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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-29344
INDO-PACIFIC ENERGY LTD.
(Exact name of registrant as specified in its charter)
YUKON TERRITORY, CANADA NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1200, 1090 West Pender Street
Vancouver, B. C. Canada V6E 2N7
(Address of principal executive offices)
(604) 682-6496
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common shares without par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 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 number of the issuer's common shares without par value
outstanding on June 30, 1998 was 28,262,398 shares.
Documents incorporated by reference: Form 10 and all amendments
thereto.
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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements for the
Period Ended June 30, 1998
INDO-PACIFIC ENERGY LTD.
Consolidated Balance Sheets
As at June 30, 1998
Unaudited, Prepared by Management
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
1998 1997
ASSETS
<S> <C> <C>
Current
Cash and short-term deposits $ 8,613,665 $ 8,380,518
Accounts receivable 79,277 117,232
Due from related parties 132,222 305,481
Goods and services
tax receivable 10,436 30,903
Marketable securities 573,010 -
Prepaid expenses 8,586 4,909
------------ ------------
9,417,196 8,839,043
Petroleum and natural
gas properties 3,088,521 1,949,971
Property and equipment 133,576 119,455
------------ ------------
Total Assets $ 12,639,293 $ 10,908,469
------------ ------------
LIABILITIES
Current
Accounts payable and
accrued liabilities $ 40,935 $ 70,827
------------ ------------
Total Liabilities 40,935 70,827
------------ ------------
Shareholders' Equity
Share capital 17,719,726 15,844,318
Deficit (5,121,368) (5,006,676)
------------ ------------
Total Shareholders' Equity 12,598,358 10,837,642
------------ ------------
Total Liabilities and
Shareholders' Equity $ 12,639,293 $ 10,908,469
------------ ------------
</TABLE>
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INDO-PACIFIC ENERGY LTD.
Consolidated Statements of Loss and Deficit
For the Six Month Period Ended June 30, 1998
(Comparative figures are for the six month
period ended June 30, 1997)
Unaudited, Prepared by Management
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
REVENUES
Petroleum sales $ 129,808 $ 253,171
Interest 216,822 154,501
------------ ------------
346,630 407,672
------------ ------------
Cost of sales
Production costs 24,519 32,639
Depletion 43,281 169,381
------------ ------------
67,800 202,020
------------ ------------
278,830 205,652
------------ ------------
EXPENSES
Accounting and audit 19,798 15,014
Amortization 25,621 7,062
Consulting 22,230 36,812
Corporate relations
and development 36,813 33,916
Filing and transfer agent 4,456 4,050
Foreign exchange loss 51,004 42,450
Legal 65,171 19,163
Management fees - -
Office and miscellaneous 19,474 40,539
Printing 88,207 48,342
Rent 33,097 7,939
Telephone 23,616 8,452
Travel 46,015 20,254
Wages and benefits 29,582 74,848
------------ ------------
465,084 358,841
------------ ------------
Net loss for the period (186,254) (153,189)
Deficit - Beginning of period (4,935,114) (4,853,487)
------------ ------------
Deficit - End of period $ (5,121,368) $ (5,006,676)
Basic loss per share $ 0.01 $ 0.01
Diluted loss per share 0.01 0.01
</TABLE>
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INDO-PACIFIC ENERGY LTD.
Consolidated Statements of Cash Flows
For the Six Month Period Ended June 30, 1998
(Comparative figures are for the six month period ended June 30, 1997)
Unaudited, Prepared by Management
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash provided by (used in):
Operating activities
Net loss for the period $ (186,254) $ (153,189)
Adjustments to reconcile net loss to
cash applied to operating activities:
Amortization 25,621 7,062
Depletion 43,281 169,381
Changes in non-cash working capital:
Accounts receivable 55,197 25,603
Goods and services
tax receivable (10,436) (30,903)
Prepaid expenses 883 6,563
Marketable securities (339,500) -
Due to/from related parties 20,151 (310,929)
Accounts payable and
accrued liabilities (4,769) (10,356)
------------- -------------
Cash used in operating
activities (395,826) (296,768)
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Financing activities
Common shares issued for cash - 331,740
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Cash provided by financing
activities - 331,740
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Investing activities
Petroleum and natural
gas properties (1,201,963) (1,005,424)
Property and equipment (43,953) (91,584)
------------- -------------
Cash used in investing
activities (1,245,916) (1,097,008)
------------- -------------
Net decrease in cash
during the period (1,641,742) (1,062,036)
Cash position - Beginning
of period 10,255,407 9,442,554
------------- -------------
Cash position - End of period $ 8,613,665 $ 8,380,518
------------- -------------
</TABLE>
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<PAGE> 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The business of the Registrant was organized in 1996. The Registrant is
in the exploration and evaluation stage of its oil and gas properties
and hence has not yet achieved profitability or break even cash flow.
The Registrant has experienced losses in each fiscal period reported on.
Its main source of capital currently is the issuance of equity
securities, which has a dilutive effect on the Registrant's
shareholders. Total losses incurred from incorporation to December 31,
1997 were $4,935,114. The loss for the quarter ending June 30, 1998 was
$95,564 and for the six months ended June 30, 1998 was $186,254. The
level of future operations may be limited by the availability of capital
resources, the sources of which are not predictable. The results of
operations should be largely measured by the success of the extent and
quality of oil and gas discovered as a result of exploration programs.
The sales value of any oil and gas discovered by the Registrant will be
largely dependent on factors beyond the Registrant's control such as the
market value of the hydrocarbons produced.
Operating Revenue
Ngatoro Energy Limited, a subsidiary of the Registrant, owns a five per
cent participating interest and revenue interest in petroleum mining
permit PMP 38148, Taranaki Basin, North Island, New Zealand, which has
four producing oil wells and two shut-in gas wells. In the six months
ending June 30, 1998 the Registrant received $129,808 from hydrocarbon
sales compared with $253,171 in the comparable period in 1997.
Production has remained relatively constant. The difference is due to
one of the Ngatoro wells being shut-in for a workover and to lower
hydrocarbon prices.
Interest Income
Interest income for the six months ended June 30, 1998 was $216,822
compared with $154,501 in the comparable period in 1997.
Costs and Expenses
In the six months ended June 30, 1998 no new petroleum interests were
acquired and the Registrant incurred exploration and development
expenses of $1,201,963.
Depletion and amortization expense for the six months ending June 30,
1998 was $68,902 compared with $176,443 for the comparable period in
1997.
For the six months ended June 30, 1998 general and administrative
expenses were $465,084 compared with $358,841 for the comparable period
in 1997. The increase is due to greater activity associated with field
activities.
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Interest Expense
The Registrant finances its business primarily from the issuance of
common shares and secondarily from the receipt of petroleum revenues
from its interest in the Ngatoro oil field, New Zealand. The Registrant
has not effected any borrowing and has consequently not incurred any
interest expense.
Liquidity
The Registrant has maintained an appropriate liquidity level to fund its
expenditure programs in the past and has no reason to conclude that this
will not continue for fiscal 1998. The Registrant is satisfied with its
ability to access capital markets through private placements, public
offerings, and convertible securities in order to preserve liquidity
levels. The Registrant will utilize joint venture arrangements to reduce
its exposure on exploration and development programs.
At June 30, 1998 working capital was $9,376,261 compared with $8,768,216
for the comparable period in 1997.
In the quarter ended June 30, 1998 the Registrant issued the shares
described under Part II, Item 4, but this had no effect on liquidity as
it was merely the replacement of escrow shares.
Capital Resources
Material capital commitments to December 31, 1998 are described in
amendment one of Item 1-Business-Plan of Operations of the Registrant's
Form 10 as at December 31, 1997, which is incorporated herein by
reference. The Registrant has this amount on deposit.
The Registrant has no other anticipated capital expenditures of a
material amount. However, the Registrant intends to acquire additional
petroleum interests which may give rise to further capital expenditures.
In the quarter ended June 30, 1998 the Registrant granted an option
agreement to AMG Oil Ltd. (OTCBB: AMGO) an associated company to
explore Petroleum Exploration Permit 38256, onshore Canterbury Basin,
South Island, New Zealand. The Registrant and associated company,
Trans-Orient Petroleum Ltd. ("TOP") each own a 50% participating
interest in the permit area. Both the Registrant and TOP have equally
granted options to AMG to earn up to an 80% interest in the permit. In
order to earn the interests AMG must:
(i) pay 100% of the cost of a 120 mile seismic survey which was
recently completed to earn a 30% interest; and
(ii) pay 100% of the cost of any additional seismic required to
define two drilling prospects and pay the dry hole costs of
drilling two wells to a maximum of about US$2,100,000 to earn an
additional 50%.
<PAGE> 7
In the quarter ended June 30, 1998 the Registrant purchased 1,000,000
shares of AMG Oil Ltd., an associated company, for $0.25 per share and
was granted an option to purchase 1,000,000 shares for $0.50 per share
before July 31, 2000.
The transaction with AMG is described in amendment number one to the
Form 10 at December 31, 1997 of the Registrant.
The Registrant has no agreements with management, investors,
shareholders or anyone else respecting additional financing at this
time. Because of the nature of the Registrant's business, there are no
trends in the nature of its capital resources which could be considered
predictable. To date, the Registrant's capital resources have consisted
solely of the issuance of common shares pursuant to either public
distributions, private placements or the exercise of convertible
securities.
Results of Operations
The Registrant is an exploration company. The Registrant's primary focus
is the investigation and acquisition of oil and gas properties. The
Registrant's policy is to acquire interests and where possible, minimize
its risk exposure by farming out or joint venturing these interests to
other industry participants.
Petroleum revenues for the six months ended June 30, 1998 were $129,808
compared with revenues for the six months ended June 30, 1997 which were
$253,171. The difference is attributable to one of the Ngatoro oil wells
being shut-in for a workover and due to lower hydrocarbon prices.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings commenced or maintained by, or
against, the Registrant.
ITEM 2. CHANGES IN SECURITIES
There has been no change in the rights of the holders of any class of
registered securities and none of the rights evidenced by any class of
registered securities has been materially limited or qualified by the
issuance or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Registrant has no debt securities outstanding.
<PAGE> 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual general meeting of the Registrant was held on June 24, 1998.
Shareholders appointed Sadovnick Telford & Skov as auditors for the
ensuing year and authorized the directors to fix their remuneration,
elected Dr. David Bennett, Ronald Bertuzzi, Alex Guidi and Brad Holland
as directors, approved by ordinary resolution the reservation of the
number of shares that is 20 percent of the outstanding shares from time
to time for the grant of directors' and employees' stock options on
terms and conditions to be determined by the directors, approved by
ordinary resolution the surrender to the Company and cancellation in
accordance with applicable securities law of 1,406,250 common shares
subject to an escrow agreement dated April 8, 1994 among Pacific
Corporate Trust Company, International Resource Management Corp., Kim
Morris and Lana Ko and to Local Policy 3-07 of the British Columbia
Securities Commission, approved by ordinary resolution the replacement
of escrow shares by the issuance in accordance with applicable
securities law to International Resource Management Corp. of 1,181,250
common shares, and to the DJ and JM Bennett Family Trust of 225,000
common shares, for CDN$0.01 per share and confirmed by ordinary
resolution Bylaw No. One of the Company;
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities & Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.
Dated this 11th day of August, 1998.
INDO-PACIFIC ENERGY LTD.
BY: /s/ Alex Guidi
Alex Guidi, Chairman
BY: /s/ Mark Katsumata
Mark Katsumata, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1998 and the Consolidated Loss
and Deficit for the six month period ended June 30, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 8,613,665
<SECURITIES> 573,010
<RECEIVABLES> 89,713
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,417,713
<PP&E> 3,488,048
<DEPRECIATION> (265,951)
<TOTAL-ASSETS> 12,639,293
<CURRENT-LIABILITIES> 40,935
<BONDS> 0
0
0
<COMMON> 17,719,726
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,639,293
<SALES> 129,808
<TOTAL-REVENUES> 346,630
<CGS> (67,800)
<TOTAL-COSTS> (67,800)
<OTHER-EXPENSES> (465,084)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (186,254)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (186,254)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
