UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-8609
Future Petroleum Corporation
(Exact name of small business issuer as specified in charter)
Utah 87-0239185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2351 West Northwest Highway, Suite 2130, Dallas, Texas 75220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:214/350-7602
Check whether the issuer (1) filed all reports required to
be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The Company had approximately 3,486,779 shares of common
stock, par value $0.01 per share, issued and outstanding as of
November 14, 1996.
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. However, in the opinion of
management, all adjustments (which consist only of normal recurring
adjustments) necessary to present fairly the financial position and results
of operations for the periods presented have been made. These condensed
consolidated financial statements should be read in conjunction with
financial statements and the notes thereto included in the Company's Form
10-KSB filing for the year ended December 31, 1995.
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FUTURE PETROLEUM CORPORATION
Balance Sheets
SEPTEMBER 30, 1996
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and interest-bearing deposits $ 122,949
Current portion of notes receivable $ 101,404
Trade accounts receivable:
Joint interest billings 93,152
Accrued oil and gas sales 146,843
_________
Total Current Assets 464,348
PROPERTY AND EQUIPMENT:
Proved oil and gas properties, using
the full cost method of accounting 239,781
Other 49,024
_________
288,805
Less accumulated depletion, depreciation,
amortization and impairment (78,095)
_________
Net Property and Equipment 210,710
OTHER ASSETS:
Investment in partnership 732,687
Mining properties held for sale 39,977
Other 1,306
_________
TOTAL OTHER ASSETS 773,970
TOTAL ASSETS $ 1,449,028
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<TABLE>
FUTURE PETROLEUM CORPORATION
Balance Sheets
SEPTEMBER 30, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Trade accounts payable $ 182,620
Advances from shareholder 6,000
Accrued oil and gas proceeds payable 196,837
__________
Total Current Liabilities 385,458
DEFERRED GAIN ON SALE 13,777
LONG TERM NOTES PAYABLE 29,982
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 200,000 shares
authorized, no shares issued --
Common stock, $.01 par value, 30,000,000
shares authorized, shares issued and
outstanding; 3,486,779 at September 30, 1996 and
3,376,903 at September 30, 1995 34,868
Additional paid-in capital 1,031,209
Accumulated deficit (46,266)
__________
Total Stockholders' Equity 1,019,811
Total Liabilities and Stockholders' Equity $ 1,449,028
</TABLE>
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FUTURE PETROLEUM CORPORATION
Statement of Operations and Accumulated Deficit
Three Months Ended
September 30,
____________________
1996 1995
____________________
<S> <C> <C>
REVENUES:
Oil and gas sales $ 14,200 $ 37,475
Well operation fees 43,704 10,197
Other 1,685 34,847
____________________
Total Revenues 59,589 82,519
COSTS AND EXPENSES:
Lease operations and production taxes 32,003 34,165
General and administrative 24,121 43,264
Depletion, depreciation and
amortization 3,238 10,346
Interest 648 --
___________________
Total Expenses 60,010 87,775
OTHER INCOME:
Gain on sale of assets 30,095 28,702
Income from equity investment 5,333 --
Interest income 1,452 11,598
___________________
Total Other Income 36,880 40,300
NET INCOME 36,459 35,044
BEGINNING ACCUMULATED DEFICIT (82,725) (204,879)
___________________
ENDING ACCUMULATED DEFICIT $ (46,266) $ (169,835)
NET INCOME PER COMMON SHARE $ 0.01 $ 0.01
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 3,487,000 3,377,000
</TABLE>
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FUTURE PETROLEUM CORPORATION
Statements of Cash Flows
Nine Months Ended
September 30,
___________________
1996 1995
____________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES:
Net Income $ 125,301 $ 59,481
Adjustments to reconcile to net
cash used in continuing operations:
Depreciation, depletion, and amortization 9,739 31,037
Gain on sale of assets (101,803) (59,671)
Decrease (increase) in receivables (112,310) 1,612
(Decrease) increase in accounts payable
and accrued expenses 76,126 (17,733)
Other assets -- (702)
Current notes receivable 264,997 162,503
____________________
Net cash provided by (used in)
operations 262,051 176,527
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (135,577) (221,528)
Distribution from partnerships 20,945 --
Proceeds from sale of oil and gas
and mining properties 4,100 --
____________________
Net cash provided by (used in)
investing activities (110,533) (221,528)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock 14,550 --
Collection of notes receivable (9,485) --
Additions to long-term debt -- 45,000
-------------------
Net cash provided by financing
activities 5,065 45,000
____________________
NET INCREASE (DECREASE) IN CASH 156,582 --
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of
period $ (33,634) $ --
CASH AND CASH EQUIVALENTS, end of period $ 122,949 $ --
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
General
Prior to August 1993, the Company was engaged primarily in the business of
mining for gold, silver, lead, zinc and gypsum and held several mining
properties. In August 1993, the Company acquired all of the issued and
outstanding stock of Future Petroleum Corporation ("Future"), which was
engaged in the acquisition and production of oil and gas reserves.
Management of the Company has determined to dispose of most of its mining
properties and concentrate on the oil and gas business previously conducted by
Future. The historical financial statements are those of Future combined with
Intermountain beginning in August 1993.
During 1995 the Company concentrated on acquiring oil and gas leases and
performing seismic surveys and geological evaluations covering acreage that
was to be acquired or contributed to Future Acquisition 1995, Ltd.
Geological evaluations were performed on the Azalea Field in anticipation of
drilling two wells. These wells have been drilled as of May 14, 1996, and
now have been completed in the Grayburg and San Andres Formations as producers.
Strategic Developments
In December 1995, the Company's subsidiary Future Petroleum Corporation, a
Texas corporation ("Future-Texas"), contributed a substantial portion of its
oil and gas properties to Future Acquisition 1995, Ltd., a limited
partnership in which Future-Texas is the general partner. The partnership
has two limited partners, which contributed cash to the partnership to be
used in the acquisition and development of oil and gas properties. Revenues,
costs and expenses are generally allocated 15% to the general partner and 85%
to the limited partners until the limited partners have recovered their
investment and a 20% return as defined in the agreement. After that point, the
general partner is allocated 75% of revenues, costs and expenses. Certain
acquisition and development costs are allocated 100% to the limited partners.
As operator of the properties the general partner is entitled to receive copas
overhead charges which will generate income to the general partner in addition
to the 15% of revenues reserved until the 20% rate of return has been generated
to the limited partners, at which time the general partner will be allocated
75% of revenues.
Business Strategy
Operating Strategy. The Company's business strategy is to increase
its proved producing reserves by continuing its drilling activities in Texas
and Oklahoma and by pursuing acquisitions of proved oil and gas properties,
either in the form of asset purchases or mergers with other companies. The
Company will focus on producing properties with additional development
potential to augment existing production while also expanding and
diversifying its reserve base. Acquisition criteria will include reserve life,
development opportunity, profit enhancement potential, geographic
concentration and ownership levels permitting operation of acquired
properties. Under this strategy, the Company will initially seek to increase
its concentration in Texas and eventually diversify its interests outside
this core area. As of the date of this Report, the Company has no
acquisition commitments but has implemented an active program
for ongoing evaluation of opportunities meeting its acquisition
criteria.
Because of the nature of the Company's business, the results of
operations for any interim period are not necessarily indicative of the
results of operations that may be expected for an entire fiscal year.
Financial Condition
Liquidity and Capital Resources
General. The Company incurred consolidated net income of
$36,459, and of $35,044, for the three months ended September 30, 1996 and
1995, respectively. At September 30, 1996, the Company had working
capital of approximately $65,112, which was a $118,721 reduction from
the $183,833 working capital that the Company had as of September 30, 1995.
This reduction in working capital was due primarily to the contribution
of oil and gas properties to Future Acquisition 1995, Ltd., which the
Company's subsidiary Future-Texas
The Company requires capital to continue with its acquisition
of producing oil and gas properties and drilling prospects as well as to
complete drilling on existing properties and to earn an interest in
prospects developed by others under standard industry farmout
arrangements. The Company has established a financial relationship
through the limited partnership it has formed through its subsidiary
Future-Texas. The Company believes that through the limited partnership
it now has the ability to acquire producing oil and gas properties as well
as fund development drilling and uphole recompletions as required.
The Company anticipates completing a drilling prospect and/or
other explorations during the next 12 months as well as acquiring
additional producing oil and gas properties. The Company believes that
these projects will be funded through the limited partnership it has formed
through its subsidiary Future-Texas. This included 2D seismic acquisition
on the Price Ranch Prospect in anticipation of the drilling of the Marty A-1
well which has been drilled and completed in the Brown Dolomite Formation.
The well is waiting on pipeline connection. The Company has also
completed the drilling of two development wells that have been
completed as producers in the Grayburg and the San Andres formations in
the Azalea Field, located in Midland County, Texas. The Company is
currently preparing to drill three (3) additional well in the Azalea Field.
During the three months ended September 30, 1996, operating activities
required net cash of approximately $56,771 which, when offset by non-cash
expenses for depreciation, depletion, and amortization, increases in accounts
payable and increases in receivables, resulted in net income of approximately
$36,459 for the period. In the same period during 1995, operations required
net cash of approximately $77,000, which resulted in a net profit from
operations of $35,044. Investing activities required approximately $14,000
and required $112,000 for the three month period ended September 30, 1996,
and 1995, respectively.
Results of Operations
Total revenues for the nine months ended September 30, 1996, increased
8% over revenues for the preceding year, and well operation fees increased by
340% and other income increased by $24,904.
Lease operations and production expenses were lower for the nine months
interim period ended September 30, 1996, as compared to the corresponding period
a year earlier. General and administrative expenses decreased by 5% in the nine
month interim period during 1996, as compared to a year earlier as a result of
the Company's cost cutting efforts.
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
None.
b. Reports on Form 8-K.
None.
During the quarter ended September 30, 1996, the Company did not file
any report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FUTURE PETROLEUM CORPORATION
Registrant
Dated: November 14, 1996 By: /s/ B. Carl Price
B. Carl Price, President,
Principal Financial and Accounting Officer
(Signature)
Dated: November 14, 1996 By: /s/ Christine J. Sirera
Christine J. Sirera
Secretary
(Signature)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 122,949
<SECURITIES> 0
<RECEIVABLES> 341,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 464,348
<PP&E> 210,710
<DEPRECIATION> (78,095)
<TOTAL-ASSETS> 1,449,028
<CURRENT-LIABILITIES> 1,414,160
<BONDS> 0
<COMMON> 34,868
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,449,028
<SALES> 14,200
<TOTAL-REVENUES> 59,589
<CGS> 0
<TOTAL-COSTS> 60,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,459
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
