SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended: SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ___________
Commission File No. 0-9295
WINCO PETROLEUM CORPORATION
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-0794604
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1645 COURT PLACE, SUITE 312
DENVER, COLORADO 80202
-----------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 623-9095
Securities Registered Pursuant to Section 12(b) of the Act: NONE.
Securities Registered Pursuant to Section 12(g) of the Act: COMMON STOCK,
NO PAR VALUE PER SHARE.
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
-------- --------
As of February 23, 1997, 40,852,576 shares of Common Stock were
outstanding, and the aggregate market value of the Common Stock of Winco
Petroleum Corporation held by nonaffiliates was not able to be ascertained
as no trading market exists for the Registrant's Common Stock.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. / X /
Documents incorporated by reference: NONE.
This Form 10-KSB consists of 34 pages. The Exhibit Index begins on page
16.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
- --------------------------------
GENERAL
Winco Petroleum Corporation (the "Registrant" or the "Company") with
its principal and executive offices at 1645 Court Place, Suite 312, Denver,
Colorado 80202, telephone (303) 623-9095, was incorporated as a Colorado
corporation on June 21, 1979. The Company was formed primarily for the
purpose of exploration, development, and production of oil and gas.
The Registrant investigates potential opportunities to develop, drill
and/or participate in the development of new oil and gas properties
primarily in the West and Midwest regions of the United States. Its
current activities on a yearly basis include identifying and drilling from
one (1) to five (5) oil and gas properties on its own behalf or with other
industry partners. It is likely that any significant expenditures required
of the Registrant in connection with the future exploration activities will
require additional funding from outside sources in the form of debt or
equity. There can be no assurance such funding is or will be available to
the Registrant for this purpose.
BUSINESS STRATEGY
The Registrant's growth strategy is to increase its oil and gas
revenues by drilling and completing, on its own behalf and with other
industry partners, from one (1) to five (5) oil and gas prospects per year.
The Registrant will develop these prospects each year with a view to taking
advantage of industry advances in seismic and drilling technologies and
management's oil and gas experience primarily in Wyoming and Kansas. Of
the projected new prospects, one (1) or two (2) will be intended as higher
potential, higher risk prospects. As indicated above, the Registrant
intends to market its prospects in such a way that will allow it to be able
to control its cost and risks on each prospect.
OPERATIONS
As of September 30, 1996, the Registrant or affiliate entities serve
as operator for all of the Registrant's producing wells and for which it
receives an operating fee for each well. The Registrant believes that, as
operator, it is in a better position to control costs, safety and
timeliness of work as well as other critical factors affecting the
economics of a well or property. The Registrant presently operates wells
which represent virtually 100% of the Registrant's proved reserves.
CUSTOMERS AND MARKETS
Two purchasers each represent in excess of 10% of the Registrant's
total oil and gas revenue for the fiscal years ended September 30, 1996 and
1995. These purchasers are Western Gas Resources, Inc. and Texaco Trading,
Inc. Prices of Registrant's oil and gas are generally set unilaterally by
the individual buyers based upon prevailing market prices paid to oil and gas
producers in that area.
The Registrant's business is not seasonal in nature, except to the
extent that weather conditions at certain times of the year may affect the
Registrant's access to its oil and gas properties and its ability to drill
oil and gas wells. The impact of inflation on the Registrant's activities
is minimal. While gas prices have historically fluctuated between winter
and summer seasons, changes in the market during the last few years have
made such fluctuations unpredictable. For instance, because local gas
utilities around
2
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the country need to refill their gas storage facilities in the summer,
prices may be higher during spring or summer months than during subsequent
winter months when temperatures are warmer than normal.
COMPETITION
The Registrant competes with numerous other companies and individuals,
including many that have significantly greater resources, in virtually all
facets of its business. Such competitors may be able to pay more for
desirable leases and to evaluate, bid for and purchase a greater number of
properties that the financial or personnel resources of the Registrant
permit. The ability of the Registrant to increase reserves in the future
will be dependent on its ability to select and acquire suitable producing
properties and prospects for future exploration and development. The
availability of a market for oil and natural gas production depends upon
numerous factors beyond the control of producers, including but not limited
to the availability of other domestic or imported production, the locations
and capacity of pipelines, and the effect of federal and state regulation
on such production. Domestic oil and natural gas must compete with
imported oil and natural gas, coal, atomic energy, hydroelectric power and
other forms of energy. The Registrant does not hold a significant
competitive position in the oil and gas industry.
GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY
GENERAL
The Registrant's exploration and marketing operations are regulated
extensively at the federal, state and local levels. Gas and oil
exploration, development and production activities are subject to various
laws and regulations governing a wide variety of matters. For example,
hydrocarbon-producing states have statutes or regulations addressing
conservation practices and the protection of correlative rights, and such
regulations may affect the Registrant's operations and limit the quantity
of hydrocarbons the Registrant may produce and sell. Other regulated
matters include marketing, pricing, transportation, and valuation of
royalty payments.
At the U.S. federal level, the Federal Energy Regulatory Commission
("FERC") regulates interstate transportation of natural gas under the
Natural Gas Act and regulates the maximum selling prices of certain
categories of gas sold in "first sales" in interstate and intrastate
commerce under the Natural Gas Policy Act. Effective January 1, 1993, the
Natural Gas Wellhead Decontrol Act deregulated natural gas prices for all
"first sales" of natural gas, which includes sales by the Registrant of its
own production. As a result, all sales of the Registrant's natural gas
produced in the U.S. may be sold at market prices, unless otherwise
committed by contract.
The Registrant's gas sales are affected by regulation of intrastate
and interstate gas transportation. In an attempt to promote competition,
the FERC has issued a series of orders which have altered significantly the
marketing and transportation of natural gas. The Registrant believes that
these changes have generally improved the Registrant's access to
transportation and have enhanced the marketability of its natural gas
production. To date, the Registrant has not experienced any material
adverse effect on gas marketing as a result of these FERC orders; however,
the Registrant cannot predict what new regulations may be adopted by the
FERC and other regulatory authorities, or what effect subsequent
regulations may have on its future gas marketing.
The Registrant also is subject to laws and regulations concerning
occupational safety and health. It is not anticipated that the Registrant
will be required in the near future to expend amounts that are material in
the aggregate to the Registrant's overall operations by reason of
occupational safety and health
3
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laws and regulations, but inasmuch as such laws and regulations are
frequently changed, the Registrant is unable to predict the ultimate cost
of compliance.
ENVIRONMENTAL REGULATIONS
Various federal, state and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, may affect the operations and costs of the
Registrant. It is not anticipated that the Registrant will be required in
the near future to expend amounts that are material in relation to its
total capital expenditure program by reason of environmental laws and
regulations. However, inasmuch as such laws and regulations are frequently
changed, the Registrant is unable to predict the ultimate cost of
compliance.
STATE REGULATION OF OIL AND GAS PRODUCTION
State statutes and regulations require permits for drilling
operations, drilling bonds and reports concerning operations. Most states
in which the Registrant owns and operates properties have statutes, rules
or regulations governing conservation matters, including the unitization or
pooling of oil and gas properties, establishing of maximum rates of
production from oil and gas wells and the spacing of such wells. Many
states also restrict production to the market demand for oil and gas. Some
states have enacted statutes prescribing ceiling prices for gas sold within
their state. The Registrant's Wyoming production is not currently subject
to price regulation. However, the Registrant is unable to predict whether
production rate limitations or price regulations may be imposed in the
future.
TITLE TO PROPERTIES
As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time properties believed to be suitable for
drilling operations are acquired by the Registrant. Prior to the
commencement of drilling operations, a thorough title examination of the
drill site tract is conducted by independent attorneys. Once production
from a given well is established, the Registrant prepares a division order
title report indicating the proper parties and percentages for payment of
production proceeds, including royalties. The Registrant believes that
titles to its leasehold properties are good and defensible in accordance
with standards generally acceptable in the oil and gas industry.
OFFICE AND OPERATIONS FACILITIES
The Registrant currently maintains its offices at 1645 Court Place,
Suite 312, Denver, Colorado. The Registrant leases this space on a
month-to-month basis at approximately $300 per month and believes its office
space is sufficient for the foreseeable future.
EMPLOYEES
At September 30, 1996, the Registrant employed 1 person full time, L.
W. Winkler, Jr. and 1 part time person, an office manager and bookkeeper.
The Registrant also utilizes the services of two independent contractors on
a when-needed basis.
4
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ITEM 2. DESCRIPTION OF PROPERTY.
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OIL AND GAS RESERVES
The table below sets forth the Registrant's quantities of proved
reserves, as estimated by McCartney Engineering, consulting independent
petroleum engineer, all of which are located in the continental U.S., and
the present value of estimated future net revenues from these reserves on
a non-escalated basis discounted by 10 percent per year as of the last two
fiscal years ending September 30, 1996 and 1995. Reserve estimates are
inherently imprecise and are subject to revisions based on production
history, results of additional exploration and development, prices of oil
and gas and other factors outside the Registrant's control.
Year Ended
September 30,
-------------------
1996 1995
Estimated Proved Gas Reserves
(MCF) 105,300 76,500
Estimated Proved Oil Reserves
(Bbls) 127,400 36,800
Present Value of Future Net
Revenues (before future
income tax expense) $886,700 $185,600
Reference should be made to Supplemental Oil and Gas Information on
pages F-8 and F-9 of this Annual Report on Form 10-KSB for additional
information pertaining to the Registrant's proved oil and gas reserves.
During fiscal 1996 the Registrant did not file any reports that include
estimates of total proved net oil or gas reserves with any federal agency
other than the Securities and Exchange Commission.
5
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PRODUCTION
The following table sets forth the Registrant's net oil and gas
production for the last two fiscal years.
Year Ended
September 30,
-------------------
1996 1995
Natural Gas (MCF) 10,100 11,671
Crude Oil & Condensate (Bbls) 9,800 5,630
AVERAGE SALES PRICES AND PRODUCTION COSTS
The following table sets forth the average gross sales price and the
average production cost per unit of oil produced, including production
taxes, for the last two fiscal years. For purposes of calculating
production cost per equivalent barrel, MCF's of gas have been converted at
a ratio of six MCF's of gas for each barrel of oil:
Year Ended
September 30,
-------------------
1996 1995
Average Sales Price
Gas (per MCF) $ 1.82 $ 1.70
Oil (per Bbl) $18.36 $17.36
Average Production Cost
Per Equivalent
Barrel $ 7.46 $11.59
PRODUCING WELLS AND DEVELOPMENT ACREAGE
The following table sets forth, as of September 30, 1996, the
approximate number of gross and net producing oil and gas wells and their
related developed acres owned by the Registrant. Productive wells are
producing wells and wells capable of production, including shut-in wells.
Developed acreage consists of acres spaced or assignable to productive
wells.
PRODUCING WELLS DEVELOPED ACRES
----------------------------------- ---------------
OIL GAS GROSS NET
-------------- -------------- ----- ---
GROSS NET GROSS NET
13 8.41 0 0 2,081 1,346
6
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UNDEVELOPED ACREAGE
At September 30, 1996, the Registrant held undeveloped acreage as set
forth below:
UNDEVELOPED ACRES
--------------------
LOCATION GROSS NET
Kansas 0 0
Wyoming 1,400 1,400
DRILLING ACTIVITIES
The Registrant had no drilling activities for the years ended
September 30, 1996 and 1995. The Registrant's drilling activities, when
conducted, are on a contract basis with independent drilling contractors.
ITEM 3. LEGAL PROCEEDINGS.
- --------------------------
The Registrant is not engaged in any material pending legal
proceedings to which the Registrant is a party or to which any of its
property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
- --------------------------------------------------------------
During the fourth quarter of the fiscal year ended September 31, 1996,
the Registrant submitted to its shareholders of record on August 5, 1996
(i) a proposal to amend the Registrant's Articles of Incorporation to
increase the Registrant's authorized Common Stock from 50,000,000 shares,
no par value, to 500,000,000 shares, no par value and (ii) a proposal to
elect four Directors. At the meeting held on September 16, 1996, the
proposal to increase the Registrant's authorized Common Stock was approved
and the following four persons were elected as Directors of the Registrant:
L. W. Winkler, Jr., G. Allan Nelson, Cecil O'Brate and Daniel L. Dalke.
7
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PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY STOCK AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS.
- -------
(a) PRINCIPAL MARKET OR MARKETS. The Registrant's common stock, no
par value, is traded in the national over-the-counter market and quotes for
such common stock are reported by the National Association of Securities
Dealers, Inc. on its "pink sheets" under the symbol "WNCO." The range of
high and low bid prices for each quarterly period during the two most
recent fiscal years ended September 30, 1996 and 1995 are reported as
follows:
Quarter Ended High Low
------------- ---- ---
December 31, 1994 No quote No quote
March 31, 1995 No quote No quote
June 30, 1995 No quote No quote
September 30, 1995 No quote No quote
December 31, 1995 No quote No quote
March 31, 1996 No quote No quote
June 30, 1996 No quote No quote
September 30, 1996 No quote No quote
December 31, 1996 No quote No quote
March 31, 1997 (through Feb. 23) No quote No quote
The trading market for the Registrant's Common Stock is extremely
sporadic and limited.
(b) SECURITY HOLDERS. The approximate number of security holders of
record of the Registrant's no par value common stock as of September 30,
1996 was approximately 2,350.
(c) DIVIDENDS. Holders of Common Stock are entitled to receive such
dividends as may be declared by the Registrant's Board of Directors. No
dividends have been paid with respect to the Registrant's common stock and
the Registrant has no present plans to pay dividends in the foreseeable
future.
8
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ITEM 6. SELECTED FINANCIAL INFORMATION.
- ---------------------------------------
The following is a summary of selected financial data which the
Registrant believes highlights its financial condition and results of
operations.
Year Ended September 30,
------------------------
1996 1995
Revenues $158,821 $109,663
-------- --------
Net Earnings (Loss) $ (60,876) $ (59,881)
--------- ---------
Net Earnings (Loss)
Per Common Share $ -- * $ -- *
======== ========
Total Assets $490,316 $393,944
-------- --------
Long-term Obligations -- --
======== ========
___________________
* Less than one cent per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS.
- ------------------------------------------------------------------
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND THE SECURITIES
EXCHANGE ACT OF 1934. SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THIS
SECTION AND UNDER "ITEM 1. DESCRIPTION OF BUSINESS," "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS" AND "ITEM 2. PROPERTIES."
ACTUAL EVENTS OR RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.
YEAR ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995
- ----------------------------------------------------
RESULTS OF OPERATIONS
The Registrant had a net loss for the year ended September 30, 1996
totaling $60,876, compared to $59,881 at September 30, 1995. This increase
of 0.2% in net loss was primarily a result of increased general and
administrative costs reduced by a significant increase in net oil and
gas income.
REVENUES
Oil and gas sales for the year ended September 30, 1996 totaled
$154,386 compared to revenues of $106,740 for the year ended September 30,
1995. Oil production increased from 5,630 barrels to 9,851 barrels for a
net increase of 4,221 barrels or 75%. Gas production decreased from 11,671
MCFs to 10,111 MCFs for a net decrease of 1,560 MCFs or 1.3%. These changes
in revenue and fluctuations in production were created primarily by the
purchase by the Registrant of four (4) producing wells.
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COSTS AND EXPENSES
Oil and gas production costs for the year ended September 30, 1996
totaled $87,051 for a 9.6% (or $7,613) increase over the year ended
September 30, 1995 costs of $79,438. The increased costs were primarily a
result of the cost of production from additional properties less a
reduction of workover expenses which were incurred in 1995.
General and administrative expenses totaled $105,233 at September 30,
1996 as compared to $68,193 at September 30, 1995 for a total increase of
54.3%. This increase was due to additional costs for engineering studies
and commissions incurred in the acquisition of additional reserves in
exchange for the Registrant's Common Stock.
Depreciation, depletion and amortization costs for the year ended
September 30, 1996 totaled $20,896 for a decrease of $980 (or 4.5%) over
the year ended September 30, 1995 costs of $21,876. This decrease is
created by adjustments to depletion rates based on year end reserve
quantities.
Exploration costs and dry hole costs increased a total of 256% from
$9,484 at September 30, 1995 to $33,811 at September 30, 1996. This
increase resulted from additional costs associated with the Registrant's
acquisition of certain oil and gas properties in exchange for stock. The
Registrant's approach to exploration has not changed significantly from the
prior period.
OTHER INCOME (LOSS)
Other income (loss) for the year ended September 30, 1996, was $315, an
increase of $2,522 from the year ended September 30, 1995 loss of $2,207.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended September 30, 1996, the Registrant's working
capital decreased from $175,169 at September 30, 1995 to $148,494 at
September 30, 1996.
The Registrant anticipates revenues from operations with the
additional wells acquired to facilitate its working capital needs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
See Part IV, page F-1 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
Not Applicable.
10
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PART III
--------
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
- ---------------------------------------------------------------------
(a)(b) IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES.
The following sets forth certain information with respect to the
officers and directors of the Registrant.
Name Age Position
---- --- --------
Cecil O'Brate (1) 67 President, Chief Executive Officer
and a Director since 1996
Daniel L. Dalke (1) 45 Secretary, Treasurer, Chief Financial
Officer and a Director since 1996
G. Allan Nelson 73 Director since 1989
L. W. Winkler, Jr. (2) 76 Director since 1979
___________________________
(1) Elected officers and directors of the Registrant on July 3, 1996.
(2) L. W. Winkler, Jr. passed away in February, 1997.
The directors of the Registrant are elected to hold office until the
next annual meeting of shareholders and until their respective successors
have been elected and qualified. Officers of the Registrant are elected by
the Board of Directors and hold office until their successors are elected
and qualified.
The Registrant has no audit or compensation committee.
Biographical information concerning each director and executive
officer, including business experience for the past five years is as
follows:
CECIL O'BRATE has been Chairman of the board and President of American
Warrior, Inc., a Kansas corporation involved in oil and gas development,
since 1984. He has also been Chairman of the Board and President of
Mid-Continent Resources, Inc., a Kansas corporation involved in oil and gas
development, since 1984. Mr. O'Brate has also been chairman of the board
and President of Palmer Mfg. & Tank, Inc., a Kansas corporation
manufacturing storage vessels for various industries, since 1966. Mr.
O'Brate also holds investments in other closely-held corporations involved
in banking, farming and implement dealerships. Mr. O'Brate devotes part-time
to the Registrant.
DANIEL L. DALKE has been Assistant Secretary-Treasurer and Controller
of American Warrior, Inc., Mid-Continent Resources, Inc. and Palmer Mfg. &
Tank, Inc. since 1984. Mr. Dalke holds a degree in accounting from Wichita
State University and is a Certified Public Accountant. Mr. Dalke devotes
part-time to the Registrant.
11
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G. ALLAN NELSON was the Secretary of the Registrant from 1989 to 1996.
Mr. Nelson holds a degree in geology from the University of Texas. He has
been a member of the American Association of Petroleum Geologists since
1948, and an active member since 1954. Mr. Nelson is also an active member
of the Rocky Mountain Association of Geologists, the Wyoming Geological
Association, and the East Anshuta Ranch Field Unit Arbitration Panel. Mr.
Nelson is an independent consulting geologist.
L. W. WINKLER, JR., the founder, past President and a Director of the
Registrant, passed away in February, 1997.
(c) FAMILY RELATIONSHIPS.
There are no family relationships between or among any officer and
director.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
No officer, director, significant employee, promoter or control person
of the Registrant has been involved in any event of the type described in
Item 401(d) of Regulation S-B during the past five years.
ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------
(a)(b) GENERAL AND SUMMARY COMPENSATION TABLE.
The following table sets forth all compensation paid or accrued by the
Registrant for services rendered during the fiscal years ended September
30, 1994, 1995 and 1996 by its Chief Executive Officer. No other executive
officers received a salary and other compensation which exceeded $100,000
during any year.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------- --------------------------------------------------
Name and Restricted
Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonuses($) Compensation Awards SARS Payouts($) Compensation
-------- ---- ------ ---------- ------------ ------ ---- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cecil O'Brate, 1996 $ 0 -0- $ -0- -0- -0- -0- -0-
President and 1995 N/A -0- $ -0- -0- -0- -0- -0-
Chief Executive 1994 N/A -0- $ -0- -0- -0- -0- -0-
Officer
L. W. Winkler, Jr., 1996 $ 20,690 -0- $ -0- -0- -0- -0- -0-
President and 1995 $ 31,059 -0- $ -0- -0- -0- -0- -0-
Chief Executive 1994 $ 31,155 -0- $ -0- -0- -0- -0- -0-
Officer
</TABLE>
(c) OPTION/SAR GRANTS TABLE.
There were no options to purchase shares of Common Stock granted to
the Executive Officers of the Registrant listed in the Executive
Compensation Table during the Registrant's last fiscal year.
(d) AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END
OPTION/SAR VALUE TABLE.
Not applicable.
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(e) TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE.
Not applicable.
(f) COMPENSATION OF DIRECTORS.
STANDARD ARRANGEMENTS. All Directors are reimbursed for reasonable
out-of-pocket expenses incurred related to Board duties assigned and in
connection with attending Board and Shareholders' meetings.
OTHER ARRANGEMENTS. There are no other arrangements pursuant to which
the Registrant's Directors receive compensation from the Registrant for
services as Directors.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS.
None.
(h) REPORTING ON REPRICING OF OPTIONS/SARS.
Not Applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -----------------------------------------------------------------------
(a)(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of September 30, 1996 the ownership
of the Registrant's Common Stock by (i) each Director of the Registrant,
(ii) all Executive Officers and Directors of the Registrant as a group, and
(iii) all persons known by the Registrant to own more than 5% of the
Registrant's Common Stock.
Beneficial Ownership (1)
------------------------
Name Number of Shares Percentage
---- ---------------- ----------
L. W. Winkler, Jr. (2) 7,049,300 17.25%
1645 Court Place, Suite 312
Denver, CO 80202
Cecil O'Brate 16,949,947 (3) 41.52%
P.O. Box 399
Garden City, KS 67846
Daniel Lee Dalke 0 0.0%
P.O. Box 399
Garden City, KS 67846
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G. Allen Nelson 8,300 .04%
1645 Court Place, Suite 312
Denver, CO 80202
American Warrior, Inc. 16,949,947 41.52%
P.O. Box 399
Garden City, KS 67846
All Directors and Officers 24,007,547 (2)(4) 58.77%
as a Group (4 persons) (2)
_________________________________
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting
and investment power with respect to all such shares. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but are not deemed outstanding for the purpose
of calculating the percentage owned by each other person listed.
(2) L. W. Winkler, Jr. passed away in February, 1997, and his shares of
the Company are currently held by his estate. As of the date this
Annual Report on Form 10-KSB is being filed, there are presently only
three Directors and Officers holding 16,958,247 shares (41.56%).
(3) Cecil O'Brate is the President, a director and the majority
shareholder of American Warrior, Inc. and therefore may be deemed to
be the beneficial owner of the shares owned by American Warrior, Inc.
(4) Includes 16,949,947 shares owned by American Warrior, Inc., as to
which Cecil O'Brate, a Director and Officer of the Registrant, may be
deemed to have beneficial ownership by virtue of being a Director and
Officer of American Warrior, Inc.
(c) CHANGES IN CONTROL.
No understandings. arrangements or agreements are known by management
at this time which would result in a change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
(a)(b) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
On July 3, 1996, the Registrant issued 16,959,947 shares of the
Registrant's Common Stock to American Warrior, Inc. in consideration for
the transfer and assignment of working interests in four oil and gas
producing properties in Kansas and Wyoming to the Registrant.
The Registrant's Board of Directors and its officers are subject to
certain provisions of Colorado law which are designed to eliminate or
minimize the effects of certain potential conflicts of interest. In
addition, the Board of Directors has adopted a policy that provides that
any transaction between the Registrant and an interested party must be
fully disclosed to the Board of Directors, and that a majority of the
directors not otherwise interested in the transaction (including a majority
of disinterested directors) must make a determination that such transaction
is fair, competitive and commercially reasonable and on terms and
conditions not less favorable to the Registrant than those available from
unaffiliated third parties.
14
<PAGE>
(c) PARENTS OF THE REGISTRANT.
L. W. Winkler, Jr. may be deemed to be the parent of the Registrant.
As disclosed above, Mr. Winkler passed away in February, 1997.
(d) TRANSACTIONS WITH PROMOTERS.
Information required by Item 404 of Regulation S-B is not required to
be presented inasmuch as the Registrant has been organized for more than
five years.
(e) COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Registrant's Directors and Officers, and persons who own more than 10% of
a registered class of the Registrant's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Registrant with copies of all
Section 16(a) forms they file.
Based solely on the Registrant's review of the copies of such forms
received by it during the fiscal year ended September 30, 1996, and written
representations that no other reports were required, the Registrant
believes that each person who, at any time during such fiscal year, was a
director, officer or beneficial owner of more than 10% of the Registrant's
Common Stock complied with all Section 16(a) filing requirements during
such fiscal year or prior fiscal year.
15
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) FINANCIAL STATEMENTS. The following financial statements are filed as
part of this report:
Page
----
Reports of Independent Certified Public
Accountants. . . . . . . . . . . . . . . . . F-1
Balance Sheets - September 30, 1996 and 1995 F-2
Statements of Operations for the years
ended September 30, 1996 and 1995 . . . . . F-3
Statements of Stockholders' Equity
for the years ended September 30,
1996 and 1995 . . . . . . . . . . . . . . . F-4
Statements of Cash Flows for the years
ended September 30, 1996 and 1995 . . . . . F-5
Notes to Financial Statements. . . . . . . . F-6-F-14
All Schedules are omitted because they are not required, inapplicable,
or the information is included in the financial statements or notes
thereto.
(3)(a) EXHIBITS. Reserve Report prepared by McCartney
Engineering, Inc.
(b) REPORTS ON FORM 8-K. The Registrant filed one (1) report
on Form 8-K during the last quarter of the period covered by this
report reporting the acquisition of producing properties for shares
of Common Stock and certain changes in management.
16
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANT
BOARD OF DIRECTORS AND STOCKHOLDERS
WINCO PETROLEUM CORPORATION
We have audited the accompanying balance sheets of Winco Petroleum
Corporation as of September 30, 1996 and 1995, and the related statements
of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Winco Petroleum
Corporation as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ LAWRENCE E. VAN ZETTEN, P.C.
Lawrence E. Van Zetten, P.C.
Denver, Colorado
February 7, 1997
F1
<PAGE>
WINCO PETROLEUM CORPORATION
BALANCE SHEETS
September 30
----------------
1996 1995
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 97,941 $ 155,911
Accounts receivable 82,170 39,057
Prepaid expenses and other 6,389 6,559
---------- ----------
Total current assets 186,500 201,527
Investment in oil and gas properties at cost
(full cost method) net of accumulated
depreciation, depletion and amortization of
$984,811 and $965,046 in 1996 and 1995
respectively 248,340 118,793
Well equipment inventory-at lower of cost
or market 53,476 59,993
Furniture, fixtures and vehicles-at cost net
of accumulated depreciation of $21,699
and $20,567 for 1996 and 1995 respectively 1,000 2,131
Other assets 1,000 11,500
---------- ----------
$ 490,316 $ 393,944
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -
Trade $ 17,972 $ 3,470
Directors and shareholders 150 482
Accrued liabilities 19,884 22,406
---------- ----------
Total current liabilities 38,006 26,358
---------- ----------
Commitment
Stockholders' Equity:
Common stock, no par value; 500,000,000
shares authorized; 40,852,576 (in 1996)
and 23,000,000 (in 1995) shares issued
and outstanding 307,000 173,000
Additional paid-in capital 1,260,920 1,249,320
Deficit (1,115,610) (1,054,734)
---------- ----------
Total stockholders' equity 452,310 367,586
---------- ----------
$ 490,316 $ 393,944
========== ==========
See Notes to Financial Statements
F2
<PAGE>
WINCO PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
Years Ended
September 30
----------------
1996 1995
---- ----
REVENUES:
Oil and gas sales $ 154,386 $ 106,740
Investment income 4,120 5,130
Other oil and gas income (loss) 315 (2,207)
---------- ----------
158,821 109,663
---------- ----------
COSTS AND EXPENSES:
Lease operating, including
production taxes 87,051 79,438
Depreciation, depletion and
amortization 20,896 21,876
General and administrative 105,233 68,193
Write-down of well equipment inventory 6,517 37
---------- ----------
219,697 169,544
---------- ----------
Loss before income taxes (60,876) (59,881)
Income tax expense (benefit) - -
---------- ----------
Net loss $ (60,876) $ (59,881)
========== ==========
Net earnings (loss) per common share $ (-) $ (-)
========== ==========
See Notes to Financial Statements
F3
<PAGE>
WINCO PETROLEUM CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK COMMON PAID-IN
ISSUED STOCK CAPITAL DEFICIT
------ ----- ------- -------
<S> <C> <C> <C> <C>
Balance -
October 1, 1994 23,000,000 $ 173,000 $1,241,039 $(994,853)
Contributions 8,281
Net loss - - - (59,881)
---------- ---------- ---------- ----------
Balance -
September 30, 1995 23,000,000 173,000 1,249,320 (1,054,734)
Issuance of
additional shares 17,852,576 134,000 11,600
Net loss - - - (60,876)
---------- ---------- ---------- ----------
Balance -
September 30, 1996 40,852,576 $ 307,000 $1,260,920 $(1,115,610)
========== ========== ========== ===========
</TABLE>
See Notes to Financial Statements
F4
<PAGE>
WINCO PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended
September 30
----------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (60,876) $ (59,881)
Adjustments to reconcile net loss
to net cash used in operating
activities -
Depreciation, depletion and
amortization 20,896 21,876
Write-down of well equipment inventory 6,517 37
Loss on sale of well equipment
inventory 2,206
Change in current assets and current
liabilities -
Accounts receivable (32,613) (7,816)
Prepaid expenses 170 459
Accounts payable 14,170 (816)
Accrued expenses (2,522) (793)
---------- ----------
Net cash (used for) operating
activities (54,258) (44,728)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in oil and gas properties
and office equipment (3,712) (9,484)
Proceeds from sale of inventory 6,082
---------- ----------
Net cash provided (used for)
investing activities (3,712) (3,402)
---------- ----------
Net (decrease) in cash and cash
equivalents (57,970) (48,130)
Cash and cash equivalents at beginning
of year 155,911 204,041
---------- ----------
Cash and cash equivalents at end of year $ 97,941 $ 155,911
========== ==========
Supplemental schedule of noncash
operating and investing activities:
Common stock issued for additional
oil and gas properties $ 145,600 $
Contribution, by stockholder, of oil
and gas property 8,281
---------- ----------
$ 145,600 $ 8,281
========== ==========
There were no payments of interest or income taxes during 1996 or 1995
fiscal years.
Disclosure of accounting policy:
For purposes of reporting cash flows, cash and cash equivalents include
cash and short-term cash investments.
See Notes to Financial Statements
F5
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
NATURE OF BUSINESS -
The Company, incorporated on June 21, 1979, is engaged in the
business of acquiring and developing interests in domestic oil
and gas properties, primarily in southeastern Wyoming and Kansas.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
A. OIL AND GAS PROPERTIES
The Company follows the "full-cost" method of accounting for oil
and gas properties. Under this method, all costs associated with
property acquisition, exploration and development activities are
capitalized in one cost center, including internal costs that can
be identified with those activities. No gains or losses are
recognized on the sale or abandonment of oil and gas properties,
unless it involves the disposition of significant reserves.
Depreciation, depletion and amortization of the full-cost pool is
computed using a unit-of-production method based on proved
reserves as determined annually by the Company and independent
engineers. An additional depletion, depreciation and
amortization provision is made if the total capitalized costs of
oil and gas properties in the cost center exceed the
"capitalization ceiling" which is the sum of (1) the present
value of future net revenues from estimated production of proved
oil and gas reserves applicable to such cost center plus (2) the
carrying value of the cost center's unproved properties.
At September 30, 1996, and 1995, the total capitalized cost of
oil and gas properties did not exceed the capitalization ceiling.
Therefore, no additional depletion, depreciation and amortization
provision was made for fiscal 1996 or 1995.
Based on independent engineer's estimates for fiscal 1996 and
1995, the provision for depreciation, depletion and amortization
on a per equivalent barrel basis during fiscal 1996 and 1995 was
approximately $1.71 and $2.73, respectively.
B. UNDEVELOPED OIL AND GAS PROPERTIES
Undeveloped oil and gas leases represent leasehold and other
costs of acquiring leases. Leases are stated at the lower of
cost or market using the specific identification method.
C. WELL EQUIPMENT INVENTORY
Well equipment inventory used by the Company is transferred to
the full-cost pool at its carrying value. The inventory is
stated at the lower of cost or market using the first-in,
first-out method.
D. FURNITURE, FIXTURES AND VEHICLES
Furniture, fixtures and vehicles are depreciated using
accelerated methods over estimated useful lives ranging from
three to seven years.
F6
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES, continued -
E. RETIREMENT BENEFITS
The Company has no plans in effect to provide post-retirement
benefits, other than as described in Note 5.
F. INCOME TAXES
The Company provides deferred income taxes for intangible
drilling and developmental costs and other costs incurred that
enter into the determination of taxable income and accounting
income in different periods when applicable. The excess of
statutory depletion over cost depletion for income tax purposes
will be recognized as a permanent difference in the period in
which the excess occurs.
G. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed utilizing the
weighted average number (27,463,144 in 1996 and 23,000,000 in
1995) of common shares outstanding.
H. OTHER
The preparation of financial statements in conformity with
generally accepted accounting principles requires managment to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, results could differ from
those estimates.
I. CONCENTRATION
The Company places its cash with high credit quality
institutions. At such times deposits may be in excess of FDIC
insurance limits.
NOTE 2. INVESTMENTS:
As of September 30, 1996 and 1995, cost of noncurrent marketable
securities, adjusted for permanent declines in value, was $1,000.
There was no allowance for unrealized temporary losses on
noncurrent marketable equity securities as adjusted cost
approximated or was lower than estimated market value at
September 30, 1995 and 1996.
F7
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. OIL AND GAS ACTIVITIES:
Oil and gas operations -
Information relating to the Company's oil and gas operations,
including costs incurred in such, is summarized below:
Years Ended
September 30
----------------
1996 1995
---- ----
Capitalized costs -
Property acquisition costs $ 145,600 $ 8,281
Exploration costs 33,811 9,484
Recovery of costs/transfer
to well equipment inventory (30,100) -
---------- ----------
149,311 17,765
---------- ----------
Production costs -
Lease operating costs 71,633 65,162
Production and transportation
taxes 14,476 12,865
Ad Valorem taxes 942 1,411
---------- ----------
87,051 79,438
---------- ----------
$ 236,362 $ 97,203
========== ==========
Net revenues from production (oil and gas sales less production
costs) were $67,335 in 1996 and $27,302 in 1995.
Capitalized costs -
Capitalized costs associated with oil and gas producing
activities and related accumulated depreciation, depletion and
amortization are as follows:
September 30
----------------
1996 1995
---- ----
Proved properties $1,233,150 $1,083,839
Unproved properties - -
---------- ----------
1,233,150 1,083,839
---------- ----------
Accumulated depreciation,
depletion and amortization 250,816 231,052
Additional accumulated
depreciation, depletion
and amortization -
"capitalization ceiling" 733,994 733,994
---------- ----------
984,810 965,046
---------- ----------
Net capitalized costs $ 248,340 $ 118,793
========== ==========
F8
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. OIL AND GAS ACTIVITIES, continued:
Major customers -
The Company's oil and gas sales consisted of sales to
unaffiliated purchasers primarily as follows:
September 30
----------------
Purchaser 1996 1995
---- ----
A $ 120,310 $ 62,983
B 16,255 14,877
---------- ----------
$ 136,565 $ 77,860
========== ==========
% to total oil and gas sales 87.87% 69.19%
====== ======
NOTE 4. INCOME TAXES:
The Company recognizes deferred tax assets and liabilities for
future tax consequences of events that have previously been
recognized in the Company's financial statements or tax returns.
The measurement of deferred tax assets and liabilities is based
on provisions of enacted tax laws. The effects of future changes
in tax laws or rates have not been anticipated.
The net deferred tax assets (liabilities) include the following
components.
1996 1995
---- ----
Deferred tax liabilities -
Depletion, depreciation and
amortization $ (85,300) $ (7,300)
---------- ----------
Deferred tax assets -
Adjustment to value of well
equipment inventory 19,900 17,700
Net operating loss
carryforward 252,900 272,000
---------- ----------
272,800 289,700
---------- ----------
Net deferred tax asset 187,500 282,400
Valuation allowance 187,500 282,400
---------- ----------
Net deferred tax asset
(liability) $ 0 $ 0
========== ==========
The Company has investment tax credit carryforwards of $2,178 for
both financial reporting and income tax purposes at September 30,
1996 which expire in varying amounts from 1997 through 1999.
In addition, the Company has a capital loss carryover of
approximately $8,055 which expires in 2007.
F9
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. INCOME TAXES, continued:
The Company has net operating loss carryforwards for financial
reporting and income tax purposes at September 30, 1996 as
follows:
Income tax
----------------------
Year net operating loss Financial Alternative
carryforward expires reporting Regular minimum
-------------------- --------- ------- -------
1997 $ $ 174,000 $ 174,000
1998 21,000 23,000 23,000
2000 167,000 53,000 53,000
2001 380,000 89,000 89,000
2002 59,000 64,000 64,000
2003 56,000 115,000 86,000
2004 94,000 106,000 100,000
2005 19,000 - -
2006 54,000 18,000 16,000
2007 28,000 35,000 35,000
2008 59,000 58,000 58,000
2009 57,000 68,000 68,000
2010 60,000 66,000 66,000
2011 61,000 49,000 49,000
--------- --------- ---------
$1,115,000 $ 918,000 $ 881,000
========= ========= =========
NOTE 5. RETIREMENT PLAN:
The Board of Directors has executed a Simplified Employee
Pension - IRA Contribution Agreement. Under the terms of the
agreement, the Company may contribute the lesser of $15,000 or
15% of each employees' salary. In fiscal 1996 and 1995, the
Company contributed $5,169 and $6,681, respectively, to the plan.
The Company's contributions under this plan are determined
annually by the Board of Directors.
NOTE 6. OFF BALANCE SHEET RISK:
The Company's future production revenues, development costs and
production expenses are dependent on economic and operating
conditions, such as pricing and production taxes, which are not
within the Company's control. At December 31, 1996, the price of
crude oil was approximately $24.50 per Bbl. versus $23.25 at
September 30, 1996.
F10
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL:
During 1995 a major shareholder/director/officer contributed a
producing well to the Company. The property was valued at the
year-end discounted value times the estimated reserves at the
time of the transfer. This amount was included in additional
paid-in capital.
During the year the Company acquired four additional properties
in exchange for 17,852,576 shares of additional stock, 43.7%, of
the outstanding shares. In addition, two representatives of the
seller were elected to the board of directors, which presently
totals four members, and were elected to the office of Chief
Executive Officer, President, Secretary and Treasurer. For
financial statement purposes these properties are valued at the
carryover basis of the seller, $145,600, since the seller
effectively has control of the company. At September 30, 1996
future discounted cash flows from these properties is estimated
to be $508,500. Generally, this increase in value is due to the
net change in price and production costs.
Three of the acquired properties are located in central and
western Kansas and one is located in Wyoming. At the time of the
acquisition, reserves from these properties were estimated to be
76,000 barrels of oil with a discounted future net cash flow of
$477,000.
NOTE 8. UNAUDITED OIL AND GAS RESERVE INFORMATION:
The reserve estimates presented as of September 30, 1996 and 1995
were prepared by independent petroleum consultants. The Company
cautions that there are many uncertainties inherent in estimating
proved reserve quantities and in projecting future production
rates and the timing of development expenditures. In addition,
reserve estimates of new discoveries that have little production
history are more imprecise than those of properties with more
production history. Accordingly, these estimates are expected to
change as future information becomes available.
Proved oil and gas reserves are the estimated quantities of crude
oil, condensate, natural gas and natural gas liquids which
geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved developed oil and gas reserves are those reserves expected
to be recovered through existing wells with existing equipment
and operating methods.
F11
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. UNAUDITED OIL AND GAS RESERVE INFORMATION, continued:
Net quantities of proved reserves and proved developed reserves
of crude oil (including condensate) and natural gas (all of which
are located within the United States) are as follows:
RESERVE QUANTITY INFORMATION
For the years ended September 30, 1995 and 1996
Oil (Bbls) Gas(Mcf)
---------- --------
Proved Reserves
---------------
Estimated quantity,
October 1, 1994 41,900 155,900
Proved reserves donated 2,200
Revisions of previous estimates (1,700) (67,700)
Production (5,600) (11,700)
------- --------
Estimated quantity,
September 30, 1995 36,800 76,500
Proved reserves purchased 76,200
Revisions of previous estimates 24,200 38,900
Production (9,800) (10,100)
-------- --------
Estimated quantity,
September 30, 1996 127,400 105,300
======= =======
Proved Reserves
------------------------------
Developed Undeveloped Total
--------- ----------- -----
Oil (Bbls)
September 30, 1995 36,800 - 36,800
September 30, 1996 127,400 - 127,400
Gas (Mcf)
September 30, 1995 76,500 - 76,500
September 30, 1996 105,300 - 105,300
F12
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. UNAUDITED OIL AND GAS RESERVE INFORMATION, continued:
The following table sets forth a standardized measure of the
discounted future net cash flows attributable to the Company's
proved oil and gas reserves. Future cash inflows were computed
by applying year-end prices of oil and gas to the estimated
future production of proved oil and gas reserves. The future
production and development costs represent the estimated future
expenditures (based on current costs) to be incurred in
developing and producing the proved reserves, assuming
continuation of existing economic conditions. Future income tax
expenses were computed by applying statutory income tax rates to
the difference between pre-tax net cash flows relating to the
Company's proved oil and gas reserves and the tax basis of proved
oil and gas properties and available net operating loss
carryforwards, reduced by investment tax credits. Discounting
the annual net cash inflows at 10% illustrates the impact of the
time value of money on these future cash inflows.
STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS AND CHANGES
THEREIN RELATING TO PROVED OIL AND GAS RESERVES
AT SEPTEMBER 30,
1996 1995
---- ----
Future cash inflows $3,134,400 $ 706,800
Future production and
development costs (1,703,800) (432,200)
Future income tax expenses - -
---------- ----------
Future net cash flows 1,430,600 274,600
10% annual discount for
estimated timing of cash flows (543,900) 89,000
---------- ----------
Standardized measure of
discounted future net
cash flows $ 886,700 $ 185,600
========== ==========
Following are the principal sources of change in the standardized
measure of discounted future net cash flows during the years
ended September 30:
1996 1995
---- ----
Standardized measure of
discounted future net cash
flows, beginning $ 185,600 $ 263,800
---------- ----------
Sales and transfers of oil
and gas produced, net of
production costs (67,500) (28,100)
Net changes in prices and
production costs 83,300 79,400
Sales of minerals in place - -
Acquisition of reserves 145,600 8,800
Change in prices and production
costs on acquired properties 508,500
Development costs incurred
during the period and
change in estimated
future development costs - -
Revisions of previous quantity
estimates 12,600 (164,700)
Accretion of discount 18,600 26,400
Net change in income taxes - -
---------- ----------
701,100 (78,200)
---------- ----------
Standardized measure of
discounted future net cash
flows, ending $ 886,700 $ 185,600
========== ==========
F13
<PAGE>
WINCO PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. UNAUDITED OIL AND GAS RESERVE INFORMATION, continued:
ESTIMATED FUTURE NET REVENUES FROM
PROVED RESERVES OF OIL AND GAS
(Based on current prices and current cost)
Fiscal Proved Total
year ending developed proved
September 30 reserves reserves
------------ -------- --------
1997 $ 187,000 $ 187,000
1998 167,300 167,300
1999 149,000 149,000
Remainder 921,800 921,800
---------- ----------
$1,425,100 $1,425,100
========== ==========
PRESENT VALUE OF FUTURE NET CASH FLOWS
OF PROVED RESERVES DISCOUNTED AT 10% PER YEAR
September 30
----------------
1996 1995
---- ----
Proved developed $ 886,700 $ 185,600
Proved undeveloped - -
---------- ----------
Total proved $ 886,700 $ 185,600
========== ==========
F14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
WINCO PETROLEUM CORPORATION
Date: March 11, 1997 By /s/ Cecil O'Brate
--------------------------------
Cecil O'Brate, President, Chief
Executive Officer, and Director
Date: March 11, 1997 By /s/ Daniel L. Dalke
--------------------------------
Daniel L. Dalke, Secretary,
Treasurer, Principal Financial
Officer and Director
Date: March 11, 1997 By /s/ G. Allan Nelson
--------------------------------
G. Allan Nelson, Director
EXHIBIT 3(a)
MCCARTNEY ENGINEERING, LLC
CONSULTING PETROLEUM ENGINEERS
- ------------------------------------------------------------------------------
1888 SHERMAN STREET, SUITE 760 DENVER, CO 80203 (303)830-7208 FAX(303)830-7004
March 3, 1997
Mr. L.W. Winkler, Jr.
President
1645 Court Place, Suite 312
Denver, Colorado 80202
Re: Property Evaluation (Revised 2/15/97)
Dear Mr. Winkler:
Pursuant to your request, we have revised our previous report to reflect
the entire potential producing life of the Hummer Fed #1 well which was
previously projected to be taken out of service in one year due to coal
mining activity. In this report, this well is assumed to continue
operations to its projected economic limit (17.83 years). This report gives
the revised estimated the remaining reserves and future net revenue for
certain developed oil properties owned by Winco Petroleum Corporation. The
effective date of this study is September 30, 1996. Results are summarized
below:
Net Remaining Reserves Estimated Future Net Revenue
As of September 30, 1996 Discounted at
Reserve Category Oil (BBL) Gas(MCF) Undiscounted 10 Percent
- ---------------- --------- -------- ------------ ----------
Proved Producing 127,393 105,341 $ 1,430,612 $ 886,740
Table #1 is a tabulation by lease of the working and net revenue interests,
gross and net reserves, and projected discounted net revenues of the
individual leases. Table #2 is a cash flow summary reflecting the estimated
remaining reserves and revenue of the Winco Petroleum Corporation
properties. Also included in the report are cash flow projections and
performance curves for the individual leases.
Source of Data
- --------------
Lease names, locations, completion data, performance history, and logs were
supplied by Winco Petroleum Corporation for use in this study. Working
interests and net revenue
<PAGE>
Mr. L.W. Winkler, Jr.
March 3, 1997
Page 2
interests were supplied by Winco personnel, as were historic oil prices and
lease operating expenses. This data was accepted by McCartney Engineering,
LLC as presented. McCartney Engineering, LLC reserves the right to revise
the associated reserve and economic projections if future information
indicates discrepancies in the data provided. No independent well tests or
property inspections were made in conjunction with this study.
Reserve Category
- ----------------
The reserves included in this report are classified in the proved developed
producing category. Proved developed reserves are those which are expected
to be recovered through existing wells with existing equipment and
operating methods. Proved developed producing reserves are those which are
expected to be produced from existing completion intervals now open for
production in existing wells.
Method of Assigning Reserves
- ----------------------------
Reserves were determined through the application of evaluation methods
generally accepted in the oil and gas industry. Sufficient production
history was available to estimate remaining reserves from an extrapolation
of past performance.
Oil and Gas Prices
- ------------------
Oil and gas prices were derived from accounting information supplied by
Winco Petroleum personnel. The initial oil prices were based on a posted
price for West Texas intermediate crude of $22.75/BBL. Oil prices were
held constant throughout the property life. The individual lease oil
prices were adjusted for bonuses, crude gravity and geographic location.
The gas prices used in the evaluation were based on the average price
received in the previous fiscal year. No increases or decreases in future
sales prices were considered in these cash flow projections.
Expenses
- --------
The estimated future operating costs were based on historic expense data
supplied by Winco Petroleum Corporation. No provisions were made for
increases or decreases in future, operating expenses. Applicable
severance, ad valorem, and production taxes were considered in the cash
flow projections. No deductions were made for general or corporate
overhead, depletion, depreciation, or any other indirect costs. The
estimated net income is before state and federal income tax and does not
consider any encumbrances against the properties, if such exist. The value
of salvageable equipment has not been included in this evaluation.
<PAGE>
Mr. L.W. Winkler, Jr.
March 3. 1997
Page 3
General
- -------
The accuracy of any reserve estimate, especially when based on volumetric
analysis or limited production history, is a function of available data and
of engineering and geological interpretation and judgment. While the
reserve estimates used herein are believed reasonable, they should be
accepted with the understanding that subsequent reservoir performance,
changes in pricing structure, or market demand may justify their revision.
Reserve estimates based on volumetric analysis and reserves assigned to
behind pipe intervals are inherently less reliable than those based on a
lengthy production history.
In our opinion, the above reserve and revenue estimates fairly and
approximately present the proven reserves of Winco Petroleum Corporation
with respect to definitions, assumptions, and methodology described above.
We appreciate the opportunity to provide you with this study. All related
data is in our file and is available for your review.
Very truly yours,
McCartney Engineering, LLC
/s/ JACK A. MCCARTNEY
Jack A. McCartney
Manager
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
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0
0
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<OTHER-EXPENSES> 111,750
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