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 June 30, 1997
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 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)
Not Applicable
(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 July 14, 1997, was 37,018,970 shares.
PART I
Item 1. FINANCIAL STATEMENTS
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED BALANCE SHEET
June 30, 1997
Unaudited
ASSETS
Current Assets
Cash ..................................................... $ 27,202
Accounts receivable/prepaid expenses ..................... 10,179
___________
Total current assets .................................. 37,381
Furniture and Equipment
Office furniture and equipment, at cost .................. 17,120
Less accumulated depreciation ........................... (10,541)
___________
Net furniture and equipment ........................... 6,579
Oil and gas properties, using the successful
efforts method (Note 3) .................................. 2,476,883
Less accumulated depreciation, depletion and
amortization ............................................. (14,779)
___________
Net oil and gas properties ........................... 2,462,104
Other Assets
Term deposit account - restricted (Note 3) ............... 53,042
Note receivable, officer ................................. 100,000
Mineral Interest ......................................... 40,083
Other Investments ........................................ 15,000
___________
Total other assets ...................................... 208,125
___________
Total assets ............................................ $ 2,714,189
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Advances .................................................. $ 24,363
Advanced payroll .......................................... 6,675
Accounts payable .......................................... 16,002
Accrued liabilities ....................................... 3,259
Line of credit ............................................ 34,500
Note payable - officer .................................... 9,276
Due to affiliates ......................................... 2,351,891
___________
Total current liabilities ............................... 2,445,966
Shareholder's Equity
Common Stock, $.001 par value, authorized:
50,000,00 shares, issued 37,018,970
shares; outstanding 37,018,970 shares .................... 37,019
Capital in excess of par value ............................ 1,607,997
Accumulated deficit ...................................... (1,376,793)
___________
Total stockholders' equity .............................. 268,223
___________
Total liabilities and stockholders' equity .............. $ 2,714,189
===========
See accompanying notes to financial statements.
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Three Months
Ended Ended
June 30, 1997 June 30, 1996
REVENUES
Oil and Gas Sales ....................... $ 14,321 $ 5,734
Lease Income ............................ -- --
Other operating income .................. 33,898 --
____________ ____________
Total income .......................... 48,219 5,734
EXPENSES
Production costs ........................ 1,805 1,200
Depreciation and depletion .............. 1,000 1,276
Consulting .............................. 1,150 --
General and administrative .............. 59,337 58,401
____________ ____________
Total expenses ........................ 63,292 60,877
Loss from operations .................. (15,073) (55,143)
Other income
Interest income ......................... 38,364 1,899
Interest expense ........................ (1,563) (13)
Other ................................... (1,074) --
____________ ____________
Total other income (loss) ............. 35,727 1,886
____________ ____________
Net earnings .......................... $ 20,654 $ (53,257)
============ ============
Earnings (loss) per common share: ........ $ 0.001 $ (0.001)
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ................... 37,026,620 36,635,720
============ ============
See accompanying notes to financial statements.
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
REVENUES
Oil and Gas Sales ......................... $ 25,216 $ 9,414
Lease Income .............................. 13,655 --
Other operating income .................... 33,897 --
Interest in sale of oil & gas property .... -- 170,000
____________ ____________
72,768 179,414
EXPENSES
Production costs .......................... 6,010 107,296
Depreciation and depletion ................ 1,366 2,552
Consulting ................................ 1,414 --
General and administrative ................ 85,872 100,338
____________ ____________
Total expenses .......................... 94,662 210,186
Loss from operations .................... (21,894) (30,772)
Other income
Interest income ........................... 39,454 3,962
Interest expense .......................... (1,876) (13)
Other ..................................... (1,304) --
____________ ____________
Total other income ...................... 36,274 3,949
____________ ____________
Net earnings (loss) ..................... $ 14,380 $ (26,823)
============ ============
Earnings (loss) per common share: .......... $ 0.001 $ (0.001)
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ..................... 37,033,887 36,566,220
============ ============
See accompanying notes to financial statements.
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
Cash flows from operating activities
Cash received from customers ................... $ 97,514 $ 180,918
Cash paid to suppliers & employees ............. (112,960) (207,498)
Interest received .............................. 38,454 3,962
Interest paid .................................. (1,876) (13)
_________ _________
Net cash provided (used) by
operating activities ....................... 21,132 (22,631)
Cash flows from investing activities
Purchases related to oil and gas venture ....... (59,438) (17,218)
_________ _________
Net cash used by investing activities ........ (59,438) (17,218)
Cash Flows from Financing Activities
Net draw on line of credit ..................... 34,500 --
Repayment of officer loan ...................... (7,092) --
Retirement of stock ............................ (776) (2,040)
_________ _________
Net cash provided (used) by
financing activities ...................... 26,632 (2,040)
Net decrease in cash ............................ (11,674) (41,889)
Cash at beginning of period ..................... 38,876 115,329
_________ _________
Cash at end of period ........................... $ 27,202 $ 73,440
========= =========
Reconciliation of net income (loss) to cash flows
provided (used) by operating activities:
Net earnings (Loss) ............................. $ 14,380 $ (26,823)
Adjustments
Depreciation, depletion and
amortization ................................. 1,366 2,552
Increase in prepaid expenses
and accounts receivable ...................... (3,756) (551)
Increase in advances, accounts payable
and accrued liabilities ...................... 9,142 2,191
_________ _________
Net Cash provided by operating activities ....... $ 21,132 $ (22,631)
========= =========
Noncash Investing or Financing Activities:
The Company was loaned $482,284 & $573,563 for the six month periods ended June
30, 1997 and 1996, respectively. These amounts were invested in its oil and gas
property in Papua, New Guinea. In the second quarter of 1997, the government of
New Guinea acquired $707,123 of the Company's oil and gas interests. This amount
was credited to the Company's obligation to other GOBE affiliates.
See accompanying notes to financial statements
MOUNTAINS WEST EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The balance sheet at June 30, 1997, statements of operations and statements of
cash flows for the six months ended June 30, 1997 and 1996 and statements of
operations for the three month periods then ended 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 31,1996. The results
of operations for the six months ended June 30, 1997 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.
3. OIL AND GAS PROPERTIES
Capitalized costs using the successful efforts method related to the Company's
oil and gas activities as of June 30, 1997 are as follows:
Proved developed properties .. $ 14,779
Proved shut - in property .... 2,476,883
Accumulated depreciation,
depletion, amortization and
valuation allowances ...... (14,779)
___________
Net capitalized costs ........ $ 2,476,883
===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
During the quarter ended June 30, 1997, oil and gas sales were $25,216, compared
to $9,414 for the same period in the prior year. In addition, the Company had
$33,897 in other operating income during the quarter. 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.
The status of the Company's properties is as follows:
Colorado
The Company owns approximately 2,400 acres of mineral interest in Las Animas
County, Colorado. During the quarter these properties were leased to a
corporation with offices in Texas. The Company received, after payment of
certain finders fees, $13,900 for the leases and retained a royalty interest of
2.5% and mineral interest of 15% in the properties.
Following the leasing of the properties, the Texas corporation questioned the
Company's title in portions of the acreage. Thereupon, the Company undertook a
quiet title action and on June 24, 1997 the District Court for the County
entered and order finding that the Company owned all mineral interest in the
properties.
Papua New Guinea
a. Petroleum Development License (PDL) 3. The three oil wells in which the
Company has an interest are located on this license. This license has been
unitized with Chevron Oil Company's PDL 4 to the north. The two new PDLs
encompass the Southeast Gobe Oil and Main Gobe Fields. Development of these
fields is well under way with an anticipated first production scheduled during
the first quarter of 1998. The Company's interest in the unitized production,
after exercise by the government of its right to acquire a 22 1/2% interest in
the fields, 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 the first
production from PDL 3 is sold. Thereafter, the Company must pay its share of all
costs of PDL 3. 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 $300,000,000, which
Management believes will pay out in approximately three years if the Company's
share of production is at least 200 barrels over that period of time.
b. PPL 189. This license contains approximately 483,661 acres in which the
Company owns a 5.051% working interest. The Barikewa shut-in gas field is
located on this license and has gas reserves estimated from a low of 163 billion
cubic feet to a high of 1590 billion cubic feet. Further evaluation will be made
to more precisely define the true reserves of this field. Plans to build at
least one LNG plant near Port Moresby has been announced and Chevron has
announced plans to build a gas pipeline from Papua New Guinea into Northern
Australia. Either an LNG plant or the proposed pipeline should greatly increase
the value of the gas reserves at Barikewa. The Company will have to fund its
share of most of the work program of this license which calls for an expenditure
of approximately $6,250,000 over a period of six years. Management anticipates
that the Company's cost over the next year will be approximately $56,000.
c. PPL 190. This block of approximately 462,632 acres has many very prospective
surface structures located on it. One of these structures will be drilled during
the first two years of the license. The Company has a 3.763% interest in this
license. During the previous quarter a new seismic program costing approximately
$1,000,000 was undertaken on the property, but has not yet been completed and
evaluated. The work program for this license calls for an expenditure of
$13,500,000 over the next six years and the Company will be required to pay its
percentage share of these costs. 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 156, therefore, the Company is obligated to pay only 1.263% of the total
costs incurred prior to production from PDL 3 discussed above. The Company was
not required to nor did it make any expenditures in relation to the seismic
program during the quarter. The Partners intend drilling an exploratory well on
this license that will test the Wasuma structure. The well will be started near
the end of 1997, and the Company's anticipated costs in the well will be
approximately $150,000.
The Iehi shut-in gas field lies on this license but the reserves are
insignificant at this time.
d. PPL No. 165. Oil Search, Gedd PNG and the Company have reached an agreement
looking toward the exploration, and if warranted, the development of the lands
covered by this license. Under the agreement, the Company will recapture certain
of its costs in acquiring and maintaining the license, and the three parties
will surrender PPL 165 and apply for a new Prospecting Permit License covering
the newly defined lands that will include lands originally within the boundaries
of PPL 165. The Company has will have a 5% working interest in the new license
and its costs will be carried up to the drilling of the first exploration well
that will be drilled on the license.
The Company is continuing to seek funds to carry forward the programs which are
currently under way. With oil production only a little over nine months 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
During the quarter the Company has experienced a decline in cash and total
assets through the first six months of the current fiscal year due to the
aquisition of approximately $700,000 of the Company's interest in oil and gas
interests in Papua, New Guinea by the government. The Company's total debt
decreased proportionately. The Company's primary liability is a continually
developing carried interest in certain New Guinea oil and gas rights. The
Company's total liabilities other than those created by this carried interest
are approximately $95,000. It is Management's belief that the Company will be
able to continue to meet its financial commitments during the remainder of the
fiscal year.
As noted above, during the first six months of the year, the Company experienced
a decrease in total assets because of the exercise by Papua New Guinea of its
option to acquire an interest in the PDLs. Due to this acquisition, the
Company's debt was reduced by approximately $700,000, while its interest in the
production from the properties was reduced to approximately .88%. The Company's
interest in the PDL remains carried until the first production from the PDL is
sold.
It is management's belief expenditures for the rest of the year will be minimal
and will, in addition to the ordinary day-to-day costs of operations of the
Company's offices in Albuquerque, consist of the costs of the President's travel
to New Guinea to meet with other owners of interests in which the Company has an
interest, including the owners of the PDL and all of the PPLs. Because of the
effort being devoted to completing pipe-line and bringing this property on
production Management cannot predict how many such trips may be necessary.
Because Oil Search has agreed to bear the costs of developing an exploration
program for PPL 165, Management does not anticipate any additional costs or
expenses related to that license until the time that a well on the license must
be drilled, which Management believes will not be until 1998, at the earliest.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than the judgment described in the Company's annual report on form 10-KSB,
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 HOLDER
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.
NONE
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. August 18, 1997
- --------------------------------------------------------
Robert A. Doak, Jr. President, Chief Executive Officer
and Chief Financial Officer
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