-----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, ShFY/Ewyy8ACtxxYTR3Ip34968jmncEuFj2znn5g13xuBpX6k2uNGCOe9xnLOjJf hhDirM9/r0FzMbjUjmMo0A== 0000788965-97-000012.txt : 19971113 0000788965-97-000012.hdr.sgml : 19971113 ACCESSION NUMBER: 0000788965-97-000012 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALLADOR PETROLEUM CO CENTRAL INDEX KEY: 0000788965 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 841014610 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14731 FILM NUMBER: 97717034 BUSINESS ADDRESS: STREET 1: 1660 LINCOLN ST STE 2700 CITY: DENVER STATE: CO ZIP: 80264 BUSINESS PHONE: 3038395505 MAIL ADDRESS: STREET 1: 1660 LINCOLN STREET STREET 2: SUITE 2700 CITY: DENVER STATE: CO ZIP: 80264 FORMER COMPANY: FORMER CONFORMED NAME: KIMBARK OIL & GAS CO /CO/ DATE OF NAME CHANGE: 19900102 FORMER COMPANY: FORMER CONFORMED NAME: KIMBARK INC DATE OF NAME CHANGE: 19860624 10QSB 1 THIRD QUARTER FORM 10QSB U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 0-14731 HALLADOR PETROLEUM COMPANY (Exact name of small business issuer as specified in its charter) COLORADO 84-1014610 (State or other jurisdiction of (IRS Employer Identification No.) Incorporation or organization) 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264 (Address of principal executive offices) 303-839-5504 FAX: 303-832-3013 (Issuer's telephone numbers) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Shares outstanding as of November 13, 1997: 7,093,150 This report contains ten pages and the exhibit index is on page 9. -1- PART I. FINANCIAL INFORMATION: HALLADOR PETROLEUM COMPANY Consolidated Balance Sheet (in thousands)
September 30, December 31, 1997 1996* ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 3,157 $ 2,898 Short-term investments 4,112 900 Accounts receivable- Oil and gas sales 391 505 Well operations 543 365 ------- ------- Total current assets 8,203 4,668 ------- ------- Oil and gas properties (full-cost accounting), at cost: Unproved properties 1,707 711 Evaluated properties 40,784 39,527 Less - accumulated depreciation depletion, amortization (33,153) (32,691) ------- ------- 9,338 7,547 ------- ------- Other assets 269 165 ------- ------- $17,810 $12,380 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 663 $ 317 Oil and gas sales payable 196 169 Debt with recourse only to the So. Cuyama Field 425 590 ------- ------- Total current liabilities 1,284 1,076 ------- ------- Debt with recourse only to the So. Cuyama Field 4,898 5,231 ------- ------- Deferred bonus plan 200 178 ------- ------- Other 105 110 ------- ------- Minority interest 5,032 ------- ------- Preferred stock, $.10 par value; 10,000,000 shares authorized; no shares issued Common Stock, $.01 par value; 100,000,000 shares authorized; 7,093,150 shares issued 71 71 Additional paid-in capital 18,061 18,061 Accumulated deficit (11,841) (12,347) ------- ------- 6,291 5,785 ------- ------- $17,810 $12,380 ======= =======
*Derived from the Form 10-KSB. See accompanying notes. -2- HALLADOR PETROLEUM COMPANY Consolidated Statement of Income (in thousands, except per share amounts)
Nine months ended Three months ended September 30, September 30, 1997 1996 1997 1996 ----- ----- ----- ----- Revenue: Oil $2,978 $3,105 $ 949 $1,067 Gas 260 235 93 80 NGLs 310 367 89 122 Interest 168 159 82 55 Other 39 4 ------ ------ ----- ----- 3,716 3,905 1,213 1,328 ------ ------ ----- ----- Costs and expenses: Lease operating 2,048 2,068 766 657 Depreciation, depletion and amortization 462 425 176 141 General and administrative 314 343 111 95 Interest 379 453 125 146 ------ ------ ------ ------ 3,203 3,289 1,178 1,039 ------ ------ ------ ------ Income before minority interest 513 616 35 289 Minority interest 7 7 ------ ------ ------ ------ Net income $ 506 $ 616 $ 28 $ 289 ====== ====== ====== ====== Net income per share $ .07 $ .09 (1) $ .04 ====== ====== ====== ====== Weighted average shares outstanding 7,094 7,094 7,094 7,094 ====== ====== ====== ======
(1) Less than one cent. See accompanying notes. -3- HALLADOR PETROLEUM COMPANY Consolidated Statement of Cash Flows (in thousands)
Nine months ended September 30, 1997 1996 -------- -------- Cash flows from operating activities $ 1,058 $ 1,233 ------ ------ Cash flows used in investing activities: Short-term investments (3,212) (2,831) Additions to properties (2,026) (360) Other assets (88) ------ ------ Net cash used in investing activities (5,326) (3,191) ------ ------ Cash flows from financing activities: Yorktown investment 5,025 Repayments of debt (498) (670) ------ ------ Net cash provided by (used in) financing activities 4,527 (670) ------ ------ Net increase (decrease) in cash and cash equivalents 259 (2,628) ------ ------ Cash and cash equivalents, beginning of period 2,898 3,459 ------ ------ Cash and cash equivalents, end of period $ 3,157 $ 831 ====== ======
See accompanying notes. -4- HALLADOR PETROLEUM COMPANY Notes to Financial Statements 1. The interim financial data is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted counting principals have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included herein are adequate to make the information presented not misleading. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company's financial statements filed as part of the Company's 1996 Form 10-KSB. This quarterly report should be read in conjunction with such annual report. 2. On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown) invested $5,025,000 cash in Hallador Petroleum, LLP, a newly formed limited liability limited partnership. The Company is the general partner and received a 70% interest in the partnership in return for contributing its net assets and Yorktown represents the limited partners and received a 30% interest for its $5,025,000 contribution. The Company, being the general partner, consolidates the activity of the partnership and presents the 30% limited partners' interest as a minority interest. -5- HALLADOR PETROLEUM COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS YEAR-TO-DATE COMPARISON ----------------------- The table below provides sales data and average prices for the period.
1997 1996 Sales Volume Average Price Sales Volume Average Price ------------ ------------- ------------ ------------- Oil - barrels 163,690 $18.19 165,077 $18.81 Gas - MCF 105,200 2.47 152,781 1.54 NGLs- barrels 22,962 13.51 29,841 12.30
Significantly higer gas prices partially neutralized the reduction in revenue resulting from declining production. Interest income will increase in future periods due to the Yorktown investment. The tables below provide sales and expense data for each quarter through September 30, 1997.
1997 Sales Volume by Quarter and Year-to-date First Second Third Year-to-date ---------- ---------- ---------- ------------ Oil - barrels 51,637 54,761 57,292 163,690 Gas - MC 30,313 35,487 39,400 105,200 NGLs- barrels 7,389 7,807 7,766 22,962
1997 Average Prices by Quarter and Year-to-date First Second Third Year-to-date ---------- ---------- ---------- ------------ Oil - barrels $20.90 $17.35 $16.56 $18.19 Gas -MCF 3.08 2.06 2.35 2.47 NGLs- barrels 17.60 11.65 11.51 13.51
Production levels are trending up because of the pump program discussed below. Management expects to maintain or slightly increase the third quarter production levels because of the pump program. -6-
1997 Expenses by Quarter and Year-to-date First Second Third Year-to-date ---------- ---------- ---------- ------------ LOE $630 $652 $766 $2,048 DD&A 134 152 176 462 G&A 107 96 111 314 Interest 129 125 125 379
The upward trend in lease operating expense (LOE) is expected to continue due to the higher electricity costs related to the pump program. The upward trend in depreciation, depletion and amortization (DD&A) will continue due to more costs being subject to amortization and because of the increased level of activity resulting from the Yorktown investment. The upward trend in general and administrative expenses will continue due to the hiring of a vice-president on July 7, 1997, and because of the increased level of activity resulting from the Yorktown investment. Interest expense will stay at about the same level for the remainder of the year. QUARTER-TO-DATE COMPARISON -------------------------- The table below provides sales data and average prices for the period.
1997 1996 Sales Volume Average Price Sales Volume Average Price --------------------------- --------------------------- Oil - barrels 57,292 $16.56 54,362 $19.62 Gas - MCF 39,400 2.35 41,802 1.92 NGLs- barrels 7,766 11.51 10,020 12.17
Revenue decreased slightly due primarily to lower average oil prices. See the table above for average prices by quarter for 1997. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Cash, short-term investments and cash to be provided from operations are expected to enable the Company to meet its obligations as they come due and fund current planned activities The following discussion updates the MD&A contained in Item 6 of the 1996 Form 10-KSB and should be read in conjunction therewith. PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY --------------------------------------------- At September 30 and November 13, 1997, the Company had investments in unproved properties of $1,707,000 and $1,815,000, respectively. These costs, most of which represent high-risk, high-reward investments may or may not prove successful. -7- SACRAMENTO BASIN-CALIFORNIA --------------------------- The first well was drilled and completed in late May and placed on production August 4. The well is producing 200 mcf/day from the Kione zone (the Forbes zone - the primary zone-was dry) and the gas is being sold at $2.14/mcf. Gas reserves for this well, net to the Company's interest, are estimated to be less than 100,000 mcf. The Company's net revenue interest in this well, considering the assignment discussed below, is 24%. The second well, a dry hole, reached total depth on June 9. In late July, the Company assigned half its 60% interest to Equity Oil Company for $158,000 and a 30% carried interest through completion in the next two wells to be drilled on or before December 31, 1997. After these two wells are drilled, the Company is responsible for its 30% proportionate share in all future drilling costs in the prospect. Depending on the success of the next two wells, five to seven additional wells could be drilled during the next 18 months. WILLISTON BASIN-NORTH DAKOTA ---------------------------- In the first quarter 1997, the Company entered into a joint venture (JV) which obtained five-year leases covering 30,000 net acres in North Dakota. The Company has a 55% profits interest in the JV and, to date, has invested approximately $684,000; the other party contributed seismic and geological studies for its 45% profits interest. The Company is entitled to recoup its investment before the other joint venture partners shares in any profits. The Company plans to sell the acreage and retain an overriding royalty interest or carried working interest. BIG HORN BASIN-WYOMING ---------------------- On October 20, 1997, the Company reached an agreement to sell 50% of its interest in the this prospect and closing is expected to occur on or before November 17, 1997. The Company will essentially recover its investment in the prospect but due to the full-cost method of accounting, no gain will be recognized. Drilling is planned for the summer of 1998. CALIFORNIA OIL PRICES --------------------- As of November 13, the Company was receiving $17.01 for its California oil production which is $.45 above the average prices received for the third quarter of 1997 and about $2.54 below the average price received during the calendar year 1996. On November 1, 1997, the Company began selling its oil to TOSCO Energy under a one-year contract, which includes a $.30 premium. SOUTH CUYAMA FIELD ------------------ During the third quarter Phase I of the pump program was completed by installing ten electric, submersible pumps in the South Cuyama Field (Field). The total cost net to the Company's interest was approximately $478,000. The Company qualified for a rebate program with Pacific Gas & Electric (PG&E), who supplies the electricity to the Field, and on November 12, received $179,000 to its share. Such amount is included in accounts receivable in the accompanying balance sheet. -8- The Company is evaluating Phase II of the pump project for 1998. Several more pumps could be purchased. It is possible that the Company would receive another PG&E rebate under its 1998 program. Some of the benefits of using electrical pumps are (i) an increase in natural gas revenue since gas is sold as opposed to being consumed in the Field, (ii) lower repair and maintenance expense, (iii) increased oil and gas production because more water is being moved, and (iv) less emissions, which results in less environmental regulation and costs. The downside is the capital cost and the higher electricity bills; the advantages more than offset the disadvantages. Due to lower oil prices and the costs associated with the pump progam, no new drilling into the Colgrove formation is planned for the remainder of 1997. NEW ACCOUNTING RULES -------------------- In February 1997, FAS 128 dealing with earnings per share calculations was issued and will be effective for the 1997 year-end reporting. In addition, during June, FAS 130 and 131 were issued dealing with comprehensive income and segment reporting, respectively, and are required for 1998 reporting. The adoption of 128 and 130 will have no material effect on the Company's financial reporting. Management is evaluating the disclosure impact of FAS 131. FUTURE RESULTS OF OPERATIONS ---------------------------- Assuming no success from the current exploration activities and stable production, management projects 1997 net income to be lower than 1996 reported net income due to lower oil prices and higher expenses as discussed above. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.14 -- Tosco Oil Contract 27 -- Financial Data Schedule; EDGAR filing only (b) On July 24, 1997 the Company filed a Form 8-K to report the Yorktown investment. -9- SIGNATURE In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HALLADOR PETROLEUM COMPANY Date: November 13, 1997 By: /s/ Victor P. Stabio Victor P. Stabio Chief Executive Officer and Chief Financial Officer Signing on behalf of the registrant and as principal financial officer. -10- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet on page 2 of the Company's Form 10-QSB for the year-to-date, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1996 SEP-30-1997 3,157 4,112 934 0 0 8,203 42,491 33,153 17,810 1,284 4,898 0 0 71 0 17,810 0 3,716 0 0 0 0 379 0 0 0 0 0 0 506 .07 .07
EX-10.14 3 TOSCO REFINING CO. (A DIV OF TOSCO CORP) 3003 N. CENTRAL AVE., STE. 1500 PHOENIX, AZ 85012 SEPTEMBER 29, 1997 HALLADOR PRODUCTION COMPANY 1660 LINCOLN ST., STE. 2700 DENVER, CO 80264 **REVISED 10/7/97--SECTION 19 TELEX/TWX: FAX: 303-832-3013 ATTENTION: VICTOR STABIO TELEX CONTRACT RE: TOSCO CONTRACT # 009237 HALLADOR # PLEASE ADVISE TOSCO REFINING CO. (A DIV OF TOSCO CORP) (TOSCO) HAS THE PLEASURE TO CONFIRM THE FOLLOWING TRANSACTION AGREED TO BY VICTOR STABIO OF HALLADOR PRODUCTION COMPANY (HALLADOR) AND JIM GRAVATT OF TOSCO ON SEPTEMBER 23, 1997. THIS TELEX SETS FORTH AND CONFIRMS THE COMPLETE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDES, AND REPLACES ALL OTHER AGREEMENTS, WRITTEN OR ORAL, REGARDING ITS SUBJECT MATTER. ALL OTHER TERMS AND CONDITIONS ARE HEREBY OBJECTED TO AND SHALL NOT BE BINDING UNLESS IN WRITING AND SIGNED BY BOTH PARTIES. 1. SELLER: HALLADOR PRODUCTION COMPANY 1660 LINCOLN ST., STE. 2700 DENVER, CO 80264 2. BUYER: TOSCO REFINING CO. (A DIV OF TOSCO CORP) 3003 N. CENTRAL AVE., STE. 1500 PHOENIX, AZ 85012 3. TERM: FROM NOVEMBER 1, 1997 TO OCTOBER 31, 1998, AND CONTINUING YEARLY THEREAFTER UNTIL CANCELLED BY EITHER PARTY PROVIDING 60 DAYS PRIOR WRITTEN NOTICE OF SUCH CANCELLATION. 4. CRUDE TYPE: SOUTH CUYAMA. 5. QUANTITY: APPROXIMATELY 1,100 BARRELS PER DAY. 6. DELIVERY METHOD: PIPELINE 7. DELIVERY: BY IN-LINE TRANSFER FROM LACT UNIT INTO FOUR CORNERS PIPELINE AT S. CUYAMA UNIT. 8. MEASUREMENT: PIPELINE METERS 9. TITLE & RISK: TITLE TO AND RISK OF LOSS OF THE CRUDE PASSES FROM THE SELLER TO THE BUYER AS THE CRUDE IS LINE TRANSFERRED AT SAID FACILITY. TOSCO REFINING CO. (A DIV OF TOSCO CORP) 3003 N. CENTRAL AVE., STE. 1500 PHOENIX, AZ 85012 Contract 9237 PAGE 2 10. PRICE: THE AVERAGE OF CHEVRONIS, UNION 76'S, AND TEXACO'S POSTED PRICES FOR BUENA VISTA HILLS CRUDE OIL FOR GRAVITY DELIVERED IN THE MONTH OF DELIVERY, PLUS $0.3100 PER BARREL. FOR PRICING PURPOSES, VOLUMES WILL BE CONSIDERED TO BE DELIVERED ON AN EQUAL DAILY BASIS. 11. PAYMENT: PAYMENT SHALL BE MADE ON OR BEFORE THE 20TH CALENDAR DAY OF THE MONTH FOLLOWING THE MONTH OF DELIVERY BY WIRE TRANSFER IN IMMEDIATELY AVAILABLE U.S. DOLLARS, WITHOUT DEDUCTION, DISCOUNT OR OFFSET. IF PAYMENT DATE FALLS ON A SATURDAY, PAYMENT IS DUE ON THE PRECEDING BUSINESS DAY. IF PAYMENT DATE FALLS ON SUNDAY, PAYMENT IS DUE ON THE FOLLOWING BUSINESS DAY. IF PAYMENT DATE FALLS ON A HOLIDAY, PAYMENT SHALL BE DUE ON THE PRECEDING BUSINESS DAY EXCEPT WHEN A HOLIDAY FALLS ON A MONDAY, AND IN THAT INSTANCE, PAYMENT SHALL BE DUE ON THE FOLLOWING BUSINESS DAY. 12. CREDIT: OPEN LINE OF CREDIT 13. TAXES: BUYER SHALL REIMBURSE SELLER FOR ALL TAXES IMPOSED BY FEDERAL, STATE OR LOCAL GOVERNMENTS WITH RESPECT TO PRODUCT DELIVERED UNDER THIS AGREEMENT. IF BUYER IS ENTITLED TO PURCHASE PRODUCT FREE OF ANY TAX (STATE OR FEDERAL), BUYER SHALL FURNISH TO SELLER THE PROPER EXEMPTION CERTIFICATE. 14. ASSIGNMENT: NEITHER PARTY SHALL ASSIGN THIS AGREEMENT WITHOUT THE WRITTEN APPROVAL OF THE OTHER PARTY. 15. GOVERNING LAW: THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAW RULES AND EACH PARTY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS IN CALIFORNIA. RESOLUTION OF DISPUTES BY ARBITRATION IS SPECIFICALLY EXCLUDED FROM THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR CONSEQUENTIAL DAMAGES OR SPECIFIC PERFORMANCE. 16. FORCE MAJEURE: IF EITHER PARTY IS RENDERED UNABLE BY FORCE MAJEURE TO PERFORM OR COMPLY FULLY OR IN PART WITH ANY OBLIGATION OR CONDITION OF THIS CONTRACT, THE AFFECTED PARTY SHALL GIVE WRITTEN NOTICE TO THE OTHER PARTY OF SUCH FORCE MAJEURE WITHIN FORTY-EIGHT (48) HOURS AFTER RECEIVING NOTICE OF THE OCCURRENCE OF FORCE MAJEURE RELIED UPON AND SUCH AFFECTED PARTY SHALL BE RELIEVED OF LIABILITY AND SHALL SUFFER NO PREJUDICE FOR FAILURE TO PERFORM SAME DURING SUCH PERIOD. IN THE EVENT THAT THE SAID PERIOD OF SUSPENSION SHALL CONTINUE IN EXCESS OF THIRTY (30) CALENDER DAYS, THIS CONTRACT MAY BE CANCELLED AT THE OPTION OF EITHER PARTY, WITHOUT LIABILITY OF EITHER PARTY. TOSCO REFINING CO. (A DIV OF TOSCO CORP) 3003 N. CENTRAL AVE., STE. 1500 PHOENIX, AZ 85012 Contract 9237 PAGE 3 AS USED HEREIN, THE TERM "FORCE MAJEURE" SHALL INCLUDE, BY WAY OF EXAMPLE AND NOT IN LIMITATION, FIRE; ACTS OF GOD; NAVIGATIONAL ACCIDENTS; VESSEL DAMAGE OR LOSS; ACCIDENTS AT OR CLOSING OF NAVIGATIONAL OR TRANSPORATION MECHANISM; STRIKES, GRIEVANCES OR ACTIONS BY OR AMONG WORKERS, LOCK-OUTS, OR LABOR DISTURBANCES; EXPLOSIONS OR ACCIDENTS TO WELLS, PIPELINES, STORAGE DEPOTS, REFINERY FACILITIES, MACHINERY, AND OTHER FACILITIES; ACTIONS OF ANY GOVERNMENT, OR BY PERSONS PURPORTING TO REPRESENT A GOVERNMENT; OR OTHER CAUSES NOT REASONABLY WITHIN CONTROL OF THE RESPECTIVE PARTIES. 17. FINANCIAL RESPONSIBILITY: IN THE EVENT THAT EITHER PARTY (THE --NON-PERFORMING PARTY-') FAILS TO MAKE TIMELY PAYMENT OF ANY SUMS DUE HEREUNDER OR DEFAULTS IN THE PERFORMANCE OF ANY OBLIGATION TO THE OTHER PARTY (THE "PERFORMING PARTY") UNDER THIS AGREEMENT, OR OTHERWISE GIVES THE PERFORMING PARTY REASONABLE GROUNDS TO DOUBT ITS CONTINUING FINANCIAL RESPONSIBILITY, THE NON-PERFORMING PARTY SHALL PROVIDE SUCH ADDITIONAL SECURITY FOR OR ASSURANCES OF THE PERFORMANCE OF ITS OBLIGATIONS AS MAY BE DEMANDED BY THE PERFORMING PARTY. IF SUCH SECURITY FOR OR ASSURANCES OF CONTINUED PERFORMANCE IS NOT PROVIDED - WITHIN 48 HOURS OF THE DEMAND THEREFOR, THE PERFORMING PARTY MAY SUSPEND ITS OWN PERFORMANCE UNDER THIS CONTRACT UNTIL SUCH SECURITY OR ASSURANCE IS PROVIDED, OR MAY IMMEDIATELY TERMINATE THIS AGREEMENT WITHOUT FURTHER ADDITIONAL NOTICE. IF EITHER PARTY MAKES A GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR FILES A PETITION OR COMMENCES A CASE UNDER ANY BANKRUPTCY, REORGANIZATION, OR SIMILAR LAW FOR THE PROTECTION OF CREDITORS, OR HAS ANY SUCH PETITION FILED OR CASE COMMENCED AGAINST IT, THEN THE OTHER PARTY MAY IMMEDIATELY TERMINATE THIS AGREEMENT UPON WRITTEN NOTICE. EXERCISE BY EITHER PARTY OF ANY RIGHTS UNDER THIS PROVISION SHALL BE WITHOUT PREJUDICE TO ANY CLAIMS FOR DAMAGES OR ANY OTHER RIGHT UNDER THIS AGREEMENT OR APPLICABLE LAW. 18. LIABILITY: NEITHER PARTY SHALL BE LIABLE FOR SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR SPECIFIC PERFORMANCE AND THE LIABILITY OF EITHER PARTY WITH RESPECT TO THIS AGREEMENT OR ANY ACT IN CONNECTION HEREWITH WHETHER IN CONTRACT, TORT, OR OTHERWISE SHALL NOT EXCEED THE PRICE OF THE PRODUCT SOLD HEREUNDER OR THE PRICE OF THAT PORTION OF SUCH PRODUCT ON WHICH LIABILITY IS ASSERTED. 19. INDEMNITY: SELLER AGREES TO INDEMNIFY AND HOLD BUYER HARMLESS FROM LIABILITY FOR ANY AND ALL LOSSES, DEMANDS OR CLAIMS ARISING FROM INJURIES OR DAMAGES WHICH OCCUR BEFORE TITLE IS TRANSFERRED TO BUYER AND IN CONNECTION WITH THE TRANSPORTATION, USE OR HANDLING OF ANY PRODUCT COVERED BY THIS AGREEMENT, WHETHER DELIVERIES ARE MADE TO BUYER, ITS ASSIGNS OR NOMINEES. TOSCO REFINING CO. (A DIV OF TOSCO CORP) 3003 N. CENTRAL AVE., STE. 1500 PHOENIX, AZ 85012 Contract 9237 PAGE 4 BUYER AGREES TO INDEMNIFY AND HOLD SELLER HARMLESS FROM LIABILITY FOR ANY AND ALL LOSSES, DEMANDS OR CLAIMS ARISING FROM INJURIES OR DAMAGES WHICH OCCUR AFTER TITLE IS TRANSFERRED TO BUYER. 20. GOVERNMENT REGULATIONS: EACH PARTY SHALL, IN THE PERFORMANCE OF THIS AGREEMENT, COMPLY WITH ALL APPLICABLE GOVERNMENT LAWS AND REGULATIONS. FURTHER, SELLER CERTIFIES THAT THE PRODUCT HAS BEEN PRODUCED, PROCESSED AND TRANSPORTED IN COMPLIANCE WITH ALL APPLICABLE LAWS AND REGULATIONS. 21. OTHER: ANY SITUATION NOT SPECIFICALLY ADDRESSED BY ANY OF THE ABOVE TERMS SHALL BE GOVERNED BY STANDARD INDUSTRY PRACTICE IN EFFECT AT THE DELIVERY LOCATION. 22. CONTACTS: COMMERCIAL: JIM GRAVATT (805) 393-8930 OPERATIONAL: ANDY HAUSIG (602) 200-4193 ACCOUNTING: CRUDE OIL ACCOUNTANT FINANCIAL: GEORGE PADILLA (602) 200-4181 CONTRACT ADMIN: MIMI BARTON (602) 200-4131 INVOICING: CRUDE OIL ACCOUNTANT (602) 200-4110 PEASE INDICTE YOUR ACCEPTANCE AND AGREEMENT BY SIGNING IN THE SPACE BELOW AND RETURNING ONE EXECUTED COPY TO THE ABOVE ADDRESS FOR OUR RECORDS. TOSCO HALLADOR /S/JOHN B. EIDMAN /S/RODERICK SMITH - ------------------ ------------------ BY: JOHN B. EIDMAN BY: RODERICK SMITH MGR., CRUDE SUPPLY & TRADING TITLE: VICE PRESIDENT -----END PRIVACY-ENHANCED MESSAGE-----