Gas Imbalance AR XTO ENERGY INCORPORATED FRANKLIN 0.01 0.01 0.01 0.01 -1,647.00 Text135: -1,647.00 OK DOMINION OKLAHOMA TEXAS E&P CUSTER 0.23 0.19 0.23 0.19 41.00 DOMINION OKLAHOMA TEXAS E&P CUSTER 0.17 0.14 0.17 0.14 279.00 Text135: 320.00 KAISER FRANCIS CADDO 0.00 0.00 0.00 0.00 -570.00 Text135: -570.00 DOMINION OKLAHOMA TEXAS E&P CUSTER 0.00 0.00 0.00 0.00 88.00 Text135: 88.00 SAMSON RESOURCES COMPANY LOGAN 0.45 0.37 0.45 0.37 -3,250.00 SAMSON RESOURCES COMPANY LOGAN 0.45 0.37 0.45 0.37 -2,583.00 Text135: -5,833.00 EXXON COMPANY U S A HASKELL 0.09 0.08 0.09 0.08 -1.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.01 0.01 0.01 3,704.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.01 0.01 0.01 9,074.00 OXLEY PETROLEUM COMPANY LATIMER 0.01 0.01 0.01 0.01 1,019.00 EXXON COMPANY U S A LATIMER 0.02 0.02 0.02 0.02 -1.00 SAMSON RESOURCES COMPANY HASKELL 0.00 0.00 0.00 0.00 15,664.00 OXLEY PETROLEUM COMPANY HASKELL 0.00 0.00 0.00 0.00 -220.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.01 0.01 0.01 18,311.00 OXLEY PETROLEUM COMPANY LATIMER 0.02 0.02 0.02 0.02 -1,256.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.01 0.01 0.01 3,846.00 EBERLY & MEADE INCORPORATED PITTSBURG 0.01 0.01 0.01 0.01 -1,937.00 TEXACO EXPL & PROD HASKELL 0.09 0.08 0.09 0.08 2,279.00 OXLEY PETROLEUM COMPANY HASKELL 0.09 0.08 0.09 0.08 -599.00 BRAVO NATURAL RESOURCES INC HASKELL 0.09 0.08 0.09 0.08 379.00 SAMSON RESOURCES COMPANY HASKELL 0.00 0.00 0.00 0.00 -520.00 SAMSON RESOURCES COMPANY HASKELL 0.00 0.00 0.00 0.00 387.00 EXXON COMPANY U S A LATIMER 0.02 0.02 0.02 0.02 18,295.00 CHESAPEAKE OPERATING INC. LATIMER 0.02 0.02 0.02 0.02 1,168.00 SAMSON RESOURCES COMPANY HASKELL 0.08 0.07 0.08 0.07 7,689.00 OXLEY PETROLEUM COMPANY HASKELL 0.05 0.04 0.05 0.04 5.00 EL PASO PRODUCTION COMPANY HASKELL 0.03 0.03 0.03 0.03 -269.00 QUESTAR EXPL. & PROD. HASKELL 0.07 0.06 0.07 0.06 5,945.00 H S RESOURCES INCORPORATED HASKELL 0.17 0.15 0.17 0.15 2,014.00 XTO ENERGY INCORPORATED HASKELL 0.01 0.01 0.01 0.01 -1,831.00 STEPHENS PRODUCTION COMPANY LE FLORE 0.07 0.06 0.07 0.06 -9,346.00 EXXON COMPANY U S A HASKELL 0.01 0.01 0.01 0.01 207.00 EXXON COMPANY U S A HASKELL 0.01 0.01 0.01 0.01 -529.00
Text98 Text97 Lease Name SortLegal ZONE Status TERRELL 4 08N-19E-36 SPIRO Proved Producing WIMBERLY 1 08N-19E-28 SPIRO Proved Producing COBLENTZ 2-27 07N-19E-27 CROMWELL Proved Shut-In DOBY 1 WM NW SE NW 07N-20E-03 SPIRO Proved Shut-In SLOAN UNIT 2 07N-21E-06 SPIRO Proved Shut-In TERRELL 1 W J SW SE 08N-19E-36 CROMWELL Proved Shut-In MILDER WILHITE 1-35 23N-26W-35 MORROW Proved Producing REAMS NORTHWEST CROWDER 1 07N-15E-18 CROMWELL Proved Producing HAMILTON 1-13 07N-14E-13 CROMWELL Proved Producing MURRIN 1 07N-14E-23 CROMWELL Proved Producing REAMS SOUTHEAST HAZELWOOD 1 06N-15E-02 HARTSHORNE Proved Producing LALMAN 5 06N-15E-01 HARTSHORNE Proved Producing P S C 1 07N-16E-31 HARTSHORNE Proved Producing SILVA 3 06N-15E-12 HARTSHORNE Proved Producing WATONGA-CHICKASHA TREND ICE B 1-6 14N-10W-06 MORROW Proved Producing WILBURTON ADAMS C 1 06N-19E-33 SPIRO Proved Producing ADAMS C 2 06N-19E-33 SPIRO Proved Producing BENNETT STATE 1 NE NW SE 05N-18E-19 SPIRO Proved Producing BENNETT STATE 2-19 05N-18E-19 SPIRO Proved Producing BENNETT STATE 3-U 05N-18E-19 SPIRO Proved Producing BENNETT STATE 4-19 05N-18E-19 SPIRO Proved Producing BENNETT STATE 4-U 05N-18E-19 ATOKA Proved Producing BOWMAN P D 1 NE 05N-17E-29 SPIRO Proved Producing BOWMAN P D 2 05N-17E-29 SPIRO Proved Producing DEGNAN 1 06N-19E-28 SPIRO & CROMWELL Proved Producing DIAMOND 1 05N-19E-30 PANOLA Proved Producing DUNAGAN 1-A A SE 05N-17E-13 SPIRO Proved Producing DUNAGAN 2-A 05N-17E-13 SPIRO & WAPANUCKA Proved Producing DUNAGAN 3-A 05N-17E-13 SPIRO Proved Producing FAZEKAS STEVE 2 05N-18E-17 ARBUCKLE Proved Producing FAZEKAS STEVE 3-L 05N-18E-17 WAPANUCKA Proved Producing FAZEKAS STEVE 4-L 05N-18E-17 CRML-SPRO-WPCK Proved Producing FAZEKAS STEVE 4-U 05N-18E-17 WAPANUCKA & CROMWELL Proved Producing GOLDIE SIVIL 2-22C 05N-17E-22 SPIRO Proved Producing GOLDIE SIVIL 2-22T 05N-17E-22 CROMWELL Proved Producing QUAID NE SE NW 1 05N-19E-07 SPIRO Proved Producing RAY J A 150 NE OF C NW 05N-19E-20 SPIRO Proved Producing ROBINSON 1 SW NW 05N-18E-12 SPIRO Proved Producing ROBINSON 2 05N-18E-12 ATOKA & SPIRO Proved Producing ROBINSON 3-12 05N-18E-12 FANSHAWE Proved Producing Int Text98 Text97 Operator County WI NRI Fin_Wrk Fin_RevInt Rev Gas Imbalance EXXON COMPANY U S A HASKELL 0.02 0.01 0.02 0.01 -3,107.00 EXXON MOBIL CORPORATION HASKELL 0.00 0.00 0.00 0.00 2,106.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.01 0.01 0.01 9,074.00 FAULCONER VERNON E INC. HASKELL 0.03 0.03 0.03 0.03 1,907.00 H S RESOURCES INCORPORATED HASKELL 0.17 0.15 0.17 0.15 2,014.00 EXXON COMPANY U S A HASKELL 0.01 0.01 0.01 0.01 207.00 Text135: 85,678.00 ZINKE & TRUMBO INCORPORATED ELLIS 0.25 0.19 0.25 0.19 6,491.00 Text135: 6,491.00 WILSHIRE OIL COMPANY OF TEXAS PITTSBURG 0.23 0.20 0.23 0.20 23,096.00 WILSHIRE OIL COMPANY OF TEXAS PITTSBURG 0.26 0.23 0.26 0.23 30,937.00 WILSHIRE OIL COMPANY OF TEXAS PITTSBURG 0.55 0.46 0.55 0.46 209.00 Text135: 54,242.00 WILSHIRE OIL COMPANY OF TEXAS PITTSBURG 0.56 0.44 0.56 0.44 -61.00 SPARTAN RESOURCES PITTSBURG 0.33 0.26 0.33 0.26 -34.00 QUENCH OIL & GAS INCORPORATED PITTSBURG 0.06 0.05 0.06 0.05 -616.00 QUENCH OIL & GAS INCORPORATED PITTSBURG 0.20 0.17 0.20 0.17 -846.00 Text135: -1,557.00 MARATHON OIL COMPANY CANADIAN 0.20 0.15 0.20 0.15 -761.00 Text135: -761.00 CHESAPEAKE OPERATING INC. LATIMER 0.06 0.05 0.06 0.05 3,878.00 CHESAPEAKE OPERATING INC. LATIMER 0.07 0.06 0.07 0.06 -7,725.00 AMOCO PRODUCTION COMPANY LATIMER 0.03 0.03 0.03 0.03 60,703.00 AMOCO PRODUCTION COMPANY LATIMER 0.03 0.03 0.03 0.03 -2,187.00 AMOCO PRODUCTION COMPANY LATIMER 0.03 0.03 0.03 0.03 -33,216.00 AMOCO PRODUCTION COMPANY LATIMER 0.04 0.04 0.04 0.04 -25,465.00 AMOCO PRODUCTION COMPANY LATIMER 0.03 0.03 0.03 0.03 -17,488.00 AMOCO PRODUCTION COMPANY PITTSBURG 0.01 0.01 0.01 0.01 11,120.00 AMOCO PRODUCTION COMPANY PITTSBURG 0.01 0.01 0.01 0.01 -2,348.00 SAMSON RESOURCES COMPANY LATIMER 0.00 0.02 0.00 0.02 -22,331.00 QUESTAR EXPL. & PROD. LATIMER 0.06 0.05 0.06 0.05 7,860.00 AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 74,066.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.00 0.01 0.00 -2,845.00 AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 -618.00 AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 127,134.00 AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 -4,603.00 AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 -636.00 VASTAR RESOURCES INCORPORATED LATIMER 0.00 0.00 0.00 0.00 -636.00 MARATHON OIL COMPANY LATIMER 0.01 0.01 0.01 0.01 2,765.00 MARATHON OIL COMPANY LATIMER 0.01 0.01 0.01 0.01 -9.00 CHESAPEAKE OPERATING INC. LATIMER 0.04 0.03 0.04 0.03 6,908.00 EXXON COMPANY U S A LATIMER 0.01 0.01 0.01 0.01 9,518.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.00 0.01 0.00 14,178.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.00 0.01 0.00 -815.00 AMOCO PRODUCTION COMPANY LATIMER 0.01 0.00 0.01 0.00 -440.00
Text98 Text97 Lease Name SortLegal ZONE Status SAMS 1-22 05N-17E-22 UNION VALLEY Proved Producing SIVIL 3 05N-17E-22 WAPANUCKA Proved Producing SIVIL 4-12 05N-17E-22 WAPANUCKA Proved Producing UAS MCTIERNAN J W SE NW 1 05N-19E-06 SPIRO Proved Producing YOUNG RANCH 1-28 06N-19E-28 SPIRO Proved Producing YOUNG RANCH 2-27 06N-19E-27 SPIRO Proved Producing BENNETT STATE 2-19 05N-18E-19 ARBUCKLE Proved Shut-In BENNETT STATE 3 05N-18E-19 MRRW-SPRO Proved Shut-In BENNETT STATE 3-U 05N-18E-19 SPIRO Proved Shut-In FAZEKAS STEVE 3-U 05N-18E-17 SPIRO Proved Shut-In FAZEKAS STEVE 5 05N-18E-17 ATOKA Proved Shut-In VARNUM GUY 1 C NE 05N-18E-25 SPIRO Proved Shut-In WY NITCHIE GULCH NICHIE GULCH STATE UNIT 17-16 23N-103W-16 FRONTIER Proved Producing NICHIE GULCH STATE UNIT 17-16 23N-103W-16 DAKOTA Proved Producing NITCHIE GULCH UNIT 18 23N-103W-29 FRONTIER Proved Producing NITCHIE GULCH UNIT 21-21F 23N-103W-21 FRONTIER Proved Producing NITCHIE GULCH UNIT 22-8 23N-103W-07 DAKOTA Proved Producing PINE CANYON WEST PINE CANYON 10 22N-103W-05 DAKOTA Proved Producing Text98 Text97 Operator County WI NRI Fin_Wrk Fin_RevInt Rev Gas Imbalance SAMSON RESOURCES COMPANY LATIMER 0.04 0.03 0.04 0.03 -2,076.00 MARATHON OIL COMPANY LATIMER 0.01 0.01 0.01 0.01 -107.00 MARATHON OIL COMPANY LATIMER 0.02 0.01 0.02 0.01 154.00 CHESAPEAKE OPERATING INC. LATIMER 0.00 0.00 0.00 0.00 45,186.00 SAMSON RESOURCES COMPANY LATIMER 0.26 0.24 0.26 0.24 -59,418.00 SAMSON RESOURCES COMPANY LATIMER 0.25 0.23 0.25 0.23 -157,858.00 VASTAR RESOURCES INCORPORATED LATIMER 0.03 0.03 0.03 0.03 -2,187.00 VASTAR RESOURCES INCORPORATED LATIMER 0.03 0.03 0.03 0.03 -33,216.00 ARCO PERMIAN LATIMER 0.03 0.03 0.03 0.03 -33,216.00 VASTAR RESOURCES INCORPORATED LATIMER 0.00 0.00 0.00 0.00 -4,603.00 AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 -103.00 SAMSON RESOURCES COMPANY LATIMER 0.02 0.02 0.02 0.02 54,345.00 Text135: 3,669.00 WY BERCO RESOURCES SWEETWATER 0.03 0.02 0.03 0.02 -1,954.00 BERCO RESOURCES SWEETWATER 0.03 0.03 0.03 0.03 113.00 BERCO RESOURCES SWEETWATER 0.03 0.02 0.03 0.02 42.00 BERCO RESOURCES SWEETWATER 0.03 0.03 0.03 0.03 -32.00 BERCO RESOURCES SWEETWATER 0.03 0.03 0.03 0.03 365.00 Text135: -1,466.00 SAMSON RESOURCES COMPANY SWEETWATER 0.03 0.03 0.03 0.03 -599.00 Text135: -599.00 Text145: 138,055.00
Text98 Text97 Lease Name SortLegal ZONE Status OK NOBLE NORTHWEST FOSTER PAUL 08N-02W-04 VIOLA LIME Proved Producing WATONGA-CHICKASHA TREND ICE B 1-6 14N-10W-06 MORROW Proved Producing WILBURTON MALITZ 1-25 05N-18E-25 SPIRO Proved Producing MALITZ 1-25 05N-18E-25 PANOLA Proved Producing VARNUM GUY 2-25 05N-18E-25 SPIRO Proved Producing VARNUM GUY 3-25 05N-18E-25 SPIRO Proved Producing VARNUM GUY 4-25 05N-18E-25 SPIRO Proved Producing VARNUM GUY 1 C NE 05N-18E-25 SPIRO Proved Shut-In PA VARIOUS 1975 PROGRAM HOMER CITY Proved Producing 1976 PROGRAM VARIOUS Proved Producing 1977 PROGRAM VARIOUS Proved Producing 1978 PROGRAM VARIOUS Proved Producing 1979 PROGRAM VARIOUS Proved Producing TX HELUMA EAST JACOBS LIVESTOCK C 2 Patterson W-A1270-Sec# DEVONIAN Proved Producing Text98 Text97 Operator County WI NRI Fin_Wrkl Fin_Revl Preferential Right OK WILSHIRE OIL COMPANY OF TEXAS CLEVELAND 0.56 0.48 0.56 0.48 Yes MARATHON OIL COMPANY CANADIAN 0.20 0.15 0.20 0.15 NOS Required AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 Yes AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 Yes SAMSON RESOURCES COMPANY LATIMER 0.00 0.00 0.00 0.00 Yes SAMSON RESOURCES COMPANY LATIMER 0.00 0.00 0.00 0.00 Yes AMOCO PRODUCTION COMPANY LATIMER 0.00 0.00 0.00 0.00 Yes SAMSON RESOURCES COMPANY LATIMER 0.02 0.02 0.02 0.02 Yes PA DOMINION INDIANA 0.50 0.44 0.50 0.44 Yes DOMINION INDIANA/ WESTMORELAND 0.50 0.44 0.50 0.44 Yes DOMINION INDIANA/ WESTMORELAND 0.50 0.44 0.50 0.44 Yes DOMINION VARIOUS 0.32 0.28 0.32 0.28 Yes DOMINION VARIOUS 0.19 0.17 0.19 0.17 Yes TX ENDEAVOR ENERGY RESOURCES UPTON 0.50 0.44 0.50 0.44 NOS Required
SCHEDULE "J" ESCROW TRUST AGREEMENT This Escrow Trust Agreement (the "Agreement") is made and entered into as of this ____ day of March, 2004 (the "Effective Date") by and among CROW CREEK ENERGY L.L.C., a Delaware limited liability company ("CCE" or "Purchaser"), WILSHIRE ENTERPRISES, INC., a Delaware corporation ("WEI"), SAN FRANCISCO OIL COMPANY, a California corporation ("SFO"), ROCKLAND RESOURCES, CO., an Oklahoma corporation ("RRC"), BRITALTA VENEZOLANO, LTD., an Alberta private corporation ("BV", together with WEI, SFO and RRC, the "Sellers"), and BANK OF OKLAHOMA, N.A. ("Escrow Agent"). For all purposes herein, WEI shall act on behalf of itself and the other Sellers. CCE, each of the Sellers and Escrow Agent sometimes individually may be referred to as a "Party" and collectively may be referred to as the "Parties." RECITALS A. CCE and the Sellers have entered into a Purchase and Sale Agreement dated as of March 17, 2004, but effective for all purposes as of March 1, 2004 (the "Purchase Agreement"). B. Pursuant to the Purchase Agreement, CCE will place One Million Dollars ($1,000,000.00) in escrow (the "Escrow Amount") with Escrow Agent. C. Each of CCE and the Sellers desire to establish an escrow with Escrow Agent to provide for the retention, administration and controlled access of the Escrow Amount. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual agreements and covenants contained in this Agreement, and including to be legally bound hereby, the Parties agree as follows: ARTICLE 1. ESTABLISHMENT OF ESCROW 1.1 Appointment of Escrow Agent. Each of CCE and the Sellers hereby appoint and direct Escrow Agent to act as escrow agent in accordance with the terms of this Agreement, and the Escrow Agent hereby accepts such appointment. 1.2 Deposit of Escrow Amount. (a) Upon the execution of this Agreement, CCE has deposited or caused to be deposited the Escrow Amount into an account established by Escrow Agent. The Escrow Amount shall be held and disposed of by Escrow Agent in accordance with the terms and conditions of this Agreement. (b) Each of CCE and the Sellers hereby authorize and direct the Escrow Agent to keep and preserve the Escrow Amount in its possession, free and clear of any and all claims, liens and encumbrances whatsoever, subject to the terms of this Agreement regarding the disbursement of all or part of such Escrow Amount. 1.3 Investment of Escrow Amount. Escrow Agent shall be permitted, and is hereby authorized to deposit, transfer, hold and invest the Escrow Amount, including principal and interest, in a money market fund managed by Escrow Agent, during the period of this escrow in accordance with such instructions and directions as may from time to time be provided to Escrow Agent in writing and signed by CCE and WEI (on behalf of the Sellers). Any interest received by Escrow Agent with respect to the Escrow Amount, including reinvested interest ("Interest"), shall become part of the Escrow Amount. The Interest earned on the Escrow Amount shall be distributed in accordance with the terms of this Agreement. 1.4 Tax Related Terms. (a) Tax Reporting. CCE and the Sellers agree that, for tax reporting purposes, all Interest or other taxable income earned from the investment of the Escrow Amount in any tax year shall be taxable to the Party who receives such Interest under this Agreement or under the escrow agreement with Bank of Oklahoma, N.A. established pursuant to Section 2.1(c) below. (b) Certification of Tax Identification Number. CCE within 30 days after the date hereof, shall provide Escrow Agent with certified tax identification numbers by furnishing appropriate forms and documents that the Escrow Agent may reasonably request. CCE understands that if such tax reporting documentation is not so certified to Escrow Agent, then Escrow Agent may be required by the Internal Revenue Code of 1986, as amended, to withhold a portion of any Interest or other income earned on the investment of the Escrow Amount pursuant to this Agreement. (c) Tax Allocation. To the extent that the Escrow Agent becomes liable for the payment of any taxes in respect of income derived from the investment of the Escrow Amount, Escrow Agent shall satisfy such liability to the extent possible from the Escrow Amount and the Interest. Each of CCE and the Sellers agree to indemnify and hold the Escrow Agent harmless from and against any taxes, additions for late payment, interest, penalties and other expenses that may be assessed against the Escrow Agent on or with respect to any payment or other activities under this Agreement unless any such tax, addition for late payment, interest, penalties and other expenses shall arise out of or be caused by the actions of, or failure to act by, the Escrow Agent. ARTICLE 2. RELEASE OF ESCROW AMOUNT 2.1 Release of Escrow Amount. (a) Escrow Agent shall release the Escrow Amount, together with Interest thereon, to WEI (on behalf of itself and the Sellers) upon delivery by WEI of a duly executed certificate to Escrow Agent certifying that it is entitled to the release of the Escrow Amount pursuant to Section 2.5(a) of the Purchase Agreement along with evidence that a copy of such certificate has been delivered to CCE in accordance with Section 6.2 of this Agreement. 2 (b) Escrow Agent shall release the Escrow Amount, together with Interest thereon, to CCE upon delivery by CCE of a duly executed certificate to Escrow Agent certifying that it is entitled to the release of the Escrow Amount pursuant to Section 2.5(b) of the Purchase Agreement along with evidence that a copy of such certificate has been delivered to WEI (on behalf of itself and the Sellers) in accordance with Section 6.2 of this Agreement. (c) Escrow Agent shall, pursuant to Section 2.4 of the Purchase Agreement, retain the Escrow Amount, together with Interest thereon as the Holdback Amount (as defined in the Purchase Agreement) upon receipt of joint written instructions signed by each of CCE and WEI (on behalf of the Sellers) certifying that Closing (as defined in the Purchase Agreement) has occurred and specifying that the Holdback Escrow Agreement (as defined in the Purchase Agreement) has been executed by CCE and the Sellers. (d) Notwithstanding anything herein to the contrary, upon the receipt of joint written instructions signed by each of CCE and WEI (on behalf of the Sellers), Escrow Agent shall deliver the Escrow Amount, or portions thereof and inclusive of Interest thereon, in accordance with such instructions. ARTICLE 3. TERM AND TERMINATION 3.1 Term of Agreement. This Agreement shall remain in effect until the Escrow Amount (and Interest thereon) is distributed. This Agreement may be terminated by joint instructions in writing from CCE and WEI (on behalf of the Sellers). 3.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to Escrow Agent, Escrow Agent shall provide written notice of delinquency to CCE and WEI (on behalf of the Sellers). Any Party to this Agreement shall have the right to make the payment to Escrow Agent to cure the default. If the past due payment is not received in full by Escrow Agent within 30 days of the date of such notice, then Escrow Agent shall have the right either to (a) terminate this Agreement at any time thereafter by sending written notice of termination to CCE and WEI (on behalf of the Sellers), or (b) cure the default by deducting the unpaid and owing fees from (i) the Interest and (ii) if the amount of Interest is insufficient, by deducting the remainder from the Escrow Amount. Escrow Agent shall have no obligation to take any action under this Agreement so long as any payment due to Escrow Agent remains unpaid. 3.3 Survival of Terms Following Termination. Upon termination of this Agreement, the following provisions of this Agreement shall survive. (a) The provisions of Article 2; (b) The obligation to pay Escrow Agent any fees and expenses due; (c) The provisions of Article 5; and 3 (d) Any provisions in this Agreement which specifically state they survive the termination or expiration of this Agreement. ARTICLE 4. ESCROW AGENT'S FEES 4.1 Fee Schedule. Escrow Agent is entitled to be paid its standard fees and expenses applicable to the services provided. Escrow Agent shall notify CCE and WEI (on behalf of the Sellers) for payment of Escrow Agent's fees at least sixty (60) days prior to any increase in fees. For any service not listed on Escrow Agent's standard fee schedule, Escrow Agent will provide a quote prior to rendering the service, if requested. 4.2 Payment Terms. Escrow Agent shall not be required to perform any service unless the payment for such service and any outstanding balances owed to Escrow Agent are paid in full. All invoiced fees shall be payable out of Interest; provided, that any fees in excess of accrued Interest shall be paid one-half (1/2) by CCE and one-half (1/2) by the Sellers. Late fees on past due amounts shall accrue at the rate of __________ percent per month (__% per annum) from the date of the invoice. ARTICLE 5. LIABILITY AND DISPUTES 5.1 Right to Rely on Instructions. Escrow Agent may act in reliance upon any instruction, instrument, certificate or signature reasonably believed by Escrow Agent to be genuine. Escrow Agent shall only act upon written notice, request or instruction given by the designated contacts of a Party to this Agreement. Escrow Agent shall not be responsible for failure to act as a result of causes beyond the reasonable control of Escrow Agent. 5.2 Indemnification. Escrow Agent shall be responsible to perform its obligations under this Agreement and to act in a reasonable and prudent manner with regard to this escrow arrangement. Provided Escrow Agent has acted in the manner stated in the preceding sentence, CCE and the Sellers each agree to indemnify, defend and hold harmless Escrow Agent from any and all claims, actions, damages, arbitration fees and expenses, costs, attorney's fees and other liabilities incurred by Escrow Agent relating in any way to this Agreement. 5.3 Disputes. If any disagreement or dispute arises between the Parties to this Agreement concerning the meaning or validity of any provision hereunder or concerning any other matter relating to this Agreement, the Escrow Agent shall be under no obligation to act, except under process or order of court, or until it has been adequately indemnified to its full satisfaction, and shall sustain no liability for its failure to act pending such process, court order or indemnification; and may, in its sole discretion, interplead the Escrow Amount or that portion of the Escrow Amount it then holds with the District Court of Harris County, Texas, and name the Parties in such action. Upon filing the interpleader action, the Escrow Agent shall be relieved of all liability as to the Escrow Amount and shall be entitled to recover from the Parties, its reasonable attorneys fees and other costs incurred in commencing and maintaining such action. In no event shall the institution of such interpleader action impair the rights of the Escrow Agent set forth in Section 5.3 above. 4 5.4 Controlling Law. This agreement is to be governed and construed in accordance with the laws of the state of Texas, without regard to its conflicts of law provisions. The Parties irrevocably submit to the exclusive jurisdiction of the state courts of Harris County, Texas, and the Federal courts of the United States located in Houston, Texas, with regard to any action brought to enforce this Agreement. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT. ARTICLE 6. GENERAL PROVISIONS 6.1 Entire Agreement. This Agreement, which includes the Exhibits described herein, embodies the entire understanding among the Parties with respect to its subject matter and supersedes all previous communications, representations or understandings, either oral or written. No amendment or modification of this Agreement shall be valid or binding unless signed by all the Parties hereto. 6.2 Notices. All notices, invoices, payments, deposits and other documents and communications shall be given to the Parties at the addresses specified in the attached Exhibit A. It shall be the responsibility of the Parties to notify each other as provided in this Section in the event of a change of address. The Parties shall have the right to rely on the last known address of the other Parties. Unless otherwise provided in this Agreement, all documents and communications may be delivered by First Class mail or by facsimile. 6.3 Severability. In the event any provision of this Agreement is found to be invalid, voidable or unenforceable, the Parties agree that unless it materially affects the intent and purpose of this Agreement, such invalidity, voidability or unenforceability shall affect neither the validity of this Agreement nor the remaining provisions herein, and the provision in question shall be deemed to be replaced with a valid and enforceable provision most closely reflecting the intent and purpose of the original provision. 6.4 Successors. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the Parties. However, Escrow Agent shall have no obligation in performing this Agreement to recognize any successor or assign of CCE or any of the Sellers unless Escrow Agent receives written evidence of the change of Parties. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 The Parties have executed this Agreement effective as of the date first above written. PURCHASER: CROW CREEK ENERGY L.L.C., a Delaware limited liability company By: _______________________________________ Name: _____________________________________ Title: ____________________________________ SELLERS: WILSHIRE ENTERPRISES, INC., a Delaware corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ SAN FRANCISCO OIL COMPANY, a California corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ ROCKLAND RESOURCES CO., an Oklahoma corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ 6 BRITALTA VENEZOLANO, LTD., an Alberta private corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ ESCROW AGENT: BANK OF OKLAHOMA, N.A. By: _______________________________________ Name: _____________________________________ Title: ____________________________________ 7 EXHIBIT A TO ESCROW TRUST AGREEMENT DESIGNATED CONTACT Notices, deposit materials and communications to CCE should be addressed to: Company Name: Crow Creek Energy L.L.C. Address: 2100 South Utica, Suite 200 Tulsa, Oklahoma 74114 Attn: Maurice Storm Facsimile: (918) 745-1701 Notices and communications to Sellers should be addressed to: Company Name: Wilshire Enterprises, Inc. Address: 921 Bergen Avenue Jersey City, New Jersey 07306 Attn: Philip Kupperman Facsimile: (201) 420-6012 Contracts, deposit materials and notices Escrow Invoices inquiries and fee to Escrow Agent should be addressed to: remittances to Escrow Agent should be addressed to: Bank of Oklahoma, N.A. _____________________________________ _______________________________________ _____________________________________ _______________________________________ _____________________________________ Attn: Attn: Telephone: Telephone: Facsimile: Facsimile: SCHEDULE "K" HOLDBACK ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Agreement"), is made and entered into as of this ____ day of March, 2004 (the "Effective Date") by and among CROW CREEK ENERGY L.L.C., a Delaware limited liability company ("Purchaser"), WILSHIRE ENTERPRISES, INC., a Delaware corporation ("WEI"), SAN FRANCISCO OIL COMPANY, a California corporation ("SFO"), ROCKLAND RESOURCES, CO., an Oklahoma corporation ("RRC"), BRITALTA VENEZOLANO, LTD., an Alberta private corporation ("BV", together with WEI, SFO and RRC, the "Sellers"), and BANK OF OKLAHOMA, N.A. ("Escrow Agent"). For all purposes herein, WEI shall act on behalf of itself and the other Sellers. CCE, each of the Sellers and Escrow Agent sometimes individually may be referred to as a "Party" and collectively may be referred to as the "Parties." RECITALS A. Purchaser and Sellers have entered into a Purchase and Sale Agreement dated as of March __, 2004, but effective for all purposes as of March 1, 2004 (the "Purchase Agreement"); B. The Purchase Agreement provides for, among other things, a Sellers' limited indemnity, indemnifying Purchaser from and against certain claims and losses that may be asserted against or incurred by Purchaser as well as setting forth procedures after Closing for addressing title defects and environmental liabilities. C. As security for the limited indemnity obligation of Sellers and the rights of Purchaser after Closing to address title defects and environmental liabilities under the Purchase Agreement, the Parties have agreed that a holdback amount equal to the earnest money (together with interest thereon), previously escrowed under the Purchase Agreement, remain in an escrow fund (as defined below); and D. The Escrow Agent has agreed to hold such funds pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, the parties hereby agree as follow 1. Holdback Escrow Fund. (a) On the date hereof, Purchaser and Sellers, by written instructions to the Escrow Agent, have directed that the Deposit (as defined in the Purchase Agreement) (together with interest thereon), in the amount of $1,000,000 plus accrued interest (the "Holdback Amount") in immediately available funds (as increased by any earnings thereon and as reduced by any disbursements or losses on investments, the ("Holdback Escrow Fund"), remain in escrow in accordance with this Agreement. The Escrow Agent hereby acknowledges receipt thereof. (b) The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse the Holdback Escrow Fund pursuant to the terms and conditions hereof. Subject to and in accordance with the terms and conditions hereof, Escrow Agent agrees that it shall receive, hold in escrow, invest and reinvest and release or distribute the Holdback Escrow Fund. It is hereby expressly stipulated and agreed that all interest and other earnings on the Holdback Escrow Fund shall become a part of the Holdback Escrow Fund for all purposes, and that all losses resulting from the investment or reinvestment thereof from time to time and all amounts charged thereto to compensate or reimburse the Escrow Agent from time to time for amounts owing to it hereunder shall from the time of such loss or charge no longer constitute part of the Holdback Escrow Fund. 2. Investment of the Holdback Escrow Fund. Escrow Agent shall invest and reinvest the Holdback Escrow Fund, including principal and interest, in a money market fund managed by Escrow Agent, during the period of this escrow and unless otherwise instructed in writing by Purchaser and Sellers. Such written instructions, if any, shall specify the type and identity of the investments to be purchased and/or sold and shall also include the name of the broker-dealer, if any, any particular settlement procedures required, if any (which settlement procedures shall be consistent with industry standards and practices), and such other information as Escrow Agent may require. Escrow Agent shall not be liable for failure to invest or reinvest funds absent sufficient written direction. Unless Escrow Agent is otherwise directed in such written instructions, Escrow Agent may use a broker-dealer of its own selection, including a broker-dealer owned by or affiliated with Escrow Agent or any of its affiliates. The Escrow Agent or any of its affiliates may receive compensation with respect to any investment directed hereunder. Escrow Agent shall not be liable for losses on any investments, including, but not limited to, losses from market risks due to premature liquidation or resulting from other actions taken pursuant to this Escrow Agreement. 3. Release of Holdback Escrow Funds. The Escrow Agent shall release the Holdback Escrow Fund as follows: (a) The Escrow Agent shall release the Holdback Escrow Fund in accordance with the written instructions of both Purchaser and Sellers (written instructions by either Purchaser or the Sellers acting independently shall not be sufficient to release the Holdback Escrow Fund). (b) Purchaser may, from time to time, submit a demand to Sellers, with a copy to the Escrow Agent, specifying any claim (a "Claim") against Sellers made pursuant to Section 7.1 or Article 10 of the Purchase Agreement, and if known, the amount of the Claim, and certifying that Purchaser is entitled to payment from Sellers with respect to such Claim pursuant to the terms of Section 7.1 or Article 10, as applicable, of the Purchase Agreement (a "Notice of Claim"). Upon agreement among Purchaser and Sellers as to the validity and value of a Claim or upon a final determination by the Arbitrator as set forth in Article 11 of the Purchase Agreement as to the validity and amount of a Claim, Purchaser and Sellers shall submit a notice in writing signed by both Purchaser and Sellers (a "Payment Notice") to the Escrow Agent, setting forth the amount of payment due from Sellers that Purchaser is entitled to pursuant to the Purchase Agreement (the "Payment Amount"), with a copy of the Payment Notice to Sellers. The Escrow Agent shall release the Payment Amount to Purchaser pursuant to the terms of the Payment Notice. (c) Unless the Escrow Agent shall have received a Notice of Claim from Purchaser that has not been paid or otherwise resolved on or before the Final Settlement Date (as defined in the Purchase Agreement), the Escrow Agent shall distribute the Holdback Escrow Fund (or, if pending Notice(s) of Claim specify a maximum Claim, and the Holdback Escrow Fund exceeds the amount of such Claim, the Escrow Agent shall distribute such excess) to Sellers. (d) On or after the Final Settlement Date (as defined in the Purchase Agreement) and for each outstanding Claim that is resolved, to the extent the Holdback Escrow Fund exceeds the Payment Amount for such resolved Claim plus the maximum amount of Claims subject to any unresolved Notice of a Claim, the Escrow Agent shall distribute such excess to Sellers. (e) Upon resolution and payment (if necessary) after the Final Settlement Date (as defined in the Purchase Agreement) of all outstanding Notices of Claim, the Escrow Agent shall distribute the Holdback Escrow Fund to Sellers. (f) The Escrow Agent shall release the Holdback Escrow Fund in accordance with the terms of an order, judgment or decree of a court or administrative agency of competent jurisdiction ordering the release of the Holdback Escrow Fund or any portion thereof, accompanied by an opinion of counsel of the party requesting release of the Holdback Escrow Fund to the effect that such order, judgment or decree represents a final adjudication of the rights of the parties hereto by a court of competent jurisdiction, and that the time for appeal from such order, judgment or decree has expired without an appeal having been perfected. 4. Matters Relating to the Escrow Agent. (a) Indemnification of Escrow Agent. Purchaser and Sellers, jointly and severally, agree to hold the Escrow Agent harmless and to indemnify the Escrow Agent against any loss, liability, expense (including reasonable attorney's fees and expenses), claim, or demand arising out of or in connection with the performance of its obligations in accordance with the provisions of this Agreement, except for gross negligence or willful misconduct of the Escrow Agent. The foregoing indemnities in this paragraph shall survive the resignation of the Escrow Agent or the termination of this Agreement. (b) Specific Duties: No Liability. The Escrow Agent's duties are only such as are specifically provided herein, and the Escrow Agent shall incur no liability whatsoever to Purchaser or Sellers, except for gross negligence or willful misconduct. The Escrow Agent shall have no responsibility hereunder other than to follow faithfully the instructions herein contained. The Escrow Agent may consult with counsel and shall be fully protected in any action taken in good faith in accordance with such advice. The Escrow Agent shall be fully protected in acting in accordance with any written instructions given to it hereunder and believed by it to have been executed by the proper parties. (c) Fees. The Escrow Agent shall be entitled to a fee of _______________________ Dollars ($______________) for the services rendered under this Agreement, which fee shall be paid from interest and other earnings on the Holdback Amount; provided that any fees in excess of accrued interest and earnings shall be paid by Sellers and Purchaser in equal shares. The Escrow Agent shall have a lien on the Holdback Escrow Fund for all expenses and fees incurred by it pursuant to this Agreement and shall have the right to reimbursement for all such expenses and fees from the Holdback Escrow Fund. If the Escrow Agent believes it to be reasonably necessary to consult with counsel concerning any of its duties hereunder, or if the Escrow Agent becomes involved in litigation as a result of acting as Escrow Agent hereunder, then in either case, the costs, expenses, and reasonable attorneys fees of the Escrow Agent shall be borne equally by the Purchaser and the Sellers. (d) Disputes. It is understood and agreed that should any dispute arise with respect to the payment, ownership, or right of possession of the Holdback Escrow Fund, the Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, all or any part of such funds until such dispute shall have been settled either by mutual agreement by the parties concerned or by the making of a final written arbitration award rendered in an arbitration proceeding conducted pursuant to Article 11 of the Purchase Agreement, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. (e) Resignation. The Escrow Agent may resign at any time by giving written notice thereof to the other Parties, but such resignation shall not become effective until a successor escrow agent shall have been appointed and shall have accepted such assignment in writing. If an instrument of acceptance by a successor escrow agent shall not have been delivered to the Escrow Agent within 30 days after the giving of such notice of resignation, the resigning Escrow Agent may at the expense of the other parties hereto petition any court of competent jurisdiction for the appointment of a successor escrow agent. 5. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas applicable to contracts made and to be performed entirely within such State. 6. Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt) provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers, as follows: If to Sellers: Wilshire Enterprises, Inc., for itself and San Francisco Oil Company 921 Bergen Avenue Jersey City, New Jersey 07306 Attn: Philip Kupperman Fax: (201) 420-6012 If to Purchaser: Crow Creek Energy L.L.C. 2100 South Utica, Suite 200 Tulsa, Oklahoma 74114 Attn: Maurice Storm Fax: (918) 745-1701 If to the Escrow Agent: Bank of Oklahoma, N.A. ---------------------- ---------------------- 7. Termination. This Agreement shall terminate upon the disbursement of the Holdback Escrow Fund. 8. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original and all of which, when taken together, will be deemed to constitute one and the same. 9. Section Headings. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. 10. Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no Claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the Claim or right unless in a writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.
"Sellers" "Escrow Agent" WILSHIRE ENTERPRISES, INC. BANK OF OKLAHOMA, N.A. By: By: ----------------------------------------- ----------------------------------------- Name: Name: --------------------------------------- --------------------------------------- Title: Title: -------------------------------------- -------------------------------------- SAN FRANCISCO OIL COMPANY "Purchaser" CROW CREEK ENERGY L.L.C. By: ----------------------------------------- Name: By: --------------------------------------- ----------------------------------------- Title: Name: Maurice Storm -------------------------------------- Title: Manager ROCKLAND RESOURCES, CO. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- BRITALTA VENEZOLANO, LTD. By: ----------------------------------------- Name: --------------------------------------- Title: --------------------------------------
EX-10.92 4 b331035_ex10-92.txt CONTRACT OF SALE Exhibit 10.92 CONTRACT OF SALE This Contract of Sale is made as of this _23 day of January, 2004 by and between WILSHIRE ENTERPRISES, INC. formerly known as WILSHIRE OIL COMPANY OF TEXAS, a Delaware corporation with its principal office at 921 Bergen Avenue, Jersey City, New Jersey 07306 ("Seller"), and ECONOMIC PROPERTIES 2004, L.L.C., a New Jersey limited liability company, having an address at 11D Harmony Road, Spring Valley, New York 10977 ("Buyers"). W I T N E S S E T H: WHEREAS, Buyer desires to acquire and Seller desires to sell certain properties located in the City of Jersey City, County of Hudson and State of New Jersey, as more particularly described in Schedule "A" attached hereto and made a part hereof (the "Property"); NOW, THEREFORE, in consideration of the premises herein set forth and for the payment of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged by the undersigned, the parties hereto agree as follows: 1. Seller agrees to sell, convey and transfer to Buyer and the Buyer agrees to buy, receive and accept the Property. 2. The purchase price to be paid by Buyer to Seller for the Property shall be Eleven Million and No/100 Dollars ($11,000,000.00) (the "Purchase Price"). The Buyer shall pay Two Hundred Thousand and No/100 Dollars ($200,000.00) upon execution of this Contract, which shall be held in escrow by Seller's attorney in a non-interest bearing attorney trust account until the closing of title. The balance of the Purchase Price shall be payable by certified check, bank check, attorney trust account check or wire transfer in immediately available funds, at closing. 3. The purchase of the Property is not contingent on the Buyer obtaining financing. The Buyer represents to the Seller that the Buyer has adequate financial resources, including the ability to obtain financing, to purchase the Property pursuant to the terms contained in this Agreement. 4. Buyer shall at its expense obtain a survey of the Property including a metes and bounds description thereof. Such legal description shall be inserted in the Deed delivered at closing. 5. On the Closing Date (as hereinafter defined), Seller shall execute and deliver a Bargain and Sale Deed with Covenants against Grantor's Acts (the "Deed"), and such other documents as shall be reasonably necessary to convey title to Buyer for the Property. 6. Buyer shall, at its sole cost and expense, obtain a commitment for an ALTA owner's title insurance policy covering the Property and shall deliver a copy to Seller no later than thirty (30) days after the date hereof. Title to the Property shall be free of all liens, encumbrances or other restrictions which would render title unmarketable or uninsurable at standard rates from a title insurance company authorized to do business in the State of New Jersey, except for: (i) all standard exclusions and printed exceptions set forth in the standard form of owner's policy of title insurance; (ii) the rights of utility companies to maintain pipes, poles, cables and wires over, on and under the street, the part of the Property adjacent to the street or running to any building or other improvements on such Property; (iii) easements, covenants and restrictions which limit the use of the Property, unless the agreements (1) are presently violated, (2) provide that the Property would be forfeited if they were violated, or (3) prohibit the permitted use (pursuant to local zoning ordinances and regulations) of the Property; (iv) zoning regulations and municipal building restrictions, and all other laws, ordinances, regulations and restrictions of any duly constituted public authority enacted prior to the closing date; (v) matters which were or are caused or created by acts done or suffered by Buyer; (vi) matters which have been or are accepted by Buyer; (vii) real estate taxes not yet due and payable and any possible additional assessments; (viii) matters shown on a current survey of the Property, except for overlaps and encroachments which render the title unmarketable; and, (ix) unpaid franchise taxes, provided the Seller delivers to Buyer at closing an indemnification agreement executed by the Seller agreeing to indemnify and hold Buyer and its title insurance company harmless against any loses they may incur as a result of the State of New Jersey exercising a claim against the Property provided the Buyer's title insurance company will omit any exception for franchise taxes, further provided that if the Buyer's title insurance company will not omit any exception for franchise taxes, Buyer will accept a commitment from any title insurance company licensed to do business in the State of New Jersey, which will insure at regular rates without making an exception for franchise taxes. Each of the foregoing exceptions (i) - (ix) are hereinafter referred to as "Permitted Exceptions". 2 Buyer must within five (5) days from the date of receipt of its title binder, notify Seller in writing of any objection to title that are not Permitted Exceptions. If such notice is not received within such time period, any objections shall be deemed waived. Buyer shall notify Seller of any objection to title that is not a Permitted Exception within five (5) days of the Buyer's receipt of any objection not shown in the initial title report. The Seller shall have ten (10) business days after receipt of notice of any title objections to cure such title objections (or, if not readily curable within said ten (10) business day period, then the Seller may have such additional time as is reasonably necessary to cure the same, in which case, the Closing Date shall be extended accordingly) (said ten (10) business day period or expansions thereof, as the same may be extended, being hereinafter referred to as the "Cure Period"). If some or all of the title objections can only reasonably be cured at Closing, then Seller may covenant to cure such title objections at Closing, subject to Buyer's reasonable consent. Should the Seller be unable or unwilling to cure the title objections within the Cure Period, the Seller shall notify the Buyer of such fact prior to the expiration of the Cure Period, and the Buyer shall have the option to: (i) accept the Property subject to the title objections; or (ii) declare this Agreement to be null and void and of no further force or effect, in which case, all sums paid or deposited with the Seller shall be returned to the Buyer. The Buyer shall notify the Seller of its election of alternative (i) or (ii) above within ten (10) days after receipt from Seller of notice of Seller's inability to cure the title objections. Seller agrees to not intentionally take any action which will cause a title objection. Notwithstanding anything contained herein, Seller will satisfy any lien encumbering an individual property which can be satisfied with the payment of money at closing, up to the amount of the Purchase Price allocated to that individual property, provided that if a mortgage loan encumbers more than one (1) property, the limitation in this sentence shall not apply to that mortgage lien. 7. In connection with this Contract and the transactions contemplated hereby, Seller makes the following representations and warranties: (a) that it has entered into no other contracts to sell the Property to be conveyed hereunder; and (b) that the transactions contemplated by this Contract do not and will not result in a breach of the terms of Seller's articles of incorporation or its by-laws. If the amount of liens, excluding mortgage liens encumbering more than one property, exceed the Purchase Price allocated to that individual property, the Seller in the Seller's sole option, may satisfy that lien from the closing proceeds, or may withdraw that property from this Contract, in which event the Purchase Price shall be adjusted accordingly. 8. The Buyer represents and warrants to the Seller that: (a) Buyer has the requisite authority to enter into this Contract and to purchase the Property under the terms and conditions of this Contract and that this Contract is the valid and binding obligation of Buyer; (b) Buyer has the financial capacity to purchase the Property at the price and under the terms and conditions of this Contract; and 3 (c) Notwithstanding anything else to the contrary in the Contract of Sale, the Buyer acknowledges that the Buyer is not relying on any representation or inducement which was or may have been made or implied by the Seller or any other party acting on behalf of the Seller with respect to the Property or any circumstances or conditions affecting the Property (including, without limitation, matters relating to approvals and requirements of governmental authorities and utility companies). The Buyer is purchasing the Property in an "AS IS" "WHERE IS" condition with "ALL FAULTS" as of the date of this Contract and the Closing Date. The Buyer expressly acknowledges and agrees that, except as expressly set forth in this Contract or any rider to this Contract, no representations or warranties have been made or are made and no responsibility has been or is assumed by Seller or by any employee, officer, person, firm, agent or representative acting or purporting to act on behalf of Seller as to the condition or repair of the Property or the value, expenses of operation, developability or income potential thereof or as to any other fact or condition which has or might affect the Property or the condition, repair, value, expense of operation, developability or income potential thereof. Buyer acknowledges that Seller has requested Buyer to inspect fully the Property and all portions thereof and to rely solely upon the results of Buyer's own inspections or other information obtained or otherwise available to Buyer and Buyer waives any and all actions, causes of action, suits, damages, and demands, whether at law or equity, that Buyer may have or could have against Seller with respect to the condition of the Property. All future, and except as set forth herein, all current, notices of violations of federal, state or municipal laws, statutes, regulations, ordinances, orders or requirements, whether or not noted or issued by any governmental authorities having jurisdiction of any type or character what-so-ever, against or affecting the Property or any part thereof shall be the sole responsibility of Buyer, who expressly undertakes the duty and obligation to investigate the existence of any such violations, and Seller shall have no responsibility therefor. Buyer shall be responsible to obtain a Smoke Detector Certificate, and if required by the municipality a Certificate of Occupancy or Continued Occupancy. Seller shall be obligated to make any repairs necessary to correct any violations listed on all violation notices issued on the date of this Contract, or earlier. Buyer acknowledges that all repairs may not be inspected as of the date of closing. Buyer shall be responsible to correct all violations, if any, shown on any violation notices issued after the date of this Contract. This paragraph shall survive the Closing. (d) Buyer acknowledges that, except as expressly set forth in this Contract or any Rider thereto, neither Seller nor Seller's agents has made any express statement, representation or warranty concerning past, present, or future liability arising out of or related to the environmental condition of the Property, and Seller shall have no liability to Buyer by reason of the presence of any hazardous substances or wastes within the meaning of the New Jersey Spill Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq.) or any other toxic or other hazardous material as may be defined under applicable environmental statutes, regulations, rules or ordinances (collectively, "hazardous substances") on the Property, or the migration of any hazardous substances from the Property in, on or under any adjacent property. This paragraph shall survive the Closing. 4 9. Seller shall pay for any applicable realty transfer fees for the Property. Real estate taxes, water and sewer charges, rents collected, and any security deposits paid by tenants shall be adjusted as of the Closing Date along with such other items of adjustment customary for a transaction of this nature. Any other costs or charges of closing not specifically mentioned in this Contract shall be paid by the party who customarily pays such charges or costs as determined by local custom. 10. Seller and Buyer each represent to the other that it has had no dealings, negotiations or consultations with any broker, representative, employee, agent or other intermediary in connection with this Contract or the sale of the Property except for Gerber/ Somma Associates, Inc. (the "Broker"). The Buyer will pay a commission to the Broker pursuant to a separate agreement between the Buyer and the Broker. Except for the Broker, each party will indemnify, defend and hold the other free and harmless from the claims of any brokers, representatives, employees, agents or other agents or other intermediaries claiming to have represented it in connection with this Contract or in connection with the sale of the Property. This paragraph shall survive the closing of title. 11. Any notice required or permitted to be given hereunder shall be in writing and shall be deemed to be given three (3) business days after being mailed, postage prepaid, by U.S. registered or certified mail, return receipt requested or one (1) business day after being sent by overnight courier service, in any case, addressed to the parties at their respective addresses first named in this Contract or to their attorneys. 12. (a) The closing of title (the "Closing") shall take place on or prior to April 30, 2004 (the "Closing Date"), time being of the essence, at the offices of Buyer's Attorney or at the offices of the attorneys for any Lender, provided the attorney's office is located in the State of New Jersey, in Middlesex County, or north. In the event a closing will take place in any other location in the State of New Jersey, or in metropolitan New York, the Buyer shall pay an attendance fee of Five Hundred ($500.00) Dollars to the Seller's attorney. Notwithstanding anything contained herein, Seller may, by giving not less than fifteen (15) days written notice to the Buyer, designate a date not earlier then March 1, 2004, as the Closing Date. In no event shall any Closing Date prior to March 15, 2004 be designated as "time of the essence". Seller may designate such Closing Date as Time of the Essence. Notwithstanding the designation of a Closing Date as Time of the Essence, the Buyer may postpone any such closing date for a period not to exceed seven (7) days. (b) On the Closing Date, Buyer shall deliver to Seller the remaining portion of the Purchase Price for the Property. 5 (c) On the Closing Date, the Seller shall deliver to the Buyer: (i) the Deed; (ii) Seller's affidavit of title; (iii) corporate resolution authorizing the conveyance of the Property and all actions which are required to be taken in connection therewith; (iv) Form 1099-S reporting form, if required; and (v) possession of the Property, subject to the rights of tenants at the Property. (d) each party shall deliver such other documents as shall be necessary to consummate the transactions contemplated hereby. 13. This Contract shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 14. This Contract shall be governed by and construed in accordance with the laws of the State of New Jersey. This Contract may not be changed or modified without the written consent of all parties hereto. The parties acknowledge that should any provision contained herein be later found to be unenforceable, void or illegal by a court of competent jurisdiction, such provisions shall be considered omitted from this Contract, it being the parties' intent to enter into this Contract notwithstanding the omission of such unenforceable, void or illegal provision. 15. This Contract and the documents referred to herein represent the entire agreement between the parties hereto with respect to the transaction described herein and supersedes all prior negotiations or agreements with respect thereto. The parties agree that either party's failure to insist upon complete performance of any right or other provision set forth herein shall not constitute or effect a waiver of that party's right to so insist on complete performance of that right or provision in the future. 16. This Contract is made exclusively for the benefit of and solely for the protection of Seller and Buyer, and no other person or persons shall be deemed to be third-party beneficiaries hereof or have any rights hereunder; nor shall any provisions hereof give any third person any right of subrogation or action over or against any party hereto. 17. If the Seller materially breaches this Contract before the closing, the sole liability of the Seller shall be (and the remedies of the Buyer shall be limited to) the return by the Seller to the Buyer of the deposit, and/or a suit for specific performance and legal fees and neither party shall have any further liability to the other. If the Buyer materially breaches this Contract before the closing, the Seller shall be entitled to retain, as liquidated damages and not as a penalty, an amount equal to five (5%) percent of the Purchase Price (the parties hereby agreeing that the amount of the actual damages that would be incurred by the Seller would be difficult of proof, and subject to collection of the liquidated damages, this Contract shall be terminated and neither party shall have any further liability to the other. 6 18. Risk of loss should remain with Seller until closing. In the event damage to any one building exceeds an amount equal to $100,000.00 in excess of the insurance proceeds for damage to that building, or $500,000.00, in the aggregate, in excess of insurance proceeds to all buildings, Buyer may terminate this Contract by giving written notice to the Seller. 19. Buyer may not assign its rights hereunder to any party without the prior written consent of Seller. 20. Each of the parties hereby waive trial by jury in any action, proceeding or with respect to any counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Contract or the transaction contemplated hereunder. Each of the parties acknowledge that it has been represented by counsel in connection with the negotiation of this Contract, the transaction contemplated hereunder and the provisions of this Section 20 in particular. 21. All municipal special assessments, unpaid by Seller, for work completed before the Closing Date, shall be the responsibility of Seller. Buyer shall be responsible for all other special assessments. 22. It is understood and agreed that this Contract must be executed by the Buyer and returned to Seller by 5:00 p.m. on January 23, 2004 or this Contract shall be deemed disapproved by Buyer and the unexecuted copies thereof shall be returned to the Seller. 23. Buyer will not record this Contract. Any recording of this Contract shall constitute a default hereunder on the part of the Buyer. The Buyer irrevocably appoints and designates the Seller as its attorney-in-fact to execute, deliver and/or record a document on behalf of the Buyer in order to terminate and/or remove any such recordation. Buyer may record one or more notices of settlement relating to this transaction. 24. This Contract may be executed in one or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 25. Buyer hereby acknowledges that it is the intent of the Seller to complete a tax deferred exchange under IRC Section 1031 which will not delay the close of the purchase transaction or cause additional expense to the Buyer. The Seller's rights under this Contract may be assigned to a Qualified Intermediary of the Seller's choice for the purpose of completing such an exchange. Buyer agrees to cooperate with the Seller and the Qualified Intermediary in a manner necessary to complete the exchange at no cost to the Buyer. 7 IN WITNESS WHEREOF, the undersigned have executed this Contract of Sale as of the date first written above. ATTEST OR WITNESS: WILSHIRE ENTERPRISES INC., formerly known as WILSHIRE OIL COMPANY OF TEXAS ______________________ By:________________________________ Philip Kupperman, President ATTEST OR WITNESS: ECONOMIC PROPERTIES 2004, L.L.C. ___________________________ By:_________________________________ Name: Title: ___________________________ By:_________________________________ Name: Title: 8 SCHEDULE A
Property Address Number of Units Block Lot - ---------------- --------------- ----- --- 14-16 Berkeley Place 9 616 25, 26, 27 and 28 317-319 Fairmount Avenue 26 1826 13, 14 and 15 320 Fairmount Avenue 57 1830 F10 321 Fairmount Avenue 34 1826 16A and 17A 343 Fairmount Avenue 22 1826 25, 26 and 27 444 Jersey Avenue 14 270 T 62-64 Kensington Avenue 15 1820 44B 665 Newark Avenue Office Building & Retail Space 525.1 13E 198-200 Ocean Avenue 14 and 1 Store 1425 B and C 620 Pavonia Avenue 40 584 19 Apt # 20K 42 Vroom Street 21 1884 6C
9 RIDER TO CONTRACT This is a Rider to Contract for the sale of real estate made this _________ day of January, 2004, by and between WILSHIRE ENTERPRISES, INC. ("Seller") and ECONOMIC PROPERTIES 2004, LLC ("Buyer") for the properties identified on Schedule "A" attached hereto (collectively the "Property") For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree to amend the Contract as follows: 1. Buyer shall have the right to perform any environmental tests of the Property which Buyer deems appropriate within thirty (30) days of the date hereof. Buyer shall provide a copy of any report to the Seller within the thirty (30) day period. If Buyer's inspection reveals material adverse environmental conditions which are unacceptable to Buyer, Buyer may cancel the Contract within the thirty (30) day period and receive a return of the deposit. Notwithstanding anything in the previous sentence, the Seller may agree to remediate any environmental condition shown in the Buyer's environmental report by giving written notice to the Buyer within ten (10) days of the Seller's receipt of Buyer's environmental report. The remediation shall be completed within a reasonable period of time. If the Seller agrees to remediate any environmental condition shown in Buyer's report, Buyer's notice to terminate this Contract shall be null and void. In the event remediation is not completed prior to closing, Seller shall escrow with Seller's attorney, an amount equal to one hundred twenty (120%) percent of the cost of remediation not completed prior to closing. 2. Seller shall obtain from the New Jersey Department of Environmental Protection, prior to closing, a letter of non-applicability for the Industrial Site Recovery Act. 3. Buyer shall have the right to assign this Contract, upon notification to Seller, to a partnership, corporation or limited liability company. Buyer can assign its rights under the Contract to one or more entities, with the right to designate different buyers for different Properties. The Buyer shall pay to the Seller's attorney any incremental costs associated with multiple buyers of the Property. The price allocation for each Property shall be selected by Buyer. Notwithstanding any assignment of this Contract, the Buyer named herein shall remain liable to perform all of the obligations of the Buyer hereunder. 4. The closing shall take place at the offices of Feinstein, Raiss, Kelin & Booker, L.L.C., 100 Executive Drive, Suite 210, West Orange, New Jersey or at the offices of the attorney for the new mortgage lender, provided same is located in the State of New Jersey, Middlesex County and north. If the closing takes place in any other location in the State of New Jersey, or takes place in metropolitan New York, Buyer shall pay an attendance fee of Five Hundred ($500.00) Dollars to Seller's attorney. 5. At the closing, the Seller shall deliver to Buyer the following documents: (a) A Bill of Sale covering all personal property located at the Property, all of which are to be free and clear of all liens. (b) An assignment of the Seller's interest in the leases and tenancies then in effect at the Property, in the form attached hereto as Exhibit "A". [Need Form] (c) An agreement with respect to security deposits in the form attached hereto as Exhibit "B". [Need Form] (d) A notice to the tenants, in a form reasonably satisfactory to the Buyer, advising of the sale of the Property to the Buyer. [Need Form] (e) An updated rent roll as of the date of closing for all tenancies at the Property. (f) A then current employee list. (g) A certificate that to the Seller's knowledge, the representations set forth in the Contract and in this Rider are true and correct as of the closing date. (h) All original, complete tenant files to the extent they are in the possession of the Seller. (i) Seller shall obtain estoppel certificates (in a reasonable form) from not less than eighty (80%) percent of the commercial tenants at the Property, and shall use reasonable efforts to obtain subordination agreements (in form reasonably requested by Buyer's Lender) for any commercial tenant. Seller shall provide a Seller's estoppel certificate for any commercial tenant which Seller has not been successful in obtaining an estoppel certificate. 6. Seller hereby states: (a) Attached hereto as Exhibit "C" is a complete list of all of Seller's employees engaged in the operation and maintenance at the Property, including all wages, free rent, if any, and any other benefit allowed to the employee. As of the date of closing, the employee shall be paid in full and have been compensated for any vacation time. (b) Except as to 444 Jersey Avenue, there are no current tax appeals pending concerning the Property. Seller agrees that it will not settle any tax appeal without the prior written consent of Buyer, which consent shall not be unreasonably withheld. Seller and Buyer will apportion any tax savings and any expenses, including legal fees, based upon the Closing Date. (c) Subject to the rights and approval of tenants, the Buyer shall have the right to inspect the Property at any reasonable time after execution of this Contract, upon 24 hours notice to the Seller, subject to the reasonable availability of Seller's representative. If an inspection is scheduled with Seller, and Seller's representative is not present, subject to the provisions of this paragraph, Buyer may proceed with its inspection. Prior to entering the Property for any invasive inspections or testing, Buyer shall provide Seller a certificate showing proof of liability insurance in amounts not less than $1,000,000.00 per occurrence, naming the Seller as certificate holder. Buyer shall repair any damage caused by inspections, and shall indemnify and hold the Seller harmless for any losses, damage or injuries as a result of any activities of the Buyer, its agents, employees or contractors on the Property. 2 (d) Attached hereto as Exhibit "D" is a complete and accurate rent roll for the Property as of the date of this Contract setting forth the name of the tenant, the starting date for current lease for each tenancy, the amount of rent, the apartment number and the amount of security deposit. (e) Except as shown on the current rent roll, no tenant has prepaid rent for more than the current month. (f) There are no union contracts in effect for the Property and none shall be in effect at the time of closing. (g) There are no service, maintenance or other contracts effecting the Property, except as set forth on Exhibit "F" attached hereto, and there shall be none at the time of closing, except those already in effect as shown on Exhibit "F" and for any other contract to which the Buyer may consent. Buyer shall assume all contracts shown on Exhibit F at closing. (h) To Seller's knowledge there are no assessments, either levied, threatened or pending against any or all part of the Property and there are no intended assessments. (i) To Seller's knowledge there are no threatened or pending condemnation or similar proceedings against the Property. (j) To Seller's knowledge, Seller has received no notices of violations of law or municipal ordinances; codes, orders or requirements noted or issued by any authority having jurisdiction against or affecting the Property. In the event any violations are issued prior to the date of the Contract , Seller shall abate same. (k) There are no outstanding commissions respecting the rental or lease of any apartments at the Property and there will be none at closing. (l) As of the date of this Contract, Seller has not received any notices of complaints of any tenants regarding any violation of any rent control or similar law which have not been resolved. There is no concerted rent strike at the Property. (m) Seller agrees to notify Buyer in writing of any eviction proceedings proposed or commenced after the date of this Contract. 3 (n) The Property (except for the office building) is registered with the New Jersey Department of Community Affairs. Attached hereto as Exhibit "G" are copies of Yellow Cards in Seller's possession. (o) To Seller's knowledge, there are no civil, administrative, arbitration or other actions, suits or proceedings pending or threatened against or affecting the Property or tenancies of the Property. (p) To Seller's knowledge, there are no claims, litigation, administrative proceedings, actual or threatened or judgments or orders, or any notices, relating to any hazardous substances or any environmental condition concerning the Property. No hazardous substances or wastes, as defined by law, have been introduced into the Property by Seller, except hazardous substances used in the maintenance or operating of the Property. (q) To Seller's knowledge, the underground storage tanks do not leak and there are no abandoned oil tanks at the Property. Any oil tank which is required to be registered with the State of New Jersey has been or will be properly registered. 7. The representations contained in Paragraph 6(a), 6(b), 6(d), 6(g), 6(i), 6(j) and 6(l) (the "Surviving Representation(s)") shall survive the closing for a period of six (6) months of the date of closing. In the event the Buyer believes that it has a claim against the Seller for a misrepresentation of a Surviving Representation, the Buyer shall give written notice of a claim, including the basis of the belief of the buyer that the Surviving Representation was incorrect. The Buyer shall commence suit for any claim within one (1) year of the closing provided a notice was provided to Seller within the six (6) month period. 8. All adjustments shall be made as of midnight of the day preceding the closing. At the closing, the parties shall adjust real estate taxes, collected rents, wages, water, and sewer. Any rents collected after the closing shall be adjusted when, and if, collected, and shall be applied first to current rents and then to arrearages. All arrearages collected shall be remitted to the Seller within fifteen (15) days of the Buyer's receipt of same. Seller shall give Buyer a credit for all tenant security deposits which tenants have paid, including interest. Seller shall not deduct or appropriate any tenant security deposits for any tenant still in possession. Seller has not made a deduction from a security deposit for any current tenant, and will not make a deduction for any tenant in occupancy on the date of closing. 9. Any vacant apartments at the time of the closing shall be delivered in a clean painted and otherwise rentable condition in accordance with the Seller's standard practices. Seller shall not be responsible to clean, paint or otherwise repair any unit which becomes vacant within thirty (30) days of the closing.. 10. Seller shall not enter into, or modify or extend, any commercial leases prior to the closing, unless Buyer gives its prior written consent to same, which consent shall not be unreasonably withheld. Seller shall not grant any rent credits for any time period beyond the closing. Seller shall not enter into any other agreements affecting the Property, without the Buyer's prior written consent. Seller shall not enter into any residential lease for a rent less than the prior rent for the unit, increased by the amount allowed pursuant to the Rent Contract Ordinance. Pending the closing, Seller shall operate the Property in accordance with its standard practices. 4 11. Prior to the closing, Seller shall maintain the Property in its current condition, reasonable wear and tear excepted. 12. In the event of any conflict between the terms of the Rider and the terms of the Contract, the terms of this Rider shall govern. IN WITNESS WHEREOF, the parties have executed this Rider to Contract on the date and year set forth above. WITNESS OR ATTEST: WILSHIRE ENTERPRISES, INC., Seller _________________________________ By:_________________________________ Philip Kupperman, President ECONOMIC PROPERTIES 2004, LLC ("Buyer") _________________________________ By:_________________________________ The undersigned agrees to be responsible for the performance of the Buyer pursuant to the terms of the Contract of Sale and the Rider to Contract. This Guaranty shall expire upon closing of title. J.S. MANAGEMENT, L.L.C. _________________________________ By:_________________________________ 5 LIST OF EXHIBTS EXHIBIT "A" ASSIGNMENT OF LEASES EXHIBIT "B" SECURITY DEPOSIT AGREEMENT EXHIBIT NOTICE TO TENANTS EXHIBIT "C" LIST OF EMPLOYEES EXHIBIT "D" RENT ROLL EXHIBIT "E" SERVICE/MAINTENANCE CONTRACTS EXHIBIT "G" YELLOW CARDS 6 EX-10.94 5 b331035ex_10-94.txt SEVERANCE LETTER AGREEMENT Exhibit 10.94 Wilshire Enterprises, Inc. 921 Bergen Avenue Jersey City, NJ 07306 March 29, 2004 Ms. Sherry Wilzig Izak Livingston, NJ Dear Sherry: As you know, your contributions over the years to Wilshire Enterprises, Inc. have contributed to Wilshire's success and are greatly appreciated. Accordingly, the Compensation Committee of the Board of Directors has approved a special severance bonus that will be paid to you if and when you leave the employ of Wilshire. Receipt of the special bonus will be subject only to your execution of a General Release, which will be provided at the time of separation. This special bonus or severance will be paid to you in appreciation of your past services and your loyalty to Wilshire. Accordingly, upon termination of your employment with Wilshire for whatever reason or under any circumstances, whether initiated by Wilshire or by you, and whether with or without cause, including but not limited to death or disability, you (or your heirs) will receive a special bonus equal to $200,000, less customary deductions or withholdings, payable on the date of termination of employment; provided however that you shall not receive the special bonus if you are terminated by Wilshire for "Cause". For purposes of this letter agreement, "Cause" for termination shall exist only upon (i) the commission by you of any material act of dishonesty with respect to the Company which would, in the reasonable judgment of the Board of Directors, have a material adverse effect upon the Company, (ii) the commission by you of any act of moral turpitude or your conviction of any felony or (iii) any violation of law (excluding misdemeanors) the effect of which would, in the reasonable judgment of the Board of Directors, have a material adverse effect upon the Company. If for any reason you are required to litigate in order to collect this bonus, you will also be entitled to recover your attorneys fees and other collection costs. In consideration, you agree that all prior employment and severance agreements with the Company are terminated as of the date hereof. On behalf of the Board of Directors and myself, thank you for your continued loyalty, dedication and commitment to Wilshire's success. Sincerely, AGREED: By: /s/ Philip G. Kupperman By: /s/Sherry Wilzig Izak ----------------------------- --------------------------- Philip G. Kupperman Sherry Wilzig Izak President Chairman and CEO EX-23 6 b331035ex_23.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement Form S-8, No. 33-60845, of Wilshire Enterprises, Inc. of our report dated March 26, 2004 with respect to the consolidated financial statements and schedule of Wilshire Enterprises, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2003. /S/ERNST & YOUNG LLP New York, New York March 26, 2004 EX-31.1 7 b331035ex_31-1.txt CERTIFICATIONS Exhibit 31.1 CERTICICATION PURSUANT TO EXCHANGE ACT RULES 13a-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, S. Wilzig Izak, certify that: (1) I have reviewed this Annual Report on Form 10-K of Wilshire Enterprises, Inc.: (2) Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report: (3) Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report: (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures ( as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period win which this Annual Report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and (c) Disclosed in this Annual Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ S. Wilzig Izak ------------------------- Dated: March 30, 2004 S. Wilzig Izak Chief Executive Officer EX-31.2 8 b331035ex_31-2.txt CERTIFICATIONS Exhibit 31.2 CERTICICATION PURSUANT TO EXCHANGE ACT RULES 13a-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Philip G. Kupperman, certify that: (1) I have reviewed this Annual Report on Form 10-K of Wilshire Enterprises, Inc.: (2) Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report: (3) Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report: (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures ( as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period win which this Annual Report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and c. Disclosed in this Annual Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors ( or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: March 30, 2004 /s/ Philip G. Kupperman ------------------------ Philip G. Kupperman Chief Financial Officer EX-32.1 9 b331035ex_32-1.txt CERTIFICATIONS Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Wilshire Enterprises, Inc. (the "Company") on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission (the "Report"), I, S. Wilzig Izak, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented. Dated: March 30, 2004 By: /s/ S. Wilzig Izak -------------------------- S. Wilzig Izak Chief Executive Officer This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-32.2 10 b331035ex_32-2.txt CERTIFICATIONS Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Wilshire Enterprises, Inc. (the "Company") on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission (the "Report"), I, Philip Kupperman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934;and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented. Dated: March 30, 2004 By: /s/ Philip G. Kupperman ------------------------- Philip G. Kupperman Chief Financial Officer This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -----END PRIVACY-ENHANCED MESSAGE-----