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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 September 30, 1999
[ ] 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.)
Registrant's telephone number including area code: (604) 682-6496
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 common shares without par value outstanding on September
30, 1999 was 28,262,398 shares.
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<PAGE> 2
PART 1 FINANCIAL INFORMATION
Item 1 Unaudited Consolidated Financial Statements for the Period
Ended September 30, 1999
INDO-PACIFIC ENERGY LTD.
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
As at September 30, 1999 1998
<S> <C> <C>
ASSETS
Current
Cash and short-term deposits $ 6,298,153 $ 8,259,610
Accounts receivable 141,737 108,633
Marketable securities 279,191 853,083
Due from related parties 334,357 51,267
Prepaid expenses and deposits 12,948 5,793
------------ ------------
7,066,386 9,278,386
Investments 132,500 2,750,000
Petroleum and natural gas properties 3,437,592 3,357,348
Property and equipment 156,950 137,427
------------ ------------
TOTAL ASSETS $ 10,793,428 $ 15,523,161
============ ============
LIABILITIES
Current
Accounts payable and accrued
liabilities $ 116,704 $ 34,719
------------ ------------
TOTAL LIABILITIES 116,704 34,719
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, no par value;
100,000,000 shares authorized;
Issued and outstanding at September 30,
1999 and 1998: 28,262,398 shares 18,245,867 18,253,992
Accumulated deficit (6,927,759) (5,735,558)
Accumulated other comprehensive
income (loss) (641,384) 2,970,008
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,676,724 15,488,442
------------ ------------
Total Liabilities and
Stockholders' Equity $ 10,793,428 $ 15,523,161
============ ============
</TABLE>
1
<PAGE> 3
INDO-PACIFIC ENERGY LTD.
Consolidated Statements of Loss and Comprehensive Income (Loss)
(Unaudited - Prepared by Management)
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
For the Nine Month Periods Ended September 30, 1999 1998
<S> <C> <C>
REVENUES
Petroleum and natural gas sales $ 207,594 $ 181,125
Interest income 249,411 285,824
------------ -----------
457,005 466,949
------------ -----------
COST OF SALES
Production costs 43,949 38,606
Depletion 77,500 62,957
Write-off of oil and gas properties 391,699 -
------------ -----------
513,148 101,563
------------ -----------
(56,143) 365,386
------------ -----------
EXPENSES
Accounting and audit 16,375 29,562
Compensation recovery (8,125) (129,000)
Consulting fees 15,986 37,778
Corporate relations and development 34,667 53,896
Depreciation 48,348 38,366
Filing and transfer agency fees 3,481 5,856
Foreign exchange loss 15,580 71,222
Legal fees 37,297 97,029
Management fees - -
Office and miscellaneous 75,720 98,554
Printing 66,849 107,936
Rent 45,030 57,147
Telephone 28,467 36,986
Travel 40,014 51,450
Wages and benefits 103,524 41,629
Recovery of general and
administrative expenses (123,149) (89,331)
------------ -----------
400,064 509,080
------------ -----------
Net loss for the period (456,207) (143,694)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable
securities and investments (2,203,184) 2,882,441
------------ -----------
Comprehensive income (loss)
for the period $ (2,659,391) $ 2,738,747
============ ===========
Basic and diluted loss per share $ (0.02) $ (0.01)
============ ===========
</TABLE>
2
<PAGE> 4
INDO-PACIFIC ENERGY LTD.
Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
For the Nine Month Periods Ended September 30, 1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net loss for the period $ (456,207) $ (143,694)
Adjustments to reconcile net loss to
cash applied to operating activities:
Compensation recovery (8,125) (129,000)
Depletion 77,500 62,957
Depreciation 48,348 38,366
Write-off of oil and gas properties 391,699 -
Changes in non-cash working capital:
Accounts receivable (39,543) 25,841
Due from related parties (288,196) 101,106
Prepaid expenses and deposits (3,913) 3,676
Accounts payable and accrued
liabilities (40,192) (10,985)
------------ ------------
Net cash used in operating activities (318,629) (51,733)
------------ ------------
FINANCING ACTIVITIES
Common stock issued for cash - 9,774
Cancellation of previously
issued common stock - (3,258)
------------ ------------
Net cash provided by financing
activities - 6,516
------------ ------------
INVESTING ACTIVITIES
Purchase of marketable securities - (149,565)
Purchase of investments (420,000) (250,000)
Petroleum and natural gas properties (1,086,845) (1,490,466)
Property and equipment (71,222) (60,549)
------------ ------------
Net cash used in investing activities (1,578,067) (1,950,580)
------------ ------------
NET DECREASE IN CASH DURING THE PERIOD (1,896,696) (1,995,797)
CASH POSITION - BEGINNING OF PERIOD 8,194,849 10,255,407
------------ ------------
CASH POSITION - END OF PERIOD $ 6,298,153 $ 8,259,610
============ ============
</TABLE>
3
<PAGE> 5
INDO-PACIFIC ENERGY LTD.
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited - Prepared by Management)
(Expressed in United States Dollars)
For the Nine Month Periods Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Accumulated Comprehensive Stockholders'
Shares Amount Deficit Income (Loss) Equity
<S> <C> <C> <C> <C> <C>
Balance at
12/31/98 28,262,398 $ 18,253,992 $ (6,471,552) $ 1,561,800 $ 13,344,240
Net compensation
recovery from
stock options (8,125) (8,125)
Net loss during
the period (456,207) (456,207)
Unrealized loss
on marketable
securities and
investments (2,203,184) (2,203,184)
---------- ------------ ------------ ------------ ------------
Balance at
09/30/98 28,262,398 $ 18,245,867 $ (6,927,759) $ (641,384) $ 10,676,724
========== ============ ============ ============ ============
Balance at
12/31/97 28,262,398 $ 18,376,476 $ (5,591,864) $ 87,567 $ 12,872,179
Common stock
issued for
private
placements 1,406,250 9,774 9,774
Cancellation of
of previously
issued common
stock (1,406,250) (3,258) (3,258)
Net compensation
recovery from
stock options (129,000) (129,000)
Net loss during the
period (143,694) (143,694)
Unrealized gain on
marketable securities
and investments 2,882,441 2,882,441
---------- ------------ ------------ ------------ ------------
Balance at
09/30/98 28,262,398 $ 18,253,992 $ (5,735,558) $ 2,970,008 $ 15,488,442
========== =========== ============ ============ ============
</TABLE>
5
<PAGE> 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Registrant (OTCBB symbol: INDX) is an independent oil and gas
exploration and production company focused exclusively in the Austral-
Pacific region. The business of the Registrant was organized in 1996.
In New Zealand, the Registrant has varying participating interests in
6,620,000 acres of onshore exploration permits and a five percent
participating interest in onshore petroleum mining permit 38148,
Taranaki Basin, North Island. In Australia, the Registrant has varying
interests in 522,160 acres of offshore exploration permits and in Papua
New Guinea, varying interests in 2,170,000 acres of onshore exploration
permits.
The business and securities of the Registrant are speculative. For
other information regarding the Registrant, see (1) other EDGAR filings
in SEC file number 0-29344, www.sec.gov (2) Canadian SEDAR filings at
www.sedar.com and (3) the Registrant's website at www.indopacific.com.
Property maps: see www.indopacific.com
Shareholder relations:
Mr. Gary Saik
Tel: 604-609-3361
Fax: 604-682-1174
Email: [email protected]
The Registrant has experienced losses in each fiscal period on
which it has reported. Its main source of capital is the issuance of
equity securities. Total losses incurred from incorporation to December
31, 1998 were $6,471,552. Net loss for the nine month period ended
September 30, 1999 was $456,207 ($ 0.02 per share).
Operating Revenue
1) Operating Revenue
Gross oil production revenue from PMP 38148 for the nine month
period ended September 30, 1999 was $198,112 (period ended September
30, 1998 $177,558). The increase is due to a rise in production volume
from 4,711 barrels to 5,337 barrels, plus a rise in the average oil
sale price of US$7.48 per barrel of oil to US$17.86 per barrel.
Additional revenue from gas production was received for the nine month
period ended September 30, 1999 of $9,482 (period ended September 30,
1998: $3,567).
Interest Income
Interest income for the nine month period ended September 30, 1999
was $249,411 (September 30, 1998: $285,824).
<PAGE> 7
Costs and Expenses
Property exploration expenditure and New Zealand development
expenditure were:
Expenditure for Expenditure for
the Period Ended the Year Ended
Country September 30, 1999 December 31, 1998
New Zealand
Exploration $ 850,931 $ 828,604
Development 50,358 198,064
Australia
Exploration 49,700 862,413
Papua New Guinea
Exploration 182,596 11,949
China Nil Nil
General and administrative expenses for the year ended December
31, 1998 were $510,384. For the nine month period ended September 30,
1999, general and administrative expenses were $400,064 (September 30,
1998: $509,080).
Amortization and depletion expense for year ended December 31,
1998 was $148,875, while the amortization and depletion expense for the
nine month period ended September 30, 1999 was $125,848 (September 30,
1998: $101,323).
Interest Expense
There is no borrowing and consequently no interest expense.
Liquidity
The Registrant has maintained adequate liquidity to fund its
expenditure programs in the past and has no reason to conclude that
this will not continue for fiscal 1999. Given the Registrant's future
capital commitments it is anticipated that the Registrant will need to
secure future outside sources of capital to fund the ongoing operations
after fiscal 1999. At this time the Registrant has not identified these
sources of outside capital and while the Registrant has been successful
in attracting new capital in the past, there can be no assurances that
the Registrant will be able to attract sufficient capital in the
future. Should the Registrant fail to attract sufficient capital to
fund its ongoing operations the Registrant will have to reduce its
exploration activities and operations where possible in order to
conserve capital. In certain instances, the reduction of exploration
activity may lead to the surrender of currently held permit areas.
<PAGE> 8
At December 31, 1998, the Registrant had $10,390,218 in working
capital as compared with $10,827,096 at December 31, 1997. At September
30, 1999, working capital was $6,949,682 (September 30, 1998:
$9,243,667) while cash reserves are $6,298,153 (September 30, 1998:
$8,259,610). Expenditures to the Registrant's properties for the nine
month period ended September 30, 1999 were $1,133,585.
Capital Resources
Material capital commitments to December 31, 1999 are more
described in Item 1 Business - Plan of Operations of the Registrant's
Form 10-K for the fiscal year ended December 31, 1998. For the
Registrant's 1999 fiscal year ended December 31, 1999, the Registrant's
permit obligations require US$1,350,000 in total work commitments to
the properties. The Registrant plans on spending an additional
US$615,000 above the obligatory amount on exploration projects meriting
the extra expenditure. However, of the amounts required to meet
obligations, approximately US$295,000 will not be expended in 1999 as
the licenses on which the expenditure was required have been
relinquished. 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.
The Registrant has no agreements 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's primary focus is the acquisition and exploration
of unproven 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 property interests to other industry
participants.
Material changes on petroleum properties during the period were:
NORTH ISLAND, NEW ZEALAND, ONSHORE EAST COAST BASIN
Petroleum Exploration Permit 38328 (40%), Operator: Indo-Pacific Energy
Ltd.
Through the past acquisition of nearly 200 miles of new seismic,
reprocessing of over 200 miles of existing seismic and the completion
of a variety of geological studies, a number of exploration leads and
prospects have been identified. During the year, the Registrant
concentrated its exploration efforts within this permit on three
prospects: the Napier, Whakatu and Mai Mai by collecting 25 miles of
new seismic data over these areas. Subsequent processing and mapping of
the seismic confirms Whakatu as a drillable prospect with the other
prospects also considered as possible future drilling sites. During the
<PAGE> 9
nine month period ended September 30, 1999, the participants in this
permit negotiated land access and have obtained resource consents to
drill a well to test the Whakatu-1 Prospect. The consents have all been
received and drilling is expected to commence in early January 2000 to
a target depth of 2000m (6,500 feet) where the parties have calculated
a possible reserve estimate of 200 BCF of gas or 100 million barrels of
oil. During the nine month period ended September 30, 1999, the
Registrant spent $154,999 which includes well preparation and inventory
purchases for the drilling of the Whakatu-1. The Registrant's portion
of the costs to drill the Whakatu-1 is estimated to cost $350,000.
Petroleum Exploration Permit 38332 (42.5%), Operator: Indo-Pacific
Energy Ltd.
The Boar Hill prospect which has been defined by earlier seismic
mapping is being considered as a possible drilling target by the permit
participants. During the previous quarter, reservoir studies were
undertaken on samples from the area around this prospect. The field
studies are being conducted with the goal of determining a suitable
future drilling location. The Boar Hill prospect may be drilled in the
first quarter of 2000 to a target depth of 1000 metres or 3,250 feet.
Petroleum Exploration Permit 38335 (10.0%), Operator: Westech Energy
Corp.
The Registrant acquired a 10% interest in this 101,887 acre permit
over an area previously covered by Petroleum Prospecting Licence 38312,
in which the Registrant participated in the drilling of the Waitaria-1
well. It is intended to acquire seismic over the area of the Waitaria
prospect to better delineate the prospect for drilling in the future.
Everest Energy Inc. and Asia Pacific Oil Sdn. Bhd. assigned interests
and operatorship to Westech Energy Corp. in September 1999. Twenty
kilometers of new seismic will be acquired at the earliest opportunity
at an estimated minimum cost to the Registrant of $9,500.
NORTH ISLAND, NEW ZEALAND, ONSHORE TARANAKI BASIN
Petroleum Mining Permit PMP 38148 (5%), Operator: New Zealand Oil & Gas
See Operating Revenue for petroleum sales.
The Ngatoro-1 well workover was completed successfully in mid-
June, adding approximately 280 barrels of oil per day to production.
The joint venture participants have also approved a work over of the
Ngatoro-9 and Ngatoro-6 production wells. The Registrant's portion of
costs for the work over of the Ngatoro-9 well is budgeted at $5,000.
The Registrant's portion of costs for the work over of the Ngatoro-6
well is budgeted at $3,000.
Drilling two new wells to test separate oil prospects is being
considered.
<PAGE> 10
Petroleum Exploration Permit PEP 38716 (19.8%), Operator: Marabella
Enterprises Ltd.
On March 31, 1999, drilling of the Huinga-1 well on the Crown
Prospect commenced. The Huinga-1 well was drilled to a total depth of
13,000 feet in order to test several target zones. The well was plugged
and suspended for later re-entry should the participants determine that
a re-entry is warranted.
The Registrant holds a 19.8% interest in the well and permit area.
A farm out agreement with Australian Worldwide Exploration N.L. and
sale of a five percent interest for US$150,000 to Antrim Oil and Gas
Limited of Calgary, Alberta reduced exposure to about 10% of well cost
of approximately $3.4 million.
Seismic has also detailed the shallower Oru Prospect to the south
of the Crown Prospect. The Oru Prospect may be drilled late in 1999.
A farm out agreement with Antrim Oil and Gas Ltd. and Swift Energy
New Zealand Ltd. for 7.5% of the permit is in the process of
negotiations.
On September 3, 1999, the Ministry of Commerce approved a Change
of Conditions to the work program which enables the Joint Venture to
undertake geological and geophysical studies and, prior to January 29,
2000, either submit for approval an ongoing work program for the final
permit year, or surrender the permit.
Petroleum Exploration Permit PEP 38736 (50%), Operator: Indo-Pacific
Energy Ltd.
The Registrant has acquired a 50% participating interest in, and
is the operator of, PEP 38736. This permit was awarded on July 14, 1999
to the Registrant and Millenium Oil and Gas Ltd. for a five-year term.
It is adjacent to PEP 38723 which is held by the Registrant (40%) and
Trans-Orient Petroleum Ltd. (40%). The Registrant has applied for an
extension of the PEP 38736 area to incorporate the area previously held
as the PEP 38706 appraisal area, which permit was relinquished in
August 1999. (See Item 5).
The joint venture must complete geological and geophysical work
and acquire at least 8 km of new seismic by January 2001.
Petroleum Exploration Permit PEP 38720 (50%), Operator: Indo-Pacific
Energy Ltd.
The Registrant has a 50% participating interest in, and is the
operator of, PEP 38720. The other participant in PEP 38720 is Trans-
Orient Petroleum Ltd. (50%). During the nine month period ended
September 30, 1999, the Registrant expended $36,827 which included
costs associated with acquiring the necessary permitting to drill the
Clematis 1 well. The Clematis-1 well is scheduled to spud in late
November 1999 to be drilled to a target depth of 1600 m. The cost
attributable to the Registrant for drilling the well is budgeted at
US$750,000 including logging and casing. The permit also includes the
deeper and significant Waitoriki Prospect, which could hold potential
<PAGE> 11
reserves of 200 Bcf of gas at 13,000 feet, and is situated directly
under a major gas pipeline. Permitting and planning preparation is
complete for this drilling project, and the Registrant is in
negotiations to secure farm-in partners to participate in the drilling
of this deeper formation at some future date.
The drilling of Clematis-1 will fulfill the current permit work
obligation.
SOUTH ISLAND, NEW ZEALAND, CANTERBURY BASIN
Petroleum Exploration Permit PEP 38256 (35%), Operator: Indo-Pacific
Energy Ltd.
In February 1999, the Registrant and its joint venture partners,
AMG Oil Ltd. (30%) ("AMG Oil") and Trans-Orient Petroleum Ltd. (35%)
("Trans-Orient") completed a 165 mile 2D seismic program as a second
stage follow up survey to the joint venture's earlier 120 mile seismic
survey. The second phase of seismic surveys were paid solely by AMG Oil
in return for the other joint venture participants, Trans-Orient and
the Registrant, extending the time for AMG Oil to exercise the drilling
option to acquire a further 50% interest on PEP 38256 until October 31,
1999; this date has recently been extended to May 31, 2000. AMG Oil's
funding of the ongoing costs includes an independent evaluation of the
permit by the Geology Department of the University of Canterbury, New
Zealand. The participants are currently conducting interpretation and
mapping of the recently acquired seismic.
One half of the original area must be relinquished by August 25, 2000,
in addition to that required upon renewal of the permit.
PAPUA NEW GUINEA:
Petroleum Prospecting Licence PPL 192 (40%), Operator: Indo-Pacific
Energy Ltd
The Registrant has a 40% participating interest in, and is the
operator of, PPL 192. The other participants in PPL 192 are Trans-
Orient Petroleum Ltd. (20%), Durum Cons. Energy Corp (20%) and Mosaic
Oil N.L. (20%).
The participants are currently acquiring approximately 55 miles of
2D seismic to delineate two prospects: Kamu and Douglas and to further
evaluate the Aiemu lead. The seismic should also tie the Kamu and
Douglas prospects to the Langia gas discovery. During the nine month
period ended September 30, 1999, the Registrant expended $123,302 on
this permit which included acquiring the seismic. The total cost to
acquire the seismic is estimated to be $650,000 of which the
Registrant's proportionate share is $260,000. The acquisition of the
seismic will more than meet the license requirement to acquire 30 miles
of seismic in Year 3, and a portion of this program will count towards
the requirement to acquire seismic in the adjacent PPL 215.
<PAGE> 12
Petroleum Prospecting Licence PPL 215 (40%), Operator: Indo-Pacific
Energy Ltd.
On May 6, 1999, the Papua New Guinea government awarded to the
Registrant and its joint venture partners the exploration permit PPL
215. Aside from the Registrant's 40% interest in this 600,000 acre
permit, the other interest holders are Mosiac Oil (20%) and Trans-
Orient Petroleum Ltd. (40%). PPL 215 is located in a lightly explored
but strategically situated area in the foreland of the Papuan Basin,
where several recent drilling results in offsetting acreage have shown
there is good potential for entrapment of both oil and gas.
The seismic program over PPL 192 will also acquire 18 miles of
seismic for PPL 215 at a cost to the Registrant of approximately
$44,000.
AUSTRALIA
Petroleum Permit Area AC/P31, Operator: Indo-Pacific Energy Ltd.
On September 12, 1999, the Northern Territory Department of Mines
and Petroleum formally awarded permit AC/P31 in the Timor Sea to the
Registrant as Operator (65%) and Mosaic Oil NL (35%).
The Permit, consisting of approximately 18,000 acres, is awarded
for six years subject to the Registrant fulfilling the minimum work
requirements. In the first year, these requirements comprise the
purchase of geological and geophysical data and the completion of
geological and geophysical studies. In the second year, they comprise
the reprocessing of 30 km of 2D seismic data and completion of AVO and
pre-stack depth migration studies over the test line. In the third
year, they comprise the acquisition of 20 km of new 2D seismic and the
integration and interpretation in the existing database. In the fourth
year, the obligation is to acquire 20 km of new 2D seismic to high
grade prospects and in the fifth year, comprises a re-evaluation and
re-interpretation of seismic data. In the sixth year, one exploration
well must be drilled
Petroleum Permit Area VIC/P39
After extensive geological and geophysical work in this permit the
participants have determined that there is a lack of sufficient
prospectivity in this permit area. This conclusion has resulted in the
Joint Venture's formal offer to surrender the license. The Joint Venture
awaits a response from the Federal Government of Australia.
Trends and Prices
The Registrant's revenues, cash flows and ability to attract farm-
in partners are affected by changes in oil and gas prices. The markets
for oil and gas have historically been, and will continue to be,
volatile. Prices for oil and gas typically fluctuate in response to
relatively minor changes in supply and demand, market uncertainty,
seasonal, political and other factors beyond the control of the
Registrant. The Registrant is unable to accurately predict domestic or
worldwide political events or the effects of such other factors on the
<PAGE> 12
prices received by the Registrant for its oil and gas. The Registrant
historically has not entered into transactions to hedge against changes
in oil and gas prices, but may elect to enter into hedging transactions
in the future to protect against fluctuations in oil and gas prices.
Industry conditions deteriorated significantly during 1998 as a result
of declining oil prices and weakening gas prices. There was an excess
supply of, and reduced demand for, crude oil worldwide. This excess
supply placed downward pressure on oil prices worldwide. Natural gas
prices also declined, primarily due to decreased demand and normal
seasonal conditions. There has been significant improvement in oil &
gas prices during the first nine months of 1999, with current oil
prices (for WTI) being around $20 per barrel. However, there is
substantial uncertainty regarding future oil and gas prices. There can
be no assurance that oil and gas prices will not further decline in the
future. If the decline in crude oil and natural gas prices worsens or
continues for a protracted period, it would adversely affect the
Registrant's revenues, income and cash flows from operations. Also, if
prices stay at present levels for an extended period of time or decline
further, the Registrant may delay or postpone certain of its capital
projects.
Year 2000 Compliance
The Registrant is currently conducting a review of its computer
systems to identify the systems that could be affected by the "Year
2000" issue. The Year 2000 problem is the result of computer programs
being written using two digits rather than four to define the
applicable year. Any of the Registrant's programs that have time-
sensitive software may recognize a date using '00' as the year 1900
rather than the year 2000. This could result in a major system failure
or miscalculations. Based upon the Registrant's current review of its
systems, the Registrant does not believe that the Year 2000 problem
will pose a material operations problem for the Registrant. The
Registrant's computer software providers have assured the Registrant
that all of the Registrant's software is or will be Year 2000 compliant
(i.e. will function properly in the year 2000 and beyond). Because the
Registrant believes that it has no material internal Year 2000
problems, the Registrant has not expended and does not expect to expend
a significant amount of funds to address Year 2000 issues. It is the
Registrant's policy to continue to review its suppliers' Year 2000
compliance and require assurance of Year 2000 compliance from new
suppliers; however, such monitoring does not involve a significant cost
to the Registrant. The Registrant's sole source of oil & gas sales
revenue is from its 5% interest in Petroleum Mining Permit ("PMP").
With regard to the Registrant's interest in PMP 38148, the Registrant
is presently dependent on Fletcher Challenge Energy Limited
("Fletcher") for the sale and payment of the Registrant's oil and
natural gas revenues. Fletcher is in turn dependent on various third
parties for delivery and payment. The Registrant will request written
assurances from Fletcher that it has examined their own Year 2000
issues. However, as of the date of this report, the Registrant has not
requested such an assurance. It should be emphasized that no assurance
can be given at this time that Fletcher is or will be Year 2000
compliant. In the event that Fletcher was to have a material Year 2000
<PAGE> 14
problem, the Registrant believes that the foreseeable consequences
would be a temporary delay in revenue collection caused by an
interruption in computerized billing and collecting which may have a
short term impact on the Registrant's revenues. As yet, the Registrant
does not have any contingency plan to address this possibility.
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 were no changes in securities during the quarter.
Item 3 Defaults Upon Senior Securities
The Registrant has no debt securities outstanding.
Item 4 Submission of Matters to a Vote of Security Holders
None.
Item 5 Other Information
Millennium Oil & Gas Limited ("Millenium") is a private company
incorporated in New Zealand. Mrs. Jenni Lean, wife of Dave Bennett, is
the sole shareholder, officer and director of Millennium. Since the
date of awarding the permit the parties have decided to transfer
Millenium's interest to the Registrant at no cost to the Registrant.
There is no other material information.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Form 10-Q are:
27 Financial Data Schedule
Other documents are incorporated by reference to the filing are
Form 10-K at December 31, 1998, and Form 10-Q at September 30, 1998.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended
September 30, 1999.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
27 Financial Data Schedule
<PAGE> 15
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.
INDO-PACIFIC ENERGY LTD.
By: /s/ David Bennett November 19, 1999
David Bennett, President
By: /s/ Mark Katsumata November 19, 1999
Mark Katsumata, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at September 30, 1999 (Unaudited)
and the Consolidated Statement of Income for the nine months ended September
30, 1999 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 6,298,153
<SECURITIES> 279,191
<RECEIVABLES> 476,094
<ALLOWANCES> 0
<INVENTORY> 7,066,386
<CURRENT-ASSETS> 0
<PP&E> 3,672,042
<DEPRECIATION> 77,500
<TOTAL-ASSETS> 10,793,428
<CURRENT-LIABILITIES> 116,704
<BONDS> 0
0
0
<COMMON> 18,245,867
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,793,428
<SALES> 0
<TOTAL-REVENUES> 457,005
<CGS> 513,148
<TOTAL-COSTS> 513,148
<OTHER-EXPENSES> 400,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (456,207)
<INCOME-TAX> 0
<INCOME-CONTINUING> (456,207)
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<EXTRAORDINARY> 0
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<NET-INCOME> (456,207)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
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