UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-9965
QUESTA OIL & GAS CO.
(Exact name of registrant as specified in its charter)
COLORADO 84-0846588
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7030 South Yale Ave.
Suite 700
Tulsa, Oklahoma 74136-5718
(Address of principal executive offices)
Registrant's telephone number area code: (918) 494-6055
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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
As of May 1, 1996, the Company had 999,953 shares of Common Stock issued and
outstanding.
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QUESTA OIL & GAS CO.
Contents
Page
Part I - Financial Information
Consolidated balance sheets at June 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . 3
Consolidated statements of operations for the three
months and six months ended June 30, 1996 and 1995 . . . . 4
Consolidated statements of cash flow for
the six months ended June 30, 1996 and 1995 . . . . . . . 5
Consolidated notes to financial statements . . . . . . . . 6
Management's discussion and analysis of
financial condition and results of operations. . . . . . . 7
Part II - Other Information
Signature page . . . . . . . . . . . . . . . . . . . . . . 8
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Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
<S> <C> <C>
June 30,1996 DECEMBER 31,
ASSETS (UNAUDITED) 1995
Current Assets:
Cash and cash equivalents $ (35,021) $ 143,532
Accounts receivable - Trade 163,912 175,063
- Other 31,314 19,234
- Oil & Gas Sales 202,500 178,468
Notes Receivable 170,000 190,000
Inventory 16,104 22,699
Prepaid expenses and other assets 30,093 8,757
Total Current Assets 578,902 737,753
Property and equipment, at cost:
Oil and gas properties, successful efforts:
Unproved properties 57,219 71,447
Proved properties 9,845,927 9,161,409
Furniture/equipment and automobile 131,612 126,033
10,034,758 9,358,889
Less accumulated depletion and depreciation (4,106,265) (3,676,721)
Net Property and Equipment 5,928,493 5,682,168
Deferred Tax Assets 150,000 150,000
Long term notes receivable -0- 10,000
$6,657,395 $6,579,921
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $ 300,000 $ 300,000
Accounts Payable - Trade 243,895 250,500
Accounts Payable - Related Parties 29,219 19,097
Accounts Payable - Oil & Gas 173,062 139,072
Notes payable 200,000 200,000
Other Current Liabilities 25,136 6,569
Advances from Drilling Partners -0- 16,415
Total Current Liabilities 971,312 915,238
Other long-term liabilities $ 84,137 $ 84,137
Long-term debt due after one year $ 622,690 $ 775,692
Deferred income tax $ 490,000 $ 490,000
Stockholders' equity:
Common stock, $.01 par value;
Authorized 50,000,000 shares;
Issued 1,358,328 shares 13,583 13,583
Additional paid-in capital 1,098,050 1,098,050
Accumulated earnings 3,919,844 3,919,844
Current earnings 204,268 -0-
Treasury stock at cost, 363,384 shares at
June 30, 1996 and 357,922 shares at
December 31, 1995 (746,489) (716,623)
Total Stockholders' Equity 4,489,256 4,314,854
$6,657,395 $6,579,921
</TABLE>
See accompanying notes to financial statements.
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Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Statements of Operations
(Unaudited)
<S> <C> <C> <C> <C>
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
Revenues:
Oil and gas sales $ 736,323 $ 585,558 $1,392,056 $1,117,754
Management fees 14,400 14,400 28,800 28,800
Administrative charges 69,976 62,189 139,542 129,383
Total Revenues 820,699 662,147 1,560,398 1,275,937
Operating costs & expenses:
Lease Operating expenses 212,125 147,337 410,838 302,128
Dry hole & geological 133,449 25,000 155,632 36,500
Depletion, depreciation,
& amortization 258,855 174,991 476,413 353,070
General & Administrative 171,346 173,348 328,930 313,461
Total Operating costs 775,775 520,676 1,371,813 1,005,159
Income From Operations $ 44,924 $ 141,471 $ 188,585 $ 270,778
Other income (expenses):
Dividend income 0 0 0 0
Interest income 0 (10,250) 2,074 15,182
Interest expense (25,836) (32,779) (53,213) (66,119)
Gain(Loss) on sale of oil & gas
properties 66,822 8,598 66,822 8,598
Total Other Income(Expense) 40,986 (34,431) 15,683 (42,339)
Income before provision for
income taxes $ 85,910 $ 107,040 $ 204,268 $ 228,439
Income tax provision
Current 0 0 0 0
Deferred 0 (29,971) 0 (63,963)
Net Income $ 85,910 $ 77,069 $ 204,268 $ 164,476
EARNINGS PER COMMON SHARE:
Net income per common share and
common equivalent
PRIMARY .09 .08 .20 .18
FULLY DILUTED .09 .08 .20 .16
Weighted average number of common
shares and common share
equivalent outstanding
PRIMARY 999,953 930,817 997,449 930,062
FULLY DILUTED 999,953 1,013,817 997,449 1,013,062
</TABLE>
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Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Statement of Cash Flows
(Unaudited)
<S> <C> <C>
FOR THE SIX MONTHS ENDED
June 30, June 30,
1996 1995
Cash Flows From Operating Activities:
Operations:
Net Income (Loss) $ 204,268 $ 164,476
Plus Adjustments to Reconcile Net Income
(Loss) to Net Cash Flows From Operating Activities:
Gain (Loss) on Sale of Assets 66,822 8,598
Depreciation,Depletion and Amortization 476,413 353,070
Dry Hole and Exploration 155,632 36,500
Provision for Deferred Income Taxes -0- 63,963
Equity Loss -0- -0-
Changes In Operating Assets and Liabilities:
Accounts Receivable (24,961) (36,605)
Equipment / Inventory 6,595 8,703
Notes Receivable 30,000 -0-
Other Current Assets (21,336) 24,463
Accounts Payable and Accrued Expenses 56,074 (234,861)
Advances from Drilling Partners -0- (16,415)
Net Cash Provided By Operating Activities $ 949,507 $ 371,892
Cash Flows From Investing Activities:
Purchase of Property and Equipment:
Oil and Gas Properties (939,613) (791,523)
Furniture and Fixtures (5,579) 6,600
Net Cash Used In Investing Activities $ (945,192) $ (781,923)
Cash Flows From Financing Activities:
Proceeds From Borrowing -0- 100,000
Payment of Debt (153,002) (153,043)
Purchase of Treasury Stock (29,866) (30,932)
Net Cash (Used In) Provided By Financing Activities $ (182,868) $ ( 83,975)
Net Increase (Decrease) In Cash And Cash
Equivalents (178,553) (497,006)
Cash and Cash Equivalents, Beginning of Year 143,532 568,333
Cash and Cash Equivalent, End of Period $ (35,021) $ 71,327
</TABLE>
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Part I Financial Information
QUESTA OIL & GAS CO.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Note Payable
The Company has a line of credit and a term loan with a local bank.
For the first half of 1996 interest on both the line and the term loan was at
prime plus one quarter (1/4) of a percent. As of June 30, 1996, the outstanding
principal amount of the term loan was $900,000 and $200,000 on the line of
credit. The aggregate borrowing limits were $2,000,000. The term loan was
$1,200,000 with quarterly installments of $75,000 plus accrued interest. The
line of credit was $800,000 with no charges until drawn upon. Loans are secured
by certain of the Company's interests in oil and gas properties. The Company is
not required by the loan agreement to maintain a certain balance in our demand
accounts with the bank. The Company also has a automobile loan with the bank.
The loan is for 60 months, 6.39% rate, with final payment due April, 1999.
Effective July 1, 1996 the Company has negotiate a new loan with a
different local bank. The limit on the new term loan is $2,100,000 with
quarterly principal payments of $75,000 plus accrued interest at a rate of New
York prime, final payment due June 30, 2001. The revolver loan has a maximum
limit of $1,000,000.
(2) Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and foot notes required by generally accepted accounting principles
for complete financial stat ements. In the opinion of management, all
adjustments (consisting of only normal reoc curring items) considered necessary
for a fair presentation have been included. These statements should be read in
conjunction with the Questa Oil & Gas Co. financial stat ements and notes
thereto as of December 31, 1995, which are included in the Company's annual
report and Form 10-K.
QUESTA OIL & GAS CO.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 1996
Liquidity and Capital Resources
At June 30, 1996, the Company had current assets of $ 579,000
compared to current liabilities of approximately $ 971,000 resulting in a
negative working capital of $ 392,000. As of June 30, 1996 the total outstanding
bank loan balance was $ 900 ,000. With the new loan in place July 1, 1996, the
Company paid off the outstanding balances on it's previous loans, $1,100,000 and
is in a positive position to participate in new acquisitions and the offset
drilling for the future. Current cash flows and the new revolver loan of $
1,000,000, the Company with be able to continue it's acquisitions and drilling.
Working capital will continue to fluctuate during the year as the Company
acquires interest in producing wells and wells that are drilled are completed
and conn ected to a sales outlet.
During the first six months of 1996 the Company participated in the
drilling of six wells with the completion of five gas wells and one dry hole.
The Company's working interest varied from 6% to 85% and participated as the
operator in three wells (2 producing and 1 dry hole) and as a joint owner in
three wells (all producers).
The Company was very aggressive in the acquisition of producing
properties during the first half of 1996. The Company spent approximate $
500,000 in working interests and overriding royalty interests in twelve
producing wells. The Company has also been active
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in working over several wells with favorable result of 50 to 100% increases in
production.
Results of Operations
1996 to 1995
Oil and gas sales for the first half of 1996 increased from
$1,117,000 in 1995 to $1,392,000, due to increases in gas prices and volume
increases in gas and oil sales. Administrative charges increased in 1996 due to
the drilling of three Company operated wells.
The lease operating expenses for the first half increased from
$302,000 to $411,000, this increase was the result of several workovers in 1996.
Dry Hole & Geological expenses increase in 1996 due to the drilling of the dry
hole in which Questa had an 80% working interest. The increases in depletion,
depreciation, and amortization from $353,000 to $476,000 is a direct result of
the increase in oil and gas sales in 1996. The changes in the Company's general
and administrative expenses for the first half of 1996 over the previous year
was due to the cost of an independent contract geologist.
Interest income dropped from $15,000 to $2,000 as a result of the
write down of the factoring company's loan. Interest expense decreased in 1996
over 1995 due to the decrease in the principal borrowing base.
Net income for the first half of 1996 has increased from $164,000 in
1995 to $204,000. This was the result of the Company's zero tax provision. The
Company is capitalizing intangible drilling costs and utilizing it's high tight
sand tax credits in projecting zero federal tax liability in 1996.
Part II Other Information
Item 1 - Not Applicable.
Item 2 - Not Applicable.
Items 3 through 5 - Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUESTA OIL & GAS CO.
Date: August 14, 1996 /s/ Warren Meeks
Warren L. Meeks, President
Date: August 14, 1996 /s/ Donald Towner
Donald A. Towner, Controller
and Chief Financial Officer
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<CASH> (35021)
<SECURITIES> 0
<RECEIVABLES> 567726
<ALLOWANCES> 0
<INVENTORY> 16104
<CURRENT-ASSETS> 578902
<PP&E> 10034758
<DEPRECIATION> 4106265
<TOTAL-ASSETS> 6657395
<CURRENT-LIABILITIES> 971312
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<COMMON> 13583
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<TOTAL-LIABILITY-AND-EQUITY> 6706528
<SALES> 736323
<TOTAL-REVENUES> 820699
<CGS> 212125
<TOTAL-COSTS> 775775
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25836
<INCOME-PRETAX> 85910
<INCOME-TAX> 0
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<EPS-PRIMARY> .09
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