UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to.
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Commission File No. 1-6336
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Petrominerals Corporation
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(Exact name of registrant as specified in its charter)
Delaware No. 95-2573652
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
915 South Westminster Avenue, Alhambra, California 91803
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(Address of principal executive offices)
(626) 284-8842
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(Registrant's telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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.
[ ] [X]
No Yes
The number of shares of Registrant's common stock outstanding at June 30, 1998
was 1,059,417.
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PETROMINERALS CORPORATION
INDEX
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets June 30, 1998 and December 31, 1997. . . . . 3
Consolidated Statements of Operations for the three and six months ended
June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
Condition and Results of Operations . . . . . . . . . . . . 8
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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See accompanying notes to consolidated financial statements.
PART I - FINANCIAL INFORMATION
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See accompanying notes to consolidated financial statements.
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
(Unaudited)
ASSETS
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December 31,
June 30, 1998 1997
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Current Assets
Cash and cash equivalents $ 3,469 $ 235
Accounts receivable, net 82 115
Inventories - 50
Prepaid expenses 26 7
Current portion of note receivable - 22
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Total Current Assets 3,577 429
Restricted Cash 40 40
Property and Equipment, net (including oil
and gas properties accounted for on the
successful efforts method) 184 2,198
Notes Receivable and Other Assets 1,061 445
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Total Assets $ 4,862 $ 3,112
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PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
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December 31,
June 30, 1998 1997
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Current Liabilities
Accounts payable $ 138 $ 160
Current portion of long-term debt - 8
Accrued liabilities 66 83
Royalties payable 11 29
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Total Current Liabilities 215 280
Long-Term Debt, net of current portion - 3
Prepetition liabilities 458 516
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Total Liabilities 673 799
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Stockholders' Equity
Preferred stock:
$.10 par value, 2,900,000 shares authorized;
no shares issued and outstanding - -
Common stock:
$.80 par value, 20,000,000 shares authorized;
1,059,417 shares issued and outstanding at
June 30, 1998 and December 31, 1997,
respectively 848 848
Capital in Excess of Par Value 563 563
Retained Earnings 2,778 902
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Total Stockholders' Equity 4,189 2,313
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Total Liabilities and Stockholders' Equity $ 4,862 $ 3,112
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See accompanying notes to consolidated financial statements.
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
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For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1998 1997 1998 1997
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REVENUES
Oilfield services $ 30 $ 31 $ 55 $ 43
Oil and gas 2 264 134 589
Other income 78 42 109 73
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Total Revenues 110 337 298 705
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COSTS AND EXPENSES
Oilfield services 42 44 82 79
Oil and gas 22 146 178 276
Depreciation, depletion and amortization 2 28 33 56
General and administrative 164 120 270 230
Interest 1 - 2 1
Other expense 7 8 19 15
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Total Costs and Expenses 238 346 584 657
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Net Income (Loss) from Operations (128) (9) (285) 48
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Gain on sale of fixed assets 2,161 - 2,161 -
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Net income (loss) $2,033 $ (9) $1,876 $ 48
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Net Income (Loss) Per Share $ 1.92 $ - $ 1.77 $ .01
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Weighted Average Common Shares Outstanding $1,059 $8,475 $1,059 $8,475
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(Per share amounts at December 31, 1997 have been adjusted retroactively for
the effects of a one for eight reverse stock split on January 9, 1998. See
Note 3 - Stock Split)
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See accompanying notes to consolidated financial statements.
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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For the Six Months
Ended June 30,
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1998 1997
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Cash Flows from Operating Activities
Net income (loss) $ 1,876 $ 47
Adjustments to reconcile net loss to net cash
provided from operating activities:
Depreciation, depletion and amortization 33 56
Gain on sale of fixed assets (2,161) -
Changes in operating working capital:
Accounts receivable 33 29
Prepaid (19) (16)
Inventory 50 (4)
Other assets (594) 20
Accounts payable (22) (322)
Royalties payable (18) (8)
Accrued liabilities (17) 15
Prepetition liabilities (58) (5)
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Net Cash Provided (Used) by Operating Activities (897) (188)
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Cash Flows from Investing Activities
Proceeds from sale of assets 3,680 -
Capital expenditures - (189)
Note receivable 462 (17)
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Net Cash Used by Investing Activities 4,142 (206)
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Cash Flows from Financing Activities
Principal payment of debt (11) -
Long term debt borrowed - -
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Net Cash Provided (Used) by Financing Activities (11) -
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Net Decrease in Cash and Cash Equivalents 3,234 (394)
Cash and Cash Equivalents at beginning of period 275 654
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Cash and Cash Equivalents at end of period $ 3,509 $ 260
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PETROMINERALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
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The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results of operations for
the six month period ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
The accompanying consolidated financial statements do not include footnotes
and certain financial presentations normally required under generally accepted
accounting principles; and, therefore, should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.
Certain reclassifications have been made to the 1997 financial statements to
conform to the presentation used in 1998.
NOTE 2 - PER SHARE COMPUTATIONS
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Per share computations are based upon the weighted average number of common
shares outstanding during each year. Common stock equivalents are not included
in the computations since their effect would be anti-dilutive.
NOTE 3 - STOCK SPLIT
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On January 9, 1998, the Company's shareholders approved a one for eight
reverse split of the Company's common stock. Under the terms of the reverse
split, one share of $0.80 par value common stock will be issued for eight
shares of $0.10 par value common stock, effective as of January 25, 1998, for
shareholders of record on December 8, 1997. In addition, the Company's
shareholders approved a reduction in the number of authorized preferred stock
from 5,000,000 shares to 2,900,000 shares.
NOTE 4- DISPOSITION OF ASSETS
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On February 4, 1998, the Company entered into a contract for the sale of
substantially all of the Company's oil and gas operating assets to an
unrelated entity. These operating assets include the Company's 140 acre real
property holding in Hasley Canyon, together with the oil and gas wells and
leasehold interests and related equipment. The sale was effective April 1,
1998. The purchase price was $4,670,000 which included $3,739,000 in cash and
a production payment of $931,000, payable in installments in any month in
which certain postings for crude oil exceeds $13.50 per barrel. The monthly
payment will be equal to one-half of the difference between the posted price
and $13.50, multiplied by the barrels produced. There is no stated interest
on the note. Presently, the company has received no production payments under
this provision.
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ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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FINANCIAL CONDITION
As discussed in Note 4 to the Financial Statements, the Company has sold
substantially all of its oil and gas properties to an unrelated party. The
Company has retained interests in two small oil and gas properties. As a
result of the sale, the Company had a positive cash flow of approximately
$3,234,000 for the six months ended June 30, 1998, compared to a negative cash
flow of approximately $394,000 for the six months ended June 30, 1997.
However, the Company had a negative cash flow from operations of approximately
$285,000 for the six months ended June 30, 1998. The current period negative
cash flow is the result of a significant decline in production and sales due
to the sale of the substantially all of the Company's oil and gas properties,
coupled with continuing depressed oil prices. The negative cash flow at June
30, 1997 was the result of the Company paying off the accrued liabilities
associated with the 96-1 turnkey drilling program. The Company expects to
have positive cash flows from the earnings on its cash and cash equivalents
and from the retained oil and gas operations during the subsequent quarters of
1998.
Six months ended June 30, 1998 as compared with the six months ended June 30,
1997
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The Company sold substantially all of its oil and gas properties in the middle
of the second quarter of 1998. Accordingly, results of continuing operations
for the period ended June 30,1998 is not comparable to the same period in 1997.
BUSINESS REVIEW
Oil and Gas Segment
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As noted in the 10-KSB for the year ended December 31, 1997, the Company
entered into a contract to sell their oil and gas producing properties to an
unrelated entity. The sale was completed in May, 1998 with an effective date
of April 1, 1998. As a part of the amended sale agreement, the Company agreed
to retain a small portion of the field and made repairs to the facilities in
order to prepare the property for the sale. The Company continues to earn
marginal revenues from the retained interests in certain oil and gas
properties and interest income.
Oilfield Services Segment
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The Company continues to operate its wholly owned subsidiary Hydro-Test
International, Inc. (HTI) with existing equipment at the remaining facility
near Waller, Texas. There are no current or future plans to expand these
operations. Oilfield service revenues from HTI's operations increased by
approximately $43,000 during the first six months of 1998, as compared to the
same period in 1997. However, oilfield service expenses also increased by
approximately $58,000 during the same period. This resulted in a loss of
approximately $29,800 for the six months ended June 30, 1998, as compared to a
loss of approximately $36,000 for the same period in 1997. It is difficult to
determine if these losses will continue.
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PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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The Company is not a party to nor is its property the subject of any material
legal proceedings other than ordinary routine litigation incidental to its
business, or which is covered by insurance, except as previously disclosed in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.
ITEM 2. CHANGES IN SECURITIES
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits - None.
(b) Reports on Form 8-K - A statement on the proposed sale of the oilfield
properties was filed on February 4, 1998 on Form 8-K.
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SIGNATURES
Pursuant to the requirement 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.
PETROMINERALS CORPORATION
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(Registrant)
/s/ Paul L. Howard
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Paul L. Howard
President, CEO &
Chief Financial Officer
