SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
For the Quarter Ended Commission File
September 30, 1999 Number 0-24493
CAMBRIDGE ENERGY CORPORATION
--------------------------------------------------
(Exact name of registrant as specified in charter)
Nevada 59-3380009
- ------------------- -----------------------
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
215. South Riverside Drive, Suite 12, Cocoa, Florida 32922
----------------------------------------------------------
(Address of Principal Executive Offices)
407-636-6165
---------------------------------------------------
(Registrant's telephone number including area code)
Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the exchange Act during the preceding 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 [ ]
The Registrant has 11,634,827 shares of common stock, par value $0.0001 per
share issued and outstanding as of September 30, 1999.
Traditional Small Business Disclosure Format
Yes [ x ] No [ ]
<PAGE>
Cambridge Energy Corporation
and Subsidiaries
Table of Contents
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Cambridge Energy Corporation Financial Statements 1 - 13
(Unaudited)
Balance Sheet as of September 30, 1999
Statement of Operations for the three
months ended September 30, 1999 and 1998
Statement of Operations for the six
months ended September 30, 1999 and 1998
Statement of Cash Flows for the three months
ended September 30, 1999 and 1998
Notes to Financial Statements
Item 2. Management's Discussion and Analysis 14 - 16
PART II - OTHER INFORMATION 17
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
SIGNATURE PAGE 18
<PAGE>
PART 1 - FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 and 1998
<S> <C> <C>
1999 1998
---- ----
ASSETS
Current assets:
Cash $ 135,049 $ 213,086
Accounts receivable, trade 274,405 199,087
Marketable equity securities, at fair value 18,750 24,525
Inventory, material and supplies 216,617 -
Prepaid expenses 1,060,278 105,160
-------------- --------------
Total current assets 1,705,099 541,858
-------------- --------------
Property and Equipment, net of $64,068
and $8,663 of accumulated depreciation 1,112,703 1,262,824
Oil and gas properties (successful efforts method):
Oil interests, proved properties, net of $22,862
and $10,353 of accumulated depletion 4,399,212 338,487
Support equipment, at cost, net of $14,266 and
$8,242 of accumulated depreciation 18,989 18,396
-------------- --------------
5,530,904 1,619,707
-------------- --------------
$ 7,236,003 $ 2,161,565
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,524,116 348,212
Advances for future drilling contracts 2,625,644 232,012
Funds held for future distribution 129,105 109,586
Taxes payable 66,878 8,894
Accrued expemses 252,096 -
Loans from shareholders 342,776 124,934
-------------- --------------
Total current liabilities 4,940,615 823,638
-------------- --------------
Long-term liabilities
Property Mortgage 166,404 170,000
Notes payable 928,881 700,300
-------------- --------------
Total long-term liabilities 1,095,285 870,300
Stockholders' equity (deficit):
Preferred stock, $.0001 par value, 25,000,000 shares
authorized, 159,000 shares issued and outstanding
of Series A and B convertible redeemable, $375,000
aggregate liguidation value 16 -
Common stock, $ .0001 par value, 50,000,000
shares authorized, 11,634,827 and 9,519,959
shares issued and outstanding, respectively 1164 952
Paid in capital in excess of par 3,942,957 1,702,197
Accumulated deficit ( 2,661,926) ( 1,238,195)
Accumulated other comprehensive loss ( 46,275) -
Treasury stock, at cost, 89,582 shares ( 35,833)
--------------- --------------
1,200,103 467,627
--------------- --------------
$ 7,236,003 $ 2,161,565
=============== ==============
The accompanying notes are an integral part of the financial statements.
1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIAIRES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 and 1998
<S> <C> <C>
1999 1998
---- ----
Revenues:
Oil and gas sales, net of royalties $ 268,929 $ 72,356
Manufacturing and service - -
Lease operating and other income 3,745 5,040
Other income 528 1,866
-------------- --------------
273,202 79,262
-------------- --------------
Operating expenses:
Production costs 343,766 34,686
Exploration costs 86,359 15,261
Manufacturing and Service costs - -
Marketing expense - -
General and administrative 161,664 109,212
Depletion 4,552 2,322
Depreciation 15,671 5,027
-------------- --------------
612,012 166,508
-------------- --------------
Interest expense 8,050 2,833
-------------- --------------
Net loss $( 346,860) $( 90,079)
============== ==============
Net loss per share $( .03) $( .01)
============== ==============
Loss per share from operations $( .03) $( .01)
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIAIRES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
<S> <C> <C>
1999 1998
Revenues: ---- ----
Oil and gas sales, net of royalties $ 535,681 $ 190,857
Manufacturing and service - -
Lease operating and other income 12,194 7,740
Other income 4,634 1,866
---------------- ----------------
552,509 200,463
---------------- ----------------
Operating expenses:
Production costs 529,814 101,631
Exploration costs 125,472 15,261
Manufacturing and Service costs - -
Marketing expense - -
General and administrative 282,726 269,400
Depletion 7,993 6,961
Depreciation 23,728 9,983
---------------- ----------------
969,733 403,236
---------------- ----------------
Interest expense 20,206 6,689
---------------- ----------------
Net loss $( 437,430) $( 209,462)
================ ================
Net loss per share $( .03) $( .02)
=============== ================
Loss per share from operations $( .03) $( .02)
=============== ================
The accompanying notes are an integral part of the financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
Accumulated Other
Preferred Stock Common Stock Add'l Paid Accumulated Comprehensive Treasury Stock
Shares Amount Shares Amount In Capital Deficit Loss Amount Total
------- ------ ---------- ------- ---------- --------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 - $ - 8,340,746 $ 834 $ 886,552 $(985,560) $( 40,500) $ - $(138,674)
Issuance of preferred
stock for cash 134,000 $ 13 334,987 335,000
Issuance of common stock
for cash 406,223 41 314,959 315,000
Issuance of common stock
for services 252,000 25 214,525 214,550
Issuance of common stock
for purchase of
subsidiaries 2,635,768 264 2,126,937 2,127,201
Reacquired shares held
in treasury ( 23,341) ( 23,341)
Unrealized loss in
marketable securities ( 5,775) ( 5,775)
Dividends on preferred
stock ( 5,452) ( 5,452)
Net loss (1,264,547) ( 1,264,547)
-------- ------- --------- ------- ---------- ---------- ---------- ------------ -----------
Balance at March 31,1999 134,000 $ 13 11,634,827 $ 1,164 $3,877,960 $(2,255,559) $( 46,275) $( 23,341) $ 1,553,962
Issuance of preferred
stock for cash 20,000 $ 2 49,998 50,000
Reacquired shares held
in treasury (12,492) ( 12,492)
Net loss ( 59,507) ( 59,507)
-------- ------- --------- ------- ---------- ----------- ---------- ------------ -----------
Balance at June 30,1999 154,000 $ 15 11,634,827 $ 1,164 $3,927,958 $(2,315,066) $( 46,275) $( 35,833) $ 1,531,963
Issuance of preferred
stock for cash 15,000 $ 2 39,998 40,000
Cancellation of preferred
stock (10,000) $( 1) (24,999) (25,000)
Net Loss (346,860) (346,860)
-------- ------- --------- ------- ---------- ----------- ---------- ------------ -----------
Balance at Sept 30,1999 159,000 $ 16 11,634,827 $ 1,164 $3,942,957 $(2,661,926) $( 46,275) $( 35,833) $ 1,200,103
The accompanying notes are an integral part of the financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 and 1998
<S> <C> <C>
1999 1998
---- ----
Cash flows from operating activities:
Oil and gas sales received $ 634,913 $ 286,951
Interest received 814 1,866
Cash paid to employees - (76,265)
Cash paid to suppliers (1,004,810) (399,232)
Interest paid (9,894) (6,689)
Income taxes paid - -
---------------- ----------------
Net cash used in operating activities (378,977) (193,369)
Cash flows from investing activities:
Purchase of property and equipment (2,274) (591,647)
Disposal of equipment 34,798 -
Shareholders' loans - (39,800)
Deposits - -
---------------- ----------------
Net cash used in investing ativities (32,524) (631,447)
Cash flows from financing activities:
Repayment of notes payable 251,598 -
Sales of stock, preferred 90,000 -
Shareholders loan 36,185 -
Treasury stock purchase (12,492) -
Proceeds of note payable 83,000 480,300
Issuance of common stock - 545,463
---------------- ---------------
Net cash provided by financing activities 448,291 1,025,763
---------------- ---------------
Net change in cash 101,838 200,947
---------------- ---------------
Cash at beginning of period 33,211 12,139
---------------- ---------------
Cash at end of period $ 135,049 $ 213,086
================ ===============
The accompanying notes are an integral part of the financial
statements.
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 and 1998
Reconciliation of Net Loss to Net Cash
Used in Operating Activities
<S> <C> <C>
1999 1998
---- ----
Net loss $ (406,367) $ (209,462)
---------------- ----------------
Adjustment to reconcile net loss to
net cash used in operating activities:
Depletion 21,332 6,961
Depreciation 7,994 9,983
(Increase) decrease in accounts receivable, trade 83,217 88,354
(Increase) decrease in prepaid expenses (664,470) (77,173)
Increase (decrease) in accounts payable, trade 2,528,846 (114,430)
Common stock issued for services - 3,300
Preferred stock issued for debt 539 -
Increase (decrease) in accrued expenses 37,956 -
Increase (decrease) in royalty interest payable (7,744) -
Increase (decrease) in drilling advances (1,980,280) 99,098
--------------- ----------------
Total adjustments 27,390 $ 16,093
--------------- ----------------
Net cash used in operating activities $ (378,977) $( 193,369)
=============== ================
The accompanying notes are an integral part of the financial statements.
</TABLE>
6
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Organization and business
- -------------------------
Cambridge Energy Corporation (the Company) was incorporated in the state of
Nevada on April 9, 1996. The Company is an independent oil and gas company
engaged in the exploration and development of domestic and foreign oil and gas
properties. It presently owns oil well properties located in Louisiana and oil
and gas properties in Indonesia. The Company also manufactures certain wellhead
control devices. Oil produced is sold to various crude oil purchaser in the
Louisiana market and to the Indonesian government in the Indonesian market.
Business combinations
- ---------------------
The Company acquired its two subsidiary corporations in transactions accounted
for as purchases. In both transactions, the purchase price was allocated to the
fair values of the assets acquired with no portion of the purchase price
allocated to goodwill.
The Company acquired 100% of the outstanding common stock of Triton Wellhead &
Manufacturing, Inc. (TWM), a U.S. corporation, on September 30, 1998 in exchange
for 762,354 common stock shares valued at $.64 per share, $5,000 cash, the
issuance of a $75,000 note payable and the assumption of $366,944 of liabilities
(Note 8). TWM manufactures values and other wellhead control devices (Note 9).
The accompanying consolidated statement of operations and comprehensive income
include TWM's results of operations subsequent to September 30, 1998.
The Company acquired 100% of the outstanding common stock of Intermega Energy
Pte, Ltd. (IEP), a Singapore corporation, on January 4, 1999 in exchange for
1,873,414 common stock shares valued at $.875 per share and $500,000 cash. IEP
owns oil properties in Indonesia. The accompanying consolidated financial
statement of operations and comprehensive income include IEP's results of
operations subsequent to January 4, 1999.
Principles of consolidation
- ---------------------------
The accompanying consolidated financial statements include the general accounts
of the Company and its wholly owned subsidiaries, Triton Wellhead and
Manufacturing, Inc. (TWM) and Intermega Energy PTE, Ltd. (IEP).
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.
7
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Marketable equity securities
- ----------------------------
The Company owns 75,000 common stock shares of a corporation publicly traded on
NASDAQ Small Cap market. 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.
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.
2. PREFERRED STOCK
To date the Company has issued a total of 150,000 shares of its Series A and
Series B, respectively, preferred stock for 2.50 cash per share. Other than in
liquidation and redemption at the holders' option, the preferences attached to
these series are identical. The shares have a par value of $.0001 and pay an
8.0% per annum non-cumulative dividend payable quarterly. The shares are
convertible into common stock at the holders options anytime within 18 months
8
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from the date of issue at a conversion price of $1.50 per common share. The
shares are redeemable by the Company within 12 months from the date of issue at
a per share redemption price of $2.50. The holders of the Series A shares can
require redemption at the same price anytime during a period beginning 12 months
from the date of issue and ending 14 months from such date. The holders of the
Series B shares can also require redemption at the same price anytime during a
period beginning six months from the date of issue and ending 12 months from
such date.
In liquidation, the Series A and B holders are entitled to receive an amount
equal to their purchase price of the shares plus declared but unpaid dividends.
Series A holders have liquidation preference over the Series B holders and the
holders of both series have liquidation preference over the common stockholders.
3. COMMITMENTS AND CONTINGENCIES
Leases
- ------
The Company's home office facilities are currently being provided without charge
by a corporation owned by the Company's president. The fair rental value of this
space provided is not material. The Company's Singapore offices are currently
leased on a month to month basis from a corporation owned by another of the
Company's stockholders.
At September 30, 1999, the Company was not obligated under any noncancelable
operating or capital lease agreements.
Year 2000 computer compliance
- -----------------------------
Management believes 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 consolidated 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.
Because of the unprecedented nature of the year 2000 issue, its effects and the
success of related remediation efforts will not be fully determinable until the
year 2000 and thereafter. Management cannot assure that the Company is or will
be year 2000 ready, that the Company's remediation efforts will be successful in
whole or in part, or that parties with whom the Company does business will be
year 2000 ready.
9
<PAGE>
CAMBRIDGE ENERGY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Litigation
- ----------
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Management does not believe that the outcome of
any of those matters will have a material adverse effect on the Company's
consolidated financial position, operating results or cash flows.
Employment and related agreements
- ----------------------------------
In January 1998, the Company entered into an employment agreement with an
executive officer which provides for the payment of $150,000 in annual salaries
and additional compensation based on annualized gross revenues. The agreement
expires in December 2002 and, in certain instances, can be extended through
December 2007. In October 1998, the Company entered into a consulting and share
repurchase agreement with a former officer. The agreement provides for an
initial $50,000 payment and monthly payments of $5,000 until such time as a
total of $400,000 has been paid under the agreement. The former officer will
return to the Company 250,000 common stock shares for each $100,000 of fees paid
to him under the agreement. At September 30, 1999, 89,582 shares had been
returned to the Company and are being held in the treasury.
4. INCOME TAXES
The Company uses the accrual method of accounting for tax reporting purposes. At
March 31, 1999, the Company had net operating loss carryforwards for financial
and tax reporting purposes of approximately $2,340,000, which expire through the
year 2014.
5. NOTES PAYABLE
The Company borrowed $300,000 on two notes payable. The notes are due in October
1999 and April 2000, bear interest at 10.0% and are unsecured. To date, $33,595
of principal was repaid on these notes.
10
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
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 two reportable geographic areas, oil and gas properties
in southern Louisiana and oil properties in Indonesia.
1. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Proved oil and gas properties $4,456,284 $ 198,198
Unproved oil and gas properties - -
Support equipment, proved properties 31,966 25,586
----------- -----------
4,488,250 223,784
Accumulated depreciation and
depletion 28,381 9,039
----------- -----------
Net capitalized costs $4,459,869 $ 214,745
=========== ===========
</TABLE>
2. COST INCURRED IN OIL AND GAS PRODUCING ACTIVITIES FOR ABOVE REFERENCED PERIOD
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Acquisition of proven properties, including $ 4,264,456 $ 170,712
$4,213,565 for properties in Indonesia
Exploration costs $ 140,771 $ 840,450
Development costs $ - $ -
</TABLE>
3. RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES FOR THE ABOVE
REFERENCED PERIODS
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Oil and gas sales $ 529,305 $ 73,899
Lease operating income 32,721 52,514
Production costs 102,794 15,997
Exploration expenses 140,771 840,450
Depreciation and depletion 19,332 7,009
Income tax expense - -
------------ ------------
Results of operations for oil
and gas producing activities
(excluding corporate overhead
and financing costs) $ 299,129 $( 737,043)
============ ============
</TABLE>
11
<PAGE>
CAMBRIDGE ENERGY CORPORATION
SUPPLEMENTARY INFORMATION REGARDING
OIL AND GAS PRODUCING ACTIVITIES
FOR THE YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
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 following reserve
information relates to the Company's reserves located in southern Louisiana
except for the 10,215,867 barrels of Indonesian oil reserves acquired during the
year ended March 31, 1999.
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)
----------- -----------
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
Purchase of minerals in place 10,215,867 -
Revision of previous estimates 765,800 47,758,910
Production ( 28,327) ( 82,300)
------------ ------------
Reserves at March 31, 1999 14,097,790 76,812,750
============ ============
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 YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
UNAUDITED
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOW AT MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
Foreign Domestic
<S> <C> <C> <C>
Future cash inflows $ 172,200,000 $ 181,311,731 $ 32,039,330
Future production costs ( 20,664,000) ( 21,757,408) ( 9,131,220)
Future development costs ( 10,332,000) ( 10,878,704) ( 2,000,750)
Future income tax expenses ( 46,494,000) ( 48,954,167) ( 9,625,168)
--------------- -------------- --------------
Future net cash flows 94,710,000 99,721,452 11,282,192
10% annual discount for
estimated timing of cash flows ( 46,407,900) ( 48,863,512) ( 4,120,252)
--------------- -------------- ----------------
Standardized measure of
discounted future net cash
flows relating to proved
oil and gas reserves $ 48,302,100 $ 50,857,940 $ 7,161,940
=============== ================ ================
</TABLE>
RECONCILIATION OF CHANGES IN THE STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
DURING THE ABOVE REFERENCED PERIOD
Beginning of period $ 7,161,940 $ 752,190
Sales of oil and gas produced ( 529,305) ( 73,899)
Net changes in prices and production costs ( 102,794) ( 105,394)
Development costs incurred ( 140,771) ( 840,450)
Revisions of previous quantity estimates 44,468,670 347,972
Net changes from purchase of minerals
in place 48,302,300 7,081,521
------------- --------------
End of period $ 99,160,040 $ 7,161,940
============= ==============
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The Company is engaged in the exploration and development of oil and natural gas
reserves through the acquisition and development of properties primarily with
proven reserves. The Company's ability to grow shareholder value through growth
of assets, earnings and cash flows is dependent on its ability to acquire and
development commercial quantities of oil and natural gas that can be produced
and marketed at a profit. Product prices, primarily crude oil, dropped
significantly during the Company's previous fiscal year. This drop has adversely
affected the revenue and cash flow of the company, as well as most companies in
the industry. An additional effect of this significant drop in prices have been
the reduction of exploration and development budgets of major oil companies and
independents, causing reduction or elimination of new ventures, work force
reductions and reorganizations. Such changes may result in a decrease in the
ability of the Company to solicit industry partners to participate in projects
undertaken by Cambridge Energy Corporation on a promoted basis. This has
continued to result in delays by partners in making partner contributions,
putting additional demands on the Company's cash flow.
Although product prices have increased during the quarter ended September 30,
1999, company exploration budgets are generally created on a fiscal year basis,
so management believes that a general industry wide recovery will take well into
calendar year 2000 to achieve any meaningful levels. Industry estimates are for
a 4% increase over 1999 budgets.
Company management has used this period to put in place the initial elements of
its growth strategies so that it can maximize the positive results from the
recovery of the industry including:
1. To actively pursue acquisition of significant producing properties with
development potential which can be exploited with lower cost and with
lower risk than unproven prospects
2. The selection, engineering review and rework of workover prospects on
existing properties to maximize production from existing assets;
3. To continue to solicit institutional and industry partners for promoted
transactions as well as increasing equity and long financing to support
this expanded level of projects and operations
4. To significantly add to the company's technical capabilities through
the selective addition of technical personnel and the development and
acquisitoin of advanced reservoir and engineering software.
Management believes that this plan will position the Company to take advantage
of opportunities that it expects to occur as the industry recovers from the
recent period of low prices. While management believes that it has worked toward
the successful completion of this plan, there can be no assurance that the
intended result will be achieved or that funds will be available to accomplish
the plan.
Results of Operations
- ---------------------
Six Months ended September 30, 1999 compared to the Six Months ended September
30, 1998.
For the Six Months ended September 30, 1999, the company recorded a loss of
$437,430 up from $209,462 for the same period the previous year. Revenues
increased to $552,509 for the period, up from $200,463 for the same period the
previous year. The Company received an average of $2.07 per mcf for its gas up
from the average of $1.95 it received for the previous fiscal year. The Company
received an average of $17.47 per barrel of oil, up from the average of $12.74
it received during the previous fiscal year
14
<PAGE>
During the quarter, the Company engaged in various rework operations on its
properties but delays in partnership contributions have delayed full
implementation of its drilling program. During the period, the Company added
production from one non operated well and continued work on various acquisition
opportunities. Although, the Company believes that various acquisition
opportunities will be successful, the completion of these opportunities is
dependent of third party financing which has not been committed and there is no
assurance that such financing will be made available to the Company for any
specific acquisition.
Twelve Months ended March 31, 1999 compared to Twelve Months ended March 31,
1998.
The Company recorded net loss of $843,493 for the year ended March 31, 1999 down
from $1,016,531 for the year ended March 31, 1998. Revenues increased to
$562,026 over $127, 188 the previous year due to the increase in U.S. production
and to service income and international production added toward the end of the
fiscal year.. General and Administrative expenses increased to $1,078,481 over
$237,528 for the previous year due to increases in current depreciation expenses
to $181,340 and consulting fees to $421,600. The increase in consulting fees was
substantially the result of increased engineering activities associated with
acquisitions and proposed acquisitions and to certain consulting fees paid to a
former director as part of a settlement package.
The Company realized some added gains in production during the year due to
addedproduction period resulting in the following:
Percent Year Ended
Increase December 31,
(Decrease) 1998 1999
--------- ---- ----
Gas Production (Mcf) 137% 84,460 200,985
Oil Production (bbls) 115% 1,927 4,163
Barrel of Oil Equivalent 95.76% 19,241 37,660
Average Price of Gas (per mcf) (9.8%) $2.06 $1.86
Average Price of Oil (per bbls) (31.3%) $17.20 $11.93
Based upon increases in the prices of oil and gas since the end of the fiscal
year, management expects that prices received for the Company's products during
the current fiscal year will continue to be higher than those received in the
fiscal year ended March 31, 1999.
Liquidity
- ---------
The Company expects to finance its future acquisition, development and
exploration activities through cash flow from operating activities, various
means of corporate and project finance and through the issuance of additional
securities. In addition the Company expects to continue to subsidize drilling
activities through the sale of participations to industry partners on a promoted
basis, whereby the Company's working interests in reserves and production
greater than its proportionate share capital costs.
Throughout the past 11 months, the Company raised additional capital in the
amount of $375,000 through private sale of preferred shares. Based upon
acquisitions currently in negotiation, the Company expects to begin negotiations
for the placement of a significant financial institution credit facility or
other structured debt facility during the coming fiscal year. This would provide
additional funds for expansion to consistent with the Company growth strategy.
Although management believes that this will be accomplished during the current
fiscal year, there can be no assurance that such a facility will be forthcoming
or that sufficient funds will be available to meet the requirements of the
Company's growth strategy.
15
<PAGE>
Material Commitments for Capital Expenditures
- ---------------------------------------------
The Company has made few limited commitments toward future projects other than
to acquire and pay for the respective leases and to advance certain engineering
work related to projected rework and drilling as well for some limited
operations related to certain reworks. 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 generally 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.
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. To date, the Company has $181,340 in
lease depreciation expenditures.
The company has committed to provide $750,000 in final payment for the purchase
of Indonesian production now under contract, which is due. The transaction was
closed with the exchange of stock between the Company and the owners of the
company which owned the production. Although the certain monies have been paid
on behalf of the transaction, the Company is obligated to pay additional amounts
to the sellers as a part of the transaction. 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 when a commitment will be forthcoming.
16
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 6 of Part II were not applicable during this quarter.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
These risks are described in the Company's Form 10-KSB for the fiscal year ended
March 31, 1999 filed with the Securities and Exchange Commission.
17
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cocoa, State of Florida, on December 9, 1999.
CAMBRIDGE ENERGY CORPORATION
by: /s/ Perry D. West
--------------------------------------
Perry D. West, Chief Executive Officer
18
<PAGE>
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<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
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16
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