U.S SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
For Quarterly Period Ended September 30, 1998
Quarterly Report for Small Business Issuers Subject to the Securities
Exchange Act of 1934 Reporting Requirement
CAMBRIDGE ENERGY CORPORATION
----------------------------
(Name of Small Business Issuer in its charter)
0-24493
-------
Commission File No.
Nevada 59-3380009
------------------------------ -------------------
(State or Other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 South Riverside Drive
Suite 12
Cocoa, Florida 32922
- - -------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (407) 636-6165
--------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ___________
As of September 30, 1998, the Company has 9,519,959 shares of common
stock issued and outstanding.
<PAGE>
Table of Contents
PART I - FINANCIAL INFORMATION Page No.
Item 1. Cambridge Energy Financial Statements 2-13
Balance Sheet as of September 30, 1998 and 1997
Statement of Operations for the Three
Months Ended September 30, 1998 and 1997
Statement of Operations for the Six
Months Ended September 30, 1998 and 1997
Consolidated Statement of Stockholders' Equity
Statement of Cash Flow for the Six Months
Ended September 30, 1998 and 1997
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis 14
PART II - OTHER INFORMATION 16
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE 17
1
<PAGE>
PART 1 - FINANCIAL INFORMATION:
ITEM ONE: FINANCIAL STATEMENTS:
<TABLE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
ASSETS
1998 1997
---- ----
Current assets:
Cash $ 213,086 $ 64,555
Accounts receivable, trade 199,087 2,070
Marketable equity securities, at fair value 24,525 65,025
Prepaid expenses 105,160 215,185
---------- --------
Total current assets 541,858 346,834
---------- --------
Property, plant and offices 785,000 -
Equipment and inventory, net of $8,663
and $0 of accumulated depreciation 477,824 -
Oil and gas properties (successful efforts method):
Oil interests, proved properties, net of $10,353
and $1,370 of accumulated depletion 338,487 32,796
Support equipment, at cost, net of $8,242 and
$2,814 of accumulated depreciation 18,396 15,946
----------- ----------
1,619,707 48,742
----------- ----------
$ 2,161,565 $ 395,576
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 348,212 18,404
Advances for future drilling contracts 232,012 -
Funds held for future distribution 109,586
Sales Tax liability 8,894 -
Advances from others 124,934 1,842
----------- ---------
Total current liabilities 823,638 20,247
----------- ---------
Long-term liabilities
Property Mortgage 170,000 -
Notes payable 700,300 -
----------- ---------
Total long-term liabilities 870,300 -
Stockholders' equity (deficit):
Preferred stock, $ .0001 par value,
25,000,000 shares authorized, no shares
issued or preferences determined - -
Common stock, $ .0001 par value,
50,000,000 shares authorized,
9,519,959 and 8,169,787 shares
issued and outstanding, respectively 952 817
Paid in capital in excess of par 1,702,197 433,521
Accumulated deficit ( 1,238,195) (59,009)
----------- ----------
467,627 375,329
----------- ----------
$ 2,161,565 $ 395,576
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
1998 1997
Revenues: ---- ----
Oil and gas sales, net of royalties $ 72,356 $ 6,400
Manufacturing and service - -
Lease operating and other income 5,040 -
Other income 1,866 -
--------------- ---------------
79,262 6,400
--------------- ---------------
Operating expenses:
Production costs 34,686 9,693
Exploration costs 15,261 1,991
Manufacturing and Service costs - -
Marketing expense - -
General and administrative 109,212 14,910
Depletion 2,322 -
Depreciation 5,027 313
--------------- ---------------
166,508 26,907
--------------- ---------------
Interest expense 2,833 -
--------------- ---------------
Net loss $ (90,079) $ (20,507)
=============== ===============
Net loss per share $( .01) $( .01)
Loss per share from operations $( .01) $( .01)
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
1998 1997
Revenues: ---- ----
Oil and gas sales, net of royalties $ 190,857 $ 12,079
Manufacturing and service - -
Lease operating and other income 7,740 -
Other income 1,866 -
-------------- ---------------
200,463 12,079
-------------- ---------------
Operating expenses:
Production costs 101,631 15,301
Exploration costs 15,261 2,423
Manufacturing and Service costs - -
Marketing expense - -
General and administrative 269,400 41,681
Depletion 6,961 903
Depreciation 9,983 1,251
-------------- ---------------
403,236 61,559
-------------- ---------------
Interest expense 6,689 -
-------------- ---------------
Net loss $( 209,462) $( 49,480)
============== ===============
Net loss per share $( .02) $( .01)
Loss per share from operations $( .02) $( .01)
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD
APRIL 9, 1996 (INCEPTION) THROUGH SEPTEMBER 30, 1998
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Accumulated Other
Common Stock Add'l Paid Comprehensive Accumulated
Shares Amount In Capital Loss Deficit Total
Balance at March 31, 1998 8,340,786 $ 834 $ 886,552 $ (40,500) $( 985,560) $(138,674)
Issuance of common stock
for investor 142,500 $ 14 $ 92,486 $ 92,500
Issuance of common stock
For services 3,300 $ $ 3,300 $ 3,300
Issuance of common stock
for cash 277,223 $ 28 $ 249,472 $ 249,500
Net Loss ( 129,340) (129,340)
--------- ------- ---------- --------------- ----------- ----------
Balance at June 30, 1998 8,763,809 $ 876 $1,231,810 $( 40,500) (1,114,900) $ 77,286
Issuance of common stock
for investor 3,750 2,500 2,500
Void certificate of common
stock for investor (10,000) (1) (19,999) (20,000)
Issuance of common stock for
purchase of subsidiary 762,400 77 487,886 487,963
( 80,122) (80,122)
-------- ------- ----------- -------------- ----------- ----------
September 30, 1998 9,519,959 $ 952 $1,702,197 $( 40,500) (1,195,022) $ 467,627
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Cash flows from operating activities:
Oil and gas sales received $ 286,951 $ 4,782
Interest received 1,866 -
Cash paid to employees (76,265) -
Cash paid to suppliers (399,232) (38,182)
Interest paid (6,689) (17)
Income taxes paid - -
-------------- -------------
Net cash used in operating activities (193,369) (33,417)
Cash flows from investing activities:
Purchase of property and equipment (591,647) -
Purchase of oil interests (17,377)
Subscription receivable 10,000
Prepaid expenses (28)
Shareholders' loans (39,800)
Deposits - -
-------------- -------------
Net cash used in investing activities (631,447) (7,405)
Cash flows from financing activities:
Repayment of shareholders advances -
Advances from stockholders -
Shareholders loan (123,618)
Paid-in capital in excess of par 215,978
Proceeds of note payable 480,300 -
Issuance of common stock 545,463 21
-------------- -------------
Net cash provided by financing activities 1,025,763 92,381
-------------- -------------
Net change in cash 200,947 51,559
-------------- -------------
Cash at beginning of period 12,139 12,996
-------------- -------------
Cash at end of period $213,086 $64,555
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997
Reconciliation of Net Loss to Net Cash
Used in Operating Activities
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Net loss $ (209,462) $ ( 18,986)
--------------- ----------------
Adjustment to reconcile net loss
to net cash used in operating
activities:
Depletion 6,961 903
Depreciation 9,983 313
(Increase) decrease in accounts receivable, trade 88,354 (1,618)
(Increase) decrease in prepaid expenses (77,173) (28)
Increase (decrease) in accounts payable, trade (114,430) (14,001)
Common stock issued for services 3,300 -
Increase (decrease) in drilling advances 99,098 -
--------------- ---------------
Total adjustments 16,093 $ 14,431)
--------------- ---------------
Net cash used in operating activities $( 193,369) $( 33,417)
=============== ===============
Supplemental Schedule of Non-Cash Investing
and Financing Activities
Issuance of common stock in exchange for
marketable equity securities $ - $ -
Purchase of support equipment
in exchange for account payable $ - $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Cambridge Energy Corporation (the Company) was incorporated in the state of
Nevada on April 9, 1996. The Company is engaged in the development and operation
of oil and gas properties with proven reserves. The Company's strategy is to
focus in domestic areas where major oil and gas producing companies have reduced
their exploration efforts to move offshore and overseas in search of the larger
reserves. Cambridge Energy's initial development strategy has been to acquire
such proven fields in Louisiana and increase production through the application
of advanced technology and the exploration of other proven formations in the
same fields.
Cambridge Energy's primary operational strategy includes the operation of
its own projects, giving it substantial control over drilling and production
costs. The Company has associated highly experienced exploration and development
engineering and geology personnel that strive to add production at lower costs
through development drilling, workovers, behind pipe recompletions and secondary
recovery operations.
Consolidated Principals
In September 1998, the Company completed the closing of their newly
acquired subsidiary, Triton Wellhead and Manufacturing, Inc. (Triton). Triton,
which is located in Broussard, Louisiana, designs, manufactures,
repairs/remanufactures and tests wellhead equipment and components. The Company
acquired property, plant and equipment directly from lenders to prior owners for
cash and notes totalling $440,000, and acquired inventory, equipment and
operations through the acquisition of 100% of the shares of Triton in exchange
for cash notes and 762,354 shares of the Company's common stock.
Basis of Presentation
The financial information presented as of any date other than March 31 has
been prepared from the books and records without audit. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended March 31, 1998 contained in the
Company's Form 10-SB.
Method of accounting for oil and gas properties
The Company uses the successful efforts method of accounting for oil and
gas producing activities, as set forth in the Statement of Financial Accounting
Standards No. 19, as amended. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved reserves, geological and geophysical costs and
costs of carrying and retaining unproved properties are expensed as incurred.
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing a valuation allowance. Other unproved properties
are amortized based on the Company's experience of successful drilling and
average holding period. Capitalized costs of producing oil and gas properties,
after considering estimated dismantlement and abandonment costs and estimated
salvage values, are depreciated and depleted by the unit-of-production method.
Support equipment and other property and equipment are carried at cost and
depreciated over their estimated useful lives.
On sale or retirement of a complete unit of a proved property, the cost and
related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On
retirement or sale of a partial unit of proved property, the cost is charged to
accumulated depreciation, depletion, and amortization with a resulting gain or
loss recognized in income.
8
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
On sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any recorded impairment if the property has been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation of property and equipment are being provided by accelerated methods
for financial and tax reporting purposes over estimated useful lives of five to
seven years.
Marketable equity securities
The Company owns 75,000 common stock shares of a corporation publicly
traded on NASDAQ Small Cap market (Note 4) Pursuant to Financial Accounting
Standards No. 115 these securities are classified as available-for-sale and are
recorded in the accompanying financial statements at their fair value based on
the quoted market price of the stock. At September 30, 1998 and 1997, unrealized
loss on these securities totaled $40,500 and $0, respectively and have been
charged to comprehensive earnings.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Flow
For purposes of the statement of cash flows, cash includes demand deposits
and time deposits with maturities of less than three months. None of the
Company's cash is restricted.
Net loss per share
For the quarter ended September 30, 1998 and 1997, the net loss per share
amount is based upon 9,519,959 and 8,169,787 weighted average shares of common
stock outstanding, respectively.
2. COMMITMENTS AND CONTINGENCIES
Leases
The Company is currently using office space provided free of charge by a
corporation owned by its President. The fair rental value of this space provided
is not material. At September 30, 1998, the Company was not obligated under any
noncancellable operating or capital lease obligations.
Year 2000 computer compliance
The Company's computer hardware and the software is currently in compliance
with the year 2000 dating issues. Furthermore, management does not believe any
additional significant costs will be incurred in dealing with this issue and the
accompanying financial statements do not contain any reserve for this
contingency. The Company has charged to expense when incurred approximately
$2,000 related to becoming year 2000 compliant.
9
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS
Stockholder
During the year ended March 31, 1998, the Company received cash advances
from its two major stockholders totaling $31,905 and it also received property
and equipment with a fair value of $30,753 accounted for as additional advances.
These advances are non interest bearing, unsecured and payable upon demand. In
June 1998, the Company issued 5,184,786 common stock shares at a fair value of
$.005 per share and cash to repay $55,927 of these advances.
On September 30, 1998, the Company's acquired shareholders' loan payable
totalling $75,000 with the closing of its new subsidiary . These advances are
non interesting bearing, unsecured and payable within 60 days. At September 30,
1998, outstanding advances totalled $81,731.
4. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of its cash and accounts
receivable.
Cash
The Company maintains its cash in bank deposit and other accounts which, at
times, may exceed federally insured limits. The Company has not experienced any
losses in such accounts, and does not believe it is subject to any credit risks
involving its cash.
Accounts receivable
The Company accounts receivable are unsecured and represent oil production
sales, lease operating, manufacturing and service income not collected at the
end of the quarter. Management believes these accounts receivable are fairly
stated at estimated net realizable amounts and do not require any reserve for
uncollectible amounts.
5. NOTES PAYABLE
The Company's note payable consist of a loan from an individual, funding
from a corporation (both for working capital purposes), and a loan from a bank
for a property mortgage. The loan from an individual, which contains no
significant restrictions, bears an interest rate of 10.0%, is due through April
8, 1999 and is unsecured. The funding is non recourse, payable from a percentage
a production produced from one of the Company's proven properties. The mortgage
is payable monthly and bears an interest rate of 10.0%, until paid in full.
10
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 1998 AND
THE PERIOD APRIL 9, 1996 (INCEPTION) THROUGH MARCH 31, 1997
UNAUDITED
The following supplementary oil and gas information is provided in
accordance with Statement of Financial Accounting Standards No. 69, Disclosures
about Oil and Gas Producing Activities (SFAS 69). The Company has properties in
only one reportable geographic area, all of which are oil properties.
1. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
1998 1997
---- ----
Proved oil and gas properties $ 198,198 $ 34,323
Unproved oil and gas properties -
Support equipment, proved properties 25,586 18,759
------------ ----------
223,784 53,082
Accumulated depreciation and
depletion 9,039 2,030
------------ ----------
Net capitalized costs $ 214,745 $ 51,052
============ ==========
2. COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES FOR ABOVE
REFERENCED PERIODS
1998 1997
---- ----
Acquisition of proven properties $ 170,712 $ 53,082
Exploration costs 840,450 2,915
3. RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES
FOR THE ABOVE REFERENCED PERIODS
1998 1997
---- ----
Oil and gas sales $ 73,899 $ 17,272
Lease operating income 52,514 -
Production costs 15,997 8,382
Exploration expenses 840,450 2,915
Depreciation and depletion 7,009 2,030
Income tax expense - -
---------- ----------
Results of operations for oil
and gas producing activities
(excluding corporate overhead
and financing costs) $( 737,043) $ 3,945
=========== ==========
11
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 1998 AND
THE PERIOD APRIL 9, 1996 (INCEPTION) THROUGH MARCH 31, 1997
UNAUDITED
4. RESERVE QUANTITY INFORMATION
The following estimates of proved developed reserve quantities are
estimates only, and do not purport to reflect realizable values or fair market
value of the Company's reserves. They are presented in accordance with the
guidelines established by the S.E.C. and disclosure requirements promulgated by
SFAS 69. The Company emphasizes the reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise than those of currently
producing oil and gas properties. Accordingly, these estimates are expected to
change as future information becomes available. All of the Company's reserves
are located in southern Louisiana.
Proved reserves are estimated reserves of crude oil (including
condensate and natural gas liquids) and natural gas that geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are those expected to be recovered through
existing wells, equipment, and operating method. The Company's proved developed
and undeveloped reserves and changes in them during the periods are as follows.
Oil Gas
(BBLS) (MCF)
------ -----
Purchase of minerals in place 663,779 -
Production ( 1,079) -
---------- ---------
Reserves at March 31, 1997 662,700 -
Revisions of previous estimates 99,143 -
Purchase of minerals in place 2,386,370 29,228,756
Production ( 3,763) ( 92,866)
---------- ------------
Reserves at March 31, 1998 3,144,450 29,135,890
========== ============
5. STANDARDIZED MEASURES OF DISCOUNTED FUTURE NET CASH FLOWS AND
CHANGES THEREIN RELATING TO PROVED OIL AND GAS RESERVES AT THE
ABOVE REFERENCED DATE
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas, estimated at $14.00 per barrel and
$2.18 per MMBTU, respectively, (with consideration of price changes only to the
extent provided by contractual arrangements) to the estimated future production
of proved oil and gas reserves, less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves,
less estimated future income tax expenses (based on year-end statutory tax
rates, with consideration of future tax rates already legislated) to be incurred
on pretax net cash flows less basis of the properties and available credits, and
assuming continuation of existing economic conditions. The estimated future net
cash flows are then discounted using a rate of 10 percent a year to reflect the
estimated timing of the future cash flows.
12
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 1998 AND
THE PERIOD APRIL 9, 1996 (INCEPTION) THROUGH MARCH 31, 1997
UNAUDITED
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOW AT MARCH 31, 1998 AND 1997
1998 1997
---- ----
Future cash inflows $ 39,039,330 $ 3,276,240
Future production costs ( 9,131,220) ( 862,010)
Future development costs ( 2,000,750) ( 500,750)
Future income tax expenses ( 9,625,168) ( 661,630)
------------- ------------
Future net cash flows 11,282,192 1,251,850
10% annual discount for
estimated timing of cash flows ( 4,120,252) ( 499,660)
-------------- ------------
Standardized measure of
discounted future net cash
flows relating to proved
oil and gas reserves $ 7,161,940 $ 752,190
============== ============
RECONCILIATION OF CHANGES IN THE STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
DURING THE ABOVE REFERENCED PERIOD
Beginning of period $ 752,190 $ -
Sales of oil and gas produced ( 73,899) ( 17,272)
Net changes in prices and production costs ( 105,394) -
Development costs incurred ( 840,450) ( 2,915)
Revisions of previous quantity estimates 347,972 -
Net changes from purchase of minerals
in place 7,081,521 772,377
----------- --------------
End of period $ 7,161,940 $ 752,190
=========== ==============
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Most active of the Company's operations during the quarter ended 9-30-98
was the launching of the international component of its growth strategy
including the engineering review and contract signing for the acquisition of
Indonesian oil operations, production and reserves under Intermega Energy Pte
Ltd. The acquisition includes production in the Salawati, Subaku and Linda and
Sele contract areas of approximately 1000-1500 barrels of oil per day. The
Company expects to close this acquisition during the next quarter. Other
operations included the Company's producing oil and gas properties; preliminary
work on its 20 well 98'-99' drilling program and completion of the acquisition
of Triton Wellhead and Manufacturing, Inc. at the end of the quarter.
For the six months ended September 30, 1998, Cambridge operations produced
a total of 433.034 million cubic feet of gas and 9014.68 barrels of oil and oil
condensate. The Company's total revenues for this period were $200,463, up from
$12,079 for the same period the year prior, due primarily to the addition of the
Calvert and Todd No. 1 well in Houma, Louisiana. The Company has a 34.375%
working interest in this well. This property has paid out the total drilling and
completion costs of $1,379,984.79 since it came on line February 28, 1998.
Revenues for the Quarter ended 9-30-98 were down due to the Calvert & Todd No. 1
and the Floyd A-1 wells being down for reworks, both of which have been
completed.
Operating expenses increased to $403,236 for the three months ended
September 30, 1998 up from $61,559 for the same period the previous year. This
increase was attributable to: 1) rework on the Floyd A-1 and the Calvert & Todd
No. 1 wells; 2) the continued preparation and initial operations on the
Company's 20 well, 1998'-99' drilling program and 3) to expenses for the
management and operation of Triton Wellhead and Manufacturing, Inc.
At the end of the Quarter ended 9-30-98, the Company completed acquisition
of property, plant and equipment, and operations of Triton Wellhead and
Manufacturing, Inc. for a total cost of $1,310.000 in cash and stock. The
Company has hired new management for Triton and in the process of making
operational changes to complete application for API Certification of its shop
and manufacturing facility, which it expects to complete in the coming quarter.
Although Company expenses related to Triton were included in its financials,
revenues for Triton have not been included as the transaction was only completed
at the end of the Quarter.
During the Company's first fiscal year (partial) ended March 31, 1997, it
acquired leases each containing one producing well and one salt water disposal
well on two producing oil and gas properties in Louisiana. These properties also
contained additional proven reserves the Company intends to develop. The Company
is the operator on both properties, maintaining a 100% working interest net of
royalties in the Floyd #A-1 well in the Big Island Field of Rapides Parish,
Louisiana, and a 5% working interest net of royalties in the Odra Stelly #1-D
well in the Abbeville Field of Vermilion Parish, Louisiana. The Company
subsequently negotiated a 100% working interest in the Odra Stelly #1-D well. In
addition, the principals conveyed to the Company a 1/128th interest in an oil
producing property, the Brinley #2-6 in Garvin County, Oklahoma. Revenues from
these producing properties were $17,272 during the Company's partial fiscal year
ending March 31, 1997. Funds over and above these revenues required for lease
renewals, working interest contributions, and other Company operations during
this partial FY 1997 were provided by loans from shareholders.
During the fiscal year ended March 31, 1998, Company acquired additional
leases via an assigned farmout from Union Oil of California (UNOCAL) in the
Houma Field of Terrebonne Parish, Louisiana; leases in the Arnaudville Field of
St. Martin and St. Landry Parishes, Louisiana; leases in the West Lake Arthur
Field of Jefferson Davis Parish, Louisiana; and leases in the Bayou Blue Field
of Iberville Parish, Louisiana. (see "Current Oil and Gas Properties") Revenues
from the Floyd #A-1 well in the Big Island Field of Rapides Parish, Louisiana,
totaled $20,210.56 during the fiscal year ending March 31, 1998. The revenue was
reduced significantly as the Company performed rework and maintenance on the
well during this period, resulting in the well being down for a considerable
14
<PAGE>
period of time, however, the Company's rework operations were successful and the
well is back on line. The leases the Company holds at Big Island include a
saltwater disposal well that currently services the Floyd #A-1 well, and is
capable of handling this function for the two new wells to be drilled on these
properties. The Company also undertook a "sidetrack" drilling operation at its
Odra Stelly #1-D well in the Abbeville Field of Vermilion Parish during December
1997. The producing sands that were the target of the sidetrack were found to be
lower than expected, the well was determined to be not commercially viable and
was plugged and abandoned. Revenues to the Company from the Odra Stelly #1-D
well were negligible in FY 1998.
The Company has continued to acquire properties during the Quarter ended
9-30-98 with the acquisition of its 160 acre SE Crescent Field in Iberville
Parish, La. The initial work planned for this gas and oil condensate property
will be the rework of the W. Wilbert & Sons No. 1, 11,700 gas and oil
condensate well. In addition, during the Quarter, the Company added a 117 acre
property next to the Company's Calvert & Todd No. 1 well in Houma, Louisiana.
Cambridge has planned a 20 well 1998'-99' drilling schedule with 16 wells
on properties which it now owns and the balance on properties which it expects
to acquire. The Company scheduled drilling to begin during the second quarter of
the current fiscal year and although it has undertaken preliminary operations
with this schedule, delays on the part of the Company's infield drilling
partners have delayed major operations until the following quarter.
Liquidity :
In June 1997, the Company undertook a Private Placement of its Common
Shares to raise capital for the execution of its business plan. This offering
ultimately resulted in the Company raising $772,625 during fiscal year ended
March 31, 1998. During the quarter ended 9-30-98, the Company raised an
additional $545,463 from the sale of common stock.
Management believes that its 34.375% working interest revenues from the
Calvert & Todd #1 well will meet its minimum general and administrative cost
requirements and provide the basic liquidity the Company needs to operate at
current levels over the next twelve months. However, additional funding will be
required to execute its business plan of acquiring additional leases and
reserves, and performing drilling and rework activities planned for its existing
properties. Part of this funding is expected to be obtained by the sale of
working interest percentages in the drilling and rework projects, with the
Company maintaining an additional promotional interest in each project after
payout in addition to the working interest percentage it retains up front. The
balance of the funding required to execute the Company's planning will need to
be obtained from other sources such as debt or the sale of additional equity.
The Company has completed a transaction involving a production payment facility
with Domain Energy (DXD) in the amount of $700,000 which provided funding for
the Company's portion of the initial projects in its drilling program.
Material Commitments for Capital Expenditures:
The Company has made no material commitments for these future projects
other than to acquire and pay for the respective leases. Each drilling and/or
rework project is stand-alone and although the Company is in constant discussion
with prospective working interest partners on each potential project,
commitments for the actual drilling or rework and site preparation operations
are not made for each project until the Company has received the funds from its
working interest partners and the funds for its portion of the working interest
are in place. The leases the Company holds are renewable annually unless "held
by production". If the leased property has a producing well that is providing
royalty payments to the leaseholders, then annual lease payments and renewals
are not required. This is the case with certain of the Big Island leases as well
as Houma assigned farmout properties. Cambridge Energy strives to accomplish the
drilling or rework planned for each property within the year first leased. When
that does not occur however, management reviews the potential of each property
as its leases come up for renewal and makes a decision whether or not to renew
each lease in light of the Company's business planning at that time.
15
<PAGE>
The company has committed to provide $750,000 at the closing of the
purchase of Indonesian production now under contract, which is due on or before
January 4, 1999. The Company has under negotiation several facilities to provide
these funds however, it does not have a commitment in place and there is no
assurance that a commitment will be forthcoming prior to that closing date.
PART 11 - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No Reports on Form 8-K were required to be filed during the Quarter.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Cambridge Energy Corporation
November 16 , 1998
By: /s/ Perry Douglas West
------------------------------------
Perry Douglas West
Chairman and Chief Executive Officer
17
<PAGE>
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