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, 1996
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 (I.R.S. Employer Identification No.)
of 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.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of common stock,
as of September 30, 1996: 1,907,604
<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. Financial Statements
Consolidated Balance Sheets as of
September 30, 1996 and June 30, 1996 3
Consolidated Statements of Operations
for the Three Months Ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash
Flows for the Three Months Ended
September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 8
ITEM 2. Changes in Securities 8
ITEM 3. Defaults Upon Senior Securities 8
ITEM 4. Submission of Matters to a Vote of
Security Holders 8
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports of Form 8-K 8
Signatures 9
<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, 1996 and June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, June 30,
1996 1996
--------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalent $563,407 $300,399
Short term investments 421,788 644,834
Accounts receivable 178,573 164,805
Due from related party 25,560 25,560
Other assets 15,569 24,018
----------- -----------
Total current assets 1,204,897 1,159,616
----------- -----------
PROPERTIES AND EQUIPMENT, NET, AT COST:
Oil and gas properties,
Successful efforts methods
of accounting:
Unproved 294,604 309,931
Proved 4,119,882 4,084,044
Furniture and Equipment 59,889 58,554
----------- -----------
4,474,375 4,452,529
Accumulated depreciation and
depletion (1,722,320) (1,496,934)
----------- -----------
Net property and equipment 2,752,055 2,955,595
----------- -----------
$3,956,952 $4,115,211
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $119,361 $78,680
Related Party 29,823 32,742
Accrued liabilities 17,705 39,081
----------- -----------
Total current liabilities 166,889 150,503
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value;
1,000,000 shares
authorized, none issued
at September 30, 1996 ----- -----
Common Stock, no par value;
20,000,000 shares
authorized, 1,907,604
issued and outstanding
at September 30, 1996 8,374,654 8,374,654
Accumulated deficit (4,584,591) (4,409,946)
----------- -----------
Total stockholders' equity 3,790,063 3,964,708
----------- -----------
$3,956,952 $4,115,211
=========== ===========
</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, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
1996 1995
---------- ---------
<S> <C> <C>
REVENUE:
Oil and gas sales $285,834 $257,938
Interest 9,921 12,894
Gain on sale of property
and equipment - 2,888
Other income 222 1,449
---------- -----------
TOTAL REVENUES 295,977 275,169
---------- -----------
COSTS AND EXPENSES:
Production and operating 129,166 140,719
Dry holes, abandoned and
impaired properties 210,031 10,471
Depreciation and depletion 30,683 78,746
General and administrative 100,742 103,411
---------- -----------
TOTAL COSTS AND EXPENSES 470,622 333,347
---------- -----------
NET LOSS $(174,645) $(58,178)
---------- -----------
NET LOSS PER COMMON SHARE $(0.09) ($0.03)
---------- -----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,907,604 1,965,578
========== ===========
</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, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(174,645) $(58,178)
Adjustments to reconcile
net income to net cash provided
by operating activities:
Dry holes, abandoned and
impaired properties 210,031 -
Depreciation and depletion 30,683 78,746
Gain on sale of property
and equipment, net - (2,888)
(Increase) decrease in accounts
receivable relating to operations (13,768) 14,449
(Increase) decrease in
related party receivable - 169
Increase (decrease) in
other current assets 8,449 (15,861)
Increase (decrease) in
accounts payable 40,681 16,929
Increase (decrease) in
accrued liabilities (21,376) (48,149)
Increase (decrease) in
related party payable (2,919) -
---------- ---------
Net cash, (used) provided by
operating activities 77,136 (14,790)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures/acquisition
of properties (37,174) (6,172)
Proceeds from sale of
property and equipment - 2,888
(Purchase) redemption of
short-term investments 223,046 (101,462)
-------- --------
Net cash provided (used)
by investing activities 185,872 (104,746)
-------- --------
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 263,008 (77,911)
Cash & cash equivalents at
the beginning of the period 300,399 776,141
-------- --------
Cash & cash equivalents at
the end of the period $563,407 $698,230
======== ========
Cash paid during the period
for interest - $ -
======== ========
</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, 1996.
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,
1996, 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.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $1,038,008. This
compares to the Company's working capital of $1,091,882 as of September
30, 1995.
Net cash provided from operating activities was $77,136 for the period
ending September 30, 1996, an increase of $91,926, over the use of $14,790
for the same period in 1995. Operating cash flows increased during the
first quarter due to higher oil and gas revenues and lower total expenses
excluding non cash impairment costs of $210,031, of the Company as more
fully described under Results of Operations. The Company's accounts
receivable increased $13,768 or 8% to $178,573 during the period as
compared to a decrease of $14,449, or 9% for the same period in 1995. The
increase in receivables from a year ago is primarily due to higher oil and
gas prices. The Company's accounts payable increased $40,681 or 52% to
$119,361 during the period versus an increase of $16,929 or 16% a year
ago. The increase is partly a result of the Company's reclassification of
approximately $21,376 of accrued liabilities during the period. The
Company's accrued liabilities decrease $21,376 to $17,705 or 55% for the
quarter ended September 30, 1996. This compared to a decreased of $48,149
or 45% for the same period a year ago. The decrease in accrued
liabilities was a result of the Company's reclassification to accounts
payable of $21,376 during the quarter. All other factors regarding
operating activities affecting cash flow were not material.
Net cash flow provided by investing activities was $185,872, for the
quarter ended September 30, 1996, versus the use of $104,746 for the same
period in 1995. The increase in cash flow from investing activities was
due to the redemption of short term investments during the period. The
Company had capital expenditures of $37,174 during the three months ended
September 30, 1996, which included the purchase of a new compressor for
the Piece Unit in Wyoming and completion costs incurred on the Gallion #5
offset well in Pittsburgh County, Oklahoma.
No cash was provided from financing activities during the quarter ended
September 30, 1996. This compares to the same period in 1995 when $41,625
was provided from the purchase and sale of shares of the Company's stock
by an affiliated company.
RESULTS OF OPERATIONS
FIRST QUARTER RESULTS
The Company reports a loss of $174,645, or 9 cents per share, for the
three month period ended September 30, 1996. This compares with a loss of
$58,178 or 3 cents per share, for the same period a year ago. The loss
in 1996 is attributable to the Company's recognition of non cash
impairment costs of $194,000 during the period as more fully described
below.
The Company's revenues for the three month period ended September 30, 1996
were $295,977 compared to $275,169 during the same period of 1995, an
increase of $20,808 or 8%. Revenue from oil and gas sales was $285,834
for the period ended September 30, 1996, an increase of $27,896, or 11%,
as compared to $257,938 for the same period in 1995. The increase in
total revenues and revenues from oil and gas sales was attributable to the
higher oil and gas prices versus a year ago.
The Company's total expenses increased $137,275 or 41% to $470,622 as
compared to $333,347 a year ago. The increase in overall expenses is a
result of the increase in dry holes, abandoned, and impaired properties
costs of $210,031. On July 1, 1996 the Company implemented the Financial
Accounting Standards Boards Statement of Financial Accounting Standards
No. 121 (SFAS 121). This statement requires the Company to measure the
carrying value of its proved oil and gas properties against the expected
future cash flows from those properties, and if the carrying value of a
property is greater than the expected future cash flows from the property
to recognize an impairment loss. As a result of SFAS No. 121, the Company
recognized an impairment loss of $194,000 during the period. The
remaining impairment loss represents the Company's amortization of certain
non-producing international oil and gas permits in the amount of $16,031.
Production and operating expenses decreased $11,553, or 8%, to $129,166
versus $140,719 for the same period a year ago. No particular factor
caused the decease in production and operating expenses. Production and
operating expenses can vary from one period to another based on the
expenses incurred by the property's operator, which are for the most part
outside of the Company's control.
General and Administrative costs decreased $2,669, or 3%, to $100,742 as
compared to $103,411 for the same period a year ago.
The Company participated in the drilling of the Helicon #1 on the WA-254-P
prospect in Australia in July. The well was abandoned as a dry hole at a
cost of approximately $25,000. These costs were recorded as of June 30,
1996, because the Company had incurred the costs, and the unfavorable
drilling results were known prior to the preparation of the Company's
audited year end financial statements. The Company continues to actively
pursue acquisition candidates and exploration prospects.
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
27 Financial Data Schedule
(b) 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 thereunto duly authorized.
KESTREL ENERGY, INC.
(Registrant)
Date: November 13, 1996 /s/TIMOTHY L. HOOPS
Timothy L. Hoops
President, Principal Executive Officer,
and Director
Date: November 13, 1996 /s/MARK A. BOATRIGHT
Mark A. Boatright
Vice President - Finance,
Principal Financial and Accounting Officer,
and Director
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ----------------
27 Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 563
<SECURITIES> 422
<RECEIVABLES> 204
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,205
<PP&E> 4,474
<DEPRECIATION> 1,722
<TOTAL-ASSETS> 3,957
<CURRENT-LIABILITIES> 167
<BONDS> 0
0
0
<COMMON> 8,375
<OTHER-SE> (4,585)
<TOTAL-LIABILITY-AND-EQUITY> 3,957
<SALES> 0
<TOTAL-REVENUES> 296
<CGS> 0
<TOTAL-COSTS> 471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (175)
<INCOME-TAX> 0
<INCOME-CONTINUING> (175)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (175)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
