-----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, JupqaN8u2JM6MCAzbIGDhb9GcE93ER9LotH1inJjCTAhgdA/jh/wBH3DyZ3z5ble knKlJIVZTXSLR0DsmvVL5A== 0000788965-01-000003.txt : 20010409 0000788965-01-000003.hdr.sgml : 20010409 ACCESSION NUMBER: 0000788965-01-000003 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 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: 10KSB40 SEC ACT: SEC FILE NUMBER: 000-14731 FILM NUMBER: 1591520 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 10KSB40 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB [x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-14731 HALLADOR PETROLEUM COMPANY COLORADO 84-1014610 (State of incorporation) (IRS Employer Identification No.) 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264-2701 (Address of principal executive offices) (Zip Code) Issuer's telephone number: 303.839.5504 Fax: 303.832.3013 Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: Common Stock,$.01 par value Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of he Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [x] Our revenue for the year ended December 31, 2000 was $8,272,000. At March 30, 2001, we had 7,093,150 shares outstanding and the aggregate market value of such shares held by non-affiliates was about $3.3 million based on a price of $4.19, which was the last reported trade on that date. DOCUMENTS INCORPORATED BY REFERENCE: NONE ITEM 1. DESCRIPTION OF BUSINESS General Development of Business - ------------------------------- Hallador Petroleum Company, a Colorado corporation, was organized by our predecessor in 1949. About four years ago, Yorktown Energy Partners II and affiliates (Yorktown) invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited liability limited partnership. We are the general partner and received a 70% interest in the partnership in return for contributing our net assets, and Yorktown represents the limited partners and received a 30% interest for its $5,025,000 cash contribution. As general partner, we consolidate the activity of the partnership and present the 30% limited partners' interest as a minority interest. We and our principal operating subsidiaries, Hallador Production Company and Hallador Petroleum, LLP, are engaged in the exploration, development and production of oil and natural gas. Our principal and administrative offices are located at 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264, phone 303.839.5504, fax 303.832.3013. The South Cuyama field office is located in New Cuyama, California. We have no website. 88% of our oil and gas revenue is attributable to the South Cuyama field (the "SC Field") located in Santa Barbara County, California, approximately 75 miles southwest from Bakersfield, California. We own 92% of Santa Barbara Partners (SBP), an Oklahoma general partnership, which has a 93% working interest (78% net revenue interest) in the SC Field. The SC Field's oil reserves consist of light oil at 29 degree gravity. We operate oil and natural gas properties for our own account and for the account of others. We also review and evaluate producing oil and natural gas properties, companies, or other entities, which meet certain guidelines for acquisition purposes. In addition, we engage in the trading and acquisition of non-producing oil and gas mineral leases and fee-simple minerals. Markets - ------- Our products are sold to various purchasers in the geographic area of the properties. Natural gas, after processing, is distributed through pipelines. Oil and natural gas liquids (NGLs) are distributed through pipelines or hauled by trucks. The principal uses for oil and natural gas are heating, manufacturing, power, and transportation. At March 30, 2001, we were receiving $22.93 per barrel for our California oil production, which is $4.81 less than the average price received during 2000 and $1.80 above the December 31, 2000 price. The SC Field's oil is sold to EOTT Energy Corp. pursuant to a "spot market" contract, which can be cancelled by either party with 30 days notice. The contract pays a $.20 per barrel premium to "spot market" postings. The SC Field's natural gas is sold to Aera Energy, L.L.C., a joint venture between Exxon Mobil and Shell, pursuant to a "spot market" contract, which can be cancelled by either party with 60 days notice. NGLs are sold to EOTT Energy Corp. pursuant to a "spot market" contract, which can be cancelled by either party with 30 days notice. Competition - ----------- The oil and gas industry is highly competitive. We encounter competition from major and independent oil companies in acquiring economically desirable producing properties, drilling prospects, and even the equipment and labor needed to drill, operate and maintain our properties. Competition is intense with respect to the acquisition of producing and partially developed properties. We compete with companies having financial resources and technical staffs significantly larger than our own. We do not own any refining or retail outlets and have minimal control over the prices of our products. Generally, higher costs, fees and taxes assessed at the producer level cannot be passed on to our customers. We also face competition from imported products as well as alternative sources of energy such as coal, nuclear, hydro-electric power, and a growing trend toward solar. We could incur delays or curtailments of the purchase of our available production. We may also encounter increasing costs of production and transportation while sale prices remain stable or decline. Any of these competitive factors could have an adverse effect on our operating results. Environmental and Other Regulations - ----------------------------------- Our operations are affected in varying degrees by federal, state, regional and local laws and regulations, including, but not limited to, laws governing allowable rates of production, well spacing, air emissions, water discharges, endangered species, marketing, prices and taxes. We are further affected by changes in such laws and by constantly changing administrative regulations. Most natural gas pricing is presently deregulated and the remaining regulation has no material impact on our prices. We cannot predict the long-term impact of future natural gas price regulation or deregulation. We are subject to various federal, state, regional and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the owner or the lessee for the cost of pollution clean-up resulting from operations, subject the owner or lessee to liability for pollution damages, require suspension or cessation of operations in affected areas or impose restrictions on injection into subsurface aquifers that may contaminate groundwater. Such regulation has increased the resources required in, and costs associated with, planning, designing, drilling, installing, operating and abandoning our oil and natural gas wells and other facilities. We spend a significant amount of technical and managerial time to comply with environmental regulations and permitting requirements. We have and will continue to make expenditures to comply with these requirements, which we believe are necessary business costs. Although environmental requirements do have a substantial impact upon the energy industry, generally these requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in California. Although we are not fully insured against all environmental and other risks, we maintain insurance coverage, which we believe, is customary in the industry. During 2000, we incurred about $64,000 to comply with these recurring environmental regulations. We estimate that such expenditures for 2001 and for each year thereafter, in the foreseeable future, will approximate $67,000. We will continue to use our best efforts to comply with all applicable environmental laws and regulations. See Item 6 - Management's Discussion and Analysis (MD&A) for a discussion regarding idle wells in the SC Field. To the extent these environmental expenditures reduce funds available for increasing our reserves of oil and natural gas, future operations could be adversely impacted. Despite the fact that all of our competitors have to comply with similar regulations, many are much larger and have greater resources with which to deal with these regulations. Other - ----- We have no significant patents, trademarks, licenses, franchises or concessions. The oil business is not generally seasonal in nature; although unusual weather extremes for extended periods may increase or decrease demand. Natural gas prices tend to increase in the fall and winter months and to decrease in the spring and summer. We have 29 employees; seven are located at our executive office in Denver and 22 are located at the SC Field. When needed we also engage consulting petroleum engineers, environmental professionals, geologists, geophysicists, landmen, accountants and attorneys on a fee basis. ITEM 2. DESCRIPTION OF PROPERTY Location and General Character - ------------------------------ Our various operating areas consist of (i) the SC Field located 75 miles southwest from Bakersfield, California, (ii) the Sac Basin located 70 miles north of Sacramento, (iii) "South Texas", located 75 miles west of Houston, and (iv) the San Juan Basin, located in the northwest corner of New Mexico. Revenue from the SC Field accounted for 88% of 2000 oil and gas revenue, South Texas accounted for 3%, the Sac Basin accounted for 5%, and San Juan accounted for 4%. We hold our working interests in oil and natural gas properties either through recordable assignments, leases, or contractual arrangements such as operating agreements. Consistent with industry practices, we do not make a detailed examination of title when we acquire undeveloped acreage. Title to such properties is examined by legal counsel prior to commencement of drilling operations. This method of title examination is consistent with industry practices. In the acquisition and operation of oil and natural gas properties, burdens such as royalty, overriding royalty, liens incident to operating agreements, liens by taxing authorities, as well as other burdens and minor encumbrances are customarily created. We believe that no such burdens materially affect the value or use of our properties. Proved Oil and Gas Reserves - --------------------------- Information concerning our reserve estimates is set forth in Note 7 to the financial statements. The reserve estimates were prepared by a consulting petroleum engineer. All of our oil and gas reserves are located onshore. The South Cuyama Field - ---------------------- Discovered in 1949 in the Cuyama Valley, Santa Barbara County, California, the SC Field became the largest oil field found to date in the valley and is located approximately 75 miles southwest from Bakersfield. By 1951, the SC Field contained 200 wells producing approximately 40,000 barrels of oil per day. Since inception, the SC Field is estimated to have produced over 222 million barrels of crude oil. Current oil production to the 100% is about 800 barrels per day. Currently, there are 66 producing wells. The wells produce from a depth range of 3,400 to 4,800 feet. Sales and Price Data for all Properties - --------------------------------------- See Item 6 - MD&A Producing Wells - --------------- As of March 30, 2001, we had a working interest in 61 gross (54 net) oil wells and 29 gross (7 net) gas wells. Leasehold Interests - ------------------- The following table sets forth our gross and net acres of undeveloped oil and gas leases as of March 30, 2001:
Gross Net ----- ----- South Cuyama, California 3,375 2,797 Option acreage 6,706 4,828 Sac Basin, California 968 290 North Dakota 46,492 7,566 Texas 1,660 307 Utah 5,777 5,777 Wyoming 48,486 37,095 ------- ------ 113,464 58,660 ======= ======
We have an interest in 3,777 gross (2,707 net) developed acres in the SC Field. Drilling Activity - ----------------- From January 1, through March 30, 2001, we drilled one development oil well and one exploratory gas well in SC Field and one exploratory gas well (25% WI) in East Texas. All three wells were successful. Another SC Field development oil well was recently abandoned during the drilling phase. During 2000, we drilled one successful development oil well in the SC Field. In the Sac Basin, we drilled two exploratory gas wells that were dry. In South Texas we drilled an exploratory gas well which was dry. In the San Juan Basin, we drilled three successful development gas wells. We also participated in one exploratory oil well in Noble County, Oklahoma that was dry in which we had a 10% WI. During 1999, we drilled six development oil wells in the SC Field. Four were successful and two were dry. In the Sac Basin we drilled three exploratory gas wells. One was successful and the other two were dry. In South Texas we drilled four exploratory gas wells. Three were successful and one experienced mechanical problems after producing for several months and was P & A. We have an 88% WI in the SC Field, a 30% WI in the Sac Basin, a 14% WI in South Texas, and a 6% WI in the San Juan wells. ITEM 3. LEGAL PROCEEDINGS: None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is traded on the OTC Bulletin Board under the symbol "HPCO". The following table sets forth the high and low sales price for the periods indicated:
High Low ---- ---- 2001 First quarter (through March 30, 2001) $4.19 $1.75 2000 First quarter 1.38 .66 Second quarter 3.75 1.38 Third quarter 3.00 2.38 Fourth quarter 2.50 2.06 1999 First quarter .75 .75 Second quarter 1.00 .75 Third quarter 1.06 .88 Fourth quarter 75 .66
During the last two years no dividends were paid. We have no present intention to pay any dividends in the foreseeable future. As of March 30, 2001 there were 429 holders of record of our common stock and the last recorded sales price was $4.19. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Overview - -------- Our financial statements should be read in conjunction with this discussion. Our various operating areas consist of (i) the South Cuyama field (SC Field) located 75 miles southwest from Bakersfield, California, (ii) the Sac Basin located 70 miles north of Sacramento, (iii) "South Texas" located 75 miles west of Houston and (iv) the San Juan Basin located in the northwest corner of New Mexico. Due to its significance, our value depends on the estimated future cash flows from the SC Field. We intend to maximize cash flow by continuing to increase oil and gas production and keeping operating expenses low. Future operations will also be affected by the results of the development and exploration activity discussed below. About four years ago, Yorktown Energy Partners II and affiliates (Yorktown) invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited liability limited partnership. We are the general partner and received a 70% interest in the partnership in return for contributing our net assets and Yorktown represents the limited partners and received a 30% interest for its $5,025,000 cash contribution. As general partner, we consolidate the activity of the partnership and present the 30% limited partners' interest as a minority interest. Our profitability in any particular accounting period will be directly related to: (i) prices, (ii) production, (iii) lifting costs, and (iv) exploration activities. Accordingly, operating results will fluctuate from period to period based on these factors, among others. What follows is a discussion of our various operating areas. South Cuyama Field ------------------ During October 2000, we completed a 3-D project on adjoining acreage east of the SC Field. The cost of this project was $350,000 to the 100%. We have an 80% WI in this project. The data was evaluated during January 2001 and several drillable prospects were identified. The first exploratory gas well was drilled during March 2001. This well, the Cox Federal 41-5, is producing 1,000 MCF per day. Perforations were between 3,454 feet and 3,472 feet in the Santa Margarita formation. Two additional pay zones totaling fifty feet were also encountered in the formation. Because it is too early to judge the success of this well, we have not booked any new gas reserves. We are the operator and own a 70% working interest and a 60% revenue interest. The cost to drill and complete this well was about $260,000 to the 100%. This well is an important step in validating our 3-D seismic project. We are reviewing our 3-D seismic data to identify other locations to drill. Two development oil wells were drilled during March 2001, one is producing about 20 barrels per day and the other was abandoned during the drilling phase. Two more wells are planned for April 2001. One development oil well was drilled during October 2000 and is currently producing 11 barrels per day. We had a significant downward revision in the oil reserves of 693,000 barrels due primarily to lower actual production rates experienced during 2000 compared to those estimated at December 31, 1999. In January 2001, our monthly electricity costs increased by about $12,000 due to the California electrical crisis. We have been told by PG&E that our April electricity costs will increase by another $43,000 per month due to the crisis. Last year our average monthly electricity cost in the field was $73,000; we estimate that starting in April our average monthly electricity cost will be $128,000. With all of the current uncertainty and turmoil that exists in the California electrical marketplace, we can provide no assurance as to the timing and nature of the resolution of the electrical crisis. If electrical costs continue to increase, we will have to shut in certain oil wells. As this crisis continues, future cash flow will decrease and so will reserve estimates. PV10 for the SC Field using December 31, 2000 prices is $7,135,000. Using current prices of $22.93 for oil and $4.89 for gas and anticipated LOE, which reflects higher electricity prices which may or may not continue in the future, a rough estimate of the PV10 would be in the $5,000,000 range. During the next several months we will perform a study to develop the proper strategy to optimize the cash flow from the SC Field considering these higher electricity costs. The Merlin Prospect of the Sac Basin - Northern California ---------------------------------------------------------- This field is located about 70 miles north of Sacramento, California. Equity Oil Company (Equity) of Salt Lake City, Utah is the operator. Presently we have two producing gas wells. We are currently consulting with Equity regarding the possibility of drilling an exploratory gas well during 2001. We have a 30% WI (24% NRI) in this field. These wells have an estimated remaining life of four years. Our PV10 for this field is $1,047,000 at December 31, 2000 based on prices of $13.95 per mcf. Using current lower gas prices of $11.04 our PV10 is $781,000. Davis Ranch Prospect of the Sac Basin -------------------------------------- This prospect, which is approximately 20 miles south of the Merlin prospect, was brought to us by Equity. During the second quarter we participated in the drilling of two exploratory dry holes at a cost to us of $259,000. No further drilling is planned for this prospect. South Texas ----------- This gas field is located about 75 miles west of Houston in Colorado County. Marquee Corporation of Corpus Christi, Texas is the operator of these gas wells. We have a 14% WI (11% NRI) in this field. Presently, we have two producing gas wells. These wells have an estimated remaining life of three years. During June, we participated in the drilling of one exploratory gas well, which was dry. Our cost was about $26,000. During March 2001, we recompleted an existing well and it is producing 450 mcfpd. Because it is too early to judge the success of this recompletion, we have not booked any new reserves for this well. Our PV10 for this field is $250,000 at December 31, 2000 based on prices of $5.83. Using current lower gas prices of $4.86 our PV10 is $188,000. Due to rig shortages, an exploratory gas well that was to be drilled in the fourth quarter of 2000 is now scheduled for the second quarter 2001 at a cost of $210,000 to the 100% to drill and complete. San Juan Basin -------------- This gas field is located in the NW corner of New Mexico in San Juan County. Three development gas wells were drilled in early spring 2000. We have an interest in twenty wells and are the operator. These wells have and estimated remaining life of twenty years. The PV10 for this field at December 31, 2000 was $3,381,000 based on prices of $6.99. Using lower current gas prices of $5.66 the PV10 is $2,660,000. Our WI in this field ranges from 5%-10% with NRI between 4%-8%. Nine additional development wells have been identified and we plan to drill two or three of them in the third and fourth quarter of 2001. The cost to the 100% to drill and complete these wells are about $400,000 each. East Texas ---------- This is a new prospect for us located about 150 miles southeast of Dallas in Nacogdoches County. We participated in an exploratory gas well, which hit total depth in early March 2001. Based on the preliminary results, we're cautiously optimistic. We are currently waiting on a completion rig; sales are expected to commence sometime in April 2001. The well was drilled vertically to about 7,500 feet then drilled laterally at two different depths extending each lateral about 5,000 feet. These types of wells are very expensive to drill. Our investment will be about $510,000. We have a 25% WI (20% NRI). Hallwood Energy of Denver is the operator. A second exploratory gas well is planned to be drilled in the summer of 2001 in Shelby County, Texas, about 20 miles east from the Nacogdoches County well. El Paso Energy will be the operator. We have a 7% WI (6% NRI). The cost to drill and complete this well to the 100% is about $2,000,000, our share would be about $150,000. Paradox Basin - Utah -------------------- During June 1998, we leased about 5,800 acres in the Paradox Basin, Utah (about 25 miles from the Four Corners area). The leases are with the Federal government and the State of Utah and expire between 2003 and 2008. We invested about $200,000. We are evaluating the sale of this prospect or possibly shooting some 3-D seismic. Catalytic Solutions Investment - ------------------------------ During 1998, we invested $62,000 for a half percent (.005) ownership in Catalytic Solutions, Inc. (CSI) located in Oxnard, California (a Los Angeles suburb). CSI manufactures catalytic converters that reduce toxic emissions from internal combustion engines. Honda Motor Company uses the product and during 2000 purchased a 10% interest in CSI. During 2000, we invested another $113,000 in CSI. Our current ownership is about 1%. Marketable Securities - --------------------- In June 1998 and through November 1999, we invested in several publicly traded drilling and services companies. We sold all of our interest in these companies in late November 1999 and have no plans to make a similar investment in the future. During this 18-month period, we recognized a net gain of about $161,000 from these investments. Environmental and Regulation - ---------------------------- We are directly affected by changing environmental rules and regulations. Although we believe our operations and facilities are in compliance with applicable environmental regulations, risk of substantial cost and liabilities resulting from an unintentional breach of environmental regulations are inherent to oil and gas operations. It is possible that other developments, such as increasingly strict environmental laws, regulations, and enforcement policies or claims for damages could result in significant costs and liability in the future. In January 1999, the California legislature passed a bill, which increased our operator's bond from $100,000 to $250,000 over a five-year period. In addition, an idle well bill was passed to ensure that funds would be available to properly plug and abandon (P&A) California wells upon their depletion. Over the next ten years, we as the SC Field's operator, are required to place in an interest-bearing escrow account $500 per year for each idle well in the SC Field until such well is plugged and abandoned or until $5,000 has been deposited. Installments of $60,000 and $68,000 were paid in June 1999 and 2000, respectively. We estimate that after ten annual installments we will have met the current funding obligation of $700,000 considering the interest to be earned. As the SC Field depletes, and more wells move from the producing category to the idle-well category we will have to make additional annual payments. Presently, there are 280 wells in the SC Field, 140 of which are classified as "idle". During 1999, we began amortizing, using the units-of-production method, our share of the estimated future costs ($1,207,000) to P&A the SC Field's 280 wells. Included in the DD&A expense for 1999 and 2000 was $85,000 and $113,000, respectively, associated with these estimated future costs. Washington County, Colorado Gas Plant - ------------------------------------- In late February 2001, we were notified by the Colorado Oil and Gas Conservation Commission that we must conduct a site investigation of a gas plant that our predecessor operated forty years ago. It is our understanding that the plant has not been in operation for at least thirty years and that the plant was dismantled in 1961. At this time we are unable to estimate the ultimate liability that will be incurred to clean up this site. We have not made a site visit due to winter conditions. We have until May 31, 2001 to submit a soil testing and remediation plan to the State of Colorado. Liquidity and Capital Resources - -------------------------------- Cash and cash to be provided from operations are expected to enable us to meet our obligations as they become due during the next several years. The SC Field, our principal asset, is pledged to U. S. Bank National Association under a $3,500,000 revolving line of credit. Presently, we owe $231,000 under this line. RESULTS OF OPERATIONS YEAR-TO-DATE COMPARISON - ----------------------- The table below (in thousands) provides sales data and average prices for the period.
2000 1999 ------------------------ ---------------------- Sales Average Sales Average Volume Price Revenue Volume Price Revenue ------- ------- ------ ------ ----- ------- Oil - barrels South Cuyama field 233 $27.74 $6,464 195 $16.83 $3,282 Other * * 30 * * 21 Gas - mcf South Cuyama field 41 3.90 160 35 2.48 87 Northern California 111 3.89 432 120 2.30 276 South Texas 70 3.29 230 27 2.33 63 New Mexico 56 3.45 193 60 1.85 111 Other * * 11 * * 5 NGLs - barrels South Cuyama field 16 21.50 344 16 12.25 196 New Mexico 5 19.60 98 4 10.25 41 Other * * 4 * * 2 - ------------------------ * Not meaningful
The table below (in thousands) shows lease operating expenses (LOE) by field.
2000 1999 ---- ---- LOE South Cuyama field $3,258 $2,511 Northern California 41 34 South Texas 33 16 New Mexico 117 63 Other 28 15
LOE per equivalent barrel was $11.59 for 2000 and $10.33 for 1999. Oil, gas and NGL revenue almost doubled compared to last year due to higher prices and volumes as indicated in the table above. LOE increased due to higher workover costs in New Mexico and South Cuyama. The increase in G&G costs was due to the 3-D seismic project in the South Cuyama field. Hedging Activities - ------------------ We have never entered into such transactions and at this time do not expect to. New Accounting Pronouncements - ----------------------------- None of the new accounting pronouncements that have been released will have a significant impact on our financial position or results of operations. 2001 Outlook - ------------ Assuming current oil prices remain in the $23 range and we drill no dry holes, we estimate to book a profit for the year 2001. This is a "forward-looking" statement and actual results will differ due to changing oil and gas prices, changes in California electricity prices, dry holes, lifting costs and the five issues listed below. Risk Factors - ------------ The five issues that cause us worry are: 1. OPEC deciding to significantly increase production, which would result in a free-fall of oil prices. 2. Although the SC Field has a 50-year operating history, the reserve estimates could be overstated. The December 31, 2000 reserve estimates reduced the oil reserves by 693,000 barrels compared to the December 31, 1999 estimates. 3. We never know what adverse rules or regulations could be passed by our regulatory agencies such as the EPA (Environment Protection Agency), BLM (Bureau of Land Management), DOG (California Division of Oil & Gas), the SBAPCD (Santa Barbara County Air Pollution Control District), and the Colorado Oil and Gas Conservation Commission. 4. The SC Field is a high-water-cut oil field meaning that we move about 30,000 barrels of water per day in order to produce about 800 barrels of oil per day. Such fields have a high break-even point and consequently depend on a relatively high oil price to make money. Higher electricity costs will make it difficult to continue to operate the SC Field profitably. 5. California is prone to earthquakes. Certain types of earthquakes could shear the casing heads resulting in catastrophic damage to the SC Field. Earthquake insurance is cost prohibitive. ITEM 7. FINANCIAL STATEMENTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Hallador Petroleum Company: We have audited the accompanying consolidated balance sheet of Hallador Petroleum Company (a Colorado corporation) and subsidiaries as of December 31, 2000 and the related consolidated statements of operations and cash flows for each of the two years in the period ended December 31, 2000. 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Hallador Petroleum Company and subsidiaries as of December 31, 2000 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP /s/ARTHUR ANDERSEN LLP Denver, Colorado March 23, 2001 Consolidated Balance Sheet December 31, 2000 (in thousands)
ASSETS Current assets: Cash and cash equivalents $ 2,489 Accounts receivable- Oil and gas sales 716 Well operations 583 ------- Total current assets 3,788 ------- Oil and gas properties at cost (successful efforts): Unproved properties 313 Prepaid drilling cost-East Texas well 477 Proved properties 21,597 Less - accumulated depreciation, depletion, amortization and impairment (15,123) ------- 7,264 ------- Oil and gas operator bonds 312 Investment in Catalytic Solutions 175 Other assets 51 ------- $ 11,590 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 626 Oil and gas sales payable 440 ------- Total current liabilities 1,066 ------- Bank debt 231 ------- Key employee bonus plan 295 ------- Minority interest 5,441 ------- Commitments and contingent liabilities (Note 6) Stockholders' equity: Preferred stock, $.10 par value; 10,000,000 shares authorized; none issued Common stock, $.01 par value; 100,000,000 shares authorized; 7,093,150 shares issued 71 Additional paid-in capital 18,061 Accumulated deficit (13,575) ------- 4,557 ------- $ 11,590 =======
See accompanying notes. Consolidated Statement of Operations (in thousands)
Year ended December 31, 2000 1999 ------ ------ Revenue: Oil $6,494 $3,303 Gas 1,026 542 NGLs 446 239 Gain (loss) prospect sale 147 (26) Interest and other 159 87 Non-recurring water disposal fee, net 208 Gain on stock sales 571 ----- ----- 8,272 4,924 ----- ----- Costs and expenses: Lease operating 3,477 2,639 Exploration costs Geological and geophysical 296 21 Dry hole expense 319 213 Delay rentals 55 73 Other 17 37 Depreciation, depletion and amortization 976 638 General and administrative 777 662 Interest 94 143 ----- ----- 6,011 4,426 ----- ----- Income before minority interest 2,261 498 Minority interest (678) (149) ----- ----- Net income $1,583 $ 349 ===== ===== Basic and diluted income per share $ 0.22 $ 0.05 ===== ===== Weighted average shares outstanding-basic 7,093 7,093 ===== ===== Weighted average shares outstanding-diluted 7,318 7,093 ===== =====
See accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
Year ended December 31, 2000 1999 ------ ------ Cash flows from operating activities: Net income $ 1,583 $ 349 Depreciation, depletion, and amortization 976 638 Minority interest 678 149 Change in accounts receivable (469) (18) Change in payables and accrued liabilities 695 140 Gain on marketable securities (571) Other 26 ----- ----- Net cash provided by operating activities 3,463 713 ----- ----- Cash flows from investing activities: Marketable securities 2,100 Properties (1,715) (1,571) Other assets (216) (74) ----- ----- Net cash provided by (used in) investing activities (1,931) 455 ----- ----- Cash flows from financing activities: Repayment of debt (1,000) (2,000) Brokerage account (284) ----- ----- Net cash used in financing activities (1,000) (2,284) ----- ----- Net increase (decrease) in cash and cash equivalents 532 (1,116) Cash and cash equivalents, beginning of year 1,957 3,073 ----- ----- Cash and cash equivalents, end of year $2,489 $1,957 ===== ===== Supplemental disclosure of cash flow information: Cash paid out for interest $ 84 $ 143 ===== =====
See accompanying notes. NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Basis of Presentation and Consolidation - --------------------------------------- The accompanying consolidated financial statements include the accounts of Hallador Petroleum Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. We are engaged in the exploration, development, and production of oil and natural gas primarily in California. On July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown) invested $5,025,000 in Hallador Petroleum, LLP, a newly formed limited liability limited partnership. We are the general partner and received a 70% interest in the partnership in return for contributing our net assets, and Yorktown represents the limited partners and received a 30% interest for its $5,025,000 cash contribution. As general partner, we consolidate the activity of the partnership and present the 30% limited partners' interest as a minority interest. We are a 92% partner in Santa Barbara Partners (SBP), a general partnership, and account for our investment using the proportionate consolidation method. SBP has a 93% working interest in the South Cuyama field. Oil and Gas Properties - ---------------------- We account for our oil and gas activities using the successful efforts method of accounting. Under the successful efforts method, the costs of successful wells, development dry holes and productive leases are capitalized and amortized on a units-of-production basis over the remaining life of the related reserves. Exploratory dry hole costs and other exploratory costs, including geological and geophysical costs, are expensed as incurred. Delay rentals are also expensed as incurred. Cost centers for amortization purposes are determined on a field-by- field basis. Estimated future abandonment and site restoration costs, net of anticipated salvage values, are accrued based on units-of- production. Unproved properties with significant acquisition costs are periodically assessed for impairment in value, with any impairment charged to expense. The carrying value of each field is assessed for impairment on a quarterly basis. If estimated future undiscounted net revenues are less than the recorded amounts, an impairment charge is recorded. Statement of Cash Flows - ----------------------- Cash equivalents include investments (primarily commercial paper) with maturities of three months or less from the date of purchase. Income Taxes - ------------ Income taxes are provided based on the liability method of accounting pursuant to FAS 109, Accounting for Income Taxes. The provision for income taxes is based on pretax financial taxable income. Deferred tax assets and liabilities are recognized for the future expected tax consequences of temporary differences between income tax and financial reporting and principally relate to differences in the tax basis of assets and liabilities and their reported amounts, using enacted tax rates in effect for the year in which differences are expected to reverse. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. Earnings (Loss) per Common Share - -------------------------------- We follow the provisions of FAS 128, Earnings Per Share. Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are computed based on the weighted average number of common shares outstanding adjusted for the incremental shares attributed to outstanding stock options. Under the treasury stock method, options to purchase 225,000 shares of common stock were included in the calculation of diluted earnings per share for the year ended December 31, 2000. In 1999 all options were excluded from the calculation of diluted earnings per share because the option exercise prices were greater than the average market price of the Company's common stock. Use of Estimates in the Preparation of Financial Statements - ----------------------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. Reclassifications - ----------------- Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. (2) BANK DEBT --------- The South Cuyama field, our principal asset, is pledged to U. S. Bank National Association under a $3,500,000 revolving line of credit. The loan is interest only, payable quarterly, at LIBOR + 1.75%. The LIBOR rate at December 31, 2000 was 6.76%. The principal is due on March 31, 2002. (3) INCOME TAXES ------------ We have the following tax carryforwards at December 31, 2000 (in thousands): Statutory depletion $ 3,500 Tax net operating losses (NOLs), utilization limited (expires in 2001-2003) 1,500 Tax NOLs, utilization not limited (expires in 2005-2018) 4,060 We have fully reserved our net deferred tax asset account of about $2,100,000. (4) STOCK OPTIONS AND BONUS PLANS ------------------------------ Stock Option Plan - ----------------- In December 1995, we granted to our CEO 620,000 options and another 62,000 options to other employees at an exercise price of $1.00. These options are fully vested. During 1999, we issued 68,000 options with an exercise price of $1.00, which vested one-third upon grant date with the remainder over the next two years. At December 31, 2000, there were 750,000 options outstanding of which 728,335 were exercisable. All options were granted at fair value. On January 19, 2001, we purchased from certain employees 177,777 options at a cost of $1.6875 per option (about $300,000), which was recorded as compensation expense in January 2001. Since December 1995 no options have been exercised. Options to purchase a 3% partnership interest in Hallador Petroleum, LLP are outstanding as of December 31, 2000. The exercise price for these options was based on the fair market value on the date of grant. We account for our option plans under APB 25, Accounting for Stock Issued to Employees. Had compensation costs for the plans been determined consistent with FAS 123, Accounting for Stock-Based Compensation, the effect on 1999 and 2000 operations would have been immaterial. 401-(k) Plan - ------------ We maintain a 401-(k) Plan, which all full-time employees are able to participate after six months of service. We match dollar-for-dollar up to 4% of all employee contributions when oil prices are $13.00 or greater per barrel; vesting occurs immediately. Our contributions for 2000 and 1999 were $37,000 and $27,000, respectively. Key Employee Bonus Plan - ----------------------- At present, Mr. Stabio, CEO, is the only participant in the key employee bonus plan. Bonuses are computed based on cash flow attributed to the SC Field plus accrued interest on the bonus plan liability at 30-day risk free rates. Amounts accrued for 2000 and 1999 were $61,000 and $16,000, respectively. As of December 31, 2000, the liability to Mr. Stabio was $295,000. This liability will not be paid until the earliest of the following events occur; (i) voluntary or involuntary termination of the participant's employment; (ii) our merger or sale or a sale of substantially all of our assets, or (iii) the exercise by a participant of any of our stock options which requires a payment by the participant of more than $100,000. The amounts accrued are unfunded and unsecured. Catalytic Solutions Investment - ------------------------------- During 1998, we invested $62,000 for a half percent (.005) ownership in Catalytic Solutions, Inc. (CSI), a private company, located in Oxnard, California (a Los Angeles suburb). CSI manufactures catalytic converters that reduce toxic emissions from internal combustion engines. During 2000, we invested another $113,000 resulting in a total ownership of about 1%. This investment is accounted for under the cost method. Mr. Stabio and other employees own less than a quarter percent (.0025) in CSI. (5) MAJOR CUSTOMERS --------------- The SC Field's oil production is purchased by EOTT Energy Corp. (6) COMMITMENTS AND CONTINGENT LIABILITIES -------------------------------------- South Cuyama Field - ------------------ In January 1999, the California legislature passed a bill, which increased our operator's bond from $100,000 to $250,000 to be phased in over a five-year period. In addition, an idle well bill was passed to ensure that funds would be available to properly plug and abandon (P&A) California wells upon their depletion. Over the next ten years, we as the SC Field's operator, are required to place in an interest-bearing escrow account $500 per year for each idle well in the SC Field until such well is plugged and abandoned or until $5,000 has been deposited. Installments of $60,000 and $68,000 were paid in June 1999 and 2000, respectively. We estimate that after 10 annual installments we will have met the current funding obligation of $700,000 considering the interest to be earned. As the SC Field depletes, and more wells move from the producing category to the idle-well category we will have to make additional annual payments. Presently, there are 280 wells in the SC Field, 140 of which are classified as "idle". During 1999, we began amortizing, using the units-of-production method, our share of the estimated future costs ($1,207,000) to P&A the SC Field's 280 wells. Included in the DD&A expense for 1999 and 2000 was $85,000 and $113,000, respectively, associated with these estimated future costs. Washington County, Colorado Gas Plant - ------------------------------------- In late February 2001, we were notified by the Colorado Oil and Gas Conservation Commission that we must conduct a site investigation of a gas plant that our predecessor operated forty years ago. It is our understanding that the plant has not been in operation for at least thirty years and that the plant was dismantled in 1961. At this time we are unable to estimate the ultimate liability that will be incurred to clean up this site. We have not made a site visit due to winter conditions. We have until May 31, 2001 to submit a soil testing and remediation plan to the State of Colorado. (7) OIL AND GAS RESERVE DATA (UNAUDITED) ------------------------------------ The following reserve estimates for the years ended December 31, 1999 and 2000 were prepared by one of our consulting petroleum engineers based on data we supplied. Be cautious that there are many uncertainties inherent in estimating proved reserve quantities and in projecting future production rates. Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and NGLs which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are those reserves expected to be recovered through existing wells with existing equipment and operating methods. Analysis of Changes in Proved Developed Reserves (in thousands)
Oil Gas NGLs (BBLs) (MCF) (BBLs) ------- ------- ------- Balance at December 31, 1998 0 (1) 1,935 0(1) Revisions of previous estimates 2,705 (2) (62) 214(2) Discoveries 271 337 Purchases 260 57 18 Production (197) (245) (20) ----- ----- ---- Balance at December 31, 1999 3,039 2,022 212 Revisions of previous estimates (693) (77) 75 Discoveries 223 13 Production (234) ( 287) (22) ----- ----- ---- Balance at December 31, 2000 2,112 1,881 278 ===== ===== ==== Net of 30% minority interest 1,478 1,317 195 ===== ===== ====
(1) Due to low oil prices at December 31, 1998, no reserves could be assigned to the SC Field. (2) Represents the reinstatement of the SC Field. There are no significant proved undeveloped reserves. The following table (in thousands) sets forth a standardized measure of the discounted future net cash flows attributable to our proved developed oil and gas reserves (hereinafter referred to as "SMOG"). Future cash inflows were computed using December 31, 1999 and 2000 product prices of $23.45 and $21.13 for oil, $19.07 and $28.73 for NGLs and $2.46 and $7.19 for gas, respectively. Future production costs represent the estimated future expenditures to be incurred in producing the reserves, assuming continuation of economic conditions existing at year-end. Discounting the annual net cash inflows at 10% illustrates the impact of timing on these future cash inflows.
1999 2000 ------ ------ Future Revenue Oil $71,000 $45,000 Gas 4,000 13,000 NGLs 4,000 8,000 ------ ------ Future cash inflows 79,000 66,000 Future cash outflows - production costs (45,000) (47,000) Future income taxes (6,000) (1,000) ------ ------ Future net cash flows 28,000 18,000 10% discount factor (9,000) (6,400) ------ ------ SMOG $19,000 $11,600 ====== ====== Net of 30% minority interest $13,300 $ 8,120 ====== ======
The following table (in thousands) summarizes the principal factors comprising the changes in SMOG:
1999 2000 ------ ------ SMOG, beginning of year $ 800 $ 19,000 Sales of oil and gas, net of production costs (1,500) (4,500) Net changes in prices and production costs 15,591 500 Revisions (10,400) Discoveries 4,400 900 Change in income taxes (2,000) 1,800 Purchases 1,709 Changes in production rates and other 2,200 Acceleration of discount 2,100 ------ ------ SMOG, end of year $19,000 $11,600 ====== ====== ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: None PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT CORTLANDT S. DIETLER, 79, has been one of our directors since November 1995. From April 1995 to October 1999 he was CEO of TransMontaigne Inc. and is currently Chairman of the Board. He also serves as a director of Carbon Energy Corporation, Forest Oil Corporation and Key Production Company. DAVID HARDIE, 50, is the Chairman of the Board and has served as a director since July 1989. He is a General Partner of Hallador Venture Partners LLC, the General Partner of Hallador Venture Fund II & III. Mr. Hardie is also a director of Freedom Communications Company based in Irvine, California and serves as a director and partner of other private entities that are owned by members of his family. STEVEN HARDIE, 46, has been a director since 1994. He and David Hardie are brothers. For the last 15 years he has been a self-employed film producer. He also serves as a director and partner of other private entities that are owned by members of his family. BRYAN H. LAWRENCE, 58, has been one of our directors since November 1995. He is a founder and senior manager of Yorktown Partners LLC that manages investment partnerships formerly affiliated with Dillon, Read & Co. Inc., an investment-banking firm (Dillon Read.) He had been employed with Dillon, Read since 1966, serving most recently as a Managing Director until the merger of Dillon Read with SBC Warburg in September 1997. He also serves as a Director of Carbon Energy Corporation, D&K Healthcare Resources, Inc., TransMontaigne, Inc., and Vintage Petroleum, Inc. (each a United States public company), and Cavell Energy Corp. (a Canadian public company) and certain non-public companies in the energy industry in which Yorktown partnership holds equity interests including Meenan Oil Co., Inc., PetroSantander Inc., Savoy Energy, L.P., Concho Resources Inc., Ricks Exploration, Inc., Athanor Resources Inc., Camden Resources, Inc., and Crosstex Energy Holdings, Inc. He is a graduate of Hamilton College and also has a MBA from Columbia University. VICTOR P. STABIO, 53, is our President, CEO, CFO and a director. He joined us in March 1991 as our President and CEO and has been active in the oil and gas business for the past 28 years. ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE Annual Compensation --------------------------------------------- Name and Principal Other Annual Position Year Salary Bonus (1) Compensation (2) - --------------------- ---- --------- ---------- ---------------- Victor P. Stabio, CEO 2000 $110,500 $94,700 $5,900 1999 105,000 48,000 4,400 1998 103,000 15,000 3,107
(1) Includes amounts, payment of, which is deferred, pursuant to the Key Employee Bonus Plan. (2) Our contribution to the 401(k) Plan. During 1997, Mr. Stabio was granted an option to purchase 1.75% of Hallador Petroleum, LLP for $294,000 that expires December 31, 2010. No options were exercised during the last three years. At December 31, 2000 Mr. Stabio had 620,000 exercisable options and the in-the-money vakye was $620,000. On January 19, 2001 we purchased 75,000 options from Mr. Stabio at a cost of $1.6875 per option or $126,500. Change in Control Arrangements - ------------------------------ As of December 31, 2000, we have accrued $295,000 payable to Mr. Stabio pursuant to the key employee bonus plan. The $295,000 will become payable upon our merger/sale or sale of substantially all of our assets or his voluntary or involuntary termination. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table is as of March 30, 2001.
Name No. Shares (1) % of Class (1) - ------------------------------------ --------------- ------------- David Hardie and Steven Hardie as 3,791,259 53 Nominee for Hardie Family Members (2) Victor P. Stabio (3) 609,937 8 Cortlandt S. Dietler (4) 100,000 1 Bryan H. Lawrence (5) 2,328,500 33 SBC Warburg Dillion Read Inc. (6) 421,500 6 All directors and executive officer as a group (3) 6,829,696 96
(1) Based on total outstanding shares of 7,093,150 if no options are held by the named directors, or based on a pro forma calculation of the total outstanding shares including shares issued upon exercise of options held by the named director or by members of the named group. Beneficial ownership of certain shares have been, or is being, specifically disclaimed by certain directors in ownership reports filed with the SEC. (2) The Hardie family business address is 740 University Avenue, Suite 110, Sacramento, California 95825. (3) Includes 545,000 shares issuable upon the exercise of options by Mr. Stabio. (4) Mr. Dietler's address is P. O. Box 5660, Denver, Colorado 80217. All shares are held by Pinnacle Engine Company LLC, wholly owned by Mr. Dietler. (5) Mr. Lawrence's address is 410 Park Avenue, 19th Floor, New York, NY 10022. Mr. Lawrence owns 50,000 shares directly, and the remainder is held by Yorktown Energy Partners II, L.P., an affiliate. (6) SBC Warburg Dillon Read Inc.'s address is 535 Madison Avenue, New York, NY 10022. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Restated Articles of Incorporation of Kimbark Oil and Gas Company, effective September 24, 1987 (1) 3.2 Articles of Amendment to Restated Articles of Incorporation of Kimbark Oil & Gas Company, effective December 14, 1989, to effect change of name to Hallador Petroleum Company and to change the par value and number of authorized shares of common stock (1) 3.3 Amendment to Articles of Incorporation dated December 31, 1990 to effect the one-for-ten reverse stock split (2) 3.4 By-laws of Hallador Petroleum Company, effective November 9, 1993 (4) 10.1 Composite Agreement and Plan of Merger dated as of July 17, 1989, as amended as of August 24, 1989, among Kimbark Oil & Gas Company, KOG Acquisition, Inc., Hallador Exploration Company and Harco Investors, with Exhibits A, B, C and D (1) 10.2 Hallador Petroleum Company 1993 Stock Option Plan *(3) 10.3 Not used 10.4 Not used 10.5 Hallador Petroleum Company Key Employee Bonus Compensation Plan *(3) 10.6 Not used 10.7 EOTT ENERGY NGL Contract (10) 10.8 EOTT ENERGY OIL Contract (10) 10.9 First Amendment to the 1993 Stock Option Plan *(6) 10.10 First Amendment to Key Employee Bonus Compensation Plan *(6) 10.11 Stock Purchase Agreement with Yorktown dated November 15, 1995 (6) 10.12 Second Amendment to Key Employee Bonus Compensation Plan *(7) 10.13 Hallador Petroleum, LLP Agreement (9) 10.14 Hallador Petroleum, LLP Stock Option Agreement *(9) 21.1 List of Subsidiaries (2) ------------------- (1) Incorporated by reference (IBR) to the 1989 Form 10-K. (2) IBR to the 1990 Form 10-K. (3) IBR to the 1992 Form 10-KSB. (4) IBR to the 1993 Form 10-KSB. (5) Not used. (6) IBR to the 1995 Form 10-KSB. (7) IBR to the September 30, 1996 Form 10-QSB. (8) IBR to the September 30, 1997 Form 10-QSB. (9) IBR to the December 31, 1997 Form 10-KSB. (10) Filed herewith. * Management contracts or compensatory plans. (b) No reports on Form 8-K were filed during the 1999 fourth quarter. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HALLADOR PETROLEUM COMPANY BY:/S/VICTOR P. STABIO VICTOR P. STABIO, CEO Dated: March 30, 2001 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /S/ DAVID HARDIE Chairman March 30, 2001 DAVID HARDIE /S/ VICTOR P. STABIO CEO, Principal Financial March 30, 2001 VICTOR P. STABIO and Accounting Officer and Director /S/ BRYAN LAWRENCE Director March 30, 2001 BRYAN LAWRENCE EX-99 2 0002.txt Exhibit 10.7 EOTT ENERGY Operating Limited Liability Partnership 111 W. OCEAN BLVD., SUITE 1700 LONG BEACH CA 90802-4632 (562) 437-3577 FAX (562) 437-4935 PURCHASE AGREEMENT This agreement is made and entered into this lst day of February 2001, by and between EOTT ENERGY Operating Limited Partnership ("EOTT") and Hallador Production Company (Seller). 1. Background and Purpose: EOTT has been advised that Seller desires EOTT to purchase certain liquid hydrocarbon mixtures produced at the South Cuyama gas processing facility ("LHM"). EOTT is willing to purchase such LHM from Seller subject to the terms and conditions of this Agreement. 2. Term: The term of this Agreement shall be effective as of 12:01 A.M., February 1, 2001, and shall continue until 11:59 P.M., March 31, 2001. It shall continue month to month thereafter until cancelled my either party by giving thirty (30) days written notice to the other party. 3. Location: The sales and custody transfer point shall be at EOTT's North Coles Levee Plant 8 Fractionation Facility ("Facility"). 4. Delivery: Seller shall deliver to EOTT, at the Facility, the LHM production pursuant to any limitations 6-f Paragraph 5. of this Agreement. EOTT shall take delivery of such LHM at the Facility. 5. Limitation of Volumes: Volumes of LHM processed hereunder shall be limited to the fractionation capacity in the, Facility which exceeds the capacity required for fulfilling other EOTT processing requirements and commitments as of the effective date of this Agreement. 6. Determination of Volumes: EOTT shall gauge the incoming volume of Seller's LHM to EOTT's satisfaction, and will notify Seller of any discrepancy with the bill of lading provided by Seller. In the event of any discrepancy, EOTT's measurement shall control. EOTT's analysis of the incoming LHM shall determine the volume of methane, ethane, propane, butanes and gasoline delivered to the Facility. 7. Prices: EOTT shall pay Seller the following Base Prices for the LHM delivered to the Facility: OPIS Component Reference Price ($/Gal) --------- ------------- ------------------------- Propane Bakersfield OPIS average minus $0.075 Normal Butane Bakersfield OPIS average minus $0.075 ISO Butane L.A. OPIS average minus $0.115 C5+ Bakersfield OPIS average minus $0.075 Ethane $0.10 per gallon Seller agrees to pay for transporting such LHM to Facility, currently $0.02614/gallon. OPIS average posted price shall be the price published by Oil Price Information Service, Inc. on the first calendar day of the month of delivery or on the last Thursday of the month preceding the month of delivery, whichever is closest to the first workday of the month of delivery. The base price in this Agreement assumes a monthly fuel cost of $14.00/mmbtu. In the event that the Southern California Border Index Price ("Border") at Topock, as published by Natural Gas Weekly and Natural Gas Intelligence, exceeds $14.00/mmbtu, a fuel surcharge shall apply equal to an accumulative 7.1 % for each $1.00/mmbtu increase in Border. For example, fuel surcharges shall be assessed as follows: BORDER Cumulative Fuel (Price per mmbtu) Surcharge $15.00 7.1% $16.00 14.2% $17.00 21.3% $18.00 28.4% $19.00 35.5% $20.00 42.6% etc. If Border price ceases to be available from Natural Gas Weekly and Natural Gas Intelligence, the parties agree to negotiate an acceptable substitute to measure. Any fuel surcharge will be removed or reduced when monthly Border price remains below the price that triggers a specific surcharge. In no case will the price be reduced below the Base Price. Reductions will become effective as they become applicable. In no case will the application or removal of the fuel surcharge be retroactive. 8. Statements/Audits: Seller shall render EOTT a monthly statement showing the value of the component parts of the LHM stream. EOTT shall render Seller a statement showing the total LHM received in each transport load hereunder. Statements shall be sent to Seller at the following address: Hallador Production Company 1660 Lincoln Street, Suite 2700 Denver, CO 80264 FAX (303) 832-3013 Monthly statements/invoices shall be sent to EOTT at the following address: EOTT Energy Corp. 111 W. Ocean Blvd. Suite 1700 Long Beach, California 90802-4632 Attention: Dwight Simpson 9. Contaminants: EOTT may at its sole discretion refuse to accept delivery of any mixture that contains contaminants that, in EOTT's sole judgment, may be injurious to EOTT's Facilities or be undesirable in finished products. Seller shall reimburse EOTT for all charges associated with undesirable LHM, including, but not limited to, transportation charges to and from the Facility, disposal charges, and additional marketing fees. 10. No Dedication: Seller agrees and acknowledges that this Agreement is as accommodation by EOTT and not a dedication of any EOTT facility or assets to a public use. Seller shall never assert in any action or proceeding that the services provided by EOTT hereunder constitute a dedication for a public use or a common carriage of any kind whatsoever. 11. Force Majeure: The obligations hereunder of each party shall be suspended while and to the extent that such party is prevented from complying therewith in whole or in part by force majeure including without limitation strikes, lockouts, labor and civil disturbances, acts of GOD, unavoidable accidents, mechanical breakdown or failure, breakdown of plant equipment, including lack of storage capacity which is a result of any such breakdown or failures, laws, rules, regulations, orders or any other act or failure to act of any government or agent or instrumentality thereof(whether domestic of foreign) having at any time de facto or de jure control over any of the parties, the project area or the agreement, acts of war or conditions arising out of or attributable to war whether declared or undeclared, shortage of essential equipment, materials or labor or restrictions thereon or limitations upon the use thereof, unavoidable delays in transportation or communication, adverse weather conditions, or causes reasonably beyond the control of any party claiming force majeure hereunder. Where such condition results in suspension of performance of any of the obligations of any party hereunder, such party shall give the other party notice in writing of such suspension of performance as soon as reasonably possible, stating therein the date and extent of such suspension, whether in whole or in part, and specifying in reasonable detail the nature of the force majeure causing such suspension. Any party, the performance of whose obligations has been suspended as aforesaid, shall resume performance thereof as soon as reasonably possible after the circumstance preventing such performance as provided above shall have terminated or ceases to have such effect and shall so notify the other party. The provisions of this Paragraph shall not suspend the obligation of a party to make timely payment of any money due hereunder. 12. No Waiver: The failure of either party at any time to require performance by the other of any provision hereof shall not constitute a waiver of performance of the provision or any other provision at any time. 13. Governing Law: This Agreement shall be governed by and construed according to the law of the State of California. 14. Notices: All notices, demands, or requests from one party to the other may be personally delivered, sent via facsimile, sent by recognized overnight delivery service, or sent via United States mail, certified or registered, postage prepaid, to the addresses stated in this paragraph and shall be effective upon receipt thereof, or as mutually agreed. EOTT: EOTT Energy Corporation 111 West Ocean Blvd., Suite 1700 Long Beach, California 90802 Attention: Manager, NGL & Feedstock Acquisition Hallador: Hallador Production Company 1660 Lincoln Street, Suite 2700 Denver, CO 80264 Attention: Victor Stabio 15. Successors and as each and all of the covenants, condition, and restriction contained in the Agreement shall be binding on and inure to the benefit of the parties and their successors, assignees, and transferees. 16. Entire Agreement: This Agreement contains the entire agreement of the parties with respect to the matters covered by this Agreement, and no other agreement, statement, or promise made by any party, or to any employee, officer, or agent of any party, which is not contained in this Agreement shall be binding. Executed as of the date first written. EOTT Energy Operating Limited Partnership By: EOTT Energy Corp., its General Partner By:/s/Larry J. Garrett Title: Manager NGL & Feedstock Acquisition Hallador Production Company By:/s/VICTOR P. STABIO Name: VICTOR P. STABIO Title: PRESIDENT EX-99 3 0003.txt Exhibit 10.8 EOTT ENERGY OPERATING LIMITED PARTNERSHIP EOTT ENERGY PIPELINE LIMITED PARTNERSHIP 5400 Aldrin Court Bakersfield, CA 93313 December 7, 2000 Hallador Production Company 1600 Lincoln St., Suite 2700 Denver, CO 80264 Attn: Victor P. Stabio Re: Contract Price Change Dear Vic: Per our conversation, EOTT Energy corp. proposes that our contract price will change to the following effective January 1, 2001:THE AVERAGE OF CHEVRON, EXXONMOBIL, UNION, & EQUIVA'S POSTING FOR BUENA VISTA PLUS $.02 PER BBL. GRAVITY ADJUSTED, EDQ. I need this confirmed by you by 1:00 p.m., Pacific Time, Friday December 8, 2000. I look forward to our continu9ing business relationship. Sincerely, /s/ Ted McCurdy Ted McCurdy EOTT Energy Corp. Crude Oil Acquisitions The above proposed price change is hereby agreed to and accepted this 8th day of December, 2000. Hallador Production Company By:/s/ Victor P. Stabio Victor P. Stabio, President EOTT ENERGY CORP. General Partner -----END PRIVACY-ENHANCED MESSAGE-----