UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to .
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 (I.R.S. EmployerIdentification No.)
incorporation or organization)
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 March 31,
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 March 31, 1998 and December 31, 1997 . 3
Consolidated Statements of Operations for the three months ended
March 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 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. . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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See accompanying notes to consolidated financial statements.
PART I - FINANCIAL INFORMATION
<PAGE>
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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<CAPTION>
March 31, December 31,
1998 1997
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Current Assets
Cash and cash equivalents $ 216 $ 235
Accounts receivable, net 92 115
Inventories 50 50
Prepaid expenses 14 7
Current portion of note receivable 440 22
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Total Current Assets 812 429
Restricted Cash 40 40
Property and Equipment, net (including oil
and gas properties accounted for on the
successful efforts method) 2,247 2,198
Notes Receivable and Other Assets 21 445
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Total Assets $ 3,120 $ 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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<CAPTION>
March 31, December 31,
1998 1997
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Current Liabilities
Accounts payable $ 237 $ 160
Current portion of long-term debt 8 8
Accrued liabilities 179 83
Royalties payable 24 29
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Total Current Liabilities 448 280
Long-Term Debt, net of current portion 1 3
Prepetition liabilities 516 516
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Total Liabilities 965 799
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Stockholders' Equity
Preferred stock:
$.10 par value, 5,000,000 shares authorized;
no shares issued and outstanding - -
Common stock:
$.10 par value, 20,000,000 shares authorized;
1,059,417 shares issued and outstanding at
March 31, 1998 and December 31, 1997,
respectively 848 848
Capital in Excess of Par Value 563 563
Retained Earnings 744 902
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Total Stockholders' Equity 2,155 2,313
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Total Liabilities and Stockholders' Equity $ 3,120 $ 3,112
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<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the Three Months
Ended March 31,
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<CAPTION>
1998 1997
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REVENUES
Oilfield services $ 25 $ 12
Oil and gas 132 325
Other income 31 31
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Total Revenues 188 368
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COSTS AND EXPENSES
Oilfield services 40 35
Oil and gas 156 130
Depreciation, depletion and amortization 31 28
General and administrative 106 110
Interest 1 1
Other expense 12 8
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Total Costs and Expenses 346 312
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Net income (loss) $ (158) $ 56
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Net income (loss) per share $ (.15) $ .05
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Weighted Average Common Shares Outstanding 1,059 1,056
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</TABLE>
(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).
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Three Months
Ended March 31,
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<CAPTION>
1998 1997
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Cash Flows from Operating Activities
Net income (loss) $(158) $ 56
Adjustments to reconcile net loss to net cash
provided from operating activities:
Depreciation, depletion and amortization 31 28
Bad debt written off (15) -
Changes in operating working capital:
Accounts receivable 23 9
Prepaid (7) (11)
Other assets 1 -
Accounts payable 92 (288)
Royalties payable (5) (2)
Accrued liabilities 96 (5)
Prepetition liabilities - (5)
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Net Cash Provided (Used) by Operating Activities 58 (218)
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Cash Flows from Investing Activities
Capital expenditures (80) (91)
Note receivable 5 2
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Net Cash Used by Investing Activities (75) (89)
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Cash Flows from Financing Activities
Principal payment of debt (2) -
Long term debt borrowed - 2
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Net Cash Provided (Used) by Financing Activities (2) 2
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Net Decrease in Cash and Cash Equivalents (19) (305)
Cash and Cash Equivalents at beginning of period 275 654
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Cash and Cash Equivalents at end of period $ 256 $ 349
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<PAGE>
PETROMINERALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
-----------------------
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 three month period ended March 31, 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
------------------------
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.
NOTE 4- SUBSEQUENT EVENT
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The Company received approximately $440,000 on May 6, 1998, as an advance
payment on a note receivable. The original note, dated January 15, 1995, was
due in monthly installments of $4,923.70 for a period of 15 years at 8.50%
annual interest, with a balloon payment due at the end of the period. The
payor opted to pay the loan off early to reduce interest expense. The note
receivable has been reported as a current asset in the financial statements
for the three months ended March 31, 1998.
<PAGE>
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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FINANCIAL CONDITION
The Company had a negative cash flow of approximately $19,000 for the three
months ended March 31, 1998, compared to a negative cash flow of approximately
$305,000 for the three months ended March 31, 1997. The current period
negative cash flow is the result of depressed oil prices and production
cutbacks. The negative cash flow at March 31, 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 during the
second quarter of 1998, following the receipt of a prepayment of a $440,000
note receivable on May 6, 1998. The Company plans to use the cash from this
prepayment to reduce outstanding liabilities.
Three months ended March 31, 1998 as compared with the three months ended
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March 31, 1997.
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The Company had a loss from continuing operations of $158,000 for the three
months ended March 31, 1998 as contrasted to income from continuing operations
of approximately $56,000 for the three months ended March 31, 1997. The
current period loss is primarily the result of a significant decline in oil
and gas revenues as discussed below.
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 has
entered into a contract to sell their oil and gas producing properties to an
unrelated entity. During subsequent negotiations, the Company agreed to
retain a small portion of the field and has made repairs to the facilities in
order to prepare the property for the sale. The sale is now expected to close
sometime during May 1998.
The Company's oil and gas revenues decreased by approximately 60% as compared
to the three months ended March 31, 1997. The decrease was due to a decline
in oil prices and a decrease in the Company's production.
Oil prices have rebounded slightly since early 1998, however, prices are still
well below 1997 levels. This continues to hurt the Company's profitability.
The Company's production was also cut during the first quarter of 1998 when
the Company experienced problems with their waste water disposal well. The
problem has been corrected and production levels have since returned to their
normal levels.
<PAGE>
The Company's expenses related to oil and gas production for the current
period increased by approximately 17% as compared to the three months ended
March 31, 1997. This increase was primarily due to increased utility costs
that the Company incurred when their cogeneration plant became inoperable.
The cogeneration plant supplies electricity to operate the pumping units that
produce oil, therefore, the Company is forced to buy electricity from a
ulitity company when the cogeneration plant is inoperable. The company
recently completed the repairs to their cogeneration plant and the plant is
now fully operational.
Oilfield Services Segment
- ---------------------------
The Company continues to operate its wholly owned subsidiary Hydo-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 $13,000 during the first three months of 1998, as compared to
the same period in 1997. However, oilfield service expenses also increased by
approximately $5,000 during the same period. This resulted in a loss of
approximately $15,000 for the three months ended March 31, 1998, as compared
to a loss of approximately $23,000 for the same period in 1997. It is
difficult to determine if these losses will continue.
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.
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 256,000
<SECURITIES> 0
<RECEIVABLES> 92,000
<ALLOWANCES> 0
<INVENTORY> 50,000
<CURRENT-ASSETS> 812,000
<PP&E> 2,247,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,120,000
<CURRENT-LIABILITIES> 448,000
<BONDS> 0
0
0
<COMMON> 848,000
<OTHER-SE> 563,000
<TOTAL-LIABILITY-AND-EQUITY> 2,155,000
<SALES> 157,000
<TOTAL-REVENUES> 188,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 345,000
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> (158,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (158,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,000)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
