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 March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ___________ to ___________
Commission file number 0-16487
Inland Resources Inc.
(Exact name of small business issuer as
specified in its charter)
Washington 91-1307042
(State of incorporation or organization)
(IRS Employer Identification No.)
475 17th Street, Suite 1500, Denver, Colorado 80202
(Address of principal executive offices) (ZIP Code)
Issuer's telephone number, including area code:
(303) 292-0900
___________________________________________________________
(Former name, address and fiscal year, if changed, since last
report)
Indicate by check mark whether the issuer (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 to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes xx No
Number of shares of common stock, par value $.001 per share,
outstanding as of May 1, 1995: 28,927,999
1
<PAGE>
PART 1. FINANCIAL INFORMATION
<TABLE>
INLAND RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
<CAPTION>
March 31, December 31,
1995 1994
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 663,556 $ 1,691,156
Restricted cash 342,636 160,658
Accounts receivable 657,482 902,959
Inventory 979,148 835,691
Department of Energy contract 315,385 650,147
Prepaid expenses 593,658 379,622
Total current assets 3,551,865 4,620,233
Property and equipment, at cost:
Oil and gas properties
(successful efforts method) 12,872,524 11,884,625
Gas and water transportation
facilities 647,833 646,507
Accumulated depletion,
depreciation and amortization (712,005) (489,840)
12,808,352 12,041,292
Other property and equipment, net 377,220 376,128
Total assets $ 16,737,437 $17,037,653
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $1,726,888 $ 2,407,179
Current portion of long-term debt 2,366,500 1,965,157
Property reclamation costs,
short-term 300,000 300,000
Total current liabilities 4,393,388 4,672,336
Long-term debt 2,803,996 2,157,842
Property reclamation costs,
long-term 225,036 283,670
Stockholders' equity:
Preferred Class A stock, par
value $.001; 20,000,000 shares
authorized, 106,850 shares of
Series A issued and outstanding;
liquidation preference of $5,342,500 107 107
Additional paid-in capital
- - preferred 3,672,861 3,672,861
Common stock, par value $.001;
100,000,000 shares authorized;
issued and outstanding 28,927,999 28,928 28,928
Additional paid-in capital
- - common 13,168,591 13,168,591
Accumulated deficit (7,555,470) (6,946,682)
Total stockholders' equity 9,315,017 9,923,805
Total liabilities and
stockholders' equity $ 16,737,437 $ 17,037,653
The accompanying notes are an integral
part of the financial statements
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
<TABLE>
INLAND RESOURCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three-month periods ended
March 31, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Sales of oil and gas $ 552,956 $ 184,236
Operating expenses:
Lease operating expenses 387,366 176,765
Production taxes 51,104 19,485
Exploration 11,927
Depletion, depreciation and
amortization 253,665 63,219
General and administrative 306,431 197,039
Total operating expenses 1,010,493 456,508
Operating loss (457,537) (272,272)
Interest expense (175,906)
Other income, net 24,655 1,582
Net loss $ (608,788) $(270,690)
Net loss per share $ (.02) $ (.02)
Weighted average common shares
outstanding 28,927,999 14,124,221
Dividends per share NONE NONE
The accompanying notes are an integral
part of the financial statements
</TABLE>
3
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
<TABLE>
INLAND RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three-month periods ended
March 31, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (608,788) $(270,690)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Net cash used by discontinued
operations (58,634) (38,913)
Depletion, depreciation and
amortization 253,665 63,219
Effect of changes in current
assets and liabilities:
Accounts receivable 580,239 29,462
Inventory (143,457)
Other current assets (214,036) (5,190)
Accounts payable and accrued
expenses (592,791) 23,977
Net cash used by operating activities (783,802) (198,135)
Cash flows from investing activities:
Development expenditures and
equipment purchases (1,021,817) (27,061)
Change in restricted cash (181,978)
Net cash provided by discontinued
operations 220,363
Net cash provided (used) by investing
activities (1,203,795) 193,302
Cash flows from financing activities:
Proceeds from issuance of common stock 400,000
Proceeds from long-term debt 1,000,000
Payments of long-term debt (40,003)
Net cash provided by financing
activities 959,997 400,000
Net increase (decrease) in cash
and cash equivalents (1,027,600) 395,167
Cash and cash equivalents at
beginning of period 1,691,156 302,608
Cash and cash equivalents at end
of period $ 663,556 $ 697,775
Noncash financing activity:
Issuance of note payable for
consulting services $ 87,500
The accompanying notes are an integral part
of the financial statements
</TABLE>
4
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY ORGANIZATION:
Inland Resources Inc. (the "Company") was incorporated
on August 12, 1985 in the State of Washington for the
purpose of acquiring, exploring and developing interests
in mining properties. In 1987 the Company developed a leased
property (the "Toiyabe Mine") and began production of gold
and silver. Operations at the Toiyabe Mine have included
open-pit mining, crushing, agglomerations, heap leaching
and gold and silver recovery processes. Currently, the
Company's mining operations are limited to the final
detoxification, reclamation and closure of the Toiyabe
Mine in compliance with Nevada and federal laws.
Effective March 1, 1993, the Company acquired an undivided
50% interest in 36,860 net acres of oil and gas leases
in the Uinta Basin located in Duchesne County Utah, and an
undivided 50% interest in various tangible oil and
gas assets (collectively called the "Duchesne
County Fields"). Accordingly, the Company's business
emphasis changed from precious metals mining to oil
and gas development and production.
Effective September 21, 1994, the Company acquired all
the outstanding common and preferred stock of Lomax
Exploration Company ("Lomax"). Lomax is also engaged
primarily in oil and gas development and production
activities in the Uinta Basin area of Northeastern Utah.
The acquisition was accounted for as a purchase,
therefore, the net assets and results of operations of
Lomax are included in the Company's consolidated financial
statements from the acquisition date forward. Lomax operates
as a wholly-owned subsidiary of the Company.
2. BASIS OF PRESENTATION:
The preceding financial information has been prepared by
the Company pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC") and, in the
opinion of the Company, includes all normal and recurring
adjustments necessary for a fair statement of the results of
each period shown. Certain information and footnote
disclosures normally included in the financial statements
prepared in accordance with generally accepted
accounting principles have been condensed or omitted
pursuant to SEC rules and regulations. Management believes
the disclosures made are adequate to ensure that the
financial information is not misleading, and suggests that
these financial statements be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
3.RECLASSIFICATIONS:
Certain amounts for 1994 have been reclassified to
conform with the 1995 financial statement presentation.
The reclassifications had no impact on net loss or the
accumulated deficit.
5
<PAGE> PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LONG-TERM DEBT:
The Company is in violation of the minimum net cash
flow covenant within the Inland Loan Agreement. Waivers
regarding compliance with this covenant have been received
covering the period through June 30, 1995. Before that
date, the Company intends to renegotiate the amount of
minimum net cash flows required to be generated from the
Duchesne County Fields based on the current 1995 operating
plan. If Joint Energy Development Investments Limited
Partnership ("JEDI") is unwilling to renegotiate the
minimum net cash flow requirement, the Company has
the option to cure its current default by transferring
$191,000 from the unrestricted operating account into
the restricted operating account. The Company also
has the option to cure any future minimum net cash
flow deficits by making similar transfers. In addition,
borrowings under the Inland Loan Agreement are due
and payable on December 31, 1995. If the Company is
unable to repay the borrowings when due or should the
Company remain in violation of covenants, it is possible
that JEDI could foreclose on the Duchesne County
Fields. While the Company considers this course of
action unlikely, the impact would not be significant to
current company-wide operations since the Inland Loan
Agreement is nonrecourse to other assets of the
Company. Also, Inland does not operate the Duchesne County
Fields and the property does not currently generate any
unrestricted operating cash for the Company. See an expanded
discussion of the Inland Loan Agreement within the
"Liquidity and Capital Resources" section of Management's
Discussion and Analysis or Plan of Operation.
6
<PAGE> PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 2. Management's Discussion and Analysis or Plan
of Operation:
GENERAL:
Upon the acquisition of the Duchesne County Fields in March
1993, Inland's mining operations were limited to final
detoxification, reclamation and closure of the Toiyabe
Mine, and Inland's business emphasis was shifted to its
current business of oil and gas development and production.
Effective February 1, 1994, Evertson sold its remaining 50%
undivided interest and assigned its option for 2,008,894
shares of Inland Common Stock to Petroglyph Gas Partners,
L.P. ("PGP"). As a result, Inland will now jointly develop the
Duchesne County Fields with PGP.
Effective September 21, 1994, the Company acquired all
the outstanding common and preferred stock of Lomax. Lomax is
also engaged primarily in oil and gas development and
production activities in the Uinta Basin area of Northeastern,
Utah. At the acquisition date, Lomax owned varying working
interests in 62 wells of which the majority were operated and
located adjacent to the Company's properties. Lomax's
property interest included 8,508 net acres of oil and gas
leases in Utah and 8,847 net acres of mostly undeveloped
leasehold in Wyoming. The Lomax acquisition was accounted for
as a purchase, therefore, the net assets and results of
operations of Lomax are included in the Company's
consolidated financial statements from the acquisition
date forward. Lomax operates as a wholly-owned subsidiary
of the Company.
Inland's strategy for achieving profitability is to increase
oil and gas reserves and production through acquisition of
existing oil and gas production in developed fields,
and further developing such existing production through
development drilling, reworking existing wells and engaging
in secondary recovery enhancement operations. Increased
production levels are expected to increase operational
efficiencies at the field level which in turn should have a
positive impact on the Company's equivalent per barrel lifting
costs. In addition, general and administrative costs should
continue to decrease in relation to production since these
costs are generally fixed in nature and thereby do not
increase proportionate to production. The Company also
has protected the price it receives for a portion of
its oil production by entering into hedging arrangements.
The ultimate success of the Company's plan to achieve
profitability is primarily dependent on locating and
purchasing properties on terms acceptable to the Company,
continuing to secure sufficient capital to acquire target
properties and conduct extensive development and secondary
recovery operations, then successfully implementing development
and secondary recovery plans.
7
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company does not generally intend to pursue
exploratory drilling in undeveloped oil and gas properties
due to the industry's relatively high historical failure
rate relating to exploratory drilling and the resulting
higher associated finding costs. However, from time to
time the Company may for various reasons determine to
drill exploratory wells in certain areas considered
strategic by the Company.
RESULTS OF OPERATIONS:
Three Months Ended March 31, 1995 and 1994:
Continuing Operations:
The Company acquired Lomax effective September 21,
1994. Accordingly, the results of operations for the first
quarter of 1995 includes three months of consolidated
activity, while the results of operations for the first
quarter of 1994 does not include any Lomax activity.
Sales during the first quarter of 1995 exceeded the previous
year first quarter by $369,000 due to the Lomax sales and
development drilling in the Duchesne County Fields. A total
of five wells were completed and put on production in the
Duchesne County Fields during the period from November 1994
to January 1995. Monthly consolidated sales volumes
increased to an average of 9,600 Bbl of oil and 13,400
Mcf of natural gas in the first quarter of 1995 from
2,500 Bbl and 14,000 Mcf in 1994. In addition, the average
price received for oil production increased from approximately
$14.00 Bbl during 1994 to approximately $17.09 Bbl during 1995.
Natural gas prices fell from an average price of $2.00 Mcf in
1994 to approximately $1.50 Mcf during 1995.
Lease operating expenses increased $211,000 between
periods primarily due to the Lomax operations in 1995. Lease
operating expense per barrel of oil equivalent ("BOE")
decreased from $12.27 for the year ended December 31, 1994
to $10.90 for the three month period ended March 31, 1995.
The Company's policy is to expense the costs of water
injection operations during the start-up phase of secondary
recovery water flood operations. These expenses include the
costs of purchasing water and operating water source wells,
water injection wells and water injection stations. As a
result of this policy, the Antelope Creek Field (a start-up
water flood operation in 1994) had operating costs in excess
of $14.00 per BOE during 1994 and continued high operating
costs during the first quarter of 1995, while the operating
costs for the first water flood unit within the Lomax properties
(a mature water flood operation) (the "Monument Butte Unit")
were less than $5.00 per BOE. The decrease in lifting costs
per BOE in mature water floods is attributable to increased
production rather than decreased operating costs. The Company
considers the Monument Butte Unit to be the only mature
water flood in which the Company has an interest at March 31,
1995.
8
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The increase in production taxes and depletion, depreciation
and amortization between periods is consistent with the
increased sales volumes in 1995.
Exploration expense in 1995 primarily represents the
Company's share of costs to retain unproved acreage and costs
related to uneconomic wells.
General and administrative expenses increased
approximately $109,000 or 56% between periods. Comparing the
56% general and administrative increase to the sales increase
of 200% provides support for the administrative economies
gained through the Lomax merger. The majority of the general
and administrative increase is related to salaries, payroll
taxes and employee benefits as the Company's employee base
grew from five employees at March 31, 1994 to twenty-two
employees at March 31, 1995. The increase in employees was
required since the Company became an operator of properties
through the merger with Lomax and to prepare for the 1995
drilling program. The remaining increase is associated with the
cost of operating with a larger employee base such as
additional travel, meals and supplies expense. In
addition, Inland increased the size of its office space in
May 1994 and incurred additional rent expense.
Interest expense represents the financing cost of borrowings
in 1995 under the Inland Loan Agreement, Lomax Loan Agreement
and other debt assumed during the merger with Lomax. No debt
existed during the first quarter of 1994.
Other income in 1995 primarily represents interest earned on
the investment of surplus cash balances and certain trading
income.
Discontinued Operations:
The Company considers all mining activities to be
discontinued operations. During the first quarter of 1994, the
Company sold an undeveloped mining property for approximately
$222,500. Since March 1994, the Company's only mining
activity has been the Toiyabe Mine. Reclamation activities
at the Toiyabe Mine during 1994 concentrated on the
detoxification of leach pad #1 which, based on sampling
results, appears to be within the toxicity guidelines as
established in the approved reclamation plans. The focus of
reclamation activities in 1995 will be the detoxification
of leach pad #2 using fresh water obtained from Spring
precipitation and snow melt.
During the first quarter of 1994, the Company incurred
net reclamation costs of $22,300 at the Toiyabe Mine. The net
cost was comprised of $60,300 of reclamation expense offset by
$38,000 of gross profit from the sale of incidental mineral
recoveries during the reclamation process. During the first
quarter of 1995, the Company incurred $58,700 of reclamation
expense and did not sell any minerals. In each year, the net
reclamation cost was charged against the reclamation reserve
9
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
and, therefore, did not impact the Consolidated Statement of
Operations. Based on factors presently known or anticipated,
the Company believes that the reclamation reserve of
$525,000 at March 31, 1995 will be sufficient to fully
reclaim the Toiyabe Mine in compliance with established
environmental standards.
LIQUIDITY AND CAPITAL RESOURCES:
During the first quarter of 1995, the Company's unrestricted
cash and cash equivalents decreased $1,028,000 to
$664,000. The significant events providing cash flows were (1)
net cash flows from oil and gas properties of $114,000 for
the quarter and (2) receipt of $335,000 under the contract
with the Department of Energy. The primary uses of cash flows
during the first quarter of 1995 were (1) reclamation
activities at the Toiyabe Mine site of $59,000, (2)
principal payments on long term debt of $40,000, (3)
payment of general and administrative expenses of $306,000,
(4) the reduction of outstanding accounts payable and
accrued expenses of $593,000, (5) the payment of interest
expense of $176,000 and (6) net changes in other current assets
and liabilities and other items of $303,000. The Company
also borrowed a total of $1,000,000 under the Inland and
Lomax Loan Agreements and further developed the Duchesne
County Fields and Lomax properties.
On August 24, 1994, the Company entered into a Loan
Agreement with JEDI, an affiliate of Enron Corp., to provide
nonrecourse financing for the development of the Duchesne
County Fields (the "Inland Loan Agreement"), and on September
21, 1994, the Company entered into a separate Loan Agreement
with JEDI to provide financing for the development of the
Lomax oil and gas properties (the "Lomax Loan Agreement").
The production loan portion of each facility includes the
initial $1.5 million of borrowings and bears interest at
prime plus 1.5%. The development loan portion of the Inland
Loan Agreement includes the next $6.0 million of advances
beyond the initial $1.5 million production loan for a
maximum combined commitment of $7.5 million, and the
development loan portion of the Lomax Loan Agreement includes
the next $3.5 million of advances beyond the initial $1.5
million production loan for a maximum combined commitment
of $5.0 million. The development loan portion of each
facility bears interest at prime plus 4% plus an equity
yield enhancement in the form of a 7.25% overriding
royalty interest in the Inland Loan Agreement and an 8.5%
overriding royalty interest in the Lomax Loan Agreement,
in each instance proportionately reduced by the Company's
interest in the oil and gas properties and commencing
January 28, 1996 and continuing until the internal rate
of return to JEDI equals 19% on the development loan
portion of the applicable facility. Each advance under
each facility is also subject to a 1% loan commitment
fee. Interest only is payable monthly under each
facility until December 31, 1995. On December 31, 1995,
the entire principal balance of the Inland Loan Agreement
10
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
is due, and the principal balance on the Lomax Loan
Agreement will be scheduled over 60 monthly installments
of principal and interest. The Company is required to meet
certain minimum ratios, generate or contribute agreed upon
levels of monthly net cash flow and maintain a commodity
price hedging agreement under each facility. The Inland Loan
Agreement is collateralized by the Company's interest in
the Duchesne County Fields and the Lomax Loan Agreement
is collateralized by the Company's interest in substantially
all the Lomax properties. At March 31, 1995, the Company had
borrowed $2,000,000 under the Inland Loan Agreement and
$2,900,000 under the Lomax Loan Agreement.
The Company is in violation of the minimum net cash
flow requirements of the Inland Loan Agreement. Waivers
regarding compliance with this covenant have been received
covering the period through June 30, 1995. Before that
date, the Company intends to renegotiate the minimum net
cash flow requirements based on the current 1995 operating
plan for the Duchesne County Fields. If JEDI is unwilling to
renegotiate the minimum net cash flow requirement, the
Company has the option to cure its current default by
transferring $191,000 from the unrestricted operating account
into the restricted operating account. The Company could also
cure any future minimum net cash flow deficits by making
similar transfers.
As noted above, substantially all oil and gas properties of
the Company are mortgaged under the Loan Agreements with JEDI.
Under those agreements, the net cash flows (generally
defined as production revenue less production taxes and
lease operating costs) from mortgaged properties are required
to be maintained in segregated accounts and are not otherwise
available for general corporate purposes. Funds in the
segregated accounts may be used to make principal and interest
payments as they become due. As a result, the Company is
required to cover the net reclamation costs of the Toiyabe
Mine, general and administrative expenses, capital
expenditures on non-mortgaged properties and
contributions to cover minimum net cash flow deficiencies
under the Loan Agreements out of its current unrestricted
operating cash holdings and the Company's share of proceeds
received under the contract between Lomax and the Department
of Energy. While the Company believes such unrestricted cash
holdings and sources will be sufficient to cover such costs,
it is possible that the Company could experience operating
cash shortfalls during 1995. The Company anticipates curing
any operating cash shortfalls by selling additional equity of
the Company, selling interests in properties or entering into
a joint venture arrangement with an industry partner that
provides the Company with additional unrestricted
operating cash. Furthermore, the amount borrowed under the
Inland Loan Agreement is due and payable on December 31, 1995,
as further discussed below.
The Loan Agreements with JEDI also require the Company
to maintain price protection agreements to help insure the
11
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
repayment of indebtedness. In satisfaction of this
requirement in the Inland Loan Agreement, on August 24,
1994 the Company entered into a commodity contract with
JEDI, through its affiliate Enron Risk Management Services
Corp. Under terms of the contract, the Company hedged
crude oil production over a four year period beginning
January 1, 1996 in monthly amounts escalating from
8,500 Bbl in January 1996 to 13,250 Bbl in December
1999. The hedge was structured as a cost free collar
whereby if the average monthly price (based on NYMEX Light
Sweet Crude Oil Futures Contracts) (the "Average Price") is
between $17.00 and $20.75 per barrel, no payment is due under
the contract. If the Average Price is less than $17.00,
the Company is paid the difference between $17.00 and the
Average Price, multiplied by barrels of crude oil hedged
that month. Similarly, should the Average Price exceed $20.75
per barrel, the Company is required to pay the difference
between $20.75 and the Average Price, multiplied by barrels
of crude oil hedged that month. A similar contract was
entered into with JEDI regarding the Lomax Loan Agreement
on November 22, 1994. This contract hedges crude oil production
over a five year period beginning January 1, 1996 in
monthly amounts escalating from 8,500 Bbl in January
1996 to 14,000 Bbl in December 2000. This hedge was
also structured as a cost free collar with a floor price of
$18.00 and a ceiling price of $20.55. Since the hedged
quantities are based on expected future development in the
Duchesne County Fields and the Monument Butte Field and
because hedging activities do not affect the actual sales
price for the Company's crude oil, there exists substantial
risk to the Company's financial position and results of
operations should the Average Price rise significantly above
the ceiling prices of $20.75 and $20.55 in the respective
contracts and development activities do not produce the
expected results or progress on a slower than expected
timetable. The Company is aware of and continually evaluates
this financial risk and has the ability to enter into commodity
contracts to mitigate potential financial loss should the
risk factors as explained above begin to materialize.
The Company has also entered into similarly structured
commodity contracts on August 4, 1994 and January 18, 1995
which cover the period ending December 31, 1995. These
contracts hedge an aggregate 8,000 Bbl of oil each month
with a "cost-free" range from $17.00 to $20.00 per Bbl.
Because recent consolidated net production has averaged in
excess of 9,000 Bbl per month and because the actual
average sales price of oil in the field has approximated the
Average Price in the contract, these contracts do not
currently subject the Company to significant financial
exposure. No hedging income or loss was recognized during
the first quarter of 1995 under these contracts.
12
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
During the first quarter of 1995, the Company incurred
capital expenditures of $1,022,000. A substantial portion
of the expenditures relate to the drilling and completion of
three development wells on the Lomax properties. The
Company also incurred its proportionate share of completion
costs on two wells in the Antelope Creek field and
performed various other activities. Throughout the
remainder of 1995, the Company anticipates using borrowings
available under the Inland Loan Agreement and Lomax Loan
Agreement to further develop oil and gas operations in the
Duchesne County Fields and on Lomax properties through
additional infill well drilling, further development of
existing water flood areas and the initiation of new
water flood areas.
The Company continues to aggressively seek other
opportunities to acquire existing oil and gas production
in developed fields. The Company will attempt to
finance such acquisitions through (i) seller financing,
whenever possible; (ii) joint operating agreements
with industry partners where the Company may sell
part of its position to provide acquisition and
development funds; (iii) sales of equity or debt of the
Company; or (iv) traditional bank lines of credit, although
the Company currently has no existing bank lines of credit
or arrangements with any bank to loan funds.
The Inland Loan Agreement is due and payable on December
31, 1995. The Company does not anticipate generating
sufficient cash from operations before that time to
fully repay this indebtedness. The Company plans to
renegotiate the Inland Loan Agreement with JEDI or a
different debt provider to allow for a principal and interest
amortization schedule similar to the five year repayment
schedule contained in the Lomax Loan Agreement. If this is
not possible, the Company has several options for the repayment
of the Inland Loan Agreement, including (i) entering into an
agreement with an industry partner to jointly develop the
Duchesne County Fields, (ii) selling additional equity of
the Company, or (iii) selling the property to a third party.
If the Company is unable to repay borrowings under the
Inland Loan Agreement or should the Company remain in
violation of covenants, it is possible that JEDI could
foreclose on the Duchesne County Fields. While the Company
considers this course of action unlikely, the impact would
not be significant to current companywide operations since the
Inland Loan Agreement is nonrecourse to other assets of the
Company. Also, Inland does not operate the Duchesne County
Fields and the property does not currently generate any
unrestricted operating cash for the Company.
The Company is subject to numerous federal and state laws
and regulations relating to environmental matters. Increasing
focus on environmental issues nationally has lead the
Company to continue to evaluate its responsibilities to the
environment. The Company believes it is in compliance in all
material respects with applicable federal, state and
13
<PAGE>
PART 1. FINANCIAL INFORMATION (Continued)
INLAND RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
local environmental regulations. There are no
environmental proceedings pending against the Company. At
March 31, 1995, the Company had recognized a liability of
$525,000 to cover the future costs of reclaiming the Toiyabe
Mine.
PART II. OTHER INFORMATION
INLAND RESOURCES INC.
Items 1, 2, 3, 4 and 5 are omitted from this report as inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this Quarterly
Report on Form 10-QSB:
Exhibit
Number Description of Exhibits
3.1 Articles of Incorporation, as amended through May 5, 1993 (filed
as Exhibit 3.1 to the Company's Registration Statement on Form S-
18, Registration No. 33-11870-F, and incorporated herein by
reference).
3.1.1 Articles of Amendment to Articles of Incorporation dated May 6,
1993 (filed as Exhibit 3.1.1 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1993, and
incorporated herein by reference).
3.1.2 Articles of Amendment to Articles of Incorporation dated August
16, 1994 designating a series of stock (filed as Exhibit 3.1.2 to
the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1994, and incorporated herein by reference).
3.1.3 Articles of Amendment to Articles of Incorporation filed with
Secretary of State of Washington on August 30, 1994 (filed as
Exhibit 3.1.3 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1994, and incorporated herein
by reference).
3.1.4 Articles of Correction to Articles of Amendment dated August 31,
1994 (filed as Exhibit 3.1.4 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1994, and
incorporated herein by reference).
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-18, Registration No. 33-11870-F,
and incorporated herein by reference).
14
<PAGE>
3.2.1 Amendment to Article IV, Section 1 of the Bylaws of the Company
adopted February 23, 1993 (filed as Exhibit 3.2.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1992, and incorporated herein by reference).
3.2.2 Amendment to the Bylaws of the Company adopted April 8, 1994
(filed as Exhibit 3.2.2 to the Company's Registration Statement on
Form S-4, Registration No. 33-80392, and incorporated herein by
reference).
3.2.3 Amendment to the Bylaws of the Company adopted April 27, 1994
(filed as Exhibit 3.2.3 to the Company's Registration Statement on
Form S-4, Registration No. 33-80392, and incorporated herein by
reference).
27.1 Financial Data Schedule required by Item 601 of Regulation S-B.
(b) No Current Report on Form 8-K was filed during the quarter ended
March 31, 1995.
15
<PAGE>
INLAND RESOURCES INC.
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.
INLAND RESOURCES INC.
(Registrant)
Date: May 10, 1995 By: Kyle R. Miller
Signature
Chief Executive Officer
Date: May 10, 1995 By: Michael J. Stevens
Signature
Controller (Principal
Financial and Accounting
Officer)
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the consolidated balance sheet at March 31, 1995 and the consolidated
statements of operations and cash flows for the quarter ended
March 31, 1995, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,006,192<F1>
<SECURITIES> 0
<RECEIVABLES> 657,482
<ALLOWANCES> 0
<INVENTORY> 979,148
<CURRENT-ASSETS> 3,551,865
<PP&E> 14,182,439
<DEPRECIATION> 996,867
<TOTAL-ASSETS> 16,737,437
<CURRENT-LIABILITIES> 4,393,388
<BONDS> 2,803,996
<COMMON> 13,197,519
0
3,672,968
<OTHER-SE> (7,555,470)
<TOTAL-LIABILITY-AND-EQUITY> 16,737,437
<SALES> 552,956
<TOTAL-REVENUES> 552,956
<CGS> 438,470
<TOTAL-COSTS> 1,010,493
<OTHER-EXPENSES> (24,655)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175,906
<INCOME-PRETAX> (608,788)
<INCOME-TAX> 0
<INCOME-CONTINUING> (608,788)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (608,788)
<EPS-PRIMARY> ($.02)
<EPS-DILUTED> 0
<FN>
<F1>
Unrestricted - $663,556; Restricted - $342,636
</FN>
</TABLE>
