================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION ------------------------------------ WASHINGTON, D.C. 20549 ------------------------------------ FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended December 31, 2000 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: 000-25717 [GRAPHIC OMITTED][GRAPHIC OMITTED] BETA OIL "&" GAS, INC. (Exact name of registrant as specified in its charter) Nevada 86-0876964 (State of Incorporation) (I.R.S. Employer Identification No.) 6120 S. Yale, Suite 813, Tulsa, OK 74136 (Address of principal executive offices) (Zip Code) (918) 495-1011 (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 ____ Check if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained within this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 15, 2001, 12,361,951 shares of the registrant's common stock were outstanding. The aggregate market value of such common stock held by non-affiliates was approximately $68,603,608 based on the reported closing sales price of $8.00 on the Nasdaq Market on that date. Certain sections of the registrant's annual proxy statement for the 2001 annual meeting of stockholders on or about June 2, 2001 is incorporated by reference into Part III. Exhibit table is on page 40. ================================================================================
December 31, 2000 December 31, 1999
United States ......... Foreign United States Foreign
Capitalized costs-
Evaluated properties .............$ 41,429,542 $ 1,680,921 $ 8,128,928 $ 1,681,270
Unevaluated properties ..............13,326,778 123,569 11,973,532 118,095
Less- Accumulated
depreciation, depletion,
amortization and impairment (4,673,635) (1,681,270) (2,115,957) (1,681,270)
------------ ------------ ------------ ------------
$ 50,082,685 $ 123,220 $ 17,986,503 $ 118,095
============ ============ ============ ============
Unevaluated oil and gas properties - United States
As our properties are evaluated through exploration, they will be included
in the amortization base. Costs of unevaluated properties in the United States
at December 31, 2000 and 1999 represent property acquisition and exploration
costs in connection with our Louisiana, Texas and Oklahoma prospects. The
prospects and their related costs in unevaluated properties have been assessed
individually and no impairment charges were considered necessary for the United
States properties for any of the periods presented. The current status of these
prospects is that seismic has been acquired, processed and is currently being
interpreted on the subject lands within the prospects. Drilling commenced on the
prospects in the first quarter of 1999. As the prospects are evaluated through
drilling in future periods, the property acquisition and exploration costs
associated with the wells drilled will be transferred to evaluated properties
where they will be subject to amortization.
Unevaluated oil and gas properties - Foreign
Unevaluated costs as of December 31, 2000, outside the United States
represent costs in connection with the evaluation and proposed acquisition of
one or more exploration blocks in Australia.
Evaluated Properties - United States
The property acquisition and exploration costs associated with the wells
drilled (completed or plugged and abandoned) are transferred to evaluated
properties. Total cost in evaluated properties did not exceed their net
realizable value at December 31, 2000. During the year ended December 31, 2000
we participated in the drilling of 21wells within the United States. At December
31, 2000, evaluated property cost was $41,429,542 which included $28,371,531
associated with the RRE Merger. No impairment was recorded for 2000. It was
determined that the total costs in evaluated properties of $8,128,928 as of
December 31, 1999 exceeded their net realizable value by $1,167,910.
Accordingly, an impairment charge for this amount was recorded for the year
ended December 31, 1999. Production commenced during the period and depletion
expense of $901,573 was recorded.
Evaluated Properties - Foreign
During 1998, Beta, through its wholly owned subsidiary, BETAustralia, LLC
secured an option to participate for a 5% working interest in two petroleum
licenses covering 2,798,000 acres (approximately 4,372 square miles). Per the
terms of the option agreement, Beta exercised its option to earn a 5% working
interest by participating in the drilling of two offshore test wells in the
license areas. The wells were completed as dry holes. The property acquisition
and exploration costs associated therewith totaling $1,624,218 were transferred
to evaluated properties and charged to impairment expense during the year ended
December 31, 1998. The exploration licenses expired in December 1998. Property
acquisition and exploration costs associated with foreign prospects totaling
$57,052 were transferred to evaluated properties and charged to impairment
expense during the year ended December 31, 1999. Beta has generated no revenues
from its foreign properties to date.
For further information on oil and gas operations, please see Item 8.
Financial Statements and Supplementary Data, Note 2. Acquisitions And Oil And
Gas Operations.
Principal Products
Our principal products are natural gas and crude oil.
Patents, Trademarks, Licenses, Franchises and Concessions Held
Permits, licenses and oil and gas leases are important to our operations,
as they allow the search for the extraction of any oil, gas and minerals
discovered on the areas covered. See further, Item 2 herein.
Seasonality of Business
Weather conditions affect the demand for and prices of natural gas and can
also delay drilling activities, disrupting our overall business plans. Demand
for natural gas is typically higher in the fourth and first quarters resulting
in higher natural gas prices. Due to these seasonal fluctuations, results of
operations for individual quarterly periods may not be indicative of results
which may be realized on an annual basis.
Markets and Customers
Our oil and gas production is sold at the well site on an as produced basis
at market-related prices in the areas where the producing properties are
located. We do not refine or process any of the oil or natural gas we produce
and approximately 97% or our production is sold to unaffiliated purchasers on a
month-to-month basis.
In the table below, we show the purchasers that each accounted for 10% or
more of our revenue during the specified years.
2000 1999
------------ ------------
IP Petroleum 31% 53%
Duke Energy 19% -
Cokinos Energy 13% 38%
Allegro Investments 12% -
We do not believe the loss of any one of our purchasers would materially
affect our ability to sell the oil and gas we produce. Other purchasers are
available in our areas of operations.
We are not obligated to provide a fixed and determinable quantity of oil or
natural gas under any existing arrangements or contracts other than the contract
discussed in Item 3. Legal Proceedings. We currently have a hedge arrangement
covering approximately 2,000 Mmbtu/d at a price of $3.08 per Mmbtu for the
period July 2000 through June 2001. The volume covered represents approximately
22% of our total daily production on an Mcf equivalent basis. We expect to use
hedge arrangements on a limited basis to realize commodity pricing which we
consider favorable at the time.
Our business does not require us to maintain a backlog of products,
customer orders or inventory.
Competitive Conditions in the Business
The petroleum and natural gas industry is highly competitive and we compete
with a substantial number of other companies that have greater resources. Many
such companies not only explore for, produce and market petroleum and natural
gas but also carry on refining operations and market the resultant products on a
worldwide basis. There is also competition between petroleum and natural gas
producers and other industries producing energy and fuel. Furthermore,
competitive conditions may be substantially affected by various forms of energy
legislation and/or regulation considered from time to time by the governments
(and/or agencies thereof) of the United States and Canada; however, it is not
possible to predict the nature of any such legislation and/or regulation which
may ultimately be adopted or its effects upon the our future operations. Such
laws and regulations may, however, substantially increase the costs of exploring
for, developing or producing oil and gas and may prevent or delay the
commencement or continuation of a given operation. The exact effect of these
risk factors cannot be accurately predicted.
Our operations are subject to the many risks and hazards incident to
drilling for, producing and transporting oil and gas, including blowouts, fires,
pollution and equipment failures. Such hazards may result in damage to or
destruction of wells, producing formations, production facilities and equipment
and personal injuries.
Oil and gas exploration and development involves a high degree of risk,
which even a combination of experience, knowledge and careful evaluation may not
be able to overcome. There is no assurance that we will discover or acquire
additional oil and gas in commercial quantities. The marketability of our
current oil and gas reserves or of reserves which we may acquire or discover may
be affected by numerous factors beyond our control. These factors include
fluctuations in product markets and prices, the proximity and capacity of
pipelines to our oil and gas reserves, our ability to finance exploration and
development costs and the availability of processing equipment. Additional
factors are engineering and construction delays, difficulties and hazards
resulting from unusual or unexpected geological or environmental conditions, or
to the conditions involved in drilling and operating wells.
Oil and gas operations also involve the risk that well fires, blowouts,
equipment failure, human error and other circumstances may cause accidental
leakage of toxic or hazardous materials, such as petroleum liquids or drilling
fluids into the environment, or cause significant injury to persons or property.
In such event, substantial liabilities to third parties or governmental entities
may be incurred, the payment of which could substantially reduce available cash
and possibly result in loss of oil and gas properties. Such hazards may also
cause damage to or destruction of wells, producing formations, production
facilities and pipeline or other processing facilities.
Drilling and completion of oil and gas wells is hazardous and involves a
high degree of risk. In addition to the substantial risk that wells drilled will
not be productive, hazards such as unusual or unexpected formations, pressures,
down-hole fires, mechanical failures, blowouts and loss of circulation of
drilling fluids are inherent in oil and gas exploration. Even though a well is
completed and is found to be productive, water, sulfur, or other deleterious
substances may also be produced that may impair or prevent production or impair
or prevent the marketing of such production. Drilling operations may also be
susceptible to delays caused by inclement weather and the resulting condition of
the terrain. If any of such hazards and delays are encountered while conducting
operations, substantial unbudgeted and unexpected costs may be incurred.
As is common in the oil and gas industry, we will not insure fully against
all risks associated with our business either because such insurance is not
available or because premium costs are considered prohibitive. A loss not fully
covered by insurance could have a materially adverse effect on our financial
position and results of operations.
We are a non-operating working interest owner in 37% and operator in the
balance of the producing wells in which we have an interest. Accordingly, we
enter into joint operating agreements with third parties relating to the conduct
and supervision of drilling, completion and production operations on the
properties, including wells. The success of the oil and gas exploration or
development operations on a property depends in large measure on whether the
operator prudently performs its obligations. The failure of an operator or its
contractors to perform their services in a proper manner could result in
materially adverse consequences to the owners of interests in that property.
We conduct only a perfunctory title examination at the time we acquire
properties believed to be suitable for exploration or development activities.
The operator usually conducts a more thorough title examination prior to the
commencement of drilling operations and curative work is then performed with
respect to known significant title defects. We depend upon formal title opinions
prepared at the request of the operator at or before the time production is
commenced; and, therefore, there can be no assurance that losses will not result
from title defects or from defects in the assignments of leasehold rights. The
operator of an oil and gas property is not liable to other interest owners for
losses due to title defects pursuant to industry standards for operating
agreements.
Regulations
Domestic exploration for, and production and sale of, oil and gas are
extensively regulated at both the federal and state levels. Legislation
affecting the oil and gas industry is under constant review for amendment or
expansion, frequently increasing the regulatory burden. Also, numerous
departments and agencies, both federal and state, are authorized by statute to
issue, and have issued, rules and regulations binding on the oil and gas
industry that often are costly to comply with and that carry substantial
penalties for failure to comply. In addition, production operations are affected
by changing tax and other laws relating to the petroleum industry, by constantly
changing administrative regulations and possible interruptions or termination by
government authorities.
State regulatory authorities have established rules and regulations
requiring permits for drilling operations, drilling bonds and reports concerning
operations. Most states in which we operate also have statutes and regulations
governing a number of environmental and conservation matters, including the
unitization or pooling of oil and gas properties and establishment of maximum
rates of production from oil and gas wells. Many states also restrict production
to the market demand for oil and gas. Such statutes and regulations may limit
the rate at which oil and gas could otherwise be produced from our properties.
We are subject to extensive and evolving environmental laws and
regulations. These regulations are administered by the United States
Environmental Protection Agency ("EPA") and various other federal, state, and
local environmental, zoning, health and safety agencies, many of which
periodically examine our operations to monitor compliance with such laws and
regulations. These regulations govern the release of waste materials into the
environment, or otherwise relating to the protection of the environment, human,
animal and plant health, and affect our operations and costs. In recent years,
environmental regulations have taken a "cradle to grave" approach to waste
management, regulating and creating liabilities for the waste at its inception
to final disposition. Our oil and gas exploration, development and production
operations are subject to numerous environmental programs, some of which include
solid and hazardous waste management, water protection, air emission controls,
and situs controls affecting wetlands, coastal operations, and antiquities.
Environmental programs typically regulate the permitting, construction and
operations of a facility. Many factors, including public perception, can
materially impact the ability to secure an environmental construction or
operation permit. Once operational, enforcement measures can include significant
civil penalties for regulatory violations regardless of intent. Under
appropriate circumstances, an administrative agency can request a "cease and
desist" order to terminate operations.
New programs and changes in existing programs are anticipated, some of
which include Natural Occurring Radioactive Materials ("NORM"), oil and gas
exploration and production waste management, and underground injection of waste
materials.
Each state in which we operate has laws and regulations governing solid
waste disposal, water and air pollution. Many states also have regulations
governing oil and gas exploration, development and production operations.
We are also subject to Federal and State Hazard Communications ("OSHA") and
Community Right to Know ("SARA Title III") statutes and regulations. These
regulations govern record keeping and reporting of the use and release of
hazardous substances. We believe we are in compliance with these requirements in
all material respects.
We may be required in the future to make substantial outlays to comply with
environmental laws and regulations. The additional changes in operating
procedures and expenditures required to comply with future laws dealing with the
protection of the environment cannot be predicted.
Employees
As of the date of this annual report, we employ 17 full-time employees. We
hire independent contractors on an "as needed" basis. We have no collective
bargaining agreements with our employees. We believe that our employee
relationships are satisfactory.
Premises
We lease approximately 6,400 square feet in Tulsa, Oklahoma, which includes
offices and storage space. All of our corporate functions and some operational
functions are conducted from this site. The lease expires January 2004, and
requires monthly payments of approximately $9,106 per month. A regional Gulf
Coast office is also maintained in Houston, Texas. We also have two field
offices located in South Tulsa County and Edmond, Oklahoma.
Producing Wells Acreage
---------------------------------------------- ---------------------------------------------------------
Oil Gas Developed Undeveloped
Gross Net (1) Gross Net (1) Gross Net (2) Gross Net
------- --------- -------- --------- ----------- ----------- ----------- -----------
Texas 8 .66 44 7.21 22,827.3 1,373.3 37,724.7 14,379.8
Oklahoma 80 58.39 115 79.39 54,320.9 42,051.5 2,860.5 2,804.4
Louisiana - - 6 .74 7,573.9 854.8 9,250.6 598.9
Kansas 19 18.79 2 2.00 6,889.5 3,681.1 640.0 640.0
California - - 1 .30 318.0 95.6 - -
------- --------- -------- --------- ----------- ----------- ----------- -----------
107 77.84 168 89.64 91,929.6 48,056.3 50,475.8 18,423.1
======= ========= ======== ========= =========== =========== =========== ===========
(1) Net wells are computed by multiplying the number of gross wells by our
working interest in the gross wells.
(2) Net acres are computed by multiplying the number of gross acres by our
working interest in the gross acres.
At December 31, 2000, approximately 10,138 gross acres and 4,279 net acres
will expire in 2001.
In addition to the interests we own in developed and undeveloped acreage,
at December 31, 2000 we have an option, which expires April 16, 2002 to acquire
interest in an additional 10,032 gross (3,344 net) acres in Jackson County,
Texas.
OIL AND NATURAL GAS RESERVES
At December 31, 2000, we had proved reserves of 814.0 Mbbls of oil and 19.4
Bcf of gas as estimated by Ryder Scott and Company, an independent engineering
firm. These reserves are located entirely within the United States. The
following table sets forth, at December 31, 2000, the present value of our
future net revenues (revenues less production and development cost) before
income taxes attributable to these reserves.
Proved Proved
Developed Undeveloped Total Proved
---------------- ---------------- -------------------
Oil (Bbls) - 813,970
813,970
Gas (Mcf) 19,115,000 303,000 19,418,000
Future Net Revenues (before income taxes) $ 172,269,015 $ 2,318,800 $ 174,587,815
================ ================ ===================
Present value of Future Net Revenue
(before income taxes) $ 98,759,975 $ 1,439,313 $ 100,199,288
================ ================ ===================
The above figures do not reflect the future net revenues before income
taxes and the present value of future net revenues, discounted at 10%, for the
Company's McIntosh gathering system, which were $7,736,205 and $4,679,377,
respectively.
For purposes of estimating the above cash flows, estimates were made of
quantities of proved reserves and the periods during which they are expected to
be produced. Future cash flows were computed by applying year-end prices to
estimated annual future production from proved oil and gas reserves. The average
year-end price for oil and natural gas was $26.80/Bbl and $9.23/Mbtu at December
31, 2000. Future development and production costs were computed by applying
year-end costs to be incurred in producing and further developing the proved
reserves. The estimated future net revenue was computed by application of a 10%
discount factor. The calculations assume the continuation of existing economic,
operating and contractual conditions. However, such arbitrary assumptions have
not proven to be the case in the past. Other assumptions of equal validity could
give rise to substantially different results.
For additional information on our oil and gas reserves, please refer to
Item 8. Financial Statements And Supplementary Data, Note 13. Unaudited
Supplementary Oil And Natural Gas Information.
Our oil and gas reserves are not subject to any long-term supply
arrangement with foreign governments or authorities. Our estimated reserves have
not been filed with or included in reports to any federal agency other than the
SEC and U.S. Department of Energy, FORM EIA-23, Annual Survey of Domestic Oil
and Gas Reserves for 2000.
DRILLING ACTIVITY
For the period indicated, the following table sets forth the results of our
drilling activities in the fiscal years ended December 31, 2000, 1999 and 1998:
Years Ended December 31,
--------------------------------------------------------------------------
2000 1999 1998
Gross Net Gross Net Gross Net
-------- -------- --------- ---------- --------- ---------
Exploratory:
Productive 14 2.24 12 1.75 2 .84
Dry 5 1.13 9 2.42 6 1.13
-------- -------- --------- ---------- --------- ---------
Total Exploratory 19 3.37 21 4.17 8 1.97
Development:
Productive 2 .26 - - - -
Dry - - - - - -
-------- -------- --------- ---------- --------- ---------
Total Development 2 .26 - - - -
Total:
Productive 16 2.50 12 1.75 2 .84
Dry 5 1.13 9 2.42 6 1.13 9
-------- -------- --------- ---------- --------- ---------
Total 21 3.63 21 4.17 8 1.97
======== ======== ========= ========== ========= =========
Subsequent to December 31, 2000, we have drilled 10 gross exploratory
wells, 2 net wells, of which 7 gross wells, 1.3 net wells were discoveries and 3
gross wells, .6 net wells, were dry holes. Currently 5 gross wells, .9 net
wells, are drilling or waiting on completion.
PRICE AND PRODUCTION DATA
We commenced sales of oil and gas in 1999. Our average sales price, oil and
natural gas production volumes and average production cost for each Mcf
equivalent of production for the periods indicated were as follows:
Year Ended December 31,
-------------------------------------
2000 1999
----------------- ---------------
Oil production (Bbl) 32,617 1,822
Gas production (Mcf) 1,726,416 475,065
Average sales price:
Oil (per Bbl) $ 30.57 $ 23.03 $ $
Gas (per Mcf) $ 4.08 $ 2.44
Average production cost per McfEQ $ .71 $ 0.17
Reflects the impact of gas hedge which reduced our 2000 total average gas
price per Mcf by $ .27.
The above well information excludes five wells in which we have only a
royalty interest.
The components of production costs may vary substantially among wells
depending on the methods of recovery and other factors, but generally include
production and ad valorem taxes, repairs and maintenance, labor and utilities.
2000 High Low
---- ---- ---
1st Quarter.......... $ 10.5625 $ 6.5312
2nd Quarter.......... 10.8750 7.7500
3rd Quarter.......... 12.0000 7.7500
4th Quarter.......... 9.3750 6.8125
1999
1st Quarter.......... N/A N/A
2nd Quarter.......... N/A N/A
3rd Quarter.......... 6.6875 4.2500
4th Quarter.......... 8.6250 5.9375
Approximately 271 shareholders of record and approximately 1,978 beneficial
owners as of March 15, 2001 held the common stock. In many instances, a
registered shareholder is a broker or other entity holding shares in street name
for one or more customers who beneficially own the shares.
Recent Sales of Unregistered Securities
We issued and sold the following securities without registration under the
Securities Act of 1933, as amended ("Securities Act"), for the quarter ended
December 31, 2000:
1. On October 1, 2000 we issued 50,000 shares upon the exercise of
warrants to purchase common stock to an outside director. The
certificates representing the shares issued bear a restrictive legend
prohibiting transfer without registration under the Securities Act or
the availability of an exemption from registration and "stop transfer"
instructions were issued to the transfer agent.
2. On October 15, 2000 we issued 60,000 shares upon the exercise of
warrants to purchase common stock to an outside broker for services
rendered. The certificates representing the shares issued bear a
restrictive legend prohibiting transfer without registration under the
Securities Act or the availability of an exemption from registration
and "stop transfer" instructions were issued to the transfer agent. The
shares have since been rescinded.
3. On October 16, 2000 we issued 15,000 shares upon the exercise of
warrants to purchase common stock to an outside broker for services
rendered. The certificates representing the shares issued bear a
restrictive legend prohibiting transfer without registration under the
Securities Act or the availability of an exemption from registration
and "stop transfer" instructions were issued to the transfer agent.
4. On December 8, 2000 we issued 135,000 shares upon the exercise of
options to purchase common stock pursuant to a 1999 Incentive and
Nonstatutory Stock Option Plan for our employees. The certificate
representing the shares bear a restrictive legend prohibiting transfer
without registration under the Securities Act or the availability of an
exemption from registration and "stop transfer" instructions were
issued to the transfer agent.
In connection with the issuance of the above noted securities, we relied
upon Section 4(2) of the Securities Act in claiming exemption for the
registration requirement of the Securities Act. All of the persons to whom the
securities were issued were sophisticated persons who had full information
concerning our business affairs and each acquired the shares for investment
purposes. The certificates representing the shares issued bear a restrictive
legend prohibiting transfer without registration under the Securities Act or the
availability of an exemption from registration. "Stop transfer" instructions
were issued to the transfer agent.
Item 6. Selected Financial Data
Summary Financial Information for Beta
The following tables presents selected historical financial data derived
from our Financial Statements as well as selected historical quarterly financial
data. The following data is only a summary and should be read with our
historical financial statements and related notes contained in this document.
The acquisition of RRE in 2000 affected the comparability between the Financial
Data for the periods presented.
For the years ended December 31, The period from
inception (June
6, 1997) through
December 31, 1997
2000 1999 1998
--------------- --------------- --------------
Income Statement Data:
Operating revenues ....... $ 8,357,867 $ 1,199,480 $ -- $ --
Operating expense ........ 1,516,113 81,538 -- --
General and administrative 2,141,005 1,418,240 746,769 245,452
Impairment expense ....... -- 1,224,962 1,670,691 --
Depreciation and
depletion expense ....... 2,693,439 914,233 11,883 1,530
Interest expense ......... 393,008 2,966,651 -- --
Net income (loss) ........ 1,425,565 (5,384,403) (2,384,500) (201,573)
Earnings (loss) per share:
Basic .................... $ .134 $ (.66) $ (.37) $ (.05)
Diluted .126 (.66) (.37) (.05)
Weighted average common shares and
equivalent outstanding:
Basic .................... 10,616,692 8,160,000 6,366,923 4,172,662
Diluted .................. 11,281,413 8,160,000 6,366,923 4,172,662
Balance sheet data:
Working capital ................... $ 3,533,237 $ 2,034,268 $ (96,457) $ 3,117,351
Total assets ...................... 58,466,152 20,881,475 13,618,471 9,921,057
Total long term debt .............. 13,814,034 27,939 -- --
Stockholder's equity .............. 40,060,406 20,588,237 13,299,342 9,050,210
Proved Reserves
Oil (Mbbls) 814.0 13.2 1.4 --
Gas (Mmcf) ................... 19,418.0 4,170.0 1,596.7 --
Total (Mmcfe) ................ 24,302.0 4,249.2 1,605.1 --
Present value of estimate future
net revenues before income tax
discounted at 10% ................. $ 100,199,288 $ 6,012,972 $ 1,716,608 $ --
SELECTED QUARTERLY ....... For the quarter ended
FINANCIAL DATA
(In Thousands of Dollars) March 31 June 30 September 30 December 31
-------- ---------- -------- ---------
2000
Revenues ................. $ 940.3 $ 1,082.3 $ 2,022.8 $ 4,312.5
Operating income (loss) 906.4 959.8 1,689.5 3,286.1
Net income (loss) ........ (125.4) (50.5) 840.4 761.1
Earnings (loss) per share:
Basic ............... (0.01) (0.01) 0.08 0.06
Diluted ............ (0.01) (0.01) 0.07 0.06
1999
Revenues ................. $ 29.7 91.6 254.3 $ 823.9
Revenue - LOE ............ 20.7 88.7 242.1 766.44
Net income (loss) ........ (714.1) (1,078.2) (1,851.5) (1,740.6)
Earnings (loss) per share:
Basic ............... (0.10) (0.14) (0.21) (0.21)
Diluted ............. (0.10) (0.14) (0.21) (0.21)
For the years ended December 31,
2000 1999 1998
--------------- ------------- --------------
Beginning cash balance $ 1,448,655 $ 198,043 $ 3,985,599
Sources of cash:
Cash provided by operations 3,229,081 (1,262,655) (1,215,673)
Cash provided by financing activities 2,900,170 9,759,960 6,525,108
Cash provided from merger 895,097 - -
--------------- ------------- --------------
Total sources of cash including cash on 8,473,003 8,695,348 9,295,034
hand
Uses of cash:
Oil and gas expenditures (6,666,327) (6,945,695) (8,928,201)
Other assets (including advance to industry partners) (270,490) (300,998) (168,790)
--------------- ------------- --------------
Total uses of cash (6,936,817) (7,246,693) (9,096,991)
--------------- ------------- --------------
Ending cash balance $ 1,536,186 $ 1,448,655 $ 198,043
=============== ============= ==============
For the year ended December 31, 2000, funds on hand and net funds received
from operations and from the exercise of warrants were sufficient to meet our
capital requirements. We received approximately $3,205,000 from the exercise of
warrants. Cash flow from operations increased significantly for the year from
increased production volume and natural gas prices. This will be discussed in
detail in "Comparison of Results of Operations for the Years Ended December 31,
2000 and 1999."
During the year we expended approximately $6.3 million to fund the drilling
of its exploratory prospects, development of existing properties and acquisition
of additional acreage. This included: $2.4 million for the drilling of 13 wells
(9 were completed, 3 were dry holes and 1 is in evaluation process) in our
Jackson County, Texas prospects, $1.0 million on the leasing and drilling of the
Shark Deep prospect in which we went non-consent on the completion, $.5 million
drilling and lease costs related to our Lafourche Parish, Louisiana TC#1 well,
$.5 million for drilling and completion of three wells in the Brookshire Dome
prospect, $.5 million in development and facilities located in the West Cameron
Block 39 and 49 leases, offshore Louisiana, $.3 million in drilling costs
related to our Northern California prospect which were subsequently abandoned
due to depletion, $.6 million in lease acquisition costs on our North Texas
prospect and $.3 million related to development cost in the WEHLU unit in
Oklahoma.
During the year ended December 31, 1999 we realized net proceeds of
$2,835,000 from a bridge note financing, net proceeds of $7,733,553 from public
offering and net proceeds of $2,052,620 from exercise of Beta common stock
warrants. The combination of these proceeds funded our capital requirements for
the year. We issued promissory notes having a maturity date of one year and
bearing an interest rate of 10%. In addition, a total of 459,000 shares of our
common stock were issued in connection with the 1999 bridge financing. Our
bridge notes were repaid in full with accrued interest on July 7, 1999 from the
proceeds of our initial public offering. The estimated fair market value of
429,000 shares of common stock issued in connection with the bridge note of
$2,754,000 was treated as a discount and was amortized over the term of the
promissory note using the interest method. The estimated fair market value of
30,000 additional shares of common stock issued per the terms of the bridge note
of $180,000 was immediately expensed as interest during the year 1999.
Accordingly, we incurred additional interest expense of $2,754,000 because of
the common stock issued in connection with the bridge notes. The debt issuance
costs of the 1999 bridge financing of $89,100 were amortized as additional
interest expense during the year ended 1999.
We financed all of our business activities in December 31, 1998 through
issuances of our common stock in private placements. We raised net proceeds of
$6,548,632 during 1998 from a private placement.
Plan of Operation for 2001
For the year 2001, we expect to fund our capital requirements from existing
working capital, net cash flow from operations (after general and administrative
expense), and the exercise of common stock purchase warrants. We are planning to
raise additional funds through a private placement offering convertible
preferred stock. We expect the private placement to take place early in the
second quarter of 2001.
Our projected 2001 capital expenditures are as follows:
o $8 million for drilling and completion costs associated with our South
Texas and Louisiana prospects
o $2 million associated with drilling, completion and workovers in the
Mid-Continent Region. $1.5 million is for a salt water
disposal well and a redrill project for the WEHLU unit.
o $4 million for the exploration of a prospect located in the Wind River
Basin, Wyoming. We acquired this prospect in the first quarter of 2001
with management reviewing the prospect potential since December 2000
o $1 million for leasehold acquisition and seismic
As with any projection, the timing and amounts can vary. The timing for
drilling wells has been more difficult to estimate due to drilling rig
availability. Generally, funds must be advanced within thirty days or less after
our election to participate.
Our planned capital expenditures and administrative expenses could exceed
those amounts budgeted and could exceed our cash from all sources. Due to the
volatility of the natural gas and crude oil prices, while our capital
expenditures are on budget we could see a significant short fall from cash flow
from operations should these prices decrease. If this happens, it may be
necessary for us to raise additional funds. It is anticipated that additional
funds could be raised from one or more of the following sources:
1) We have approximately 375,725 callable common stock purchase warrants
outstanding exercisable at a price of $7.50 per share. We are able to
call these warrants at any time after our common stock has traded on
Nasdaq at a market price equal to or exceeding $10.00 per share for 10
consecutive days which was achieved in July 2000. It is our intent to
call all of these warrants at such time, if and when, the cash is
needed to fund capital requirements. We will receive proceeds equal to
the exercise price times the number of shares which are issued from the
exercise of warrants net of commission to the broker of record, if any.
We could realize net proceeds of approximately $2,814,500 from the
exercise of all of these warrants. There is no assurance that any
warrants will be exercised or that we will ever realize any proceeds
from the $7.50 warrant calls.
2) We currently have approximately $500,000 of available borrowing
capacity under our revolving credit facility.
3) We may seek mezzanine financing, if available, on terms acceptable to
us. Mezzanine financing usually involves debt with a higher cost of
capital as compared to conventional bank financing. We would seek
mezzanine financing in the range of $1,000,000 to $5,000,000. We would
seek to use this means of financing in the event that a particular
acquisition did not have sufficient proved producing reserve collateral
to support a conventional bank loan.
4) We may realize additional cash flow from oil and gas wells to be
drilled, if found to be productive. We own working interests in wells
that are currently producing and in additional wells, which are
presently being completed and equipped for production. We currently
estimate that during 2001 the wells will generate approximately $16
million of net cash flow after deducting lease operating expenses of
approximately $4 million.
If the above additional sources of cash are insufficient or are unavailable
on terms acceptable to us, we will be compelled to reduce the scope of our
business activities. If we are unable to fund planned expenditures within a
thirty to sixty-day period after a well is proposed for drilling, it may be
necessary to:
1) Forfeit our interest in wells that are proposed to be drilled;
2) Farm-out our interest in proposed wells;
3) Sell a portion of our interest in proposed wells and use the sale
proceeds to fund our participation for a lesser interest;
or
4) Reduce general and administrative expenses.
Our long term goal is to continue the pattern of growing the Company by
accumulating oil and gas reserves through acquisition and drilling during the
next three to five year period, and then selling the Company. In the event we
cannot raise additional capital, or the industry market is unfavorable, we may
have to slow or alter our long-term goal accordingly.
These are forward looking statements that are based on assumptions, which in
the future may not prove to be accurate. Although we believe that the
expectations reflected in such forward looking statements are based on
reasonable assumptions, we can give no assurance that our expectations will be
achieved.
Long Term Liquidity and Capital Resources
The timing of most of our capital expenditures is discretionary. We have no
material long-term commitments associated with our capital expenditure plans or
operating agreements. Consequently, we have a significant degree of flexibility
to adjust the level of such expenditures as circumstances warrant. The level of
capital expenditures will vary in future periods depending on the success we
experience on planned exploratory drilling activities in future periods, gas and
oil price conditions and other related economic factors. Accordingly, we have
not prepared an estimate of capital expenditures for future periods beyond 2001.
Comparison of Results of Operations
Year ended December 31, 2000 and Compared to Year ended December 31, 1999
We have reported net income of $1,425,565 for the year ended December 31,
2000 compared to a net loss of ($5,348,403) for the same period ended 1999. Our
results of operations have been significantly impacted by our ability to
increase production through our exploration activities and acquiring oil and gas
properties. Fluctuations in natural gas and crude oil prices have also
significantly impacted these results.
In Thousands ................................... Years Ended December 31, $ - Increase % - Increase
2000 1999 (Decrease) (Decrease)
- ------------------------------------------------ -------- -------- --------------- -----------
Net income (loss) .............................. $ 1,425.6 $ (5,384.4) $ 6,810.0 126%
Oil and gas sales .............................. 8,037.2 1,199.5 6,837.7 570%
Field service income ........................... 320.6 -- 320.6 100%
Operating expense .............................. 1,516.1 81.5 1,434.6 1760%
G"&"A expense 2,141.0 1,418.2 722.8 51%
Depletion and Depreciation ..................... 2,693.4 914.2 1,779.2 195%
Impairment expense -- 1,225.0 (1,225.0) -100%
Interest expense 393.0 2,966.7 (2,573.7) -87%
Income tax provision ........................... 294.3 -- 294.3 100%
Production:
Natural Gas - Mcf .............................. 1,726.4 475.1 1,251.3 263%
Crude Oil - Bbl ................................ 32.6 1.8 30.8 1711%
Natural Gas Equivalent - Mcfe .................. 1,922.1 486.0 1,436.1 295%
$ per unit:
Ave gas price - Mcf ............................ $ 4.08 $ 2.44 $ 1.64 67%
Ave oil price - Bbl 30.57 23.04 7.53 33%
Ave operating expense - McfEQ .................. .71 0.17 0.54 318%
Ave G"&"A - McfEQ 1.12 2.92 (1.80) -62%
Ave Depl. and Depr. - McfEQ 1.40 1.88 (0.48) -26%
For the twelve months ended December 31, 2000 oil and gas sales increased
$6,837,700 or 570% from the same period ended 1999. A 263% increase in natural
gas production combined with a 67% increase in average natural gas prices
accounted for approximately $5,700,000 of the increase. A 1711% increase in
crude oil production for 2000 and a 33% increase in average 2000 crude oil
prices accounted for the remaining $1,100,000 increase in oil and gas sales. The
increase in natural gas and oil production for 2000 was due to additional wells
drilled and completed during the year and incremental natural gas and crude oil
production acquired in the Merger. Approximately 67% of the increase in our
natural gas production was due to new wells drilled and completed during the
twelve months ended December 31, 2000. Acquired crude oil production accounted
for approximately 88% of the increase in oil production for the year. Higher
natural gas prices for 2000 resulted in approximately $2,800,000 in additional
oil and gas revenues. Generally, we sell our natural gas to various purchasers
on an indexed-based price. These indices are generally affected by the NYMEX -
Henry Hub spot price. We use hedges on a limited basis to lessen the impact of
price volatility. However, fixed pricing from hedges only cover 22% of our
production on an equivalent Mcf basis. Based on our 2000 natural gas production,
a change in the average natural gas price realized by the Company of $1.00 per
Mcf would have resulted in an approximate $1.5 million reduction in net income
before income taxes.
Operating expenses, including production and ad valorem taxes, increased
approximately $1,434,600, or 1760%, to $1,516,100 for the year ended 2000. The
increased expenses were due to approximately $1,000,000 of additional operating
expenses associated with the Merger properties, which included a gathering
system, and the increase in number of wells put on production for the year. The
average operating expense for the Merger oil and gas wells was $1.51 per
equivalent Mcf for the period September 1, 2000 through December 31, 2000. This
operating cost per equivalent Mcf is significantly higher than the average for
the remaining properties of $.33 per equivalent Mcf due to the Merger properties
being older in production life and the necessity to dispose of a significant
volume of salt water produced. Additionally, due to the age of the properties
repair and maintenance costs are higher than that of the other properties.
G"&"A expenses for the twelve months ended December 31, 2000 increased
in absolute dollars by approximately $722,800 but decreased $1.80 on a per
equivalent Mcf basis from the same period in 1999. The following shows the major
items accounting for the 2000 increase:
o Relocation and severance expense associated with our corporate office
move from Newport Beach, CA to Tulsa, OK of $289,000 which included a
non-cash charge of $128,000 associated with the vesting rights on stock
warrants of a former officer/employee
o Incremental increase in costs associated with additional employees
hired from the Merger, which was approximately $261,000 for the
four-month period September 2000 through December 2000
o Fees of approximately $124,000 associated with our entry on NASDAQ's
National Market system
o Overall increase in corporate expenses of approximately $120,000 due to
increased level of activity from our growth.
Depletion and depreciation expense increased $1,779,200, or 195%, to
$2,693,439 for 2000 from $914,233 in 1999 due to increase production volume in
2000. Our average depletion and depreciation rate per equivalent Mcf for 2000
decreased 26% to $1.40 from $1.88 in 1999 primarily as a result of the reserves
acquired in the Merger and those reserves discovered from our exploration effort
during the year.
There was no impairment expense for the twelve-month period ended December
31, 2000 due to the determination of the total evaluated costs in both the U.S.
and foreign cost pools exceeding their net realizable value. In 1999, it was
determined that the total costs in the U.S. evaluated properties cost pool
exceeded their present value and accordingly an impairment write-down of
$1,167,910 was recorded. The impairment was due mainly to downward revisions of
reserve estimates associated with two wells drilled in 1998. The downward
revisions were due to disappointing production results from the wells in the
fourth quarter of 1999 when producing zones in the wells commenced significant
production of salt water in place of gas and oil. Additionally, a $57,052
impairment charge was recorded for our evaluated cost associated with our
Australian properties.
Interest expense decreased for the year ended December 31, 2000 compared to
the same period for 1999 primarily due to the retirement of our bridge notes,
which were retired in July 1999. Interest expense related to the bridge notes
for 1999 consisted of the following:
Cash interest expense $ 120,555
Amortization of note discount and fair market value of 459,000 shares 2,754,000
Amortization of deferred loan costs 89,100
---------------
Bridge note interest expense for the year ended December 31, 1999 $ 2,963,655
===============
The decrease was partially offset by the interest expense we incurred in
2000 as a result of debt acquired in the Merger.
Year Ended December 31, 1999 and Compared to Year Ended December 31, 1998
Net loss for the year ended December 31, 1999 was $(5,384,403) compared to
$(2,384,500) for the year ended December 31, 1998. The increase in net loss was
primarily due to the interest expense related to the bridge note.
Loss from operations totaled $(2,439,493) for the year ended December 31,
1999 compared to $(2,429,343) for the year ended December 31, 1998.
During the year ended December 31, 1999 we had oil and gas revenues of
$1,199,480. Our net production was 475,065 mcf at an average price of $2.44 per
mcf and 1,822 barrels of oil at an average price of $23.03 per barrel. During
the year ended December 31, 1998 we generated no revenues.
During the year ended December 31, 1999 we incurred lease operating
expenses of $81,538. Our average lifting cost for this period was $.17 per mcf
equivalent. During the year ended December 31, 1998 we incurred no lease
operating expense.
General and administrative expenses for the year ended December 31, 1999
were $1,418,240 compared to $746,769 for the year ended December 31, 1998. This
represents a $671,471 or a 90% increase over the prior year period. The primary
reasons for the increase were due to:
o An increase in operational activities in 1999 versus 1998;
o An increase in the number of employees from five in 1998 to six in 1999; and
o General and administrative costs incurred in 1999 related to our
initial public offering and registration statement which are not
readily identifiable as offering costs.
1998 1999 Total
---- ---- -----
Foreign cost pool $ 1,624,218 $ 57,052 $ 1,681,270
U.S. cost pool 46,473 1,167,910 1,214,383
------------- ------------ -------------
$ 1,670,691 $ 1,224,962 $ 2,895,653
============= ============ =============
As of December 31, 1999, it was determined that the total costs in the U.S.
evaluated properties cost pool exceeded the full cost ceiling limitation.
Accordingly, an impairment write-down of $1,167,910 was recorded for the year
ended December 31, 1999. The impairment was due mainly to downward revisions of
reserve estimates associated with two wells drilled in 1998. The downward
revisions were due to disappointing production results from the wells
experienced in the fourth quarter of 1999 when the producing zones in the wells
began producing large amounts of water in place of gas and oil.
Depreciation and depletion expense for the year ended December 31, 1999 was
$914,233 compared to $11,883 for the year ended December 31, 1998. This
represents a $902,350 increase over the prior year period. The primary reason
for the increase is due to the fact Beta had no oil or gas production in the
prior year period that would give rise to depletion expense.
Other income for the year ended December 31, 1999 consisted of interest
income in the amount of $21,741. Beta realized $44,843 of interest income for
the year 1998. The reason for the decrease was lower average cash and cash
equivalents balances for the 1999 period as compared to the 1998 period.
During the year ended December 31, 1999, Beta incurred interest expense of
$2,966,651, substantially all of which related to the bridge notes. Interest
expense related to the bridge notes for the 1999 period consists of the
following:
Cash interest expense $ 120,555
Amortization of note discount and fair market value of 459,000 shares 2,754,000
Amortization of deferred loan costs 89,100
---------------
Bridge note interest expense for the year ended December 31, 1999 $ 2,963,655
===============
During the year ended December 31, 1998, Beta incurred no interest expense.
Quarter Ended December 31, 2000 and Compared to Quarter Ended September 30, 2000
(Unaudited)
Revenues and operating income for the quarter ended December 31, 2000
increased approximately 113% and 94%, respectively, compared to the quarter
ended September 30, 2000. The increases were a result of increased production
volumes associated with the RRE merger, which was effective September 1, 2000
and additional wells put on production. Our production volume for the quarter
ended December 31, 2000 was approximately 803,000 Mcf equivalent compared to
approximately 458,800 Mcf equivalent or 75% increase.
Net income for the fourth quarter ended 2000 decreased by approximately 9%
from the previous quarter primarily due to increased depletion and depreciation
expense, interest expense and income tax expense. Depletion and depreciation
expensed for the quarter increased approximately $1.0 million from the quarter
ended September 30, 2000 to $1.4 million. Interest expense increased
approximately $.3 million from the previous quarter due to RRE outstanding debt.
Income tax expense for the quarter ended December 31, 2000 was approximately $.3
million higher than the quarter ended September 30, 2000.
Quarter Ended December 31, 2000 and Compared to Quarter Ended December 31, 1999
(Unaudited)
Revenues for the quarter ended December 31, 2000 increased by approximately
$3.5 million from December 31, 1999 to $4.3 million. Operating and net income
for the quarter ended December 31, 2000 increased approximately $2.5 million
from December 31, 1999 to $3.3 million and $.8 million, respectively. The
increases were a result of increased production volumes associated with the RRE
merger, which was effective September 1, 2000 and additional wells put on
production in 2000.
The results for quarter ended December 31, 1999 included an impairment
charge for approximately $1.2 million due to downward revisions of reserves
associated with wells drilled in 1998. Depletion and depreciation expense for
quarter ended December 31, 2000 was approximately $.6 million greater than
quarter ended December 31, 2000. The quarter ended December 31, 2000 had
interest expense of approximately $.3 million and income tax expense of
approximately $.3 million while there was no comparable expense for the same
quarter in 1999. Collectively, the increased depreciation and depletion expense,
interest expense and income tax expense for the quarter ended December 31, 2000
offset the impairment charge as previously mentioned for December 1999.
Income Taxes
As of December 31, 2000, we had available, to reduce future taxable income,
a tax net operating loss carryforward of approximately $11,624,000, which
expires in the years 2013 through 2020. Utilization of the tax net operating
loss carryforward may be limited in the event a 50% or more change of ownership
occurs within a three-year period. The tax net operating loss carryforward may
be limited by other factors as well. As of December 31, 2000, we have a deferred
liability of approximately $3,526,304.
Impact of Recently Issued Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FASB133), "Accounting for Derivative
Instruments and Hedging Activities." The FASB has subsequently issued Statement
No. 137 and Statement No. 138 which are amendments to FASB133. FASB133, as
amended, requires that an entity recognize all derivatives as assets or
liabilities in the statement of financial position and measure those instruments
at fair value. FASB133, as amended, is effective for fiscal years beginning
after June 15, 2000. FASB133, as amended, cannot be applied retroactively and
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts. We adopted SFAS133, as amended,
beginning January 1, 2001. We do not believe the adoption of FASB133 will have a
material impact on our financial position or results of operation.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risk related to adverse changes in oil and gas
prices. Our oil and gas revenues can be significantly affected by volatile oil
and gas prices. This volatility can be mitigated through the use of oil and gas
derivative financial hedging instruments. Currently, we have derivative
financial instruments in place to mitigate the fluctuations in gas price. The
hedged volume represents approximately 22% of our gas equivalent production and
is hedged until July 2001. Another 10% of our gas equivalent production was
committed to a twelve-month fixed price contract, which was in effect until July
2001. However, in October 2000, we ceased deliveries to the purchaser due to the
non-performance of payment. No further deliveries have been made under this
contract and said contract is currently in litigation. (See Item 3. Legal
Proceedings.) The remainder of our production is not hedged and we may continue
to experience wide fluctuations in oil and gas revenues as a result. We are also
exposed to market risk related to adverse changes in interest rates. This
volatility could be mitigated through the use of financial derivative
instruments. Currently, we do not have any derivative financial instruments in
place to mitigate this potential risk.
Item 8. Financial Statements and Supplementary Data.
Our financial statements and supplementary financial data, which begin on
page F-1, are included elsewhere in this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Director
Name Age Since Position
Steve Antry 45 1997 President, Chairman of the Board, Director
R. Thomas Fetters 61 1997 Managing Director of Exploration, Director
Joe C. Richardson, Jr. 73 1997 Director
John P. Tatum 66 1999 Director
Robert C. Stone, Jr. 51 2000 Director
Joseph L. Burnett 48 Chief Financial Officer since 2000
Stephen L. Fischer 41 Vice President of Capital Markets since 1997
Virginia Cherry 55 Secretary since 2000
Lisa Antry 38 Treasurer since 1997
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified. The
Bylaws permit the board itself to fill vacancies and appoint additional
directors pending shareholder approval at the next annual meeting. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been elected
and qualified. Beta's Bylaws currently authorize six directors to serve on the
Board of Directors. The last annual meeting of shareholders was held on June 24,
2000.
Steve Antry and Lisa Antry are married.
The business experience of each director, executive officer and key
employee is summarized below.
Steve A. Antry, President and Chairman of the Board of Directors, is Beta's
founder. In addition, Mr. Antry founded Beta Capital Group, Inc., a financial
consulting firm in November 1992, and was its President through June 1997. Beta
Capital Group, Inc. specializes in selecting and working with emerging oil and
gas exploration companies which have production and drilling prospects strategic
for rapid growth yet also need capital and market support to achieve that
growth. Most recently, Mr. Antry orchestrated and helped to implement the
restructuring of Pease Oil and Gas Company, NASDAQ: WPOG, and remains a
Director. Mr. Antry remains Chairman of the Board of Directors of Beta Capital
Group, Inc., but resigned as its President to devote his full attention to Beta.
Before forming Beta Capital Group, Inc., Mr. Antry was an early officer of
Benton Oil "&" Gas Company, NYSE: BNO, from 1989 through 1992, ultimately becoming
President of a wholly owned subsidiary. Before Benton, Mr. Antry was a Marketing
Director for Swift Energy, NYSE: SFY, from 1987 through 1989. Mr. Antry began
working in the oil fields in Oklahoma in 1974. He has served in various
exploration management capacities with different companies, including Warren
Drilling Company, as Vice President of Exploration and Nerco Oil and Gas, a
division of Pacific Power and Light, where he served as Western Regional Land
Manager. Mr. Antry is a member of the International Petroleum Association of
America "IPAA", serving on the Capital Markets Committee and has B.B.A. and
M.B.A. degrees from Texas Christian University.
R. Thomas Fetters, Managing Director of Exploration, and Director, spent 17
years with Exxon ultimately achieving the position of Exploration Planning
Manager, Exxon U.S.A. Other notable positions held include Exploration Manager
for Exxon Australia "ESSO" and Division Manager of Research in Houston and Chief
Geologist, Exxon Production Malaysia. Mr. Fetters was President and Chief
Executive Officer of CNG Producing Co. in New Orleans from 1983 through 1989 and
President of XCL-China, Ltd. from 1989 through 1995. From 1995 through 1997, he
served as Senior Vice President of National Energy Group and also currently sits
on the Board of XCL, Ltd.. He earned his B.S./M.S. in Geology from the
University of Tennessee in 1966.
Joe C. Richardson, Jr., Director, graduated from Texas A"&"M with B.S. degrees in
Petroleum Engineering and Mechanical Engineering in 1950 when he started his
career with Shamrock Oil and Gas in Amarillo, Texas. In 1961, Mr. Richardson
formed an oil, gas, refining, and compressor equipment fabrication company and,
in 1968, co-founded a public oil and gas company that was later merged with
Worldwide Energy, Inc. Mr. Richardson has been an officer and/or director of
several successful public and private companies including Pyro Energy, Inc.
(NYSE), Consolidated Oil "&"Gas (AMEX), Texoil, Inc. (NASDAQ), and Corporate
Systems Corporation. He is a Regent Emeritus of the Texas A"&"M University System,
past President of the Texas A"&"M Twelfth Man Association, and was honored in 1989
with the University's Distinguished Alumni Award. He currently serves on the
University Presidents' Advisory Board and the Engineering Advisory Council. Mr.
Richardson is a registered engineer in the state of Texas. The Petroleum
Engineering Building on the campus of Texas A"&"M University, completed in 1990,
was named in his honor.
John P. Tatum, Director, joined Beta as a director in March 1999. Mr. Tatum has
worked in the oil and gas industry since 1962, holding successive positions with
Skelly Oil Company, Placid Oil Company, Hunt International Company and Hunt
Energy Company. From 1980 to 1996, Mr. Tatum was employed with Triton Energy
Corporation as Vice President (1980-82), Senior Vice President (1982-1991) and
Executive Vice President (1991-96). As Senior Vice President for Triton Energy
Corporation, Mr. Tatum was responsible for directing Triton's operations in
Colombia, Thailand, New Zealand, Nepal, Gabor, Cote D'Ivoire and Argentina.
Since 1996, Mr. Tatum has worked as an international oil "&" gas consultant.
Mr. Tatum received his B.B.A. from the University of Texas in 1956 and conducted
graduate studies at the Louisiana State University Graduate Business School.
Robert C. Stone, Jr., Director, joined Beta in September 2000. Mr. Stone's last
five years of employment were as Manager of Technical Services, Energy Division,
First National Bank of Commerce from 1994 to 1998 (he started with First
National as an engineer in 1983) and Manager of Energy Technical Services,
Energy/Maritime Division, Hibernia National Bank from 1998 to this year which
included evaluation responsibilities for all syndicated and direct lending
E"&"P segment clients. Specifically, Mr. Stone concluded or approved all oil
and gas collateral evaluations, and developed industry client relationships as
well as pricing lending policies. Currently Mr. Stone is the Senior Vice
President/Manager of the Energy Group at Whitney National Bank in New Orleans,
Louisiana. Mr. Stone began his career as an engineer for approximately eight
years with Exxon Company, U.S.A. Mr. Stone holds both a B.S. and M.S. in
Engineering from the University of Houston. He was also a Founding Governor of
the City Energy Club of New Orleans and is involved with many civic
organizations in New Orleans where he still resides.
Joseph L. Burnett, Chief Financial Officer, joined Beta in June 2000. He comes
to Beta with 26 years of oil and gas accounting experience and is a CPA. Most
recently, Mr. Burnett served American Central Gas Technologies, Inc. as
Controller for approximately six years. Prior to American Central, Mr. Burnett
served at Esco Energ;y for approximately seven years as Controller and Vice
President. Mr. Burnett started his oil and gas career at Skelly Oil (later Getty
Oil) in 1974. Mr. Burnett received his Bachelor of Science in Business
Administration from Oklahoma State University in 1974.
Stephen L Fischer, Vice President of Capital Markets, has been Vice President of
Beta Capital Group, Inc. since March 1996 and from April 1996 through March 1998
he was also a registered representative of Signal Securities, Inc., a registered
broker-dealer. Between 1991 and before joining Beta Capital Group, Inc. in 1996,
Mr. Fischer was a Registered Representative of Peacock, Hislop, Staley "&"
Given, an Arizona based investment banking firm. Since 1983, Mr. Fischer has
held various positions in the financial services industry in investment banking,
retail, and institutional sales, with a special emphasis on the oil and gas
exploration sector.
Lisa Antry, Treasurer, was Executive Vice President of Beta Capital Group, Inc.
from July 1994 through June 1997. In June 1997, she was appointed President of
Beta Capital Group, Inc. upon the resignation of Mr. Antry. Ms. Antry has in
excess of 15 years of finance, accounting, and tax experience. Before Beta
Capital Group, Inc., she served as Corporate Planning Manager for United
California Savings Bank from 1988 to July 1994. Ms. Antry also served United
California for several years as its Finance and Tax Manager and worked at
Priority Records, a recording and distribution company, as its Controller. Ms.
Antry received her B.B.A. from Stephen F. Austin University in 1984 and her
M.B.A. from Pepperdine University in 1991.
Board Committees
In 1997 the Board of Directors established an executive committee whose
purpose is to formulate and implement recommendations, strategies and actions
that are intended to support and protect shareholder value. The executive
committee is comprised of three voting members: Steve Antry, Beta's President
and Chairman, Tom Fetters, Managing Director of Exploration and Joe C.
Richardson, Jr., an independent Director. The Board of Directors implemented
these changes to enhance the decision-making processes in aspects of Beta's
business when the full board of directors is not readily available. This
committee did not meet during 2000.
The Board of Directors also has established an audit committee whose
purpose is to oversee Beta's financial reporting and controls and to recommend
the appointment of an independent auditor to the board each year. The audit
committee is comprised of three voting members: Joe C. Richardson, Jr., John
Tatum and Robert C. Stone, Jr., all independent Directors. This committee met
once during 2000.
In October 1998, the Board of Directors of Beta established a compensation
committee responsible for formulating and recommending to the full Board of
Directors the compensation paid to Beta's executive officers. The committee
presently consists of two outside Directors, Joe C. Richardson Jr., and John P.
Tatum. The compensation committee is discussed in more detail in the section
entitled "Executive Compensation." This committee met once during 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, certain officers and holders of 10% or more of Beta's common stock to
report to the Securities and Exchange Commission, by a specified date, initial
reports of ownership and reports of changes in ownership of our common stock and
other equity securities. Beta believes that during the fiscal year ended
December 31, 2000, its directors and executive officers complied with all these
filing requirements, based solely on a review of copies of reports filed under
Section 16(a) furnished to Beta and on the written representations of its
directors and executive officers.
Item 11. Executive Compensation
Summary Compensation Table
The following table will inform you about the compensation earned by Beta's
Chief Executive Officer for services rendered to Beta during the fiscal years
ended December 31, 1999 and 2000. No other executive officer's cash compensation
exceeded $100,000 for the fiscal years ended December 31, 1999 and 2000.
Matching
Securities Contributions to
Underlying All Other Simple IRA
Name and Principal Year Salary Bonus Options/SARs Compensation Retirement Plan
Position
- --------------------------- ------- ----------- --------- ------------------- -------------- -------------------
Steve Antry
Chief Executive Officer 2000 $ 150,000 $ 28,552 $ 15,000 (1) $ 75,906 (2) $ 4,500
and Chairman of the 1999 $ 150,000 $ 28,184 $ 25,000 (1) $ 11,250 (2) $ 2,600
Board of Directors 1998 $ 150,000 $ - $ 25,000 (1) $ 9,343 (2) $ -
1. The 25,000 shares of common stock underlying presently exercisable
stock warrants were issued March 12, 1998, are exercisable at $5.00
per share and expire on March 12, 2003; the 25,000 shares of common
stock underlying stock options were granted January 6, 1999, are
exercisable at $6.00 per share and expire on December 31, 2004; and
15,000 shares of common stock underlying stock options were granted
on December 8, 2000, are exercisable at $7.70 per share and expire on
December 8, 2005.
2. Represents compensation for use of Company leased vehicle and moving
allowance related to corporate office move and relocation in July
2000 for Mr. Antry.
Individual Grants
Percent of Potential
Number of total realizable value
securities options/SARs Exercise at assumed annual
underlying granted to or base rates of stock
Options/ employees price Expiration price appreciation
Name SARs granted in fiscal ($/Sh) date for option term
# year 5%($)(1) 10%($)(1)
- ----------------------- -------------- ------------- ---------- -------------- --------------------
Steve Antry 15,000 .08% $7.70 12/8/2005 31,913 70,513
(1) These amounts are calculated based on the indicated annual rates of
appreciation and annual compounding from the date of grant to the end of the
option term. Actual gains, if any, on stock option exercises are dependent on
the future performance of the common stock and overall stock market conditions.
There is no assurance that the amounts reflected in this table will be achieved.
The following table shows certain information with respect to stock options
exercised in 2000 by Beta's chief executive officer, if any, and the value of
his unexercised stock options at December 31, 2000.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of securities Value of unexercised
underlying unexercised in-the-money
options/SARs at fiscal options/SARs at the
Shares year end (#) fiscal year end ($)
acquired
on Value Exercisable/ Exercisable/
Name exercise Realized Unexercisable Unexercisable
- ---------------------- ------------ ------------ ------------------------ -----------------------
Steve Antry None None 65,000 exercisable $ 84,360
(1) The value of in-the-money options is equal to the fair market value of a
share of common stock at fiscal year-end ($7.484 per share), based on the
last sale price of Beta's common stock, less the exercise price.
Stock Option Plan
On September 11, 2000, a majority of our shareholders ratified and approved
the adoption of the Company's Amended and Restated 1999 Incentive and
Nonstatutory Stock Option Plan previously approved by the board of directors.
The plan authorizes the Compensation Committee to grant stock option awards to
officers, directors and employees. The plan provides, among other things, the
following:
o The maximum number of shares that may be optioned and sold under
the plan is 700,000 shares.
o The per share exercise price for common shares to be issued
pursuant to the exercise of an option shall be no less than the
fair market value of Beta's common stock as of the date of grant.
o The per share exercise price for common shares to be issued to
persons owning more than 10% of the voting stock of Beta at the
date of grant, shall be no less than 110% of the fair market value
of Beta's common stock as of the date of grant.
o The maximum terms of the options shall be a maximum of ten years or
such lesser time period as the board of directors determines. The
maximum time period for options to be issued to persons owning more
than 10% of the voting stock of Beta at the date of grant shall be
five years from the date of grant.
The Stock Option Plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and for the granting of nonstatutory stock options to
directors who are not employees and consultants. In the case of employees who
receive incentive stock options that are first exercisable in a particular
calendar year whose aggregate fair market value exceeds $100,000, the excess of
the $100,000 limitation shall be treated as a nonstatutory stock option under
the Stock Option Plan.
The Stock Option Plan is being administered by the Compensation Committee
appointed by our board of directors. This committee consists of two directors,
Joe C. Richardson, Jr. and John Tatum, neither of who are employees of Beta. As
such, under Rule 16b-3, the grant of such stock options under the Stock Option
Plan to officers and directors who are our employees is exempt from the short
swing profits provisions under Section 16(b) of the Securities Exchange Act of
1934 ("1934 Act").
This committee has the power, subject to the approval of our board of
directors, to determine the terms of the options granted, including the number
of shares subject to each option, the exercisability and vesting requirements of
each option, and the form of consideration payable upon the exercise of such
option (i.e., whether cash or exchange of existing shares of Beta common stock
in a cashless transaction or a combination thereof).
A maximum of 700,000 shares of Beta common stock (which amount is subject
to adjustment for stock splits, stock dividends, combinations or
reclassification of the Beta common stock) are reserved for issuance under the
Stock Option Plan. On September 11, 2000, stock options exercisable for a total
of 97,500 shares of Beta common stock were granted to a total of 6 employees as
incentive stock options. This had been reported in the 1999 10-K as being issued
in 1999, however, the Amended 1999 Incentive and Nonstatutory Stock Option Plan
was not approved by a majority of the shareholders until September 11, 2000. Of
this amount, stock options for a total of 95,000 shares of Beta common stock
were granted to officers and directors who are employees. The average exercise
price of such stock options is $6.00 per share, which represents an amount in
excess of 110% of the fair market value of the average of the last reported
highest bid and lowest asked prices quoted on the Nasdaq Small Cap Market on
August 27, 1999, which was the date such stock options were originally approved
to be granted. Also on September 11, 2000, stock options exercisable for a total
of 51,000 shares of Beta common stock were granted to a total of 6 employees as
incentive stock options resulting from the conclusion of the merger. None of
these 6 employees were officers or directors. On December 8, 2000, stock options
exercisable for a total of 135,000 shares of Beta common stock were granted to a
total of 9 employees as incentive stock options. Of this amount, stock options
for a total of 90,000 shares of Beta common stock were granted to officers and
directors who are employees. The average exercise price of such stock options is
$7.70 per share, which represents an amount in excess of 110% of the fair market
value of the average of the last reported highest bid and lowest asked prices
quoted on the Nasdaq National Market System on December 8, 2000.
The Stock Option Plan requires that the exercise price of the stock options
granted under such plan shall not be less than (but may be higher than) 100% of
the fair market value per share as determined on the date of grant. However, if
an employee who is granted a Stock Option owns, at the time of grant, stock
representing more than 10% of the voting power of all classes of Beta stock, the
exercise price for options which are incentive stock options may not be less
than 110% of the fair market value per share on the date of grant.
So long as our stock is reported on the National Association of Securities
Dealers, Inc. Automated System, the fair market value per share on the date of
grant of a stock option under the Stock Option Plan shall be the average of the
last reported highest bid and the lowest asked prices quoted on the Nasdaq
National Market System on such date.
The Stock Option Plan will continue in effect for 10 years from August 20,
1999 (i.e., the date first adopted by our board of directors), unless sooner
terminated by our board of directors. Unless otherwise provided by our board of
directors, the stock options granted under the Stock Option Plan will terminate
immediately prior to the consummation of a proposed dissolution or liquidation
of Beta.
The options granted under the Stock Option Plan are for a period of not
more than 10 years after the date of grant. However, in the case of an optionee
who owns, at the time of grant, stock representing more than 10% of the combined
voting power of all classes of Beta stock, the term of the options shall not be
for more than five (5) years.
Upon the termination of an optionee as our employee, he/she must exercise
his/her option within the period of time not exceeding three (3) months (as set
forth in such stock option) after he/she ceases to be our employee. If an
optionee becomes disabled and due to such disability ceases to be our employee,
he/she must exercise his/her option within the period of time not exceeding 12
months (as set forth in such stock option). Upon the death of an optionee whose
employment by us was not terminated prior to such event, the optionee's estate
or person acquiring the right to exercise such option by bequest or inheritance
may exercise such option at any time within 12 months following the date of such
optionee's death but only to the extent that the optionee could have exercised
such option (under its terms) if his/her employment had continued uninterrupted
for such 12-month period.
The options granted under the Stock Option Plan may only be exercised by
the optionee during his/her lifetime and are not transferable except by will or
by the laws of descent and distribution. The shares of Beta common stock
transferred to an optionee as a result of the exercise of a stock option are
"restricted securities" under Rule 144 as promulgated under the 1933 Act and may
only be resold or transferred in compliance with such rule and the registration
requirements or an exemption from such requirements under the 1933 Act.
Retirement Plan
We maintain a Savings Incentive Match Plan for Employees (SIMPLE IRA Plan)
for eligible employees. Currently, all Beta employees are eligible to
participate.
We presently make matching contributions to employee accounts in an amount
equal to the elective contribution made by each employee, not to exceed,
however, 3% of each employee's salary during any calendar year. All
contributions to employees' accounts are immediately 100% vested and become the
property of each employee at the time of contribution, including employer
contributions and income-deferral contributions. During 2000, we contributed an
aggregate of $15,456 to the accounts of 9 employee participants. Of this amount,
$4,500 was allocated to Mr. Antry's account.
Directors' Compensation
Beta's Bylaws state that non-employee Directors of Beta shall not receive
any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expense of attendance, if any, may be allowed for
attendance at each regular and special meeting of the Board of Directors. (All
Beta directors receive actual expense reimbursements, and Beta currently pays
$1,000 in fees per outside director per meeting up to a maximum of $2,000 in
fees per outside director for combined meetings.) Beta maintains directors and
officers liability insurance.
Employment Contracts
We have executed an employment contract dated June 23, 1997 with our
President and Chairman of the Board, Mr. Steve Antry. The contract provides for
an indefinite term of employment at an annual salary of $150,000 commencing in
October of 1997 and an annual car allowance of up to $12,000. The contract may
be terminated by Beta without cause upon the payment to Mr. Antry of the
following:
(a) Options to acquire the common stock of Beta in an amount equal to 10% of
the then issued and outstanding shares containing a five year term,
piggyback registration rights and an exercise price equal to 60% of the
fair market value of the shares during the sixty day period of time
preceding the termination notice, such amount not to exceed $3.00 per
share.
(b) A cash payment equal to two times the aggregate annual compensation.
(c) In the event of termination without cause, all unvested securities issued
by Beta to Mr. Antry shall immediately vest and Beta shall not have the
right to terminate or otherwise cancel any securities issued by Beta to Mr.
Antry.
During the period from inception, June 6, 1997 through December 31, 1997,
and for the years ended December 31, 1998 and 1999, R. Thomas Fetters, a
director of Beta was paid $20,000, $60,000 and $75,000, respectively, pursuant
to a consulting contract for exploration related services. Beta had a consulting
agreement with Mr. Fetters which provides that he will provide part time
geologic services to Beta for $5,000 per month. The agreement provided that Mr.
Fetters serve as a director during the term of the agreement. It further
provides that if Mr. Fetters is offered a full time position with Beta, his
compensation will be increased to a salary of $125,000 per year. The agreement
was terminated by mutual agreement effective January 1, 2000. Mr. Fetters is now
a full time employee of Beta at an annual salary of $92,500 for 2000 increasing
to $125,000 in 2001.
On June 23, 1997, we entered into an employment agreement with Steve
Fischer to serve at Vice President of Capital Markets at an annual salary of
$60,000. Under separate agreement, Mr. Fischer subscribed to 350,000 shares of
Founders Shares at price of $0.05 per share. The subscription agreement provides
that the shares shall vest over a three-year period.
On January 27, 1998, Beta issued 100,000 common stock purchase warrants
exercisable at a price of $3.75 per share to J. Chris Steinhauser, the Chief
Financial Officer of Beta. Mr. Steinhauser terminated his employment with us
effective June 6, 2000. As part of his severance package his remaining unvested
25,000 warrants were allowed to vest on what would have been his next
anniversary date or January 27, 2001.
Report of The Compensation Committee
The information required pursuant to Item 402 (k) of Regulation S-K is
incorporated by reference into Beta's Definitive Annual Proxy Statement which
will be filed with the SEC within 120 days of December 31, 2000.
Performance Graph
The information required pursuant to Item 402 (l) of Regulation S-K is
incorporated by reference into Beta's Definitive Annual Proxy Statement which
will be filed with the SEC within 120 days of December 31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table will inform you, as of December 31, 2000, about
the beneficial ownership of shares of Beta's common stock held by each person
who beneficially owns more than 5% of the outstanding shares of the common
stock, each person who is a director or officer of Beta and all persons as a
group who are officers and directors of Beta, and as to the percentage of
outstanding shares held.
Shares Issuable
Upon the Exercise Approximate Percent
Shares Beneficially of Stock Warrants of Class As of
Name of Beneficial Owner Owned (1) and Options 12/31/00
- --------------------------------------- ----------------------- --------------------- ----------------------
Mr. Steve Antry 1,500,000 90,000 12.79%
Mrs. Lisa Antry, Jointly(2)
Mr. R. Thomas Fetters(3) 350,000 40,000 3.15%
Mr. Joe C. Richardson Jr. 400,000 - 3.24%
Mr. Stephen L. Fischer(4) 350,000 65,000 3.35%
Mr. John P. Tatum(5) 18,500 71,000 0.72%
Mr. Rolf Hufnagel (6) 1,168,000 - 9.46%
Mr. Joseph L. Burnett (7) - 100,000 0.80%
Mr. Robert C. Stone, Jr. (8) - 50,000 0.40%
----------------------- --------------------- ----------------------
All officers, key persons and
directors as a group (8 persons) 3,786,500(12) 416,000 33.91%
======================= ===================== ======================
(1) Unless otherwise indicated, all shares of common stock are held directly
with sole voting and investment powers. Securities not outstanding, but
included in the beneficial ownership of each such person are deemed to be
outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such person, but are not deemed to be
outstanding for the purpose of computing percentage of the class owned by
any other person.
(2) Mr. Steve Antry and Mrs. Lisa Antry, husband and wife, own 1,500,000 shares
as community property. This also includes 25,000 shares of common stock
underlying stock warrants which are exercisable at $5.00 per share and
expire on March 12, 2003, 40,000 shares of common stock underlying stock
options which are exercisable at $6.00 per share and expire on December 31,
2004, and 25,000 shares of common stock underlying stock options which are
exercisable at $7.70 per share and expire on December 8, 2005. Mr. Antry
has been our President and Chairman of the Board of Directors since June
1997. Ms. Antry has been our Treasurer since June 1997 and previously also
served as Secretary.
(3) This includes 25,000 shares of common stock underlying stock options that
are exercisable at $6.00 per share and expire on December 31, 2004 and
15,000 shares of common stock underlying stock options that are exercisable
at $7.70 per share and expire on December 8, 2005. Mr. Fetters has been our
Managing Director of Exploration and a Director since June 1997. During the
period from our inception, June 6, 1997, through December 31, 997, Mr.
Fetters was paid $20,000 under a consulting contract for management and
geologic evaluation. Mr. Fetters received $60,000 and $77,500 in consulting
fees during the years ended December 31, 1998 and 1999, respectively.
(4) This includes 25,000 shares of common stock underlying presently
exercisable stock warrants. The warrants are exercisable at $5.00 per share
and expire on March 12, 2003. In addition, this includes 15,000 shares of
common stock underlying stock options that are exercisable at $6.00 per
share and expire on December 31, 2004, and 15,000 shares of common stock
underlying stock options that are exercisable at $7.70 per share and expire
on December 8, 2005. Mr. Fischer has been our Vice President of Capital
Markets since June 1997.
(5) This includes 46,000 shares underlying common stock warrants which are
exercisable at a price of $5.00 per share and which expire April 1, 2004
and 25,000 shares underlying common stock warrants which are exercisable at
a price of $10.25 per share and which expire March 16, 2005. Mr. Tatum has
been a Director since March 1999. Mr. Tatum is a partner with Dyad
Petroleum Company in Midland, Texas. Beta purchased a 20% interest in a
property owned by an affiliate of Dyad at a cost of $100,000 in January
1999, prior to the time Mr. Tatum joined Beta as a Director.
(6) Mr. Hufnagel joined Beta as a director on June 6, 2000 and resigned his
directorship on October 16, 2000. He is the former Red River President and
received his shares in connection with the Merger that was consummated on
August 30, 2000.
(7) Mr. Burnett became the Chief Financial Officer of Beta on June 6, 2000
after J. Chris Steinhauser resigned. On May 31, 2000, Beta issued 100,000
common stock purchase warrants exercisable at a price of $8.38 per share,
of which 70,000 are currently exercisable by Mr. Burnett and shall expire
on May 31, 2005. Mr. Burnett also received 30,000 shares of common stock
underlying stock options that are exercisable at $7.70 per share and expire
on December 8, 2005.
(8) Mr. Stone joined Beta as a director on September 19, 2000. This includes
50,000 shares underlying common stock warrants which are exercisable at a
price of $10.00 per share and which expire October 1, 2005.
Item 13. Certain Relationships and Related Transactions
During the period from inception, June 6, 1997, through December 31, 1997, a
director of Beta, Mr. R.T. Fetters, was paid $20,000 per a consulting contract
for management and geologic evaluation services. Mr. Fetters received $60,000
and $75,000, respectively, in consulting fees during the years ended December
31, 1998 and 1999. In addition, on June 23, 1997, the director subscribed to
350,000 founder shares of Beta's common stock at a price of $0.05 per share. Mr.
Fetters became an employee of the Company in January 2000.
A former director of Beta, Mr. Larry Horwitz, subscribed to 50,000 founder
shares at a price of $0.05 per share. In addition, a legal firm with whom the
former director was a shareholder, subscribed to 20,000 founder shares at a
price of $0.05 per share. The legal firm also received a warrant to purchase
20,000 shares of Beta's common stock at a price of $6.00 per share. The warrants
shall expire on September 1, 2004 if unexercised. The legal firm has represented
Beta as general counsel.
On March 1, 2000, another director of Beta, Mr. Joe C. Richardson, Jr.,
subscribed to 400,000 founder shares at price of $0.05 per share. We have also
entered into an Exploration and Development Area of Mutual Interest Agreement in
Fremont County, Wyoming with Mr. Richardson. We have agreed to purchase from Mr.
Richardson certain geology and lease acreage approximating 1,627 acres in a
prospect located therein for $154,800. We will acquire a 75% working interest in
such prospect. Mr. Richardson will back in to a 25% working interest after our
investment from the first two wells drilled if the prospect pays out. All future
exploration and development costs will be shared accordingly with our being
responsible for 75% and Mr. Richardson being responsible for 25% of such costs.
Another director of Beta, Mr. John P. Tatum, is a partner with Dyad
Petroleum Company in Midland, Texas. We purchased a 20% interest in foreign
property owned by an affiliate of Dyad at a cost of $100,000 in January 1999,
prior to the time Mr. Tatum joined Beta as a director.
There are no outstanding loans to officers, directors and related persons.
Our present policy does not permit loans to officers, directors and related
persons.
All future transactions with affiliates of Beta are to be on terms no less
favorable than could be approved by a majority of the directors including the
majority of disinterested directors. Management of Beta believes that all past
related party transactions were as favorable to the Company or its affiliates as
those generally available from unaffiliated third parties. At the time these
transactions were entered into, Beta lacked sufficient disinterested independent
directors to ratify the transactions. However, Beta has now obtained
ratification from its independent, disinterested directors.
Other Information - Submission of Matters to a Vote of Security Holders
Our annual meeting of shareholders was held at the Marriott Newport Beach
Hotel and Tennis Club (at Fashion Island), 900 Newport Center Drive, Newport
Beach, California on Saturday, June 24, 2000, at 2:00 P.M. Pacific Daylight
Time. The matters submitted to a vote of our shareholders as well as the results
of the votes cast are as follows:
Matters voted upon by holders of common Stock:
Proposal No. 1: Election of directors. A summary of the votes cast is as follows:
% of out- Number % of Number % of
Number For standing shares Against out-standing Abstain out-standing
shares shares
------------- --------------- ------- ------------ --------- ------------
Steve Antry 8,468,857 87% 400 0.004% 3,610 0.04%
R. Thomas Fetters 8,468,857 87% 400 0.004% 3,610 0.04%
Joe C. Richardson, Jr. 8,468,857 87% 400 0.004% 3,610 0.04%
Lawrence W. Horwitz 8,468,857 87% 400 0.004% 3,610 0.04%
John P. Tatum 8,468,857 87% 400 0.004% 3,610 0.04%
Rolf N. Hufnagel 8,468,857 87% 400 0.004% 3,610 0.04%
As a result of the voting, Steve Antry, R. Thomas Fetters, Joe C.
Richardson, Jr., Lawrence W. Horwitz, John P. Tatum and Rolf N. Hufnagel were
elected as our directors to serve in that capacity until the annual meeting of
shareholders in 2001.
Proposal No. 2: Amendment to Beta's Articles of Incorporation.
A summary of the votes cast is as follows:
% of out- % of out- Number % of out-
Number For standing shares Number Against standing shares Abstain standing shares
---------- --------------- -------------- --------------- --------- ---------------
6,250,634 64% 319,370 5.11% 40,607 0.65%
Prior to the approval of the Amendment, our Articles of Incorporation
authorized 50,000,000 shares of $0.001 par value common stock. The Amendment did
not change the number of authorized shares of common stock. The Amendment
authorized 5,000,000 shares of $0.001 par value preferred stock.
% of out- % of out- Number % of out-
Number For standing shares Number Against standing shares Abstain standing shares
---------- --------------- -------------- --------------- --------- ---------------
8,431,817 87% 29,165 .30% 11,885 .14%
We engaged Hein + Associates LLP as independent auditors to perform the
audit of our financial statements for fiscal year 2000.
Subsequent Events
On March 20, 2001, we opened a Preferred Private Placement Offering with a
minimum of $1,500,000 and a maximum of $5,000,000 offered as units, each unit
consisting of one share of Series A 8% Convertible Preferred Stock and one-half
warrant to purchase one share of common stock. The Private Placement Offering is
scheduled to close on April 30, 2001, but we may terminate earlier or extend to
no later than June 30, 2001. We have the option to expand the proceeds from the
offering to a maximum of $10,000,000. We also have the option of extending the
escrow for up to 60 days. The proceeds from the offering will be used for
corporate capital requirements and other corporate purposes.
Page
Independent Auditor's Report.........................................F-2
Consolidated Balance Sheets - December 31, 2000 and 1999.............F-3
Consolidated Statements of Operations - For the Years Ended
December 31, 2000, 1999 and 1998..............................F-4
Consolidated Statement of Stockholders' Equity - For the Years Ended
December 31, 2000, 1999 and 1998................................F-5
Consolidated Statements of Cash Flows - For the Years Ended
December 31, 2000, 1999 and 1998..............................F-6
Notes to Consolidated Financial Statements...........................F-8
BETA OIL "&" GAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
See accompanying notes to consolidated financial statements.
F-3
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------- ------------------
------------------- ------------------
CURRENT ASSETS:
Cash $ 1,536,186 $ 1,448,655
Accounts receivable
Oil and gas sales 2,766,405 745,493
Other 95,439 1,178
Prepaid expenses 200,615 104,241
---------------- ----------------
Total current assets 4,598,645 2,299,567
OIL AND GAS PROPERTIES, at cost (full cost method)
Evaluated properties 43,110,463 9,810,198
Unevaluated properties 13,450,347 12,091,627
Less - accumulated amortization of full cost pool (6,354,905) (3,797,227)
---------------- ----------------
Net oil "&" gas properties 50,205,905 18,104,598
OTHER OPERATING PROPERTY AND EQUIPMENT, at cost
Gas gathering system 1,454,212 -
Support equipment 1,505,496 -
Other 114,672 38,303
Less - accumulated depreciation (158,918) (26,072)
----------------- -----------------
Net other operating property and equipment 2,915,462 12,231
OTHER ASSETS 746,140 465,079
---------------- ----------------
TOTAL ASSETS $ 58,466,152 $ 20,881,475
================ ================
CURRENT LIABILITIES:
Current portion of long-term debt $ 89,209 $ 28,224
Accounts payable, trade 629,696 225,174
Income taxes payable 198,650 -
Other accrued liabilities 147,853 11,901
---------------- ----------------
Total current liabilities 1,065,408 265,299
LONG-TERM DEBT, less current portion 13,814,034 27,939
DEFERRED INCOME TAXES 3,526,304 -
COMMITMENTS AND CONTINGENCIES (Note 4, 6, and 9) - -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 5,000,000
shares authorized; none issued or
outstanding - -
Common stock, $.001 par value; 50,000,000
shares authorized; 12,340,951 and
9,400,124 shares issued and outstanding
at December 31, 2000 and 1999,
respectively 12,341 9,400
Additional paid-in capital 46,592,976 28,549,313
Accumulated deficit (6,544,911) (7,970,476)
----------------- -----------------
Total stockholders' equity 40,060,406 20,588,237
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,466,152 $ 20,881,475
================ ================
BETA OIL "&" GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes to consolidated financial statements.
F-4
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
------------------- ------------------ ------------------
REVENUES:
Oil and gas sales $ 8,037,234 $ 1,199,480 $ -
Field services 320,633 - -
---------------- ---------------- -----------------
Total revenue 8,357,867 $ 1,199,480 -
---------------- ---------------- -----------------
COSTS AND EXPENSES:
Lease operating expense 1,368,788 81,538 -
Field services 147,325
General and administrative 2,141,005 1,418,240 746,769
Impairment expense - 1,224,962 1,670,691
Depreciation and amortization expense 2,693,439 914,233 11,883
---------------- ---------------- ----------------
Total costs and expenses 6,350,557 3,638,973 2,429,343
---------------- ---------------- ----------------
INCOME (LOSS) FROM OPERATIONS 2,007,310 (2,439,493) (2,429,343)
---------------- ----------------- ----------------
OTHER INCOME (EXPENSE):
Interest expense (393,008) (2,966,651) -
Interest income 105,563 21,741 44,843
---------------- ---------------- ----------------
Total other income (expense) (287,445) (2,944,910) 44,843
----------------- ----------------- ----------------
INCOME (LOSS) BEFORE TAX PROVISION 1,719,865 (5,384,403) (2,384,500)
PROVISION FOR INCOME TAXES (294,300) - -
----------------- ---------------- -----------------
NET INCOME (LOSS) $ 1,425,565 $ (5,384,403) $ (2,384,500)
=============== ================= ================
BASIC NET INCOME (LOSS) PER COMMON SHARE $ 0.13 $ (0.66) $ (0.37)
=============== =============== ===============
DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.13 $ (0.66) $ (0.37)
=============== =============== ===============
BETA OIL "&" GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998.
See accompanying notes to consolidated financial statements.
F-5
Additional Total
Common Stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------------------- ------------------- ------------------- ------------------- --------------------
BALANCES, January 1, 1998 5,565,648 $ 5,566 $ 9,246,217 $ (201,573) $ 9,050,210
Issuance of common stock, net of offering costs 1,458,844 1,458 6,547,174 - 6,548,632
Warrants issued for properties 5,000 5 24,995 - 25,000
Salary contributed to Beta - - 60,000 - 60,000
Net loss - - - (2,384,500) (2,384,500)
---------------- ---------------- ---------------- ---------------- ----------------
BALANCES, December 31, 1998 7,029,492 7,029 15,878,386 (2,586,073) 13,299,342
Issuance of shares for bridge note financing 459,000 459 2,647,641 - 2,648,100
Salary contributed to Beta - - 10,000 - 10,000
Warrants issued to consultants - - 126,890 - 126,890
Warrants issued for properties - - 102,135 - 102,135
Issuance of shares for warrant exercises 446,142 446 2,052,174 - 2,052,620
Issuance of shares in initial public offering, net 1,465,490 1,466 7,732,087 - 7,733,553
Net loss - - - (5,384,403) (5,384,403)
---------------- --------------- ---------------- ------------------ -----------------
BALANCES, December 31, 1999 9,400,124 9,400 28,549,313 (7,970,476) 20,588,237
Issuance of shares for warrant exercises 665,827 666 3,114,473 - 3,115,139
Issuance of shares for option exercises 15,000 15 89,985 - 90,000
Issuance of shares upon merger 2,250,000 2,250 14,352,750 - 14,355,000
Issuance of shares for purchase of note 10,000 10 86,240 - 86,250
Warrants issued for purchase of note - - 226,030 - 226,030
Warrants issued to consultants - - 128,338 - 128,338
Warrants issued for property - - 45,847 - 45,847
Net income - - - 1,425,565 1,425,565
---------------- ---------------- ---------------- ---------------- ----------------
BALANCES, December 31, 2000 12,340,951 $ 12,341 $ 46,592,976 $ (6,544,911) $ 40,060,406
================ ================ ================ ================= ================
BETA OIL "&" GAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BETA OIL "&"GAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Continued
F-6
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
------------------- ------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,425,565 $ (5,384,403) $ (2,384,500)
Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,693,439 914,233 11,883
Gain on sale of equipment (2,915) - -
Amortization of notes payable discount and debt
issuance costs - 2,754,000 -
Impairment expense - 1,224,962 1,670,691
Warrants issued to consultants 128,338 126,890 -
Salary contributed to Beta - 10,000 60,000
Change in operating assets and liabilities:
Accounts receivable (1,140,077) (736,993) (9,678)
Prepaid expenses (45,109) (89,290) (12,352)
Accounts payable, trade 535 (85,596) (496,703)
Income taxes payable 198,650 - -
Commissions payable - - (25,329)
Accrued payroll - 3,072 (16,485)
Other accrued expenses (29,345) 1 470 (13,200)
---------------- --------------- ----------------
Net cash provided by (used in) operating activities 3,229,081 (1,262,655) (1,215,673)
---------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Oil and gas property expenditures (6,666,327) (6,945,695) (8,928,201)
Change in other assets (278,287) (299,051) (166,028)
Gas gathering and equipment expenditures (39,261) - -
Cash acquired in merger 895,097 - -
Proceeds received from equipment sale 100,000 - -
Acquisition of other (52,942) (1,947) (2,762)
---------------- ----------------- -----------------
Net cash used in investing activities (6,041,720) (7,246,693) (9,096,991)
----------------- ----------------- -----------------
BETA OIL "&" GAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Continued
F-7
See accompanying notes to consolidated financial statements
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
------------------- ------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net - 7,733,553 6,548,632
Proceeds from exercise of warrants and options 3,205,139 2,052,620 -
Proceeds from premiums payable 51,409 71,527 -
Repayment of premiums payable (27,737) (15,364) -
Proceeds from bridge notes payable - 2,894,100 -
Repayment of bridge notes - (3,000,000) -
Proceeds from notes payable 295,376 - -
Repayment of notes payable (624,017) - -
Increase (decrease) in deferred offering costs - 23,524 (23,524)
---------------- ---------------- -----------------
Net cash provided by financing activities 2,900,170 9,759,960 6,525,108
---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 87,531 1,250,612 (3,787,556)
CASH AND CASH EQUIVALENTS, at beginning of period
1,448,655 198,043 3,985,599
---------------- ---------------- ----------------
CASH AND CASH EQUIVALENTS, at end of period
$ 1,536,186 $ 1,448,655 $ 198,043
================ ================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for:
Interest $ 393,009 $ 123,552 $ -
================ ================ =========
Income taxes $ 46,375 $ 5,475 $ -
================ ================ =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Fair value of common stock and warrants issued for:
Net assets acquired, net of cash, through
acquisition of RRE $ 13,459,903 $ - $ -
Oil and gas properties $ 45,847 $ 102,135 $ 25,000
Common stock and warrants issued
in settlement of debt $ 312,280 $ - $ -
BETA OIL "&" GAS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------------------
Consolidation - Beta Oil and Gas, Inc. is engaged in the business of
acquiring, exploring and developing oil and gas properties. Based on
2000 operating income, 100% of the Company's operations are from core
areas located in Texas, Oklahoma, Kansas and Louisiana. The Company
through one of its wholly-owned subsidiaries owns a 25% interest in an
undeveloped concession located in Western Queensland, Australia. The
accompanying consolidated financial statements include the accounts of
Beta Oil "&" Gas, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated and
consolidation.
Use of Estimates - The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting
principles requires the Company's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities, if any, at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. The estimates include oil and
gas reserve quantities which form the basis for the calculation of
amortization and impairment of oil and gas properties. Management
emphasizes that reserve estimates are inherently imprecise and that
estimates of more recent discoveries are more imprecise than those for
properties with long production histories. Actual results could differ
from these estimates and the difference could be material.
Oil and Gas Properties - The Company accounts for its oil and gas
producing activities using the full cost method of accounting as
prescribed by the United States Securities and Exchange Commission
("SEC"). Accordingly, all costs incurred in the acquisition,
exploration, and development of proved oil and gas properties,
including the costs of abandoned properties, dry holes, geophysical
costs, and annual lease rentals are capitalized. All general corporate
costs are expensed as incurred. In general, sales or other dispositions
of oil and gas properties are accounted for as adjustments to
capitalized costs, with no gain or loss recorded. Amortization of
evaluated oil and gas properties is computed on the units of production
method based on all proved reserves on a country-by-country basis.
Unevaluated oil and gas properties are assessed at least annually for
impairment either individually or on an aggregate basis. The net
capitalized costs of evaluated oil and gas properties (full cost
ceiling limitation) are not to exceed their related estimated future
net revenues discounted at 10%, and the lower of cost or estimated fair
value of unproved properties, net of tax considerations.
Joint Ventures - All exploration and production activities are
conducted jointly with others and, accordingly, the accounts reflect
only the Company's proportionate interest in such activities.
Revenue Recognition - The Company recognizes oil and gas sales upon
delivery to the purchaser. Under the sales method, the Company and
other joint owners may sell more or less than their entitled share of
the natural gas volume produced. Should the Company's excess sales of
natural gas exceed its share of estimated remaining recoverable
reserves a liability is recorded and revenue is deferred.
Furniture, Fixtures and Equipment - Furniture, Fixtures and equipment
are stated at cost. Provision for depreciation and amortization on
property and equipment is calculated using the straight-line and
accelerated methods over the estimated useful lives (ranging from 3 to
5 years) of the respective assets. The cost of normal maintenance and
repairs is charged to operating expense as incurred. Material
expenditures, which increase the life of an asset, are capitalized and
depreciated over the estimated remaining useful life of the asset. The
cost of properties sold, or otherwise disposed of, and the related
accumulated depreciation or amortization are removed from the accounts,
and any gain or losses are reflected in current operations.
Impairment of Long-Lived Assets - In the event that facts and
circumstances indicate that the costs of long-lived assets, other than
oil and gas properties, may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset
would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value is required.
Impairment of oil and gas properties is evaluated subject to the full
cost ceiling as described under oil and gas properties.
Income Taxes - The Company accounts for income taxes using the asset
and liability method wherein deferred taxes and liabilities are
recognized for the future tax consequences attributable to differences
between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which temporary differences are expected
to be recovered or settled.
Concentrations of Credit Risk - Credit risk represents the accounting
loss that would be recognized at the reporting date if counterparties
failed completely to perform as contracted. Concentrations of credit
risk (whether on or off balance sheet) that arise from financial
instruments exist for groups of customers or counter parties when they
have similar economic characteristics that would cause their ability to
meet contractual obligations to be similarly affected by changes in
economic or other conditions described below. In accordance with FASB
Statement No. 105, Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk, the credit risk amounts shown in cash
and accounts receivable do not take into account the value of any
collateral or security.
The Company operates in one segment, the oil and gas industry. A
geographic concentration exists because the Company's customers are
generally located within the Central United States. Financial
instruments that subject the Company to credit risk consist principally
of oil and gas sales, which are based solely on short-term purchase
contracts from various customers with related accounts receivable
subject to credit risk.
In the table below are the purchasers that each accounted for 10% or
more of the Company's revenue during the specified years.
2000 1999
----------------- -----------------
IP Petroleum 31% 53%
Duke Energy 19% -
Cokinos Energy 13% 38%
Allegro Investments 12% -
At December 31, 2000, the Company maintained cash balances with a
commercial bank which were approximately $1,348,700 in excess of FDIC
insurance limits.
Fair Value of Financial Instruments - The estimated fair values for
financial instruments under FASB Statement No. 107, Disclosures about
Fair Value of Financial Instruments, are determined at discrete points
in time based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. The estimated
fair value of cash, cash equivalents, account receivable and accounts
payable approximates their carry value due to their short-term nature.
The estimated fair value of long-term debt approximates its carrying
value because it carries interest rates which approximates market
rates.
Stock Based Compensation - The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB25) and related interpretations in accounting for its
employee stock options. In accordance with FASB Statement No. 123
Accounting for Stock-Based Compensation (FASB123), the Company will
disclose the impact of adopting the fair value accounting for employee
stock options. Transactions in equity instruments with non-employees
for goods or services have been accounted for using the fair value
method as prescribed by FASB123.
Hedging Activities - The Company uses derivative commodity instruments
on a limited basis to manage commodity price risk associated with
future natural gas and crude oil production, but does not use them for
speculative purposes. The Company's commodity price hedging program
utilizes swap contracts. To qualify as a hedge, these contracts must
correlate to anticipated future production such that the Company's
exposure to the effects of commodity price changes is reduced. The
gains and losses related to these hedging transactions are recognized
as adjustments to revenue recorded for the related production.
Effective July 1, 2000, the Company has committed for one year to sell
985,500 Mmbtu of natural gas at a price of $3.085 per Mmbtu,
representing approximately 30% of the Company's average daily gas
production.
Earnings Per Share - Basic EPS is calculated by dividing the income or
loss available to common shareholders by the weighted average number of
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted in to common stock.
Statement of Cash Flows - For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Impact of Recently Issued Standards - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133 (FASB133), "Accounting for Derivative Instruments and
Hedging Activities." The FASB has subsequently issued Statement No. 137
and Statement No. 138 which are amendments to FASB133. FASB133, as
amended, requires that an entity recognize all derivatives as assets or
liabilities in the statement of financial position and measure those
instruments at fair value. FASB133, as amended, is effective for fiscal
years beginning after June 15, 2000. FASB133, as amended, cannot be
applied retroactively and must be applied to (a) derivative instruments
and (b) certain derivative instruments embedded in hybrid contracts.
The Company adopted SFAS133, as amended, beginning January 1, 2001.
Management does not believe the adoption of FASB133 will have a
material impact on the Company's financial position or results of
operation.
2. ACQUISITIONS AND OIL AND GAS OPERATIONS:
Acquisitions - On August 30, 2000, the Company closed the previously
reported Agreement and Plan of Merger ("Agreement") to acquire 100%
interest in Red River Energy, Inc. ("RRE" now Beta Operating Company,
L.L.C.). The acquisition was consummated through a merger ("Merger")
between Beta Acquisition Company, Inc., a wholly-owned subsidiary of
the Company, and RRE following approval of the Agreement. The effective
date of the Merger was September 1, 2000.
The acquisition, recorded under the purchase method of accounting,
included the acquisition of the net assets of RRE with a value
calculated to be $14,355,000 assuming an average Beta common stock
price of $6.38 per share with 2,250,000 shares issued to the
stockholders of RRE. A portion of the purchase price has been allocated
to assets acquired and liabilities assumed of RRE based on the fair
market value, which approximated book values, except for evaluated oil
and gas properties which were increased by $13,459,903 to their
estimated fair value which was determined based on an independent
reserve report. This amount will be included in the full cost
amortization base of the Company. The actual results of operations from
RRE have been included in the accompanying financial statements since
the effective date of the Merger, September 1, 2000.
Unaudited pro forma operating results for the Company, assuming the
acquisition of RRE occurred on January 1, 2000, are as follows:
FOR THE YEARS ENDED DECEMBER 31,
2000 1999
-------------------- -----------------
Revenue $ 11,940,452 $ 4,388,238
================ ================
Net income (loss) $ 713,235 (5,018,232)
================ ================
Basic earnings per share $ .07 $ (0.48)
================ ==============
Diluted earnings per share $ .06 $ (0.48)
================ ==============
United States Foreign Total
------------------- ------------------ ------------------
2000 Capitalized costs:
Evaluated properties $ 41,429,542 $ 1,680,921 $ 43,110,463
Unevaluated properties 13,326,778 123,569 13,450,347
---------------- ---------------- ----------------
54,756,320 1,804,490 56,560,810
Accumulated depreciation, depletion,
amortization and impairment (4,673,635) (1,681,270) (6,354,905)
---------------- ---------------- ----------------
Net capitalized costs $ 50,082,685 $ 123,220 $ 50,205,905
================ ================ ================
Cost incurred:
Property acquisition (1) $ 30,658,876 $ - $ 30,658,876
Exploration 3,514,875 5,126 3,520,001
Development 480,109 - 480,109
---------------- ---------------- ----------------
Total costs incurred $ 34,653,860 $ 5,126 $ 34,658,986
================ ================ ================
1999 Capitalized costs:
Evaluated properties $ 8,128,928 $ 1,681,270 $ 9,810,198
Unevaluated properties 11,973,532 118,095 12,091,627
---------------- ---------------- ----------------
20,102,460 1,799,365 21,901,825
Accumulated depreciation, depletion,
amortization and impairment (2) (2,115,957) (1,681,270) (3,797,227)
---------------- ---------------- ----------------
Net capitalized costs $ 17,986,503 $ 118,095 $ 18,104,598
================ ================ ================
Cost incurred:
Property acquisition $ 1,810,332 $ 114,632 $ $ 1,924,964
Exploration 5,122,866 - 5,122,866
Development - - -
---------------- ---------------- ----------------
Total costs incurred $ 6,933,198 $ 114,632 $ 7,047,830
================ ================ ================
--------------- ----------------
1998 Capitalized costs:
Evaluated properties $ 1,763,082 $ 1,624,218 $ 3,387,300
Unevaluated properties 11,426,732 39,963 11,466,695
---------------- ---------------- ----------------
13,189,814 1,664,181 14,853,995
Accumulated depreciation, depletion,
amortization and impairment (3) (46,473) (1,624,218) (1,670,691)
---------------- ---------------- ----------------
Net capitalized costs $ 13,143,341 $ 39,963 $ 13,183,304
================ ================ ================
Cost incurred:
Property acquisition $ 2,808,123 $ 323,463 $ 3,131,586
Exploration 4,510,897 1,310,718 5,821,615
Development - - -
---------------- ---------------- ----------------
Total costs incurred $ 7,319,020 $ 1,634,181 $ 8,953,201
================ ================ ================
(1) Includes $24,845,227 related to the properties acquired in the Merger and
$3,526,304 related basis from deferred taxes.
(2) At December 31, 1999, the total costs in evaluated properties exceeded
their net realizable values and accordingly an impairment write-down of
$1,224,962 was recorded.
(3) In 1998 the Company, through its wholly-owned subsidiary Beta Australia,
L.L.C., participated in the drilling of two offshore test wells as per the
terms of two petroleum licenses covering certain acreage in Australia. The
wells were completed as dry holes and the associated acquisition and
exploration costs totaling $1,624,218 were transferred to evaluated
properties and charged to impairment expense.
Evaluated oil "&" gas properties
United States - During the year ended December 31, 2000, Beta
participated in the drilling of 21 wells and the associated property
acquisition and exploration costs associated with the wells were
transferred to evaluated properties. Amortization expense was
$2,557,678 with $7.98 per barrel for equivalent units of oil and gas
produced. Natural gas is converted to equivalent units of oil on the
basis of six MCF of gas to one equivalent barrel of oil.
During the year ended December 31, 1999, Beta participated in the
drilling of 19 wells within the United States. The property acquisition
and exploration costs associated with the wells were transferred to
evaluated properties. It was determined that the total costs in the
U.S. evaluated properties cost pool exceeded their net realizable
value. Accordingly, an impairment write-down of $1,167,910 was recorded
for the year ended December 31, 1999. Production commenced during the
year and depletion expense of approximately $901,573 was recorded with
$11.13 per barrel for equivalent units of oil and gas produced. Natural
gas is converted to equivalent units of oil on the basis of six MCF of
gas to one equivalent barrel of oil.
During the year ended December 31, 1998 Beta participated in the
drilling of 6 wells within the United States. The property acquisition
and exploration costs associated with the wells were transferred to
evaluated properties and were evaluated for impairment. It was
determined that the capitalized costs associated with the drilling of
these properties exceed their net realizable value by $46,473.
Accordingly, an impairment write-down of $46,473 was recorded for the
year ended December 31, 1998. Since all of the proved reserves
associated with the wells were non-producing or behind pipe and no
production had occurred as of December 31, 1998 with no depletion
expense was recorded during the year.
Foreign - There was no activity outside of the United States for the
year ended December 31, 2000.
During 1998, Beta, through its wholly owned subsidiary, BETAustralia,
LLC secured an option to participate for a 5% working interest in two
petroleum licenses covering 2,798,000 acres (approximately 4,372 square
miles). Per the terms of the option agreement, Beta exercised its
option to earn a 5% working interest by participating in the drilling
of two offshore test wells in the license areas. The wells were
completed as dry holes. The property acquisition and exploration costs
associated therewith totaling $1,624,218 were transferred to evaluated
properties and charged to impairment expense during the year ended
December 31, 1998. The exploration licenses expired in December 1998.
Additional costs of $57,052 were transferred to and charged to
impairment expense during 1999.
United States Foreign Total
------------------- ------------------- -----------------
Revenues $ 8,037,234 $ - $ 8,037,234
Production costs (1,368,788) - (1,368,788)
Depreciation, depletion and amortization (2,557,678) - (2,557,678)
---------------- ---------------- ----------------
Results of operations for producing activities
(excluding generative administrative,
financing costs and income taxes) $ 4,110,768 $ - $ 4,110,768
================ ================ ================
1999:
Revenues $ 1,199,480 $ - $ 1,199,480
Production costs (81,538) - (81,538)
Depreciation, depletion and amortization (901,573) - (901,573)
Impairment expense (1,167,910) (57,052) (1,224,962)
---------------- ---------------- ----------------
Results of operations for producing activities
(excluding generative administrative,
financing costs and income taxes) $ (951,541) $ (57,052) $ (1,008,593)
================ ================ ================
1998:
Revenues $ - $ - $ -
Production costs - - -
Depreciation, depletion and amortization - - -
Impairment expense (46,473) (1,624,218) (1,670,691)
---------------- ---------------- ----------------
Results of operations for producing activities
(excluding generative administrative,
financing costs and income taxes) $ (46,473) $ (1,624,218) $ (1,670,691)
================ ================ ================
Unevaluated oil "&" gas properties
At December 31, 2000, 1999 and 1998, unevaluated properties consists of
the following:
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
------------------ ------------------- -------------------
Unproved $ 8,547,825 $ 7,056,414 $ 6,476,043
Exploration 4,902,522 5,035,213 4,990,652
---------------- ---------------- ----------------
$ 13,450,347 $ 12,091,627 $ 11,466,695
================ ================ ================
United States - As Beta's properties are evaluated through exploration,
they will be included in the amortization base. Costs of unevaluated
properties in the United States at December 31, 2000 and 1999 represent
property acquisition and exploration costs in connection with Beta's
Louisiana and Texas prospects. The prospects and their related costs in
unevaluated properties have been assessed individually and no
impairment charges were considered necessary for the United States
Properties for any of the periods presented. The current status of
these prospects is that seismic has been acquired, processed and is
being interpreted on an ongoing basis on the subject lands within the
prospects. Drilling commenced on the prospects during the first quarter
of 1999 and will continue in future periods. As the prospects are
evaluated through drilling in future periods, the property acquisition
and exploration costs associated with the wells drilled will be
transferred to evaluated properties and become part of the amortization
basis.
FOR THE YEARS ENDED DECEMBER 31,
2000 1999
----------------- -------------------
Notes payable under financing agreements for insurance premiums,
bearing interest at rates ranging from 8.50% to 9.75%, due in
monthly installments totaling $5,709 including interest, with
maturity dates beginning June 1, 2001 through December 31, 2001.
$ 79,832 $ 56,163
Note payable under a revolving credit agreement, due October 1, 2001,
bearing interest at a LIBOR based rate plus 1.8% (8.56% at December
31, 2000), accrued interest payable monthly, collateralized by
substantially all oil and gas properties owned by one of the
Company's subsidiaries. Additionally, the Company has guaranteed
the debt. 13,784,650 -
Note payable, due in monthly installments of $1,230 including interest
maturing on December 19, 2003, collateralized by equipment.
38,761 -
---------------- ----------------
$ 13,903,243 56,163
Less current portion 89,209 28,224
---------------- ----------------
$ 13,814,034 $ 27,939
================ ================
Cash interest expense $ 120,555
Amortization of note discount and fair market value of 459,000 shares 2,754,000
Amortization of deferred loan costs 89,100
-----------------
Bridge note interest expense for the year ended December 31, 1999 $ 2,963,655
=================
The remaining $2,996 represents cash interest expense incurred in
connection with financing insurance premiums.
AVERAGE EXERCISE
NUMBER OF SHARES PRICE PER SHARE
-------------------- -------------------
BALANCE, January 1, 1998 1,528,222 $ 4.47
Granted 969,441 6.45
Forfeited/Cancelled - -
Exercised - -
---------------- ----------------
BALANCE, December 31, 1998 2,497,663 $ 5.24
Granted 319,122 6.48
Forfeited/Cancelled (87,296) 6.54
Exercised (446,142) 4.60
---------------- ----------------
BALANCE, December 31, 1999 2,283,347 5.49
Granted 400,000 9.26
Forfeited/Cancelled (60,149) 7.75
Exercised (665,827) 4.68
---------------- ----------------
BALANCE, December 31, 2000 1,957,371 $ 6.46
================ ================
The Company is entitled to call certain warrants at any time after
the date that its common stock is traded on any exchange for a 10 day
period at a target price, ranging from $7.00 through $10.00, before the
Company may call those warrants. At December 31, 2000, 440,679 warrants
were callable with a weighted average exercise price of $7.30 per
share. The remaining 1,516,692 warrants outstanding are non-callable
warrants with a weighted average price of $6.22 per share. If not
previously exercised, 474,986 warrants will expire in 2002, 823,263
warrants will expire in 2003, 319,122 warrants will expire in 2004 and
340,000 warrants will expire in 2005.
Stock Option Plan -
In August 2000, the Company adopted the 1999 Incentive and Nonstatutory
Stock Option Plan (the 1999 plan) covering 700,000 shares which had
previously been approved by the Board of Directors in August 1999. The
1999 plan is a "dual plan" which provides for the grant of both
incentive stock options and non-qualified stock options and was
designed to attract and retain the services of employees, officers,
directors, and consultants. The price of the options granted pursuant
to the plan shall not be less than 100% of the fair market value of the
shares on the date of grant. Prices for incentive options granted to
employees who own 10% or more of the Company's stock is at least 110%
of market value at date of grant. The plan will be administered by a
compensation committee consisting of two or more disinterested
non-employee board members whom will decide the vesting period of the
options, if any, and no option will be exercisable after ten years from
the date granted. The stock option plan will continue in effect for 10
years from August 20, 1999, unless sooner terminated by the Board of
Directors. Unless otherwise provided by the Board of Directors, the
stock options granted under the stock option plan will terminate
immediately prior to the consummation of a proposed dissolution or
liquidation of the Company.
During August 1999, the Company granted options to purchase 97,500
shares of common stock to employees under the 1999 plan which did not
become effective until the shareholders had approved the 1999 stock
option plan. The options were granted with an exercise prices of $6.00
which represented an amount in excess of 110% of the fair market value
on the date of grant. The options vested immediately expire in 2009.
In September 2000, the Company granted options to purchase 51,000
shares of common stock to employees under the 1999 plan. The options
were granted with an exercise price of $9.00 per share which was
greater than the market price on the date of grant. The options expire
in 2009 and vest over three years.
In December 2000, the Company granted options to purchase 135,000
shares of common stock to employees under the 1999 plan. The options
were granted with an exercise price of $7.70 per share which was
greater than the market price on the date of grant. The options vested
immediately and expire in 2009.
The following table sets forth activity for all options granted under
the 1999 Plan:
NUMBER OF SHARES AVERAGE EXERCISE
PRICE PER SHARE
-------------------- ----------------------
BALANCE, December 31, 1999 - -
Granted 283,500 $ 7.35
Forfeited/Cancelled (2,500) 6.00
Exercised (15,000) 6.00
----------------- ---------------
BALANCE, December 31, 2000 266,000 $ 7.44
================ ===============
At December 31, 2000, options to purchase 228,000 shares were
exercisable at prices ranging from $6.00 to $9.00 per share. The
remaining 38,000 options outstanding become exercisable with an
exercise prices of $9.00 per share through March 2004.
If not previously exercised the outstanding plan options will expire as
follows:
AVERAGE EXERCISE
NUMBER OF PRICE PER SHARE
PERIOD ENDED DECEMBER 31, SHARES
----------------------------------------- -------------------- ---------------------
2009 80,000 $ 6.00
2010 186,000 8.06
---------------- ---------------
266,000 $ 7.44
================ ===============
As stated in Note 2, the Company has not adopted the fair value
accounting prescribed by FASB123 for employees. Had compensation cost
for stock options and warrants issued to employees been determined
based on the fair value at grant date for awards in 1999 and 2000
consistent with the provisions of FASB123, the Company's net loss and
net loss per share would have been adjusted to the proforma amounts
indicated below:
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
------------------ ------------------- -----------------
Net income (loss) $ 900,618 $ (5,470,000) $ (2,473,000)
================ ================ ================
Basic and diluted net income
(loss) per common share $ .08 $ (0.67) $ (0.39)
================ ================ ================
The fair value of each option and warrant granted to employees was
estimated on the date of grant using the Black-Scholes option-pricing
model using the following assumptions: risk-free interest rates ranging
from 5.07% to 6.05%, expected life of two to three years; dividend
yield of 0%; and expected volatility ranging from 0% to 54.42%. The
weighted-average fair value of the options on the grant date for the
years ended December 31, 2000, 1999 and 1998 was $3.18, $ 1.68 and
$4.31 per share, respectively.
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
---------------------- ------------------- -------------------
Current
Federal $ 51,000 $ - $ -
State 243,300 - -
---------------- ------------ ------------
$ 294,300 $ - $ -
================ ================== ============
Deferred
Federal - - -
State - - -
---------------- ---------------- ----------
$ - $ - $ -
================ ================ ==========
The actual income tax benefit (expense) differs from the expected tax
benefit (expense) as computed by applying the U.S. Federal corporate
income tax rate of 34% for each period as follows:
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
---------------------- ------------------- -------------------
Amount of expected tax benefit
(expense) $ (569,287) $ 1,829,677 $ 810,458
Non-deductible expenses (48,207) (13,846) (23,759)
State taxes, net (143,748) (800) (800)
Change in beginning balance of
valuation allowance 175,473 (1,815,831) (786,699)
Alternative minimum tax (51,000) - -
Utilization of net operating loss
carry-forwards 342,469 - -
---------------- ---------------- --------
$ (294,300) $ (800) $ (800)
================ ================ ================
FOR THE YEARS ENDED DECEMBER 31,
2000 1999
-------------------- -------------------
Long-term deferred tax assets (liabilities):
Net operating loss carry-forwards $ 4,218,944 $ 3,989,087
Equipment 1,478,797 130
Oil and gas properties (9,224,045) (695,387)
---------------- -----------------
(3,526,304) 3,293,830
Valuation allowance - (3,293,830)
---------------- -----------------
Net long-term deferred tax asset (liability) $ (3,526,304) $ -
================ =========
At December 31, 2000, the Company has Federal net operating loss carry
forward of approximately $11,624,000 which expire in the years 2013
through 2020. The Company has California net operating loss carry
forwards for the year ended December 31, 2000 of $6,590,000 which
expire in 2006.
Utilization of the tax net operating loss carry-forward may be limited
in the event a 50% or more change in ownership occurs within a
three-year period.
9. OTHER:
-----
Related Party Transactions -
For the years ended December 31, 1999 and 1998, a director of the
Company was paid $75,000 and $60,000, respectively, pursuant to a
consulting contract for management and geologic evaluation services. In
addition, the director subscribed to 350,000 shares of the Company's
common stock at a price of $0.05 per share ("founder shares"). The
Director became an employee of the Company effective January 2000.
A former director of the Company subscribed to 50,000 founder shares at
a price of $0.05 per share. The legal firm with whom the director was a
shareholder, also subscribed to 20,000 founder shares at a price of
$0.05 per share. The legal firm represented the Company as general
counsel at that time. The legal firm also received 20,000 common stock
purchase warrants presently exercisable at a price of $6.00 per share
until expiration on September 1, 2004.
Another director of the Company subscribed to 400,000 founder shares at
price of $0.05 per share. The Company has also entered into an
Exploration and Development Area of Mutual Interest Agreement in
Fremont County, Wyoming with the Director. The Company has agreed to
purchase certain geology and lease acreage approximating 1,627 acres in
a prospect located therein for $154,800 from said Director. The Company
will acquire a 75% working interest in such prospect. The Director will
back in to a 25% working interest after our investment from the first
two wells drilled if the prospect pays out. All future exploration and
development costs will be shared accordingly with the Company being
responsible for 75% and the Director being responsible for 25% of such
costs.
Another Director of the Company is a partner with Dyad Petroleum
Company in Midland, Texas. The Company purchased a 20% interest in a
property owned by an affiliate of Dyad at a cost of $100,000 in January
1999, prior to the time the Director joined the Company's Board.
Employment Contracts -
The Company has executed an employment contract dated June 23, 1997
with its president who also serves as a director. The contract provides
for an indefinite term of employment at an annual salary of $150,000
commencing in October of 1997 and an annual car allowance of up to
$12,000. The contract may be terminated by the Company without cause
upon the payment of the following:
(a) Options to acquire the common stock of the Company in an amount
equal to 10% of the then issued and outstanding shares containing
a five year term, piggyback registration rights and an exercise
price equal to 60% of the fair market value of the shares during
the sixty day period of time preceding the termination notice,
such amount not to exceed $3.00 per share.
(b) A cash payment equal to two times the aggregate annual compensation.
(c) In the event of termination without cause, all unvested securities
issued by the Company to the Employee shall immediately vest and
the Company shall not have the right to terminate or otherwise
cancel any securities issued by the Company to the Employee.
On June 23, 1997, the Company entered into an employment agreement with
a shareholder. The agreement provided for a two-year term at an annual
salary of $60,000 for services as "Vice President of Capital Markets".
The agreement has subsequently expired. Under separate agreement, the
Shareholder subscribed to 350,000 shares of Founders Shares at a price
of $0.05 per share. The subscription agreement provides that the shares
shall vest over a three-year period.
Deferred Compensation -
In 1998, the Company began to offer a simple individual retirement
account (IRA) plan for all employees meeting certain eligibility
requirements. Employees may contribute up to 3% of the employees
eligible compensation. The Company's contribution to the plan for the
years ended December 31, 2000 and 1999 was $ 15,456 and $4,693,
respectively.
10. OTHER ASSETS:
------------
Other assets of approximately $746,000 and $465,000 at December 31,
2000 and December 31, 1999, respectively, consisted primarily of
unapplied well prepayments.
11. NET INCOME (LOSS) PER COMMON SHARE:
The following represents the calculation of net income (loss) per
common share:
2000 1999 1998
------------------ ------------------ ------------------
Basic
Net income (loss) applicable to common
shareholders $ 1,425,565 $ (5,384,403) $ (2,384,500)
================ ================= =================
Weighted average number of shares 10,616,692 8,160,000 6,366,923
================ ================ ================
Basic earnings (loss) per share $ .13 $ (.66) $ (.37)
================= ================= =================
Diluted
Net income (loss) applicable to common
shareholders $ 1,425,565 $ (5,384,403) $ (2,384,500)
================ ================= =================
Weighted average number of shares 10,616,692 8,160,000 6,366,923
Common stock equivalent shares representing
shares issuable upon exercise of stock
options and warrants 664,721 - -
---------------- ---------------- -----------------
Weighted average number of shares used in
calculation of diluted income (loss) per share 11,281,413 8,160,000 6,366,923
================ ================ ================
Diluted earnings (loss) per share $ .13 $ (.66) $ (.37)
================= =================== ==================
PROVED RESERVES
OIL (BBLS) GAS (MCF)
------------------- --------------------
Proved reserves, December 31, 1997 - -
Extensions and discoveries 1,461 1,596,740
-------------- --------------
Proved reserves, December 31, 1998 1,461 1,596,740
Extensions and discoveries 13,932 4,228,627
Production (1,822) (475,065)
Revisions of previous estimates (370) (1,180,302)
---------------- ---------------
Proved reserves, December 31, 1999 13,201 4,170,000
Extensions and discoveries 19,153 2,308,520
Purchase of minerals in place 735,484 14,981,000
Production (32,617) (1,726,416)
Revision of previous estimates 78,749 (315,104)
---------------- ----------------
Proved reserves, December 31, 2000 813,970 19,418,000
=============== ==============
Standardized Measure of Discounted Future Net Cash Flows (unaudited) -
Statement of Financial Accounting Standards No. 69 prescribes
guidelines for computing a standardized measure of future cash flows
and changes therein relating to estimated proved reserves. The Company
has followed these guidelines which are briefly discussed below.
Future cash inflows and future production and development costs are
determined by applying year-end prices and costs to the estimated
quantities of oil and gas to be produced. Estimates of future income
taxes are computed using current statutory income tax rates including
consideration for estimated future statutory depletion and tax credits.
The resulting net cash flows are reduced to present value amounts by
applying a 10% discount factor.
The assumptions used to compute the standardized measure are those
prescribed by the Financial Accounting Standards Board and, as such, do
not necessarily reflect the Company's expectations for actual revenues
to be derived from those reserves nor their present worth. The
limitations inherent in the reserve quantity estimation process, as
discussed previously are equally applicable to the standardized measure
computations since those estimates are the basis for the valuation
process.
The following summary sets forth the Company's future net cash flows
relating to proved oil and gas reserves as of December 31, 2000, 1999
and 1998 based on the standardized measure prescribed in Statement of
Financial Accounting Standard No. 69:
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
-------------------- -------------------- -------------------
Future cash inflows $ 204,303,798 $ 9,141,659 $ 2,978,861
Future costs-
Production (28,592,624) (905,242) (343,478)
Development (1,123,359) (701,771) (81,621)
-------------------- -------------------- -------------------
Future net cash inflows before income
tax 174,587,815 7,534,646 2,553,762
Future income tax (49,221,755) -
-
-------------------- -------------------- -------------------
Future net cash flows 125,366,060 7,534,646 2,553,762
10% discount factor (53,907,406) (1,521,674) (837,154)
-------------------- -------------------- -------------------
Future net cash flows $ 71,458,654 $ 6,012,972 $ 1,716,608
==================== ==================== ===================
Changes in the Standardized Measure (unaudited) - The following are the
principal sources of changes in the standardized measure of discounted
future net cash flows for the years ended December 31, 2000, 1999 and
1998:
FOR THE YEARS ENDED DECEMBER 31,
2000 1999 1998
-------------------- -------------------- -------------------
Standardized measure, beginning of
year $ 6,012,972 $ 1,716,608 $ -
Sale of oil and gas produced, net of
production costs (6,668,446) (1,117,942) -
Purchase of minerals in place 77,595,310 - -
Extensions and discoveries 15,200,178 6,374,495 1,716,608
Changes in income taxes, net (28,056,400) - -
Changes in prices and costs 21,485,597 447,063 -
Changes in development costs 78,373 (443,525) -
Accretion of discount 601,297 171,661 -
Revisions of estimates and other (14,790,227) (1,135,388) -
-------------------- -------------------- -------------------
Standardized measure, end of year $ 71,458,654 $ 6,012,972 $ 1,716,608
==================== ==================== ===================
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 on the 30th day of March,
2001.
BETA OIL "&" GAS, INC.
Date: March 30, 2001
By: /s/ Steve A. Antry
---------------------------
Steve A. Antry
Chairman of the Board
of Directors and President
By: /s/ Joseph L. Burnett
------------------------------
Joseph L. Burnett
Chief Financial Officer, and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Steve Antry___ Chairman of the March 30, 2001
- -------------------
Steve Antry Board of Directors
and President
/s/ Joseph L. Burnett Chief Financial Officer, March 30, 2001
- ------------------------
Joseph L. Burnett and Principal Accounting Officer
R.T. Fetters Director March 30, 2001
- ---------------------
R.T. Fetters
/s/ Joe C. Richardson, Jr. Director March 30, 2001
- -------------------------------
Joe Richardson Jr.
/s/ John P. Tatum Director March 30, 2001
- -------------------------
John P. Tatum
/s/ Robert C. Stone, Jr. Director March 30, 2001
- -------------------------
Robert C. Stone, Jr.
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
3.1 Original Articles of Incorporation of Registrant incorporated by reference to Exhibit 3.1 of Betas
S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
3.2 Amended and Restated Bylaws of the Registrant, Dated October 29, 1998, incorporated by reference to
Exhibit 3.2 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
3.3 Certificate of Amendment of Articles of Incorporation of the Registrant, dated August 28, 2000.
10.1 Formosa Grande Prospect Agreement, Dated August 1, 1997, incorporated by reference to Exhibit
10.1 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.2 Texana Prospect Agreement, Dated July 15, 1997, incorporated by reference to Exhibit 10.2 of
Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.3 Ganado Prospect Agreement, Dated November 1, 1997, incorporated by reference to Exhibit 10.3 of
Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.4 T.A.C. Resources Agreement, Dated January 21, 1998, incorporated by reference to Exhibit 10.4 of
Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.5 Lapeyrouse Prospect Agreement, Dated October 13, 1997, incorporated by reference to Exhibit 10.5
of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.6 Rozel (Transition Zone) Prospect Agreement, Dated February 24,1998, incorporated by reference to
Exhibit 10.6 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.7 Stansbury Basin (Australia) Prospect Agreement, Dated February 1998, incorporated by reference to
Exhibit 10.7 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.8 Agreement With Jim Frimodig (Norcal), Dated October 27, 1997, incorporated by reference to
Exhibit 10.8 of Beta S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.9 Steve Antry Employment Agreement, Dated June 23,1997, incorporated by reference to Exhibit 10.9
of Beta S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.10 Steve Fischer, Employment Agreement, Dated June 23, 1997, incorporated by reference to Exhibit
10.10 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.11 J. Chris Steinhauser Warrant Agreement, Dated January 27, 1998, incorporated by reference to
Exhibit 10.11 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.12 R.T. Fetters Consulting Agreement, Dated June 23, 1997, incorporated by reference to Exhibit
10.12 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.13 Office Lease, Dated October 1997, incorporated by reference to Exhibit 10.13 of Betas Amendment
No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3, 1999 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt).
10.14 BWC Prospect Agreement, Dated April 1, 1998, incorporated by reference to Exhibit 10.14 of Betas
S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.15 Dahlia Financial Limited Consulting Agreement, Dated September 5, 1997, incorporated by reference
to Exhibit 10.15 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.16 St. Cloud Investments, Ltd., Dated March 12, 1998, incorporated by reference to Exhibit 10.16 of
Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.17 Beta Oil "&" Gas / Beta Capital Group Reciprocal Agreement, incorporated by reference to Exhibit
10.17 of Betas S-1 Registration Statement No. 333-68381 filed December 4, 1998 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-98-000005.txt).
10.18 Cobra Prospect Agreement Dated January 6, 1999, incorporated by reference to Exhibit 10.18 of
Betas Amendment No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3, 1999 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt).
10.19 Redfish Prospect Agreement Dated January 6, 1999, incorporated by reference to Exhibit 10.19 of
Betas Amendment No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3, 1999 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt).
10.20 Shark Prospect Agreement Dated January 6, 1999, incorporated by reference to Exhibit 10.20 of
Betas Amendment No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3, 1999 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt).
10.21 Cheniere Energy, Inc. Option Agreement Dated January 6, 1999, incorporated by reference to Exhibit
10.21 of Betas Amendment No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3, 1999 at
( http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt)
10.22 Dyad-Australia, Inc. Agreement Dated January 25, 1999, incorporated by reference to Exhibit 10.22
of Betas Amendment No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3, 1999 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt)
10.23 Note and Common Stock Purchase Agreement Dated March 19, 1999, incorporated by reference to
Exhibit 10.23 of Betas Amendment No. 2 to S-1/A Registration Statement No. 333-68381 filed May 3,
1999 at ( http://www.sec.gov/Archives/edgar/data/1059324/0001059324-99-000011.txt)
10.24 Northeast Hitchcock Agreement Dated July 30, 1999, incorporated by reference to Exhibit 10.24 of
Betas Form 10-K/A for the year 1999 filed March 30, 2000 at (
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-00-000007.txt)
10.25 Sarah White Agreement Dated July 30, 1999, incorporated by reference to Exhibit 10.25 of Betas
Form 10-K/A for the year 1999 filed March 30, 2000 at
http://www.sec.gov/Archives/edgar/data/1059324/0001059324-00-000007.txt)
Agreement and Plan of Merger by and between Red River Energy, Inc. and Beta Oil "&" Gas, Inc.,
10.26 incorporated by reference to Annex A of Betas 14A Definitive Proxy Statement dated August 14,
2000 at (
http://www.sec.gov/Archives/edgar/data/1059324/000105932400000042/0001059324-00-000042-0001.htm).
10.27 Revised Joint Development Agreement dated August 8, 2000 between Red River Energy, L.L.C. and
Avalon Exploration, Inc., incorporated by reference to Exhibit 10.27 of Betas Third Quarter Form
10-Q filed November 14, 2000 at (
http://www.sec.gov/Archives/edgar/data/1059324/000105932400000042/0001059324-00-000052.txt).
10.28 Purchase Agreement dated September 19, 2000 between Red River Energy, L.L.C. and Duke Energy
Financial Services, L.L.C., incorporated by reference to Exhibit 10.28 of Betas Third Quarter
Form 10-Q filed November 14, 2000 at (
http://www.sec.gov/Archives/edgar/data/1059324/000105932400000042/0001059324-00-000052.txt).
10.29 Mushroom Project Participation Agreement, Austin and Waller Counties, Texas, dated June 14, 2000.
10.30 Starboard Area Letter Agreement, Terrebone Parish, Louisiana dated June 16, 2000.
10.31 First Amended and Restated Revolving Credit Agreement Dated March 30, 1999.
10.32 First Amendment to First Amended and Restated Revolving Credit Agreement dated February 1, 2000.
10.33 Second Amendment to First Amended and Restated Revolving Credit Agreement dated June 15, 2000.
10.34 Third Amendment to First Amended and Restated Revolving Credit Agreement dated March 19, 2001.
10.35 Form of Placement Agent Agreement for Preferred Placement dated March 15, 2001.
21 List of Subsidiaries
23.2 Consent of Hein + Associates, LLP.
23.3 Consent of Ryder Scott and Associates.
99 The Amended 1999 Incentive and Nonstatutory Stock Option Plan, incorporated by reference to
Exhibit 99 of Betas 14A Definitive Proxy Statement dated August 14, 2000 at (
http://www.sec.gov/Archives/edgar/data/1059324/000105932400000042/0001059324-00-000042-0001.htm).