U. S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q-SB
(MARK ONE)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO_______
Commission File Number 0-9494
ASPEN EXPLORATION CORPORATION
Delaware 84-0811316
(State or other jurisdiction of (IRS Employer
incorporation or organization) I.D. Number)
2050 S. Oneida Street, Suite 208, Denver, Colorado, 80224
(Address of Principal Executive Offices) (Zip Code)
(303) 639-9860
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at February 1, 1996
Common stock,
$.005 par value 4,271,322
<PAGE>
Part One. FINANCIAL INFORMATION
Item 1. Financial Statements
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1995
---------- ----------
(Unaudited) (Audited)
Assets
Current assets:
Cash and equivalents................ $ 453,963 $ 116,891
Precious metals..................... 471,059 718,388
Accounts receivable................. 28,478 30,997
Prepaid expenses and other.......... 8,654 4,651
---------- ----------
Total current assets.............. 962,154 870,927
---------- ----------
Investment in oil and gas properties,
at cost (full cost method of
accounting)......................... 1,388,830 1,031,693
Less accumulated depreciation,
depletion, amortization and
valuation allowance............... (784,497) (760,874)
---------- ----------
Net oil and gas properties........ 604,333 270,819
---------- ----------
Property and equipment, at cost:
Furniture, fixtures and vehicles.... 136,581 135,147
Less accumulated depreciation and
amortization...................... (110,228) (104,348)
---------- ----------
Net property and equipment........ 26,353 30,799
---------- ----------
Undeveloped mining properties, at cost
less reserve for impairment of
$193,495............................ 18,987 11,633
---------- ----------
Organization cost - Aspen Recursos de
Mexico (Note 4)..................... 26,860 29,187
---------- ----------
Cash Surrender Value, life insurance.. 157,794 129,627
---------- ----------
TOTAL ASSETS...................... $1,796,481 $1,342,992
========== ==========
(Statement Continues)
See notes to Consolidated Financial Statements
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
December 31, June 30,
1995 1995
---------- ----------
(Unaudited) (Audited)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable & accrued expenses. $ 210,272 $ 88,121
Advances from joint owners.......... 267,269 -0-
Severance taxes payable (Note 6).... 30,680 83,419
Due to related parties.............. 9,207 9,207
---------- ----------
Total liabilities..................... 517,428 180,747
---------- ----------
Stockholders' equity:
Common stock, $.005 par value:
Authorized: 50,000,000 shares
Issued: At December 31, 1995:
4,374,922 and 4,297,922 at June
30, 1995....................... 21,489 21,489
Outstanding: At December 31, 1995
4,271,322 and 4,194,322 at
June 30, 1995..................
Capital in excess of par value...... 5,640,323 5,640,323
Accumulated deficit................. (4,336,005) (4,452,813)
---------- ----------
1,325,807 1,208,999
Less common stock in treasury,
at cost: 103,600 shares ........ (46,754) (46,754)
---------- ----------
Total stockholders' equity.......... 1,279,053 1,162,245
---------- ----------
Total liabilities and stockholders'
equity................................ $1,796,481 $1,342,992
========== ==========
The accompanying notes are an integral
part of these statements.
<PAGE>
<TABLE>
<CAPTION>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Revenues: ----------- ----------- ----------- -----------
Oil and gas .................. $ 95,928 $ 84,523 $ 195,277 $ 182,233
Mineral .................... -0- 277,250 246,589 522,575
Alaska mining tax
exemption (Note 6) ........ -0- -0- 45,000 -0-
Interest and other, net .... (823) 482 5,445 605
----------- ----------- ----------- -----------
Total Revenues ............... 95,105 362,255 492,311 705,413
----------- ----------- ----------- -----------
Costs and expenses:
Oil & gas production ....... 13,839 58,203 20,885 146,371
Loss on sale of
precious metals ........... 36,552 7,359 46,316 20,926
Depreciation, depletion
and amortization .......... 24,979 21,300 32,479 44,000
Selling, general and
administrative ............ 118,369 141,179 275,823 312,797
----------- ----------- ----------- -----------
Total Costs & Expenses ....... 193,739 228,041 375,503 524,094
----------- ----------- ----------- -----------
NET INCOME ................... $ (98,634) $ 134,214 $ 116,808 $ 181,319
=========== =========== =========== ===========
Net Income per share ......... $ (.02) .03 $ .03 .04
=========== =========== =========== ===========
Weighted average number of
common shares outstanding ... 4,271,322 4,194,274 4,271,322 4,194,274
=========== =========== =========== ===========
The accompanying notes are an integral
part of these statements.
</TABLE>
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended December 31,
1995 1994
--------- --------
Cash flows from operating activities:
Net income............................ $116,808 $ 181,319
Adjustments to reconcile net income
to net cash provided by operating
activities:
Proceeds from sale of precious metals. 447,602 359,077
Depreciation, depletion & amortization 32,479 44,018
Loss on sale of precious metals....... 46,316 20,926
Receipt of precious metals............ (246,589) (522,575)
Decrease in accounts receivable....... 2,519 22,143
Increase in prepaid expenses.......... (4,003) (5,833)
Increase (Decrease) in accounts
payable and accrued expenses........ 169,981 (20,347)
Abandonment of mining properties...... -0- 10,835
Increase in payable to related parties -0- 5,066
--------- --------
Net cash provided by operating
activities.......................... 565,113 94,629
--------- --------
(Statement Continues)
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
Six months ended December 31,
1995 1994
--------- ---------
Cash flows from investing activities:
Additions to undeveloped mining
properties......................... (7,354) -0-
Purchase of oil & gas properties..... (190,437) (1,172)
Investment in foreign subsidiaries
"Aspen Recursos de Mexico"......... (649) (21,882)
Additions to office equipment and
vehicles........................... (1,434) (114)
Additions to cash surrender value.... (28,167) (25,870)
--------- --------
Net cash used in investing activities (228,041) (49,038)
--------- --------
Net (decrease) increase in cash...... 337,072 45,591
--------- --------
Cash and cash equivalents,
at beginning of period............. 116,891 46,042
Cash and cash equivalents,
at end of period................... $ 453,963 $ 91,633
========= ========
Non cash transactions................ $ 166,700 $ -0-
========= ========
The accompanying notes are an integral
part of these statements.
<PAGE>
ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1995
Note 1 - Basis of Presentation
The accompanying unaudited, consolidated financial statements have been prepared
in accordance with Item 310 of Regulation S-B and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
six months ended December 31, 1995 are not necessarily indicative of the results
that may be expected for the fiscal year ending June 30, 1996. These statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in Form 10-K-SB for the fiscal year ended June 30, 1995,
which is available without cost from Aspen Exploration Corporation upon request.
Note 2 - Net Income (Loss) per Common Share
Net income (loss) per common share is based on the weighted average number of
shares of common stock outstanding during the period.
Note 3 - Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", as of July 1, 1993. There was no material
cumulative effect of this change in accounting for income taxes as of July 1,
1993. At December 31, 1995 the Company had Net Operating Loss ("NOL")
carry-forward for tax purposes of approximately $4,618,444 (expiring in the
years 1996 to 2008). In addition, the Company had tax credit carry-forward of
approximately $36,000 (expiring in the years 1996 to 2001).
Deferred tax assets (liabilities) at December 31, 1995 are as follows:
Gross Deferred Tax Assets:
Net operating loss carry-forward.. $1,570,270
Valuation allowance for deferred
tax assets..................... (1,559,382)
----------
Net Deferred Tax Asset 10,888
----------
<PAGE>
Note 3 - Income Taxes (Continued)
Gross Deferred Tax Liabilities:
Depreciation and other property,
plant and equipment basis
differences..................... (10,888)
---------
Net Deferred Tax Asset (Liabilities) $ -0-
=========
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year end. Deferred income tax assets are
recorded to reflect the tax consequences on future years of income tax
carry-forward benefits, reduced by benefit amounts not expected to be realized
by the Company.
The components of income tax expenses for the six months ended December 31, 1995
are as follows:
Current $ 26,275
Benefits of income
tax carry-forward (26,275)
Deferred -0-
---------
Income tax expense $ -0-
---------
The effective income tax rate applicable to the current provision before
applying the tax carry-forward benefit was 24%.
Note 4 - Organization Costs
During the first quarter, ended September 30, 1994, the Company formed a
subsidiary (Aspen Recursos de Mexico, S.A. de C.V.) which is qualified to do
business in Mexico, so that the Company can pursue management's decision to
investigate and acquire interests in mineral prospects in Mexico. During the
quarter ended September 30, 1995, the Company began amortizing its costs to
organize its subsidiary and will continue to do so over the next 60 months. As
of December 31, 1995, the subsidiary was pursuing but had not acquired any
properties in Mexico.
Note 5 - Oil and Gas Properties
The North Strand #1 well located in Kern County, California was spudded
(drilling commenced) on August 15, 1995. The total depth of 10,000' was reached
on August 24, 1995. The mud log recorded oil and gas shows while drilling from
two intervals located at depths below the surface of approximately 9175' and
9700'. A full suite of electric logs was obtained from 1,100' to 10,000'.
<PAGE>
Note 5 - Oil and Gas Properties (Continued)
Sidewall core samples were also taken across the potential zones of interest.
After careful analysis of the mud logs, electric logs, and sidewall cores by the
Company, an independent geologist, an independent log analyst, and a sidewall
core specialist, the decision was made to install and cement production casing
and attempt to complete the well as an oil and gas producer.
Completion operations commenced on the North Strand #1 well on September 24,
1995. The lower Stevens interval was perforated from 9706' to 9715'. This zone
was swab tested for 10 hours and recovered 109 barrels of fluid (31 barrels of
high quality oil and 78 barrels of water). This equates to a daily rate of 75
barrels of oil per day (BOPD) and 187 barrels of water per day (BWPD). This zone
was then isolated and the upper Stevens interval was perforated from 9148' to
9150' and 9160' to 9166'. The swab test on this zone yielded very high flow
rates of approximately 500 barrels of fluid per day (BFPD), the oil cuts
averaged 12.5%. The well flowed for brief periods from this zone. Both zones
were then tested together at flow rates of 350 BFPD and an oil cut of 8.5%. The
completion rig was released on October 6, 1995.
The Company elected to pump test this well to further evaluate its potential as
an economic producing oil well. The well was pump tested from the lower Stevens
interval (9706' to 9715') only since this zone had a more favorable oil cut than
the upper zone. During 31 days of production which commenced on December 23,
1995 and ended on January 26, 1996 (with 4 days of down time due to a pump
change), the well produced 303 barrels of oil and 5,945 barrels of water. This
is an average of 10 BOPD and 192 BWPD (5% oil cut) which is an uneconomic rate.
The well is currently shut-in as the new geological and geophysical information
is being evaluated to determine if a second well should be drilled on the North
Strand 700+ acre leasehold.
The Company has a 10% working interest in the well and an estimated capital
investment at December 31, 1995 of approximately $95,000.
The Grey Wolf #1 well located in Kern County, California was spudded (drilling
commenced) on October 10, 1995. The total depth of 4200' was reached on October
20, 1995. The mud log recorded gas shows while drilling from 3698' to 3708',
3715' to 3717', 3970' to 3973', and 4096' to 4098'. A full suite of electric
logs was run from 450' to 4200'. After careful analysis of the mud logs and
electric logs, production casing was cemented in the hole and the well was
perforated from 3698' to 3708' and 3714' to 3717'.
<PAGE>
Note 5 - Oil and Gas Properties (Continued)
The well was flow tested on a 1/4" positive choke for a 10 day period in an
effort to determine if the stabilized production rate was sufficient to justify
the expense of surface and pipeline facilities. At the end of the flow period,
the well was producing approximately 300 MCFPD of high quality (1054 BTU) gas.
The well was then shut in for a pressure build up to determine if the post
production shut-in pressure would return to the initial shut-in pressure of
1400#. The current pressure in the well is 1115# and still slowly increasing.
The Company has an 18% working interest in the well and an actual capital
investment at December 31, 1995 of approximately $108,000. The Company may spend
an additional $10,000 depending on whether the well is completed as a producer
or plugged and abandoned.
The Company entered into a purchase and sale agreement with Capitol Oil
Corporation, an unaffiliated third party, to purchase all of Capitol's interest
in certain producing properties for cash. This agreement was signed on November
9, 1995, effective November 1, 1995. Closing of the purchase and sale agreement
was on January 10, 1996. The acquired production consists of two producing oil
wells, one gas well, waiting on pipeline connection, and two shut-in wells that
will be plugged and abandoned or converted to salt water disposal wells. The
acquisition is located in Kern County, California. The Company has been
designated operator of the properties.
The total purchase price of the acquired properties was $925,000, of which the
Company has 20% of the working interest acquired, for $185,000.
Based on an engineering estimate prepared by the Company's in-house staff, net
oil reserves acquired by the Company were calculated to be approximately 18,800
barrels of proved producing reserves and 37,800 BOE (barrels oil equivalent) of
proved behind pipe reserves. All behind pipe zones are scheduled to commence
production after depletion of the current producing zone in each well. In
addition to the proved producing and proved behind pipe zones, there also exists
approximately 680 acres which contain several high quality drilling locations.
Capitol held these producing properties and the equipment thereon for the
exploration and production of oil and gas for the revenues derived thereof. The
Company intends to hold these properties and use them for the same purpose.
Note 6 - Mining Properties
During January, 1995, the Company received notice from the State of Alaska
Department of Revenue for unpaid License Tax on Royalties from Mines and Mining
("License Taxes") for the years 1991 through 1993. Pending the outcome of the
Company's petition seeking relief from these taxes, the Company recorded, as
of June 30, 1995, a liability of $45,000, which approximates the amount of
taxes due under the second phase of the Valdez Creek operations.
<PAGE>
Note 6 - Mining Properties (Continued)
On October 30, 1995 the Alaska Department of Revenue notified the Company that
the Department of Natural Resources had issued Certificates of Initial
Production to the Department of Revenue. The Department of Revenue further
stated that no taxes were due for the period 1991 through September 30, 1995.
Accordingly, the $45,000 liability has been reversed and shown as income from
mining tax exemptions in the current period.
Note 7 - Disclosure of Certain Significant Risks and Uncertainties
Nature of Operations
Aspen Exploration Corporation (hereinafter "the Company") was incorporated under
the laws of the State of Delaware on February 28, 1980 for the primary purpose
of acquiring, exploring and developing oil and gas and other mineral properties.
The consolidated financial statements include the Company and its wholly-owned
subsidiaries, Aspen Gold Mining Company, formerly Aspen Gold Refining
Corporation, and Aspen Recursos de Mexico. Aspen Gold Mining Company is
currently inactive and Aspen Recursos de Mexico operations to date have
consisted of its organization and geological investigation of certain areas in
Mexico.
During fiscal 1995, the Company continued its operation of various producing oil
and gas properties. During fiscal 1995, the Company formed a subsidiary (Aspen
Recursos de Mexico, S.A. de C.V.), which is qualified to do business in Mexico,
so that the Company may pursue management's recommendation of investigating and
acquiring interests in mineral prospects in Mexico and Central America. The
Company also continued efforts initiated in earlier years to pursue its interest
in mineral projects in Russia.
The Company owns leasehold or royalty interests in producing oil and gas
properties in California, Colorado, Michigan, Montana, North Dakota, Oklahoma,
Texas and Wyoming, and leasehold and royalty interests in mining properties in
Alaska.
The Company engages in a broad range of activities associated with the oil and
gas business in an effort to develop oil and gas reserves. The Company's primary
areas of interest are in the states of California, Montana, North Dakota, Texas
and Wyoming.
During the last few fiscal years, the Company's major emphasis has been on
production from its oil and gas properties. During the six-months ended December
31, 1995, the Company participated in the drilling of one oil well and one gas
well, as well as the acquisition of two producing properties, all located in
Kern County, California. During fiscal 1995, the Company sold a major portion of
its production in Montana, North Dakota and Texas.
<PAGE>
Note 7 - Disclosure of Certain Significant Risks and Uncertainties
(Continued)
In the minerals portion of the Company's business, the Company continued its
ongoing search for possible acquisition and exploration of undeveloped mining
properties in Alaska, seeking precious metals, primarily gold, but no Alaska
properties were acquired during the current, or the previous, fiscal year.
Continuing efforts are made to interest other companies in developing properties
with the Company.
Use of Estimates
Reserve calculations by independent petroleum engineers involve the estimation
of future net recoverable reserves of oil and gas and the timing and amount of
future net revenues to be received therefrom. Those estimates are based on
numerous factors, many of which are variable and uncertain. Reserve estimators
are required to make numerous judgments based upon professional training,
experience and educational background. The extent and significance of the
judgments in themselves are sufficient to render reserve estimates inherently
imprecise. Since reserve determinations involve estimates of future events,
actual production, revenues and operating expenses may not occur as estimated.
Accordingly, it is common for the actual production and revenues later received
to vary from earlier estimates. Estimates made in the first few years of
production from a property are generally not as reliable as later estimates
based on a longer production history. Reserve estimates based upon volummetric
analysis are inherently less reliable than those based on lengthy production
history. Also, potentially productive gas wells may not generate revenue
immediately due to lack of pipeline connections and potential development wells
may have to be abandoned due to unsuccessful completion techniques. Hence,
reserve estimates may vary from year to year.
Concentration of Customers
In the oil and gas segment of the Company's business, two purchasers in the six
months ended December 31, 1995 and two purchasers in fiscal 1995 represented
sales in excess of 10% of the Company's total oil and gas revenues. The
availability of oil and gas purchasers is such, however, that any buyer
discontinuing purchases from the Company could almost assuredly be replaced by
another buyer. In the mineral segment of the Company's business, in-kind
royalties paid by Cambior USA (operator of the Valdez Creek mining property),
represented 100% of the Company's total mineral revenues for the fiscal year
ended June 30, 1995 and the six months ended December 31, 1995. The termination
by Valdez Creek Mining Company of its mining operations will have a material
adverse effect on the Company's business. Cambior, the operator of the Valdez
Creek mining property, notified the Company that it ceased mining operations
effective June 30, 1995. Gold processing, however, continued through September,
1995. The surface area of the mine will be restored by the fall of 1996, and
Cambior will reassign all its interest in the mining claims to the Company. The
Company is currently evaluating the possibility of continued mining operations
on the property, but has made no decision to do so.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As reflected on the balance sheet and statement of cash flows, cash and
equivalents increased by $337,072 from $116,891 at June 30, 1995 to $453,963 at
December 31, 1995. The increase in cash and cash equivalents for the six-month
period ended December 31, 1995 was caused by: (1) the sale of gold from
inventory in late December, prior to its actual need by Registrant and (2) the
receipt of funds from third party investors for the acquisition of producing oil
and gas properties in Kern County, California. Cash and equivalents increased by
$45,591 from $46,042 to $91,633 for the same period a year earlier. The net cash
provided by operations for the six-month period ended December 31, 1995 was
$565,113 and the net cash provided by operations for the six-month period ended
December 31, 1994 was $94,629. Had Registrant received cash rather than in-kind
gold royalties, cash flow from operating activities would have been $811,702 for
the six-month period ended December 31, 1995 as compared to $617,204 for the
six-month period ended December 31, 1994, or an increase of 31.5% for the six
months ended December 31, 1995.
While it is true that cash and cash equivalents increased as stated, "working
capital" decreased during the six-month period by about $240,000 (more than
33%). The two principal reasons for the increase in cash and cash equivalents
were the sale of gold and the significant ($335,000) increase in accounts
payable -- only about 2/3rds of which is due to the cash received from third
party investors. Accounts payable during the period increased by about $130,000
(more than doubling the June 30, 1995 number).
Precious metals inventory decreased by approximately $235,000, and this is
indicative of the sale of gold to finance operations. In the past, Registrant
could anticipate further production from Valdez Creek operations to restore
inventory. That production has been terminated and Registrant cannot anticipate
any further production under the terms of the existing agreement.
<PAGE>
Net cash used by investing activities for the six-month period ended December
31, 1995 totaled $228,041, primarily from the drilling of two wells and the
acquisition of five wells in Kern County, California. Working capital decreased
$245,454 from $690,180 at June 30, 1995 to $444,726 at December 31, 1995, a
35.6% decrease. This decrease in working capital at December 31, 1995 is due
primarily to an increase in accounts payable from the Kern County acquisition
and a decrease in Registrant's gold inventory due to sales to meet Registrant's
current operating commitments. Current liabilities increased $336,681 from
$180,747 at June 30, 1995 to $517,428 at December 31, 1995, a 186% increase.
This increase was due to the receipt of $267,269 in advances from joint owners
and the recording of a payable of $166,700 for the Registrant's share of the
Kern County acquisition. The reduction of severance taxes and other payables by
$97,000 partially offset these amounts. Included in working capital at December
31, 1995, is $471,059 of precious metals, primarily gold. As Registrant's
precious metals are carried at the lower of cost or market, fluctuations in
market prices for precious metals will affect the carrying amount of
Registrant's precious metals and, accordingly, Registrant's working capital. At
December 31, 1995, the market value of precious metals in inventory was $477,654
which exceeded the total book value reflected on the balance sheet ($471,059).
Therefore, no writedown of the gold inventory was necessary at December 31,
1995.
Although Registrant achieved a positive cash flow from operations, that was due
primarily to the sales of gold and the increase in accounts payable as reflected
on the statement of cash flows. Registrant recognized a negative cash flow from
investing activities, primarily as a result of its purchase of oil and gas
properties. Sales of gold are expected to continue to provide a source of
capital to Registrant through the end of the current fiscal year, but Registrant
will have to develop other sources of revenues and financing to finance
operations in the future.
During the three-month period ended September 30, 1995, Cambior Alaska
("Cambior") continued mining operations on properties where Registrant owns
various mineral royalty interests. During the three-month period, Registrant
received approximately 748 troy ounces of raw gold from Cambior, valued at
$246,589. As Registrant's Valdez properties are carried at zero-dollar value on
the balance sheet, Registrant has no direct costs associated with in-kind
royalties. Registrant has been advised by Cambior that in-kind gold royalty
payments to Registrant terminated September 30, 1995 at which time Cambior
ceased operations on the Valdez Creek properties, except for continuing
reclamation requirements. Upon completion of mining restoration, Cambior will
reassign the Valdez Creek mining claims to Registrant. Registrant is
investigating the geology of both lode and placer gold deposits at Valdez Creek
and studies of remaining gold resources are being undertaken.
<PAGE>
Registrant anticipates that production from its oil and gas properties and sales
of its in-kind gold royalties currently held in inventory will provide adequate
liquidity for the near term future. However, should Registrant fail to replace
the oil and gas reserves sold during fiscal 1995 and gold production that ceased
in September, 1995, Registrant would likely experience difficulty meeting its
financial commitments beyond the fiscal period ending June 30, 1997.
Results of Operations
Registrant's operations for the six-month period ended December 31, 1995
continued to be focused on the production of oil and gas, and the investigation
for possible acquisition of properties prospective for precious metals. In
addition, Registrant continued to receive in-kind gold royalties through
September 30, 1995 from its Valdez Creek, Alaska properties, and drilled two
wildcat wells in Kern County, California. Registrant also acquired working
interests in two producing oil and gas properties in Kern County, California
effective November 1, 1995.
Precious metals income were $-0- and $246,589 for the three and six months ended
December 31, 1995 compared to $277,250 and $522,575 for the three- and six-month
periods a year earlier. This decline in precious metals revenue is due to the
cessation of operations at the Valdez Creek Mine and Registrant's receipt of
in-kind gold shipments ceased, effective September 30, 1995.
The three-month result of operations, a loss of approximately $98,000, compared
to net income of $117,000 for the six-month period is indicative of the negative
impact the closing of the Valdez Creek Mine has had on Registrant. These results
will likely continue for the near term unless Registrant can replace its lost
gold production.
Oil and gas revenues increased $11,405 for the three-month period ended December
31, 1995 from $84,523 at December 31, 1994 to $95,928 at December 31, 1995, a
13.5% increase. For the six months ended December 31, 1995, oil and gas revenues
increased $13,044 from $182,233 at December 31, 1994 to $195,277 at December 31,
1995, a 7.2% increase. This increase was due to an increase in promotional fees
and administrative overhead fees of $41,100 and $23,267 for the three months
ended December 31, 1995 and $93,600 in promotional fees and $49,036 in
administrative overhead fees for the six-month period ended December 31, 1995
charged to participants to acquire and drill the North Strand #1 and the Grey
Wolf #1 wells in Kern County, California. This increase was almost entirely
offset by a reduction in oil and gas revenue and administrative fees received by
Registrant on producing properties sold in the fourth quarter of fiscal year
ended June 30, 1995.
Oil and gas production costs decreased by $44,364 and $125,486 to $13,839 and
$20,885 for the three- and six-month periods ended December 31, 1995. This is a
decrease of 76.2% and 85.7%, respectively. Substantially all of this decrease
was the result of Registrant's sale of high cost, poorly performing oil and gas
producing properties during the fourth quarter of fiscal 1995.
<PAGE>
Depreciation, depletion and amortization expense of $24,979 and $32,479 for the
three- and six-month periods ended December 31, 1995 represent an increase of
$3,679 and a decrease of $11,521 for the three- and six-months ended December
31, 1995. The increase in depletion for the three months ended December 31, 1995
represents an increase in the asset base from the acquisition of properties
effective November 1, 1995 in Kern County, California. The decline for the six
months ended December 31, 1995 was due to the sale of underperforming properties
in fiscal 1995.
During January, 1995, Registrant received notice from the State of Alaska
Department of Revenue for unpaid License Tax on Royalties from Mines and Mining
for the years 1991 through 1993. Registrant contested these License Taxes and
believed it to be exempt from these taxes. Pending the outcome of Registrant's
petition seeking relief from these taxes, Registrant recorded a liability of
$45,000 at June 30, 1995 for the estimated amount of the taxes due. On October
30, 1995 the Alaska Department of Revenue notified Registrant that it had
accepted its petition for relief and no taxes were due through September 30,
1995. Accordingly, Registrant reversed its recorded liability to the State of
Alaska and recorded revenue in the amount of $45,000 for the Alaska Mining
License Tax exemption.
Selling, general and administrative expenses decreased by $22,810 and $36,974
(or 16.2% and 11.8%) for the three- and six-month period ended December 31,
1995. This decrease for the three- and six-month period was due primarily to a
decrease in consulting fees of approximately $45,000 and travel expenses of
$16,000 associated with a consulting geologist retained by Registrant to explore
for mining prospects in the western United States and Mexico. The services of
this geologist were discontinued in January, 1995. During the six months ended
December 31, 1994, Registrant wrote off costs associated with the abandonment of
the Sand Springs project in Nevada in the amount of $26,700 and increased its
reserve for bad debts by $17,000. These decreases were offset by costs incurred
to establish an oil and gas exploration office in Bakersfield, California during
the fourth quarter of 1995. Salaries, vehicle expense, medical and office
expense for the California office were approximately $68,000 for the six months
ended December 31, 1995.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ASPEN EXPLORATION CORPORATION
(Registrant)
/s/ R. V. Bailey
-------------------------------
By: R. V. Bailey,
February 12, 1996 Chief Executive Officer,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-END> DEC-31-1995 DEC-31-1995
<CASH> 453,963 0
<SECURITIES> 8,654<F1> 0
<RECEIVABLES> 65,478 0
<ALLOWANCES> (37,000) 0
<INVENTORY> 471,059 0
<CURRENT-ASSETS> 962,154 0
<PP&E> 1,525,411 0
<DEPRECIATION> (894,725) 0
<TOTAL-ASSETS> 1,796,481 0
<CURRENT-LIABILITIES> 517,428 0
<BONDS> 0 0
0 0
0 0
<COMMON> 5,661,812 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 1,796,481 0
<SALES> 95,928 441,866
<TOTAL-REVENUES> 95,105 492,311
<CGS> 0 0
<TOTAL-COSTS> 193,739 375,503
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (98,634) 116,808
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (98,634) 116,808
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (98,634) 116,808
<EPS-PRIMARY> (.02) .03
<EPS-DILUTED> (.02) .03
<FN>
<F1>Prepaid Expense
</FN>
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