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, 1997
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)
(214)350-7602
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last
report)
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 4,091,779 shares of common stock, par value
$0.01 per share, issued and outstanding as of November 14, 1997.
Transitional Small Business Disclosure Format (Check One): Yes No x
Page 1 of 12 Consecutively Numbered Pages
<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, 1996.
<PAGE>
FUTURE PETROLEUM CORPORATION
Balance Sheets
September 30, 1997
ASSETS
<TABLE>
<S>
CURRENT ASSETS: <C>
Cash and interest-bearing deposits $ 124,674
Current portion of notes receivable 146,177
Trade accounts receivable:
Joint interest billings 198,047
Accrued oil and gas sales 233,377
Total Current Assets 702,275
PROPERTY AND EQUIPMENT:
Proved oil and gas properties, using the full cost method of
accounting 788,123
Other 70,212
858,335
Less accumulated depletion, depreciation, amortization and
impairment (210,380)
Net Property and Equipment 647,955
Lease operating rights 609,113
Less accumulated amortization (47,862)
Net Operating Rights 561,251
OTHER ASSETS:
Mining properties held for sale 39,978
Other 10,440
TOTAL OTHER ASSETS 50,418
TOTAL ASSETS $ 1,961,899
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
Balance Sheets
September 30, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Trade accounts payable $ 166,837
Current portion of notes payable 23,382
Advances from shareholder 35,000
Accrued oil and gas proceeds payable 349,771
Total Current Liabilities 574,990
DEFERRED GAIN ON SALE 40,336
DEFERRED TAX LIABILITY 32,162
LONG TERM NOTES PAYABLE 13,729
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; 4,091,779 at September 30, 1997 and
3,486,779 at September 30, 1996 40,918
Additional paid-in capital 1,292,659
Accumulated deficit (32,895)
Total Stockholders' Equity 1,300,682
Total Liabilities and Stockholders' Equity $ 1,961,899
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
Statement of Operations and Accumulated Deficit
<TABLE>
Three Months Ended
September 30,
<S> <C> <C>
1997 1996
REVENUES:
Oil and gas sales $ 60,417 $ 14,200
Well operation fees 60,204 43,704
Other -- 1,685
Total Revenues 120,621 59,589
COSTS AND EXPENSES:
Lease operations and production taxes 56,500 32,003
General and administrative 32,123 24,121
Interest 1,004 648
Depletion, depreciation and amortization 28,926 3,238
Total Expenses 118,553 60,010
OTHER INCOME:
Gain on sale of assets -- 30,095
Income from equity investment -- 5,333
Miscellaneous income (313) --
Interest income 3,967 1,452
Total Other Income 3,654 36,880
NET INCOME 5,722 36,459
BEGINNING ACCUMULATED DEFICIT (38,617) (82,725)
ENDING ACCUMULATED DEFICIT $ (32,895) $ (46,266)
NET INCOME PER COMMON SHARE $ 0.00 $ 0.01
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,092,000 3,487,000
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
Statement of Operations and Accumulated Deficit
<TABLE>
Nine Months Ended
September 30,
<S> <C> <C>
1997 1996
REVENUES:
Oil and gas sales $ 175,696 $ 46,824
Well operation fees 168,023 134,612
Other -- 19,043
Total Revenues 343,719 200,479
COSTS AND EXPENSES:
Lease operations and production taxes 147,278 84,970
General and administrative 126,547 88,660
Interest 4,221 5,387
Depletion, depreciation and amortization 88,040 9,739
Total Expenses 366,086 188,756
OTHER INCOME:
Gain on sale of assets -- 101,803
Income from equity investment -- 154
Miscellaneous income 29,377 --
Interest income 12,533 11,622
Total Other Income 41,910 113,579
NET INCOME 19,543 125,301
BEGINNING ACCUMULATED DEFICIT (52,438) (171,567)
ENDING ACCUMULATED DEFICIT $ (32,895) $ (46,266)
NET INCOME PER COMMON SHARE $ 0.00 $ 0.04
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,092,000 3,487,000
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
Statements of Cash Flows
<TABLE>
Three Months Ended
September 30,
<S> <C> <C>
1997 1996
CASH FLOWS FROM OPERATING ACTIVATES:
Net Income $ 5,722 $ 36,459
Adjustments to reconcile to net cash used in continuing
operations:
Depreciation, depletion, and amortization 28,926 3,238
Gain on sale of assets -- (30,095)
Decrease (increase) in receivables (168,392) (58,337)
(Decrease) increase in accounts payable
and accrued expenses 70,412 47,768
Other assets (2,712) --
Current notes receivable -- 66,376
Net cash provided by (used in) operations (66,044) 65,410
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (29,736) (18,626)
Reduction of lease operating rights 35,464 --
Distribution from partnerships -- 4,459
Proceeds from sale of oil and gas and mining
properties -- --
Net cash provided by (used in) investing
activities 5,728 (14,168)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock -- --
Repayment of long-term debt (3,129) (3,616)
Net cash provided by (used in) financing
activities (3,129) (3,616)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (63,445) 47,626
CASH AND CASH EQUIVALENTS, beginning of period $ 188,119 $ 75,323
CASH AND CASH EQUIVALENTS, end of period $ 124,674 $ 122,949
CASH PAID FOR INTEREST DURING, the period $ 1,004 $ --
Supplemental information regarding non-cash investing and financing
activities:
In January 1997, the Company made an additional investment in Future Acquisition
1995, Ltd., in which they contributed 380,000 shares of common stock valued at
$237,500 in exchange for a three percent equity interest in property acquired
by the partnership along with the right to operate those acquired properties.
</TABLE>
<PAGE>
FUTURE PETROLEUM CORPORATION
Statements of Cash Flows
<TABLE>
Nine Months Ended
September 30,
<S> <C> <C>
1997 1996
CASH FLOWS FROM OPERATING ACTIVATES:
Net Income $ 19,543 $ 125,301
Adjustments to reconcile to net cash used in continuing
operations:
Depreciation, depletion, and amortization 88,040 9,739
Gain on sale of assets -- (101,803)
Decrease (increase) in receivables (172,680) (112,310)
(Decrease) increase in accounts payable
and accrued expenses 208,255 76,126
Other assets (5,209) --
Current notes receivable -- 264,997
Net cash provided by (used in) operations 137,949 262,051
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (174,419) (135,577)
Reduction of lease operating rights 35,464 --
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 (138,955) (110,533)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock 30,000 14,550
Repayment of long-term debt (18,470) (9,485)
Net cash provided by (used in) financing
activities 11,530 5,065
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 10,524 156,582
CASH AND CASH EQUIVALENTS, beginning of period $114,150 $ (33,634)
CASH AND CASH EQUIVALENTS, end of period $124,674 $ 122,949
CASH PAID FOR INTEREST DURING, the period $ 4,221 --
Supplemental information regarding non-cash investing and financing
activities:
In January 1997 the Company made an additional investment in Future Acquisition
1995, Ltd., in which they contributed 380,000 shares of common stock valued at
$237,500 in exchange for a three percent equity interest in property acquired
by the partnership along with the right to operate those acquired properties.
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
THE COMPANY
Future Petroleum Corporation (the "Company") is engaged through its
subsidiaries and subsidiary partnerships in the development of oil and
natural gas properties located onshore primarily in Texas and Oklahoma. The
Company's principal business strategies include (i) maximizing the value of
its existing high-quality, Long-Life reserves through efficient operating and
marketing practices, (ii) conducting selective exploratory and development
activities, principally in existing areas of operations, and (iii)marketing
acquisitions of producing properties, with exploration and development
potential in areas where the Company has operating experience and expertise.
As of December 31, 1996, the Company owned approximately 555 million cubic
feet of equivalent proved natural gas reserves. Substantially all of the
Company's proved reserves are proved developed reserves. Quantities stated
as equivalent natural gas reserves are based on a factor of Nine thousand
cubic feet ("MCF") of natural gas per barrel of oil.
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.
In January 1997, the Company's subsidiary Future-Texas acquired the Taylor
Properties through 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 3% to the General Partner and 97% 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
acquisitions and developments 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.
<PAGE>
PROPERTIES
Oil and Gas Holdings. The Company's properties are located onshore
principally in Texas and Oklahoma. As of November 14, 1997, the Company owns
interests in a total of 258 gross (94.84 net) producing wells, of which 213
wells are operated by the Company. As of that date, the Company had oil and
gas rights in leases comprising 17,520 gross (4,721 net) acres. The average
reserve life of these properties (based on the 1996 producing rate) is
estimated to be 26 years as of December 31, 1996.
The majority of the Company's proved reserves are concentrated in the
Panhandle field of Texas. The field is part of a reservoir that extends from
southwest Kansas through the Oklahoma Panhandle and into the Texas Panhandle.
This field which produces oil and gas from depths of 3500 feet or less, is
known for its stable Long-Life production profiles. The Company's other
properties are in the Permian Basin north Texas and in southern Oklahoma.
Wichita County Regular Field. The Company owns and operates seventy (70)
wells in the Wichita Regular Field in Wichita County, Texas. The field is on
the Bend Arch north of the Fort Worth Basin. The pay zones are the Gunsight
Sand, the Thomas Sand and an unconsolidated 600' sand and is presently under
waterflood. All of these sands are Pennsylvanian in age. The trap is a
combination of statigraphy and structure. The Company is presently performing
remedial recompletions, stimulations and improvements to the waterflood.
Panhandle Field. The Company has an interest in and operates one hundred
fifty eight (158) wells in the Panhandle of Texas. These wells are located in
Gray, Carson, Hutchinson, Moore and Roberts Counties, Texas. Most of the
wells are located in the Panhandle Field. This field is on the Amarillo
uplift West of the Anadarko Basin. All of the Company's wells produce from
the Wolfcamp Brown Dolomite of Permian Age and the Pennsylvanian Granite
Wash. Production is primarily oil on the uplift with some gas. The Company's
wells on the Western edge of the Anadarko Basin flanking the uplift are located
on anticlines along a structural ridge. These wells produce gas from the same
pay zones found on the uplift in the big Panhandle Field.
The Company has recently drilled two (2) wells in Moore County, Texas (the
Taylor Properties). These wells are currently being completed as producing
oil and gas wells.
The Company markets its gas through plants in the Panhandle Field. The high
liquid content contained in Panhandle gas enables the Company to participate
in two separate markets for its gas thereby allowing the Company to enhance
the market value of the gas stream.
Azalea Field. The Company has an interest in twenty-four (24) producing wells
and one (1) commercial salt water disposal well in the Azalea Field, located
approximately eight (8) miles Southeast of Midland, Texas in Midland County.
It is in the east central portion of the Midland Geological Basin. It is near
the edge of the Grayburg-San Andres Self as it swings across the basin from
the central basin platform on the west to the eastern shelf on the east. The
field is an anticlinal dome caused by drape over of a carbonate bioherm. The
leases are on or near the crest of the anticline. The potential pays are in the
Grayburg, Permian Age sands and carbonates and the San Andres, also Permian,
carbonates (dolomite and limestone). It is the intention of the Company and its
partner to drill infill wells to both pay zones and to start a waterflood in
order to increase the recovery of oil. Potential increases in production and
reserves will increase the Company's reserve base substantially. The Company
has completed the drilling of two development wells. The results of these
wells indicate that up to 80% of the original oil in place still remains in
the reservoir and that a portion of the remaining oil in place can be
recovered by a waterflood.
Caddo Field. The Caddo Field, located along the north edge of the Ardmore
Basin, just south of the Arbuckle Mountains was discovered on July 14, 1939,
by The Pure Oil Company. It is located in, Township 3 South Range 1 East,
Carter County, Oklahoma. Production is from the Goddard Sandstone, Sycamore
Limestone, Woodford Shale, Hunton Limestone, Viola Limestone, and 2nd Bromide
Sandstone. It has produced 3.99 MMBO and 29.9 MMMCFG. Caddo Field is
essentially a gas field with a thin oil ring around it. Structurally, the
field is an anticlinal fold on a horst block. The Company has obtained oil
and gas leases within the oil ring that surrounds the Caddo Field. One (1)
well will initially be drilled to determine if additional wells on 4 more
locations are warranted.
Cumberland Field. The Cumberland Field is located in Township 5
South Range 7-East in Bryan and Marshall Counties, Oklahoma. The
field has a northwest-southeast orientation and is located on a structural
high associated with the southwest fault block (horst) of a large northwest-
southeast oriented horst and graben fault system. Cumberland Field has
produced over 73 MMBBLS and over 54 MMMCFG. A substantial
amount of remaining BBLS of oil should be producible using present
day recovery methods and oil prices and improvements in recovery could
double or triple this number. Proven gas reserves remaining to be produced
are estimated to be at least 30 MMMCFG. The Arbuckle has never been
completely tested. It holds potentially great untapped reserves.
Cumberland Field was discovered in 1940 by the Pure (Unocal) #100-1
Quintin Little. Pays range from the Arbuckle Dolomites (Ordovician in
age) up through the Simpson Sands, Viola and Hunton Limestones,
Woodford Chert and Sycamore Siltstones (Pennsylvanian Age). The
Simpson Sands are the oil reservoirs. They also hold a large share of
the gas as attic gas in their gas caps. The Company has obtained oil
and gas leases on the flanks of this field. Major oil companies are
conducting a extensive 3-D seismic study of this area with the idea of
extending this field and further develop the remaining reserves. The
Company will be participating in the drilling of a 5900' Viola test
which will include four (4) horizontal drain holes. One (1) each for
the Sycamore, Woodford, Hunton and Viola Formations.
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.
Financial Condition
Liquidity and Capital Resources
General. The Company incurred a consolidated net income of $5,722,
and $36,459, for the three months ended September 30, 1997
and 1996, respectively. At September 30, 1997, the Company had working
capital of approximately $127,285, which was a $48,395 increase from
the $78,890 working capital that the Company had as of September 30, 1996.
This increase in working capital was due primarily to the increase in oil and
gas properties under management for Future Acquisition 1995, Ltd., which the
Company's subsidiary Future-Texas is General Partner.
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.
During the three months ended September 30, 1997, operating activities
required net cash of approximately $66,044 which, when offset by
non-cash expenses for depreciation, depletion, and amortization, increases
in accounts payable and decreases in receivables, resulted in a net income of
approximately $5,722 for the period. In the same period during 1996,
operations provided net cash of approximately $65,410, which resulted
in a net profit from operations of $36,459. Investing activities provided
approximately $5,728 and required $14,168 for the three month period
ended September 30, 1997, and 1996, respectively.
During the nine months ended September 30, 1997, operating activities
provided net cash of approximately $137,949 which, when offset by
non-cash expenses for depreciation, depletion, and amortization, increases
in accounts payable and increases in receivables, resulted in a net profit of
approximately $19,543 for the period. In the same period during 1996,
operations provided net cash of approximately $262,051, which resulted
in a net profit from operations of $125,301. Investing activities required
approximately $138,955 and required $110,533 for the nine month period
ended September 30, 1997, and 1996, respectively.
Results of Operations
Total revenues for the three months ended September 30, 1997, increased 102%
over revenues for the preceding year, well operation fees increased by
38% and other income decreased by $1,685.
Lease operations and production expenses were higher for the three months
interim period ended September 30, 1997, as compared to the corresponding
period a year earlier. General and administrative expenses
increased by 33% in the three month interim period during 1997,
as compared to a year earlier due to the Company's increased operating
activity.
<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, 1997, 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, 1997 By: /s/ B. Carl Price
B. Carl Price, President,
Principal Financial and Accounting Officer
Dated: November 14, 1997 By: /s/ Christie Sirera
Christie Sirera,
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 124674
<SECURITIES> 0
<RECEIVABLES> 409209
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 577601
<PP&E> 858335
<DEPRECIATION> 210380
<TOTAL-ASSETS> 1961899
<CURRENT-LIABILITIES> 574990
<BONDS> 0
0
0
<COMMON> 40336
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1961899
<SALES> 0
<TOTAL-REVENUES> 343719
<CGS> 366086
<TOTAL-COSTS> 366086
<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> 19543
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
