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 December 31, 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 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.
[X] Yes [--] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of common stock, as of December 31, 1996:
1,907,624
<PAGE>
KESTREL ENERGY, INC.
AND SUBSIDIARY
(A Subsidiary of Victoria International Petroleum N.L.)
INDEX TO UNAUDITED FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Consolidated Balance Sheets as of December
31, 1996 and June 30, 1996 3
Consolidated Statements of Operations for the
Three and Six months Ended December 31, 1996
and 1995 4
Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1996 and 1995 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. Change 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 December 31, 1996 and June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1996 1996
- ---------------------------- ----------- ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 389,341 $ 300,399
Short term investments 669,814 644,834
Due from related party 25,560 25,560
Accounts receivable 185,430 164,805
Other assets 13,207 24,018
----------- -----------
Total current assets 1,283,352 1,159,616
----------- -----------
OIL AND GAS PROPERTIES, NET AT COST
Successful efforts methods of accounting:
Unproved 313,440 309,931
Proved 4,126,508 4,084,044
Furniture and Equipment 60,570 58,554
----------- -----------
4,500,518 4,452,529
Accumulated depreciation and
depletion (1,754,372) (1,496,934)
----------- -----------
Net property and equipment 2,746,146 2,955,595
----------- -----------
Total assets $ 4,029,498 $ 4,115,211
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts Payable:
Trade $ 110,864 $ 78,680
Related Party 4,163 32,742
Accrued liabilities 18,700 39,081
----------- -----------
Total current liabilities 133,727 150,503
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value;
1,000,000 shares authorized,
none issued at December 31, 1996
Common Stock, no par value;
20,000,000 shares authorized,
1,907,624 issued at
December 31, 1996 8,374,654 8,374,654
Accumulated deficit (4,478,883) (4,409,946)
----------- -----------
Total stockholders' equity 3,895,771 3,964,708
----------- -----------
Total liabilities and
stockholders; equity $ 4,029,498 $ 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 AND SIX MONTHS ENDED
December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1996 1995 1996 1995
----------- ---------- ---------- ---------
REVENUE
<S> <C> <C> <C> <C>
Oil and gas sales $ 387,082 $ 278,785 $ 672,916 $ 536,726
Interest 11,036 10,934 20,957 23,828
Gain on sale of
property 21,213 5,934 21,213 8,821
Other income 99 7,111 321 8,560
---------- ---------- ---------- ----------
TOTAL REVENUES 419,430 302,764 715,407 577,935
========== ========== ========== ==========
COSTS AND EXPENSES
Production and
operating 147,200 163,404 276,366 304,123
Dry holes, abandoned
and impaired
properties 21,227 85,266 231,258 95,737
Depreciation and
depletion 32,050 76,244 62,733 154,990
General and
administrative 113,245 145,461 213,987 248,872
---------- ---------- ---------- ----------
TOTAL EXPENSE 313,722 470,375 784,344 803,722
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 105,708 $ (167,611) $ (68,937) $ (225,787)
---------- ---------- ---------- ----------
NET INCOME (LOSS) PER
COMMON SHARE $ 0.05 ($ 0.08) ($ 0.04) ($ 0.11)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,907,624 2,028,893 1,907,624 2,028,893
========== ========== ========== ==========
</TABLE>
<PAGE>
KESTREL ENERGY, INC.
AND SUBSIDIARY
(A Subsidiary of Victoria International Petroleum N.L.)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED December
31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (68,937) $(225,787)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and depletion 62,733 154,990
Dry holes, abandoned and impaired
properties 27,475 -
Gain on sale of property and equipment,
net - (8,821)
(Increase) decrease in accounts receivable
relating to operations (20,625) (27,621)
(Increase) decrease in related party
receivable - 162
(Increase) decrease in other current
assets 10,811 (21,453)
Increase (decrease) in accounts payable 32,184 (1,488)
Increase (decrease) in accrued
liabilities (20,381) (9,979)
Increase (decrease) in related party
payable (28,579) -
--------- ---------
Net cash provided (used) by operating
activities 194,681 (139,997)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures/acquisition of
properties (80,759) (97,642)
Proceeds from sale of property and
equipment - 15,316
Purchase short-term investments (24,980) (225,556)
--------- ---------
Net cash used by investing
activities (105,739) (307,892)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITES:
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 88,942 (406,264)
--------- ---------
Cash and cash equivalents at the
beginning of the period 300,399 776,141
--------- ---------
Cash and cash equivalents at the end
of the period $ 389,341 $ 369,877
========= =========
Reduction in joint interest billings
from sale of assets $ 21,213 $ -
========= =========
</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 December 31, 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.
2. Use of estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $1,149,625. This
compares to the Company's working capital of $915,542 as of December 31,
1995.
The net cash provided by operating activities was $194,681 for the period
ended December 31, 1996, an increase of $334,678, versus the prior year's
cash used of $139,997. Operating cash flows increased as of December 31,
1996 due to higher oil and gas revenues and lower overall expenses. The
Company's accounts receivable increased $20,625, or 13%, to $185,430
during the period as compared to an increase of $27,621, or 18%, for the
same period last year. Accounts receivable increased due to higher oil
and gas prices for December production. Other assets decreased during the
period due to the expensing of certain legal fees previously capitalized.
The Company's accounts payable increased $32,184, or 41%, to $110,864
during the period as compared to a decrease of $1,488 to $105,259 for the
prior year. The increase in accounts payable during the period ended
December 31, 1996 is mostly attributable to the reclassification of
approximately $21,376 of accrued liabilities. Accrued liabilities
decreased by $20,931, or 54%, to $18,700 during the period as compared
to a decrease of $9,979 to $96,277 last year. The decrease in accrued
liabilities was a result of the Company's reclassification to accounts
payable of $21,376 during the six months ended December 31, 1996. The
Company's related party payable decreased $28,579, due to the Company's
repayment of amounts advanced by affiliated companies. All other factors
regarding operating activities affecting cash flow were relatively
unchanged or insignificant.
Net cash flow used in investing activities was $105,739, a decrease of
$202,153 from the prior year's use of $307,892. The decrease in cash used
for investing activities was a result of lower purchases of short term
investments during the period. The Company had capital expenditures of
$80,759 during the six months ended December 31, 1996, which included
approximately $36,000 to maintain certain international permits, the
purchase of a new pump for the Pierce Unit in Wyoming, and completion
costs increased on the Gallion #5 offset well in Pittsburg County,
Oklahoma. During the same period a year ago, 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, sold its interest in the Royal
Federal 35-7 subject to the North Adon leasehold for $5,773 and received
sale proceeds from the sale of miscellaneous equipment of $6,665.
No cash was provided from financing activities during the six months ended
December 31, 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
Second Quarter Results
The Company reports net income of $105,708, or 5 cents per share, for the
three month period ended December 31, 1996. This compares with a loss of
$167,611, or 8 cents per share, for the same period a year ago. The
improvement in operating income during the quarter ended December 31, 1996
was a result of higher oil and gas prices, higher production volumes, and
lower total expenses than year ago levels.
The Company's revenues for the three month period ended December 31, 1996
were $419,430 compared to $302,764 during the same period of 1995, an
increase of $116,666, or 39%. Overall revenues increased due to higher
oil and gas revenues and higher production levels. Revenue from oil and
gas sales were $387,082 for the second quarter, an increase of $108,297,
or 39%, as compared to $278,785 for the same period last year, for the
same revenues.
The Company's total expenses decreased $156,653, or 33%, to $313,722 for
the quarter ended December 31, 1996 as compared to $470,375 for the same
period a year ago, a result of lower expenses in all expense categories.
Production and operating expenses decreased by $16,204 to $147,200 versus
$163,404 a year ago. The decrease in production and operating expenses
represented a 10% 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 and lower costs in general.
Dry holes, abandoned and impaired properties expense decreased $64,309 to
$21,227, or 75%, from $85,266 a year ago. The current period expense of
$21,227 represents impairment of non-producing international oil and gas
permits in the amount $17,443, and abandonment costs of $3,784 on the
Kuehne Ranch lease in Wyoming. Dry hole costs of $85,266 a year ago were
related to the drilling of the Spider #1 on the EP 325 leasehold in
Australia. The Company did not participate in the drilling of any wells
during the quarter ended December 31, 1996.
General and Administrative costs decreased $32,216, or 22%, to $113,245 as
compared to $145,461 for the same period a year ago while. The decrease in
administrative costs was not attributable to any one factor, costs were
lower for investor relations, accounting and office salaries than year ago
levels.
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
At the Company's annual meeting of shareholders held on
December 3, 1996 in Denver, Colorado, the Company's shareholders
elected Timothy L. Hoops, Robert J. Pett, Mark A. Boatright,
John T. Kopcheff and Kenneth W. Nickerson to the Company's Board
of Directors. The shareholders also approved KPMG Peat Marwick
LLP as the Company's independent certified public accountants
and auditors for the year ending June 30, 1997.
There were 1,907,624 shares of the Company's Common Stock
issued and outstanding, of which 1,907,604 were entitled to vote
at the meeting. Of that number 1,658,086 were present in person
or by proxy at the meeting. With respect to the election of
directors, the votes were as follows: Mr. Hoops - 1,653,204
shares in favor, 4,882 withheld; Mr. Pett - 1,653,204 shares in
favor, 4,882 withheld; Mr. Boatright - 1,653,264 shares in
favor, 4,822 withheld; Mr. Kopcheff - 1,653,204 shares in favor,
4,882 withheld; and Mr. Nickerson - 1,653,178 shares in favor,
4,908 withheld. The selection of KPMG Peat Marwick LLP received
a vote of 1,655,227 shares for, 2,621 against and 238
abstaining.
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
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: February 12, 1997 /s/ TIMOTHY L. HOOPS
Timothy L. Hoops
President, Principal Executive Officer,
and Director
Date: February 12, 1997 /s/ MARK A. BOATRIGHT
Mark A. Boatright
Vice President - Finance,
Principal Financial and Accounting
Officer, and Director
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF FILING
- ------- ----------------
<S> <C> <C>
27 Financial Data Schedule Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 389
<SECURITIES> 670
<RECEIVABLES> 185
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,283
<PP&E> 4,500
<DEPRECIATION> 1,754
<TOTAL-ASSETS> 4,029
<CURRENT-LIABILITIES> 133
<BONDS> 0
0
0
<COMMON> 8,375
<OTHER-SE> (4,479)
<TOTAL-LIABILITY-AND-EQUITY> 4,029
<SALES> 673
<TOTAL-REVENUES> 715
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 784
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (69)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
