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 September 30, 1996
( ) 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
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 o file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
As of October 1, 1996, the Company has 980,141 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 September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . 3
Consolidated statements of operations for the three
months and nine months ended September 30, 1996 and 1995 . . . 4
Consolidated statements of cash flow for
the nine months ended September 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
September 30, 1996 and December 31, 1995
<S> <C> <C>
September 30,
1996 DECEMBER 31,
ASSETS (UNAUDITED) 1995
Current Assets:
Cash and cash equivalents $ 606,173 $ 143,532
Accounts receivable - Trade 219,174 175,063
- Other 8,856 19,234
- Oil & Gas Sales 200,000 178,468
Notes Receivable 130,000 190,000
Inventory 11,826 22,699
Prepaid expenses and other assets 4,933 8,757
Total Current Assets 1,180,962 737,753
Property and equipment, at cost:
Oil and gas properties, successful efforts:
Unproved properties 30,731 71,447
Proved properties 10,491,673 9,161,409
Furniture/equipment and automobile 132,772 126,033
Total Property and Equipment 10,655,176 9,358,889
Less accumulated depletion and depreciation (4,323,423) (3,676,721)
Net Property and Equipment 6,331,753 5,682,168
Deferred Tax Assets 150,000 150,000
Long term notes receivable 0 10,000
TOTAL ASSETS $7,662,715 $6,579,921
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $ 300,000 $ 300,000
Accounts Payable - Trade 292,919 250,500
Accounts Payable - Related Parties 10,868 19,097
Accounts Payable - Oil & Gas 170,330 139,072
Notes payable 0 200,000
Other Current Liabilities 10,078 6,569
Advances from Drilling Partners 0 0
Total Current Liabilities 784,195 915,238
Other long-term liabilities $ 84,137 $ 84,137
Long-term debt due after one year $1,746,189 $ 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 353,606 0
Treasury stock at cost, 378,187 shares at
September 30, 1996 and 357,922 shares at
December 31, 1995 (826,889) (716,623)
Total Stockholders' Equity 4,558,194 4,314,854
TOTAL LIABILITIES AND EQUITY $7,662,715 $6,579,921
See accompanying notes to financial statements.
</TABLE>
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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 Months Three Months Nine Months Nine Months
Ending Ending Ending Ending
Sept30,1996 Sept30,1996 Sept30,1996 Sept30,1996
Revenues:
Oil and gas sales $ 725,388 $ 558,701 $2,117,444 $1,676,455
Management fees 14,400 14,400 43,200 43,200
Administrative charges 69,831 63,368 209,373 192,751
Total Revenues 809,619 636,469 2,370,017 1,912,406
Operating costs:
Lease Operating expenses 250,954 134,253 661,792 436,381
Dry hole & geological 26,471 304,997 182,103 341,497
Depletion, depreciation,
& amortization 243,564 88,276 719,977 441,346
General & Administrative 138,674 138,392 467,604 451,853
Total Operating costs 659,663 665,918 2,031,476 1,671,077
Income From Operations $ 149,956 $ (29,449) $ 338,541 $ 241,329
Other income (expenses):
Dividend income $ 0 $ 0 $ 0 $ 0
Interest income 4,254 656 6,328 15,838
Interest expense (43,156) (33,235) (96,369) (99,354)
Gain (Loss) on sale of
oil & gas properties 38,284 12,500 105,106 21,098
Total Other Incom/(Expense) (618) (20,079) 15,065 (62,418)
Income before provision for
income taxes $ 149,338 $ (49,528) $ 353,606 $ 178,911
Income tax provision
Current 0 0 0 0
Deferred 0 0 0 0
Net Income $ 149,338 $ 14,435 $ 353,606 $ 178,911
EARNINGS PER COMMON SHARE:
Net income per common share and
common equivalent
PRIMARY $ .15 $ .02 $ .35 $ .19
FULLY DILUTED .15 .02 .35 .18
Weighted average number of common
shares and common share
equivalent outstanding
PRIMARY 994,564 934,976 991,679 939,890
FULLY DILUTE 994,564 1,012,560 991,679 1,012,057
</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 NINE MONTHS ENDED
Sept 30, Sept 30,
1996 1995
Cash Flows From Operating Activities:
Operations:
Net Income (Loss) $ 353,606 $ 178,911
Plus Adjustments to Reconcile Net Income
(Loss)to Net Cash Flows From Operations:
Gain (Loss) on Sale of Assets 105,106 21,098
Depreciation,Depletion and Amortization
719,977 441,346
Dry Hole and Exploration 182,103 341,497
Provision for Deferred Income Taxes 0 (1,380)
Equity Loss 0 0
Changes In Operating Assets and Liabilities:
Accounts Receivable (55,265) 1,609
Equipment / Inventory 10,873 8,703
Notes Receivable 70,000 15,000
Other Current Assets 3,824 26,968
Accounts Payable and Accrued Expenses 68,957 (365,777)
Advances from Drilling Partners 0 (16,415)
Net Cash Provided By Operating Activities
1,459,181 651,560
Cash Flows From Investing Activities:
Purchase of Property and Equipment:
Oil and Gas Properties (1,650,032) (1,080,675)
Furniture and Fixtures (6,739) 6,600
Net Cash Used In Investing Activities (1,656,771) (1,074,075)
Cash Flows From Financing Activities:
Proceeds From Borrowing 1,000,000 200,000
Payment of Debt (229,503) (229,049)
Issuance of Common Stock 0 97,500
Purchase of Treasury Stock (110,266) (48,989)
Net Cash (Used In) Provided By Financing Activities 660,231 19,462
Net Increase (Decrease) In Cash And Cash
Equivalents 462,641 (403,053)
Cash and Cash Equivalents, Beginning of Year 143,532 568,333
Cash and Cash Equivalent, End of Period $ 606,173 $ 165,280
</TABLE>
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Part I Financial Information
QUESTA OIL & GAS CO.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Note Payable
Effective July 1, 1996 the Company has negotiated a loan with a local
bank. The limit on the 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
September 30, 2001. The revolver loan has a maximum limit of $1,000,000 with
interest rate of NY prime. 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
September 30, 1996, the outstanding principal amount of the term loan was
$2,025,000 and zero on the line of credit. The aggregate borrowing limits were
$3,100,000. The term loan was $2,100,000 with quarterly installments of $75,000
plus accrued interest. The line of credit is $1,000,000 with a quarter of one
percent charged on the balance available each month. 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.
(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
September 30, 1996
Liquidity and Capital Resources
At September 30, 1996, the Company had current assets of $ 1,181,000
compared to current liabilities of approximately $ 784,000 resulting in a
positive working capital of $ 397,000. As of September 30, 1996 the total
outstanding bank loan balance was $ 2,025,000. With the new loan in place July
1, 1996, the Company is in a positive position to participate in new
acquisitions and the offset drilling for the future. Future cash flows and the
new revolver loan of $ 1,000,000, will enable the Company to be aggressive in
the acquisition and drilling area. 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 connected to a sales outlet.
During the first nine months of 1996 the Company participated in the
drilling of six wells with the completion of four gas wells, one dry hole and
one well still in progress. The Company's working interest varied from 6% to
85%. Questa participated as the operator in three wells (1 producing, 1 dry hole
and 1 in progress) and as a joint owner in three wells (all producers).
The Company was very aggressive in the acquisition of producing
properties during the first three quarters of 1996. The Company spent
approximately $1,000,000 in purchasing working interests and overriding royalty
interests in thirty-four producing wells. The Company has also been active in
working over and recompleting several wells
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with favorable result of 50 to 100% increases in production.
Results of Operations
1996 to 1995
Oil and gas sales for the first three quarters of 1996 increased from
$1,676,000 in 1995 to $2,117,000, this increase was due to increases in oil and
gas prices. Our oil price in 1996 increased by 14% over 1995 prices ( $18.79 per
barrel in 1996 compared to $16.46 per barrel in 1995). Questa's gas prices
increased by 32% in 1996 ($2.04 in 1996 compared to $1.55 in 1995).
Administrative charges increased in 1996 due to the drilling of three Company
operated wells.
The lease operating expenses for the first three quarters increased
from $436,000 to $662,000, this increase was the result of several workovers in
1996. Dry Hole & Geological expenses decreased in 1996 due to the drilling of
the several dry hole in 1995 and several wells that were written off because
they were uneconomical to produce. The increases in depletion, depreciation, and
amortization from $441,000 to $720,000 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 three quarters of 1996 over the previous year was due to
the cost of an independent contract geologist working on new prospects.
Interest income dropped from $15,000 to $6,000 as a result of the write
down of the factoring company's loan. Interest expense remained stable due to
the increase in the Company's increased borrowing base effective Judy 1,1996.
Net income for the first three quarters of 1996 has increased from
$179,000 in 1995 to $353,000. This was the result of the Company's increase in
oil and gas prices and the increase in daily production from the acquisitions
made 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 November 14, 1996 /s/ Warren Meeks
Warren L. Meeks, President
Date November 14, 1996 /s/ Donald Towner
Donald A. Towner, Controller
and Chief Financial Officer
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<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<CASH> 606173
<SECURITIES> 0
<RECEIVABLES> 558030
<ALLOWANCES> 0
<INVENTORY> 11826
<CURRENT-ASSETS> 1180962
<PP&E> 10655176
<DEPRECIATION> 4323423
<TOTAL-ASSETS> 7662715
<CURRENT-LIABILITIES> 784195
<BONDS> 0
0
0
<COMMON> 13583
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7662715
<SALES> 2117444
<TOTAL-REVENUES> 2370017
<CGS> 661792
<TOTAL-COSTS> 2031476
<OTHER-EXPENSES> (111434)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96369
<INCOME-PRETAX> 353606
<INCOME-TAX> 0
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<NET-INCOME> 353606
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
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