BENZ ENERGY LTD /CAN/ has filed a Form SB-2 with the United States Securities and Exchange Commission.
Click on the following hyperlink to view this filing:
freeedgar.com
Following is an excerpt therefrom:
SUBSTANTIAL CAPITAL REQUIREMENTS--WE HAVE SUBSTANTIAL CAPITAL REQUIREMENTS THAT
WE MAY BE UNABLE TO MEET.
We have experienced and expect to continue to experience substantial
working capital needs. Our ongoing capital requirements consist primarily of the
following items:
- funding the 1999 capital and exploration budget;
- payment for the recently completed 3-D survey at Old Ocean
Field in remaining installments totaling approximately
$3,338,000;
- payment of EnCap Credit Facility, the BOCP Credit Facility and
the Old Ocean Loan, all due July 31, 1999 in the principal
amounts of $12.0 million, $6.0 million and $2.2 million, plus
accrued interest, respectively;
- payment of certain trade payables of which approximately
$12,160,000 is past due as of June 30, 1999;
- payment of preferred dividends not otherwise payable in common
stock; and
- payment of interest on our outstanding 9% convertible
debentures and bank obligations.
Our 1999 net capital and exploration budget is $11.3 million
(excluding capitalized interest and overhead). Approximately $2.5 million of
the net capital and exploration budget remains to be used in 1999. The net
capital and exploration budget excludes expenditures anticipated to be funded
by related property sales. We plan to finance anticipated ongoing expenses
and our 1999 net capital and exploration budget with funds generated from the
following sources:
- available cash and cash investments;
- cash provided by operating activities;
- capital we believe we can raise through the Aquila Energy
Capital Corporation ("Aquila") Production Payment and sale
of equity;
- non-core asset sales and sales of excess interests in core
assets;
- a $4.0 million capital infusion from an affiliate of EnCap;
and
- capital raised in connection with our recently completed
offering of convertible preferred stock.
No assurance can be given as to the availability or terms of additional
financing that will be required. If adequate capital resources are not
available, we may be required to curtail our drilling, development and other
operations; may not be able to participate in operations proposed by others with
an interest in our properties and be
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subjected to applicable non-consent penalties; and may not be able to meet
certain of our existing contractual obligations, which as to any of the
foregoing would have a material adverse effect on us and our financial
condition.
IMPENDING MATURITY DATES--A SUBSTANTIAL AMOUNT OF OUR INDEBTEDNESS IS CURRENTLY
DUE OR PAST DUE AND WE MAY BE UNABLE TO REPAY OR REFINANCE THIS INDEBTEDNESS.
Our EnCap, BOCP and Old Ocean Credit Facilities will come due on
July 31, 1999. As to the indebtedness reflected by the Old Ocean Loan, all
lenders, other than affiliates of EnCap that are owed $100,000, elected to
convert their respective indebtedness and the mineral interests obtained in
connection with the Old Ocean Loan into our convertible preferred stock. We
repaid the $100,000 owed to affiliates of EnCap under the Old Ocean Loan and
expect to repay the indebtedness reflected by the EnCap Credit Facility and
the BOCP Credit Facility with funds obtained in connection with our recently
completed offering of convertible preferred stock and new funds anticipated
being received in connection with a new production payment arrangement with
Aquila. We are currently engaged in negotiations, but do not have a binding
agreement with respect to the Aquila facility. There can be no assurance that
this financing option will be consummated. We currently have an extension of
the maturity dates to July 31, 1999 with respect to the EnCap and BOCP Credit
Facilities, and the lenders thereunder have in the past granted maturity date
extensions, and we believe that EnCap Energy and BOCP will continue to extend
the maturity dates to provide us with sufficient time to obtain the new
financings. If the maturity dates under the EnCap and BOCP Credit Facilities
are not extended or we are unable to obtain sufficient new financings to
repay the EnCap Credit Facility and the BOCP Credit Facility, then we will be
in default under the applicable Credit Facility and the applicable lenders
will have the right to seek immediate repayment of the entire indebtedness
due thereunder and enforce their other remedies, which include the right to
foreclose on substantially all of our properties. Such a default will also
cause defaults under other material contracts to which we and our
subsidiaries are parties. Any of the foregoing actions could cause us to
cease operations.
On June 10, 1999, we were obligated to pay one-half of the $6.7
million cost of acquiring certain seismic materials relating to the Old Ocean
Prospect and were obligated to pay the remaining amounts 60 days after
delivery of the processed data. We paid $700,000 of the total amount due on
June 18, 1999, $2.6 million on July 9, 1999 and have reached an oral
agreement to pay the remaining balance by July 31, 1999. Funds for the final
payment are anticipated to come from the sale of approximately 37.5% of our
interest in the Old Ocean Prospect. We currently are in negotiation for the
sale of that interest, and have entered into a letter of intent with a
potential purchaser. Although we believe the sale will be consummated in time
for us to meet our payment obligations, there can be no assurance that the
sale will be consummated by that time or at all. If we are unable to complete
the transaction and are unable to satisfy our payment obligations by some
other means, we will be in default with respect to our obligations to the
company that has completed the seismic survey and with the other owner of an
interest in the Old Ocean Prospect. The defaults would subject us to the
possibility of losing our rights in the seismic materials and in a
substantial portion of our rights in the Old Ocean Prospect. The defaults
also will cause defaults under other material contracts to which we and our
subsidiaries are parties. Any of the foregoing actions would have a material
adverse effect on us and our financial condition.
TRADE PAYABLES--WE HAVE A SUBSTANTIAL AMOUNT OF PAST-DUE TRADE PAYABLES THAT WE
CURRENTLY DO NOT HAVE THE FUNDS TO PAY.
At June 30, 1999, we had outstanding approximately $14,377,000 of
accounts payable to industry partners and trade creditors. Approximately
$12,160,000 of this amount is past due. We have requested the holders of such
accounts payable to accept payment over an extended time. There can be no
assurance that a sufficient number of our creditors will accept the proposed
discounts or other payment terms; however, on July 12, 1999, we conducted a
meeting with our trade creditors, and a substantial number of them have
indicated that they will be willing to participate in our proposed repayment
plan.
We anticipate funding our payment obligations by using the proceeds to
be received from the new production payment that we are attempting to arrange,
sale of assets and production revenue. If a creditor is unwilling to participate
in any of our proposed repayment arrangements and we do not have sufficient
funds to pay that creditor, then the creditor may declare us in default and
pursue their available remedies against us. Those remedies could include, under
certain circumstances, placing us into involuntary bankruptcy.
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Bottom line: if this turkey doesn't get some more financing by the end of the week is will be bankrupt. |
