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 June 30, 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 August 1, 1997, the Company had 975,133 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, 1997
and December 31, 1996 3
Consolidated statements of operations for the six
months ended June 30, 1997 and 1996 4
Consolidated statements of cash flow for
the six months ended June 30, 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
June 30, 1997 and December 31, 1996
<S> <C> <C>
June 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
ASSETS
Current Assets:
Cash and cash equivalents $1,210,326 $1,027,793
Accounts receivable - Trade 97,727 170,050
- Other 27,812 8,178
- Oil & Gas Sales 300,000 382,250
Notes Receivable 0 100,000
Inventory 13,904 14,794
Prepaid expenses and other assets 9,204 7,333
Total Current Assets 1,658,973 1,710,398
Property and equipment, at cost:
Oil and gas properties, successful efforts:
Unproved properties 90,670 148,372
Proved properties 11,345,644 10,501,701
Furniture, fixture and automobiles 135,668 132,772
11,571,982 10,782,845
Less accumulated depletion and depreciation (4,817,463) (4,157,726)
Net Property and Equipment 6,754,519 6,625,119
Other Assets
0 0
TOTAL ASSETS $8,413,492 $8,335,517
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $ 300,000 $ 300,000
Accounts Payable - Trade 91,761 329,740
Accounts Payable - Related Parties 20,162 29,482
Accounts Payable - Oil & Gas 201,951 232,430
Short Term Loans Payable 3,750 14,322
Other Current Liabilities 14,540 86,498
Advances From Drilling Partners 0 33,832
Total Current Liabilities 632,164 1,026,304
Other Long-term Liabilities $ 84,137 $ 84,137
Long-term debt due after one year $1,524,588 $1,655,367
Deferred income tax $ 702,000 $ 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 475,621 0
Treasury stock at cost, 383,195 shares at
June 30,1997 and 379,232 shares at
December 31,1996 (857,858) (833,131)
Total Stockholders' Equity 5,470,603 5,019,709
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,413,492 $8,335,517
See accompanying notes to financial statements.
</TABLE>
3
<PAGE>
Part I Financial Information
<TABLE>
<CAPTION>
QUESTA OIL & GAS CO.
Consolidated Statement of Operations
(UNAUDITED)
<S> <C> <C> <C> <C>
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
REVENUES:
Oil and gas sales $ 899,346 $ 736,323 $2,086,162 $1,392,056
Management fees 14,400 14,400 28,800 28,800
Administrative charges 68,785 69,976 136,865 139,542
982,531 820,699 2,251,827 1,560,398
OPERATING COSTS AND EXPENSES:
Lease operating expenses 245,431 212,125 484,672 410,838
Dry Hole & geological costs 651 133,449 35,737 155,632
Depletion, depreciation,
and amortization 295,359 258,855 672,451 476,413
General & administrative 169,734 171,346 381,272 328,930
711,175 771,775 1,574,132 1,371,813
Income From Operations $ 271,356 $ 44,924 $ 677,695 $ 188,585
OTHER INCOME (EXPENSES):
Dividends $ 0 $ 0 $ 0 $ 0
Interest income 17,096 0 30,051 2,074
Interest expense (40,013) (25,836) (80,125) (53,213)
Gain (loss) on sale of
oil & gas properties 0 66,822 0 66,822
$ (22,917) $ 40,986 (50,074) 15,683
Income before provision
for income taxes $ 248,439 $ 85,910 $ 627,621 $ 204,268
Income tax provision
Current 0 0 0 0
Deferred (54,000) 0 (152,000) 0
NET INCOME $ 194,439 $ 85,910 $ 475,621 $ 204,268
EARNINGS PER COMMON SHARE:
Net income per common
share and common equivalent
PRIMARY $ .20 $ .09 $ .48 $ .20
FULLY DILUTED$ .20 $ .09 $ .48 $ .20
Weighted average number of common shares
and common share equivalent outstanding:
PRIMARY 984,603 999,953 984,596 997,449
FULLY DILUTED 984,603 999,953 984,596 997,449
See accompanying notes to financial statements
</TABLE>
4
<PAGE>
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,
1997 1996
Cash Flows From Operating Activities:
Operations:
Net Income (Loss) $ 475,621 $ 204,268
Plus Adjustments to Reconcile Net Income
(Loss) to Net Cash Flows From Operating Activities:
Gain (Loss) on Sale of Assets 0 66,822
Depreciation,Depletion and Amortization 672,451 476,413
Dry Hole and Exploration 35,737 155,632
Provision for Deferred Income Taxes 152,000 0
Changes In Operating Assets and Liabilities:
Accounts Receivable 134,939 (24,961)
Notes Receivable 100,000 30,000
Equipment Inventory 890 6,595
Other Current Assets (1,871) (21,336)
Accounts Payable and Accrued Expenses (349,736) 56,074
Advances from Drilling Partners (33,832) 0
Net Cash Provided By Operating Activities $1,186,199 $ 949,507
Cash Flows From Investing Activities:
Purchase of Property and Equipment:
Oil and Gas Properties (834,692) (939,613)
Furniture, Fixtures & Automobiles (2,896) (5,579)
Net Cash Used In Investing Activities $ (837,588) $ (945,192)
Cash Flows From Financing Activities:
Proceeds From Borrowing 0 0
Payment of Debt (141,351) (153,002)
Purchase of Treasury Stock (24,727) (29,866)
Net Cash (Used In) Provided By Financing Activities $ (166,078) $ (182,868)
Net Increase (Decrease) In Cash And Cash Equivalent 182,533 (178,553)
Cash and Cash Equivalents, Beginning of Year 1,027,793 143,532
Cash and Cash Equivalent, End of Period $1,210,326 $ (35,021)
</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 half of 1997 the interest rate on both the line and
the term loan was at New York prime, 8%. As of June 30, 1997, the
outstanding principal amount of the term loan was $1,800,000 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
June 30, 1997
Liquidity and Capital Resources
At June 30, 1997, the Company had current assets of $1,659,000
compared to current liabilities of approximately $ 632,000 resulting
in positive working capital of $1,027,000. As of June 30, 1997 the
total outstanding bank loan balance was $1,800,000 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 six months of 1997 the Company participated in
the drilling of eight wells, two dry holes, four gas wells and two oil
wells. The Company's working interest in the eight wells is 6 to 30%
with the Company participating as an outside joint owner in all wells.
In the second quarter of 1997 the Company purchased units in two
drilling partnerships managed by the Company. Questa is the general
partner of eight drilling partnerships. The Company spent $526,000 in
acquiring an additional 25 to 75 percent in the two programs. The
Company has budgeted an additional $430,000 to acquire units in four
other Company managed drilling partnerships during the second half of
the year.
In the third quarter of 1997 the Company is offering to repurchase
Questa common stock from shareholders holding 99 shares or less. The
offering price of $11 per share is open to shareholders of record on
June 30, 1997, the offer will close September 5, 1997.
Results of Operations
1996 to 1997
Oil and gas sales during the two quarters ending June 30, 1997
increased from $1,400,000 to $2,000,000 over the comparable period last
year due to increases in the number of wells producing and higher oil
and gas prices (oil prices have increased by 8% and gas prices have
increased by 37% for this same period in 1997).
The lease operating expenses for the two quarters increased from
$410,000 to $485,000 over the same period last year. This increase is
the result of the increase in the number of wells producing. The
increase in depletion, depreciation, and amortization from $472,000 to
$672,000 for the first half is due to the increase volume and prices.
Changes in the Company's general and administrative expenses was due
to bonuses paid to employees.
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 six month period increased from a
$208,000 profit to a $476,000 profit due to increases in the Company's
oil and gas prices and production volume.
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 August 6, 1997 /S/ WARREN MEEKS
Warren L. Meeks, President
Date August 6, 1997 /S/ DONALD A TOWNER
Donald A. Towner, Controller
and Chief Financial Officer
8
<PAGE>
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 1210326
<SECURITIES> 0
<RECEIVABLES> 425539
<ALLOWANCES> 0
<INVENTORY> 13904
<CURRENT-ASSETS> 9204
<PP&E> 11571982
<DEPRECIATION> 4817463
<TOTAL-ASSETS> 8413492
<CURRENT-LIABILITIES> 632164
<BONDS> 0
0
0
<COMMON> 13583
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8413492
<SALES> 2086162
<TOTAL-REVENUES> 2251827
<CGS> 484672
<TOTAL-COSTS> 1574132
<OTHER-EXPENSES> 50074
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80125
<INCOME-PRETAX> 627621
<INCOME-TAX> 152000
<INCOME-CONTINUING> 475621
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 475621
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
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