-----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, OYqySm5oanoJaQx+9OmYS09jsgnECxcwT7Rj9dh9drYK4OiBhtw/5HCXpEUjSquV kTYrbWJLZFfu/XqGebl4fQ== 0000930661-01-501585.txt : 20010814 0000930661-01-501585.hdr.sgml : 20010814 ACCESSION NUMBER: 0000930661-01-501585 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 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: 1934 Act SEC FILE NUMBER: 001-13440 FILM NUMBER: 1706349 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 d10q.txt 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 JUNE 30, 2001 ---------------------- 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 June 30, 2001, was 46,900,132. On April 30, 2001, the Company discontinued trading of the Depositary Shares, each of which represented five shares of Common Stock. On May 16, 2001, the Common Stock resumed trading on the OTC Bulletin Board under the symbol AVVP. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. - ----------------------------- AVIVA PETROLEUM INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheet (in thousands, except number of shares) (unaudited)
June 30, December 31, 2001 2000 -------- ------------ ASSETS Current assets: Cash and cash equivalents $ 587 $ 820 Accounts receivable 373 237 Inventories 160 161 Prepaid expenses and other 116 187 -------- -------- Total current assets 1,236 1,405 -------- -------- Property and equipment, at cost (note 2): Oil and gas properties and equipment (full cost method) 16,469 16,414 Other 335 333 -------- -------- 16,804 16,747 Less accumulated depreciation, depletion and amortization (15,921) (15,791) -------- -------- 883 956 Other assets 1,022 950 -------- -------- $ 3,141 $ 3,311 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 580 $ 945 Accrued liabilities 118 115 -------- -------- Total current liabilities 698 1,060 -------- -------- Other liabilities 381 375 Stockholders' equity: Common stock, no par value, authorized 348,500,000 shares; issued 46,900,132 shares 2,345 2,345 Additional paid-in capital 37,710 37,710 Accumulated deficit/*/ (37,993) (38,179) -------- -------- Total stockholders' equity 2,062 1,876 Commitments and contingencies (note 3) -------- -------- $ 3,141 $ 3,311 ======== ========
* 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 Six Months Ended June 30, June 30, 2001 2000 2001 2000 ------- ------- ------- ------- Revenue: Oil and gas sales $ 575 $ 1,772 $ 1,175 $ 4,313 Services fee 107 55 273 55 ------- ------- ------- ------- Total revenue 682 1,827 1,448 4,368 ------- ------- ------- ------- Expense: Production 357 744 715 1,554 Depreciation, depletion and amortization 65 162 131 397 General and administrative 290 283 580 584 Recovery of losses on accounts receivable (4) (58) (29) (110) ------- ------- ------- ------- Total expense 708 1,131 1,397 2,425 ------- ------- ------- ------- Other income (expense): Gain on transfer of partnership interests - 3,452 - 3,452 Interest and other income (expense), net 2 102 173 102 Interest expense (1) (289) (2) (684) ------- ------- ------- ------- Total other income (expense) 1 3,265 171 2,870 ------- ------- ------- ------- Earnings (loss) before income taxes and extraordinary item (25) 3,961 222 4,813 Income taxes 19 74 36 193 ------- ------- ------- ------- Earnings (loss) before extraordinary item (44) 3,887 186 4,620 Extraordinary item - debt extinguishment, net of income taxes of $1,591 - 3,089 - 3,089 ------- ------- ------- ------- Net earnings (loss) $ (44) $ 6,976 $ 186 $ 7,709 ======= ======= ======= ======= Weighted average common shares outstanding - basic and diluted 46,900 46,900 46,900 46,900 ======= ======= ======= ======= Basic and diluted earnings (loss) per common share: Before extraordinary item $(.00) $.08 $.00 $.10 Extraordinary item - .07 - .06 ------- ------- ------- ------- Net earnings (loss) $(.00) $.15 $.00 $.16 ======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements. 3 AVIVA PETROLEUM INC. AND SUBSIDIARIES Condensed Consolidated Statement of Cash Flows (in thousands) (unaudited)
Six Months Ended June 30, 2001 2000 ------- ------- Net earnings $ 186 $ 7,709 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 131 397 Gain on transfer of partnership interests - (3,452) Gain on debt extinguishment - (3,089) Changes in working capital and other, net of effects of transfer of partnership interest (469) (252) ------- ------- Net cash provided by (used in) operating activities (152) 1,313 ------- ------- Cash flows from investing activities: Cash balances surrendered in transfer of partnership interests - (1,386) Property and equipment expenditures (97) (269) Proceeds from sale of assets 4 - ------- ------- Net cash used in investing activities (93) (1,655) ------- ------- Cash flows from financing activities - - ------- ------- Effect of exchange rate changes on cash and cash equivalents 12 21 ------- ------- Net decrease in cash and cash equivalents (233) (321) Cash and cash equivalents at beginning of the period 820 846 ------- ------- Cash and cash equivalents at end of the period $ 587 $ 525 ======= =======
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, 2000 46,900,132 $2,345 $ 37,710 $(38,179) $1,876 Net earnings - - - 186 186 ---------- ------ ---------- -------- ------ Balances at June 30, 2001 46,900,132 $2,345 $ 37,710 $(37,993) $2,062 ========== ====== ========== ======== ======
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" or "Aviva") 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 consolidated 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 $31,000 for the six months ended June 30, 2001 and $29,000 for the six months ended June 30, 2000. Unevaluated oil and gas properties totaling $273,000 and $272,000 at June 30, 2001 and December 31, 2000, respectively, have been excluded from costs subject to depletion. The Company capitalized interest costs of $30,000 for the six-month period ended June 30, 2000 on these properties. 3. Commitments and Contingencies The Company is engaged in ongoing operations on the Santana contract in Colombia. The contract obligations have been met; however, the Company plans to recomplete certain existing wells and engage in various other projects. The Company's current share of the estimated future costs of these activities is approximately $0.3 million at June 30, 2001. Any substantial increase in the amount of the above referenced expenditures could adversely affect the Company's ability to meet these obligations. The Company expects to fund these activities using existing cash and cash provided from operations. Risks that could adversely affect funding of such activities include, among others, delays in obtaining any required environmental approvals and permits, cost overruns, failure to produce the reserves as projected or a decline in the sales price of oil. Depending on the results of future exploration and development activities, substantial expenditures which have not been included in the Company's cash flow projections may be required. Failure to fund certain expenditures could result in a decrease in the Company's ownership interest in Argosy Energy International ("Argosy"), a Utah limited partnership which holds the Colombian assets. 6 AVIVA PETROLEUM INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) (continued) During 1998, leftist Colombian guerrillas inflicted significant damage on Argosy's oil processing and storage facilities. Since that time Argosy has been subject to lesser attacks on its pipelines and equipment resulting in only minor interruptions of oil sales. The Colombian army guards Argosy's operations; however, there can be no assurance that such operations will not be the target of additional guerrilla attacks in the future. The damages resulting from the above referenced attacks were covered by insurance. There can be no assurance that such coverage will remain available or affordable. Under the terms of the contracts with Ecopetrol, a minimum of 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. Activities of the Company with respect to the exploration, development and production of oil and natural gas are subject to stringent foreign, federal, state and local environmental laws and regulations, including but not limited to the Oil Pollution Act of 1990, 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 future 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 and other risks that may affect the Company's operations, see the Company's latest annual report on Form 10-K. The Company is involved in certain litigation involving its oil and gas activities. 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 AVIVA PETROLEUM INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) (continued) 4. Segment Information The following is a summary of segment information of the Company as of and for the six-month periods ended June 30, 2001 and 2000 (in thousands):
United States Colombia Total ------- -------- ------- 2001 - ---- Revenue: Oil and gas sales $ 546 $ 629 $1,175 Services fee 273 - 273 ------ ------ ------ 819 629 1,448 ------ ------ ------ Expense: Production 432 283 715 Depreciation, depletion and amortization 73 58 131 General and administrative 527 53 580 Recovery of losses on accounts receivable (29) - (29) ------ ------ ------ 1,003 394 1,397 ------ ------ ------ Interest and other income (expense), net 36 137 173 Interest expense (2) - (2) ------ ------ ------ Earnings (loss) before income taxes (150) 372 222 Income taxes - 36 36 ------ ------ ------ Net earnings (loss) $ (150) $ 336 $ 186 ====== ====== ====== Total assets $1,724 $1,417 $3,141 ====== ====== ======
8 AVIVA PETROLEUM INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
United States Colombia Total ------- --------- ------- 2000 - ---- Revenue: Oil and gas sales $ 793 $3,520 $4,313 Services fee 55 - 55 ------ ------ ------ 848 3,520 4,368 ------ ------ ------ Expense: Production 542 1,012 1,554 Depreciation, depletion and amortization 63 334 397 General and administrative 549 35 584 Recovery of losses on accounts receivable (110) - (110) ------ ------ ------ 1,044 1,381 2,425 ------ ------ ------ Gain on transfer of partnership interests - 3,452 3,452 Interest and other income (expense), net (13) 115 102 Interest expense (190) (494) (684) ------ ------ ------ Earnings (loss) before income taxes and extraordinary item (399) 5,212 4,813 Income taxes - 193 193 ------ ------ ------ Earnings (loss) before extraordinary item (399) 5,019 4,620 Extraordinary item - debt extinguishment - 3,089 3,089 ------ ------ ------ Net earnings (loss) $ (399) $8,108 $7,709 ====== ====== ====== Total assets $2,188 $1,597 $3,785 ====== ====== ======
9 Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations. - -------------- Results of Operations - --------------------- Three Months Ended June 30, 2001 compared to Three Months Ended June 30, 2000 - -----------------------------------------------------------------------------
United States Colombia Oil Gas Oil Total ----- ----- ------- ------- (Thousands) Revenue - 2000 $ 371 $ 25 $ 1,376 $ 1,772 Volume variance (122) (8) (1,034) (1,164) Price variance (21) 15 (27) (33) ----- ----- ------- ------- Revenue - 2001 $ 228 $ 32 $ 315 $ 575 ===== ===== ======= =======
Colombian oil volumes were 13,000 barrels in the second quarter of 2001, a decrease of 41,000 barrels as compared to the second quarter of 2000. Such decrease is due to a 33,000 barrel decrease resulting from the transfer of partnership interests to Crosby Capital L.L.C. ("Crosby") and an 8,000 barrel decrease resulting from normal production declines. The transfer of partnership interests to Crosby on June 8, 2000, was part of an overall restructuring plan which eliminated all of the Company's long-term debt. U.S. oil volumes were 9,000 barrels in 2001, down approximately 4,000 barrels from 2000. Such decrease is primarily due to the relinquishment of Main Pass 41 effective November 7, 2000. U.S. gas volumes were 7,000 thousand cubic feet (MCF) in 2001, up 1,000 MCF from 2000. Colombian oil prices averaged $23.38 per barrel during the second quarter of 2001. The average price for the same period of 2000 was $25.42 per barrel. The Company's average U.S. oil price decreased to $25.12 per barrel in 2001, down from $27.49 per barrel in 2000. U.S. gas prices averaged $4.85 per MCF in 2001 compared to $3.56 per MCF in 2000. Service fees of $107,000 for administering the Colombian assets were received in 2001 compared to $55,000 in 2000. The 2001 amount covers three months at a monthly rate of $46,000. The 2000 amount covers only the month of June at a monthly rate of $71,000. The recorded amounts are net of Aviva Overseas' 22.1196% share of the fees. Operating costs decreased approximately 52%, or $387,000, primarily as a result of the transfer of partnership interests to Crosby. Depreciation, depletion and amortization ("DD&A") decreased by 60%, or $97,000, as a result of the transfer of partnership interests to Crosby and a decrease in the amount of oil produced. During 2000, in connection with the restructuring of the Company's long term debt, the Company realized a $3,452,000 gain on the transfer of partnership interests to Crosby and an extraordinary gain of $3,089,000, net of income taxes of $1,591,000, on the extinguishment of a portion of the debt. No similar gains were recorded in 2001. 10 Interest expense decreased $288,000 in 2001 due to the extinguishment of the Company's long-term debt in 2000. Income taxes were $55,000 lower in 2001 principally as a result of the transfer of partnership interests to Crosby. Six Months Ended June 30, 2001 compared to Six Months Ended June 30, 2000 - -------------------------------------------------------------------------
United States Colombia Oil Gas Oil Total ----- ----- ------- ------- (Thousands) Revenue - 2000 $ 749 $ 44 $ 3,520 $ 4,313 Volume variance (242) (18) (2,763) (3,023) Price variance (29) 42 (128) (115) ----- ----- ------- ------- Revenue - 2001 $ 478 $ 68 $ 629 $ 1,175 ===== ===== ======= =======
Colombian oil volumes were 28,000 barrels in the first half of 2001, a decrease of 102,000 barrels as compared to the first half of 2000. Such decrease is due to an 84,000 barrel decrease resulting from the transfer of partnership interests to Crosby and an 18,000 barrel decrease resulting from production declines. U.S. oil volumes were 18,000 barrels in 2001, down approximately 9,000 barrels from 2000. Such decrease is primarily due to the relinquishment of Main Pass 41 effective November 7, 2000. U.S. gas volumes were 12,000 MCF in 2001, down 1,000 MCF from 2000. Such decrease is due to the relinquishment of Main Pass 41 effective November 7, 2000. Colombian oil prices averaged $22.58 per barrel during the first half of 2001. The average price for the same period of 2000 was $27.00 per barrel. The Company's average U.S. oil price decreased to $25.97 per barrel in 2001, down from $27.56 per barrel in 2000. U.S. gas prices averaged $5.70 per MCF in 2001 compared to $3.07 per MCF in 2000. Service fees of $273,000 for administering the Colombian assets were received in 2001 compared to $55,000 in 2000. The 2001 amount covers six months, whereas the 2000 amount covers only the month of June. These amounts are net of Aviva Overseas' 22.1196% share of the fees. Operating costs decreased approximately 54%, or $839,000, primarily as a result of the transfer of partnership interests to Crosby. DD&A decreased by 67%, or $266,000, primarily as a result of the transfer of partnership interests to Crosby and a decrease in the amount of oil produced. During 2000, in connection with the restructuring of the Company's long term debt, the Company realized a $3,452,000 gain on the transfer of partnership interests to Crosby and an extraordinary gain of $3,089,000, net of income taxes of $1,591,000, on the extinguishment of a portion of the debt. There were no similar gains during 2001. Interest expense decreased $682,000 in 2001 due to the extinguishment of the Company's long-term debt in 2000. 11 Income taxes were $157,000 lower in 2001 principally as a result of the transfer of partnership interests to Crosby. New Accounting Pronouncements - ----------------------------- The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and requires the Company to recognize all derivatives on its balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives are either offset against the change in fair value of the hedged item through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. As of January 1, 2001, the date of adoption, and as of June 30, 2001 and the six-month period then ended, the Company was not a party to any derivative financial instruments. In July 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method, and SFAS No. 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. As of June 30, 2001 there is no impact on the Company's financial statements as we have not entered into any business combinations and have not acquired goodwill. Also, the FASB has voted to issue SFAS No. 143 "Accounting for Asset Retirement Obligations" which establishes requirements for the accounting of removal-type costs associated with asset retirements. The standard is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. The Company is currently assessing the impact on its financial statements. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents totaled $587,000 and $820,000 at June 30, 2001 and December 31, 2000, respectively. The decrease in cash and cash equivalents resulted primarily from net cash used in operating activities ($152,000) and property additions ($97,000). Net cash used in operating activities was $(152,000) in 2001, compared to $1,313,000 net cash provided by operating activities for 2000. This decrease resulted primarily from the transfer of partnership interests to Crosby, effective June 8, 2000, resulting in lower levels of net cash flow from operations. Additionally, production declines and lower oil prices contributed to the decrease. The Company plans to recomplete certain existing wells and engage in various other projects in Colombia. The Company's current share of the estimated future costs of these development activities is approximately $0.3 million at June 30, 2001. Any substantial increase in the amount of the above referenced expenditures could adversely affect the Company's ability to meet these obligations. The Company expects to fund these activities using existing cash and cash provided from operations. Risks that could adversely affect funding of such activities include, among others, delays in obtaining any required environmental permits, failure to produce the reserves as projected or a decline in the sales price of oil. Any substantial increases in the amounts of these required expenditures could adversely affect the Company's ability to fund these activities. Depending on the results of future exploration and development activities, substantial expenditures, which have not been included in the Company's cash flow projections, may be required. Failure to fund certain expenditures could 12 result in a decrease in the Company's ownership interest in Argosy. The outcome of these matters cannot be projected with certainty. 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 its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include, among other things, general economic conditions, volatility of oil and gas prices, the impact of possible geopolitical occurrences world-wide and in Colombia, imprecision of reserve estimates, the assessment of geological and geophysical data, changes in laws and regulations, unforeseen engineering and mechanical or technological difficulties in drilling, working-over and operating wells during the periods covered by the forward-looking statements, as well as other factors described in the Company's annual report on Form 10-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- The Company is exposed to market risk from changes in commodity prices. The Company produces and sells crude oil and natural gas. These commodities are sold based on market prices established with the buyers. The Company does not use financial instruments to hedge commodity prices. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- a) Exhibits - ------------ **10.1 Santana Crude Sale and Purchase Agreement dated January 3, 2001. - --------------------------------- ** Filed herewith b) Reports on Form 8-K - ---------------------- The Company did not file any Current Reports on Form 8-K during or subsequent to the end of the second quarter of 2001. 13 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: August 13, 2001 /s/ Ronald Suttill ------------------------------------------------ Ronald Suttill President and Chief Executive Officer /s/ James L. Busby ------------------------------------------------ James L. Busby Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) 14 INDEX TO EXHIBITS Exhibit Number Description of Exhibit - ------ ---------------------- **10.1 Santana Crude Sale and Purchase Agreement dated January 3, 2001. - ---------------------------- ** Filed herewith 15 EX-10.1 3 dex101.txt SANTANA CRUDE SALE AND PURCHASE AGREEMENT EXHIBIT 10.1 ECOPETROL CONTRACT NO. GCI - 001 - 01 SELLER: ARGOSY ENERGY INTERNATIONAL PURPOSE: PURCHASE AND SALES OF THE SANTANA CRUDE OIL TERM: JANUARY 1, 2001 TO OCTOBER 31, 2001 VALUE: UNDETERMINED AMOUNT The Contracting Parties on one hand, EMPRESA COLOMBIANA DE PETROLEOS - ECOPETROL, hereinafter referred to as ECOPETROL, a Government-owned Industrial and Commercial Corporation, authorized by Law 165 of 1948, and ruled by the by- laws set forth by Decree 1209 of 1994, with its main office in Santafe de Bogota, D.C., represented by MANUEL IGNACIO DUSSAN VILLAVECES, of legal age, bearer of citizenship card No. 17.118.200 issued in Bogota, resident in Bogota, who hereby states: a. That he acts in his capacity as International Trade and Gas Vice President and according to the legal standards and internal provisions of ECOPETROL; and b. On the other hand ARGOSY ENERGY INTERNATIONAL, a corporation duly organized under the laws of the State of Utah, United States of America, with its main place of business in Salt Lake City, Utah and a Colombian branch incorporated by Public Deed No. 5323 filed at Notary Public's Office Seven of Bogota on October 25th, 1983 and registered at the Chamber of Commerce of Bogota under Registry No. 200848 of November 23rd, 1983, represented by ALVARO JOSE CAMACHO R., of legal age, bearer of citizenship card No. 79.142.747 of Bogota, hereinafter referred to as SELLER, enter into a Purchase and Sale Contract of the Santana Crude Oil, ruled by the following clauses: CLAUSE ONE: PURPOSE AND AMOUNTS. SELLER agrees to sell and deliver to ECOPETROL, under conditions set forth hereunder, the crude oil produced under the Santana Shared Risk Contract, corresponding to SELLER, with the quality set forth in Clause Two hereunder and ECOPETROL agrees to receive and pay for this crude oil. PARAGRAPH 1: The Santana Shared Risk Contract was entered into on May 27th, 1987 with effective date May 27th, 1987 among ECOPETROL, ARGOSY ENERGY INTERNATIONAL AND NEO ENERGY INC. It was amended by Public Deed No. 00064 dated January 19th, 1999, filed at Notary Public's Office 50 of Santafe de Bogota. PARAGRAPH 2: All purchases shall be made by ECOPETROL, under the preliminary crude oil purchase schedule agreed by the parties for six (6) months periods, which ECOPETROL can modify upon written notice to SELLER given at least thirty (30) days in advance. CLAUSE TWO: QUALITY. The quality of the crude oil under this contract shall include the following specifications: a) The crude oil gravity shall be that with which such crude oil is obtained within production operations. b) The crude oil water and sediment contents cannot exceed 0.5% in volume and their determination shall be made through the methods ASTM-D4377 "Karl Fisher Method", last revision and ASTM-D473 method "Sediment in Crude Oil and Fuel Oil Extraction", last revision. c) Crude oil sulfur content shall be that with which such crude oil is obtained, within production operations: sulfur determination shall be made through the ASTM-D2622 method, last revision "X Ray Sulfur Analysis". d) Salt contents cannot exceed 20 pounds per 1,000 barrels of crude oil and it shall be determined through AST-D3230 method "Salts in Crude Oil (Electrometric Method)", last revision. When any of the preceding parameters or specifications is not met or is not within the required parameters, ECOPETROL has the right to reject such crude oil. However, if ECOPETROL should decide to accept crude oil with a higher salinity level, the crude oil price shall be penalized according to the following table:
Salt Contents in Penalty in US To be covered by Pounds per Thousand Barrels Dollars/Barrel 20.1 30.0 0.160 SELLER 30.1 40.0 0.180 SELLER 40.1 60.0 0.200 SELLER 60.1 80.0 0.220 SELLER 80.1 100.0 0.240 SELLER
It is understood that SELLER shall do its best to deliver the contracted crude oil, with a salt content of less than twenty (20) pounds per thousand (1000) barrels of crude oil. e. Any change concerning the aforementioned quality specifications accepted by both parties must be recorded in a minutes signed by the representatives of ECOPETROL and SELLER. CLAUSE THREE: PLACE OF DELIVERY AND OWNERSHIP. The Crude Oil hereunder shall be transported by SELLER to the Santana Terminal, where it shall be measured and analyzed. Later, from the outlet to the pipeline of the Santana Terminal it shall be transported by ECOPETROL to the Tumaco Terminal. Delivery, ownership and risk shall be conveyed from SELLER to ECOPETROL when crude oil passes the outlet flange of the measurement system located at the Santana Terminal. PARAGRAPH 1: Should the SANTANA ASSOCIATION build the Santana-Orito Pipeline, measurement and conveyance of ownership shall be effective in Orito. In addition, as of that date purchase and sale value shall be amended, since transport rate from Santana to Orito shall be disregarded, pursuant to Resolution 6031 of May 8th, 1998 of the Ministry of Mines and Energy. PARAGRAPH 2: The Reception Capacity of the Santana Crude shall be limited to the existing capacity of the Santana-Orito Pipeline. CLAUSE FOUR: TERM. The initial term of this Agreement shall be ten (10) months from January 1st, 2001 to October 31st, 2001 and can be extended by mutual consent of the parties, prior to its expiration. Any extension shall be made in writing. CLAUSE FIVE: PRICE. The price which ECOPETROL will pay to SELLER for the crude oil delivered at the Santana Terminal, is defined as follows: Price = Base Price plus or less quality adjustment, less transport, less transport tax, less marketing value. PARAGRAPH 1: Base Price shall be the weighted average of the export loads invoiced by ECOPETROL during that month. PARAGRAPH 2: Quality adjustment applied hereunder shall be for API Gravity and Sulfur contents and shall be estimated on a monthly basis according to the procedure described in Attachment No. 1. PARAGRAPH 3: For estimation purposes of the transport variable and of the transport tax, the basis to apply the rate set forth by the 2 Ministry of Mines and Energy shall be the number of gross barrels transported. The transport tax shall be estimated on the total number of net barrels transported. The Pipeline Transport Rules shall be considered part to this Contract once approved by the parties and after being subject to the official approvals which could be required. PARAGRAPH 4: The Santana - Tumaco transport cost, as well as the respective transport tax shall be subject to any change made in this connection during contract term. Santana - Tumaco transport rate corresponds to the rate set forth in Resolution number 6031 of May 8th, 1998 of the Ministry of Mines and Energy. Transport tax shall be 2% (two per cent) of the rate, pursuant to Article 17 of Decree 2140 of 1955 adopted permanently by Law 10, 1961. These rates shall be readjusted on a yearly basis pursuant to the aforementioned Resolution No. 6031. PARAGRAPH 5: The Marketing cost shall be of 0.165 USD/BL. PARAGRAPH 6: In the event that no exports of South Blend crude are made, the following will be taken into consideration: a) If during one month or several consecutive months there are no South Blend crude oil exports, the provisional invoicing price shall be the price estimated taking as base price, the export price of the previous month. In order to estimate the definite price to be used as base price, the export price of the crude exports conducted in a month following the month or the months for whom the provisional price estimate was made, will be used. Once the definite price is estimated, the parties will draft the corresponding balance as the case may be. The quality adjustment will be estimated using the procedure described in Attachment 1. In the event that during the last month of the contract and during the previous months no exports of South Blend Crude are made, and nor are they made during the immediately following month to the last month of the contract term, the provisional price estimated for this (these) month(s) will be considered as the definite price. b) In the event that no South Blend Crude Oil exports are carried out for more than three consecutive months, the provisional invoicing of the first three months will be carried out as described in item a) hereunder. For deliveries made from the fourth month on, seller can only invoice such deliveries until one or several exports of South Blend Crude Oil are carried out in one month within the term of the contract. For the first three months provisionally invoiced and for the months with pending invoicing, the base price shall be the value of the aforementioned export(s). c) In the event that during the last month of the contract and during the previous months no exports of South Blend Crude are made, and nor are they made during the immediately following month to the last month of the contract term, the definite prices for deliveries pending invoicing will be estimated taking as base prices the prices of the last export(s) of South Blend Crude made through the Tumaco Port. Quality adjustment of the provisional price and definite price shall be estimated according to the procedures described in Attachment 1. For the first three months during which no exports were carried out, provisions described in item a) hereunder shall apply. PARAGRAPH 7: In case of coastwise shipping of Tumaco's oil (South Blend) to the Refinery of Cartagena, sale and price ECOPETROL will pay to SELLER shall be the same 3 obtained by the International Trade Management for the South Blend of Tumaco (FOB Tumaco) received by the Refinery of Cartagena as a result of a bid plus or less the quality adjustment, less the Santana - Tumaco transport cost and the respective tax, less marketing (USD 0.165 per barrel). In case the Cartagena Refinery purchases South Blend Crude Oil without a bid, the parties shall agree on the mechanism to be used to estimate the crude oil's price. PARAGRAPH 8: Notwithstanding the provisions set forth in Paragraph 2 concerning the quality adjustment procedure, the parties can agree on a review of the crude oil market and of the present method, and for this purpose they can resort to a mutual consent on the crude oils to eliminate or add to the present market. In addition, the parties can also hire an external consultant to determine whether they should continue with the present method or they should use a new method. In case parties do not reach an agreement in this connection, the present method will continue to be applied. If it is necessary to apply a new method, it shall be effective as of the deliveries made during the month when the agreement was reached. CLAUSE SIX: INVOICING AND FORM OF PAYMENT: SELLER shall invoice to ECOPETROL in its Bogota Office, within the first 10 days of each month, the crude oil delivered to ECOPETROL during the previous month after deducting the value corresponding to royalties, contributions, and participations. Within 7 days of the aforementioned term, ECOPETROL shall give SELLER the information it may require to make the corresponding invoicing. Payment shall be made on a monthly basis 30 days after receipt of invoice by ECOPETROL, after making the lawful withholdings, if any. SELLER will inform ECOPETROL in writing at the time of submission of the invoices about the percentages to apply on the net deliveries of SELLER in order to determine the value to be paid in pesos and the value to be paid in dollars. The percentages which can be applied on net deliveries are: 25% in pesos and 75% in dollars or 50% in pesos and 50% in dollars or 75% in pesos and 25% in dollars. Invoicing shall be made based on the net volume, free of water and sediment, adjusted at 60 degrees F. For the portion in Colombian pesos the market's representative exchange rate shall be used according to certification by the Banking Superintendency, estimated as the arithmetic average corresponding to the month when deliveries were made. PARAGRAPH 1: In Case of delay in payment of the dollars portion on invoices not timely rejected by ECOPETROL, ECOPETROL shall pay to SELLER as interest in dollars, the "Libor" interest rate during the days of delay plus 1.0%. In case of delay in payment of the pesos portion, ECOPETROL shall pay the maximum monthly interest rate certified by the Banking Superintendency. Invoices collecting interests in pesos or dollars shall be paid within the ten (10) days following receipt by ECOPETROL. PARAGRAPH 2: If ECOPETROL should not have United States of America dollars available or should it be unable to get them from the Colombian government or its authorized agencies, in order to cover the crude oil purchases hereunder, it shall give notice, as soon as possible, and in writing to SELLER, without prejudice as to the conditions set forth in paragraph 1 above, and the parities shall have a maximum 30 calendar days term as of such notice of ECOPETROL, to reach a mutual agreement and an adequate solution. PARAGRAPH 3: ECOPETROL shall have a 15 working days term to check, correct or reject invoices filed by SELLER. Invoices not rejected within this term shall be deemed final and correct. Any adjustment or correction required shall change the valid date of the invoice to the date when the adjustment or correction is made effective before ECOPETROL. ECOPETROL shall inform SELLER within the term set forth about any rejected invoice in order for it to be adjusted and 4 corrected, clearly specifying the items which need to be adjusted or corrected and the reason for such objection or correction. CLAUSE SEVEN: INSPECTION AND MEASUREMENT. For the purpose of Clause Two, quality will be determined pursuant to operational procedures set forth at the Santana Station. Costs of these procedures shall be shared by the parties at a rate proportionate to their ownership of the crude oil. In addition to these operational procedures, any of the parties can appoint when so desired an Independent Inspector to certify the amount and quality, to measure the capacity of the tanks and to gauge volume measurement instruments. In this latter case, the party requesting measurement shall bear with costs. CLAUSE EIGHT: DESTINATION. ECOPETROL can do as it pleases with the purchased crude oil, provided that such destination is approved by applicable legal provisions at this time. CLAUSE NINE: ASSIGNMENT. Neither party can assign, sell or transfer all or part of its rights and obligations hereunder to any third party without the prior and written consent of the other party. CLAUSE TEN: FORCE MAJEURE. Force majeure or acts of God are those events which cannot be prevented and cannot be imputed to the obliged party and which cannot be blamed upon that party and which place such party in an absolute impossibility to meet its obligations such as: natural phenomena (earthquakes, floods, land slides) or public order events (strikes, mutiny, terrorism, sabotage, breakage of the pipeline). The obligations that cannot be fulfilled due to Force Majeure shall be suspended during the term of the Force Majeure which prevents contract compliance, provided that the party affected by Force Majeure gives notice to the other party, as soon as possible, using an adequate means for this purpose, about such situation, with as many details as possible. Such notice shall be confirmed through a notice sent to the other party within a forty eight (48) hours term after the Force Majeure event or after the party has decided to resort to this clause, including all the evidences showing the occurrence of the Force Majeure event. Once the event is duly proven, the suspension of the obligations shall be recorded in a Minutes signed by the Parties. The Party that decides to abide under this item must do its best to solve the problems preventing it from complying with its obligations. After overcoming the Force Majeure events, the parties shall sign a minutes verifying the date when suspended obligations are resumed. Force Majeure shall not relieve ECOPETROL from its obligation to pay SELLER those invoices filed for the sale of crude oil delivered by SELLER pursuant to the terms of Clause Three hereunder. CLAUSE ELEVEN: TERMINATION. This contract can be subject to early termination for causes imputable to Force Majeure or Acts of God that prevent contract execution during a term exceeding 90 continuous calendar days. CLAUSE TWELVE: APPLICATION OF COLOMBIA LAW. For all purposes hereunder, the parties hereby appoint as contract domicile the city of Bogota D.C., Republic of Colombia. This contract shall be ruled by the Colombian law and the parties shall abide to the jurisdiction of Colombian courts and waive to attempt any diplomatic claim concerning all aspects related to rights and obligations arising hereunder, except for cases of denial of 5 justice. For all purposes hereunder, provisions of Article 25 of Law 40 of 1993 and of Chapter Two, Title Three of Law 104 of 1993 and any additional or amending provision shall be deemed to be part of this contract. CLAUSE THIRTEEN: DISAGREEMENTS. A) Disagreements between the parties on legal aspects regarding interpretation and execution of the contract which cannot be amicably settled shall be put to the consideration and decision of the judicial branch of Colombia. B) All factual or technical differences arising between the parties which cannot be amicably settled, shall be submitted to the final decision of experts appointed as follows: one by each party and a third one appointed by common consent of the two main experts appointed by the parties. If the two experts appointed are unable to reach an agreement concerning the appointment of the third expert, this person shall be appointed, upon request of any of the parties, by the Board of Directors of the Colombian Engineers Association, with its office in Bogota D.C. Any accounting difference which may arise between the parties regarding the interpretation and execution of the contract and which cannot be amicably settled shall be submitted to the decision of experts who must be public accountants appointed as follows: one by each party and a third one appointed by common consent of the two main experts appointed by the parties. If the two experts appointed are unable to reach an agreement concerning the appointment of the third expert, this person shall be appointed, upon request of any of the parties, by the Central Board of Accountants of Bogota, and if it does not exist, by the Colombian Engineers Association. D) Both parties hereby declare that the decision of the experts shall have all settlement effects and be final and binding. E) In case of a disagreement between the parties on the technical, accounting and/or legal qualification of the difference, it shall be deemed legal and item A) hereunder shall apply. All aspects agreed in this Clause shall apply without prejudice, as to the special procedures set forth hereunder. CLAUSE FOURTEEN: TAXES AND EXPENSES. All taxes and expenses arising from the signature and execution of this contract and its extensions or amendments shall be exclusively covered by SELLER. CLAUSE FIFTEEN: ADMINISTRATION CLAUSE. Administration of the contract shall be carried out by the International Trade Management. CLAUSE SIXTEEN: NOTICES. All notices hereunder shall refer to this clause and to the pertinent clause. Notices shall be sent by certified mail, fax or delivered to the addresses stated ahead and shall be deemed received at the respective address on the date indicated at the receipt seal or on the date when the fax is sent: EMPRESA COLOMBIANA DE PETROLEOS - ECOPETROL Calle 37 No. 7 - 43, Fax No. 3382585 and 3382583, Attention: International Trade and Gas Vice Presidency. SELLER: ARGOSY ENERGY INTERNATIONAL. Diagonal 108 No. 7-54. Fax No. 6192098, Bogota D.C., Att: Alvaro Jose Camacho R., President. Any address change must be notified in writing in advance. In witness whereof this contract is signed in Bogota, D.C., on January 3rd, 2001 in Ecopetrol's Paper. 6 EMPRESA COLOMBIANA DE PETROLEOS Signed: MANUEL IGNACIO DUSSAN VILLAVECES Vice President International Trade and Gas ARGOSY ENERGY INTERNATIONAL Signed: ALVARO JOSE CAMACHO R. Legal Representative Seal: Ecopetrol Reviewed R 99761 This is a fair and accurate English translation of the original document which is in the Colombian language. /s/ James L. Busby ------------------ James L. Busby Secretary and Treasurer of Aviva Petroleum Inc. 7 -----END PRIVACY-ENHANCED MESSAGE-----