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 period ended September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from -------------- to
--------------
Commission File Number: 0-9261
KESTREL ENERGY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0772451
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
999 18th Street, Suite 1100, Denver, CO 80202
(Address of principal executive offices) (Zip Code)
(303)295-0344
(Registrant's telephone number, including area code)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of common stock, as of September 30,
1995: 1,901,850
<PAGE>
KESTREL ENERGY, INC.
AND SUBSIDIARY
(A Subsidiary of Victoria International Petroleum N.L.)
INDEX TO UNAUDITED FINANCIAL STATEMENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets as of September 30, 1995
and June 30, 1995 3
Consolidated Statements of Operations for the Three
Months Ended September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports of Form 8-K 9
Signatures 10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
KESTREL ENERGY, INC.
AND SUBSIDIARY
(A Subsidiary of Victoria International Petroleum N.L.)
CONSOLIDATED BALANCE SHEETS as of September 30, 1995 and June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, June 30,
1995 1995
- ------------------------------ ------------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 698,230 $ 776,141
Short term investments 397,938 296,474
Due from related party 22,642 22,804
Accounts receivable 136,775 151,224
Other assets 18,080 2,219
----------- -----------
Total current assets 1,273,665 1,248,862
------------ -----------
OIL AND GAS PROPERTIES, NET, AT COST
Successful efforts methods
of accounting:
Unproved 235,280 234,833
Proved 4,075,612 4,070,059
Furniture and Equipment 54,503 54,331
----------- -----------
4,365,395 4,359,223
Accumulated depreciation and depletion (1,401,603) (1,322,857)
----------- -----------
Net property and equipment 2,963,792 3,036,366
----------- -----------
Total assets $4,237,457 $4,285,228
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 123,676 $ 106,747
Accrued liabilities 58,107 106,256
----------- -----------
Total current liabilities 181,783 213,003
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value;
1,000,000 shares authorized,
none issued at September 30, 1995
Common Stock, no par value;
20,000,000 shares authorized,
1,901,850 issued at
September 30, 1995 8,375,350 8,333,725
Accumulated deficit (4,307,891) (4,249,715)
----------- -----------
4,067,459 4,084,010
Treasury Stock, at cost, 1,010 shares (11,785) (11,785)
Total stockholders'equity 4,055,674 4,072,225
----------- -----------
Total liabilities and
stockholders' equity $4,237,457 $4,285,228
=========== ===========
</TABLE>
<PAGE>
KESTREL ENERGY, INC.
AND SUBSIDIARY
(A Subsidiary of Victoria International Petroleum N.L.)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED September
30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
1995 1994
<S> <C> <C>
REVENUE
Oil and gas sales $ 257,938 $ 338,135
Interest 12,894 2,978
Gain on sale of property and equipment 2,888 -
Other income 1,449 8,383
----------- -----------
TOTAL REVENUES 275,169 349,496
----------- -----------
COSTS AND EXPENSES
Production and operating 140,719 185,110
Abandonment costs 10,471 -
Depreciation and depletion 78,746 88,641
General and administrative 103,411 94,987
Interest expense - 11,310
----------- -----------
TOTAL EXPENSE 333,347 380,048
----------- -----------
NET (LOSS) $ (58,178) $ (30,552)
----------- -----------
NET (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARE ($0.03) ($0.02)
=========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 1,965,578 1,397,984
=========== ===========
</TABLE>
<PAGE>
KESTREL ENERGY, INC.
AND SUBSIDIARY
(A Subsidiary of Victoria International Petroleum N.L.)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED September
30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (58,178) $ (30,552)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 78,746 88,641
Gain on sale of property and equipment, net (2,888) -
Increase (decrease) in accounts receivable
relating to operations 14,449 (20,071)
(Increase) decrease in related
party receivable 162 -
Increase (decrease) in other current assets (15,861) (10,507)
Increase (decrease) in accounts payable 16,929 143,362
Increase (decrease) in accrued liabilities (48,149) 15,034
----------- -----------
Net cash used by operating activities (14,790) 185,907
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Capital expenditures/acquisition
of properties (6,172) (152,306)
Proceeds from sale of property and equipment 2,888
Purchase short-term investments (101,462)
----------- -----------
Net cash (used) by investing activities (104,746) (152,306)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock by affiliate 41,625 -
----------- -----------
Net cash provided by financing activities 41,625 -
----------- -----------
Net increase (decrease) in cash
and cash equivalents (77,911) 33,601
Cash & cash equivalents at the
beginning of the period 776,141 464,754
----------- -----------
Cash & cash equivalents at the
end of the period $ 698,230 $ 498,355
=========== ===========
Cash paid during the period
for interest - $ 11,310
=========== ===========
</TABLE>
<PAGE>
KESTREL ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Management Opinion
These condensed financial statements should be read in conjunction
with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995.
In the opinion of management, the accompanying interim unaudited
financial statements contain all the adjustments necessary to present
fairly the financial position of the Company as of September 30,
1995, the results of operations for the periods shown in the
statements of operations, and the changes in cash position for the
periods shown in the statements of cash flows. All adjustments made
are of a normal recurring nature.
2. Income Taxes
A valuation allowance equal to the net deferred tax asset has been
established at September 30, 1995. The components of the net
deferred tax liability at September 30, 1995, computed in accordance
with SFAS No. 109, are as follows:
<TABLE>
<CAPTION>
Tax Effect
at Applicable Rate
<S> <C>
Deferred Tax
Assets
Net operating loss carry forward $ 2,199,600
Depletion carryforward 24,000
Investment tax credit carryforward 47,000
-------------
Total gross deferred tax assets 2,270,600
Less valuation allowance (1,960,600)
-------------
Net Deferred tax assets $ 310,000
Deferred Tax Liabilities
Successful efforts method of accounting,
principally capitalized expenditures for
financial reporting purposes in excess of
amounts for income tax purposes $ (310,000)
Net Deferred tax assets $ 0
=============
</TABLE>
3. Accounting for the Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 (SFAS No.
121), ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF. This Statement is effective
for financial statements for fiscal years beginning after
December 15, 1995. Under SFAS No. 121 an entity shall review
long-lived assets and certain identifiable intangibles to be
held and used for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. If the changes in circumstances are present
or if other circumstances indicate that the carrying amount of
an asset that an entity expects to hold and use may not be
recoverable, the entity shall estimate the future cash flows
expected to result from the use of the asset and its eventual
disposition. Future cash flows are the future cash inflows
expected to be generated by an asset (grouped at the lowest
level for which there are identifiable cash flows) less the
future cash flows expected to be necessary to obtain those
inflows. If the sum of expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount
of the asset, the entity shall recognize an impairment loss in
accordance with SFAS No. 121. Otherwise, an impairment loss
shall not be recognized. The Company has not adopted SFAS No.
121 as of September 30, 1995; however, the Company estimates
that if it were to adopt SFAS No. 121 as of that date, it would
be required to record a provision of approximately $210,000 for
the impairment of certain of its oil and gas properties.
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
RESULTS OF OPERATIONS
First Quarter Results
The Company reports a loss of $58,178, or 3 cents per share, for the three
month period ended September 30, 1995. This compares with a loss of
$30,552, or 2 cents per share, for the same period a year ago. The
increased loss resulted from lower oil and gas prices from year ago levels
coupled with a reduction in production volumes.
The Company's revenues for the three month period ended September 30, 1995
were $275,169 compared to $349,946 during the same period of 1994, a
decrease of $74,327, or 21%. Revenue from oil and gas sales was $257,938
for the period ended September 30, 1995, a decrease of $80,197, or 24%, as
compared to $338,135 for the same period in 1994. The decrease in total
revenues and revenues from oil and gas sales were attributable to the
lower oil and gas prices and lower production volumes cited above.
The Company's total expenses decreased $46,701, or 12%, to $333,347 for
the period ended September 30, 1995 as compared to $380,048 for the same
period in 1994. Production and operating expenses decreased by $44,391 to
$140,719 versus $185,110 a year ago. The decrease in operating expenses
represented a 24% decline from year ago levels. The decline in current
year production expenses versus a year ago is due to a reduction in
remedial work on several wells finished in 1994.
Abandonment costs were $10,471 for the period ended September 30, 1995.
All costs were associated with the plugging of the McIlhenny B-1 well in
Louisiana. No abandonment costs were incurred a year ago.
General and Administrative costs increased $8,424, or 9%, to $103,411 as
compared to $94,987 for the same period a year ago.
No interest expense was incurred during the period ended September 30,
1995 versus $11,310 a year ago.
The Company did not drill any wells during the quarter ended September 30,
1995. The Company continues to actively pursue acquisition candidates and
exploration prospects.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had working capital of $1,091,882. This
compares to the Company's working capital of $348,180 as of September 30,
1994. The increase in working capital is attributable to the Company's
private placement of stock during October of 1994.
The net cash used by operating activities was $14,790 for the period ended
September 30, 1995, a decrease of $200,697 over the prior year's cash
provided of $185,907. The decrease in cash from operating activities
versus a year ago is attributable to the payment of the Company's accounts
payable and accrued liabilities by the end of the period and the increase
in loss versus a year ago. The Company's accounts receivable decreased
$14,449 or 9%, to $136,775 during the period as compared to an increase of
$20,071 or 10% for the same period in 1994. Accounts receivable decreased
due to lower gas prices and a reduction in production volumes during the
period. The Company's accounts payable increased $16,929 or 16% to
$123,676 during the period as compared to an increase of $143,362 to
$290,715 for the prior year. Accrued liabilities decreased by $48,149 or
45% to $58,107 during the period as compared to an increase of $15,034 to
$67,588 in 1994. The decrease in accrued liabilities is a result of
payment of cash calls on certain international permits during the period.
All other factors regarding operating activities affecting cash flow were
relatively unchanged or insignificant.
Net cash flow used in investing activities was $104,746, a decrease of
$47,560 from the prior year's use of $152,306. Approximately $101,500 of
the net cash flow used in investing activities was to purchase short-term
investments. During the period, the Company sold its interest in 271.5
gross acres subject to the Sam Acola lease, a non-producing oil and gas
property in Texas for $2,888.
Cash flows from financing activities increased $41,625 during the quarter
ended September 30, 1995. The increase was attributable to the payment to
the Company of the short-term gain realized by an affiliate on the sale of
shares of the Company's stock held less than six months. There was no
activity in cash flows from financing activities during the period ended
September 30, 1994.
INFLATION AND CHANGING PRICES
Inflation has not had a significant effect on the Company's results of
operations. However, the constantly fluctuating price of crude oil and
natural gas materially affects the Company's cash flow, either positively
or negatively.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<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.
(Registrant) KESTRAL ENERGY, INC.
By (Signature) /s/ Timothy L. Hoops
(Name and Title) President, Principal Executive Officer
and Director
(Date) November 17, 1995
By (Signature) Mark A. Boatright
(Name and Title) Vice President - Finance,
Principal Financial and Accounting Officer
and Director
(Date) November 17, 1995
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF FILING
- --------- ----------------
<S> <C>
27. Financial Data Schedule Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains Summary Financial Information extracted from the
Consolidated Balance Sheets and Consolidated Statement of Operations found on
Pages 3 and 4 of the Company's Form 10-Q for the year to date.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 698
<SECURITIES> 398
<RECEIVABLES> 159
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,274
<PP&E> 4,365
<DEPRECIATION> 1,402
<TOTAL-ASSETS> 4,237
<CURRENT-LIABILITIES> 182
<BONDS> 0
<COMMON> 8,375
0
0
<OTHER-SE> (4,320)
<TOTAL-LIABILITY-AND-EQUITY> 4,237
<SALES> 0
<TOTAL-REVENUES> 275
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (58)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
