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, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number0-9965
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, including area code: (918) 494-6055
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 May 1, 1997, the Company had 975,147 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 March 31, 1997
and December 31, 1996 . . . . . . . . . . . . . . . 3
Consolidated statements of operations for the three
months ended March 31, 1997 and 1996 . . . . . . . . 4
Consolidated statements of cash flow for
the three months ended March 31, 1997 and 1996 . . . 5
Consolidated notes to financial statements . . . . . 6
Management's discussion and analysis of
financial condition and results of operations. . . . 6
Part II - Other Information . . . . . . . . . . . . . . . . 7
Signature page . . . . . . . . . . . . . . . . . . . 8
2
<PAGE>
Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
<S> <C> <C>
March 31,
1997 DECEMBER 31,
(UNAUDITED) 1996
ASSETS
Current Assets:
Cash and cash equivalents $1,380,059 $1,027,793
Accounts receivable - Trade 190,963 170,050
- Other 23,754 8,178
- Oil & Gas Sales 300,000 382,250
Notes Receivable 20,000 100,000
Inventory 8,827 14,794
Prepaid expenses and other assets 6,704 7,333
Total Current Assets 1,930,307 1,710,398
Property and equipment, at cost:
Oil and gas properties, successful efforts:
Unproved properties 106,998 148,372
Proved properties 10,639,183 10,501,701
Furniture, fixture and automobiles 128,371 132,772
10,874,552 10,782,845
Less accumulated depletion and depreciation (4,528,783) (4,157,726)
Net Property and Equipment 6,345,769 6,625,119
Other Assets
Deferred Tax Asset 0 0
Long term notes receivable 0 0
TOTAL ASSETS $8,276,076 $8,335,517
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $ 300,000 $ 300,000
Accounts Payable - Trade 100,558 329,740
Accounts Payable - Related Parties 29,701 29,482
Accounts Payable - Oil & Gas 229,226 232,430
Short Term Loans Payable 14,322 14,322
Other Current Liabilities 14,990 86,498
Advances From Drilling Partners 0 33,832
Total Current Liabilities 688,797 1,026,304
Other Long-term Liabilities $ 84,137 $ 84,137
Long-term debt due after one year $1,578,866 $1,655,367
Deferred income tax $ 648,000 $ 550,000
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 4,741,207 4,741,207
Current earnings 281,182 0
Treasury stock at cost, 383,174 shares at
March 31,1997 and 379,232 shares at
December 31,1996 (857,746) (833,131)
Total Stockholders' Equity 5,276,276 5,019,709
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,276,076 $8,335,517
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Statement of Operations
(UNAUDITED)
<S> <C> <C>
THREE THREE
MONTHS MONTHS
ENDED ENDED
March 31, March 31,
1997 1996
Revenues:
Oil and gas sales $1,186,816 $ 655,733
Management fees 14,400 14,400
Administrative charges 68,080 69,566
1,269,296 739,699
Operating costs & expenses:
Lease operating expenses 239,241 198,713
Dry Hole & geological costs 35,086 22,183
Depletion, depreciation,
and amortization 377,092 217,558
General & administrative 211,538 157,584
862,957 596,038
Income From Operations $ 406,339 $ 143,661
Other income ( expenses):
Dividends $ 0 $ 0
Interest income 12,955 2,074
Interest expense (40,112) (27,377)
Gain (loss) on sale of
oil & gas properties 0 0
$ (27,157) $ (25,303)
Income before provision for income
taxes $ 379,182 $ 118,358
Income tax provision
Current 0 0
Deferred (98,000) 0
Net Income $ 281,182 $ 118,358
EARNINGS PER COMMON SHARE:
Net income per common share and common
equivalent
PRIMARY $ .29 $ .12
FULLY DILUTED $ .29 $ .12
Weighted average number of common shares
and common share equivalent outstanding:
PRIMARY 984,610 999,953
FULLY DILUTED 984,610 999,953
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Statement of Cash Flows
(Unaudited)
<S> <C> <C>
FOR THE THREE MONTHS ENDED
March 31, March 31,
1997 1996
Cash Flows From Operating Activities:
Operations:
Net Income (Loss) $ 281,182 $ 118,358
Plus Adjustments to Reconcile Net Income
(Loss) to Net Cash Flows From Operating Activities:
Gain (Loss) on Sale of Assets 0 0
Depreciation,Depletion and Amortization 377,092 217,558
Dry Hole and Exploration 35,086 22,183
Provision for Deferred Income Taxes 98,000 0
Changes In Operating Assets and Liabilities:
Accounts Receivable 45,761 (6,911)
Notes Receivable 80,000 30,000
Equipment Inventory 5,967 1,595
Other Current Assets 629 (21,336)
Accounts Payable and Accrued Expenses (303,675) 87,067
Advances from Drilling Partners (33,832) 0
Net Cash Provided By Operating Activities $ 586,210 $ 448,514
Cash Flows From Investing Activities:
Purchase of Property and Equipment:
Oil and Gas Properties (137,229) (330,276)
Furniture, Fixtures & Automobiles 4,401 (5,579)
Net Cash Used In Investing Activities $ (132,828) $ (335,855)
Cash Flows From Financing Activities:
Proceeds From Borrowing 0 0
Payment of Debt (76,501) (76,501)
Purchase of Treasury Stock (24,615) (2,317)
Net Cash (Used In) Provided By Financing Activities $ (101,116) $ (78,818)
Net Increase (Decrease) In Cash And Cash Equivalent 352,266 33,841
Cash and Cash Equivalents, Beginning of Year 1,027,793 143,532
Cash and Cash Equivalent, End of Period $1,380,059 $ 177,373
</TABLE>
5
<PAGE>
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 quarter of 1997 interest on both the line and the
term loan was at New York prime. As of March 31, 1997, the outstanding
principal amount of the term loan was $1,875,000 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 with the final payment due September 30, 1999. The line of
credit is $1,000,000 with interest of one quarter of one percent on the
amount not used. 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 another
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 footnotes required by generally accepted acco
unting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of only normal reoccurring
items) considered necessary for a fair presentation have been incl
uded. These statements should be read in conjunction with the Questa
Oil & Gas Co. financial statements and notes thereto as of December 31,
1996, 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
March 31, 1997
Liquidity and Capital Resources
At March 31, 1997, the Company had current assets of $1,930,000
compared to current liabilities of approximately $ 689,000 resulting
in positive working capital of $1,241,000. As of March 31, 1997 the
total outstanding bank loan balance was $1,875,000 compared to
$1,950,000 as of December 31, 1996.The Company is in a positive
position to participate in new acquisitions and offset drilling
available through current cash flows and the line of credit of
$1,000,000. Working capital will continue to fluctuate during the year
as the Company acquires interest in additional wells and wells that are
drilled are completed and connected to a sales outlet.
6
<PAGE>
During the first three months of 1997 the Company participated in
the drilling of four wells, two dry holes, one gas well and one oil
well. The Company's working interest in the four wells is 10 to 13%,
with the Company participating as an outside joint owner.
Results of Operations
1996 to 1997
Oil and gas sales during the first quarter ending March 31, 1997
increased from $656,000 to $1,187,000 over the comparable period last
year due to increases in the number of wells producing and higher oil
and gas prices.
The lease operating expenses for the first quarter increased from
$199,000 to $239,000 over the same period last year. This increase is
the result of the increased number of wells producing this year. The
increase in depletion, depreciation, and amortization from $218,000 to
$377,000 for the first quarter is due to the increase in the number of
wells and increases in oil and gas prices. Changes in the Company's
general and administrative expenses was due to bonuses paid to
employees and higher rent charges for additional space.
Interest income increased due to larger cash balances in the
banks. Interest expenses increased due to the larger principal balance
on the new loan negotiated in July of 1996.
Net income for the first three month period increased from
$118,000 profit to a $281,000 profit due to increases in the Company's
oil and gas prices and production volumes.
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.
7
<PAGE>
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 May 6, 1997 /s/ Warren L. Meeks
Warren L. Meeks, President
Date May 6, 1997 /s/ Donald A. Towner
Donald A. Towner, Controller
and Chief Financial Officer
8
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<CASH> 1380059
<SECURITIES> 0
<RECEIVABLES> 544717
<ALLOWANCES> 10000
<INVENTORY> 8827
<CURRENT-ASSETS> 6704
<PP&E> 10874552
<DEPRECIATION> 4528783
<TOTAL-ASSETS> 8276076
<CURRENT-LIABILITIES> 688797
<BONDS> 0
0
0
<COMMON> 13583
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8276076
<SALES> 1186816
<TOTAL-REVENUES> 1269296
<CGS> 239241
<TOTAL-COSTS> 862957
<OTHER-EXPENSES> (12955)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40112
<INCOME-PRETAX> 379182
<INCOME-TAX> 98000
<INCOME-CONTINUING> 281182
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281182
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
