Company Name: Amtex Oil & Gas, Inc.
Public Availability Date: Apr. 13, 1978
INQUIRY LETTER 1
NOBLE, MOYLE & ROBERTS
2022 R STREET, N.W.
WASHINGTON, DC 20009
(202) 387-3292
December 06, 1977
Richard K. Wulff
Office of Chief Counsel
Division of Corporate Finance
Securities & Exchange Commission
500 North Capitol Street
Washington, D.C. 20549
Dear Mr. Wulff:
At our meeting last Friday, you suggested that I send you a memorandum outlining
the contractual arrangements between my client, Amtex Oil & Gas and the "issuer"
(fund raising firm) in New York. As you may recall, the "issuer" proposes to
raise funds through "private placements" with which to finance and purchase a
"turnkey" drilling program from Amtex. The enclosed agreement is representative
of the contractual arrangement proposed between Amtex and "issuer". On its lace
it would seen to limit Amtexs position to that of strictly an independent
contractor; however, the fact that Amtex has engaged in preliminary negotiations
with "issuer", and is obligated to supply the basic information required for
full disclosure, gives rise in my mind to the question, is Amtex by privity a
constructive "issuer" and therefore within the jurisdiction of SEC enforcement
regulations: If the answer to this question is in the affirmative, I feel we
have a problem in that Amtex is in no position to exercise control in the actual
placement process.
Civil liability creates no
problem for Amtex. It is a small but solid young producing company presently
operating over ten oil and gas wells. It has financed its operation in the past
through investment from private individuals who were sophisticated in this area
of investment and had access to full disclosure. Any future investors will in a
like manner have similar access to complete and full disclosure and should not,
therefore, give rise to any problem in the civil area.
In reviewing this letter and
attached agreement form, please do not read between the lines. I do not intend
to suggest in any way that we anticipate improprieties in the "private
placement" process. In fact, we do not. But, as stated above, we are concerned
with the lack of control and would prefer to continue financing expansion
through our own efforts if we are to be catagorized as an "issuer".
I will appreciate any advice you may give us in regard
to this matter.
Very truly yours,
Walter G. Moyle
INQUIRY LETTER 2
NOBLE, MOYLE & ROBERTS
2022 R STREET, N.W.
WASHINGTON, D.C. 20009
TELEPHONE(202) 387-3292
January 18, 1978
Joseph Whitford, Esq.
Room 521
Securities & Exchange Commission
500 North Capitol Street
Washington, D.C. 20549
Dear Mr. Whitford:
During our conversation last month, you suggested that I follow up with a letter
describing in some detail the relationship between my client, Amtex Oil & Gas of
Canton, Ohio, and a New York City based sales organization which has expressed
interest in purchasing leasehold interests owned by Amtex and entering into an
employment contract whereby Amtex would provide drilling and marketing services.
Amtex is a small, successful oil and gas operating company which can readily use
additional investment capital for expansion of its present drilling operations;
however, because of its location, lack of control and experience, it cannot
assume the additional responsibilities incident to qualifying as an "issuer" as
defined by Rule 146. (Title 17 - Commodity & Security Exchanges; Chapter 2,
Section 230. 146) Therefore, we would appreciate an informal opinion based on
the following fact situation.
(1) Amtex Oil & Gas (Amtex) is
controlled and managed by Dan Cook who has over ten years experience in the
field of oil and gas drilling and exploration. Amtex has approximately 14,000
acres under lease in Sugarcreek Township, Stark County, Ohio. They have been
operating for the past several years and have to date drilled fourteen wells,
all of which are producing commercially viable oil and/or gas. Amtex has the
customary (1/8th roralty interest) arrangement with lessor.
(2) To date, funds for drilling
and operating have been obtained from a small number of individuals through
direct contact with Mr. Cook. The structure of his operation and the product he
wishes to sell is best described in the attached brocture. In the mutual case,
the selling group would replace an individual purchaser. They would, of course,
require additional information in order to prepare a suitable Memorandum for
dealing with a segment of the general public. The attached brochure is in no way
an example of the Memorandum which ultimately would be made available by the
sales organization which will purchase the described interests with funds
obtained by private placement in accordance with Rule 146.
(3) The selling group is a
company with offices in New York City which has successfully completed at least
one similar transaction with an independent oil and gas operating company. The
president of the selling group became involved with Amtex as a result of
personal investment on his own account in the drilling of two of the existing
wells. Upon their successful completion, he entered into negotiations for the
purpose for the purpose of the arranging the financing required to drill another
five or ten wells by purchasing the described interests with funds acquired
through private placement. The selling group would retain a 1/8th override for
their efforts. It should be noted that full and complete disclosure in every
detail of the operation and personnel involved was included in the selling
groups private placement memorandum supplied to prospective investors in
successfully completing their previous transaction. A like degree of disclosure
in accordance with Rule 146 would be a condition precedent to acceptance of any
agreement by Amtex.
(4) The relationship between
the selling group and investor would be that of general partners with the
investors being limited partners. The general partners would contract to
purchase the described interests from Amtex much in the manner as set forth in
their agreement with the operating company in their previous fund raising
effort. (A copy is enclosed.)
(5) Prior to the present
negotiations, the only relationship that either Dan Cook or Amtex have had with
the selling group has been in regard to the above described personal investment
in drilling two wells. Neither Dan Cook nor Amtex has any other personal or
business relationship with the selling group. In the view of Amtex, the selling
group is no different than an individual who has expressed interest in investing
money for the purpose of drilling exploratory wells. Such information as may be
required in order to complete a private placement memorandum will be supplied by
Amtex just as it would at the request of any individual prospective investor.
In summary, it is our position
that in the above described relationship, Amtex is strictly an independent
contractor dealing at arms length with a selling group who may legally be
identified as "issuers."
After you have had an
opportunity to review this letter and supporting material, we would appreciate
your comments regarding the relationship we propose to establish and the
underlying question whether or not Amtex, under the circumstances described,
could reasonably be categorized an "issuer."
Very truly yours,
Walter G. Moyle
INQUIRY LETTER 3
NOBLE, MOYLE & ROBERTS
2022 R STREET, N.W.
WASHINGTON, D.C. 20009
TELEPHONE(202) 387-3292
February 24, 1978
Joseph Whitford, Esquire
Securities & Exchange Commission
500 North Capitol Street
Room 521
Washington, D.C. 20549
Re: Amtex Oil & Gas, Inc.
Dear Mr. Whitford:
This is in reference to our conversation of February 10th at which time you
indicated it would be necessary to have additional specific information before
expressing an informal opinion as to whether or not Amtex might be considered an
"issuer" in respect to the provisions of Rule 146.
The selling group (issuer) is a
corporation which has been in business less than one year. It was organized for
the purpose of earning commissions and an interest in income produced by the
sale of gas and oil from drilling operations which it proposed to finance as
general partner from funds provided by offerees (limited partners) of private
placement offers. Todate, they have sucessfully raised such funds for the
drilling of 10 wells by another operating company.
The enclosed page from the
selling groups earlier private placement memorandum, shows by way of example
their style of doing business, their compensation, and relationship to the
independent drilling operator. Elsewhere in the memorandum it is stated that the
limited partners will invest 1% of the limited partnership funds and that the
principal general partner has a net worth in excess of $150,000,00. (Note: In
the proposal at hand, the selling group would be contracting directly with Amtex
rather than an intermediate corporation such as Panther.
In summary, Amtex, in
consideration of its turnkey drilling job, would receive an agreed upon and
realistic price for its cost of drilling and maintaining the wells plus a 1/8th
working interest in production. No commissions, directly or indirectly, would
accrue to its benefit. The selling group, on the other hand, would receive
substantial commissions plus a 1/8th interest in production for its efforts.
(Note: The cost of drilling Amtex wells would be roughly double the cited
example as it will be required to drill its wells to twice that depth.)
Should you need additional
information, let me know and I will get it to you. I do not have a financial
statement of the issuing corporation or its individual general partner.
Very truly yours,
Walter G. Moyle
cc: Dan Cook, Amtex Oil & Gas
STAFF REPLY LETTER
MARCH 13, 1978
Walter G. Moyle, Esq.
Noble, Moyle & Roberts
2022 R Street, N.W.
Washington, D.C. 20009
Re:
Amtex Oil & Gas. Inc.
Dear Mr. Moyle:
This is in response to your letter of December 6, 1977, as supplemented by
further letters of January 18, 1978 and February 24 1978 and various
telephone conversations, in which you request an interpretation as to whether
your client, Amtex Oil & Gas, Inc. ("Amtex"), would be considered a co-issuer
with regard to a proposed offering intended to comply with the provisions of
Rule 146 under the Securities Act of 1933 (the "Act").
We understand the facts to be
as follows. Amtex is a company engaged in the field of oil and gas drilling and
exploration, having approximately 14,000 acres under lease in Sugarcreek
Township, Stark Country, Ohio. It has financed its operations in the past
through direct sale of interests in prospects taken from such acreage to private
individuals, which then have been drilled by Amtex. Amtex has made three filings
pursuant to Regulation B during 1975 and 1976 (File No. 20-2076A1, A2 and A3).
In seeking additional
investment capital for expansion of its present drilling operations, you state
that Amtex proposes to make available to purchases interests in one or more
prospects taken from such acreage which Amtex proposes to drill for such
purchasers on a rurnkey basis. While you do not furnish the particulars of the
proposed, deal, based on information regarding past deals which you have
furnished and your representations that the proposed offering will be similar,
Amtex will sell up to 3/4 of the working interest, retaining for itself the
remaining portion of the working interest. The entire working interest is
subject to a landowners royalty interest and also to certain overriding roralty
interests.
The purchase of the working
interests, as again appears from materials of previous drilling deals which you
have supplied, is intended to be accomplished through a limited partnership to
be formed by certain general partners, who constitute the principals of an
unafiliated corporation recently organized to obtain interests in income from
sale of oil and gas derived from drilling operations in which it has invested.
The sale of limited partnership interests by the general partners will provide
the funds required for acquisition of the working interest by the partnership as
well as for the turnkey drilling contract price specified by Amtex in its
proposal to drill and test wells on such prospect. You represent that based on
past information regarding transactions by these general partners, the sale of
the partnership interests will be subject to a commission allowance to such
partners of up to 15% of the offering price of such interests, as well as the
retention of a carried interest in favor of the general partners in the
partnership operation as additional compensation. You state that you understand
that the general partners intend to effect the offer and sale of the partnership
interests through compliance with Rule 146, which matter is not addressed by
your inquiry.
Pursuant to the turnkey
contract, any funds for drilling or completing in excess of funds actually
expended will become funds to which Amtex is entitled as compensation for the
risks associated with its obligations to perform under the turnkey contract. The
subscription monies received from the sale of the limited partnership interests
will be deposited in accordance with the terms as specified in Amtexs proposal
for payment by investors for their working interests as drilling progresses with
respect to each well drilled and/or completed.
Amtex will provide information
to the general partners regarding operations for use in connection with the
memorandum to be employed by the general partners in the placement of the
limited partnership interests.
On the basis of the information
presented to the staff, this Division is of the view that Amtex would be deemed
to be a co-issuer of the limited partnership units to be issued in the proposed
offering (see Rule 140). Furthermore, this Division is taking no position with
regard to whether the proposed offering would be in compliance with Rule 146
under the Act.
Sincerely,
Richard K. Wulff
Attorney Adviser
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