FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________________
to ___________________________________
For Quarter Ended June 30, 1997 Commission file no. 0-20760
PETRO UNION, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1091986
(State or other jurisdiction (I. R. S. Employer No.)
of incorporation of organization)
123 Main Street, Suite 300
Evansville, Indiana 47708
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (812) 424-
6745
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
dates.
Title of Each Class Outstanding at June 30, 1997
Common 17,537,945
PART I
ITEM 1 - FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE
Consolidated Balance Sheets as of June 30, 97
(Unaudited) and December 31, 1996 (Audited) 3
Consolidated Statements of Operations for the Three and Six
Months' Ended June 31, 1997 and 1996 (Unaudited) 4
Consolidated Statements of Stockholders, Equity for
the year ended December 31, 1996 (Audited)
and the Six Months Ended June 30, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7-9
Management's Discussion and Analysis 10
Other Information 11-12
<PAGE>
PETRO UNION INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
June 30 December 31
1997 1996
(UNAUDITED) (AUDITED)
CURRENT ASSETS:
CASH $8,467 $22,132
RESTRICTED CASH 30,747 30,747
ACCOUNTS RECEIVABLE 117,053 132,262
TOTAL CURRENT ASSETS 156,267 185,141
PROPERTIES AND EQUIPMENT 4,205,701 4,237,267
TOTAL ASSETS 4,361,968 4,422,408
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES:
SHORT TERM NOTES PAYABLE 6,700 6,700
SHORT TERM POST PETITION 150,000 150,000
ACCOUNTS PAYABLE 23,488 31,164
ACCRUED TAXES, PRE-PETITION 14,306 14,306
OTHER ACCRUED EXPENSES 102,095 96,095
TOTAL CURRENT LIABILITIES 296,589 298,265
LONG TERM NOTE PAYABLE 16,416 16,416
LIABILITIES SUBJECT TO COMPROMISE
ACCOUNTS PAYABLE AND ACCRUED EXP. 296,968 296,968
ADVANCES FROM RELATED PARTIES 52,088 52,088
ADVANCE ON JOINT VENTURE AGR. 230,000 230,000
AMOUNTS FROM DISCONTINUED
OPERATIONS 24,022,791 24,022,791
TOTAL LIABILITIES SUBJECT TO
COMPROMISE 24,601,847 24,601,847
TOTAL LIABILITIES 24,914,852 24,916,528
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.125 PAR VALUE, 50,000,000
SHARES AUTHORIZED, 17,537,945 SHARES
ISSUED AND OUTSTANDING 2,192,243 2,192,243
ADDITIONAL PAID IN CAPITAL 14,076,088 14,076,088
RETAINED EARNINGS (DEFICIT) (36,821,215) (36,747,451)
LESS STOCK SUBSCRIPT. AGREEMENT 0 (15,000)
TOTAL STOCKHOLDERS' EQUITY (20,552,884) (20,494,120)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,361,968 $4,422,408
<PAGE>
PETRO UNION INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,1997 AND 1996
(UNAUDITED)
SIX MONTHS THREE MONTHS
ENDED JUNE 30 ENDED JUNE 30
1997 1996 1997 1996
REVENUES $189,918 $92,849 $66,445 $75,740
COST OF REVENUES 93,140 95,417 42,989 35,442
GROSS PROFIT (LOSS) 96,778 (2,568) 23,456 40,298
GENERAL AND ADMINISTRATIVE 88,208 132,041 49,188 65,823
PROFIT (LOSS) FROM
OPERATIONS 8,570 (134,609) (25,732) (25,525)
OTHER INCOME (EXPENSES)
INTEREST EXPENSE (3,000) (466) (3,000) (231)
INTEREST INCOME 0 1,075 0 738
OTHER (37,651) 0 (38,680) 0
TOTAL OTHER INCOME
(EXPENSE) (40,651) 609 (41,680) 507
NET (LOSS) FROM
OPERATIONS BFIT (32,081)($134,000) (67,412) ($25,018)
FEDERAL INCOME TAX 0.0 0.0 0.0 0.0
NET INCOME (LOSS) ($32,081)($134,000) ($67,412) ($25,018)
PER SHARE (0.002) -0.008 (0.001) (0.001)
WEIGHTED AVERAGE NUMBER
OF SHARES USED TO COMPUTE
PER SHARE 17,537,945 17,537,945 17,537,945 17,537,945
<PAGE>
PETRO UNION INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31,1994, 1995 & 1996 (AUDITED) AND
FOR THE SIX MONTHS ENDED JUNE 30,1997 (UNAUDITED)
ADDITIONAL
PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
BALANCE
DEC.31,
1994 13496760 $1,687,095 $13,919,522 ($11,970,914) $3,635,703
BALANCE
DEC.31,
1995 15927445 $1,990,930 $14,019,562 ($12,423,859) $3,586,633
BALANCE
DEC.31,
1996 17537945 $2,192,243 $14,076,088 ($36,747,451)($20,479,120)
NET LOSS ($6,351)
BALANCE
MAR.31,
1997 17537945 $2,192,243 $14,076,088 ($36,753,803)($20,485,472)
NET LOSS ($67,412)
BALANCE
JUN.30,
1997 17537945 $2,192,243 $14,076,088 ($36,821,215)($20,552,884)
<PAGE>
PETRO UNION INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
1997 1996
CASH FLOWS FROM OPERATIONS:
NET LOSS ($73,761) ($134,000)
ADJUSTMENTS TO RECONCILE NET:
DISCONTINUE OPERATIONS 0
DEPRECIATION DEPLETION
AMORTIZATION 76,331 61,655
BOOK VALUE OF ASSETS SOLD 0
STOCK ISSUED FOR SERVICES 0
(INCREASE) DECREASE
IN RECEIVABLE 15,209 (12,172)
(INCREASE) DECREASE
IN ADVANCE ROYALTIES 0
DECREASE IN OTHER ASSETS 0
INCREASE (DECREASE) IN PAYABLES (7,678) 29,639
INCREASE IN ACCRUED LIABILITIES 6,000 65,538
NET CASH PROVIDED (USED)
BY OPERATIONS 16,101 10,660
CASH FLOW FROM INVESTING ACTIVITIES:
INCREASE IN PROPERTIES AND
EQUIPMENT 51,352 741
NET CASH PROVIDED (USED) 51,352 741
CASH PROVIDED (USED) FROM FINANCING ACTIVITIES
INCREASE (DECREASE) DUE
TO RELATED PARTIES 0 0
PROCEEDS FROM NOTES PAYABLE 0 0
REPAYMENTS OF NOTES PAYABLE 0 0
ADVANCES ON JOINT VENTURES 0 0
DECREASE (INCREASE)
STK SUBSCRIPT. RECEIVABLE 0 0
STOCK ISSUED FOR ACCRUED LIABILITIES 0 0
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 0 0
NET INCREASE (DECREASE)
IN CASH & CASH EQUIVAL. (13,665) (5,302)
CASH AND CASH EQUIVALENTS:
BEGINNING PERIOD 22,132 27
ENDING PERIOD 8,467 (5,329)
<PAGE>
NON-CASH FINANCING & INVESTING ACTIVITIES
STOCK ISSUED FOR SERVICES 0 14,312
STOCK ISSUED FOR
ACCRUED LIABILITIES 0 272,000
ASSETS ACQUIRED BY
ISSUANCE OF NOTES PAYABLE 0
SUPPLEMENTARY CASH FLOW DATA:
INTEREST PAID 0 466
INCOME TAXES PAID 0 0
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles. Except as disclosed herein, there has
been no material change in the information disclosed in the notes
to consolidated financial statements included in the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1996. In the opinion of Management, all adjustments considered
necessary for a fair presentation have been included. All
significant intercompany accounts and transactions have been
eliminated. Operating results for the three-month period ended
June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997.
NOTE 2. OIL AND LIMESTONE OPERATIONS
The Company acquired its limestone reserves in July, 1992 through
the acquisition of Calox Corporation. The Company has not
commenced production and development activities on these acquired
reserves. The following summarizes activity related to these
acquired reserves:
LIMESTONE
Capitalized costs: RESERVES
Acquisition costs 3,500,000
Production and Development Costs -
Amortization/Depletion -
Balance at March 31, 1996 3,500,000
LIMESTONE
RESERVES
(TONS)
Initial Proven Reserves at
Acquisition 73,458,000
Production -
Change in Estimates -
Estimated Reserves at
March 31, 1996 73,458,000
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 (CONTINUED)
(UNAUDITED)
NOTE 2. OIL AND LIMESTONE OPERATIONS (CONTINUED)
The accompanying table reflects the standardized measure of
discounted future net cash flows relating to Petro Union, Inc.'s
interest in proved reserves as of September 30, 1996:
LIMESTONE
Future cash inflows $367,290,000
Future Costs:
Development (18,000,000)
Production (202,000,000)
Future income tax expense (44,074,800)
Future net cash flows 102,841,200
10% discount to reflect
timing of cash flows (77,698,967)
Standardized measure of
discounted future net
cash flows 25,142,233
Discounted future net cash
flows before income tax 35,917,475
Future cash inflows are computed by applying year-end prices of
limestone and oil relating to the year-end quantities of those
reserves. Future development and production cost are computed by
independent consultants by estimating the expenditures to be
incurred in developing and producing limestone and oil reserves
at the end of the year, based on year-end cost and assuming
continuation of existing economic conditions.
Future income tax expenses are computed by applying the
appropriate statutory tax rates to the future pretax net cash
flows relating to proved reserves, exclusive of the tax basis of
the properties involved. The future income tax expenses give
effect to permanent differences and tax credits, but do not
reflect the impact of continuing operations. Future income tax
expenses have been reduced by the estimated future
nonconventional fuel source tax credits to be utilized.
The 10% annual discount is applied to reflect the timing of the
future net cash flows. The standardized measure of discounted
cash flows is the future net cash flows less the computed
discounts.
<PAGE>
PETRO UNION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 (CONTINUED)
(UNAUDITED)
NOTE 2. OIL AND LIMESTONE OPERATIONS (CONTINUED)
Standardized Measure of Discounted Future Net Cash Flows
(Continued)
The Company is obligated under various working interest leases
for oil extraction. The Company's working interest in these
leases varies from 3 to 100%. Working interest reserves are
included calculations of reserves and net future revenues.
The Company has elected to use the successful efforts method of
accounting for its oil and gas operations.
NOTE 3. DISCONTINUED OPERATIONS
On April 10, 1993, the Company entered into an agreement to
purchase 100% of the issued and outstanding common stock of Green
Coal Company, Inc., a Kentucky corporation for $3,052,000 cash
with $100,000 payable on April 10, 1993 and $2,952,000 due August
15, 1993, 1,000,000 restricted common shares and a 1% overriding
royalty on controlled reserves in place upon the signing of the
contract. A $1,052,000 note due from the former stockholder to
be forgiven by the Company as a non-compete agreement for five
years.
In April, 1995, the Company discontinued the operations of its
coal mining segment. This decision resulted from the following
events:
1. Involuntary conversion of the Company's investment in Green
Coal Company by a Bankruptcy Judge on August 8, 1994; and
2. Loss of the Company's leasehold interest in the Central City
coal reserves in Muhlenberg County, Kentucky, due to the
Company's inability to pay lease royalties due April, 1994, and
April, 1995.
The discontinuance of the Company's coal operations was effective
as of August 8, 1994. Accordingly, the revenues and expenses
applicable to the discontinued segment have been removed from the
appropriate accounts and presented as a separate line item in the
statement of operations.
<PAGE>
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997
TO THE SIX MONTHS ENDED JUNE 30, 1996
Revenues for the six months ended June 30, 1997 increased $97,069
over the same period in 1996 due to increased horizontal drilling
service work performed in this period. Cost of Revenue and
General and Administrative Expenses decreased $46,110 over the
same period in 1996, due to a reduction of legal and consulting
charges as a result of the Registrant's Chapter 11
Reorganization.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of $16,101.00 at June 30, 1997 increase $5,441.00
as compared to working capital of $10,660.00 for the six months
ended June 30, 1996 primarily due to the increase of horizontal
drilling service activities and reorganization activities.
The Company has submitted a Plan of Reorganization in its
bankruptcy proceedings that is subject to confirmation at a
hearing to be held on August 25, 1997. If the Plan of
Reorganization is approved, working capital for future operations
will be funded by the Company's newly acquired subsidiary,
Horizontal Ventures, Inc. and from expanded operations (see
"Legal Proceedings").
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Location: United States Bankruptcy Court
Southern District of Indiana
Case: 96-70559-BHL-11
Description: Chapter 11 Reorganization
Date: May 13, 1996
On May 13, 1996 the Company voluntarily filed a petition for
"Reorganization" pursuant to Chapter 11 in the United States
Bankruptcy Court for the Southern District of Indiana. The
filing was due to the liabilities and contingent liabilities
resulting from the acquisition and subsequent disposition of
Green Coal Company, Inc.
<PAGE>
The Company has been unable to attract the needed financings to
develop its properties and pursue its business opportunities as a
result of these liabilities. If the Registrant's financing
efforts are not successful in the immediate term, Management
cannot reasonably predict the outlook for continuing operations.
On June 13, 1997 the Company filed with The United States
Bankruptcy Court a Plan of Reorganization and a Disclosure
Statement for the purpose of creating a reorganized Petro Union
which will enure to the benefit of the assets of the Company,
while restructuring the debt. On July 22, 1997, the Court
approved the Disclosure Statement requiring ballots be received
by August 19, 1997, and set a hearing date of August 25, 1997,
for confirmation of the Plan.
Upon confirmation the Plan provides that the administrative and
priority claims be paid in full. The existing secured debt is to
be paid according to the terms and conditions previously
contracted. The unsecured creditors will receive 100,000 shares
of new common stock in the Reorganized Petro Union. The equity
holders of the stock existing as of the date of confirmation,
will receive new shares of stock in the reorganized Company at a
reverse ratio of 220 shares of the current common stock to one
(1) share of new stock in the reorganized Company.
On June 27, 1997, the Bankruptcy Court approved, subject to
confirmation, the Company's Acquisition Agreement to acquire 100%
of the issued and outstanding stock of its single largest
competitor, Horizontal Ventures, Inc., of Tulsa, Oklahoma, in
exchange for 590,000 shares of the new common stock of the
reorganized Company. The consideration was determined based upon
HVI's inventory of equipment, its personnel and its available
working capital. The ultimate effect of the Plan, upon
confirmation and the acquisition of HVI, will be the reorganized
Company having issued common stock in the amount of One Million
(1,000,000) shares at a book value in a minimum amount of Five
Million Dollars ($5,000,000).
Also on June 27, 1997, the Bankruptcy Court approved an agreement
between the Company and Pembrooke Holding Corporation and
approved the Post-Petition Finance Agreement between the Company
and International Publishing Holdings, S.A. ("IPH"). Pembrooke
has agreed to modify and release its administrative claim and its
Post-Petition rights against the Company in exchange for a
repayment of one Hundred Thousand Dollars ($100,000) from the
Company and Forty-Nine Thousand Nine Hundred Ninety-Nine (49,999)
shares of new stock in the reorganized Company, upon
confirmation. IPH will lend the Company Two Hundred Thousand
($200,000) secured by the remaining fifty percent (50%) interest
in the Company's limestone reserve and a first secured interest
on all unencumbered assets. The loan will be converted to Forty
Thousand (40,000) shares of common stock in the reorganized
Company.
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 of Form 8-K
None
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 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.
PETRO UNION, INC.
Date: August 19, 1997 /S/ Richard D. Wedel
Richard D. Wedel, President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,214
<SECURITIES> 0
<RECEIVABLES> 117,053
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 156,267
<PP&E> 4,205,701
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,361,968
<CURRENT-LIABILITIES> 296,589
<BONDS> 0
0
0
<COMMON> 16,268,331
<OTHER-SE> (36,821,215)
<TOTAL-LIABILITY-AND-EQUITY> 4,361,968
<SALES> 189,918
<TOTAL-REVENUES> 189,918
<CGS> 93,140
<TOTAL-COSTS> 93,140
<OTHER-EXPENSES> 88,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> (32,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,081)
<EPS-PRIMARY> (0.002)
<EPS-DILUTED> (0.002)
</TABLE>
