SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
-----------------
Commission File No. 1-14754
-----------------
PENDARIES PETROLEUM LTD.
(Exact name of registrant as specified in its charter)
-----------------
PROVINCE OF NEW BRUNSWICK, CANADA
(State or other jurisdiction of incorporation)
Internal Revenue Service - Employer Identification No. 52-2051576
8 Greenway Plaza, Suite 910, Houston, Texas 77046
(713) 355-2900
-----------------
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 total number of shares of the registrant's Common Shares, no par
value, outstanding on March 31, 1999, was 8,829,470.
1
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PENDARIES PETROLEUM LTD.
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999
(Unaudited) and December 31, 1998....................................3
Statements of Consolidated Operations and Deficit for the
three months ended March 31, 1999 (Unaudited)
With Comparative Figures for the Preceding Year......................4
Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 (Unaudited) With
Comparative Figures for the Preceding Year...........................5
Notes to Consolidated Financial Statements (Unaudited)...............6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk........None
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................None
Item 2. Changes in Securities and Use of Proceeds.........................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 of Form 8-K..................................None
SIGNATURES....................................................................15
2
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PART I:
ITEM 1. FINANCIAL STATEMENTS
PENDARIES PETROLEUM LTD.
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998
(All figures are in U.S. dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
ASSETS (Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 7,326,055 $ 7,873,280
Accounts receivable 149,011 105,750
Prepaid expenses and other assets 253,601 208,451
----------------- --------------
7,728,667 8,187,481
----------------- --------------
PROPERTY AND EQUIPMENT
Oil and gas properties, recorded under the full cost method
Proved 10,337,926 7,890,804
Unproved 11,019,615 13,238,236
Furniture, fixtures and office equipment 168,166 169,938
Accumulated depreciation, depletion and amortization (691,499) (644,449)
------------------ --------------
Net property and equipment 20,834,208 20,654,529
----------------- --------------
Total Assets $ 28,562,875 $ 28,842,010
==================== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 42,429 $ 44,627
Accrued liabilities 129,469 115,235
----------------- --------------
Total current liabilities 171,898 159,862
----------------- --------------
SHAREHOLDERS' EQUITY
Common shares
Authorized, unlimited number of common shares
Issued 8,829,470 and 8,781,970 common shares, respectively 32,530,051 32,501,842
Deficit (4,139,074) (3,819,694)
------------------ --------------
Total sharesholders' equity 28,390,977 28,682,148
----------------- --------------
Total liabilities and shareholders' equity $ 28,562,875 $ 28,842,010
================= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
PENDARIES PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(All figures are in U.S. dollars)
<TABLE>
<CAPTION>
For the For the
Three-Month Three-Month
Period Ended Period Ended
March 31, March 31,
1999 1998
---------------- ---------------
(Unaudited) (Unaudited)
REVENUE
<S> <C> <C>
Oil and gas income $ 100,791 $ 112,854
---------------- ---------------
EXPENSES
Oil and gas operating expenses 95,160 53,444
General and administrative expenses 376,097 534,633
Depreciation, depletion and amortization 47,751 85,166
Exchange gain (10,063) (761)
Stock option settlement - 450,000
---------------- ---------------
508,945 1,122,482
---------------- ---------------
OTHER INCOME
Interest income 88,774 178,394
---------------- ---------------
NET LOSS (319,380) (831,234)
DEFICIT, beginning of period (3,819,694) (1,109,316)
----------------- ----------------
DEFICIT, end of period $ (4,139,074) $ (1,940,550)
================= ================
NET LOSS PER SHARE
Basic $ (.04) $ (.09)
================= ================
Fully diluted $ (.04) $ (.09)
================= ================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
PENDARIES PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All figures are in U.S. dollars)
<TABLE>
<CAPTION>
For the For the
Three-Month Three-Month
Period Ended Period Ended
March 31, March 31,
1999 1998
(Unaudited) (Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $ (319,380) $ (831,234)
Items not affecting cash
Depreciation, depletion and amortization 47,751 85,166
Changes in non-cash working capital items-
Accounts receivable (43,261) (54,101)
Accounts payable (2,198) (47,296)
Accrued liabilities 42,443 556,941
Prepaid expenses and other assets (45,150) (21,221)
----------------- ---------------
Net cash used in operating activities (319,795) (311,745)
----------------- ---------------
CASH FLOW USED IN INVESTING ACTIVITIES
Additions to unproved oil and gas properties (228,501) (1,511,813)
Additions to furniture, fixtures and office equipment 1,071 (19,880)
---------------- ----------------
Net cash used in investing activities (227,430) (1,531,693)
---------------- ----------------
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from exercise of common stock options - 29,500
Cumulative translation effects - 12,886
---------------- ---------------
Net cash provided by financing activities - 42,386
---------------- ----------------
DECREASE IN CASH AND CASH EQUIVALENTS (547,225) (1,801,052)
CASH AND CASH EQUIVALENTS, beginning of period 7,873,280 15,133,285
---------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 7,326,055 $ 13,332,233
================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
PENDARIES PETROLEUM LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(All figures are in U.S. dollars)
1. Nature of Operations
Pendaries Petroleum Ltd. ("Pendaries" or "the Company"), a New Brunswick,
Canada corporation, is a holding company whose primary interests are in
exploration, development and production of oil and gas properties in the
People's Republic of China.
2. NATURE OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The Company completed an initial public offering and became a public
company in Canada on December 12, 1996.
The consolidated interim financial statements included herein have been
prepared by Pendaries without audit and reflect all adjustments which are,
in the opinion of management, necessary to present a fair statement of the
results of the interim period. These statements are presented on a basis
consistent with annual audited consolidated financial statements. Certain
information, accounting policies and footnote disclosures normally included
in consolidated financial statements prepared in accordance with generally
accepted accounting principles have been omitted, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These consolidated interim financial statements
should be read in conjunction with the consolidated financial statements
and the summary of significant accounting policies and notes thereto
included in the Company's latest annual financial statements.
The consolidated financial statements include the accounts of Pendaries,
Pendaries Production, Inc., Sino-American Energy Corporation
(Sino-American) and Sino-American Overseas Energy Corporation. All
significant intercompany transactions and balances have been eliminated.
The Company's registration statement filed on Form 20-F was declared
effective by the U.S. Securities and Exchange Commission in June 1998. This
permitted the Company to list its common shares for trading on the American
Stock Exchange.
3. OIL AND GAS PROPERTIES - BOHAI BAY, CHINA
Laopu Block Relinquishment - On March 19, 1999, the Company received a
recommendation from Kerr-McGee Corporation ("Kerr-McGee" or the
"Operator"), to terminate the petroleum contract (the "PC") on the Laopu
Block in the Bohai Bay, China which covers approximately 78,000 gross
acres. All obligations have been fulfilled on this block and the Company
has approved the recommendation.
Block 05/36 - On March 4, 1999, the Operator and China National Offshore
Oil Corp. ("CNOOC") agreed to extend the PC on Block 05/36 into its second
phase which covers the period March 31, 1999 to February 28, 2001. Block
05/36 is located in the Bohai Bay, China and covers approximately 415,000
gross acres. Under the terms of the PC, the foreign contractors are
required to relinquish 25% of the acreage in the block upon electing to
6
<PAGE>
proceed to the second exploration phase. The Operator is negotiating the
acreage to be relinquished with CNOOC at this time. The Company does not
believe that the relinquishment will materially affect the future potential
of the block. Entry into the second exploration phase carries with it a
bonus payment to CNOOC of U.S. $250,000 (U.S. $37,500 net to Pendaries) and
a one well commitment to be drilled during the second phase period by the
foreign contractors.
4. COMMON SHARES
Issuance of Stock Options
In February 1999, certain outside directors of Pendaries were granted stock
options for a total of 107,100 common shares. The exercise price is U.S.
$0.59 per common share and the options expire on March 9, 2004. On March 9,
1999, 84,500 stock options were issued under the February 1999 grant as a
result of two directors electing to forego their respective stock option
grants.
Issuance of Common Shares
In February 1999, certain outside directors of Pendaries were granted
62,500 common shares as compensation. The value of the share compensation
was U.S. $36,875 and was accrued at December 31, 1998. On March 9, 1999,
47,500 shares of stock were issued under the February 1999 grant as a
result of two directors electing to forego their respective stock
compensation grants. The value of the shares issued was $28,209.
Stock Option Settlement
In connection with litigation with the former president of Sino-American
over the number of stock options to which the former president was
entitled, in April 1998, the parties entered into a Settlement Agreement
pursuant to which the former president received $450,000 (which was accrued
as of March 31, 1998) and agreed to execute a new Stock Option Agreement
reflecting a grant of 100,000 stock options (the number of stock options
the Company claimed had originally been granted) and, with the exception of
certain restrictions not imposed on other option holders, contains terms
substantially similar to those contained in the Stock Option Agreements of
all other option holders who had been granted options prior to 1996.
5. MURPHY AGREEMENT
On April 24, 1998, Sino-American and the Company entered into an agreement
with Murphy Exploration & Production Company ("Murphy") to purchase its 45%
interest in Block 04/36 (the "Murphy Agreement"), which was extended to
December 21, 1998 and then to March 22, 1999. The Murphy Agreement provided
that the Company would pay a total of $38 million for Murphy's interest;
$35 million of the consideration was to be paid in cash and $3 million in
Pendaries Common Shares. Due to the adverse change in the condition of the
oil and gas industry subsequent to the signing of the Murphy Agreement, the
Company elected not to go forward with the agreement subsequent to March
22, 1999. The Company's only obligation in the transaction was restricted
to the forfeiture of a non-refundable deposit of $1 million made in April
1998.
7
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6. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These consolidated financial statements are expressed in U.S.dollars, which
is the functional currency in all areas of operation, and are prepared in
accordance with generally accepted accounting principles in Canada
("Canadian GAAP") which conform in all material respects with those in the
United States ("U.S. GAAP") for the years presented, except as outlined
below.
Oil and Gas Properties
In Canada, if the net capitalized costs of oil and gas properties in a cost
center exceed an amount equal to the sum of estimated future net revenues
from proved oil and gas reserves in the cost center and the costs of
properties not being amortized, both adjusted for income tax effects, such
excess is charged to expense. Also, the total capitalized costs of all cost
centers are subject to a further recoverability test which includes, among
other things, provision for site development and restoration and future
general, administrative and financial costs. This is not consistent with
U.S. GAAP. For U.S. GAAP, if the net capitalized costs of oil and gas
properties in a cost center exceed an amount equal to the sum of estimated
discounted present value at 10% of future net revenues from proved oil and
gas reserves in the cost center and the costs of properties not being
amortized, both adjusted for income tax effects, such excess is charged to
expense. Included in the estimated future net cash flows are Canadian
provincial tax credits expected to be realized beyond the date at which the
legislation, under its provisions, could be repealed. To date, the Canadian
provincial government has not indicated an intention to repeal this
legislation.
If U.S.GAAP had been applied instead of Canadian GAAP, the Company would
have recognized an impairment of its oil and gas properties in Canada in
the amount of U.S.$549,555 and $2,195,799 in China in 1998. As a result of
increased oil and gas prices during the quarter ended March 31, 1999 and
consideration of the impairment discussed in the preceding sentence, there
were no material differences between Canadian GAAP and U.S. GAAP during the
quarters ended March 31, 1999 and 1998.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements included elsewhere and with the
Company's Form 10-K for the year ended December 31, 1998.
ACCOUNTING POLICIES
The unaudited consolidated financial statements and notes thereto included
herein have been prepared in accordance with Canadian GAAP.
As of March 31, 1999, the Company's revenues were derived from interest income
and oil and gas production related to its activities in Canada. Accumulated
losses are presented on the balance sheet as "Deficit." The unaudited statements
of operations present revenues and expenses for the quarter in comparison with
the same period for the previous year. The unaudited statements of changes in
cash flow shows the inflows and outflows for the period comparatively with those
of the previous year.
The Company follows the full-cost method of accounting for oil and gas
properties. Under this method, all costs incurred in connection with the
exploration and development of oil and gas reserves are capitalized in separate
cost centers on a country-by-country basis. Such capitalized costs include
contract and concession acquisition; geological, geophysical and other
exploration work; drilling, completing and equipping oil and gas wells;
constructing production facilities and pipelines; and other related costs. The
Company also capitalizes interest costs related to unevaluated oil and gas
properties.
Capitalized costs associated with the acquisition and evaluation of unproved
properties are excluded from amortization until it is determined whether proved
reserves can be assigned to such properties, or until the value of the
properties is impaired. Unproved properties are assessed periodically to
determine whether any impairment has occurred.
If the net capitalized costs of oil and gas properties in a cost center exceed
an amount equal to the sum or estimated future net revenues from proved oil and
gas reserves in the cost center and the costs of properties not being amortized,
both adjusted for income tax effects, such excess is charged to expense. The
total capitalized costs of all cost centers is subject to a further
recoverability test which includes, among other things, provisions for site
development and restoration, and future general, administrative and financial
costs.
Substantially all of the Company's exploration, development and production
activities are conducted jointly with others, and accordingly, the Company's
financial statements reflect only its proportionate interest in such activities.
The Company owns an interest in producing oil and gas properties in Alberta,
Canada. Depletion is provided based on the Company's proportionate interest of
production in respect of proved reserves.
The Company currently has no producing oil and gas properties in the People's
Republic of China. Therefore, related capitalized costs of oil and gas
properties are not currently subject to depletion.
9
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CHINESE TAXES
The Company's future net income, as defined under Chinese law, from Chinese
sources, will be subject to Chinese corporate income tax at a rate of 33%. In
accordance with the terms of the tax treaty between the U.S. and China, such
taxes are creditable to U.S.corporate income taxes.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 and 1998:
The Company incurred a net loss of $319,380 and $831,234 for the quarters ended
March 31, 1999 and 1998, respectively. The $511,854 decrease in net loss was a
result of the following:
Oil and gas income from the Company's properties located in Alberta, Canada,
decreased from $112,854 in the first quarter ended March 31, 1998 to $100,791
for the same period in 1999. The $12,063 decrease was due to lower oil and
natural gas prices.
Interest income decreased by $89,620 from $178,394 in the first quarter of 1998
to $88,774 in the first quarter of 1999. The decrease was due to the reduction
of cash available for investment in 1999.
Oil and gas operating expenses increased from $53,444 for the first quarter of
1998 to $95,160 for the same period in 1999. The increase was due to workover
operations carried out in 1999 on a well located in the Wintering Hills Field in
Alberta, Canada.
General and administrative expenses decreased from $534,633 in the first quarter
of 1998 to $376,097 in the first quarter of 1999. The $158,536 decrease was due
primarily to decreased salaries and related costs, cost savings in connection
with the closing of the Toronto office in 1998, and reduced outside legal and
professional costs.
During the three months ended March 31, 1998, the Company recorded the
settlement of litigation with the former president of its wholly owned
subsidiary, Sino-American Energy Corporation, over the number of stock options
to which the former president was entitled, and in April 1998, the parties
entered into a Settlement Agreement pursuant to which the former president
received $450,000 and agreed to execute a new Stock Option Agreement reflecting
a grant of 100,000 stock options (the number of stock options the Company
claimed had originally been granted) and, with the exception of certain
restrictions not imposed on other option holders, contains terms substantially
similar to those contained in the Stock Option Agreements of all other option
holders who had been granted options prior to 1996. The $450,000 settlement
amount was charged to expense as of March 31, 1998. There were no such expenses
in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
From inception (July 5, 1994) the Company's capital by year is shown below. Of
the total, $30,977,761 represents cash raised by issuance of common shares,
$1,325,000 represents oil and gas properties paid for by issuance of common
shares, and $227,290 represents services paid for by issuance of common shares.
10
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<TABLE>
<CAPTION>
Common
Share Exercise of Exercise of
Period Equity Warrants Options Total
------ ------ -------- ------- -----
<S> <C> <C> <C> <C> <C>
Year - 1995 $ 3,287,500 $ - $ - $ 3,287,500
Year - 1996 22,812,658 - 20,000 22,812,658
Year - 1997 68,000 944,488 5,196,115 6,208,603
Year - 1998 131,081 - 42,000 173,081
Year - 1999 28,209 - - 28,209
------------ -------- ---------- ------------
Totals $26,327,448 $944,488 $5,258,115 $ 32,530,051
=========== ======== ========== ============
</TABLE>
During the same periods, the Company incurred capital expenditures as follows:
<TABLE>
<CAPTION>
Oil and Gas Oil and Gas Furniture,
Properties Properties Fixtures and
Period Canada China Equipment Total
<S> <C> <C> <C> <C> <C>
Year - 1995 $ - $ 3,597,631 $ 59,758 $ 3,657,389
Year - 1996 1,966,088 2,981,853 62,613 5,010,554
Year - 1997 - 7,739,641 105,286 7,844,927
Year - 1998 - 4,843,827 (57,719) 4,786,108
Year - 1999 - 228,501 (1,772) 226,729
----------- ------------ --------- ------------
Totals $ 1,966,088 $ 19,391,453 $ 168,166 $ 21,525,707
=========== ============ ========= ============
</TABLE>
After capital expenditures and funds used in operations the Company had cash of
$7,326,055 at March 31, 1999. There is no credit facility with a financial
institution or any other outstanding debt.
YEAR 2000 DISCLOSURE
The Year 2000 issues relate to the problems associated with the inability of
computer programs and equipment to properly calculate, store or use dates after
December 31, 1999. Hardware and software systems which only use a two-digit
convention for keeping track of dates would improperly interpret the Year 2000
as the Year 1900. Errors of this type can result in system failures,
miscalculations and the disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business. In response to the Year 2000 issues, the Company has
developed a strategic plan divided into the following phases: inventory
assessment and review of vendor representations, in-house testing, third party
integration and development of a contingency plan.
The Company has completed this initial assessment phase by compiling an
inventory listing of all in-house systems and reviewing all vendor
representations regarding the Year 2000 that the Company has received to date.
The licensor of the Company's in-house software system has certified that such
software is programmed to properly address Year 2000 scenarios. In addition, the
initial assessment has shown that less critical in-house software and
non-information technology or equipment is either not date sensitive or is
capable of addressing the Year 2000. Based on the initial review and reliance on
vendor representations, the Company is predicting that all such in-house systems
will perform their respective functions in a customary manner when faced with
Year 2000 scenarios. In addition, the Company has determined that functions
which have been out-sourced to third parties, consisting mainly of processing
needs, are performed by systems purchased within the last few years and are
programmed to recognize the Year 2000.
11
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The Company conducted its in-house testing phase, reviewing core systems and
core-non-information technology. To date, the Company has not encountered any
system disruption during testing, and therefore, the Company expects that the
performance of such systems will not be substantially disrupted by Year 2000
scenarios. However, being primarily involved in the acquisition, development and
exploration of oil and gas internationally, the "mission critical" equipment and
technology of the operators of the Company's properties rely on external power
sources, such as electricity, supplied by third parties. The Company is relying
upon representations by these operators that no material disruption of services
are anticipated as a result of the Year 2000. However, the most reasonably worst
case Year 2000 scenario for the Company would involve a disruption of third
party services affecting the productivity of core equipment, which could result
in substantial decrease in the Company's oil and gas production. Such event
could result in a business interruption that could affect the Company's
production payments from its Alberta properties.
In addition to its internal review and testing, the Company is communicating
with its third party suppliers, service providers and customers to determine the
status of their Year 2000 compliance programs. The Company has received and is
relying on Year 2000 readiness reports periodically issued by various third
parties, such as financial services providers. The Company will continue to have
formal communications with its significant suppliers and business partners to
determine the extent to which the Company is vulnerable to either the third
parties' or its own failure to correct Year 2000 issues. Third party
notification and integration is expected to be completed during the second
quarter of 1999. To date, approximately 75% of these third parties have
responded and have provided favorable representations as to their Year 2000
readiness. These third parties have received similar representations from the
Company. While there can be no guarantee that the systems of other companies on
which the Company relies will be timely converted or that the conversion will be
compatible with the Company's systems, based on representations received to
date, the Company does not foresee material disruptions in the Company's
business as a result of Year 2000 issues involving third parties.
During its assessment, the Company has taken steps to prevent anticipated Year
2000 disruptions and intends to prepare, if such a plan is called for, a
contingency plan to address any anticipated disruption caused by Year 2000
scenarios once the bulk of the readiness surveys have been received. Although
the effects of Year 2000 issues cannot be predicted with certainty, to date, all
systems tested have performed adequately, and therefore, the Company believes
that the potential impact, if any, of such disruption will, at most, require
employees to manually complete otherwise automated tasks of calculations. The
Company does not expect that any additional training would be required to
perform these tasks on a manual basis. The Company does not believe that such
event would materially affect the Company's ability to continue business
activities, although performing such tasks may require additional time or
personnel. In addition, if needed, the Company will identify and arrange for
other vendors, purchasers and third party contractors to provide such services
in order to maintain normal business operations.
It may not be economically feasible for the operator to maintain a separate and
duplicate secondary power supply for every major component of the operator's
"mission critical" equipment. Therefore, unanticipated prolonged losses of
certain services could cause material disruptions for which no economically
feasible contingency plan has been developed.
The Company has, and will continue to, utilize both internal and external
resources to complete tasks and perform testing necessary to address the Year
2000 issues. The Company has not incurred, and does not anticipate that it will
incur, any significant costs relating to the assessment and remediation of Year
2000 issues.
12
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q ("Quarterly
Report") that are not historical facts, including, but not limited to,
statements found in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, are forward-looking statements, as that
term is defined in Section 21E of the Securities and Exchange Act of 1934, as
amended, that involve a number of risks and uncertainties. Such forward-looking
statements may be or may concern, among other things, capital expenditures,
drilling activity, acquisition plans and proposals and dispositions, development
activities, cost savings, production efforts and volumes, hydrocarbon reserves,
hydrocarbon prices, liquidity, regulatory matters and competition. Such
forward-looking statements generally are accompanied by words such as "plan,"
"estimate," "expert, " "predict, " "anticipate, " "projected, " "should, "
"assume, " "believe, " or other words that convey the uncertainty of future
events or outcomes. Such forward-looking information is based upon management's
current plans, expectations, estimates and assumptions and is subject to a
number of risks and uncertainties that could significantly affect current plans,
anticipated actions, the timing of such actions and the Company's financial
condition and results of operations. As a consequence, actual results may differ
materially from expectations, estimates or assumptions expressed in or implied
by any forward-looking statements made by or on behalf of the Company. Among the
factors that could cause actual results to differ materially are: fluctuations
of the prices received or demand for the Company's oil and natural gas, the
uncertainty of drilling results and reserve estimates, operating hazards,
acquisition risks, requirements for capital, general economic conditions,
competition and government regulations, as well as the risks and uncertainties
discussed in this Quarterly Report, including, without limitation, the portions
referenced above, and the uncertainties set forth from time to time in the
Company's other public reports, filings and public statements.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - N/A
Item 2. Changes in Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security Holders - N/A
Item 5. Other Information - N/A
Item 6. Exhibits and Reports on Form 8-K - N/A
14
<PAGE>
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, thereunto duly authorized.
PENDARIES PETROLEUM LTD.
Date: April 21, 1999 By: /s/Bobby J. Fogle
-----------------------
Bobby J. Fogle
Vice President, Finance and
Chief Financial Officer
15
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PENDARIES PETROLEUM LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
ENDED March 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,326
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