U.S SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
For Quarterly Period Ended June 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__________ No ___________
As of June 30, 1998, the Company has 8,763,809 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 June 30, 1998 and 1997
Statement of Operations for the
Three Months Ended June 30, 1998 and 1997
Consolidated Statement of Stockholders' Equity
Statement of Cash Flow for the Three Months
Ended June 30, 1998 and 1997
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis 14
PART II - OTHER INFORMATION 15
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE 16
1
<PAGE>
PART 1 - FINANCIAL INFORMATION:
ITEM ONE: FINANCIAL STATEMENTS:
<TABLE>
CAMBRIDGE ENERGY CORPORATION
BALANCE SHEETS
JUNE 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
ASSETS
1998 1997
---- ----
Current assets:
Cash $ 327,756 $ 12,996
Accounts receivable, trade 507,382 452
Marketable equity securities,
at fair value 24,525 65,025
Subscription receivable - 10,000
Prepaid expenses 25,728 197,483
------------- -------------
Total current assets 885,391 285,956
------------- -------------
Property and equipment, net of $4,941 and
$0 of accumulated deprecation 55,743 -
------------- -------------
Oil and gas properties (successful efforts method):
Oil interests, proved properties, net of $8,031
and $467 of accumulated depletion 239,517 33,699
Support equipment, at cost, net of $6,936 and
$938 of accumulated depreciation 18,659 18,948
------------- -------------
258,176 52,647
------------- -------------
$ 1,199,310 $ 338,603
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 353,172 $ 32,405
Advances for future drilling contracts 237,327 -
Funds held for future distribution 398,541
Advances from stockholders 32,984 125,314
------------- -------------
Total current liabilities 1,022,024 157,719
------------- -------------
Long-term liabilities
Notes payable 100,000 -
---------------
Total long-term liabilities 100,000
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,
8,763,809 and 7,849,787 shares
issued and outstanding, respectively 876 795
Paid in capital in excess of par 1,231,810 217,690
Accumulated deficit ( 1,114,900) (37,601)
Accumulated other comprehensive loss ( 40,500) -
------------- -------------
77,286 180,884
---------------- -------------
$ 1,199,310 $ 338,603
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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<TABLE>
CAMBRIDGE ENERGY CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
JUNE 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Revenues:
Oil and gas sales, net of royalties $ 118,501 $ 5,679
Lease operating and other income 2,700 -
------------- -------------
121,201 5,679
------------- -------------
Operating expenses:
Production costs 66,944 5,608
Exploration costs 9,957 432
Marketing expense - -
General and administrative 160,188 26,773
Depletion 4,639 -
Depreciation 4,956 938
------------- -------------
246,684 33,751
------------- -------------
Interest expense 3,856 -
------------- -------------
Net loss $( 129,339) $( 28,072)
============= ==============
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
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<TABLE>
CAMBRIDGE ENERGY CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD
APRIL 9, 1996 (INCEPTION) THROUGH JUNE 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
Issuance of common stock
for cash and marketable
equity securities 1,200,000 $ 120 $ 114,875 $114,995
Net loss ( 9,529) ( 9,529)
--------- ------- ---------- ---------------- ----------- ---------
Balance at March 31, 1997 1,200,000 $ 120 $ 114,875 $ $( 9,529) $105,466
Issuance of common stock
to repay stockholder
advances 5,184,786 $ 518 $ 25,406 $25,924
Issuance of common stock
for cash, net of $47,858
of offering costs 1,941,000 $ 194 $ 728,773 $728,967
Issuance of common stock
for services 15,000 $ 2 $ 17,498 $ 17,500
Unrealized loss in
marketable securities (40,500) $(40,500)
Net loss ( 976,031) (976,031)
--------- ------- ---------- --------------- ----------- ---------
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
========= ======= ========== ============== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED
JUNE 30, 1998 AND 1997
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Cash flows from operating activities:
Oil and gas sales received $ 294,628 $ 5,470
Interest received - -
Cash paid to employees ( 45,258) -
Cash paid to suppliers ( 307,937) ( 25,947)
Interest paid ( 3,856) ( 139)
Income taxes paid - -
------------- --------------
Net cash used in operating activities ( 62,423) ( 20,616)
------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment ( 14,160) ( 2,534)
Purchase of oil interests ( 49,350) ( 6,783)
Deposits - ( 190,700)
--------------- ---------------
Net cash used in investing activities ( 63,510) ( 200,017)
------------- ---------------
Cash flows from financing activities:
Repayment of shareholders advances ( 3,750)
Advances from stockholders - 123,618
Shareholders loan - 1,696
Paid-in capital in excess of par - 102,815
Proceeds of note payable 100,000 -
Issuance of common stock 345,300 675
------------- --------------
Net cash provided by financing activities 441,550 228,804
------------ ---------------
Net change in cash 315,617 8,171
Cash at beginning of period 12,139 4,825
------------- --------------
Cash at end of period $ 327,756 $ 12,996
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements. 4
5
<PAGE>
<TABLE>
CAMBRIDGE ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED
JUNE 30, 1998 AND 1997
Reconciliation of Net Loss to Net Cash
Used in Operating Activities
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Net loss $( 129,339) $(28,072)
------------ ---------
Adjustment to reconcile net loss
to net cash used in operating
activities:
Depletion 4,639 -
Depreciation 4,956 938
(Increase) decrease in accounts receivable, trade ( 219,941) ( 209)
Increase (decrease) in prepaid expenses 2,259 2,505
Increase (decrease) in accounts payable, trade 280,176 4,222
Increase (decrease) in drilling advances ( 5,173) -
-------------- -------------
Total adjustments 66,916 7,456
------------- --------------
Net cash used in operating activities $( 62,423) $( 20,616)
============= ==============
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.
6
<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.
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.
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.
7
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
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 June 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 June 30, 1998 and 1997, the net loss per share amount
is based upon 8,763,809 and 7,849,787 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 June 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.
3. RELATED PARTY TRANSACTIONS
Stockholder
In March 1997, the stockholders of the Company each contributed 37,500
common stock shares of a public company (Note 1), controlled by one of the
Company's stockholders, as additional paid in capital on common stock shares
issued by the Company earlier in the year. The shares were recorded at their
fair value at the date they were contributed to the Company.
8
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
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 to repay $25,924 of these advances. At June 30, 1998,
outstanding advances totaled $32,984.
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 and lease operating income not collected at the end of the year.
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 provided
for working capital purposes. The note, which contains no significant
restrictions, bears an interest rate of 10.0%, is due through April 8, 1999 and
is unsecured.
The following estimates of proved oil and gas reserves, both developed and
undeveloped, represent interests owned by the Company located solely in the
United States. Proved reserves represent estimated quantities of crude oil and
natural gas which geological and engineering data demonstrate to be reasonably
certain to be recovered in the future from known reservoirs under existing
economic and operating conditions. Proved developed oil and gas reserves are
reserves that can be expected to be recovered through existing wells, with
existing equipment and operating methods. Proved undeveloped oil and gas
reserves are reserves that are expected to be recovered from new wells on
undrilled acreage, or from existing wells for which relatively major
expenditures are required for completion.
Disclosure of oil and gas reserves which follow are based on estimates
prepared by independent engineering consultants for the period ended March 31,
1998. Such estimates are subject to numerous uncertainties inherent in the
estimation of quantities of proved reserves and in the production of future
rates of production and the timing of development expenditures. These estimates
do not include probable or possible reserves.
These estimates are furnished and calculated in accordance with
requirements of the Financial Accounting Standards Board and the Securities and
Exchange Commission (SEC). Because of unpredictable variances in expenses and
capital forecasts, crude oil and natural gas prices changes, largely influenced
and controlled by U.S. and foreign government actions, and the fact that the
basis for such estimates vary significantly, management believes the usefulness
of these projections is limited. Estimates of future net cash flows presented do
not represent management's assessment of future profitability or future cash
flows to the Company. Management's investment and operating decisions are based
upon reserve estimates that include proved reserves prescribed by the SEC as
well as probable reserves, and upon different price and cost assumptions from
those used here.
9
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED
MARCH 31, 1998 AND 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
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
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
=========== ==========
10
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED
MARCH 31, 1998 AND 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
=========== ============
11
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED
MARCH 31, 1998 AND 1997
UNAUDITED
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 (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.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOW AT MARCH 31, 1998 AND 1997
1998 1997
---- ----
Future cash inflows $ 52,197,348 $ 3,276,240
Future production costs ( 14,913,528) ( 862,010)
Future development costs ( 5,865,120) ( 500,750)
Future income tax expenses ( 10,682,358) ( 661,630)
-------------- ----------------
Future net cash flows 20,736,342 1,251,850
10% annual discount for
estimated timing of cash flows ( 11,090,370) ( 499,660)
-------------- ----------------
Standardized measure of
discounted future net cash
flows relating to proved
oil and gas reserves $ 9,645,972 $ 752,190
=============== =================
12
<PAGE>
CAMBRIDGE ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEAR ENDED
MARCH 31, 1998 AND 1997
UNAUDITED
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 3,773,340 -
Development costs incurred ( 840,450) ( 2,915)
Revisions of previous quantity estimates 347,972 -
Net changes from purchase of minerals
in place 5,686,819 772,377
-------------- -------------
End of period $ 9,645,972 $ 752,190
=============== =============
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company's operations during the first quarter included: the operations
of its producing oil and gas properties; completion of engineering and contract
work for its 20 well 98'-99' drilling program and management of Triton Wellhead
and Manufacturing, Inc.
For the three months ended June 30, 1998, Cambridge operations produced a
total of 270.095 million cubic feet of gas and 6262 barrels of oil and oil. The
Company's total revenues for this period were $121,201, up from $5,679 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 25% working interest in
this well before payout with a 34% working interest after payout. This property
has paid out $799,145.22 of total drilling and completion costs of $1,379,984.79
since it came on line February 28, 1998.
Operating expenses increased to $250,540 for the three months ended June
30, 1998 up from $33,751 for the same period the previous year. This increase
was attributable to: 1) the final expenses of bringing the Calvert & Todd No. 1
on line; 2) the increased level of engineering and lease acquisition costs for
the Company's 20 well, 1998'-99' drilling program and 3) to expenses for the
management and operation of Triton Wellhead and Manufacturing, Inc. The Company
believes that much of the work represented by these added operating expenses
will result in increased revenues for the current and future fiscal years.
In the second month of the Quarter ended June 30, 1998, the Company entered
into an agreement to manage Triton Wellhead & Manufacturing Inc operations in
Broussard, Louisiana. The Company has an agreement in place to acquire this
Company and began to manage operations as a part of the process of acquisition.
The Company has acquired a secured first position in the real property and plant
of Triton Wellhead & Manufacturing, Inc. in exchange for $170,000 in cash paid
to Associates Financial Services, of America, Inc. and expects to complete the
closing of this purchase during the present fiscal quarter. The total purchase
price will be approximately $1,000,000 (subject to adjustment for inventory,
receivables and payables) with the balance to be paid in cash, common stock of
the Company and debt.
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
period of time, however, the Company's rework operations were successful and the
14
<PAGE>
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 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 has scheduled drilling to begin during the second
quarter of the current fiscal year.
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 first quarter of the subsequent year, the Company
raised an additional $230,000 for the sale of common stock.
Management believes that its 25% (34.375% after payout) 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 will provide
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.
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.
15
<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
August 12, 1998
By: /s/ Perry Douglas West
------------------------------------
Perry Douglas West
Chairman and Chief Executive Officer
16
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