-----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, EIJwhpom5r2go1Bf7c4Txmlhd17a4JxQ9nGIP7SUydcBnR1GrLI5Bi6c9jVSQ2tY Fnzy7k7Ni/nJNluUUIvD4A== 0000316704-96-000006.txt : 19970924 0000316704-96-000006.hdr.sgml : 19970924 ACCESSION NUMBER: 0000316704-96-000006 CONFORMED SUBMISSION TYPE: PRES14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960901 FILED AS OF DATE: 19960910 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK DOME ENERGY CORP CENTRAL INDEX KEY: 0000316704 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 840808397 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRES14A SEC ACT: SEC FILE NUMBER: 000-09394 FILM NUMBER: 96628136 BUSINESS ADDRESS: STREET 1: 1536 COLE BLVD. , STE #325 STREET 2: SUITE 325 CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 303-231-9059 MAIL ADDRESS: STREET 1: 1536 COLE BLVD STREET 2: SUITE 325 CITY: DENVER STATE: CO ZIP: 80401 PRES14A 1 PRELIMINARY COPY ---------------- BLACK DOME ENERGY CORPORATION 1536 Cole Boulevard, Building 4, Suite 325 Golden, Colorado 80401 (303) 231-9059 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ____________, 1996 TO THE SHAREHOLDERS OF BLACK DOME ENERGY CORPORATION: NOTICE HEREBY IS GIVEN that a Special Meeting of Shareholders of Black Dome Energy Corporation, a Colorado corporation (the "Company"), will be held in the Cole Conference Room of the Denver West Office Park located at 1746 Cole Boulevard, Building 21, Suite 225, Golden, Colorado 80401, on ______________, 1996, at ______ _.m., and at any and all adjournments thereof, for the purposes of: 1. Obtaining shareholder authorization for the voluntary dissolution of the Company under Colorado law; and 2. The transaction of any other business which may lawfully come before the Meeting. Only holders of the no par value common stock of the Company of record at the close of business on __________, 1996 will be entitled to notice of and to vote at the Meeting or at any adjournment or adjournments thereof. The proxies are being solicited by the Board of Directors of the Corporation. All Shareholders, whether or not they expect to attend the Special Meeting of Shareholders in person, are urged to sign and date the enclosed Proxy and return it promptly in the enclosed envelope. The giving of a proxy will not affect your right to vote in person if you attend the Meeting. BY ORDER OF THE BOARD OF DIRECTORS Golden, Colorado EDGAR J. HUFF, PRESIDENT _____________, 1996 PRELIMINARY COPY ---------------- PROXY STATEMENT OF BLACK DOME ENERGY CORPORATION 1536 Cole Boulevard, Building 4, Suite 325 Golden, Colorado 80401 SPECIAL MEETING OF SHAREHOLDERS __________, 1996 SOLICITATION OF PROXIES The accompanying Proxy is solicited on behalf of the Board of Directors of Black Dome Energy Corporation (hereinafter referred to as either "Black Dome" or the "Company") in connection with a Special Meeting of Shareholders to be held in the Cole Conference Room of the Denver West Office Park located at 1746 Cole Boulevard, Building 21, Suite 225, Golden, Colorado 80401 on __________, 1996, at __:__ _.m., and at any adjournments thereof, for the purpose of obtaining shareholder authorization to dissolve the Company as discussed below. The cost of preparing, assembling and mailing the Notice of Special Meeting of Shareholders, Proxy Statement and Proxy, which are first being mailed to the shareholders on or about September __, 1996, will be borne by the Company. It is contemplated that solicitation of Proxies will be primarily by mail, but may be supplemented by personal solicitation by the Company's officers, employees and Directors, for which no additional compensation will be paid. Any shareholder giving a Proxy may revoke it at any time before it is voted by delivering a later-dated Proxy, or by notifying the Secretary of the Company either in person or by written notice specifically revoking the power to use and vote the Proxy. Shareholder attendance and voting in person at the Special Meeting will also revoke any Proxy given by such shareholder. If no specification is made on the Proxy, the shares will be voted in accordance with the recommendation of the Board of Directors, as stated herein, or at the discretion of the named proxies with regard to any other matter that may properly come before the Special Meeting. VOTING AT THE SPECIAL MEETING The close of business on September__, 1996 has been fixed by the Company's Board of Directors as the record date for the determination of shareholders entitled to vote at the Special Meeting of Shareholders. As of that date, the Company had issued and outstanding 73,755 shares of no par value Common Stock. The Company's Articles of Incorporation do not permit cumulative voting by the shareholders. The Common Stock is the Company's only class of voting securities outstanding. Accordingly, each holder of Common Stock as of the record date shall be entitled to cast one vote for each share of Common Stock. The holders of a majority of the issued and outstanding shares of Common Stock entitled to vote, whether present in person or represented by Proxy, constitute a quorum at the Special Meeting. Assuming the presence of a quorum, the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by Proxy at the Special Meeting is required for the proposal discussed herein. Shares of Common Stock represented in person or by Proxy (including shares which abstain) will be counted for purposes of determining whether a quorum is present at the Special Meeting. Abstentions will be treated as shares present and entitled to vote with respect to any particular matter, but will not be counted as a vote in favor of such matter. Accordingly, an abstention from voting on a matter has the same effect as a vote against the matter since it is one less vote for approval. Broker non-votes on one or more matters will have no impact on such matters since they are not considered "shares present" for voting purposes. No dissenters rights of appraisal or other similar rights are available to shareholders under the Colorado Business Corporation Act with respect to the adoption of a plan to dissolve and the subsequent sale of all or substantially all of the Company's assets in the ordinary course of business after obtaining shareholder authorization to dissolve, and the subsequent filing of Articles of Dissolution with the Colorado Secretary of State. STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS The Company currently has 73,755 shares of its common stock issued and outstanding, each share of which is entitled to one vote. No shares of any other class are issued or outstanding at the present time. The following table sets forth certain information as of June 30, 1996 with respect to the beneficial ownership of Common Stock by (i) each person known to the Company to own beneficially more than five percent of the outstanding Common Stock, (ii) each executive officer of the Company, (iii) each Director and nominee for Director of the Company, and (iv) all executive officers and Directors (and nominees) of the Company as a group:
Amount and Nature of Name and Address Beneficial Percent of Beneficial Owner Title of Class Ownership1 of Class - - - ------------------- -------------- ---------- -------- Edgar J. Huff2 Common Stock 43,698 59.25% 2374 Eldorado Lane (No Par Value) Evergreen, CO 80439 Robert C. Huff4 Common Stock 999 1.35% 9930 South 87th E. Ave. (No Par Value) Tulsa, OK 74133 James E. Huff4 Common Stock 1,099 1.49% 2414 Briar Ridge Dr. (No Par Value) Houston, TX 77057
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Tish M. Hartman3 Common Stock 400 .54% 31499 Robinson Hill Road (No Par Value) Golden, CO 80403 Joseph R. Albi, Sr.4 Common Stock 300 .41% P.O. Box 5271, T.A. (No Par Value) Denver, CO 80217 Joseph R. Albi, Jr. Common Stock 7,249 9.83% 2864 East Clairton Drive (No Par Value) Highlands Ranch, CO 80126 Officers and/or Common Stock 46,096 63.04% Directors as a (No Par Value) Group (5 Persons)
1) All beneficial owners have sole voting and investment power over shares indicated in the table. 2) President, Treasurer and Director of the Company. 3) Secretary of the Company. 4) Director of the Company. Edgar J. Huff currently controls the Company by virtue of his ownership of 59.25% of the Company's outstanding Common Stock. There is no arrangement known to the Company, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company. PROPOSAL 1 - AUTHORIZATION TO DISSOLVE THE CORPORATION The Board of Directors has determined that it would be in the best interests of the Company and its shareholders to dissolve the Company as expeditiously as possible. The Company was formed in 1979 with Edgar J. Huff contributing his own oil and gas properties in exchange for his ownership of all of the Company's then issued and outstanding shares. In 1980 the Company conducted a public offering of its shares through a now defunct brokerage firm at an offering price of $0.10 per share and received gross proceeds of $2 million. As promised in the prospectus, the Company invested the proceeds from the offering into the oil and gas business (primarily oil). By 1983, the price of crude oil had fallen from nearly $40 per barrel to approximately $8 per barrel, and the Company's revenues and stock price had also declined correspondingly. As a result, the Company no longer qualified to be listed on NASDAQ and was delisted. The brokerage firm that had conducted the Company's public offering (and served as the only significant market maker in its stock) became defunct, and, for all practical purposes, trading in the Company's shares ceased. The Company could no longer afford to pay cash compensation to its officers, but Mr. Huff continued to manage the Company's business and served as its Chief Executive Officer with no compensation during the years 1983, 1984, 1985, 1989, and 1990. 3 During the years 1986, 1987 and 1988, Mr. Huff received compensation for his services only in the form of stock. Even when Mr. Huff began receiving cash compensation for his services again in 1991, he agreed to take his compensation on a deferred basis so that the Company did not have to utilize its then current revenues to pay his salary. Since the Company did not have sufficient cash available at that time, Mr. Huff loaned his personal funds to the Company to enable it to participate in various oil and gas ventures in order to establish additional cash flow and reserves. From July of 1986 through July of 1994, Mr. Huff provided the Company with furnished office space (including utilities and janitorial services) at no charge. Effective June 30, 1996 (when it became apparent to management that it would be in the best interests of the shareholders for the Company to dissolve), Mr. Huff's salary was terminated at his request. He has agreed to continue to serve as the Company's President without salary until the dissolution of the Company is completed. Although the Company began to generate a small profit, management concluded that it would be necessary for the Company to attract additional capital from outside sources to replace its existing properties (which were generating revenues, but also depleting in value as they produced) and for expansion. In seeking this additional capital, the Company was informed by investment bankers and others that as long as the Company's securities fell within the definition of "penny stocks" under certain regulations which were adopted in 1990, they would not be willing to assist the Company in providing such capital. In response to suggestions that the Company be restructured so that it could potentially attract additional capital and also reduce its administrative expenses, the Company effectuated a one for 1,001 share reverse stock split in 1994. Although the goal of reducing expenses was achieved, the Company has not been able to attract the additional capital that is necessary for even the replacement of its existing properties. The Company's properties have continued to deplete as they have produced, and the Company has begun to incur substantial losses from operations as revenues have declined accordingly. As a result, the Company's independent auditors qualified their opinion on the Company's financial statements for the fiscal year ended December 31, 1995, stating that ". . . the Company has suffered recurring losses from operations which raise substantial doubt about the Company's ability to continue as a going concern." As the Company's properties will continue to deplete and eventually become worthless if the status quo is permitted to continue for an unreasonable period of time, the Board of Directors has determined that it would be in the best interests of the Company's shareholders to authorize the immediate dissolution of the Company and liquidate its assets for cash in one or more commercially reasonable transactions while there is still a sufficient value to allow for a distribution to be made to shareholders after all of the Company's liabilities are paid. Upon obtaining shareholder authorization to dissolve and the filing of Articles of Dissolution with the Colorado Secretary of State, the Company would continue its corporate existence under Colorado law, but would not be permitted to carry on any business except as is appropriate to wind up its affairs and liquidate its business and affairs, including collecting its assets, disposing of its properties that will not be distributed in kind to 4 its shareholders, discharging or making provision for discharging its liabilities, distributing its remaining property among its shareholders according to their interests, and doing every other act necessary to wind up and liquidate its business and affairs. Accordingly, it is anticipated that upon obtaining shareholder authorization to dissolve, the Company would promptly file Articles of Dissolution with the Colorado Secretary of State and then proceed to liquidate its business and affairs, collecting its assets and selling substantially all of its non-cash assets in one or more commercially reasonable transactions. The net proceeds left after the payment of all liabilities (including, but not limited to, the payment of amounts owed to Mr. Huff for deferred compensation of $222,500), will be distributed to all of the shareholders on a pro rata basis. The Board may require shareholders to surrender their stock certificates as a condition to receipt of the distribution. The Company will close its stock transfer books on the close of business on a record date fixed by the Board for the liquidating distribution. Only shareholders of record on this record date shall be entitled to the distribution and no transfers made subsequent to that date, except by will, intestate succession or operation of law, shall be recognized on the books of the Company. The Colorado Business Corporation Act provides that the assets of a dissolved corporation that should be transferred to a creditor, claimant, or shareholder of the Company who cannot be found or who is not legally competent to receive them must be reduced to cash and deposited with the State treasurer as property presumed to be abandoned under State law. If the amount deposited is not claimed by such person within three years of the date for payment, it will be presumed to be abandoned and become the property of the State of Colorado. A Colorado corporation is permitted to revoke its dissolution within one hundred twenty days after the effective date of its dissolution, but such revocation would be required to be approved by the affirmative vote of at least a majority of the shares outstanding at a meeting called for such purpose. Upon adoption of such a resolution, a Statement of Revocation of Voluntary Dissolution would be filed with the Colorado Secretary of State and, upon filing the Revocation of Dissolution, would become effective and the Company would be permitted to carry on its business. The Board of Directors will utilize its best efforts to obtain the highest possible price from the sale of its properties. The Company is not currently engaged in any discussions or negotiations with any third parties with respect to the sale of any of its properties, and the identities of any 5 future purchasers are currently not known. As the Company has oil and gas properties located in both Kansas and Oklahoma, it is somewhat likely that these properties may be sold to different purchasers in separate transactions. If deemed prudent under the circumstances at the time of each such transaction, the Board of Directors intends to obtain and rely upon appropriate appraisals and fairness opinions from one or more independent engineering firms. It is also possible that some or all of the properties might be offered for sale in one or more auctions of oil and gas properties with the Company setting a "floor" price for any potential transactions. As a last resort, it is also possible that some or all of the properties might be purchased by Mr. Huff if for any reason the Company is unable to sell such properties to unrelated parties for amounts acceptable to the Board of Directors. After payment of obligations, claims and expenses and making provision or establishing reserves for the payment of future liabilities, the Company will distribute the remaining cash proceeds from the sale of the Company's assets to the shareholders of the Company in proportion to their holdings of the Company's common stock. Without further shareholder action, the liquidating distribution will be made as determined by the Board of Directors. The Company intends to make the distribution at the earliest practicable date after the Company's assets are sold and its liabilities are paid. SELECTED FINANCIAL DATA
Six Months Ended Years Ended December 31, --------------------------------------------- June 30, 1996 1995 1994 1993 1992 1991 ------------- ---- ---- ---- ---- ---- Total Revenues $302,062 $440,661 $762,655 $677,537 $616,351 $265,490 Oil and Gas Sales 296,226 402,627 592,513 647,328 537,162 213,732 Other Revenue 5,836 38,034 170,172 30,209 79,189 51,758 Net Income (loss) (73,902) (210,598) (44,498) 6,338 61,208 (37,793) Net Income (loss) per share (1.00) (2.86)* (.61)* .16* .91* (.62)* Total Assets 367,986 411,046 718,918 1,040,364 612,748 466,789 Obligations -- -- 120,000 60,000 Deferred Comp. 222,500 160,000 100,000 180,000 Bank Debt - LOC 57,297 84,987 132,724 222,987 -- -- Book Value Per Share $.05 $1.05 $3.91 $4.52 $4.36 $4.98
* Earnings per share are restated to reflect the 1 for 1001 reverse stock split approved by shareholders on September 2, 1994. After the Company has disposed of its oil and gas properties in a corporate dissolution and collected all of the proceeds from such sales, Colorado law provides that the Company must discharge (or make provision for discharging) its liabilities. The Company's existing liabilities as of June 30, 1996 are as follows:
Current Liabilities: Accounts Payable $ 79,275 Note Payable - Bank 53,297 Other Payables 9,600 _________ Total Current Liabilities $ 142,172 _________
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Amount Payable to Mr. Huff as Deferred Compensation $ 222,500 _________ TOTAL LIABILITIES $ 364,672 _________
These liabilities and all other liabilities incurred between June 30, 1996 and the distribution of amounts to shareholders, including without limitation the costs associated with the holding of the subject Meeting of Shareholders (estimated to be $40,000), costs associated with the sale of the Company's properties (estimated to be $35,000), and the costs associated with winding up the Company's affairs and making a final distribution (estimated to be $25,000) would then be paid. The net amount remaining after the satisfaction of all of the Company's liabilities would then be distributed on a pro rata basis to all of the shareholders of the Company who are shareholders of record on the effective date of the dissolution as stated in the Articles of Dissolution to be filed with the Colorado Secretary of State (which date is currently anticipated to be the same as the Meeting date). Because of the fact that there has been no established trading market in the Company's Common Stock for approximately the past ten years, no current market information concerning the Common Stock is available. Description of Company's Business. - - - --------------------------------- The Company explores for, develops and acquires interests in producing oil and gas leases for the purpose of resale of a portion of the working interest to industry participants, or for addition of reserves for its own account. The Company acquires and retains the operation of the oil and gas production from these leases. During the fiscal year ended December 31, 1995, the Company's revenues attributable to its overall income were derived primarily from the sale of oil and gas from its producing oil and gas leases. The Company is involved in the exploration, development and purchase and production of oil and gas properties as a general partner, joint venturer, or for its own account, and as an oil and gas lease operator. The Company's activities have in the past included the formation of joint ventures and drilling programs. The Company's principal products are natural gas, crude oil and oil field operations and supervision. Crude oil and natural gas are sold to various purchasers, which generally service the areas in which the producing wells are located. The Company operates oil and gas properties for its own account and for the account of other working interest owners in the property. 7 There has been no public announcement of, and no information otherwise has been made public about, a new product or industry segment which would require the investment of a material amount of the Company's assets or which otherwise is material. The existence of commercial oil and gas reserves is essential to the ultimate realization of value from the Company's properties and thus may be considered a raw material essential to the Company's business. However, the acquisition, exploration, development, production, and sale of oil and gas are subject to many factors which are outside the Company's control. These factors include national and international economic conditions, availability of drilling rigs, casing, pipe, and other equipment and supplies, proximity to and capacity of pipelines, the supply and price of other fuels, and the regulation of prices, production, transportation, and marketing by the Department of Energy and other federal and state governmental authorities. These factors have not materially hindered nor adversely affected the business of the Company; however, it is not known what, if any, additional regulations or constraints may arise, or to what extent, if any, they may affect the Company's operations. The Company acquires oil and gas properties from landowners, other owners of interests in such properties, or governmental entities. The Company does not own any patents, trademarks, licenses, franchises or concessions, except oil and gas leases and other interests granted by private landowners, the loss of any one of which could have a material impact on the Company. The Company's business is not seasonal in nature, except to the extent that natural gas prices may tend to fluctuate on a seasonal basis and development of its oil and gas properties and its ability to drill oil and gas wells and the availability of drilling rigs and other equipment, have occasionally been more restricted at calendar year end due to increased demand from tax-sheltered drilling programs conducted by others. It is the practice of the Company as well as others similarly situated in the industry to attempt to retain working capital in order to participate in the purchase of producing properties and the drilling and development of properties via partnerships, joint ventures and other arrangements, and to acquire significant blocks of undeveloped properties for future development and/or exploration. Working capital is not needed to meet rapid delivery requirements of customers, or to assure the Company of continuous allotments of goods from suppliers. During fiscal 1995, two customers accounted for 10% or more (individually) of total oil and gas sales: Boyd Resene and Associates, 73% and Helmerich & Payne Energy Services, Inc., 13%. The Company believes that it could be adversely affected by the loss of these major gas customers; however, there are numerous spot market gas purchasers who could be utilized for the sale of natural gas. During 1995, the Company sold oil and/or gas to 8 eight (8) customers. No revenues were received in connection with foreign governments in which the Company acted as a producer. The Company has no backlog due to the nature of its business, nor is backlog material to an understanding of the Company's business. The Company has no material portion of its business which may be subject to renegotiation of profits or termination of contracts or subcontracts at the election of government. The purchase of existing producing properties and exploration, development and production of oil and gas are subject to considerable competition, and the Company is faced with strong competition from major and medium sized oil and gas companies and other independent operators. The principal methods of competition in the industry for the acquisition of producing oil and gas properties and leases are industry sales packages and the solicitation, bidding and auctioning of individual producing properties, and the payment of bonus payments at the time of acquisition of leases. Companies with greater financial and operational resources, larger technical staffs and labor forces, better developed equipment for exploration, and more extensive experience will be in a better position than the Company to compete for such leases. In addition, the ability of the Company to market any oil or gas which it might produce could be severely limited by its inability to compete with larger companies operating in the same area who may be willing or able to offer any oil or gas produced by them at a price lower than that of the Company. In addition, the availability of a ready market for oil and gas will depend upon numerous factors beyond the Company's control, including the extent of domestic production and imports of oil and gas, proximity and capacity of pipelines, the overall foreign domestic supply and demand of oil and gas, and the effect of federal, state and local regulations of oil and gas production and sales. The Company has an insignificant competitive position in the oil and gas industry. The Company is engaged in finding and producing oil and gas, and no funds are allocated to product research and development in the conventional sense. Since its inception, the Company has not had any customer or government sponsored research activities relating to the development of new products, services or techniques or the improvement of existing products, services or techniques. The Company, as an owner and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to the discharge of materials into, and protection of, the environment. These laws and regulations, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations, subject the Company to liability for pollution damages, require suspension or cessation of operations in affected areas and impose restrictions on the injection of 9 liquids into subsurface aquifers that may contain groundwater. Environmental requirements may necessitate significant capital outlays which may materially affect the Company's earnings and potential earnings and could cause material changes in its form of business. The Company has made and will continue to make expenditures in its efforts to comply with these requirements which it believes are necessary business costs in the oil and gas industry. As of December 31, 1995, the Company is not aware of any existing environmental claims which would have a material adverse effect upon its capital expenditures, earnings or competitive position. There is no assurance, however, that existing laws or regulations or changes in or additions to laws or regulations regarding the protection of the environment will not adversely affect the Company. It is impossible to determine whether or to what extent the Company's future performance may be affected by environmental laws; however, management does not believe that such laws have had a material adverse effect on the Company's financial position or results of operations. The Company currently has one full-time salaried employee, one full-time non-salaried employee (Mr. Huff), one full-time contract employee, and one part-time contract employee, and one contact engineer employed on a retainer basis who are directly engaged in its activities. The employees and retainer perform geologic, engineering and economic property evaluations, production enhancement design and operations, management and marketing of production on a daily basis, accounting, and secretarial and administrative services for the Company, as well as all general corporate management, under the direction of the Board of Directors. The Company has no material operations in foreign countries and no material portion of its sales or revenues is derived from customers in foreign countries. Management's Discussion and Analysis of Financial Condition and Results of Operations. - - - -------------------------------------------------------------------------- Working capital (which incorporates current and deferred obligations) increased slightly by $2,137 during the year ended December 31, 1995. These results followed a working capital increase of $84,031 in 1994. Lower received natural gas prices, payment of a portion of the deferred compensation, declining production without reserve replacement and significant depreciable and depletable costs resulted in the Company's loss of $210,598 or $2.86/share in 1995. Low natural gas prices, payment of a portion of the deferred compensation, unsuccessful workover costs of two wells in Oklahoma, and the costs associated with restructuring the Company contributed to the loss of $44,498 or $0.61 per share in 1994. 10 In October, 1992, as a source for additional working capital, the Company obtained a $300,000 line of credit with a lending institution, secured with 10 producing natural gas wells in Clark County, Kansas. As of December 31, 1994, a total of $132,724 was borrowed from the line of credit. During 1995, the Company reconstructed the debt obligations associated with the outstanding balance of the line of credit. As of December 31, 1995, the Company had bank debt obligations of $84,987 tied to an 8.5% note which matures on March 31, 1997. In addition, the Company holds a $150,000 line of credit secured with eight (8) Clark County, Kansas producing gas properties against which no sums were borrowed as of December 31, 1995. The Company currently has no commitments for capital expenditures. The Company is utilizing its own cash resources as well as outside capital to attempt to purchase additional producing oil and gas properties. In general, the Company's financial condition will not permit the risk of exploratory or development drilling activities unless outside risk capital is obtained. During the fiscal year ended December 31, 1995, oil and gas revenues decreased by $189,886 or 32% as compared to fiscal 1994, primarily as a result of lower received natural gas prices, decreases in Company net oil and gas production without reserve replacement and the sale of five (5) properties in 1994. At December 31, 1995, twenty-one wells are producing to contribute to this income. Management expects normal production decline from the presently producing wells during 1996. At December 31, 1995, the Company was operating 18 wells as opposed to 19 producing wells at December 31, 1994. Current markets remain unstable and it is impossible to predict how these will function. Any price increase or decrease will have a direct effect on the Company. The Company experienced a net loss of $210,598 or $2.86/share during 1995 compared to a net loss of $44,498 or $.61/share during 1994. The decrease in earnings is a direct result of significant operational/rework expenses associated with properties, significantly lower received natural gas prices, and declining production without reserve replacement. Interest income has decreased in the past few years both because of smaller amounts of invested cash and lower interest rates. General and administrative costs decreased from $266,603 in 1994 to $237,918 in 1995, primarily as a result of the elimination of one full-time salaried employee during 1994. However, overall general and administrative costs remain high relative to the Company's size. Management believes general and administrative costs cannot be reduced below current levels while prudently managing the Company's assets. 11 Oil and gas production costs have decreased to $190,795 in 1995 as compared to $300,236 in 1994. Both 1995 and 1994 oil and gas production costs reflect the additional operational and re-work costs associated with acquired properties. The acquisition of producing gas properties in 1991, 1992 and 1993 significantly increased Black Dome's reserves during those three years. During 1994, the Company focused on re-working operations to improve and maintain production from all properties while recovering costs associated with the acquisitions. During 1994, the Company disposed of five (5) producing properties. During 1995, two (2) gas wells (1.73 net wells) in which the Company held an interest were plugged and abandoned. The Company was not successful in adding reserves through drilling or acquisition activity during 1995. As a result of significant production decline and the Company's unsuccessful drilling and acquisition activity, net proved remaining reserves decreased significantly (26% on a Bbl equivalency basis) between December 31, 1995 and December 31, 1994. The estimated SEC net present value of total proved reserves decreased from $1,281,621 at December 31, 1994 to $1,196,316 at December 31, 1995. Higher 1995 received year-end oil and gas prices cushioned the impact of lower 1995 reserve levels on the estimated SEC net present value of total proved reserves. All of the foregoing conditions are expected to have a material adverse impact on the future operations of the Company. The Company's revenues are currently expected to continuously decrease during the next fiscal year as properties are sold to pay expenses, and as the remaining producing properties suffer normal declines in production. The Company does not currently have sufficient financial resources to purchase new producing properties to replenish expected production declines, or to replace properties that have been (and in all likelihood will continue to be) sold to pay operating expenses. Expenses of operations are not expected to decrease during the next fiscal year. During fiscal 1996, the Company intends to continue to explore reasonable avenues relative to preserving and maximizing shareholder value. The recurring losses from operations sustained by the Company (primarily as the result of declining reserves, poor natural gas prices, inadequate reserve replacement and relatively high fixed costs associated with maintaining operations) raise substantial doubt about its ability to continue as a going concern. One of the avenues that management currently intends to explore is the voluntary liquidation of the Company during the next twelve months. In the event that the Company is unable to receive significant funding from some viable outside source or does not voluntarily liquidate substantially all of its assets during the next twelve months, it currently appears to be likely that the Company will continue to deplete its assets in order to meet its ongoing operating expenses (which will ultimately result in little or nothing 12 being available for distribution to any of the Company's shareholders upon its eventual liquidation.) Under Colorado law the Company is not permitted to sell substantially all of its assets without first obtaining approval from a majority of its shareholders. The cost of holding such a shareholders' meeting (including printing, mailing, legal and accounting expenses) is currently estimated to be approximately $40,000. These costs will reduce the amount that would otherwise have been available for distribution to shareholders upon liquidation. Current economic trends still indicate that costs of conducting business activities will not rise as rapidly as they have during the preceding inflationary years. Governmental and foreign decisions over which Management has no control could impact the prices received for the Company's oil and gas and could have a very serious effect on profits. It is impossible to predict long-term or even short-term trends in pricing. There are no current legal proceedings concerning the Company and there are none pending. There were no shareholder meetings of the Company held during the fiscal year ended December 31, 1995. From October 1980 through November 12, 1984, Black Dome's common stock was traded on the over-the-counter market under the symbol "BDEC" and the quotes were carried by NASDAQ during that period of time. NASDAQ voluntarily withdrew "BDEC" from the system on November 12, 1984 due to the depressed price of the stock. Since that date there has been sporadic trading in the Company's stock. At the present time, there are no market makers listed in the "pink sheets." The number of holders of record of Black Dome's no par value common stock at September 1, 1996 was approximately 1,616. Holders of common stock are entitled to receive such dividends as may be declared by Black Dome's Board of Directors. No dividends have been paid with respect to Black Dome's common stock and no dividends are anticipated to be paid in the foreseeable future. Description of Properties. - - - ------------------------- Reserves. Proved developed and undeveloped oil and gas reserves of the Company at December 31, 1995 and December 31, 1994 were computed by Joseph R. Albi, Jr., a consulting petroleum engineer and former Executive Vice President of the Company, and were audited by Donald M. Osmus, a consulting Petroleum Engineer. Proved developed and undeveloped oil and gas reserves of the 13 Company at December 31, 1993 were computed by the Company and audited by Donald M. Osmus. All of the Company's reserves are located in the continental United States and the majority of the properties comprising these reserves are operated by Black Dome Energy Corporation.
Reserve Category ----------------------------------------------------------- Proved Developed Proved Undeveloped Total Proved ---------------- ------------------ ------------ (1) (2) --- --- December 31, (Bbls)* (Mcf)** (Bbls)* (Mcf)** (Bbls)* (Mcf)** - - - ------------ ------ ----- ------ ----- ------ ----- 1993 25,985 2,664,920 9,005 4,169 34,990 2,669,089 1994 9,355 2,031,425 -- -- 9,355 2,031,425 1995 9,825 1,431,318 -- 52,256 9,825 1,483,574
* Refers to barrels consisting of 42 U.S. gallons. ** Refers to a volume of 1,000 cubic feet under prescribed conditions of pressure and temperature and represents the basic unit for measuring the volume of natural gas. Proved Developed Reserves. These are proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification includes: Proved Developed Producing Reserves. These are proved developed reserves which are expected to be produced from existing completion interval(s) now open for production in existing wells; and Proved Developed Non-Producing Reserves. These are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making such oil and gas available for production should be relatively small compared to the cost of a new well. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved. Proved Undeveloped Reserves. These are proved reserves which are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units, which are reasonably certain of production when demonstrated 14 with certainty that there is continuity of production from the existing productive formation. Estimates for proved undeveloped reserves may be attributable to acreage for which an application of fluid injection or other improved recovery technique is used or contemplated only where such techniques have been proved effective by actual tests in the area and in the same reservoir. Present Value of Estimated Future Net Revenues from Proved Developed and Proved Undeveloped Oil and Gas Reserves. The table below presents, as of the end of 1995, 1994 and 1993, the present value of the estimated future net revenues attributable to proved developed reserves and proved undeveloped reserves discounted at an annual rate of ten percent (10%) per year.
Present Value of Future Net Revenues (dis- Future Net Revenues counted at 10%) as of Proved Proved Total December 31, Developed Undeveloped Proved - - - ----------------------- --------- ----------- ------ 1993 $2,720,531 $19,185 $2,739,716 1994 $1,281,621 $ 0 $1,281,621 1995 $1,175,279 $21,037 $1,196,316
While it is reasonable to anticipate that the prices received from the future sale of production may be higher or lower than the prices used in the evaluation described above, and the operating and other costs relating to such production may increase above existing levels, such increases in prices and costs have been omitted from consideration in making these evaluations in accordance with rules adopted by the Securities and Exchange Commission. The Company emphasizes that reserve estimates and rates of production are inherently imprecise and that estimates of new discoveries and non-producing and/or undeveloped reserves are more imprecise than those of mature producing oil and gas properties. Accordingly, the estimates are subject to change as further information becomes available. For additional information concerning oil and gas revenues, see Note 6 to the Financial Statements. Reserves Reported to Other Agencies. The Company did not file any oil or gas reserve estimates with, or include such estimates in reports to, any other federal governmental authority or agency within its last fiscal year. Production. The following table shows the Company's net quantities of oil (including condensate and natural gas liquids) and of gas produced for each of the Company's past three fiscal years: 15
Net Oil and Gas Production Year Ended December 31, ------------------------ 1995 1994 1993 ---- ---- ---- Gas (Mcf) 261,562 309,210 286,162 Oil/Condensate (Barrels) 1,382 2,747 2,783
The Company has no long-term supply or similar arrangements with foreign governments or authorities. Average Sales Price and Production Costs. The average sales prices (including transfers) and production costs per barrel of oil and Mcf of gas received by the Company for the fiscal years ended December 31, 1995, 1994 and 1993, were as follows. Equivalent barrels of production were calculated on the basis of 6 Mcf equals 1 Barrel.
Oil (Per Bbl) Gas (Per Mcf) Production (MCF) Year Ended Sales Sales Costs of December 31, Price Price Equivalent Bbls - - - ------------ -------------- ------------- ---------------- 1995 $17.10 $1.45 $4.24 1994 16.97 1.83 6.21 1993 16.73 2.10 5.83
16 Productive Wells and Acreage. The following tables set forth the Company's: (i) total gross and net productive oil and gas wells, and (ii) total gross and net developed acreage, both as of December 31, 1995: Productive Oil and Gas Wells. As of December 31, 1995, the Company owned an interest in 21 oil and/or gas properties, 18 of which are operated by the Company. The following depicts the number of gross and net oil and gas wells producing or capable of production in which the Company owned an interest at the end of the last fiscal period.
Total Wells (Gross)* Total Wells (Net)** Oil Gas Total Oil Gas Total --- --- ----- --- --- ----- December 31, 1995 2 19 21 1.03 14.64 15.67
The above numbers reflect a reduction of two (2) gross wells (1.73 net wells) which were plugged and abandoned in 1995. * A "gross well or acre" is a well or acre in which a working interest is owned. The number of gross wells or acres is the total number of wells or acres in which a working interest is owned. ** A "net well or acre" exists when the sum of the fractional ownership working interests in gross wells or acres equals one. The number of net wells or acres is the sum of fractional working interests owned in gross wells or acres, expressed as whole numbers and fractions thereof. 16 Developed Acreage. The following depicts the number of gross and net developed acres in which the Company owned an interest at the end of the Company's last fiscal year.
Gross Acres Net Acres ----------- --------- December 31, 1995 9,191 6,078
Undeveloped Acreage. The following table sets forth information regarding undeveloped acreage in which the Company has an interest.
Location Gross Acres Net Acres -------- ----------- --------- Kansas 160 105 Texas 28 10 ___ ___ Total 188 115
As of the date of this filing, the Company's total undeveloped acreage is held by production and is not subject to expiration until the producing well or wells which it holds is/are non-commercial or plugged and abandoned. Drilling Activity. The following summarizes the drilling activity of the Company during each of the last three fiscal years.
Year Ended Total Development Exploratory December 31, Wells Oil Gas Dry Oil Gas Dry - - - ------------ ----- --- --- --- --- --- --- 1995- Gross Wells 1 0 1 0 0 0 0 Net Wells .4 0 .4 0 0 0 0 1994- Gross Wells 0 0 0 0 0 0 0 Net Wells 0 0 0 0 0 0 0 1993- Gross Wells 0 0 0 0 0 0 0 Net Wells 0 0 0 0 0 0 0
Present Activities. The Company participated in the unsuccessful drilling of one (1) gross well (.4 net well) during the fourth quarter of 1995. Two (2) gross wells (1.73 net wells) in which the Company held an interest were plugged and abandoned during 1995. No additional oil and/or gas properties were acquired by the Company during 1995. Delivery Commitments. As of March 21, 1996, the Company was not obligated to provide a fixed and determinable quantity of oil or gas in the future pursuant to existing contracts or agreements, nor has the Company had any significant delivery commitments since its inception on December 12, 1979. 17 Federal Income Tax Consequences - - - ------------------------------- The following discussion summarizes the material federal income tax consequences to the Company and the shareholders of the proposed sale of assets and liquidation pursuant to the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), as in effect on the date of this Proxy Statement, the Treasury Regulations issued thereunder, and applicable administrative and judicial interpretations of the Code and Regulations which have been published on that date. This summary was prepared by the Company and is not based on an opinion of any legal or accounting firm. This discussion does not purport to address consequences which vary according to the particulars of a given shareholder's situation. Accordingly, for information concerning the precise impact of this transaction upon him, a shareholder should consult his own tax advisor. Tax Consequences to Shareholders. The cash proceeds distributed to a shareholder on liquidation will be treated, for tax purposes, as received in exchange for his stock. The shareholder will be treated as having received capital gain or loss in the amount of the difference between the amount of the distribution and the basis of his or her stock. Whether there is gain or loss will depend on the amount distributed and the shareholder's tax basis for the stock. Whether the gain or loss is long-term or short-term will depend on the particular shareholder's holding period for the stock. If blocks of stock were acquired at different times or at different prices, separate computations of gain or loss must be made. The taxability of the liquidating transactions to a shareholder is determined as of the time that he receives, or is entitled to receive, the proceeds of liquidation. The mere cessation of business is not a liquidation, and shareholders are not thereby in constructive receipt of a liquidating dividend. However, a distribution may be treated as a complete liquidation even though a nominal amount of cash is reserved for contingencies. The capital gain or loss rule applicable to a complete liquidation applies as well to a liquidation carried out through a series of distributions. In general, any distribution which is one of a "series" in complete liquidation of the corporation is treated in the same manner as a single distribution in complete liquidation. A separate computation of gain or loss is not permitted with respect to the part of the stock first redeemed. The amount received is applied in reduction of the aggregate basis, and the excess over such aggregate basis is reportable as gain when received. Such gain, however, must be computed separately for each block of stock for the purpose of determining the applicable percentages of capital gain or loss required to be taken in account. Tax Consequences to Company. The Tax Reform Act of 1986 repealed the tax rules which generally provided that a corporation which completely liquidated 18 within a twelve month period would not be required to recognize any gain or loss on any sale of assets. Accordingly, the general rule which now applies is that corporations must recognize any gain or loss realized in the sale of property in contemplation of complete liquidation. However, because all or nearly all of the sales of assets in contemplation of the liquidation of the Company have been or are expected to be at a loss, this rule is not expected to have an impact on the Company. At present, it is not anticipated that an opinion of counsel will be rendered to the Company or the shareholders relative to the tax consequences of the described transactions. Due to the delay and expense which would be involved, no Internal Revenue Service ruling has been applied for. The Board of Directors therefore recommends that the following resolution be adopted by the shareholders: RESOLVED, that the shareholders of Black Dome Energy Corporation (the "Company") hereby authorize the dissolution of the Company and the filing of Articles of Dissolution with the Office of the Colorado Secretary of State, and that upon the filing of such Articles of Dissolution, the activities of the Company shall thereafter be limited to those business activities appropriate to wind up the Company and liquidate its business and affairs, including collecting its assets, disposing of its properties that will not be distributed in kind to its shareholders, discharging or making provision for discharging its liabilities, distributing its remaining property among its shareholders according to their interests, and doing every other act necessary to wind up and liquidate its business and affairs. It is anticipated that a representative from the accounting firm of Halliburton, Hunter & Associates, P.C., the Company's principal accountants for the current year and the most recently completed fiscal year, is expected to be present at the Meeting, will have the opportunity to make a statement if he desires to do so, and is expected to be available to respond to appropriate questions. The affirmative vote of a majority of the currently outstanding shares is required for approval of this proposal. The Board of Directors recommends a vote "FOR" this proposal, and all of the members of the Board of Directors have orally informed the Company that they currently intend to vote in favor of the proposal at the Meeting. As the members of the Board of Directors collectively own 62.50% of the Company's currently issued and outstanding shares (which is more than the amount necessary to approve the action proposed to be taken), no other votes by any shareholders will be necessary for the proposal to be adopted. 19 FINANCIAL STATEMENTS -------------------- The financial statements of the Company for the fiscal year ended December 31, 1995, including audited financial statements as of and for the years ended December 31, 1995, 1994 and 1993, and unaudited financial statements as of June 30, 1996, and for the six months then ended, are attached hereto and are incorporated by this reference into this Proxy Statement. AVAILABILITY OF REPORT ON FORM 10-K ----------------------------------- Upon written request, the Company will provide, without charge, a copy of its Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to each shareholder of record or each shareholder who holds stock in the name of a bank or broker as nominee as of the close of business on the record date. Any request by a shareholder for the Company's Annual Report on Form 10-K should be mailed to the Company at 1536 Cole Boulevard, Suite 325, Golden, Colorado 80401. SHAREHOLDER PROPOSALS --------------------- In the event that the authorization to dissolve the Company is approved, the Board of Directors anticipates that the Company will not hold an annual meeting of its shareholders prior to the dissolution of the Company. However, in the event that an annual meeting of the Company's shareholders is held in the future, any proposal by a shareholder intended to be presented at the Company's next annual meeting of shareholders must be received at the offices of the Company a reasonable amount of time prior to the date on which the proxy statement and proxy for that meeting are mailed to shareholders in order to be included in the Company's proxy statement and proxy relating to that meeting. OTHER BUSINESS -------------- As of the date of this Proxy Statement, management of the Company was not aware of any other matter to be presented at the Meeting other than as set forth herein. However, if any other matters are properly brought before the Meeting, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. MISCELLANEOUS ------------- The cost of solicitation of proxies will be borne by the Company. The Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of Common Stock. In addition to solicitations by mail, directors, officers and regular employees of the 20 Company may solicit proxies personally or by telegraph or telephone without additional compensation. By Order of the Board of Directors Edgar J. Huff President Denver, Colorado September __, 1996 PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AT YOUR EARLIEST CONVENIENCE. A SELF-ADDRESSED, POSTAGE PAID ENVELOPE IS ENCLOSED FOR MAILING.INDEX TO FINANCIAL STATEMENTS 21 INDEX TO FINANCIAL STATEMENTS Page ---- December 31, 1995 and 1994 Report of Independent Certified Public Accountants F1 Balance Sheet at December 31, 1995 and 1994 F2,F3 Statement of Income at December 31, 1995, 1994, 1993 F4 Statement of Stockholders Equity at December 31, 1995 F5 Statement of Cash Flows at December 31, 1995, 1994, 1993 F6 Notes to Financial Statements F7-F13 June 30, 1996 Unaudited Balance Sheet ot June 30, 1996 and December 31, 1995 F14,15 Statement of Operations for six-months ended June 31, 1996 and 1995 F16 Statement of Cash Flows for six-months ended June 30, 1995 and 1995 F17 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- The Board of Directors and Stockholders Black Dome Energy Corporation Evergreen, Colorado We have audited the balance sheet of Black Dome Energy Corporation as of December 31, 1995 and 1994 and the related statements of income, stockholders' equity, and cash flows for the three years ended December 31, 1995, 1994, and 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Black Dome Energy Corporation as of December 31, 1995 and 1994 and the results of its operations and its cash flows for the three years ended December 31, 1995, 1994, and 1993 in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, in 1995, the Company elected to change its method of accounting for depreciation of lease and well equipment from the straight line method to the unit of production method and the financial statements have been restated to reflect the change. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations which raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Littleton, Colorado Halliburton, Hunter, & Associates, P.C. March 14, 1996 F1 BLACK DOME ENERGY CORPORATION Balance Sheet -------------
December 31, ------------------------- 1995 1994 ---------- - - - --------- Assets Current assets: Cash $ 63,008 $ 53,429 Accounts receivable: Joint interest owners 10,158 10,357 Oil and gas sales 69,772 86,273 Other 200 1,556 ------- - - - ------- Total current assets 143,138 151,615 ------- ------- Property and equipment, at cost: Oil and gas properties, net (successful efforts method) 220,994 393,976 Other property and equipment, net of accumulated depreciation of $58,367 and $51,427, respectively 1,988 7,589 Inventory of well equipment 44,926 53,921 ------- ------- 267,908 455,486 ------- ------- Other assets: Deposit --- 2,294 ------- ------- $ 411,046 $ 609,395 =========== ===========
See accompanying notes to financial statements F2
Liabilities and Stockholders' Equity Current liabilities: Notes payable, current portion $ 62,896 $ --- Line-of-credit --- 132,724 Accounts payable, trade 78,581 79,257 Accounts payable, officer 9,600 9,600 Accrued interest 662 --- Deferred compensation 160,000 100,000 -------- -------- Total current liabilities 311,739 321,581 -------- -------- Long-term debt, less current portion 22,091 --- Commitments and Contingencies Stockholders' equity: Common stock, no par value. Authorized 75,000,000 shares; issued and outstanding 73,755 shares in 1995 and 73,455 shares in 1994 292,415 292,415 Additional paid-in capital 1,886,495 1,886,495 Accumulated deficit (2,093,137) (1,882,539) ----------- ----------- 85,773 296,371 -------- -------- Less treasury stock 8,557 8,557 -------- -------- 77,216 287,814 -------- -------- $ 411,046 $ 609,395 ========= =========
F3 BLACK DOME ENERGY CORPORATION Statement of Income -------------------
December 31, ------------------------------- 1995 1994 1993 ------- ------- ------- Revenue: Oil and gas sales $ 402,627 592,513 647,328 Operating income 38,034 19,879 28,402 Gain (loss) on property disposition --- 142,852 --- Interest income 366 2,413 1,804 Other income (loss) 357 4,998 3 ------- ------- ------- 441,384 762,655 677,537 ------- ------- ------- Costs and expenses: Oil and gas production 166,262 300,236 249,814 Production and windfall profit taxes 22,737 37,136 44,461 Depreciation, depletion and amortization 199,519 119,218 130,522 Exploration expense 10,110 216 616 Write-off non-productive wells 15,438 65,955 --- Interest 14,250 17,739 10,200 General and administrative 223,666 266,603 235,586 ------- ------- ------- 651,982 807,103 671,199 ------- ------- ------- Earnings (loss) before income taxes (210,598) (44,448) 6,338 Provision for income tax --- --- 1,000 ----- ----- ----- Net earnings (loss) before income tax benefit (210,598) (44,448) 5,338 Income tax benefit --- --- 1,000 ----- ----- ----- Net earnings (loss) $ (210,598) (44,448) 6,338 ============ ======== ======= Earnings (loss) per common and common equivalent share (1) $ (2.86) (.61) .16 ========= ======== =======
(1) Calculated after one-for-1,001 share reverse split See accompanying notes to financial statements F4 BLACK DOME ENERGY CORPORATION Statement of Stockholders' Equity ---------------------------------
Common Stock Total ------------------- Additional Accumulated Stock- Stated Paid-in Earnings Holder's Shares Value Capital (Deficit) Equity ------- -------- --------- ---------- -------- Balance at December 31, 1992 67,500,000 $283,040 1,886,495 (1,844,429) 325,106 Net earnings for the year ended December 31, 1993 --- --- --- 6,338 6,338 Balance at December 31, 1993 67,500,000 283,040 1,886,495 (1,838,091) 331,444 Stock issued in lieu of annual compensation 7,500,000 9,375 --- --- 9,375 Reverse split of stock one-for-1,001 (74,926,545) --- --- --- --- Net loss for year --- --- --- ( 44,448) (44,448) Balance at December 31, 1994 73,455 292,415 1,886,496 (1,882,539) 296,371 Stock issued to employees for bonus 300 --- --- --- --- Net loss for year --- --- --- (210,590) (210,590) Balance at December 31, 1995 73,755 $292,415 1,886,495 (2,093,137) 85,773 ====== ======== ========= =========== ======
See accompanying notes to financial statements F5 BLACK DOME ENERGY CORPORATION Statement of Cash Flows -----------------------
December 31, 1995 1994 1993 ---------- ----------- --------- Cash flows from operating activities: Net earnings (loss) $ (210,598) (44,448) 6,338 Depreciation, depletion, amortization 199,519 119,218 130,522 (Gain) loss on property dispositions --- (142,852) --- Changes in assets and liabilities: (Increase) decrease in receivables 18,056 16,444 15,011 Increase (decrease) in accounts payable (676) (224,815) 78,863 Increase (decrease) in other liabilities 662 --- --- (Increase) decrease in other assets 2,294 729 3,024 Increase (decrease) in deferred compensation 60,000 (80,000) 60,000 ------ -------- ------ Net cash provided (used) by operating activities 69,257 (355,724) 293,758 ------ --------- ------- Cash flows from investing activities: Acquisition of properties --- --- (197,580) Proceeds from property dispositions --- 164,424 7,193 Purchase of equipment (28,598) (59,698) (222,082) Purchase of well equipment inventory, net of transfers to wells 8,995 (20,115) 22,336 Write-off non-producing properties 7,662 65,955 --- -------- -------- -------- Net cash (used in) provided by investing activities (11,941) 150,566 (390,133) -------- ------- --------- Cash flows from financing activities: Increase (decrease) in line-of-credit (132,724) --- 223,987 Increase (decrease) in notes payable 132,724 --- 2,800 Payments on note payable (47,737) --- --- Issuance of common stock --- 9,375 --- Acquisition of Treasury stock --- (8,557) --- -------- ------- -------- Net cash (used in) provided by financing activities (47,737) 818 226,787 Increase (decrease) in cash 9,579 (204,340) 130,412 Cash balance at beginning of year 53,429 257,769 127,357 ------- -------- ------- Cash balance at end of year $ 63,008 53,429 257,769 ========= ======== =======
See accompanying notes to financial statements F6 BLACK DOME ENERGY CORPORATION Notes to Financial Statements December 31, 1995 and 1994 1. Summary of Significant Accounting Policies: ------------------------------------------- Operations of the company ------------------------- Black Dome Energy Corporation was incorporated as a Colorado corporation on December 12, 1979 and was in the development stage through 1980. The Company is involved in exploration for oil and gas and the acquisition, development, and operation of oil and gas leasehold interests. Property and equipment and depreciation, depletion, and amortization -------------------------------------------------------------------- The Company follows the successful-efforts method of accounting for oil and gas exploration and development costs. Under this method, lease acquisition costs and exploration and development costs attributable to the finding and development of proved reserves are capitalized. Exploratory dry hole costs and other nonproductive oil and gas activities are expensed. Costs of nonproductive leases are charged to expense when abandoned or substantially impaired, based upon a property-by-property evaluation. Capitalized costs relating to producing properties are depleted or depreciated on the units-of- production method based on the total of proved reserves. Expenditures for repairs and maintenance costs and delay rentals are charged to expense as incurred; renewals and betterments are capitalized. The cost and related accumulate depreciation, depletion, or amortization of property sold or otherwise retired are eliminated from the accounts; and gains or losses on dispositions are reflected in the consolidated statement of operations. Furniture, office equipment, and an automobile are depreciated using the straight-line method of depreciation over the estimated useful lives of the assets. The Company had previously used the straight line method of depreciation for lease and well equipment, and in 1995, changed to the units-of-production method. The change resulted in additional depreciation of $56,525 ($.77 per share) in 1995; $26,999 ($.37 per share) in 1994; $55,628 ($.76 per share) in 1993; and $26,302 in prior years. The Company's financial statements have been restated to reflect the changes. The Company believes that this better reports income to conform to Financial Accounting Standards Board Statement of Accounting Standards No. 121. Inventory --------- Inventory of lease and well equipment is valued at the lower of cost or market. Cost is determined by either the specific identification method or average cost method depending on the nature of the inventory item. Income taxes ------------ The Company accounts for income taxes using tax-liability method in accordance with Financial Accounting Standards Board Statement No. 109. The effect of Statement 109 will not have a material effect on the financial statements of the Company. The benefit of tax carryforwards has not been recognized because realization is not assured. Gain (loss) per share --------------------- Gain (loss) per common share is computed on the basis of the weighted average number of shares of common stock and common stock equivalents outstanding during the year.* There were 73,755 shares outstanding at December 31,1995 and 73,455 at December 31, 1994. * after allowing for the one-for 1,001 reverse split during in 1994. F7 BLACK DOME ENERGY CORPORATION Notes to Financial Statements, Continued December 31, 1995 and 1994 1. Summary of Significant Accounting Policies: ------------------------------------------- Basis of presentation and going concern --------------------------------------- The accompanying financial statements have been prepared on a going-concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, and to increase sales to a level where the Company becomes profitable. The Company's management believes it will be able to attain these goals. 2. Oil and Gas Operations: ----------------------- Information related to the Company's oil and gas operations is summarized as follows:
December 31, 1995 1994 1993 ---------------------------- Capitalized costs: Unproved properties $ --- --- --- Proved oil and gas properties 885,006 866,280 958,459 ------- ------- ------- 885,006 866,280 958,459 Accumulated depletion, depreciation and amortization 664,012 362,781 336,943 ------- ------- ------- $ 220,994 502,499 621,516 ======= ======= ======= Costs incurred in oil and gas producing activities: Property acquisition costs --- --- 197,580 Exploration costs 10,110 216 616 Production costs 188,999 337,372 294,275 Depreciation, depletion, and amortization expense 199,519 119,218 130,522 ------- ------- ------- $ 398,628 456,806 622,993 ======= ======= ======= Sales of oil and gas, net of production costs $ 213,678 $ 255,141 $ 353,053 ======= ======= =======
3. Income Taxes: ------------- At December 31, 1995, net operating losses available for federal income tax purposes total approximately $1,250,000, of which $189,000, $187,000, $237,000, $151,000, $250,000, $36,000 and $200,000 will expire in 1996, 1997, 1998, 1999, 2000, 2006, and 2007 respectively. Investment tax credit carryforwards at December 31, 1995, total $13,800 of which, $8,900, $2,000, $2,800, and $100 will expire in 1996, 1997, 1998, and 1999, respectively, if not utilized. F8 BLACK DOME ENERGY CORPORATION Notes to Financial Statements, Continued December 31, 1995 and 1994 4. Employment Contracts: -------------------- On May 8, 1991, the Company entered into an employment contract with E.J. Huff as President of Black Dome for a four-year period beginning January 1, 1991 and ending December 31, 1994. The contract provides for annual compensation of $9,600 paid currently and $60,000 to be deferred to the final year of the contract. At December 31, 1994, $240,000 for the first four years of deferred compensation had been recognized by the Company and payment of $140,000 had been made. The deferred compensation is unfunded. During 1993 and 1994 in lieu of his $9,600 annual compensation and with approval of the Board of Directors, Mr. Huff accepted 6,800,000 and 7,500,00 restricted (pre reverse split) shares of the Company's no par value common stock and cash compensation of $1,100. On December 31, 1994, the Company entered into an employment contract with E.J. Huff as President of Black Dome for the three years ending December 31, 1997 with annual compensation of $100,000 for 1995; $125,000 for 1996 and $150,000 for 1997. On July 1, 1991, the Company entered into an employment contract with J.R. Albi, Jr., as Executive Vice President of Black Dome for a three-year period beginning July 1, 1991 and ending June 30, 1994. The contract provides for annual compensation of $60,000. Upon execution of the agreement, Mr. Albi received 7,256,000 pre-split shares of the Company's common stock valued at $.00125 per share or $9,070. The shares were restricted for the term of the contract and were forfeitable as follows: If Mr. Albi left the employ of the Company prior to June 30, 1992, all of the shares; prior to June 30, 1993, two-thirds of the shares; and prior to June 30, 1994, one-third of the shares. The contract has been fulfilled. 5. Major Customers: --------------- During the year ended December 31, 1995 sales of oil and gas to two customers totaled approximately $295,000 and $52,000. During the year ended December 31, 1994, sales of oil and gas to two major customers were $336,000 and $154,000. During the year ended December 31, 1993, sales of oil and gas to two customers totaled approximately $132,000 and $242,000. 6. Supplementary Oil and Gas Information (Unaudited): -------------------------------------------------- Changes in proved oil and gas reserves:
1995 1994 Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) ------ ----- ------ ----- Proved reserves: Balance at beginning of year 9,355 2,031,425 34,990 2,669,089 Properties sold --- --- (19,247) (227,135) Additions to and revisions of previous estimates 1,852 (286,289) (3,641) (101,313) Production (1,382) (261,562) (2,747) (309,216) ------ ------- ----- ------- Balance at end of year 9,825 1,483,574 9,355 2,031,425 ===== ========= ===== =========
F9 BLACK DOME ENERGY CORPORATION Notes to Financial Statements December 31, 1995 and 1994 6. Supplementary Oil and Gas Information (Unaudited), Continued: -------------------------------------------------------------
Proved developed reserves: Balance at December 31, 1993 25,985 2,664,920 Balance at December 31, 1994 9,355 2,031,425 Balance at December 31, 1995 9,825 1,431,318
Future net cash flows from proved oil and gas reserves:
Future net cash flows at December 31, 1995 ------------------ Total Proved Proved Developed Reserves Reserves --------------------- December 31, ----------- 1996 $ 306,423 338,801 1997 290,572 271,754 1998 232,079 217,449 Remainder 853,044 814,673 ------- ------- $ 1,682,118 $1,642,677 ========= =========
Present value of future net cash flows (discounted at 10%):
Proved Proved Developed ------ --------- December 31, ----------- 1993 2,739,716 2,720,531 1994 1,281,621 1,281,621 1995 1,196,316 1,175,279
Changes in present value of estimated future net cash flows from proved oil and gas reserves:
December 31, ------------------------------ 1995 1994 1993 ---- ---- ---- Present value at beginning of period $ 1,281,621 $ 2,739,716 $ 2,039,192 Additions and revisions, net of future estimated development and productions costs and net of properties sold 128,323 (1,202,954) 1,053,577 Sales of oil and gas, net of lifting costs (213,628) (255,141) (353,053) ------- ------- ------- Present value at end of period $ 1,196,316 $ 1,281,621 $ 2,739,716 ========= ========= =========
F10 BLACK DOME ENERGY CORPORATION Notes to Financial Statements December 31, 1995 and 1994 6. Supplementary Oil and Gas Information (Unaudited), Continued: ------------------------------------------------------------- Summary of oil and gas producing activities on the basis of reserve recognition accounting:
1995 1994 ________ ________ Additions and revisions to present value (discounted at 10%) of estimated future net revenues of proved oil and gas reserves: Additions, net of estimated future development and production costs $ 21,037 $ --- Revisions to estimates of reserves proved in prior years: Changes in prices, net of production costs and taxes 31,256 (66,517) Other revisions (10,327) (125,100) Accretion of discount 86,357 (1,011,337) ---------- ----------- Total additions and revisions 128,323 (1,202,954) Less evaluated acquisition, exploration and development costs incurred --- --- --------- - - - -------- Additions and revisions under evaluated costs 128,323 (1,202,954) Provision for income taxes --- --- ------- ----------- Results of oil and gas producing activities on the basis of reserve recognition accounting $ 128,323 $ (1,202,954) ============ =============
The following accounting policies have been used in preparing the Reserve Recognition Accounting (RRA) presentation. The summary of oil and gas producing activities on the basis of RRA was prepared based on the rules of the Securities and Exchange Commission (SEC). Under RRA, earnings are recognized as proved reserves are found based on the estimated present value of such reserves, computed as described below. Subsequent revisions to the RRA valuation of proved reserves are included in earnings as they occur. Proved reserves are those quantities of oil and gas which can be expected, with little doubt, to be recoverable commercially at current prices and costs under existing operating methods. The proved reserves and related valuations were computed by J.R. Albi, Jr. and audited by Donald M. Osmus, independent petroleum consulting individual, in accordance with the rules of the SEC. Estimated future net revenues were computed by applying current prices received by the Company to estimated future production of reserves, less estimated future development and production costs and windfall profit taxes based on current costs. A discount factor of 10% was applied to the estimated future revenues to compute the estimated present value of proved oil and gas reserves. This valuation procedure does not necessarily result in an estimate of the fair market value of the Company's oil and gas properties. F11 BLACK DOME ENERGY CORPORATION Notes to Financial Statements, Continued December 31, 1995 and 1994 6. Supplementary Oil and Gas Information (Unaudited), Continued: ------------------------------------------------------------- Totals of proved reserves are inherently imprecise estimates and are continually subject to revision based on production history, results of additional exploration and development, price changes, and other factors. The pretax income (loss) reflected in the primary financial statements for oil and gas producing activities corresponds to the pretax income (loss) on the basis of RRA of $128,323 in 1995 and $(1,202,954) in 1994 and $1,053,577 in 1993, respectively. "Additions to reserves" are the result of current acquisitions and development activities. Increases in prices are the approximate effect on the RRA valuation of proved reserves due to price changes. Other revisions represent the net effect of all revisions to estimated quantities of proved reserves. Accretion of discount was computed by multiplying 10% times the present value of future net revenues as of the beginning of the year, adjusted to reflect downward revisions. Evaluated acquisition, exploration, development, and production costs include current and estimated future costs associated with the current year reserve additions. Such expenses include property acquisitions, well costs, lease rentals, and abandonments. The cost of acquiring unproved properties and drilling exploratory wells are deferred until the properties are evaluated and determined to be either productive or nonproductive, at which time they are charged to expense. There were no deferred acquisition and exploration costs at December 31, 1995 and 1994. The provision for income taxes is based on the "liability" method computed by applying the current statutory income tax rate to the difference between the year end RRA valuation of proved reserves and the tax basis in the properties less estimated investment tax credits and statutory depletion associated with future development costs. 7. Commitments and Contingencies: ------------------------------ There were no commitments or contingencies known to management at December 31, 1995. 8. Related Party Transactions: --------------------------- On January 27, 1992, the Company issued its one-year note for $35,000 to Clayton Corporation, a company controlled by E.J. Huff, with interest at 8% per annum. On January 27, 1993, the not was renewed and interest paid by issuance of a note for $2,800. On January 27, 1994, an additional note for $2,800 was issued for interest which was included in accrued interest at December 31, 1993. The notes were paid in full in 1994. 9. Environmental Liabilities: -------------------------- The company's oil and gas operations are subject to various federal, state, and local laws and regulations regarding environmental and ecological matters. These laws and regulations, among other things, impose liability on the Company, as a lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations, subject the lessee to liability for pollution damages, require suspension or cessation of operations in affected areas and impose restrictions on the injection of liquids into subsurface aquifers that may contain groundwater. As of December 31, 1995, the Company was not aware of any environmental claims which would have a material impact upon the Company's financial position or results of operations. F12 BLACK DOME ENERGY CORPORATION Notes to Financial Statements, Continued December 31, 1995 and 1994 10. Reverse stock split and Treasury Stock -------------------------------------- During 1994, the Company effected a reverse stock split pursuant to which one new share of the Company's Common Stock was issued in exchange for each 1,001 shares of the Company's previously outstanding Common Stock. To the extent that such reverse stock split resulted in any shareholder owning less than a single full share of the Company's common stock, the Company paid cash for each such fractional share in an amount equal to the appropriate fraction of $5.90 per whole share (which represents the fair value of a whole share after the consummation of the proposed reverse stock split as determined by the Company's Board of Directors). To the extent that the proposed reverse stock split resulted in fractional shares held by persons who owned one or more full shares of the Company's common stock after consummation of the reverse stock split, such fractional shares were rounded up or down to the nearest full share. F13 BLACK DOME ENERGY CORPORATION AND SUBSIDIARY -------------------------------------------- BALANCE SHEET -------------
June 30, December 31, ____1996_____ ____1995____ (Unaudited) (Note) ASSETS ------ Current Assets: Cash $134,762 $ 63,008 Accounts Receivable 81,926 80,130 -------- -------- Total current assets $216,688 $143,138 -------- -------- Property and equipment, at cost: Oil and gas properties - net (successful efforts method) 105,108 220,994 Materials and supplies 45,952 44,926 Other property and equipment - net 238 1,988 ------- ------- Total assets $ 367,986 $ 411,046 ========= =========
Note: The balance sheet at December 31, 1995 has been taken from the audited financial statements at that date, and condensed. F14 BLACK DOME ENERGY CORPORATION AND SUBSIDIARY BALANCE SHEET (CONT'D) ----------------------
June 30, December 31, ____1996___ ____1995____ (Unaudited) (Note) LIABILITIES_AND_STOCKHOLDER'S_EQUITY ------------------------------------ Current Liabilities: Accounts Payable $ 79,275 $ 79,243 Note Payable - Bank 53,297 84,987 Other Payables 9,600 9,600 ------- ------- Total Current Liabilities 142,172 173,830 ------- ------- Deferred Liability 222,500 160,000 ------- ------- Stockholders' Equity: Common stock; no par value; authorized 10,000,000 shares, issued and outstanding 73,755 and 73,455 shares, respectively 2,170,353 2,170,353 Accumulated deficit (2,167,039) (2,093,137) ----------- ----------- Total stockholders' equity 3,314 77,216 ----------- ----------- Total liabilities and stockholders' equity $ 367,986 $ 411,046 ============ ============
Note: The balance sheet at December 31, 1995 has been taken from the audited financial statements at that date, and condensed. F15 BLACK DOME ENERGY CORPORATION AND SUBSIDIARY STATEMENT OF OPERATIONS -----------------------
Six Months Ended June 30, 1996 1995 --------------------- (Unaudited) Revenue: Oil and gas sales $296,226 $223,177 Operating income 5,678 5,678 Interest Income 158 198 Miscellaneous -- 248 -------- -------- Total $302,062 $229,301 -------- -------- Expenses: Oil & Gas production 104,409 96,726 Production and windfall profit taxes 16,640 13,435 Depreciation, depletion and amortization 83,500 33,000 General & Administrative 171,415 135,265 Total $375,964 $278,426 -------- -------- Income (loss) before taxes $<73,902> $<49,125> Provision for Income taxes -- -- Net Income (Loss) before Income Tax Benefit $<73,902> $<49,125> --------- --------- Income Tax Benefit -- -- Net Income (loss) $<73,902> $<49,125> ======== ======== Income per common and common equivalent share $ <1.00> $ <.67> ========= ========= F16 BLACK DOME ENERGY CORPORATION AND SUBSIDIARY STATEMENT OF CASH FLOWS -----------------------
Six Months Ended June 30, ------------------ 1996 1995 (Unaudited) Net Cash Flows Provided By Operating Activities $<73,902> $<49,125> Net Cash Used In Investing Activities 118,880 28,767 Net Cash Used In Financing Activities 26,776 -- ------- ------- Net Increase(Decrease) in Cash $ 71,754 $<20,358> ======== ========
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