<PAGE> 1
FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
(Mark One) Washington, D.C. 20549
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________to ____________________________
Commission file number: 0-3912
PETROL INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 75-1282449
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation of Organization)
202 N. THOMAS, SUITE 4, SHREVEPORT, LOUISIANA 71107-6539
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (318) 424-6396
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
Check mark whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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: [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
State the issuer's revenues for its most recent fiscal year: $810,365
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the average of the closing bid and
asked price of the stock as of March 12, 1998 was $499,124.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares of common stock, $.10 par value, outstanding as of
March 19, 1998 was 1,597,196.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
DOCUMENTS INCORPORATED BY REFERENCE:
None
Page 1 of 34 Pages
Index appears at Page 10
<PAGE> 2
ITEM 1. BUSINESS.
GENERAL DESCRIPTION.
Petrol Industries, Inc. ("Petrol" or the "Company") was organized under
the laws of the State of Nevada in 1968 as a wholly-owned subsidiary of
Sovereign Industries, Inc. In 1970, Sovereign Industries, Inc. distributed a
substantial portion of Petrol's common stock to its stockholders. Since the
dates of their respective organizations, Petrol and its wholly-owned
subsidiaries have been engaged in a single industry segment - drilling for and
producing oil and gas on leased property located in the Caddo Pine Island
Field, the Greenwood-Waskom Field, and the Shreveport Field, all in Caddo
Parish, Louisiana. Petrol and its wholly-owned subsidiaries currently employ
16 persons in the aggregate.
As of December 31, 1997, Petrol's leases contained 8 completed gas wells,
18 completed wells producing oil and gas, and 326 completed oil wells,
principally in the Annona Chalk zone. Petrol estimates that, on the average,
its wells have been producing for a period in excess of 25 years. An aggregate
of 275 wells producing oil or oil and gas are currently being operated. The
Company expects that if received oil prices justify the expenditure,
approximately 30 of its wells will be placed back in operation during the
course of 1998, as a result of its on-going rework program discussed below,
although even so, it is expected that approximately 20-25 wells will
temporarily not be operating at any given time as maintenance is required.
Management is carefully examining whether to suspend production on certain
wells to conserve available capital and assets. During the course of 1997, the
Company disposed of two of its leases which had become unprofitable to operate.
Virtually all of the Company's oil production comes from property
characterized as stripper well property, meaning that the wells located thereon
produced an average of 10 barrels or less per day. In 1997, Petrol's interests
in oil wells and gas wells taken together with oil wells owned by the limited
partnerships organized in connection with its 1979, 1983 and 1984 drilling
programs had a gross production of 42,672 barrels of oil and 3,038 MCF of gas,
and production, net to Petrol, of 32,516 barrels of oil and 3,038 MCF of gas.
The prices obtained by Petrol for its oil are in direct proportion to its
gravity (a.p.i.); the higher the gravity, the higher the price. Approximately
51% of Petrol's oil production constitutes high gravity, light crude, having a
gravity of 40 a.p.i. or above; the balance of Petrol's production ranges from
18 to 39 a.p.i. During the calendar year 1997, the average price received by
Petrol for its oil (including wells owned by the various partnerships) was
$18.44 per barrel of oil and $2.04 per MCF of gas.
REWORK AND MAINTENANCE PROGRAMS.
Petrol maintains for itself and the limited partnerships it formed (see
below) an ongoing rework and maintenance program with respect to all its
wells. During 1997 and 1996, approximately $157,199 and $151,054 were
expended on such maintenance.
In 1979, 1983 and 1984 Petrol formed Louisiana partnerships in commendam
(limited partnerships) for the development of oil and gas wells on its
properties. In connection with such programs, Petrol contributed drilling
sites and hardware, was responsible for drilling and completing the wells on a
"turnkey" basis, and presently operates the completed wells. Actual drilling
was done by one of several locally available subcontractors. The Company also
<PAGE> 3
handles the administrative and bookkeeping arrangements for the partnerships.
Petrol was paid fees for drilling the partnerships' wells, receives additional
fees for operating the wells and is entitled to a share of the partnerships'
net income.
The Company receives 75% of net revenues from the 26 wells drilled for the
1983 limited partnership and from the 17 wells drilled for the 1984 limited
partnership.
There was no drilling activity in 1996 or 1997.
MARKET FOR PETROL'S OIL AND GAS PRODUCTION.
The Company's oil and gas production is sold to major oil companies and
other purchasers which gather oil production by tankwagon in areas where
pipelines are not available. Two companies, EOTT Energy Operating Limited
Partnership, formerly EOTT Energy ("EOTT") and Citgo Petroleum Corporation
together accounted for 93.3% of the Company's 1997 oil sales. More than half a
dozen other customers account for the balance of the Company's sales. Petrol
is not a party to any long-term supply contracts for oil and gas.
In recent years, Petrol's production has been sold at the local open
market price, which is reflective of world-wide supply of and demand for crude
oil and local demand for natural gas. Management believes that the continuing
desire of domestic refiners and marketers of oil and gas to secure access to
domestic production will continue to create a strong market for Petrol's
products. Petrol anticipates, however, that the price which its products will
command will continue to closely match world oil prices, which in turn reflect
world economic and political conditions.
GOVERNMENTAL REGULATION.
Petrol, in the operation of its existing oil and gas wells and in the
drilling of new wells, is subject to a number of federal, state and other laws
and regulations concerning requirements relating to permits to drill wells, the
spacing of wells, the prevention of waste of oil and gas, and the manner of
drilling and completing wells. Management believes that Petrol is in
compliance with all federal, state and local statutes and regulations
regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment. Although compliance with such
statutes and regulations has a material effect on the Company's capital
expenditures and earnings, such compliance does not adversely affect its
competitive position in its industry, as all other producers in its market are
subject to the same statutes and regulations. Should such regulations be
strengthened, however, the Company would likely not have the capital or liquid
asset reserves to ensure compliance, given the cash flow generated from oil
sales at current oil prices.
ITEM 2. PROPERTIES.
a. LOCATION AND CHARACTER OF THE COMPANY'S PROPERTIES. Petrol, in
connection with its oil and gas production, currently leases approximately 110
parcels of property, located in the Caddo Pine Island Field and the Shreveport
Field, both located in Caddo Parish, Louisiana. Most of its wells are shallow
oil wells, completed in the Annona Chalk Zone, at depths ranging from 1,400
feet to 1,600 feet. In general, the leases held by Petrol provide that they
shall remain in force so long as producing wells are being operated thereon or
so long as Petrol is actively engaged in rework thereon. If Petrol does not
<PAGE> 4
produce any oil from a particular lease and is not engaged in any rework on
such lease for a period of three consecutive months, such lease may at the
option of the lessor, be deemed abandoned. Because of the Company's shortage
of capital and liquid assets, Management is examining the possibility of
suspending production on many of its leases. If such a strategy is
implemented, Management will seek to minimize the adverse effect which
suspension of production could have on the Company's lease holdings.
b. RESERVES. See Supplemental Information regarding Oil and Gas
Producing Activities at Pages 21 to 24 and Schedules 3 and 4 at Pages 25 to 26,
for estimates of net quantities of proved oil and gas reserves, and for
standardized measure of discounted future net cash flow relating thereto.
c. RESERVES REPORTED TO OTHER AGENCIES. The Company did not file any
estimates of oil and gas reserves with any federal authority or agency during
1997.
d. PRODUCTION. For the years ended December 31, 1996 and 1997, the
average sales price (including transfers) per unit of oil produced was $20.34
and $18.44, respectively, and the average production cost (lifting cost) per
unit of production for oil was $15.36 and $15.73, respectively.
e. PRODUCTIVE WELLS AND ACREAGE. As of December 31, 1997, the Company
held the following productive wells and developed acres:
OIL GAS OIL & GAS
(i) Gross Productive Wells 326 8 18
(ii) Net Productive Wells 316 1.2 10.5
(iii) Gross Developed Acres 4,288 1,310 958
(iv) Net Developed Acres 2,436.3 66 179.5
f. UNDEVELOPED ACREAGE. As of December 31, 1997, the Company held the
following undeveloped acreage:
(i) Gross Acres 121
(ii) Net Acres 54
g. DRILLING ACTIVITY. No drilling activity occurred in 1997 or 1996.
h. PRESENT ACTIVITIES. See Item 1.
i. DELIVERY COMMITMENTS. The Company is not, and for more than three
years, had not been required to provide any fixed or determinable quantity of
oil or gas under any contracts or agreements.
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
<PAGE> 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Until June 8, 1992, trading in the Company's common stock was reported in
the National Association of Securities Dealers' Automated Quotation system.
Since June 9, 1992, the Company's common stock has been traded
over-the-counter. Following are the high and low bids of its common stock as
of January 1, 1996, on a quarterly basis. Prices are reported by the National
Quotation Bureau, Inc. which may reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
HIGH BID LOW BID
-------- -------
1996
1st Quarter 3/16 5/32
2nd Quarter 7/16 3/16
3rd Quarter 3/8 1/8
4th Quarter 9/16 1/8
1997
1st Quarter 5/16 5/32
2nd Quarter 1/2 5/32
3rd Quarter 9/32 3/16
4th Quarter 7/16 5/32
1998
1st Quarter thru March 13 3/8 7/32
On March 20, 1998, there were 3,747 holders of record of its common stock.
No dividends were declared or paid during 1996 or 1997 and the Company has
no present intention to pay cash dividends in the foreseeable future.
During the course of 1997, Joseph M. Rodano, President and Treasurer of
Petrol, as well as a member of its Board of Directors, purchased a total of
92,000 shares Common Stock, $.10 par value per share, of Petrol Industries,
Inc. During the course of 1996, Mr. Rodano purchased a total of 27,500
shares. Each purchase was, in each case, in an open market transaction. All
of the shares purchased by Mr. Rodano were purchased with his personal funds.
<PAGE> 7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
1997 COMPARED TO 1996
(a) RESULTS OF OPERATIONS. The Company continues to endeavor a decrease
in production for 1997, as overall production declined 5.1% from 1996. This
decline in gross production is also accompanied by a decrease in received oil
prices. The average price of an equivalent barrel of oil received in 1997 was
$18.44, down from $20.34 received on average for 1996. The decline in
production when associated with the decline in received oil prices resulted in
a net loss to the Company of $236,196, or $.14 per share, on revenues of
$810,365.
The net loss from operations (before other income/expense items) was
$224,618 for 1997 as compared to $138,457 for 1996, or an increase in the loss
from operations of 62.2% over the prior year's operations. To restore
operating profitability, the Company will depend on significant increases in
overall production and this production must be aided by an increase in received
oil prices over the following twelve month period, understanding that received
oil prices are dependent on the results of world events outside the Company's
control.
(b) FINANCIAL CONDITION AND LIQUIDITY. The recurring losses from
operations continue to erode the cash and cash equivalents of the Company, as
the liquid assets are being used to fund current operations. Current
liabilities exceed current assets by $568,759 and stockholders' deficit was
$451,125 for the year ended December 31, 1997. Management has continued to
endeavor a further reduction in the average price of an equivalent barrel of
oil during the first quarter of 1998.
Management is examining available financing alternatives to enable it to
remain in operation. These alternatives range from seeking outside equity
capital to permit continued or expanded operations, with the hope of lowering
average direct lifting costs, to shutting down all but minimal operations
utilizing only a skeleton staff, putting the Company in a suspended state for
as long as assets permit. Management is also examining the possibility of
realizing value for the Company's remaining assets, including, if necessary,
dissolution.
(c) ENVIRONMENTAL. The Company's operations are subject to numerous laws
and regulations designed to protect the environment and/or impose remedial
obligations. The Company operates certain oil fields for which known or
potential obligations for environmental remediation exist.
Although the Company is not aware of any environmental matters that might
have a material effect on the Company's financial condition at December 31,
1997, there is the possibility that expenditures could be required, or revised
regulatory requirements could necessitate expenditures at certain sites. Such
expenditures could have a material impact on the results of operations in a
future period.
1996 COMPARED TO 1995
(a) RESULTS OF OPERATIONS. Production declined 10.5% from 1995. The
decline in production offset the increase in received oil prices, resulting in
a net loss of $133,243, or $.08 per share, on revenues of $956,541. The
<PAGE> 8
Company's operating loss of $138,457 declined from last year's operating loss
of $171,218.
The average price of an equivalent barrel of oil received in 1996 was
$20.34, up from $16.59 received on average in 1995.
(b) FINANCIAL CONDITION AND LIQUIDITY. Due to the Company's recurring
losses from operations, significant operating and administrative expenses,
current liabilities in excess of current assets, and a stockholders' deficit of
$214,929, the Company will lack sufficient capital reserves and liquid or
liquidatable assets to permit a full year of operations.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS.
This Annual Report on Form 10-KSB includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act") and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). All statements other than statements of
historical facts included in this Annual Report on Form 10-KSB regarding
reserve estimates, planned capital expenditures, future oil and gas production
and prices, future drilling activity, the Company's financial position,
business strategy and other plans and objectives for future operations, are
forward-looking statements. Although the Company believes that the
expectations reflected in such forward- looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. There
are numerous uncertainties inherent in estimating quantities of proved oil and
natural gas reserves and in projecting future rates of production and timing
of development expenditures, including many factors beyond the control of the
Company. Reserve engineering is a subjective process of estimating
underground accumulations of oil and natural gas that cannot be measured in an
exact way, and the accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. As a result, estimates made by different engineers often vary from
one another. In addition, results of drilling, testing and production
subsequent to the date of an estimate may justify revisions of such estimate
and such revisions, if significant, would change the schedule of any further
production and development drilling. Accordingly, reserve estimates are
generally different from the quantities of oil and natural gas that are
ultimately recovered. Additional important factors that could cause actual
results to differ materially from the Company's expectations include changes
in oil and gas prices, changes in regulatory or environmental policies,
production difficulties, transportation difficulties and future drilling
results. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by such factors.
RECENT ACCOUNTING PRONOUNCEMENTS
In February of 1997, the Financial Accounting Standards Board (FASB)
issued SFAS 128, EARNINGS PER SHARE, effective for financial statements for
both interim and annual periods ending after December 15, 1997. SFAS 128
provides for revised calculation of earnings per share to compare with
current international reporting and provides for computation of earnings per
share from continuing operations and earnings per share of net income along
with disclosures of the respective computations. Since the Company is of
simple capital structure with only one class of common stock outstanding,
<PAGE> 9
management does not anticipate any material impact by SFAS 128 in the
calculation of the respective earnings per share computation and disclosures.
In February of 1997, the Financial Accounting Standards Board (FASB)
issued SFAS 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE, effective
for financial statements for periods ending after December 15, 1997. SFAS
129 provides for the presentation in summary from within an entity financial
statements, the pertinent rights and privileges of the various securities
outstanding and the disclosure within its financial statements of the number
of shares issued upon conversion, exercise or satisfaction of required
conditions during at least the most recent annual fiscal period and any
subsequent interim period presented. Since this SFAS pertains only to the
disclosure of required information, it should not have any financial impact
on the Company's operations.
In June of 1997, the Financial Accounting Standards Board (FASB) issued
SFAS 130, REPORTING COMPREHENSIVE INCOME, effective for fiscal years
beginning after December 15, 1997. SFAS 130 discusses how to report and
display comprehensive income and its components. Comprehensive income is
defined as "the change in equity (net asset) of a business enterprise during
a period from transactions and other events and circumstances from non owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners." This
statement divides comprehensive income into net income and other
comprehensive income, and there should be no material impact by this SFAS on
operations or financial statements.
In June of 1997, the Financial Accounting Standards Board (FASB) issued
SFAS 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, effective for fiscal years beginning after December 15, 1997.
SFAS 131 requires that public business enterprises report certain information
about operating segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises report
certain information about their products and services, the geographic areas
in which they operate, and their major customers. At the current time, the
Company does not meet the additional reporting requirements of this SFAS.
<PAGE> 10
ITEM 7. INDEX TO FINANCIAL STATEMENTS.
PAGE
----
Independent Auditors' Report 11
Consolidated Balance Sheet 12
Consolidated Statements of Operations 13
Consolidated Statements of Changes in Stockholders' 14
Deficit
Consolidated Statements of Cash Flows 15
Notes to Consolidated Financial Statements 16
<PAGE> 11
Independent Auditors' Report
The Board of Directors and Stockholders
Petrol Industries, Inc. and Subsidiaries
Shreveport, Louisiana
We have audited the consolidated balance sheet of Petrol Industries, Inc. and
Subsidiaries as of December 31, 1997, and the related consolidated statements
of operations, stockholders' deficit, and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The financial statements of Petrol
Industries, Inc. and Subsidiaries as of December 31, 1996, were audited by
other auditors whose report dated February 14, 1997, expressed an unqualified
opinion.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Petrol Industries,
Inc. and Subsidiaries at December 31, 1997, and the results of their
consolidated operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Petrol
Industries, Inc. and Subsidiaries will continue as a going concern. As
discussed in Note 2 to the financial statements, the Company has suffered
recurring losses from operations and has a net capital deficiency that raises
substantial doubt about the entity's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
HEARD McELROY & VESTAL LLP
Shreveport, Louisiana
March 1, 1998
<PAGE> 12
<TABLE>
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1997
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 174,809
Accounts receivable:
Trade 56,499
Other 9,817
---------
66,316
Inventory 43,643
Prepaid expenses 2,468
---------
Total current assets 287,236
---------
Property and equipment, at cost:
Land 7,000
Developed and undeveloped oil and gas
properties-successful efforts method 4,180,055
Trucks and other operating equipment 349,911
Furniture and fixtures 44,015
---------
4,580,981
Less accumulated depreciation, depletion and amortization 4,521,200
---------
59,781
---------
Cash surrender value of life insurance, net 56,746
Other assets 1,107
---------
$ 404,870
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 47,611
Payable to interest owners 303,692
Payable to officer, net 391,701
Accrued expenses 112,991
---------
Total current liabilities 855,995
---------
Stockholders' deficit:
Preferred stock-no par value. Authorized 1,000,000
shares; no shares issued or outstanding ---
Common stock-$.10 par value. Authorized 10,000,000
shares; issued and outstanding 1,597,196 and
1,597,233 shares in 1997 and 1996 159,720
Accumulated deficit (610,845)
---------
Total stockholders' deficit (451,125)
---------
$ 404,870
=========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 13
<TABLE>
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1997 and 1996
1997 1996
---- ----
<S> <C> <C>
Revenues:
Oil and gas sales $ 792,965 938,911
Other operating income 17,400 17,630
--------- ---------
810,365 956,541
--------- ---------
Expenses:
Lease operating expense 671,106 691,132
Severance taxes 21,118 35,422
General and administrative 333,508 359,375
Depreciation, depletion and
amortization 9,251 9,069
--------- ---------
1,034,983 1,094,998
--------- ---------
Operating loss (224,618) (138,457)
Other income and (expense):
Gain on sale of assets 7,500 19,473
Interest and dividend income 11,947 10,709
Interest expense (31,025) (24,968)
--------- ---------
(11,578) 5,214
Loss before provision
for income taxes (236,196) (133,243)
Income Tax --- ---
--------- ---------
Net loss $ (236,196) (133,243)
========= =========
Net loss per share $ (.14) (.08)
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 14
<TABLE>
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Deficit
Years ended December 31, 1997 and 1996
1997 1996
---- ----
<S> <C> <C>
Preferred stock $ --- ---
Common stock:
Balance at beginning of year 159,720 159,724
Retirement of stock --- (4)
--------- ---------
Balance at end of year 159,720 159,720
--------- ---------
Accumulated deficit:
Balance at beginning of year (374,649) (241,406)
Net loss (236,196) (133,243)
--------- ---------
Balance at end of year (610,845) (374,649)
--------- ---------
Total stockholders' deficit $ (451,125) (214,929)
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 15
<TABLE>
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997 and 1996
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net loss $ (236,196) (133,243)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation, depletion and 9,251 9,069
amortization
Gain on sale of assets (7,500) (19,473)
Losses on retirements of property
and equipment included in lease
operating expenses --- 20,767
Increase in cash surrender value
of life insurance (6,270) (11,100)
Decrease (increase) in accounts
receivable 26,468 (1,796)
Decrease (increase) in inventory 4,004 (17,657)
Decrease in prepaid expenses 2,857 9,883
Increase (decrease) in accounts payable
and accrued expenses (6,182) 42,210
Increase in payable to officer, net 150,446 130,547
Increase in payable to interest owners 25,136 34,478
--------- ---------
Net cash provided (used) by
operating activities (37,986) 63,685
--------- ---------
Investing activities:
Capital expenditures (13,060) (35,338)
Proceeds from sale of property and
equipment 7,500 20,000
--------- ---------
Net cash used by investing
activities (5,560) (15,338)
--------- ---------
Financing Activities:
Purchase and retirement of common stock --- (4)
--------- ---------
Net cash used by financing activities --- (4)
--------- ---------
Increase (decrease) in cash and cash
equivalents (43,546) 48,343
Cash and cash equivalents at beginning
of year 218,355 170,012
--------- ---------
Cash and cash equivalents at end of year $ 174,809 218,355
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 16
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of Petrol Industries, Inc. and its Subsidiaries (the
"Company"), all of which are wholly owned. All significant intercompany
transactions have been eliminated.
Cash and Cash Equivalents -- For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, demand deposits with banks or other
financial institutions, and short-term, highly liquid investments with original
maturities of three months or less.
Inventory -- Inventory consists of crude oil accumulated in the Company's
own storage tanks and is valued at the posted market price at the end of the
year.
Property and Equipment -- The Company's oil and gas producing activities
are accounted for using the successful efforts method of accounting in
accordance with Statement of Financial Accounting Standards No. 19. The costs
incurred to acquire property (proved and unproved) and all development costs
and exploratory costs which find proved oil and gas reserves are capitalized.
The costs of exploratory wells drilled are capitalized until determination is
made as to whether such wells have found proved oil and gas reserves. Upon
final determination, such costs are charged to operations if no reserves are
found or are capitalized as producing oil and gas properties. Total cost
capitalized for oil and gas producing activities that exceed the estimated
discounted future net cash flows related to oil and gas reserve quantities are
charged to expense on a quarterly basis.
During 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Management, after a review of
relevant facts and circumstances, makes a determination whether an indication
of impairment exists with respect to any asset or group of assets of the
Company. If impairment indicators are present, management assesses whether
fair value or, if fair value is not determinable, the present value of the
expected future cash flows from the operation of assets, including any proceeds
from their eventual disposition, are at least equal to their carrying value.
Should future cash flows be less than the assets' carrying value, an impairment
loss is recognized through a charge to operations and a reduction of the
carrying value of the assets. The impairment loss is based upon a
determination of fair value or, if fair value is not determinable, the present
value of the expected future cash flows from the operation of assets.
Depreciation, Depletion and Amortization -- Depreciation, depletion and
amortization of producing oil and gas properties are provided under the
unit-of-production method, comparing production to estimated proved developed
oil and gas reserves.
(Continued)
<PAGE> 17
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other property and equipment are depreciated on a straight-line basis over
their estimated useful lives.
Income Taxes -- The Company follows the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), ACCOUNTING FOR INCOME
TAXES, which requires the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities and are measured using the
enacted tax rates that are assumed will still be in effect when the
differences are expected to reverse. The effect on deferred taxes of a
change in a tax rate is recognized in the statement of income for the period
covering the enactment date.
Use of Estimates -- Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Financial Instruments -- Statement of Financial Accounting Standards No.
107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires that the
Company disclose estimated fair values for its financial instruments. Fair
value estimates set forth below for the Company's financial instruments:
Accounts receivable, accounts payable, payable to interest owners and
accrued expense -- The carrying amounts approximate fair value because of
the short maturity of these instruments.
The fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instruments.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
(2) LIQUIDITY AND FINANCIAL CONDITION
Due to the Company's recurring losses from operations, significant
operating and administrative expenses, current liabilities in excess of current
assets, and a stockholders' deficit of $451,125, the Company will lack
sufficient capital reserves and liquid or liquidatable assets to permit a full
year of operations.
Management is examining available financing alternatives to enable it to
remain in operation. These alternatives range from seeking outside equity
capital to permit continued or expanded operations, with the hope of lowering
average direct lifting costs, to shutting down all but minimal operations
utilizing only a skeleton staff, putting the Company in a suspended state for
as long as assets permit. Management is also examining the possibility of
realizing value for the Company's remaining assets, including, if necessary,
dissolution. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
(Continued)
<PAGE> 18
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) CASH SURRENDER VALUE LIFE INSURANCE
In 1993, the Company borrowed $78,666 against a life insurance policy.
No payments have been paid on the principal as of December 31, 1997, however,
interest payments of $6,293 were made in 1997 and 1996. The stated rate of
interest is 8%. There are no terms for repayment of the principal. The
outstanding loan amount has been netted against the cash surrender value of
the policy which totaled $135,412 at December 31, 1997.
(4) INCOME TAXES
There was no income tax expense (benefit) reported for the years ended
December 31, 1997 and 1996.
The following table presents reconciliations of the expected tax expense
(benefit) using the statutory federal tax rates of 34% in 1997 and 1996, and
the Company's actual tax benefit:
1997 1996
---- ----
Tax (benefit) at the statutory
federal rate $ (80,307) (45,303)
Current year losses which provided
no tax benefit 74,251 38,825
Other, net 6,056 6,478
-------- --------
$ ___ ___
======== ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1997 and 1996, are presented below.
1997 1996
---- ----
Deferred tax assets:
Net property and equipment, principally
due to differences in depreciation $ 60,000 60,142
Accounts payable and accrued expenses 51,906 48,851
Tax net operating loss carryforward 387,283 401,340
Capital loss carryforward --- ---
Statutory depletion carryforward 313,943 282,131
--------- ---------
Total gross deferred tax assets 818,132 792,464
Less valuation allowance (818,132) (792,464)
--------- ---------
Net deferred tax assets $ ___ ___
========= =========
(Continued)
<PAGE> 19
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Due to the Company's history of net operating losses and the uncertainties
that affect the ultimate realization of the above deferred tax amounts, the
Company has recorded a 100% valuation allowance applicable to these deferred
tax assets. The Company will periodically review the realizability of these
assets and adjust the related valuation allowance as needed.
The valuation allowance for deferred tax assets of approximately $818,132
at December 31, 1997, has increased approximately $26,000 (the same as the
decrease in certain deferred tax assets) from the amount determined at January
1, 1997. Any subsequently recognized tax benefits relating to the valuation
allowance would be reported as a reduction of income tax expense in the
consolidated statement of operations.
The Company has federal tax net operating loss carryforwards of
approximately $1,138,000 which expire between 2003 and 2011, which could be
used to offset future federal taxable income. The Company has a statutory oil
and gas depletion carryforward of approximately $923,000, which has no
expiration date.
There were no taxes paid in 1997 and 1996.
(5) PAYABLE TO INTEREST OWNERS
The Company has recorded as a payable totaling $303,692 to approximately
100 individual owners of royalty, working interests, and/or overriding royalty
interest as a result of proceeds it received in settling a dispute in a
property, plus the undistributed net revenues since the settlement date in
1992. The Company intends to distribute the funds when more accurate
information is available regarding the amounts due to individual interest
owners.
(6) BUSINESS AND CREDIT CONCENTRATIONS
The Company has been engaged in a single industry segment - drilling for
and producing oil and gas on leased property located in the Caddo Pine Island
Field, Greenwood Waskom Field, and the Shreveport Field, all in Caddo Parish,
Louisiana.
The Company is primarily involved in the production of oil which is sold
to approximately ten oil companies. The Company had sales to two major
customers in 1997 and 1996 as follows:
1997 1996
---- ----
Customer 1 $ 188,000 242,000
Customer 2 552,000 619,000
------- -------
$ 740,000 861,000
======= =======
(Continued)
<PAGE> 20
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) NET LOSS PER SHARE
Net loss per share of common stock was computed on the weighted average
number of shares outstanding of 1,597,196 and 1,597,223 for 1997 and 1996,
respectively.
(8) AFFILIATED PARTNERSHIPS
The Company serves as general partner in several limited partnerships
engaged in exploration and production activities. The Company is compensated
for providing management and accounting services to the partnerships (see Note
9). The Company also serves as operator on partnership wells and in connection
therewith receives and disburses partnership funds.
Indebtedness to partnerships for their portion of undistributed net
revenue was approximately $17,332 at December 31, 1997, and is included in
accounts payable.
(9) OTHER OPERATING INCOME
Other operating income for the years ended December 31, 1997 and 1996,
consists of the following:
1997 1996
---- ----
Affiliated partnerships - operations
and administration fee $ 12,180 12,406
Other 5,220 5,224
------ ------
$ 17,400 17,630
====== ======
(10) RELATED PARTY TRANSACTIONS
Payable to officer, net, consists of the following:
1997 1996
---- ----
Accrued salary plus interest $ 506,064 356,327
Note payable to Company plus interest (43,817) (40,570)
Advances (70,547) (74,502)
-------- --------
$ 391,701 241,255
======== ========
Interest at a bank's prime rate is accruing on all accrued salary and
unpaid interest thereon. Interest cost included in expense during 1997 and
1996 were $24,732 and $16,644, respectively. The note payable represents a
$35,000 note payable issued to the Company during 1995, repayable on demand;
the loan bears interest at an annual rate of one-quarter of a percent in excess
of prime rate of Citibank, N.A. Interest included in income was $3,238 and
$3,246 during 1997 and 1996, respectively. Advances are non-interest bearing.
(Continued)
<PAGE> 21
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
<PAGE> 22
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Oil and Gas Information
(unaudited)
OIL AND GAS PRODUCING ACTIVITIES
Information shown in Schedules 1 through 4 are presented in accordance with
Statement of Financial Accounting Standards No. 69, Disclosures about Oil and
Gas Producing Activities.
CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES-Schedule 1
This schedule presents the capitalized costs of proved oil and gas properties
along with the applicable accumulated depreciation, depletion, and
amortization.
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND
DEVELOPMENT ACTIVITIES-Schedule 2
This schedule presents costs incurred in oil and gas producing activities by
type of expenditure.
ESTIMATED NET QUANTITIES OF PROVED OIL AND GAS RESERVES-Schedule 3
All of the Company's oil and gas reserves are located in one geographic area
within the continental United States. Reserves cannot be measured exactly
since reserve estimates involve many subjective judgments and must be reviewed
periodically and adjusted to reflect additional information gained from
reservoir performance, new geological and geophysical data, and economic
changes.
Proved reserves are those quantities of oil and gas that appear with reasonable
certainty to be recoverable in the future from known reservoirs under existing
economic and operating conditions at that time. As additional information
becomes available or conditions change, estimates must be revised. Significant
declines in the price of crude oil or significant technological changes may
render these reserves to be uneconomical to develop. The last analysis of
geological and engineering data performed by the Company to estimated proved
reserves was performed in 1974. As a result of the financial condition of the
Company and the significant length of time that has expired since the last
engineering analysis, proved undeveloped reserves have been omitted from
Schedule 3.
Proved developed reserves are those quantities of proved oil and gas reserves
that are recoverable through existing wells within existing equipment and
operating methods. The last analysis of geological and engineering data
performed by the Company to estimated proved developed reserves was performed
as of January 1, 1989. Since 1989, changes in proved developed reserves have
been made for the results of annual production volumes.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVE QUANTITIES-Schedule 4
Estimated future net cash flows were determined by summing yearly future cash
inflows computed by applying year-end prices (approximately $15.33 per barrel
for oil at December 31, 1997) to estimated quantities of proved developed
<PAGE> 23
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Oil and Gas Information
(unaudited)
reserves as of each year end. Oil prices have declined in early 1998 from year
end levels. The estimated future production costs were deducted based on the
assumed continuation of the cost levels and economic conditions existing at the
respective year end. Income taxes are not included due to the Company not
being in a tax paying position. The future net cash flows were then discounted
at 10%.
The Company cautions readers that the standardized measure information, which
places a value on proved reserves, is not indicative of either fair market
value or present value of future cash flows. Other logical assumptions could
have been used for this computation which would likely have resulted in
significantly different amounts. This information is disclosed in accordance
with Statement No. 69 solely to provide readers with a common base for use in
preparing their own estimates of future cash flows and for comparing reserves
among companies. Management of the Company does not rely on the computations
in Schedule 4 when making investment and operating decisions.
Schedule 4 also presents a summary of the principal sources of change in the
standardized measure of discounted future net cash flows for the years 1997 and
1996.
<PAGE> 24
Schedule 1
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Capital Costs Relating to Oil and Gas
Producing Activities
December 31, 1997 and 1996
(unaudited)
1997 1996
---- ----
Proved properties $ 4,180,055 4,262,884
Other 349,911 336,098
--------- ---------
4,529,966 4,598,982
Accumulated depreciation, depletion
and amortization 4,482,391 4,552,235
--------- ---------
Net capitalized costs $ 47,575 46,747
========= =========
NOTE: Included in capitalized costs at December 31, 1997 and 1996, is
$746,941, representing contributions of capital costs made by the Company to
affiliated limited partnerships pursuant to various partnership agreements.
<PAGE> 25
Schedule 2
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Costs Incurred in Oil and Gas Property Acquisition,
Exploration, and Development Activities
Years ended December 31, 1997 and 1996
(unaudited)
1997 1996
---- ----
Developmental costs $ 6,560 24,686
======= =======
<PAGE> 26
Schedule 3
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Estimated Net Quantities of
Proved Developed Oil and Gas Reserves
Years ended December 31, 1997 and 1996
(unaudited)
1997 1996
---- ----
Barrels Barrels
of Oil of Oil
------- -------
Proved developed reserves:
Beginning of year 293,293 356,454
Production (42,672) (44,969)
Sales of minerals in place (7,056) (18,192)
Revisions, extensions and discoveries --- ---
-------- --------
End of year 243,565 293,293
======== ========
NOTE: The proved developed reserves are all located within the United
States. Proved developed reserves have been included since they are
economically the most appropriate estimate of reserves to include in the
schedule.
<PAGE> 27
Schedule 4
PETROL INDUSTRIES, INC. AND SUBSIDIARIES
Standardized Measure of Discounted Future Net Cash
Flows Relating to Proved Oil and Gas Quantities
Years ended December 31, 1997 and 1996
(unaudited)
1997 1996
---- ----
(in thousands)
Future cash inflows $ 3,734 6,975
Future production and development
cost (3,831) (4,496)
Future income tax (expense)
benefit --- ---
------ ------
Future net cash flows (deficit) (97) 2,479
10% annual discount for estimated
timing of cash flows (deficit) 29 (826)
------ ------
Standardized measure of discounted
future net cash flows (deficit) $ (68) 1,653
====== ======
Principal sources of change in the standardized measure of discounted future
net cash flows for the years shown:
1997 1996
---- ----
(in thousands)
Net changes in prices and production
cost, including excise taxes $(1,901) 738
Sales and transfers of oil and gas
produced, net of production costs (122) (212)
Net change due to revisions,
extensions, and discoveries --- ---
Net change due to purchase (sales) of
minerals-in-place (130) (370)
Development cost incurred during the
period 7 25
Accretion of discount 165 118
Change in production rates (timing)
and other 260 173
----- -----
$(1,721) 472
===== =====
NOTE: The proved and proved developed reserves are located within the United
States.
<PAGE> 28
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Effective November 12, 1997, Petrol dismissed its prior certifying
accountants KPMG Peat Marwick and retained as its new certifying accountants,
Heard, McElroy & Vestal, L.L.P. There were no disagreements between Petrol
and KPMG Peat Marwick on matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
<PAGE> 29
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) The Directors of Petrol are as follows:
Position with the Company
and Business Experience Director
Name Age During Past Five Years Since
- ---- --- ------------------------- --------
Joseph M. Rodano 61 Chairman of the Board of 1972
Directors, President
and Chief Executive Officer
of Petrol since 1972;
Treasurer of Petrol since
1980; Assistant Secretary
since March, 1996.
Robert M. Bontempi 66 Director, Retired; Bond 1972
Salesman, Thomson McKinnon
Securities, 1983-1988.
Arlys C. Milan 43 Vice President of Petrol 1994
since 1990; Office Manager
for more than 4 years prior
thereto; elected to Board of
Directors in August, 1994;
Secretary since March, 1996.
All Directors serve until the next annual meeting of stockholders and
until their successors are duly elected and qualify.
(b) The chief executive officers and four most highly compensated
executive officers of the Company are as follows:
Position with the Company and Business
Name Age Experience During Past Five Years
- ---- --- --------------------------------------
Joseph M. Rodano 61 See "Directors" above.
Arlys C. Milan 43 See "Directors" above.
Jimmy S. Foster 54 Vice President of Petrol since April,
1990; Field Supervisor for more than five
years prior thereto.
All Officers serve at the pleasure of the Board of Directors.
<PAGE> 30
(c) Significant Employees.
None.
(d) Family Relationships.
None.
(e) Business Experiences.
See (a) and (b) above.
(f) Involvement in Legal Proceedings.
Not applicable to any person listed in (a) or (b) above.
The Company has no standing audit, nominating or compensation committees,
or committees performing similar functions. The Board of Directors met twice
in 1997.
ITEM 10. EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows, for the two most recently ended fiscal years
ended December 31, the cash compensation paid or accrued for those years to
the Chief Executive Officer of the Company who is the only one among the four
most highly compensated executive officers of the Company whose aggregate
annual salary and bonus paid in compensation for services rendered in all the
capacities in which he served exceeded $100,000 for the Company's last fiscal
year:
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
------------------------------------ --------------------------------
Name and Restricted All Other
Principal Other Annual Stock Options/ LTIP Compensation
Position Year Salary($) Bonus($) Compensation($) Awards($) SARs(#) Payouts($) ($)
- -------- ---- --------- -------- --------------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph M. Rodano, 1996 125,000 - - - - - -
President, Chief 1997 125,000 - - - - - -
Executive Officer,
and Chairman of the
Board
</TABLE>
Stock Option Grants
There were no grants of stock options/SARs made during the fiscal year
ended December 31, 1997 and 1996 to Mr. Rodano.
<PAGE> 31
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------
Individual Grants
- ------------------------------------------------------------
Percent of Potential Realizable Value
Total at Assumed Annual Rates of (Alternative to
Options/ Stock Price Appreciation Potential Realizable
SARs For Option Term Realizable Value)
Options/ Granted to __________________________ ____________________
SARs Employees Exercise or
Granted in Fiscal Base Price Expiration Grant Date
Name (#) Year ($/Sh) Date 5%($) 10%($) Present Value $
- ---- ------- ---------- ----------- ---------- ----- ------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Not Applicable
</TABLE>
Stock Option Exercises
Mr. Rodano did not exercise any stock options during the fiscal year ended
December 31, 1997 or 1996 and did not have any unexercised options at the
fiscal year-end.
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Value of Unexercised
Number of Unexercised In-the-Money
Shares Option/SARs at Option/SARs at
Acquired FY-End(#) FY-End ($)
on Value --------------------------- ---------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Not Applicable
</TABLE>
Long-Term Incentive Plan Awards in Last Fiscal Year
There were no awards made in the fiscal year ended December 31, 1997 and
1996 to Mr. Rodano under any form of Company LTIP (w/incentives spanning more
than one fiscal year).
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------
Estimated Future Payouts Under Non-Stock
Number of Shares, Price-Based Plans
Units or Other Performance or Other ----------------------------------------
Rights Period Until Maturation Threshold Target Maximum
Name (#) or Payout ($ or #) ($ or #) ($ or #)
- ---- ----------------- ----------------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Not Applicable
</TABLE>
<PAGE> 32
Except as described above, no annuity, pension or retirement benefits,
plans for cash or non-cash compensation or other existing plans or arrangements
for remunerating officers and directors, other than salary, are presently in
effect. The Company does not have any stock option, stock appreciation or
other form of incentive plan or arrangement for its management or employees.
Non-management directors were paid an annual fee of $800 in 1995, with the
remainder of the fees being accrued. Fees were accrued in 1996, but none were
accrued in 1997.
There are no retirement, resignation or termination arrangements with
executive officers due to change in control of the Company, or for any other
reason.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following table sets forth, as of March 19, 1998, information
concerning the beneficial ownership of Petrol's Common Stock by each person who
is known by management to own beneficially more than 5% of such securities:
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
---------------- ----------------------- --------
Joseph M. Rodano 529,325 (direct) 33.1%
(b) The following table sets forth, as of March 19, 1998, information
concerning the beneficial ownership of voting securities of the Company by all
current directors individually, by the Chief Executive Officer and the two next
most highly compensated officers, and by all directors and officers as a group:
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
---------------- ----------------------- --------
Joseph M. Rodano 529,325 (direct) 33.1%
Robert M. Bontempi 0 0.0%
Arlys C. Milan 0 0.0%
Jimmy S. Foster 0 0.0%
(c) Changes in Control. There are no arrangements known to the Company,
including any pledge by any person of securities of the Company, the operation
of which may at a subsequent date result in a change in control thereof.
<PAGE> 33
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others. In April, 1995, the
Company loaned its president the principal sum of $35,000, repayable on
demand; the loan bears interest at an annual rate of one-quarter of a percent
in excess of the prime rate.
(b) Certain Business Relationships of Directors.
Not applicable.
(c) Indebtedness of Management in excess of $60,000.
Not applicable.
(d) Transactions with Promoters.
Not applicable.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits:
3(a) Certificate of Incorporation of the Company, and
amendments thereto (Filed as Exhibit 3(a) to the
Company's 1981 Annual Report on Form 10-K and
incorporated herein by reference).
3(b) By-laws of the Company (Filed as Exhibit 3(b) to the
Company's 1981 Annual Report on Form 10-K and
incorporated herein by reference).
10(a) Compromise Agreement between Petrol Industries, Inc. and
Enron Oil Trading & Transportation Company dated as of
November 30, 1992 (contained in the Company's 1992
Annual Report on Form 10-K).
10(b) Compromise Agreement between and among Petrol
Industries, Inc., Oryx Energy Company and Enron Oil
Trading & Transportation Company dated as of November
30, 1992 (contained in the Company's 1992 Annual Report
on Form 10-K).
22 Subsidiaries of the Company (Filed as Exhibit 22 to
Registrant's 1981 Annual Report on Form 10-K and
incorporated herein by reference).
(b) Reports on Form 8-K.
A Form 8-K regarding a change in certifying accountants
was filed with the Commission on November 19, 1997. Form
8-K/A was filed with the Commission on December 5, 1997,
to add the response letter of KPMG Peat Marwick.
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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.
PETROL INDUSTRIES, INC.
March 30, 1998 By: Joseph M. Rodano
----------------------------------
Joseph M. Rodano
President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 30, 1998 Joseph M. Rodano
-------------------------------------
Joseph M. Rodano - Director
March 30, 1998 Robert Bontempi
-------------------------------------
Robert Bontempi - Director
March 30, 1998 Arlys C. Milan
-------------------------------------
Arlys C. Milan - Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 174,809
<SECURITIES> 0
<RECEIVABLES> 56,499
<ALLOWANCES> 0
<INVENTORY> 43,643
<CURRENT-ASSETS> 287,236
<PP&E> 4,580,981
<DEPRECIATION> 4,521,200
<TOTAL-ASSETS> 404,870
<CURRENT-LIABILITIES> 855,995
<BONDS> 0
0
0
<COMMON> 159,270
<OTHER-SE> (610,845)
<TOTAL-LIABILITY-AND-EQUITY> 404,870
<SALES> 792,965
<TOTAL-REVENUES> 810,365
<CGS> 692,224
<TOTAL-COSTS> 692,224
<OTHER-EXPENSES> 342,759
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,025
<INCOME-PRETAX> (236,196)
<INCOME-TAX> 0
<INCOME-CONTINUING> (236,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236,196)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
