Unassociated Document
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report Pursuant to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date
of
Report: June 15, 2006
Date
of Earliest Event Reported: June 12, 2006
NATURAL
GAS SYSTEMS, INC.
(Exact
Name of Registrant as Specified in its Charter)
Nevada
(State
or
Other Jurisdiction of Incorporation)
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0-27862
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41-1781991
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(Commission
File Number)
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(I.R.S.
Employer Identification
No.)
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820
Gessner, Suite 1340, Houston,
Texas
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77024
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(Address
of Principal Executive
Offices)
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(Zip
Code)
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(713)
935-0122
(Registrant's
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
TABLE
OF CONTENTS
Item
1.02 Termination of a Material Definitve
Agreement
Item
2.01
Completion of Acquisition or Disposition of Assets
Item
9.01 Financial Statements and Exhibits
Signatures
ITEM
1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
As
previously reported in a Current Report on Form 8-K filed by Natural Gas
Systems, Inc. ("NGS" or the "Company") with the SEC on March 8, 2006, the
Company entered a subordinated loan agreement with Laird Q. Cagan, the Chairman
of the Board of Directors of the Company, whereby Mr. Cagan loaned the Company
$250,000 (the "Subordinated Note"). The Subordinated Note had a one year
term
and accrued interest at 10%, payable at maturity. On June 13, 2006, the Company
voluntarily prepaid all amounts due under the Loan Agreement totaling $257,058,
representing the then-outstanding principal balance and all accrued and unpaid
interest.
ITEM
2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF
ASSETS.
As
previously reported in a Current Report on Form 8-K filed by the Company with
the SEC on May 11, 2006, NGS, through our wholly-owned subsidiary NGS Sub Corp,
entered into a Purchase and Sale Agreement (the “Sale Agreement”) with
Denbury Onshore, LLC., a subsidiary of Denbury Resources, Inc. (NYSE symbol:
DNR, hereinafter referred to as “Denbury”) on May 8, 2006 to conduct an
enhanced oil recovery project in the Company’s Delhi Holt Bryant Unit within the
Delhi Field in northeast Louisiana (the “Delhi Unit”). On June 12, 2006, NGS
received $50 million and delivered to Denbury an initial 100% working interest
and 80% net revenue interest in the Delhi Unit, and
a 75%
working interest and an 80% net revenue interest (proportionately reduced to
60%) in certain other depths in the Delhi Field. NGS retained a
separate 4.8% royalty interest in the Delhi Field (including the Delhi Unit)
and
a 25% working interest in certain other depths of the Delhi Field (excluding
the
Delhi Unit, except as described below). Under the terms of the Sale Agreement,
Denbury has agreed to contribute all development capital, technical expertise
and required amounts of proven reserves of carbon dioxide that will be injected
into the Delhi Unit oil reservoirs. After the project generates $200 million
of
net cash flows before capital expenditures for Denbury, NGS will regain a 25%
working interest (20% net revenue interest) in the Delhi Unit.
For
tax
purposes, the parties to the Sale Agreement made certain non-material changes
and bifurcated the original Sale Agreement into two (2) separate agreements
in
order to assist in the consummation of a like-kind exchange. The final closing
documents for the revised Sale Agreement are attached hereto as the Purchase
and
Sale Agreement I, the Purchase and Sale Agreement II, the Unit Operating
Agreement, and the Conveyance, Assignment and Bill of Sale Agreement, attached
hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively. The foregoing
descriptions are qualified by reference to Exhibit 10.1, 10.2 10.3 and 10.4
to
this Current Report on Form 8-K, which Exhibits are incorporated herein by
reference.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibits.
The
following exhibit is filed as an exhibit to this Current Report on Form
8-K:
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10.1 |
Purchase
and Sale Agreement I, by and between NGS Sub Corp. and Denbury
Onshore,
LLC, dated May 8, 2006.
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10.2 |
Purchase
and Sale Agreement II, by and between NGS Sub Corp. and Denbury
Onshore,
LLC, dated May 8, 2006.
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10.3 |
Unit
Operating Agreement, by and between NGS Sub Corp. and Denbury
Onshore,
LLC, dated May 8, 2006.
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10.4 |
Conveyance,
Assignment and Bill of Sale Agreement, by and between NGS
Sub Corp. and
Denbury Onshore, LLC, dated May 8,
2006.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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NATURAL
GAS SYSTEMS, INC.
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Date:
June 14, 2006
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By: |
/s/
Robert Herlin |
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Robert
Herlin, Chief Executive Officer
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