FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly 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: 0-9500
MOUNTAINS WEST EXPLORATION, INC
(Exact name of small business issuer as specified in its charter)
New Mexico 85-0280415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
616 CENTRAL AVE. SE. SUITE 213
ALBUQUERQUE, NEW MEXICO 87102
(Address of principal executive offices) (Zip Code)
616 CENTRAL AVE. SE. SUITE 230
ALBUQUERQUE, NEW MEXICO 87102
(Former names, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the issuer (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 issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, par value $.001
per share, at November 12, 1996 was 36,566,220 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED BALANCE SHEET
UNAUDITED
September 30, 1996
ASSETS
Current Assets
Cash .................................................... $ 71,586
Account receivable/prepaid expenses ..................... 7,537
-----------
Total current assets ................................ 79,123
Property and Equipment
Office furniture and equipment, at cost ................. 18,201
Less accumulated depreciation ........................... (8,537)
-----------
Net property and equipment .......................... 9,664
Oil and gas properties, using the successful
efforts method (Note 3) ................................. 2,593,124
Less accumulated depreciation, depletion
and amortization ........................................ (15,254)
-----------
Net oil and gas properties .......................... 2,577,870
Other assets
Term deposit account - restricted ....................... 53,042
Note receivable, officer ................................ 100,000
Mineral Interest ........................................ 41,939
-----------
Total other assets .................................. 194,981
-----------
$ 2,861,638
===========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Advances ................................................ 21,627
Accounts Payable ........................................ 16,002
Accrued liabilities ..................................... 2,315
Due to affiliates ....................................... 2,533,110
-----------
Total Current Liabilities ........................... 2,573,054
Shareholder's Equity
Common Stock, $.001 par value, authorized:
50,000,00 shares, issued 36,635,720
shares; outstanding 36,566,220 shares ............... 36,566
Capital in excess of par value .......................... 1,557,088
Capital in excess of par value - warrants ............... 46,687
Accumulated deficit .................................... (1,351,757)
-----------
Total Stockholders Equity ........................... 288,584
-----------
$ 2,861,638
===========
See accompanying notes to financial statements.
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Three Months
Ended Ended
September 30, September 30,
1996 1995
REVENUES
Oil and Gas Sales ......................... $ 7,394 $ 4,022
Interest in sale of oil & gas
property ................................ -- --
------------ ------------
7,394 4,022
EXPENSES
Production costs .......................... 1,351 453
Depreciation and depletion ................ 1,276 677
Consulting ................................ 438 955
General and administrative ................ 27,055 28,859
------------ ------------
Total expenses ......................... 30,120 30,944
------------ ------------
Loss from operations ......................... (22,726) (26,922)
Other income
Interest income ........................... 1,463 4,450
Interest expense .......................... -- (873)
Gain on sale of oil and gas properties .... -- 181,690
Other ..................................... -- (239)
------------ ------------
Total other income (loss) .................... 1,463 185,028
------------ ------------
Net earnings (loss) .......................... $ (21,263) $ 158,106
============ ============
Earnings (loss) per common share: ............ $ (0.00058) $ 0.00432
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ...................... 36,566,220 36,635,720
============ ============
See accompanying notes to financial statements.
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
REVENUES
Oil and Gas Sales ......................... $ 16,808 $ 9,015
Interest in Sale of oil & Gas
property ............................... 170,000 --
------------ ------------
186,808 9,015
EXPENSES
Production costs .......................... 108,647 4,890
Depreciation and depletion ................ 3,828 2,014
Consulting ................................ 6,438 955
General and administrative ................ 121,394 90,162
------------ ------------
Total expenses ......................... 240,307 98,021
------------ ------------
Loss from operations ......................... (53,499) (89,006)
Other income
Interest income ........................... 5,412 5,384
Interest expense .......................... -- (973)
Gain on sale of oil and gas properties .... -- 181,690
Other ..................................... -- (239)
------------ ------------
Total other income ..................... 5,412 185,862
------------ ------------
Net Income (loss) ............................ $ (48,087) $ 96,856
============ ============
Earnings (loss) per common share: ............ $ (0.00013) $ 0.00264
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ...................... 36,589,387 36,616,220
============ ============
See accompanying notes to financial statements.
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
Cash flows from operating activities
Cash received from customers .................... $ 207,312 $ 9,015
Cash paid to suppliers & employees .............. (238,827) (92,358)
Interest received ............................... 5,425 5,384
Interest paid ................................... (13) (973)
--------- ---------
Net cash used by operating activities ........ (26,103) (78,932)
Cash flows from investing activities
Proceeds from sale of oil and gas properties .... -- 200,000
Acquisition of fixed assets ..................... (1,520) (334)
Acquisition of oil, gas & mineral
activities ................................... (14,080) (13,797)
--------- ---------
Net cash used by investing activities ........ (15,600) 185,869
Cash flows from financing activities
Purchase of Treasury Stock ...................... (2,040) (1,070)
--------- ---------
Net cash provided (used) by
financing activities ...................... (2,040) (1,070)
--------- ---------
Net increase (decrease) in cash .................... (43,743) 105,867
Cash at beginning of period ........................ 115,329 44,755
--------- ---------
Cash at end of period .............................. $ 71,586 $ 150,622
========= =========
Reconciliation of net loss to cash provided
by operating activities
Net earnings (loss) .......................... $ (48,087) $ 96,856
Adjustments
Depreciation, depletion and
amortization ........................... 3,828 2,014
Decrease (increase) in prepaid
expenses and accounts receivable ....... (3,238) 207
Decrease in Deposit ....................... -- 5,000
Increase (decrease) in advances,
accounts payable and
accrued liabilities .................... 21,394 (1,319)
Loss (gain) on sale ....................... -- (181,690)
--------- ---------
Net Cash provided (used) by
Operating Activities ...................... $ (26,103) $ (78,932)
========= =========
Noncash Investing or Financing Activities
The Company was loaned $468,555 & $141,628 for the nine month periods ended
September 30, 1996 and 1995, respectively. These amounts were invested in its
oil and gas property in Papua, New Guinea.
See accompanying notes to financial statements
MOUNTAINS WEST EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The balance sheet at September 30, 1996 and statements of operations and
statements of cash flows for the nine months ended September 30, 1996 and 1995
have been prepared by the company, without audit. In the opinion of management,
all adjustments, including normal recurring adjustments necessary to present
fairly the financial position, results of operations and cash flows, have been
made. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the Company's audited financial
statements at December 31,1995. The results of operations for the nine months
ended September 30, 1996 are not necessarily indicative of operating results for
the full year.
2. NOTES TO FINANCIAL STATEMENTS.
Net income or loss per common share has been computed based on the weighted
average number of shares outstanding during the period. Stock options issued in
1991 have not been considered as their effect would be antidilutive.
3. OIL AND GAS PROPERTIES
Capitalized costs using the successful efforts method related to the Company's
oil and gas activities as of September 30, 1996 are as follows:
Proved developed properties .. $ 14,779
Proved shut - in property .... 2,578,345
Accumulated depreciation,
depletion, amortization and
valuation allowances ...... (15,254)
-----------
Net capitalized costs ........ $ 2,577,870
===========
4. CONTINGENCIES
During the quarter ended March 31, 1996, the Company sold its interest in PPL
165. The restricted term deposit that is currently carried on the Company's
balance sheet at $53,042 was pledged as a guarantee for a bond required by the
government. The Company will negotiate with GEDD for a release of claim to these
funds. If, during the next quarter the Company is unsuccessful in obtaining a
release from GEDD, the deposit will be charged against the sale.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plans of Operations
During the quarter ended September 31, 1996, oil and gas sales were $7,394
Compared to $4,022 for the same period in the prior year. Significant increases
in such revenues are not anticipated by management to occur during the remainder
of the current fiscal year or until there is production from the Southeast Gobe
Oil and Gas Field.
During the current quarter certain transactions involving the Company's Papua
New Guinea operations occurred that will have a material effect on the Company
in future quarters and years. The original Petroleum Prospecting License No. 56
(PPL 56) is now due to expire in early December 1996. The partners in that
License have taken following the actions relating to that License, which it is
expected will be approved by the government.
a. The three oil wells in which the Company has an interest have been included
in an application for a Petroleum Development License (PDL). The oil wells and
certain lands within PPL 56 included withing the PDL will be unitized with
Chevron Oil Company's existing PDL to the north. The two new PDLs will be
developed into the Southeast Gobe Oil and Gas Field. Development of this field
is well under way with an anticipated first production scheduled shortly after
the first of 1998. The Company's interest in the unitized PDLs will be a net
0.88% interest which will result in an anticipated initial production to the
Company's interest of approximately 200 barrels of oil per day. The Company's
expenses in this unit is to be carried until production from the wells existing
on PPL 56 is sold. The costs of getting the oil from the unit to sale has been
estimated at more than $175,000,000, none of which will be borne by the Company
until after the first sale of production. After that time, all of the money
realized from the sale of the oil will be devoted to repayment of the carried
cost of the project, now estimated to be approximately $3,000,000, which, at the
production rate of 200 barrels per day to the Company's interest will take
approximately 36 months to pay out after production begins.
b. The southern part of PPL 56 has been refiled as PPL 189-Foreland Gas
Application. This new license which contains approximately 483,661 acres (24,429
net acres to the Company's interest) is expected to be issued in December of
1996. As a result of a reallocation of interests, the Company's interest will be
increased from 2.5% to 5.051%. This license has the Barikewa shut-in gas field
located on it. The Barikewa field has gas reserves estimated from 163 billion
cubic feet to as high as 1590 billion cubic feet. Further evaluation will be
made to more precisely define the true reserves of this field. Chevron has
announced plans to build a gas pipeline from Papua New Guinea into Northern
Australia. This pipeline should greatly increase the value of the gas reserves
at Barikewa. The Company will have to fund most of the work program of this
license which calls for an expenditure of approximately $6,250,000 over a period
of six years, with approximately $56,000 of that amount to be paid over the next
year.
c. The northern part of PPL 56 has been refiled as PPL 190-Fold Belt
Application. This block of approximately 462,632 acres (17,409 net to the
Company's interest) has many very prospective surface structures located on it.
One of these structures will be drilled during the first two years of the
license. A reallocation of interests has increased the Company's interest in
this license from 2.5% to 3.763%. During the first few months of the new License
existence, the Company will have to fund its share of a new seismic program
which is estimated to cost approximately $1,000,000. The Iehi shut-in gas field
lies on this license but the reserves are insignificant at this time. The
Company will have to fund most of the work program of the license which calls
for an expenditure of $13,500,000 over the next six years. Of the total costs
that must be incurred by the Company on this new License, 2.5% are subject to
the carried interest granted in PPL 56, therefore, the Company is obligated to
pay only 1.263% of the total costs incurred prior to production from any of the
properties originally encompassed by PPL 56. Management estimates that the
Company's cost in this new concession over the next year will be approximately
$200,000.
d. Petroleum Prospecting License No. 165, owned by the Company and Gedd PNG is
being evaluated at this time. An aeromagnetic survey has been completed and the
Company is awaiting the results of the survey which will determine if there is
one or more drillable structures on the license. Gedd is funding the work
program of this license.
With the increased activity and development in Papua New Guinea, the Company is
now seeking funds to carry forward the programs which are currently under way.
With oil production only a little over a year away and the gas reserves in Papua
New Guinea currently being studied for early development, the Company should be
able to acquire the necessary funds, either through borrowing or through sale of
equity, to meet its payment obligations under each of the licenses. However, the
Company does not presently have the liquidity that may be necessary to meet any
call for payment of expenses and the Company has no present assurance of the
availability of any of the funds that may be needed at the time needed. The
failure of the Company to meet any cash call made on it for its share of the
expenses incurred on any concession could result it its losing its interest in
the concession.
Changes in Financial Condition
The Company has experienced a decline in cash but has increased total assets
through the first nine months of the current fiscal year. The Company's primary
liability is a continually developing carried interest in certain New Guinea oil
and gas rights. Total liabilities aside from this obligation are approximately
$40,000. It is Management's belief that the Company will be able to continue to
meet its financial commitments during the coming fiscal year.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than the judgment described in the Company's annual report on form 10KSB,
incorporated herein by reference, management knows of no legal proceedings or
unsatisfied judgments which have not been provided for in any court or agency to
which the Company or any of its officers or directors are or may be a party.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS IN SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required by Item 601 of regulation S-K
(b) Reports on Form 8-K. States whether any reports on Form 8-K have been filed
during the quarter for which this report is filed, listing the items reported,
any financial statement filed, and the dates of any such reports.
SIGNATURES
In accordance with section 13 to 15 (d) of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Robert A. Doak, Jr. November 12, 1996
- --------------------------------------------------------
Robert A. Doak, Jr. President, Chief Executive Officer
and Chief Financial Officer
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