PETROMINERALS CORPORATION
FORM 10-QSB
FOR THE THREE MONTHS ENDED
MARCH 31, 2000
1
<PAGE>
To the Board of Directors
Petrominerals Corporation
We have performed a review of the accompanying consolidated balance sheets of
Petrominerals Corporation (a Delaware Corporation) and Subsidiary as of March
31, 2000 and 1999, and the related consolidated statements of operations,
shareholders' equity and cash flows for the three and nine months then ended.
Our review was performed in accordance with standards for such reviews
promulgated by the American Institute of Certified Public Accountants and,
accordingly, consisted principally of obtaining an understanding, by inquiries,
of the accounting system for preparation of interim financial information; and
making inquiries of and evaluating responses from certain officials of the
Company who have responsibility for financial and accounting matters.
Because our review did not constitute an examination made in accordance with
generally accepted auditing standards, we express no opinion on the balance
sheets, statements of operations and statements of cash flows.
In connection with our review no matters came to our attention that we believe
should be reported to you. Had we performed additional procedures or had we
made an examination of the balance sheet, statements of operations and
statements of cash flows in accordance with generally accepted auditing
standards, other matters might have come to our attention that would have been
reported to you.
This report is solely for the information of the board of directors and
management and is not to be quoted in documents setting forth the unaudited
interim financial information or in any other document available to the public.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
May 15, 2000
2
<PAGE>
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, 2000
[ ] 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
--------------------------
Petrominerals Corporation
-------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 95-2573652
------------------------------ --------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
27241 Burbank, Foothill Ranch, California 92610-2500
----------------------------------------------------
(Address of principal executive offices)
(949) 588-2645
---------------
(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, 2000
was 1,059,417.
3
<PAGE>
PETROMINERALS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets March 31, 2000 and
December 31, 1999 .. . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
Condition and Results of Operations . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
4
<PAGE>
PART I - FINANCIAL INFORMATION
5
<PAGE>
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March December
31, 31,
2000 1999
------ ------
<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . $2,082 $2,128
Accounts receivable, net . . . . . . . . . 68 54
Prepaid expenses . . . . . . . . . . . . . 25 31
------ ------
Total Current Assets. . . . . . . . . . . 2,175 2,213
Restricted Cash . . . . . . . . . . . . . . 25 25
Property and Equipment, net (including oil
and gas properties accounted for on the
successful efforts method) . . . . . . . . 373 355
Notes Receivable and Other Assets . . . . . 352 437
------ ------
Total Assets. . . . . . . . . . . . . . . $2,925 $3,030
====== ======
</TABLE>
1
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March December
31, 31,
2000 1999
------ ------
<S> <C> <C>
Current Liabilities
Accounts payable . . . . . . . . . . . . . . $ 145 $ 157
Accrued liabilities . . . . . . . . . . . . . 4 4
Royalties payable . . . . . . . . . . . . . . 11 11
------ ------
Total Current Liabilities. . . . . . . . . . 160 172
Prepetition liabilities. . . . . . . . . . . . 448 448
------ ------
Total Liabilities. . . . . . . . . . . . . . 608 620
------ ------
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
March 31, 2000 and December 31, 1999,
respectively. . . . . . . . . . . . . . . . . 848 848
Capital in Excess of Par Value . . . . . . . . 563 563
Retained Earnings. . . . . . . . . . . . . . . 906 999
------ ------
Total Stockholders' Equity . . . . . . . . . 2,317 2,410
------ ------
Total Liabilities and Stockholders' Equity . $2,925 $3,030
====== ======
</TABLE>
2
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
----------------
2000 1999
---------------- -------
<S> <C> <C>
REVENUES
Oil and gas . . . . . . . . . . . . . . . $ 90 $ 30
Other income. . . . . . . . . . . . . . . 26 28
---------------- -------
Total Revenues. . . . . . . . . . . . . . 116 58
---------------- -------
COSTS AND EXPENSES
Oilfield services . . . . . . . . . . . . - 10
Oil and gas . . . . . . . . . . . . . . 84 40
Depreciation, depletion and amortization. 1 1
General and administrative. . . . . . . . 120 80
Interest. . . . . . . . . . . . . . . . . - 1
Other expense . . . . . . . . . . . . . . 4 5
---------------- -------
Total Costs and Expenses. . . . . . . . . 209 137
---------------- -------
Net Loss . . . . . . . . . . . . . . . . . (93) (79)
================ =======
Net loss per share . . . . . . . . . . . . $ (.09) $ (.07)
================ =======
Weighted Average Common Shares Outstanding 1,059 1,059
================ =======
</TABLE>
3
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------
2000 1999
------------------------ -------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss . . . . . . . . . . . . . . . . . . . . . $ (93) $ (79)
Adjustments to reconcile net loss
to net cash used from operating activities:
Depreciation, depletion and amortization . . . 1 1
Changes in operating working capital:
(Increase) decrease in accounts receivable . (14) 6
(Increase) decrease in prepaid . . . . . . . 6 11
(Decrease) increase in accounts payable. . . (12) (15)
(Decrease) increase in accrued liabilities . - (38)
------------------------ -------
Net Cash Used by Operating Activities. . . . . . . . (112) (114)
------------------------ -------
Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . (19) -
Collection from notes receivable . . . . . . . . . 85 -
------------------------ -------
Net Cash Provided (Used) by Investing Activities . . 66 -
------------------------ -------
Net (Decrease) Increase in Cash and Cash Equivalents (46) (114)
Cash and Cash Equivalents at beginning of period . . 2,153 2,953
------------------------ -------
Cash and Cash Equivalents at end of period . . . . . $ 2,107 $2,839
======================== =======
</TABLE>
4
See accompanying notes to consolidated financial statements.
<PAGE>
PETROMINERALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
(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, 2000 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, 1999.
Certain reclassifications have been made to the 1999 financial statements to
conform to the presentation used in 2000.
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.
5
<PAGE>
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
---------------------------------------------------------------------
OF OPERATIONS
-------------
FINANCIAL CONDITION
- --------------------
As discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999, the Company had sold substantially all of its oil and gas
properties in 1998 to an unrelated party. The company did retain an interest in
two small oil properties and has subsequently completed an acquisition of a 25%
interest in a Wyoming gas field. As a result of the higher commodity prices, net
cashflow increased from a negative cash flow of approximately $114,000 for the
first three months of 1999 to a negative cash flow of approximately $46,000 for
the same period in 2000. The current low level of cashflow is mainly resulting
from normal general and administrative costs while the company continues to
review acquisition and merger opportunities.
Three months ended March 31, 2000 as compared with the three months ended March
- --------------------------------------------------------------------------------
31, 1999
- ---------
With oil prices in the first quarter of 2000 nearly double of those received in
the first quarter of 1999 and the addition of the Wyoming properties, the
company has recorded revenues of $116,000 for the three months ended March 31,
2000 versus $58,000 for the same period in 1999. Net realized oil prices
increased from $8.29 per barrel for the three months ended March 31, 1999 to
$24.66 for the same period in 2000. Operating expenses were $84,000 for the
three months ended March 31, 2000 versus $40,000 for the same period in 1999.
With the addition of a new officer to implement the company's growth strategy,
general and administrative expenses increased to $120,000 for the three months
ended March 31, 2000 versus $80,000 for the same period in 1999. As a result, a
net loss increased from $79,000 for the first three months of 1999 to $93,000
for the same period in 2000.
BUSINESS REVIEW
Oil and Gas Segment
- ----------------------
As discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999, the Company had sold substantially all of its oil and gas
properties in 1998 to an unrelated party. In 1999, the company initiated a
process to use the proceeds to either purchase additional oil and gas producing
assets or merge with another company. As a result of this process the Company
completed the acquisition of a 25% interest in the Smith Ranch natural gas field
located in southwest Wyoming for approximately $102,000 in cash in September
1999. In addition to reviewing merger alternatives, management is currently
focusing its efforts on utilizing its cash balance for the acquisition of
additional oil and gas producing properties.
6
<PAGE>
- ------
Wyoming Venture
- ----------------
On September 20, 1999 the Company completed the acquisition of a 25% interest in
the Smith Ranch natural gas field located in southwest Wyoming. Current
production from the two active gas wells is 300 thousand cubic feet per day (65
mcfd net). The company participated in the drilling of a gas well in the 3rd
quarter of 1999 and that well was completed in a Lewis Sandstone interval. Due
to completion problems, that well is currently in the process of being
recompleted to an Upper Fort Union or Wasatch sand interval. The company has
plans to drill one additional well in the 3d quarter of this year. That well
will target the Lewis Sandstone but will also collect gas content information on
the Fort Union coal. This information will allow the company to complete its
reservoir analysis on the coalbed methane potential for its acreage.
Santa Clarita Area
- --------------------
As a result of the 1998 sale, the company retained a 53% working interest in the
Castaic Hills Unit, a 100% working interest in a nearby oil well and an 83.3%
working interest in 2 producing oil wells in the nearby Hasley Canyon field.
Current net production from the --13 active wells on these leases is
approximately 48 barrels per day (bopd). With oil prices at historically high
levels, the operator has initiated a program of returning wells to production
and enhancement of the water disposal activities.
In addition to the retained working interest, the company reserved a production
payment of $931,000. This payment is paid in installments in any month which
certain posted prices for oil produced exceeds $13.50 per barrel. The monthly
payment is equal to one-half of the difference between the weighted average
posted price and $13.50, multiplied by the number of barrels produced. Posted
prices for the first quarter averaged $21.6 per barrel. Revenue from this note
was approximately $85,000 and is reflected in the consolidated statements of
cashflows as a reduction of Notes receivable.
Hillcrest Beverly Oil Corporation Acquisition
- -------------------------------------------------
On March 10, 2000, the company signed a non-binding letter of intent to purchase
100% of the outstanding stock of Hillcrest Beverly Oil Corporation (HBOC) from a
private Nevada corporation. HBOC operates 2 drillsites in West Los Angeles that
have daily production of approximately 400 bbls of oil, 90 bbls of natural gas
liquids and 340 mcf (300 bopd, 90 bnglpd and 290 mcfd net) from 16 active wells.
The company also operates a gas plant that processes 1.8 mmcfd. Net proven
reserves are estimated at 2.6 million barrels of oil and liquids and 3,100 mmcf
of gas. The company has identified several undeveloped locations and expects to
initiate drilling operations in the 2nd or 3rd quarter of 2000.
Petrominerals has initiated negotiations regarding the binding stock purchase
agreement as well as its due diligence process. The company has also initiated
discussions with lending institutions to fund the acquisition. The company
expects the transaction to close during the 2nd quarter of 2000.
7
<PAGE>
PART II - OTHER INFORMATION
8
<PAGE>
ITEM 1.
LEGAL PROCEEDINGS
- ------------------
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, 1999.
ITEM 2. CHANGES IN SECURITIES
-----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits - none.
(b) Reports on Form 8-K - none.
9
<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
--------------------------
(Registrant)
/s/ Morris V. Hodges
- -----------------------
Morris V. Hodges
President, CEO & Chief Financial Officer
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,107
<SECURITIES> 0
<RECEIVABLES> 420
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,175
<PP&E> 826
<DEPRECIATION> 453
<TOTAL-ASSETS> 2,925
<CURRENT-LIABILITIES> 160
<BONDS> 0
0
0
<COMMON> 848
<OTHER-SE> 563
<TOTAL-LIABILITY-AND-EQUITY> 2,925
<SALES> 90
<TOTAL-REVENUES> 116
<CGS> 0
<TOTAL-COSTS> 209
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (93)
<INCOME-TAX> 0
<INCOME-CONTINUING> (93)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
