-----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, S3z+kpG5chXAKCFA30TniCwBfI/4hbjhiei5smOk4Gq/MFRYn47OW+htzAwTZqJ4 Dt8An5+G3QF521wNIe8IBg== 0000930661-97-002622.txt : 19971113 0000930661-97-002622.hdr.sgml : 19971113 ACCESSION NUMBER: 0000930661-97-002622 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVIVA PETROLEUM INC /TX/ CENTRAL INDEX KEY: 0000910659 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751432205 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13440 FILM NUMBER: 97715498 BUSINESS ADDRESS: STREET 1: 8235 DOUGLAS AVE STREET 2: STE 400 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2146913464 MAIL ADDRESS: STREET 1: 8235 DOUGLAS AVE STREET 2: STE 400 CITY: DALLAS STATE: TX ZIP: 75225 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1997 --------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________to_________ Commission File Number 0-22258 AVIVA PETROLEUM INC. (Exact name of registrant as specified in its charter) TEXAS 75-1432205 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 8235 DOUGLAS AVENUE, 75225 SUITE 400, DALLAS, TEXAS (Zip Code) (Address of principal executive offices) (214) 691-3464 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Number of shares of Common Stock, no par value, outstanding at September 30, 1997, was 31,482,716 of which 10,336,835 shares of Common Stock were represented by Depositary Shares. Each Depositary Share represents five shares of Common Stock held by a Depositary. 1 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. - ----------------------------- AVIVA PETROLEUM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except number of shares) (unaudited)
September 30, December 31, 1997 1996 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 642 $ 2,041 Accounts receivable 1,865 3,750 Inventories 596 721 Prepaid expenses and other 239 282 -------- -------- Total current assets 3,342 6,794 -------- -------- Property and equipment, at cost (note 2): Oil and gas properties and equipment (full cost method) 60,661 58,324 Other 610 613 -------- -------- 61,271 58,937 Less accumulated depreciation, depletion and amortization (41,941) (23,991) -------- -------- 19,330 34,946 Other assets 1,499 1,204 -------- -------- $ 24,171 $ 42,944 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt (note 3) $ 5,800 $ 2,780 Accounts payable 3,188 6,271 Accrued liabilities 379 357 -------- -------- Total current liabilities 9,367 9,408 -------- -------- Long term debt, excluding current portion (note 3) 1,965 5,210 Gas balancing obligations and other 1,451 1,404 Deferred foreign income taxes - 692 Stockholders' equity (note 4): Common stock, no par value, authorized 348,500,000 shares; issued 31,482,716 shares 1,574 1,574 Additional paid-in capital 33,376 33,376 Accumulated deficit * (23,562) (8,720) -------- -------- Total stockholders' equity 11,388 26,230 Commitments and contingencies (note 6) -------- -------- $ 24,171 $ 42,944 ======== ========
* Accumulated deficit of $70,057 was eliminated at December 31, 1992 in connection with a quasi-reorganization. See accompanying notes to condensed consolidated financial statements. 2 AVIVA PETROLEUM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ------- ------- -------- ------- Oil and gas sales $ 2,249 $ 3,103 $ 7,802 $10,512 ------- ------- -------- ------- Expense: Production 1,027 1,149 3,225 3,663 Depreciation, depletion and amortization 1,370 1,538 4,655 5,117 Write-down of oil and gas properties (note 2) - - 13,399 - General and administrative 311 261 1,063 1,276 Severance (note 5) - 24 - 196 ------- ------- -------- ------- Total expense 2,708 2,972 22,342 10,252 ------- ------- -------- ------- Other income (expense): Interest and other income (expense), net (53) 107 38 245 Interest expense (170) (196) (498) (602) Debt refinancing expense (note 3) - - - (100) ------- ------- -------- ------- Total other income (expense) (223) (89) (460) (457) ------- ------- -------- ------- Earnings (loss) before income taxes (682) 42 (15,000) (197) Income taxes (benefits) 124 123 (158) 339 ------- ------- -------- ------- Net loss $ (806) $ (81) $(14,842) $ (536) ======= ======= ======== ======= Weighted average common shares outstanding 31,483 31,483 31,483 31,483 ======= ======= ======== ======= Net loss per common share $ (.03) $ - $ (.47) $ (.02) ======= ======= ======== =======
See accompanying notes to condensed consolidated financial statements. 3 AVIVA PETROLEUM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended September 30, 1997 1996 ---------- -------- Net loss $(14,842) $ (536) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, depletion and amortization 4,655 5,117 Write-down of oil and gas properties 13,399 - Deferred foreign income tax benefits (692) (137) Changes in working capital and other (1,291) 3,647 -------- ------- Net cash provided by operating activities 1,229 8,091 -------- ------- Cash flows from investing activities: Property and equipment expenditures (2,381) (6,097) Proceeds from sale of assets 19 28 Other - (30) -------- ------- Net cash used in investing activities (2,362) (6,099) -------- ------- Cash flows from financing activities - principal payments on long term debt (225) (2,037) -------- ------- Effect of exchange rate changes on cash and cash equivalents (41) (28) -------- ------- Net decrease in cash and cash equivalents (1,399) (73) Cash and cash equivalents at beginning of the period 2,041 4,200 -------- ------- Cash and cash equivalents at end of the period $ 642 $ 4,127 ======== =======
See accompanying notes to condensed consolidated financial statements. 4 AVIVA PETROLEUM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except number of shares) (unaudited)
Common Stock ------------------ Additional Total Number Paid-in Accumulated Stockholders' of Shares Amount Capital Deficit Equity ---------- ------ ---------- ------------ -------------- Balances at December 31, 1996 31,482,716 $1,574 $33,376 $ (8,720) $ 26,230 Net loss - - - (14,842) (14,842) ---------- ------ ---------- -------- -------- Balances at September 30, 1997 31,482,716 $1,574 $33,376 $(23,562) $ 11,388 ========== ====== ========== ======== ========
See accompanying notes to condensed consolidated financial statements. 5 AVIVA PETROLEUM INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL The condensed consolidated financial statements of Aviva Petroleum Inc. and subsidiaries (the "Company") included herein have been prepared by the Company without audit, 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 accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the Company's prior audited yearly financial statements and the notes thereto, included in the Company's latest annual report on Form 10-K. In the opinion of the Company, all adjustments, consisting of normal recurring accruals, necessary to present fairly the information in the accompanying financial statements have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. 2. PROPERTY AND EQUIPMENT Internal general and administrative costs directly associated with oil and gas property acquisition, exploration and development activities have been capitalized in accordance with the accounting policies of the Company. Such costs totaled $94,000 for the nine months ended September 30, 1997 and $68,000 for the nine months ended September 30, 1996. Unevaluated oil and gas properties totaling $719,000 and $1,066,000 at September 30, 1997 and December 31, 1996, respectively, have been excluded from costs subject to depletion. The Company capitalized interest costs of $55,000 and $171,000 for the nine-month periods ended September 30, 1997 and 1996, respectively, on these properties. During 1997 the Company wrote down the carrying amount of its oil and gas properties as a result of ceiling limitations on capitalized costs as follows (in thousands):
United States Colombia Total ------- -------- ------- March 31 $ 1,986 $ - $ 1,986 June 30 - 11,413 11,413 September 30 - - - ------- -------- ------- $ 1,986 $ 11,413 $13,399 ======= ======== =======
The U.S. write-down at March 31, 1997 was primarily due to lower oil and gas prices, whereas the Colombian write-down at June 30, 1997 was mainly due to a downward revision (523,000 barrels) of the Company's Colombian proved oil reserves and lower prices. A future decrease in the prices the Company receives for its oil and gas production or downward reserve adjustments could, for either the U.S. or Colombian cost centers, result in a ceiling test write- down that is significant to the Company's operating results. 6 AVIVA PETROLEUM INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. LONG TERM DEBT On August 6, 1993, the Company entered into a credit agreement with ING (U.S.) Capital Corporation ("ING Capital"), secured by a mortgage on substantially all U.S. oil and gas assets, a pledge of Colombian assets and the stock of three subsidiaries, pursuant to which ING Capital agreed to loan to the Company up to $25 million, subject to an annually redetermined borrowing base which is predicated on the Company's U.S. and Colombian reserves. As of September 30, 1997, the borrowing base permitted and the outstanding loan balance was, $7,765,000. The outstanding loan balance bears interest at the ING Capital prime rate (8.5% at September 30, 1997) plus 1% or, at the option of the Company, a fixed rate, based on the London Interbank Offered Rate, for a portion or portions of the outstanding debt from time to time. Commitment fees of .5% on the unused credit were payable quarterly until December 31, 1995, at which time the credit facility converted from a revolving credit facility to a term loan. The terms of the loan, among other things, prohibit the Company from merging with another company or paying dividends, limit additional indebtedness, general and administrative expense, sales of assets and investments and require the maintenance of certain minimum financial ratios. The agreement also requires the Company to maintain a minimum consolidated tangible net worth of $22,000,000. Since June 30, 1997, the Company has not been in compliance with the above- referenced tangible net worth covenant. ING Capital has, however, waived compliance with this covenant pending realization of the Company's restructuring plan (see note 7). In addition, ING has reduced the principal payments required for the four months ending November 30, 1997 to $25,000 per month and rescheduled repayment of the remaining principal as follows: $575,000 per month for the ten months ending September 30, 1998 and $1,965,000 on October 31, 1998. At such time as the Company fails to pursue the restructuring plan actively, any prior breach of the minimum consolidated tangible net worth covenant will be reinstated and monthly payments of principal of $575,000 will be required thereafter until maturity of the credit on October 31, 1998. ING Capital has reserved to itself the right to consent to the actual terms of the restructuring plan. See Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources). In March 1996, the Company paid a fee of $100,000 to ING Capital in consideration for certain modifications to the Company's credit agreement. 4. STOCKHOLDERS' EQUITY At the Annual Meeting of Shareholders held on June 10, 1997, the Company's shareholders approved the amendment of the Aviva Petroleum Inc. 1995 Stock Option Plan (the "Plan"). The amendment increased the 200,000 shares reserved for options to be awarded to non-employee directors to 400,000 shares. In addition, the amendment provides for the grant, on July 1, 1997 and on each subsequent July 1, to each non-employee director who has served in such capacity for at least the entire preceding calendar year of an option to purchase 5,000 shares of the Company's common stock (the "Annual Option Awards"), exercisable as to 2,500 shares on the first anniversary of the date of grant and as to the remaining shares on the second anniversary thereof. Except for the vesting provisions relating to the Annual Option Awards, the provisions of the Plan relating to vesting of such options, the determination of the exercise prices thereof and other terms of such options remain unchanged. 7 AVIVA PETROLEUM INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The following is a summary of the activities under the Company's stock option plans since December 31, 1996:
Number of Shares Covered by Options Price -------------- ------------------ Outstanding at December 31, 1996 529,500 $ 0.74 - $9.71 Granted 45,000 0.51 - 0.52 Expired or cancelled (20,000) 5.93 ------- ------------------ Outstanding at September 30, 1997 554,500 $ 0.51 - $9.71 ------- ------------------
As of September 30, 1997, approximately 445,000 shares were represented by options which were exercisable under the plans. 5. SEVERANCE EXPENSE The Board of Directors had charged a committee of the Board with the task of reviewing the Company's general and administrative expenses and making recommendations as to the reduction of such expenses. On March 18, 1996, the Board, acting on one of such committee's recommendations, determined to terminate the employment of the Executive Vice President and Chief Operating Officer of the Company (the "Officer") effective on June 1, 1996. In connection with the severance arrangements between the Company and the Officer, the Company incurred costs of $172,000. On July 25, 1996, the above mentioned committee was dissolved and its function was assumed by the entire Board of Directors. In the third quarter of 1996, the Company incurred an additional $24,000 of severance expense relating to the termination of certain employees affected by the cost reduction program. 6. COMMITMENTS AND CONTINGENCIES The Company, along with its co-owner (referred to collectively as the "Co- owners"), is engaged in an ongoing development and exploration program on concessions in Colombia. The contract obligations of the Santana concession have been met. The Co- owners have, however, completed one development well in 1997 and anticipate drilling one additional development well and recompleting certain existing wells on the Santana concession during 1998. As of September 30, 1997, future development costs are estimated at approximately $1.2 million, net to the Company's interest, for these expenditures. The Co-owners have completed a 3-D seismic survey over the Mary and Miraflor fields in the Santana concession and such data continues to be interpreted. The preliminary results confirm the presence of several prospects and leads previously identified from 2-D seismic data. Depending on the results of the final seismic interpretation, the Co-owners may decide to drill an exploratory well in 1998 on the Santana concession. The Company has not, at this time, committed itself to drill such a well. 8 AVIVA PETROLEUM INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The Co-owners have completed their seismic obligations for the first two years of the La Fragua concession and were obligated to acquire additional seismic data for the third year. The Co-owners determined, however, that it was not technically justified to explore this concession further and, accordingly, requested and received from Ecopetrol a change of commitment that would allow the Co-owners to substitute certain exploratory expenditures within the Santana concession for the remaining seismic commitment on the La Fragua concession. The indigenous people of the new commitment area, however, objected to the proposed exploratory work and the Co-owners were not able to comply with the new commitment. The Co-owners requested and Ecopetrol has agreed to allow the Co-owners to surrender the concession without further expenditure. All unevaluated costs relating to the La Fragua concession have been transferred into the Colombian amortization base. Seismic obligations for the first two years of the Yuruyaco concession have also been satisfied with the completion of a 2-D seismic program in January 1997. The interpretation of this seismic data has failed to establish any significant prospects and, accordingly, the Co-Owners intend to surrender the concession rather than proceeding into the third contract year. All unevaluated costs relating to the Yuruyaco concession have been transferred into the Colombian amortization base. The Company's aggregate estimated future expenditures for 1997 and 1998, including the above referenced development costs and certain other miscellaneous projects, were $1.8 million at September 30, 1997. The Company's ability to fund these expenditures is dependent upon the success of the Restructuring Plan described in note 7 and the continued deferral of current payments under the Company's debt repayment schedule with ING Capital. Moreover, any substantial increases in the amounts of the above referenced expenditures could adversely affect the Company's ability to fund these activities. Failure to fund certain of these capital expenditures could, under either the concession agreements or joint operating agreements with the Company's Co- owner, or both, result in the forfeiture of all or part of the Company's interest in these Colombian concessions. The Company plans to fund these exploration and development activities using cash provided from operations and proceeds from the issuance of common stock and additional long-term debt which is part of the Company's Restructuring Plan as described in note 7. Risks that could adversely affect the Company's plans include, among others, failure to accomplish the Restructuring Plan, delays in obtaining the required environmental approvals and permits, increases in required expenditures as a result of inflation or cost overruns, interruptions of production, failure to produce the reserves as projected, or a decline in the sales prices of oil and gas. Depending on the results of the exploration and development activities, substantial expenditures which have not been included in the Company's plan may be required. The outcome of these matters cannot be projected with certainty. See note 7. Under the terms of the contracts with Ecopetrol, 25% of all revenues from oil sold to Ecopetrol is paid in Colombian pesos which may only be utilized in Colombia. To date, the Company has experienced no difficulty in repatriating the remaining 75% of such payments, which are payable in U.S. dollars. 9 AVIVA PETROLEUM INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Activities of the Company with respect to the exploration, development and production of oil and natural gas are subject to stringent federal, state and local environmental laws and regulations including but not limited to the Oil Pollution Act of 1990 ("OPA 90"), the Outer Continental Shelf Lands Act, the Federal Water Pollution Control Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation, and Liability Act. Such laws and regulations have increased the cost of planning, designing, drilling, operating and abandoning wells. In most instances, the statutory and regulatory requirements relate to air and water pollution control procedures and the handling and disposal of drilling and production wastes. Although the Company believes that compliance with environmental laws and regulations will not have a material adverse effect on the Company's operations or earnings, risks of substantial costs and liabilities are inherent in oil and gas operations and there can be no assurance that significant costs and liabilities, including civil or criminal penalties for violations of environmental laws and regulations, will not be incurred. Moreover, it is possible that other developments, such as stricter environmental laws and regulations or claims for damages to property or persons resulting from the Company's operations, could result in substantial costs and liabilities. For additional discussions on the applicability of environmental laws and regulations on the Company's operations, see the Company's prior audited yearly financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. On March 25, 1997, the United States Department of the Interior Minerals Management Service ("MMS") promulgated a proposed rule that would implement the recently amended OPA 90 financial responsibility requirements. For offshore facilities that have a worst case oil spill potential of more than 1,000 barrels, the OPA 90 amendments provide that the amounts of financial responsibility that must be demonstrated by most facilities range from $10 million to $35 million, with higher amounts, up to $150 million, in certain limited instances where the MMS believes such a level is justified by the risks posed by the quantity or quality of oil that is handled by the facility. The proposed rule would implement the financial responsibility criteria set forth in amended OPA 90 based on a "worst case" oil spill discharge volume calculated for the facility. The Company cannot predict whether these financial responsibility requirements under the OPA 90 amendments or proposed rule will result in the imposition of substantial additional annual costs to the Company in the future or otherwise materially adversely effect the Company, but the impact is not expected to be any more burdensome to the Company than it will be to other similarly situated companies involved in oil and gas exploration and production in the Gulf of Mexico. In July 1997, the Company received a response from the Louisiana Department of Environmental Quality ("LDEQ") regarding the Company's request to extend the date by which it must comply with the state-wide prohibition against discharges of produced waters to coastal waters offshore Louisiana. A state-wide prohibition against such discharges went into effect on July 1, 1997. In accordance with the LDEQ's response, the Company has installed a LDEQ-approved diffuser system designed to minimize the potential for exceeding water quality standards resulting from the discharge of produced water. Additionally, the LDEQ instructed the Company to adhere to an approved produced water discharge termination schedule which includes the submission of quarterly reports and scheduling the commencement of produced water injection into underground formations by December 1, 1997. 10 AVIVA PETROLEUM INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) On October 17, 1997, the Company submitted to the LDEQ a revised produced water discharge termination schedule that would extend the deadline to cease discharges of produced water from December 1, 1997, to September 1, 1998. The Company is currently awaiting the LDEQ's response. In the event that this extension is not granted by the LDEQ, then effective December 1, 1997, the Company will be required to curtail or even cease production from its Breton Sound leases until such time as the produced water can be reinjected into suitable underground formations. Management does not expect that compliance with the LDEQ's directive to reinject the produced water will have a material adverse effect on the Company or its operations. The Company is involved in certain litigation involving its oil and gas activities, but unrelated to environmental contamination issues. Management of the Company believes that these litigation matters will not have any material adverse effect on the Company's financial condition or results of operations. 7. RESTRUCTURING PLAN On July 8, 1997, the Company engaged Merrick Capital Corporation ("Merrick") to act as its financial advisor in order to identify and accomplish certain strategic corporate objectives (the "Restructuring Plan"). Such objectives currently include the private placement of ten million new shares of the Company's common stock for $5 million in cash, the procurement of $15 million of mezzanine financing and the negotiation of a $25 million oil and gas reserve based credit facility. The Company, together with Merrick, is currently engaged in negotiations with various parties relating to transactions designed to accomplish the foregoing objectives. ING Capital has agreed to waive compliance with the Company's minimum consolidated tangible net worth requirement of $22 million and to defer the predominant portion of each monthly payment through November 1997 under the Company's debt repayment schedule while the Company is pursuing the Restructuring Plan (see note 3). Also, see Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources). 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS. - -------------- RESULTS OF OPERATIONS - --------------------- THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER - ------------------------------------------------------------------------------ 30, 1996 - --------
United States Colombia Oil Gas Oil Total ------- ------- --------- ------- (Thousands) Revenue - 1996 $456 $ 606 $2,041 $3,103 Volume variance (77) (457) 84 (450) Price variance (50) 43 (406) (413) Other - 9 - 9 ---- ----- ------ ------ Revenue - 1997 $329 $ 201 $1,719 $2,249 ==== ===== ====== ======
Colombian oil volumes were 106,000 barrels in the third quarter of 1997, an increase of 4,000 barrels as compared to the third quarter of 1996. Such increase is the result of a 42,000 barrel increase primarily due to the completion of two development wells in the latter part of 1996 and one development well completed in June 1997 partially offset by a 38,000 barrel decrease resulting from normal production declines. U.S. oil volumes were 18,000 barrels in 1997, down approximately 4,000 barrels from 1996. This decrease resulted primarily from the sale of the Company's U.S. onshore properties on December 23, 1996. U.S. gas volumes before gas balancing adjustments were 65,000 thousand cubic feet (MCF) in 1997, down 222,000 MCF from 1996. Such decrease is the result of a 232,000 MCF decrease resulting from the U.S. onshore property sale, partially offset by new production from a development well completed at Main Pass 41 during October 1996. Colombian oil prices averaged $16.19 per barrel during the third quarter of 1997. The average price for the same period of 1996 was $20.01 per barrel. The Company's average U.S. oil price decreased to $18.02 per barrel in 1997, down from $20.73 per barrel in 1996. In 1997 prices have been lower than in the third quarter of 1996 due to a general decrease in world oil prices. U.S. gas prices averaged $2.24 per MCF in 1997 compared to $1.97 per MCF in 1996. In addition to the above-mentioned variances, U.S. gas revenue increased approximately $9,000 as a result of gas balancing adjustments. Operating costs decreased approximately 11%, or $122,000. Of such decrease, approximately $223,000 resulted from the sale of the U.S. onshore properties offset by a $78,000 increase for the Colombia properties and a $23,000 increase for the U.S. offshore properties. Depreciation, depletion and amortization ("DD&A") decreased by 11%, or $168,000 primarily as a result of lower levels of production. General and administrative ("G&A") expenses increased $50,000 during the third quarter of 1997 as a result of lower drilling overhead charged to operations in the current quarter compared with the third quarter of 1996. 12 Interest expense decreased $26,000 in the third quarter of 1997, primarily as a result of lower average outstanding balances of long term debt. NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, - -------------------------------------------------------------------------------- 1996 - ----
United States Colombia Oil Gas Oil Total -------- -------- --------- -------- (Thousands) Revenue - 1996 $1,446 $ 1,896 $7,170 $10,512 Volume variance (261) (1,426) (632) (2,319) Price variance (21) 132 (521) (410) Other - 19 - 19 ------ ------- ------ ------- Revenue - 1997 $1,164 $ 621 $6,017 $ 7,802 ====== ======= ====== =======
Colombian oil volumes were 337,000 barrels in the first nine months of 1997, a decrease of 33,000 barrels as compared to the first nine months of 1996. Such decrease is the result of a 68,000 barrel decrease due to the Company's net revenue interest declining from 18% to 12.6% in June 1996 when cumulative production from the Santana concession reached the 7 million barrel threshold specified in the risk-sharing contract, and a 81,000 barrel decrease resulting from normal production declines, partially offset by a 116,000 barrel increase primarily due to the completion of two development wells in the latter part of 1996 and one development well completed in June 1997. U.S. oil volumes were 60,000 barrels in 1997, down approximately 13,000 barrels from 1996. Such decrease was mainly due to the U.S. onshore property sale. U.S. gas volumes before gas balancing adjustments were 205,000 MCF in 1997, down 676,000 MCF from 1996. Of such decrease, approximately 705,000 MCF was due to the U.S. onshore property sale, partially offset by new production from a development well completed at Main Pass 41 during October 1996. Colombian oil prices averaged $17.83 per barrel during the first nine months of 1997. The average price for the same period during 1996 was $19.37 per barrel. The Company's average U.S. oil price decreased to $19.38 per barrel in 1997, down from $19.74 per barrel in 1996. U.S. gas prices averaged $2.24 per MCF in 1997 compared to $2.00 per MCF in 1996. In addition to the above-mentioned variances, U.S. gas revenue increased approximately $19,000 as a result of gas balancing adjustments. Operating costs decreased approximately 12%, or $438,000. Of such decrease, approximately $676,000 resulted from the sale of the U.S. onshore properties, offset by a $144,000 increase for the U.S. offshore properties and a $94,000 increase for the Colombian properties. DD&A decreased by 9%, or $462,000, primarily due to lower levels of production. The Company recorded write-downs to the carrying amounts of its U.S. and Colombian oil and gas properties of $1,986,000 and $11,413,000 at March 31, 1997 and June 30, 1997, respectively. The U.S. write-down at March 31 was primarily due to lower oil and gas prices, whereas the Colombian write-down at June 30 was mainly due to a downward revision (523,000 barrels) of the Company's Colombian proved oil reserves and lower prices. 13 G&A expenses declined $213,000 as a result of a cost reduction program implemented by the Company during the first quarter of 1996. This program has targeted all categories of G&A. The largest decreases, however, have resulted from reductions in the number of employees, officers and directors of the Company. The Company incurred $196,000 of severance expense in the first nine months of 1996 relating to the termination of the Executive Vice President and Chief Operating Officer of the Company and certain other employees. For more information regarding such terminations see Note 5 of Notes to Condensed Consolidated Financial Statements. The Company has not incurred any such severance expense in 1997. Interest expense was $104,000 lower, primarily as a result of lower average balances outstanding in 1997. Debt refinancing expense of $100,000 in 1996 represents a fee paid to ING Capital in consideration for certain modifications to the Company's credit agreement. See Note 3 of Notes to Condensed Consolidated Financial Statements. Income taxes were $497,000 lower in 1997 primarily due to Colombian deferred tax benefits resulting from the write-down of the carrying amount of the Company's Colombian oil and gas properties. See Note 2 of Notes to Condensed Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Since December 31, 1996, costs incurred in oil and gas property acquisition, exploration and development activities by the Company totaled approximately $2.4 million, almost all of which was incurred in Colombia. These activities were funded by cash provided by operating activities. As described in Note 6 of Notes to Condensed Consolidated Financial Statements, the Company has aggregate remaining estimated capital expenditures for 1997 and 1998 of $1.8 million at September 30, 1997. Delays in obtaining the required environmental approvals and permits on a timely basis and construction delays could both, through the impact of inflation, increase the required expenditures. Cost overruns resulting from factors other than inflation could also increase the required expenditures. Historically, the inflation rate of the Colombian peso has been in the range of 20-30% per year. Devaluation of the peso against the U.S. dollar has historically been slightly less than the inflation rate in Colombia. The Company has historically funded capital expenditures in Colombia by converting U.S. dollars to pesos at such time as the expenditures have been made. As a result of the interaction between peso inflation and devaluation of the peso against the U.S. dollar, inflation, from the Company's perspective, has not been a significant factor. During 1994, the first half of 1995, and 1996, however, devaluation of the peso was substantially lower than the rate of inflation of the peso, resulting in an effective inflation rate in excess of that of the U.S. dollar. There can be no assurance that this condition will not occur again or that, in such event, there will not be substantial increases in future capital expenditures as a result. Due to Colombian exchange controls and restrictions and the lack of an effective market, it is not feasible to hedge against the risk of net peso inflation against the U.S. dollar and the Company has not done so. The Company is a party to a credit agreement with ING (U.S.) Capital Corporation ("ING Capital") pursuant to which the borrower thereunder may borrow up to $25 million, subject to a borrowing base the determination of which is predicated on the Company's U.S. and Colombian reserves and which is redetermined annually. As of September 30, 1997, the borrowing base permitted and the outstanding loan balance was $7,765,000. Borrowings under the credit agreement bear interest at the ING Capital prime rate (8.5% at September 30, 1997) plus 1% per annum or, at the Company's option, a fixed rate based on the London Interbank Offered Rate for a portion or portions of the outstanding indebtedness. The borrower under the credit agreement is Neo Energy, Inc., a wholly owned subsidiary of the Company and the owner of the Company's interests in the Colombian concessions. The indebtedness under the credit agreement is guaranteed by the Company and certain other subsidiaries, including the wholly owned subsidiary that is the owner of substantially 14 all of the Company's domestic oil and gas properties. The loan, among other things, prohibits the payment of dividends by the Company and requires the maintenance of certain financial ratios. In addition, the Company is required by the terms of the credit agreement to maintain a minimum consolidated tangible net worth of $22,000,000. As a result of the write-downs of the capitalized costs of the Company's oil and gas properties and equipment reflected in the accompanying Condensed Consolidated Financial Statements, the Company has not been in compliance with its minimum consolidated tangible net worth covenant since June 30, 1997. Moreover, the Company's estimates of its cash flow through December 31, 1997 indicated that it would be unable to meet its then existing principal repayments scheduled for the five months ending December 31, 1997. Accordingly, on July 8, 1997, the Company engaged Merrick Capital Corporation ("Merrick") to act as its financial advisor in order to effect the Restructuring Plan described in Note 7 to the Condensed Consolidated Financial Statements. Pending effectuation of the Restructuring Plan, ING Capital has waived compliance by the Company with its minimum consolidated tangible net worth covenant and has reduced the principal payments required for the four months ending November 30, 1997 to $25,000 per month and rescheduled repayment of the remaining principal as follows: $575,000 per month for the ten months ending September 30, 1998 and $1,965,000 on October 31, 1998. At such time as the Company fails to pursue the Restructuring Plan actively, any prior breach of the minimum consolidated tangible net worth covenant will be reinstated and monthly payments of principal of $575,000 will be required thereafter until maturity of the credit on October 31, 1998. The Company, together with Merrick, is currently engaged in negotiations with various parties relating to transactions designed to accomplish the objectives of the Restructuring Plan. ING Capital has reserved to itself the right to consent to the actual terms of the Restructuring Plan. If the Restructuring Plan is not effected, management of the Company will endeavor to obtain additional capital by means of equity issues or sales of assets. Only additional equity issues will, however, assist the Company in meeting the existing minimum consolidated tangible net worth covenant if then reinstated. There is no assurance that ING Capital would, under such circumstances, waive prior defaults under the Company's minimum consolidated tangible net worth covenant even if management were able to secure additional capital through the issuance of equity. The Company is not currently exploring alternative sources of equity capital. Other risks that could adversely affect the Company's plans include, among others, delays in obtaining the required environmental approvals and permits, increases in required expenditures as a result of inflation or cost overruns, interruptions of production, failure to produce the reserves as projected, or a further decline in the sales prices of oil and gas. Depending on the results of the exploration and development activities, substantial expenditures which have not been included in the Company's plan may be required. The outcome of these matters cannot be projected with certainty. For information regarding the risks relating to the Company's business, see Note 6 of Notes to Condensed Consolidated Financial Statements and the Company's Annual Report on Form 10-K. With the exception of historical information, the matters discussed in this quarterly report contain forward-looking statements that involve risks and uncertainties. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that such expectations will be realized. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in commodity prices for oil and gas, the extent of the Company's success in discovering, developing and producing reserves, political conditions in Colombia, conditions of the capital markets and equity markets during the periods covered by the forward-looking statements and its ability to effect the Restructuring Plan, as well as other factors. 15 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- a) Exhibits - ----------- 10.1 Aviva Petroleum Inc. 1995 Stock Option Plan, as amended (filed as Appendix A to the Company's definitive Proxy Statement for the Annual Meeting of Shareholders dated June 10, 1997, and incorporated herein by reference). 10.2 Amendment to the ING Capital Credit Agreement dated August 12, 1997 (filed as exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-22258 and incorporated herein by reference). 10.3 Amended and Restated Aviva Petroleum Inc. Severance Benefit Plan dated September 30, 1997. 27.1 Financial Data Schedule. b) Reports on Form 8-K - ---------------------- The Company filed the following Current Reports on Form 8-K during and subsequent to the end of the third quarter: Date of 8-K Description of 8-K - ----------- ------------------ July 10, 1997 Submitted a copy of the Company's Press Release dated July 10, 1997, reporting on the Company's Colombian activities. 16 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AVIVA PETROLEUM INC. Date: November 12, 1997 /s/ Ronald Suttill ------------------------------------- Ronald Suttill President and Chief Executive Officer /s/ James L. Busby ------------------------------------- James L. Busby Treasurer and Secretary (Chief Accounting Officer) 17 INDEX TO EXHIBITS Exhibit Number Description of Exhibit - ------ ---------------------- *10.1 Aviva Petroleum Inc. 1995 Stock Option Plan, as amended (filed as Appendix A to the Company's definitive Proxy Statement for the Annual Meeting of Shareholders dated June 10, 1997, and incorporated herein by reference). *10.2 Amendment to the ING Capital Credit Agreement dated August 12, 1997 (filed as exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-22258 and incorporated herin by reference). **10.3 Amended and Restated Aviva Petroleum Inc. Severance Benefit Plan dated September 30, 1997. **27.1 Financial Data Schedule. - ------------- * Previously Filed ** Filed Herewith 18 EX-10.3 2 SEVERANCE BENEFIT PLAN EXHIBIT 10.3 AVIVA PETROLEUM INC. SEVERANCE BENEFIT PLAN AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 1, 1997 AVIVA PETROLEUM INC. SEVERANCE BENEFIT PLAN WITNESSETH: WHEREAS, Aviva Petroleum Inc. previously adopted the Aviva Petroleum Inc. Severance Benefit Plan and now desires to amend and restate the Plan; NOW, THEREFORE, the Aviva Petroleum Inc. Severance Benefit Plan is hereby amended and restated effective as of September 1, 1997, to read as follows: ARTICLE I DEFINITIONS ----------- 1.1. "CAUSE" means, in the context of an Employee's termination or separation from employment with the Company, an Employee's (i) neglect, refusal or failure (other than by reason of illness, accident or other physical or mental incapacity), in any material respect, to attend to his duties as assigned by the Company; (ii) failure in any material respect to comply with any of his terms of employment; (iii) failure to follow the established, reasonable and material policies, standards, and regulations of the Company; (iv) willful engagement in gross misconduct injurious to the Company or to any of its subsidiaries or affiliates; or (v) conviction in a court of law of, or pleading of guilty or nolo contendere to, any crime that constitutes a felony in the jurisdiction involved. 1.2. "CHANGE OF CONTROL" means an event which shall be deemed to have occurred when either (i) any "person" (as that term is used in sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes a "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly of securities of the Company representing 35% or more of the combined voting power of the Company's then outstanding securities, (ii) individuals who, as of the effective date of the Plan, constitute the Directors cease for any reason to constitute at least a majority of the Directors, unless such cessation is approved by a majority vote of the Directors in office immediately prior to such cessation, (iii) the Company is merged into a previously unrelated entity, or (iv) a transaction is consummated pursuant to that certain proposal and letter agreement dated July 10, 1997 (as may be modified), between Merrick Capital Corporation and the Company. 1.3. "CODE" means the Internal Revenue Code of 1986, as amended. 1 1.4. "COMPANY" means Aviva Petroleum Inc. 1.5. "DIRECTORS" means the Board of Directors of the Company. 1.6. "ELIGIBLE EMPLOYEE" means each Employee other than (a) an Employee whose terms and conditions of employment are governed by a collective bargaining agreement, unless such agreement provides for his coverage under the Plan, (b) a nonresident alien who has no United States source income, (c) an Employee who is a party to a separate severance agreement with the Company, or (d) an Employee who is a party to an individual employment agreement with the Company providing for severance benefits. 1.7. "EMPLOYEE" means any individual who is employed full-time by the Company (or any of its wholly-owned subsidiaries), and who is not a temporary employee. Full-time employees are those employees who, on average, work at least 35 hours per week for the Company. Temporary employees are those employees whose anticipated duration of employment at the time of hire is no more than six months. 1.8. "PLAN" means the Aviva Petroleum Inc. Severance Benefit Plan, as amended from time to time. 1.9. "PLAN ADMINISTRATOR" means the Company. 1.10. "PLAN YEAR" means the twelve-consecutive-month period commencing January 1 of each year. ARTICLE II GENERAL SEVERANCE BENEFIT ------------------------- 2.1. SEVERANCE BENEFIT. The Company shall provide severance benefits as set forth in Article III to Eligible Employees, pursuant to the terms, conditions and limitations set forth in the Plan. No benefits shall be provided to an Eligible Employee unless such Eligible Employee executes documents required by the Plan Administrator relieving the Company from any employment- related liability. ARTICLE III SEVERANCE BENEFITS ------------------ 3.1. SEVERANCE BENEFITS. Each Eligible Employee shall be entitled to severance benefits under the Plan if, within two (2) years after a Change of Control, the Company (or any of its 2 wholly-owned subsidiaries) terminates his employment, reduces his salary, removes him as an officer of the Company or transfers the Eligible Employee to a location that is at least 50 miles from his current employment location, or in any other circumstances in which the Plan Administrator within its discretion deems severance benefits appropriate. The amount of an Eligible Employee's severance benefits shall be determined by the Plan Administrator as follows: Each Eligible Employee shall receive the greater of (A) three (3) months' of his base salary or (B) one-half ( 1/2) month of his base salary times his years of employment with the Company (or a predecessor entity), plus one month's base salary multiplied by his annual base salary divided by $10,000. For purposes of this calculation, years of employment shall be calculated to the nearest month. Notwithstanding the immediately preceding two sentences, the severance benefits for an Eligible Employee who is an officer of the Company shall be one year's base salary. In addition to eligibility to receive benefits following a Change of Control, each Eligible Employee whose employment is terminated as a result of the recommendations of management or the Directors, in connection with a reduction of Company general and administrative expenses, shall be eligible to receive the benefits provided under the first paragraph of this Section 3.1. 3.2. VOLUNTARY TERMINATION. An Eligible Employee who voluntarily terminates employment with the Company shall receive no severance benefits under the Plan, unless the Plan Administrator deems severance benefits appropriate pursuant to Section 3.1. 3.3. TERMINATION FOR CAUSE. Notwithstanding any other provision in the Plan to the contrary, an Eligible Employee who is terminated for Cause shall receive no severance benefits under the Plan. 3.4. MAXIMUM BENEFIT. The maximum benefit under the Plan for any Eligible Employee shall be one-half ( 1/2) of the Eligible Employee's annual base salary, except for officers of the Company. 3.5. FORM OF BENEFIT. Benefits shall be paid in a lump sum. 3.6. MEDICAL BENEFITS. If an Eligible Employee becomes entitled to severance benefits under Section 3.1, the Company shall also pay premiums for medical insurance coverage for such Eligible Employee for a number of months equal to the number of months of base salary the Eligible Employee receives as severance benefits under Section 3.1, up to a maximum of three (3) months, provided the Company is able to provide such medical insurance coverage under the terms of its medical insurance policy. The medical benefits provided under such medical insurance coverage shall be substantially identical to the medical benefits provided under the medical plan in effect on the date of the Change of Control or, in the case of a termination in connection with a general reduction of Company general and administrative costs, on the date of the termination of employment. If the Company is unable to provide such coverage under its medical insurance policy, the Company shall pay the Eligible Employee the net dollar amount that the Company had been paying toward the medical insurance premiums for the Eligible Employee 3 prior to the termination of employment. Nothing in the Plan shall be construed to limit the right of any Eligible Employee to any benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). ARTICLE IV GENERAL PROVISIONS ------------------ 4.1. FUNDING AND COST OF PLAN. The benefits provided herein shall be unfunded and shall be provided from the Company's general assets. 4.2. NAMED FIDUCIARY. The Plan Administrator shall be the named fiduciary for purposes of the Employee Retirement Income Security Act of 1974, as amended. 4.3. ADMINISTRATION. The Plan Administrator shall be responsible for the management and control of the operation and the administration of the Plan, including without limitation interpretation of the Plan, decisions pertaining to eligibility to participate in the Plan, computation of Plan benefits, granting or denial of benefit claims, and review of claims denials. The Plan Administrator has absolute discretion in the exercise of its powers and responsibilities. The Company may, by action of its President, delegate any or all of its powers and responsibilities as Plan Administrator to an individual, a committee, or both. To the extent the Company delegates its responsibilities and powers as Plan Administrator, the Company shall indemnify and hold harmless each such delegate (and any other individual acting on such delegate's behalf) against any and all expenses and liabilities arising out of such person's administrative functions or fiduciary responsibilities, excepting only expenses and liabilities arising out of the person's own willful misconduct; expenses against which such person shall be indemnified hereunder include without limitation the amounts of any settlement, judgment, attorneys' fees, costs of court, and any other related charges reasonably incurred in connection with a claim, proceeding, settlement, or other action under the Plan. 4.4. AMENDMENT AND TERMINATION. The Directors have the authority to amend or terminate the Plan at any time, by means of a written instrument executed by either the Directors or a duly authorized officer of the Company. Notwithstanding the previous sentence, if the Company terminates an Eligible Employee's employment, reduces his salary, removes him as an officer of the Company, or transfers him to a location that is at least 50 miles from his current employment location prior to December 31, 1999, no such amendment or termination shall reduce the benefits to which the Eligible Employee would otherwise be entitled, unless the Eligible Employee consents in writing to the amendment or termination. 4.5. CLAIMS PROCEDURE AND REVIEW. Claims for benefits under the Plan shall be made in writing to the Plan Administrator. If a claim for benefits is wholly or partially denied, the Plan Administrator shall, within a reasonable period of time but no later than ninety days after receipt 4 of the claim (or 180 days after receipt of the claim if special circumstances require an extension of time for processing the claim), notify the claimant of the denial. Such notice shall (i) be in writing, (ii) be written in a manner calculated to be understood by the claimant, (iii) contain the specific reason or reasons for denial of the claim, (iv) refer specifically to the pertinent Plan provisions upon which the denial is based, (v) describe any additional material or information necessary for the claimant to perfect the claim (and explain why such material or information is necessary), and (vi) explain the Plan's claim review procedure. Within sixty days of the receipt by the claimant of this notice, the claimant may file a written appeal with the Plan Administrator. In connection with the appeal, the claimant may review pertinent documents and may submit written issues and comments. The Plan Administrator shall deliver to the claimant a written decision on the appeal promptly, but not later than sixty days after the receipt of the claimant's appeal (or 120 days after receipt of the claimant's appeal if there are special circumstances which require an extension of time for processing). Such decision shall (i) be written in a manner calculated to be understood by the claimant, (ii) include specific reasons for the decision, and (iii) refer specifically to the Plan provisions upon which the decision is based. If special circumstances require an extension, up to 180 or 120 days, whichever applies, the Plan Administrator shall send written notice of the extension. This notice shall indicate the special circumstances requiring the extension and state when the Plan Administrator expects to render the decision. 4.6. NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of the Plan shall not be deemed to be a contract of employment between the Company and any person, to be consideration for the employment of any person, or to have any effect whatsoever on the at-will employment relationship. Nothing in the Plan shall be deemed to give any person the right to be retained in the employ of the Company or to restrict the right of the Company to discharge any person at any time. Nothing in the Plan shall be deemed to give the Company the right to require any person to remain in the employ of such Company or to restrict any person's right to terminate his employment at any time. 4.7. GOVERNING LAW. This Plan shall be interpreted under the laws of the State of Texas except to the extent preempted by federal law. 4.8. GENDER; NUMBER. Wherever appropriate herein, the masculine, neuter, and feminine genders shall be deemed to include each other, and the plural shall be deemed to include the singular and vice versa. 4.9. NO BENEFITS. Notwithstanding any Plan provisions to the contrary, in connection with the disposition of substantial stock or assets of the Company or any affiliate, if the Eligible Employee commences employment with the entity or any affiliate that acquired such stock or assets, no termination will be deemed to have occurred and no benefits will be payable under the Plan. 5 4.10. INDEPENDENT CONTRACTORS. Notwithstanding any provision of the Plan to the contrary, no individual who is designated, compensated, or otherwise classified as an independent contractor shall be eligible for benefits under the Plan. 4.11. HEADINGS. The headings of the Articles and Sections are included solely for convenience. If the headings and the text of the Plan conflict, the text shall control. All references to Articles and Sections are to the Plan unless otherwise indicated. 4.12. SEVERABILITY. If any provision of the Plan is held to be illegal or invalid for any reason, that holding shall not affect the remaining provisions of the Plan. Instead, the Plan shall be construed and enforced as if such illegal or invalid provision had not been contained herein. 4.13. SUCCESSORS AND ASSIGNS. The provisions of this Plan shall be binding on any successors to or assigns of the Company. IN WITNESS WHEREOF, Aviva Petroleum Inc., executed this amended and restated Aviva Petroleum Inc. Severance Benefit Plan, effective as of September 1, 1997, this 30th day of September 1997. AVIVA PETROLEUM INC. By: /s/ RONALD SUTTILL ----------------------------------------- Title: CEO and President WITNESS: By: /s/ DEENA PLUTO ------------------------------- Title: Assistant Secretary 6 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET OF AVIVA PETROLEUM INC. AND SUBSIDIARIES AS OF SEPTEMBER 30, 1997 AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 642 0 1,865 0 596 3,342 61,271 41,941 24,171 9,367 1,965 0 0 1,574 9,814 24,171 7,802 7,802 7,880 7,880 13,399 0 498 (15,000) (158) (14,842) 0 0 0 (14,842) (0.47) 0
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