<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996 Commission file
number: 019020
OPTIMA PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
CANADA 98-0115468
(State of Incorporation) (I.R.S. Employee identification No.)
600- 595 HOWE STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6C 2T5
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 684-6886
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 _________.
Number of shares of Common Stock outstanding at November 12, 1996 11,344,518
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OPTIMA PETROLEUM CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11
PART II -OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 14
SIGNATURES 14
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTIMA PETROLEUM CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
==================================================================================================
September 30 December 31
1996 1995
- --------------------------------------------------------------------------------------------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 981,737 $ 1,022,925
Cash held in trust 458,850 -
Accounts receivable 4,715,621 2,472,383
Note receivable - current portion 164,844 -
Debenture receivable - 493,874
- --------------------------------------------------------------------------------------------------
6,321,052 3,989,182
OTHER
Advances to operators 1,468,193 1,350,216
Petroleum and natural gas interests, full cost method (Note 2) 33,355,242 33,499,680
Note receivable - long term portion 329,689 -
Deferred charges 290,399 338,998
- --------------------------------------------------------------------------------------------------
$41,764,575 $39,178,076
==================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 2,944,901 $ 3,242,322
- --------------------------------------------------------------------------------------------------
2,944,901 3,242,322
LONG-TERM DEBT 7,384,880 7,390,400
SITE RESTORATION AND ABANDONMENT 173,816 67,819
SHAREHOLDERS' EQUITY
Share capital (Note 3)
Authorized 100,000,000 common shares
Issued 11,084,018 (1995 - 10,559,442) common shares 30,882,778 29,024,375
Contributed surplus 608,222 608,222
Retained earnings (deficit) (230,022) (1,155,062)
- --------------------------------------------------------------------------------------------------
31,260,978 28,477,535
- --------------------------------------------------------------------------------------------------
$41,764,575 $39,178,076
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
ON BEHALF OF THE BOARD
/s/ Ronald P. Bourgeois, Director /s/ Robert L. Hodgkinson, Director
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OPTIMA PETROLEUM CORPORATION
Consolidated Statements of Operations and Deficit
(unaudited)
<TABLE>
<CAPTION>
===========================================================================================================
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING INCOME
Petroleum and natural gas sales,
net of royalties and production taxes $2,454,772 $1,162,830 $ 7,054,512 $ 3,177,325
Operating costs 353,358 243,517 1,016,952 629,396
- -----------------------------------------------------------------------------------------------------------
2,101,414 919,313 6,037,560 2,547,929
EXPENSES
General and administrative (Schedule) 396,817 305,166 1,233,474 1,082,146
- -----------------------------------------------------------------------------------------------------------
EARNINGS BEFORE
INTEREST, TAXES, DEPLETION,
DEPRECIATION AND AMORTIZATION 1,704,597 614,147 4,804,086 1,465,783
Depletion and depreciation 1,196,122 603,333 3,341,603 1,513,949
Interest and bank charges 163,741 133,395 474,716 289,601
Amortization of deferred financing costs 17,094 - 51,247 -
Foreign exchange loss (gain) 3,312 (1,241) 6,905 (16,445)
Interest and other revenue (5,374) (8,598) (15,529) (61,570)
- -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)
BEFORE INCOME TAXES 329,702 (112,742) 945,144 (259,752)
Income taxes - - 20,104 25,740
- -----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD 329,702 (112,742) 925,040 (285,492)
DEFICIT, beginning of period (559,724) (172,750) (1,155,062) (10,602,526)
Reduction of common share stated capital - - - 10,602,526
- -----------------------------------------------------------------------------------------------------------
DEFICIT, end of period $ (230,022) $ (285,492) $ (230,022) $ (285,492)
===========================================================================================================
INCOME (LOSS) PER SHARE $ 0.03 $ (0.01) $ 0.09 $ (0.03)
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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OPTIMA PETROLEUM CORPORATION
Consolidated Statements of Changes In Financial Position
(unaudited)
<TABLE>
<CAPTION>
===================================================================================================================
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Income (loss) for the period $ 329,702 $ (112,742) $ 925,040 $ (285,492)
Items not involving cash
Depletion, depreciation and amortization 1,213,216 603,333 3,392,850 1,513,949
- -------------------------------------------------------------------------------------------------------------------
1,542,918 490,591 4,317,890 1,228,457
Changes in non-cash working capital:
Accounts receivable 399,365 309,329 (2,243,238) 669,587
Accounts payable and accrued liabilities (132,208) (957,893) (297,421) (1,090,864)
Loans from shareholders - (116,500) - 233,000
Debenture receivable - 3,540 493,874 (493,874)
- -------------------------------------------------------------------------------------------------------------------
1,810,075 (270,933) 2,271,105 546,306
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issue of common
shares (net of issue expenses) 374,666 1,167,847 1,858,403 1,319,069
Note receivable 654 - (494,533) -
Increase (decrease) in bank debt (175,353) 456,380 (5,520) 3,603,380
Issue of securities on purchase of subsidiary - 6,186,272 - 6,186,272
Conversion of convertible debentures - - - (20,000)
- -------------------------------------------------------------------------------------------------------------------
199,967 7,810,499 1,358,350 11,088,721
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of
petroleum and natural gas interests 56 - 1,179,681 925,863
Petroleum and natural gas interests (950,536) (1,316,351) (4,199,368) (6,177,641)
Advances to operators (957,979) (2,449) (189,458) 55,266
Deferred charges (112) (142,826) (2,648) (171,948)
Purchase of subsidiary - (6,186,272) - (6,186,272)
- -------------------------------------------------------------------------------------------------------------------
(1,908,571) (7,647,898) (3,211,793) (11,554,732)
- -------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH 101,471 (108,332) 417,662 80,295
CASH AND CASH
EQUIVALENTS, beginning of period 1,339,116 503,918 1,022,925 315,291
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH
EQUIVALENTS, end of period $ 1,440,587 $ 395,586 $ 1,440,587 $ 395,586
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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OPTIMA PETROLEUM CORPORATION
Schedules of Consolidated General and Administrative Expense
(unaudited)
<TABLE>
<CAPTION>
=============================================================================================
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consultants $180,805 $150,025 $ 499,018 $ 485,817
Investor communication 31,059 20,352 180,288 72,407
Office expense 63,771 59,035 176,113 175,182
Legal, audit and tax 30,767 29,512 151,381 186,977
Travel 62,626 33,685 127,877 104,730
Office rent 17,211 7,775 58,871 17,225
Public listing 4,073 4,782 33,421 39,808
Directors' fees 6,505 - 6,505 -
- ---------------------------------------------------------------------------------------------
$396,817 $305,166 $1,233,474 $1,082,146
=============================================================================================
</TABLE>
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OPTIMA PETROLEUM CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1996
(unaudited) Page 1
==============================================================================
1. Significant accounting policies
(a) Basis of presentation
The consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1995, as filed with the Securities and Exchange Commission.
The consolidated financial statements included herein as of September
30, 1996, and for the three and nine month periods ended September 30,
1996 and 1995 are unaudited. Management has reflected all adjustments,
consisting of normal and recurring adjustments, which it believes are
necessary to present fairly the financial position as at September 30,
1996 and the results of operations and cash flows for the three and nine
month periods ended September 30, 1996 and 1995.
The consolidated financial statements are presented in accordance with
generally accepted accounting principles applicable in Canada and
expressed in Canadian dollars. Except as disclosed in Note 5, these
financial statements conform, in all material respects, with generally
accepted accounting principles in the United States.
(b) Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Optima Energy (U.S.)
Corporation.
(c) Cash and cash equivalents
Cash and cash equivalents include short-term investments with a maturity
of ninety days or less at the time of issue.
(d) Petroleum and natural gas interests
The Company follows the full cost method of accounting for petroleum and
natural gas interests whereby all costs of exploring and developing
petroleum and natural gas reserves, net of government grants, are
capitalized by individual country cost centre. Such costs include land
acquisition costs, geological and geophysical expenses, costs of
drilling both productive and non-productive wells and overhead charges
directly related to acquisition, exploration and development activities.
The total carrying value of the Company's petroleum and natural gas
interests, less accumulated depletion, is limited to the estimated
future net revenue from production of proved reserves, based on
unescalated prices and costs plus the lower of cost and net realizable
value of unproved properties, less estimated future development costs,
general and administrative expenses, financing costs and income taxes.
The carrying value of unproved properties is reviewed periodically to
ascertain whether impairment has occurred. Where impairment has
occurred, the costs have been written down to their net realizable
value.
For each cost centre, the costs associated with proved reserves are
depleted on the unit-of-production method based on an independent
engineering estimate of proved reserves, after royalties, with natural
gas converted to its energy equivalent at a ratio of six thousand cubic
feet of natural gas to one barrel of oil.
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OPTIMA PETROLEUM CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1996
(unaudited) Page 2
==============================================================================
1. Significant accounting policies (continued)
(d) Petroleum and natural gas interests (continued)
Site restoration and abandonment costs, net of expected recoveries for
production equipment and facilities, at the end of their useful life,
are provided for on a unit-of-production basis. Amounts accrued for
site restoration and abandonment costs are included in accounts payable
and accrued liabilities.
The resource expenditure deductions for income tax purposes related to
exploration and development activities funded by flow-through share
arrangements are renounced to investors in accordance with income tax
legislation. Petroleum and natural gas interests are reduced by the
estimated renounced income tax benefits when the expenditures are
incurred.
Equipment is depreciated on a straight-line basis over five years.
(e) Deferred charges
Debt financing costs are amortized on a straight line basis over the
terms of the related loans.
(f) Foreign currency translation
Transactions of the Company and its subsidiaries that are denominated in
foreign currencies are recorded in Canadian dollars at exchange rates in
effect at the related transaction dates. Monetary assets and liabilities
denominated in foreign currencies are adjusted to reflect exchange
rates at the balance sheet date. Exchange gains and losses arising on
the translation of monetary assets and liabilities, except as they
relate to long-term debt, are included in the determination of income
for the year. Unrealized foreign exchange gains and losses related to
long-term debt are deferred and amortized over the remaining term of the
related debt.
(g) Measurement uncertainty
Estimation of reserves in the Company's petroleum and natural gas
interests is subject to inherent uncertainty. Since these reserve
measures enter into the computation of net recoverable amount and
depreciation, depletion and amortization, there is uncertainty of
measurement in the Company's petroleum and natural gas interests.
2. Petroleum and natural gas interests
<TABLE>
<CAPTION>
==============================================================================
September 30 December 31
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Petroleum and natural gas interests $46,657,351 $43,453,987
Other equipment 174,239 143,562
- -------------------------------------------------------------------------------
46,831,590 43,597,549
Accumulated depreciation and depletion (13,476,348) (10,097,869)
- -------------------------------------------------------------------------------
$33,355,242 $33,499,680
==============================================================================
</TABLE>
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OPTIMA PETROLEUM CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1996
(unaudited) Page 3
==============================================================================
3. Share capital
(a) Issued
<TABLE>
<CAPTION>
============================================================================
Number of Capital
Shares Stock
----------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1995 10,559,442 $29,024,375
Issued for cash
Exercise of options 514,500 1,825,250
Exercise of warrants 714 3,641
In lieu of consulting fees 7,570 27,080
In lieu of directors fees 1,792 6,505
Common share issue expenses (4,073)
----------------------------------------------------------------------------
Balance at September 30, 1996 11,084,018 $30,882,778
============================================================================
</TABLE>
Subsequent to September 30,1996, 260,500 common shares were issued for
cash proceeds of $1,002,815; comprised of 260,000 shares issued for
$1,001,000 as a private placement and 500 shares issued for $1,815 in
lieu of consulting fees.
(b) Reserved in respect of options and warrants:
<TABLE>
<CAPTION>
============================================================================
Exercise Exercisable
Holder Number Price On or Before
----------------------------------------------------------------------------
<S> <C> <C>
Options
Company directors and employees 193,000 $3.50 April 3, 1998
50,000 $3.55 April 3, 1998
540,000 $4.15 June 12, 1999
110,000 $4.05 July 25, 1998
Non-related persons 170,000 $3.50 April 3, 1998
100,000 $4.15 June 12, 1999
----------------------------------------------------------------------------
1,163,000
----------------------------------------------------------------------------
Warrants
Issued on purchase of subsidiary 1,374,013 $5.10 February 28, 1997
----------------------------------------------------------------------------
1,374,013
----------------------------------------------------------------------------
2,537,013
============================================================================
</TABLE>
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OPTIMA PETROLEUM CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1996
(unaudited) Page 4
==============================================================================
4. Related party transactions
In the nine months ended September 30, 1996, the Company was charged
consulting expenses of $282,150 (1995 - $311,267) by companies related by
virtue of common directors. Accounts receivable at September 30, 1996
includes $10,594 relating to office services receivable from a related
company. Office expense includes $nil (1995 - $85,254) paid to a related
company. The Company recovered $37,613 in consulting, office and rent
expenses from a company with a common director in the nine months ended
September 30, 1996.
5. Reconciliation between generally accepted accounting principles in Canada and
the United States
Under United States accounting principles, the following items are not
considered to be cash items and would not appear in the consolidated
statements of changes in financial position:
(i) the conversion of debentures
(ii) the acquisition of a subsidiary in exchange for the issuance of shares;
and
(iii) the issuance of shares on settlement of consulting fees payable.
As a result, cash flows from operating, financing and investing activities
would be presented as follows under United States accounting principles:
<TABLE>
<CAPTION>
=============================================================================================
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from:
Operating activities $1,824,595 ($110,277) $2,298,185 $838,184
Financing activities 185,447 1,463,571 1,331,270 4,610,571
Investing activities (1,908,571) (1,461,626) (3,211,793) (5,368,460)
---------------------------------------------------------------------------------------------
Increase in cash $101,471 ($108,332) $417,662 $80,295
=============================================================================================
</TABLE>
Under United States accounting principles, the following supplementary cash
flow information would be disclosed:
<TABLE>
<CAPTION>
=============================================================================================
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest paid $163,741 $133,395 $474,716 $289,601
=============================================================================================
Income taxes paid - - $20,104 $25,740
=============================================================================================
</TABLE>
10
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PART I - FINANCIAL INFORMATION CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's financial statements are stated in Canadian Dollars (CDN$) and
are prepared in accordance with Canadian Generally Accepted Accounting
Principles. The value of the U.S. Dollar in relation to the Canadian Dollar
was U.S. $1.3341 as at November 11, 1996.
The following is a discussion of the Company's financial operations for the
three and nine month periods ended September 30, 1996 and 1995. The notes to
the Company's consolidated financial statements included in this report, as
well as the Company's Annual Report on Form 10-K for the year ended December
31, 1995 (and the notes attached thereto), should be read in conjunction with
this discussions.
<TABLE>
<CAPTION>
Working Interest Quarter Ended 1996 1996
September 30
CDN$ 1996 1995 Increase Percentage
(Decrease) Increase
(Decrease)
<S> <C> <C> <C> <C>
Volume
Natural Gas (mcf) 811,542 632,510 179,032 28%
Oil (bbls) 39,475 14,556 24,919 171%
Average Price per Unit
CAN
Natural Gas (mcf) $1.18 $1.55 ($0.37) (24%)
Oil (bbls) $31.22 $21.74 $9.48 44%
USA
Natural Gas (mcf) $3.45 $2.12 $1.33 63%
Oil (bbls) $29.86 $23.60 $6.62 26%
Gross Revenue,
Natural Gas $1,908,106 $1,233,062 $675,044 55%
Oil $1,185,922 $337,761 $848,161 251%
Total Revenue $3,094,028 $1,570,823
</TABLE>
OVERVIEW
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996, AS COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
The Company realized a significant increase in production and improved
commodity prices as compared to the third quarter of 1995 which contributed to
the increase in gross revenue and earnings before interest, taxes, depletion,
depreciation and amortization. Gross natural gas sales increased 28% from
632,510 mcf to 811,542 mcf whereas oil production increased from 14,557 barrels
to 39,475 barrels, an improvement of 171%. Based on a barrel of oil equivalent
("boe") of 10 to 1 (1 barrel equals 10 mcf) which in our opinion reflects the
current, comparative financial value of oil and gas, daily production increased
from 848 boe in the third quarter of 1995 to 1,309 boe in the second quarter of
1996, an increase of 54%. Gross revenue increased by 97% from $1,570,823 in
third quarter of 1995 to $3,094,028 in the third quarter of 1996. This
improvement in revenue is due to a combination of higher U.S. oil and gas
prices and the increase in production.
11
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Earnings before interest, taxes, depletion, depreciation and amortization
("EBITDA") in 1996 increased to $4,804,086 from $1,465,783 in 1995, an increase
of 228%. EBITDA on per share basis increased to $0.44 per share from $0.17 per
share in 1995. Income per share was $0.09 being $945,144 as compared to a
$0.03 loss per share in 1995 which was $285,492.
The weighted average number of shares issued in the calculation was 10,816,953
shares in 1996 as compared to 8,567,471 in 1995.
OPERATING REVENUES.
Petroleum and natural gas sales net of royalties and production taxes ("Net
Revenue") increased to $7,054,512 in the first nine months of 1996 as compared
to $3,177,325 in 1995, an increase of 122%. Canadian Net Revenue increased to
$1,988,683 from $890,124 a year earlier whereas Net Revenue from U.S.
operations increased from $2,287,201 to $5,065,829.
OPERATING EXPENSES.
Oil and natural gas operating expenses increased to $1,016,952 in 1996 from
$629,396 in the first nine months of 1995. On a boe basis, converting gas to
its equivalent barrels at a ratio of 10 mcf equals 1 barrel, operating expenses
fell to $2.90 per boe in 1996 from $3.10 per boe in 1995, an improvement of
$0.20 per boe.
INTEREST EXPENSE.
Interest expense and bank charges increased by 64% from $289,601 in the first
nine months of 1995 to $474,716 for the same period in 1996. This increase is
due to a combination in the increase in the average principal balance of bank
debt and convertible debentures on a year to year comparison as well as the
change in the effective interest rate. Long term debt as at September 30, 1996
was $7,384,880 as compared to $5,432,380 a year earlier. Whereas the interest
rate on U.S. bank debt fell slightly from 10.25% to 9.75%, the current rate on
our Canadian facility is 5.75% as compared to 9.00% a year earlier.
The Company has repaid $175,353 of bank debt during the third quarter of 1996.
Accordingly, the combination of a reduced principal balance and declining
interest should maintain a trend of lower interest expense in the final quarter
of 1996.
DEPLETION, DEPRECIATION AND AMORTIZATION.
Depletion and depreciation increased to $3,341,603 in the first nine months of
1996 from $1,513,949 in the same period of 1995, an increase of 136%. On a boe
basis, the 1996 expense was $6.48 per boe versus $4.89 per boe in 1995 (this
comparison is based on 6 mcf equals 1 barrel which is the energy equivalent).
The increase is due to increases in boe production of approximately 67% and the
increase in the carrying costs of petroleum and natural gas interests by over
$10 million from the previous year.
The quarterly amortization expense of $17,079, is derived from the costs of the
plan of arrangement with Roxbury Capital Corporation which occurred on
September 8, 1995. Accordingly, there is no amortization for the nine months
ended September 30, 1995. These deferred charges are being amortized on a
straight line over 60 months from the date of acquisition.
GENERAL AND ADMINISTRATIVE EXPENSE.
General and administrative expenses for the first nine months of 1996 of
$1,233,474 reflect an increase of 13.9% from $1,082,146 a year earlier. On a
boe basis, converting gas to its equivalent barrels at a ratio of 10 mcf equals
1 barrel, general and administrative expenses fell to $3.52 per boe as compared
to $5.35 per boe in 1995, an improvement of 34%.
12
<PAGE> 13
LIQUIDITY AND FINANCIAL RESOURCES
During the first nine months of 1996, the Company's liquidity needs were met
from oil and natural gas production sales, cash reserves as well as proceeds
from the issuance of common shares in the amount of $1,858,403. As at
September 30, 1996, the Company had a cash balance of $1.44 million and working
capital of $3,376,151.
Cash resources include $424,864 (approximately $312,000 U.S. funds) held in a
trust account to fund the eventual abandonment and site restoration cost in
respect of producing wells acquired during 1996 at Valentine, Louisiana.
Capital expenditures for the first nine months of 1996 were $4,199,368 which
was partially offset by the sale of non-core assets at Elm Grove, Louisiana, in
the amount of $1,179,681. The composition of the capital expended includes
lease acquisition, geological and geophysical, drilling, completion and
equipping costs in respect of various prospects. The Company has budgeted
between $1.5 and $2.0 million in its capital program for the remainder of 1996.
Cash requirements in the future will be funded from existing working capital,
cash flow from established properties, newly drilled wells developed on the
Company's exploration prospects and extension to the borrowing base with its
Canadian and U.S. bankers. The Company's U.S. bankers agreed in October,
1996, to increase the borrowing base by approximately U.S.$1.4 million to
U.S.$3.25 million. This increase in the line of credit is expected to be in
place by the end of November, 1996. In respect of 1997 onwards, the Company's
cash requirements are dependent upon the results of its current drilling
program as well as any new prospects it may undertake.
In management's opinion, the Company has sufficient capital resources available
to it to fund its development and drilling commitments as well as other
obligations and liquidity.
It is the policy of the Company to retain its existing cash for reinvestment in
the business affairs of the Company and not to pay dividends with respect to
its common stock in the foreseeable future.
OTHER.
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995) and that involve risk and uncertainty. These
forward-looking statements may include, but are not limited to, exploration and
seismic acquisition plans, anticipated results from current and future
exploration prospects, the anticipated results of wells based on logging data
and production tests, future sales of production, earnings, margins, production
levels and costs, market trends in the oil and gas industry and the exploration
and development sector thereof, environmental and other expenditures and
various business trends. Forward-looking statements may be made by management
orally or in writing including, but not limited to, the Management's Discussion
and Analysis and Financial Condition Results of Operation section and other
sections of the Company's filings with the Securities and Exchange Commission
under the Securities Act of 1933 and the Securities Exchange Act of 1934.
Actual results and trends in the future may differ materially depending on a
variety of factors including, but not limited to, the success of the Company's
exploration and development program, changes in the price of oil and natural
gas, world wide political stability and economic growth, the Company's
successful execution of internal exploration, development and operating plans,
environmental regulation and costs, regulatory uncertainties and legal
proceedings.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
quarter ended September 30, 1996.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The Company filed a Form 8-K on August 23, 1996, to report that it has received
$10,817 from Robert L. Hodgkinson pursuant to Section 16(b) of the Securities
Exchange Act of 1934. The short-term profit is based on the purchases and
sales involving 25,600 shares purchased at an average cost of $3.61 and average
proceeds of disposition of $4.03 per share between January 15, 1996 and June 3,
1996.
After the review of the evidence, the Company is confident that the "insider
profit" was a result of a misunderstanding of the application of the six month
holding rule as it impacts the calculations of short swing profits.
Additionally, the Company knows of no confidential information that Mr.
Hodgkinson would have in his possession that would have impacted the timing of
the purchase and sale of stock. The stock of Optima has traded in the range of
between $3.50 and $4.90 on the Toronto Stock Exchange during the period in
which the trades occurred.
Mr. Hodgkinson as at October 31, 1996 holds 781,400 shares of Optima Petroleum
Corporation.
SIGNATURES
Pursuant to the requirements 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.
OPTIMA PETROLEUM CORPORATION AND SUBSIDIARIES
(Registrant)
Date: November 12, 1996
By: /s/ ROBERT L. HODGKINSON
-------------------------------
Robert L. Hodgkinson
President - CEO
By: /s/ RONALD P. BOURGEOIS
--------------------------------
Ronald P. Bourgeois
Chief Financial Officer - Secretary
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIRD
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> CANADIAN DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> .7310
<CASH> 1,440,587
<SECURITIES> 0
<RECEIVABLES> 4,880,465
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,321,052
<PP&E> 46,831,590
<DEPRECIATION> 13,476,348
<TOTAL-ASSETS> 41,764,575
<CURRENT-LIABILITIES> 2,944,901
<BONDS> 7,384,880
0
0
<COMMON> 30,882,778
<OTHER-SE> 378,200
<TOTAL-LIABILITY-AND-EQUITY> 41,764,575
<SALES> 7,054,512
<TOTAL-REVENUES> 7,070,041
<CGS> 1,016,952
<TOTAL-COSTS> 5,592,029
<OTHER-EXPENSES> 532,868
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 474,716
<INCOME-PRETAX> 945,144
<INCOME-TAX> 20,104
<INCOME-CONTINUING> 925,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 925,040
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
