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, 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 November 10, 1997, was 38,019,270 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED BALANCE SHEET
September 30, 1997
Unaudited
ASSETS
Current Assets
Cash ....................................................... 4,954
Account receivable/prepaid expenses ........................ 10,400
----------
Total current assets .................................... 15,354
Property and Equipment
Office furniture and equipment, at cost .................... 17,120
Less accumulated depreciation .............................. (10,541)
----------
Net property and equipment ............................... 6,579
Oil and gas properties, using the successful
efforts method (Note 3) .................................... 2,849,188
Less accumulated depreciation, depletion
and amortization ........................................... (14,779)
----------
Net oil and gas properties ................................... 2,834,409
Other assets
Term deposit account - restricted .......................... 53,042
Note receivable, officer ................................... 100,000
Mineral Interest ........................................... 40,083
Other Investments .......................................... 15,000
----------
Total other assets ....................................... 208,125
----------
3,064,467
==========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Advances ................................................... 24,363
Accounts Payable ........................................... 16,002
Accrued liabilities ........................................ 19,832
Note Payable Officer ....................................... 14,150
Line of credit ............................................. 35,000
Due to affiliates .......................................... 2,706,851
----------
Total Current Liabilities ................................ 2,816,198
Shareholder's Equity
Common Stock, $.001 par value, authorized:
50,000,00 shares, issued 38,019,270 shares;
outstanding 38,019,270 shares ............................ 38,019
Capital in excess of par value ............................. 1,617,027
Accumulated deficit ....................................... (1,406,777)
----------
Total Stockholders Equity ................................ 248,269
----------
3,064,467
==========
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,
1997 1996
------------ ------------
REVENUES
Oil and Gas Sales ............................ $ 6,268 $ 7,394
------------ ------------
Total income ............................... 6,268 7,394
EXPENSES
Production costs ............................. 1,038 1,351
Depreciation and depletion ................... -- 1,276
Consulting ................................... -- 438
General and administrative ................... 32,618 27,055
------------ ------------
Total expenses ............................. 33,656 30,120
------------ ------------
Loss from operations ....................... (27,388) (22,726)
Other income
Interest income .............................. 1,008 1,463
Interest expense ............................. (2,053) --
Other ........................................ (1,551) --
------------ ------------
Total other income (loss) .................. (2,596) 1,463
------------ ------------
Net earnings ............................... $ (29,984) $ (21,263)
============ ============
Loss per common share ......................... $ (0.001) $ (0.001)
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ........................ 37,475,788 36,566,220
============ ============
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,
1997 1996
------------ ------------
REVENUES
Oil and Gas Sales ....................... $ 31,484 $ 16,808
Lease Income ............................ 13,655 --
Other operating income .................. 33,897 --
Interest in sale of
oil & gas property .................... -- 170,000
------------ ------------
79,036 186,808
EXPENSES
Production costs ........................ 7,048 108,647
Depreciation and depletion .............. 1,366 3,828
Consulting .............................. 1,414 6,438
General and administrative .............. 118,490 121,394
------------ ------------
Total expenses ........................ 128,318 240,307
------------ ------------
Loss from operations .................. (49,282) (53,499)
Other income
Interest income ......................... 40,462 5,412
Interest expense ........................ (3,929) --
Other ................................... (2,855) --
------------ ------------
Total other income .................... 33,678 5,412
------------ ------------
Net Loss .............................. $ (15,604) $ (48,087)
============ ============
Loss per common share .................... $ (0.001) $ (0.001)
============ ============
Weighted Average Number of Shares
Outstanding (Note 2) ................... 37,182,807 36,589,387
============ ============
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,
1997 1996
------------ ------------
Cash flows from operating activities
Cash received from customers ................. $ 103,782 $ 207,312
Cash paid to suppliers & employees ........... (138,490) (238,827)
Interest received ............................ 39,462 5,425
Interest paid ................................ (3,929) (13)
------------ ------------
Net cash provided (used) by
operating activities ..................... 825 (26,103)
Cash flows from investing activities
Acquisition of fixed assets .................. -- (1,520)
Acquisition of oil, gas
& mineral interests ........................ (76,783) (14,080)
------------ ------------
Net cash used by investing activities ...... (76,783) (15,600)
Cash Flows from Financing Activities
Net draw on line of credit ................... 35,000 --
Repayment of officer loan .................... (2,218) --
Sale of stock ................................ 10,000 --
Retirement of stock .......................... (746) (2,040)
------------ ------------
Net cash provided (used) by
financing activities .................... 42,036 (2,040)
------------ ------------
Net decrease in cash .......................... (33,922) (43,743)
Cash at beginning of period ................... 38,876 115,329
------------ ------------
Cash at end of period ......................... $ 4,954 $ 71,586
============ ============
Reconciliation of net loss
to cash flows provided (used)
by operating activities:
Net loss ...................................... $ (15,604) $ (48,087)
Adjustments
Depreciation, depletion and
amortization ............................... 1,366 3,828
Increase in prepaid expenses
and accounts receivable .................... (3,977) (3,238)
Increase in advances, accounts payable
and accrued liabilities .................... 19,040 21,394
------------ ------------
Net Cash provided (used)
by operating activities ...................... $ 825 $ (26,103)
============ ============
Noncash Investing or Financing Activities:
The Company was loaned $837,247 & $468,555 for the nine month periods ended
September 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
September 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The balance sheet at September 30, 1997, statements of operations and statements
of cash flows for the nine months ended September 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 nine months ended September
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 September 30, 1997 are as follows:
Proved developed properties (CO) ........ $ 14,779
Proved shut - in property (PNG) ......... 2,849,188
Accumulated depreciation, depletion,
amortization and valuation allowances .. (14,779)
-----------
Net capitalized costs ................... 2,849,188
===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
During the quarter ended September 30, 1997, oil and gas sales were $6,268,
compared to 7,394 for the same period in the prior year. The Company had no
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. Management anticipates that production from the Southeast Gobe Oil
and Gas Field will begin during March or April of 1998.
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.
The lessee of these properties is negotiating with the offset owner to start a
drilling program on these properties during 1998.
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. Chevron, the operator, has announced its intention to
commence drilling three additional wells on the unit by the end of 1997 or early
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 220 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 220 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 Barikiwa 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 valuation will be made
to more precisely define the true reserves of this field. A seismic program is
to commence on the Barikiwa anticline before the end of 1997. Results of this
program should help evaluate the potential reserves of the structure. Mountains
West Exploration, Inc. Cost of the program will be approximately $50,000.
Plans to build at least one LNG plant, probably on the north coast of Papua New
Guinea, has been announced and Chevron has announced plans to build a gas
pipeline from the Papua New Guinea into Northern Australia. Final contracts on
this program are scheduled to be finalized in mid 1998. Either an LNG plant or
the proposed pipeline should greatly increase the value of the gas reserves at
Baroque. 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 has reviewed the costs of this project and
anticipates that the Company's cost over the next year will be approximately
$70,000.
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 Partners
intend drilling an exploratory well on this license that will test the Wasuma
structure. Management now anticipates that the test well will be started near
during the first quarter of 1998, and that the Company's anticipated costs in
the well will be approximately $160,000.
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
have surrendered PPL 165 and have applied for a new Prospecting Permit License
covering the newly defined lands which include lands originally within the
boundaries of PPL 165. The Company has 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 parties are now waiting on final
approval by the government for the issuance of a new 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 six months away,
additional wells being drilled on the Southeast Gobe Oil Field 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 $22,248 decline in cash through the first nine
months of the current fiscal year due to the ongoing operating expenses of the
Company. The Company's total debt increased $370,232 during the quarter as a
result of additional expenses of exploration being paid by the Company's
partners. 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
$109,347. 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.
During the first nine 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-B
(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. November 10, 1997
- --------------------------------------------------------
Robert A. Doak, Jr. President, Chief Executive Officer
and Chief Financial Officer
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