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, 1998
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)
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 receding 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, 1998, was 38,019,270 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED BALANCE SHEET
UNAUDITED
September 30, 1998
ASSETS
Current Assets
Cash .................................................... $ 1,927
Due from officer ........................................ 899
Accrued interest receivable ............................. 12,024
-----------
Total current assets ...................................... 14,850
-----------
Furniture and Equipment
Office furniture and equipment, at cost ................ 14,470
Less accumulated depreciation ........................ (11,697)
-----------
Net furniture and equipment ............................ 2,773
-----------
Oil and gas properties, using the successful
efforts method ............................................ 4,596,441
Less accumulated depreciation,
depletion and amortization ............................ (14,779)
-----------
Net oil and gas properties ............................. 4,581,662
-----------
Term deposit account - restricted ......................... 53,140
Note receivable, officer .................................. 100,000
Investment in partnership ................................. 15,000
Mineral interest .......................................... 50,683
-----------
Total other assets ........................................ 218,823
-----------
Total assets ............................................... $ 4,818,108
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ........................................ $ 16,002
Accrued payroll and related taxes ....................... 44,964
Due to affiliates ....................................... 4,249,016
Due to officer .......................................... 28,259
Note payable ............................................ 35,000
-----------
Total Current Liabilities ................................. 4,373,241
-----------
Shareholder's Equity
Common Stock, $.001 par value, authorized:
50,000,00 shares, issued 38,103,770 shares;
outstanding 38,019,270 shares ............................ 38,020
Capital in excess of par value ............................ 1,617,757
Accumulated deficit ...................................... (1,210,910)
-----------
Total Stockholders Equity .................................. 444,867
-----------
Total Liabilities and Stockholders Equity ................... $ 4,818,108
===========
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
----------- -----------
REVENUES
Oil and Gas Sales ......................... $ 94,996 $ 6,268
----------- -----------
94,996 6,268
----------- -----------
EXPENSES
Production costs .......................... 1,138 1,038
Depreciation and depletion ................ 350 --
Consulting ................................ 6,517 --
General and administrative ................ 35,276 32,618
----------- -----------
Total expenses ............................. 43,281 33,656
----------- -----------
Income (loss) from operations .............. 51,715 (27,388)
Other income
Interest income ........................... 1,115 1,008
Interest expense .......................... (245) (2,053)
Other ..................................... (55) (1,551)
----------- -----------
Total other income (loss) .................. 815 (2,596)
----------- -----------
Net earnings (loss) ........................ $ 52,530 $ (29,984)
=========== ===========
Earnings (loss) per common share: .......... $ 0.001 $ (0.001)
=========== ===========
Weighted Average Number of Shares
Outstanding (Note 2) ..................... 38,019,270 37,475,788
=========== ===========
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
------------ ------------
REVENUES
Oil and Gas Sales ....................... $ 223,030 $ 31,484
Other operating income .................. -- 33,897
Lease Income ............................ -- 13,655
------------ ------------
223,030 79,036
------------ ------------
EXPENSES
Production costs ........................ 2,894 7,048
Exploration costs ....................... -- --
Depreciation and depletion .............. 1,205 1,366
Consulting .............................. 7,231 1,414
General and administrative .............. 116,363 118,490
------------ ------------
Total expenses ........................... 127,693 128,318
------------ ------------
Income (Loss) from operations ............ 95,337 (49,282)
Other income
Interest income ......................... 2,419 40,462
Interest expense ........................ (3,461) (3,929)
Other ................................... (352) (2,855)
------------ ------------
Total other income (loss) ................ (1,394) 33,678
------------ ------------
Net earnings (loss) ...................... $ 93,943 $ (15,604)
============ ============
Earnings (loss) per common share: ........ $ 0.002 $ (0.001)
============ ============
Weighted Average Number of Shares
Outstanding (Note 2): ................. 38,019,270 37,182,807
============ ============
MOUNTAINS WEST EXPLORATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
--------- ---------
Cash Flows from Operating Activities
Cash received from customers ................... $ 401,333 $ 103,782
Cash paid to suppliers & employees ............. (164,458) (138,490)
Interest received .............................. 1,419 39,462
Interest paid .................................. (3,462) (3,929)
--------- ---------
Net cash provided by operating activities ....... 234,832 825
--------- ---------
Cash Flows from Investing Activities
Acquisition of office equipment ................ (2,000) --
Acquisition of oil, gas & mineral interests .... (43,450) (76,783)
--------- ---------
Net cash used by investing activities ........... (45,450) (76,783)
--------- ---------
Cash Flows from Financing Activities
Net draw on line of credit ..................... -- 35,000
Purchase of term deposits ...................... (98) --
Repayments to affiliates ....................... (206,928) --
Proceeds (Repayment) of officer loans .......... 16,828 (2,218)
Purchase of Treasury Stock ..................... -- 10,000
Retirement of stock ............................ (746)
--------- ---------
Net cash (used) provided by financing activities (190,198) 42,036
--------- ---------
Net decrease in cash ............................ (816) (33,922)
Cash at beginning of period ..................... 2,743 38,876
--------- ---------
Cash at end of period ........................... $ 1,927 $ 4,954
========= =========
Reconciliation of Net income (loss) to Cash Provided by Operating Activities:
Net earnings (Loss) ............................ $ 93,943 $ (15,604)
Adjustments
Depreciation, depletion and amortization ...... 1,205 1,366
Decrease (increase) in prepaid expenses
and accounts receivable ..................... 175,976 (3,977)
Increase (decrease) in advances, accounts
payable and accrued liabilities ............. (36,292) 19,040
--------- ---------
Net Cash provided by operating activities ...... $ 234,832 $ 825
========= =========
Noncash Investing or Financing Activities:
Note issued in exchange for investment in
oil and gas property in Papua, New Guinea: .... $ 566,073 $ 837,247
MOUNTAINS WEST EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
The balance sheet at September 30, 1998, statements of operations for the nine
and three month periods ended September 30, 1998 and statements and the
statement of cash flows for the nine month period ended September 30, 1998, 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, 1997. The results of operations for the nine and three month
periods ended September 30, 1998 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, 1998 are as follows:
Proved developed properties . $ 14,779
Proved property ............. 4,581,662
Accumulated depreciation,
depletion, amortization and
valuation allowances ...... (14,779)
-----------
Net capitalized costs ....... $ 4,581,662
===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
During the three months ended September 30, 1998, oil and gas sales were
$128,034 compared to $31,484 for the same period in the prior year. The Company
had no other operating income during the quarter. The increase in sales is due
to production on oil and gas interests that the Company holds in Papua, New
Guinea (See "Papua New Guinea" below). Other interest held by the Company in the
Denver Basin of Colorado have almost reached their economic limit. A
redetermination of the interests in the coal bed methane unit in Las Animas
County, Colorado where the company has an interest in two gas wells has caused a
decline in monthly revenues to the Company. Although the monthly sales revenue
has decreased, the production lives of these wells will be extended and should
be beneficial to the Company over the life of the wells (See "Colorado" below).
The long awaited production from the SE Gobe oil field in Papua New guinea
commenced in April, 1998. All of the Company's revenue from that license will be
devoted to repaying the Company's debts to its partners for its share of the
costs of establishing the production, which at September 30, 1998 was
approximately $4,249,000. The debt reduction caused by this revenue stream
should greatly increase the stockholders' equity position of the Company.
Management anticipates that the production from the license will increase as
will the Company's share of the revenue from the production (See "Papua New
Guinea" below).
The Company owns interests in the following properties:
Colorado
The Company owns over 2400 acres of minerals in Las Animas county, Colorado. The
two coal bed methane gas wells discussed above are located on 240 acres of these
minerals. The Company is currently considering developing these minerals itself
as funds become available.
Papua New Guinea
At the time production commenced from the property, the Company became obligated
to pay its share of all capital development costs incurred on any license in
which it holds an interest. As of the date of this report the Company was in
default in regard to approximately $129,000 of cash calls related to these
interests.
a. The three oil wells in which the Company has an interest have been included
in Petroleum Development License (PDL) 3. As stated earlier these oil wells
commenced production on the 17th of April, 1998. The three wells initially
produced about 12,000 barrels per day and generated revenue to the Company of
approximately $207,000 between April 17, 1998 and September 30, 1998. Production
has increased daily and the SE Gobe oil field is producing 20,000 barrels per
day as of the end of September, 1998. These wells and certain other lands
included within PDL#3 have been unitized with Chevron Oil Company's existing PDL
#4 to the north. These two partial PDLs are being developed as the Southeast
Gobe Oil Field. 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, is a net 0.8718% 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 were carried until the first production from PDL
3 was sold. The operator of the field, Chevron, was able to put the Gobe Main
field and the SE Gobe field on production approximately two months ahead of
schedule and approximately $50,000,000 under budget. The costs of getting the
oil from the unit to sale has been estimated at more than $175,000,000, none of
which was payable by the Company until after the first sale of production. All
of the money realized from the sale of the oil is being devoted to repayment of
the carried cost of the project. Management estimates at the production rate of
200 barrels per day at a price of $20 per barrel to the Company's interest will
take approximately thirty six months to pay out after production begins. Because
of the recent depressed world price for oil the payout may well be substantially
longer than anticipated.
b. PPL 189 contains approximately 480,000 acres (24,245 net to the Company's
interest). As a result of reallocation of interests, the Company's interest in
this License is 5.051%. This license has the Barikiwa shut-in gas field located
on it. The Barikiwa field 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 in Papua, New Guinea have 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 Barikiwa. The Company will have to fund its
5.051% share 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 during the current year. The operator, Santos,
has recently completed a seismic program over the Barikiwa Gas field.
The seismic records are now being processed and the Company is awaiting the
results. As production has commenced on the SE Gobe field, the Company will now
have to pay its full share in future development of the license.
c. PPL 190 contains approximately 460,000 acres (17,309 net to the Company's
interest) has many very prospective surface structures located on it. A seismic
line was run over the Masaka structure during 1997 with positive results. It is
anticipated that the Masaka structures will be drilled during 1998, however, a
landowner dispute has slowed progress and a definite date for the commencement
of drilling is not known at this time. A reallocation of interests has increased
the Company's interest in this license to 3.763%. As production has commenced on
the SE Gobe field, the company must fund its share of a new seismic program
which is estimated to cost approximately $1,000,000. The manager of the joint
venture will issue cash calls to each partner, who will each then pay the amount
of the stated cash call. 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 five years. Management estimates that the Company's cost in this
new concession over the next year will be approximately $200,000.
d. PPL 203 (previously PPL 165) - Oil Search Ltd, is the operator with an 85%
ownership interest in the license. Gedd, Inc. owns 10% while the Company owns a
5% carried interest until a well is commenced on the property. A new work
program of seismic and surface mapping is to commence during the current year.
Under the terms of the contract with the Operator, the Company has a carried
interest in the two year work program and will not have to pay any of the costs
until commencement of the first well of production at which time the Company
will pay its 5% share.
As stated, the Company faces cash calls on each of the licenses in which it has
interests, while the bulk of its revenue will be devoted to paying debt incurred
over the past two decades while production was being established on PDL#3. The
Company must find the funds to meet the cash calls through the sale of stock,
borrowings or sale of interests in its properties. No specific source of the
required funds is known at the time of this report. As of the date of this
report the Company was in default in regard to approximately $129,000 of cash
calls related to these interests.
The Company does not presently have the liquidity that is necessary to meet the
aforementioned calls for payment of expenses and the Company has no present
assurance of the availability of any of the funds that may be needed to cure its
current default or meet future cash requirements. The failure of the Company to
cure the default and meet any future 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 continued to experience a decline in cash
position due to the ongoing operating expenses of the Company. The Company's
total debt increased by $156,381 during the quarter as a result of exploration
activities in Papua, New Guinea being funded by its 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 $124,224. It is Management's
belief that the Company will be able to secure financing sufficient to cure its
default on the cash calls discussed above and will continue to meet its
financial commitments during the remainder of the 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 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. November 12, 1998
- --------------------------------------------------------
Robert A. Doak, Jr. President, Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1927
<SECURITIES> 0
<RECEIVABLES> 12923
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14850
<PP&E> 14470
<DEPRECIATION> 11697
<TOTAL-ASSETS> 4818108
<CURRENT-LIABILITIES> 4373241
<BONDS> 0
0
0
<COMMON> 38020
<OTHER-SE> 406847
<TOTAL-LIABILITY-AND-EQUITY> 4818108
<SALES> 223030
<TOTAL-REVENUES> 223030
<CGS> 2894
<TOTAL-COSTS> 2894
<OTHER-EXPENSES> 124799
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3461
<INCOME-PRETAX> 93943
<INCOME-TAX> 0
<INCOME-CONTINUING> 93943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93943
<EPS-PRIMARY> .002
<EPS-DILUTED> .002
</TABLE>
